1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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-12
MGIC INVESTMENT CORPORATION
- --------------------------------------------------------------------------------
(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)(1) 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:
- --------------------------------------------------------------------------------
2
MGIC
INVESTMENT
CORPORATION
- ---------------------------
NOTICE
OF
ANNUAL
MEETING
AND
PROXY
STATEMENT
- ---------------------------
2000
ANNUAL
REPORT
TO
SHAREHOLDERS
MGIC INVESTMENT CORPORATION
CURT S. CULVER
Chief Executive Officer
March 26, 2001
Dear Shareholder:
On behalf of the Board of Directors of MGIC Investment Corporation, it is
my pleasure to invite you to attend the Annual Meeting of Shareholders to be
held on Thursday, May 10, 2001, at the Marcus Center for the Performing Arts in
Milwaukee, Wisconsin.
At the meeting, shareholders will be asked to elect three directors and to
ratify the appointment of PricewaterhouseCoopers LLP as the company's
independent accountants for 2001. We will also report on our business.
Your vote is important. Even if you plan to attend, to be sure that your
shares are represented at the meeting, we encourage you to sign the enclosed
card designating the proxies to vote your shares. Please read the Proxy
Statement for more information about the voting process.
Our Annual Report to Shareholders follows the Proxy Statement in this
booklet.
James D. Ericson, a director since 1985, and Edward J. Zore, a director
since 1990, will leave the Board when their terms expire at the meeting. On
behalf of the Board, I would like to thank Jim and Ed for their years of
dedicated service.
Sincerely,
/s/ CURT S. CULVER
Curt S. Culver
Chief Executive Officer
3
MGIC INVESTMENT CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 10, 2001
To the Shareholders of
MGIC Investment Corporation:
The Annual Meeting of Shareholders of MGIC Investment Corporation, a
Wisconsin corporation, will be held in Vogel Hall at the Marcus Center for the
Performing Arts, 123 East State Street, Milwaukee, Wisconsin, on May 10, 2001,
at 9:00 a.m., to vote on the following matters:
(1) Election of a class of three directors to serve a three-year term
expiring at the 2004 Annual Meeting;
(2) Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants for 2001; and
(3) Any other matters that may be properly brought before the meeting.
The Board of Directors has fixed the close of business on March 12, 2001,
as the record date to determine the shareholders entitled to notice of and to
vote at the meeting.
By Order of the Board of Directors
Jeffrey H. Lane, Secretary
Milwaukee, Wisconsin
March 26, 2001
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD
4
MGIC INVESTMENT CORPORATION P.O. BOX 488, MGIC PLAZA, MILWAUKEE, WI 53201
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are being mailed to
shareholders on or about March 26, 2001, in connection with the solicitation of
proxies on behalf of the Board of Directors of MGIC Investment Corporation (the
"Company"), a Wisconsin corporation, for use at the Annual Meeting of
Shareholders to be held at 9:00 a.m., Thursday, May 10, 2001, in Vogel Hall at
the Marcus Center for the Performing Arts, 123 East State Street, Milwaukee,
Wisconsin.
VOTING MATTERS
RECORD DATE INFORMATION
You are entitled to one vote for each share of Common Stock registered in
your name in the Company's records on March 12, 2001. On that date, 106,863,869
shares of the Company's Common Stock were outstanding and entitled to vote.
VOTING BY PROXIES
The enclosed proxy card is solicited by the Board of Directors of the
Company. Your shares will be voted at the meeting by the named proxies in
accordance with the choices you specify on the proxy card. If you sign and
return a proxy card without giving specific choices, your shares will be voted
as follows:
FOR--Election to the Board of the three individuals nominated by the Board
of Directors;
FOR--Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants for the year ending December 31, 2001; and
On such other matters as properly come before the meeting, in the best
judgment of the named proxies.
If your shares are held in the name of a broker, bank or other nominee, you
should be receiving with this Proxy Statement instructions from them on how you
can vote your shares.
HOW TO REVOKE A PROXY
You may revoke your proxy instructions at any time before your shares have
been voted by advising the Secretary of the Company in writing or by signing and
delivering a proxy card with a later date. If you attend the meeting, you may
withdraw your proxy and vote shares registered in your name in person. If your
shares are held in the name of a broker or other nominee you must follow their
instructions on how to revoke your vote.
HOW VOTES ARE COUNTED
A quorum is necessary to hold the meeting and will exist if a majority of
the outstanding shares of Common Stock entitled to vote are represented at the
meeting. Votes cast by proxy or in person at the meeting will be counted at the
meeting by representatives of Firstar Bank, N.A., the transfer agent and
registrar of the Company's Common Stock, which has been appointed by the Company
to act as inspector of election for the meeting. Abstentions will be counted for
purposes of determining the presence of a quorum, but do not constitute a vote
"for" or "against" any matter and will be disregarded in the calculation of
"votes cast."
A "broker non-vote" occurs when a broker or other nominee does not have
authority to vote on a particular matter without instructions from the
beneficial owner of the shares and has not received such instructions. Broker
non-vote shares will be counted for purposes of determining the presence of a
quorum, but will be disregarded in the calculation of "votes cast."
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders for the fiscal year ended
December 31, 2000, follows this Proxy Statement. The Annual Report to
Shareholders is a separate report and should not be considered a part of this
Proxy Statement.
5
STOCK OWNERSHIP
The following table gives information about shareholders who were
beneficial owners of more than 5% of the Common Stock as of December 31, 2000,
based on information filed with the Securities and Exchange Commission. The
table also shows the Common Stock beneficially owned by each executive officer
of the Company named in the Summary Compensation Table of this Proxy Statement,
and by all directors and executive officers as a group (the "Group"). Unless
otherwise noted, information is given as of January 31, 2001, and the
shareholders have sole voting and investment powers over their shares.
SHARES BENEFICIALLY PERCENT
NAME OWNED OF CLASS
- ---- ------------------- --------
Legg Mason, Inc.
100 Light Street
Baltimore, Maryland 21202 (1)............................. 12,829,579 12.0%
The Northwestern Mutual Life
Insurance Company ("Northwestern Mutual")
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202 (2)............................ 8,635,492 8.1%
Curt S. Culver (3).......................................... 370,751 *
J. Michael Lauer (3)........................................ 175,112 *
Lawrence J. Pierzchalski (3)................................ 103,676 *
James S. MacLeod (3)........................................ 151,025 *
Jeffrey H. Lane (3)......................................... 85,076 *
All directors and executive officers as a group (18 persons)
(3)(4).................................................... 1,307,735 1.2%
- ---------------
* Less than 1%
(1) Ownership information is as of December 31, 2000 and includes 8,731,210
shares as to which Legg Mason Funds Management, Inc., a registered investment
adviser and subsidiary of Legg Mason, Inc., has sole voting power and shared
investment power. Legg Mason, Inc. is the parent holding company of the
following registered investment advisers which have shared voting and investment
powers as follows: Legg Mason Capital Management, Inc. -- 3,235,763 shares; Legg
Mason Wood Walker, Inc. -- 9,244 shares; Batterymarch Financial Management,
Inc. -- 846,600 shares; Legg Mason Trust, fsb -- 5,900 shares; Bartlett &
Co. -- 400 shares; Brandywine Asset Management, Inc. -- 100 shares; and Perigee
Investment Counsel, Inc. -- 382 shares.
(2) Northwestern Mutual has sole voting and investment powers as to 8,602,192
shares and shared voting and investment powers with various subsidiaries as to
33,300 shares.
(3) Includes shares which the named executive officers had the right to acquire
on, or within 60 days after, January 31, 2001, under stock options granted to
executive officers as follows: Mr. Culver -- 345,600; Mr. Lauer -- 166,940; Mr.
Pierzchalski -- 99,940; Mr. MacLeod -- 126,940; Mr. Lane -- 81,455; and the
Group -- 1,021,785. Also includes shares held in the Company's Profit Sharing
and Savings Plan and Trust as follows: Mr. Culver -- 7,968; Mr. MacLeod --
15,816; and the Group -- 42,818. Also includes restricted shares listed in note
(3) to the Summary Compensation Table over which the named executive officer has
sole voting power but no investment power. Also includes shares for which voting
and investment powers are shared as follows: Mr. Lauer -- 2,400; and the
Group -- 28,776. Excludes shares, beneficial ownership of which is disclaimed,
which are held as custodian for children or owned by spouses or trusts as
follows: Mr. Lauer -- 2,000; and the Group -- 106,000.
2
6
(4) Includes an aggregate of 64,886 restricted shares held under the Company's
1993 Restricted Stock Plan for Non-Employee Directors and under the 1991 Stock
Incentive Plan. The beneficial owners have sole voting power but no investment
power over these shares. Excludes 8,635,492 shares held by Northwestern Mutual.
James D. Ericson and Edward J. Zore, who are executive officers and trustees of
Northwestern Mutual and directors of the Company, have each disclaimed
beneficial ownership of such shares.
- --------------------------------------------------------------------------------
ITEM 1--ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS
The Board of Directors is divided into three classes, with the directors of
each class serving for a term of three years. The term of office of one class of
directors expires each year in rotation so that one class is elected at each
Annual Meeting for a three-year term. If a nominee for director is not available
for election, the proxies will vote for another person proposed by the Board of
Directors, or as an alternative, the Board of Directors may reduce the number of
directors to be elected at the Annual Meeting.
Under the Company's Bylaws, written notice of nominations by shareholders
for election to the Board must have been received by the Secretary no later than
February 10, 2001. No notice of any such nominations was received. As a result,
no other nominations for election to the Board of Directors may be made by
shareholders at the Annual Meeting.
NOMINEES FOR DIRECTOR
Two incumbent directors, James A. Abbott and Sheldon B. Lubar, and Thomas
M. Hagerty, who is not currently a director, have been nominated by the Board of
Directors for election to serve a three-year term of office ending at the 2004
Annual Meeting. Two incumbent directors, James D. Ericson and Edward J. Zore,
will conclude their three-year terms as directors at the Annual Meeting and are
not standing for re-election.
The principal occupation, business experience for at least the past five
years, committee assignments and other information about each of the nominees
and the directors continuing in office are described below.
SHAREHOLDER VOTE REQUIRED
Each nominee who receives a plurality of the votes cast at the meeting will
be elected a director. Only votes cast for a nominee will be counted. Votes cast
include votes under proxies which are signed and do not have contrary voting
instructions. Broker non-votes, abstentions and instructions on the proxy card
to withhold authority to vote for one or more of the nominees will be
disregarded in the calculation of a plurality of the votes cast.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES NAMED ABOVE.
PROXIES WILL BE VOTED FOR THE NOMINEES UNLESS A SHAREHOLDER GIVES OTHER
INSTRUCTIONS.
3
7
SHARES
BENEFICIALLY
NOMINEES FOR DIRECTOR OWNED(1)
TERM ENDING 2004 ------------
[Abbott Photo] JAMES A. ABBOTT, 61, a Director since 1989, has been
Chairman and a principal of American Security Mortgage
Corp., a mortgage banking firm, since June 1999. He served
as President and Chief Executive Officer of First Union
Mortgage Company, a mortgage banking company, from January
1980 to December 1994. Mr. Abbott is a member of the Risk
Management Committee of the Board of Directors. He is a
graduate of the University of North Carolina. 10,762(2)(3)
[Hagerty Photo] THOMAS M. HAGERTY, 38, who is not currently a Director, has
been a managing director with Thomas H. Lee Company, a
private investment firm, since 1992 and has been with the
firm since 1988. He previously was in the Mergers and
Acquisitions Department of Morgan Stanley & Co.
Incorporated. Mr. Hagerty is a director of ARC Holdings,
Conseco Inc. (where he is also serving as interim Chief
Financial Officer), Cott Corporation, Metris Companies,
Syratech Corporation and Tucker Anthony. He is a graduate of
the University of Notre Dame and Harvard Business School. -0-
[Lubar Photo] SHELDON B. LUBAR, 71, a Director since 1991, has been
Chairman of Lubar & Co. Incorporated, a private investment
and management firm, since 1977. Mr. Lubar is a Director of
C2, Inc., Grant-Prideco, Inc., Jefferies & Co.,
Massachusetts Mutual Life Insurance Co., U.S. Bancorp and
Weatherford International, Inc. He is Chairman of the
Management Development Committee of the Board of Directors
and a member of the Executive Committee. Mr. Lubar holds a
B.B.A. degree and an L.L.B. degree from the University of
Wisconsin-Madison. 30,042(2)(3)(4)
4
8
SHARES
BENEFICIALLY
OWNED(1)
------------
DIRECTORS CONTINUING IN OFFICE
TERM ENDING 2003
[Case Photo] KARL E. CASE, 54, a Director since 1991, is the Katharine
Coman and A. Barton Hepburn Professor of Economics at
Wellesley College where he has taught since 1976. Dr. Case
has been Visiting Scholar at the Federal Reserve Bank of
Boston since 1985 and a lecturer on economics and tax policy
in the International Tax Program at the Harvard Law School
since 1980. He is a Director of Century Bank & Trust, the
Lincoln Institute of Land Policy and the New England
Economic Project, Inc. Dr. Case is Chairman of the Risk
Management Committee of the Board of Directors. He is a
graduate of Miami University, Oxford, Ohio, and holds M.A.
and Ph.D. degrees from Harvard University. 6,633(2)(3)
[Culver Photo] CURT S. CULVER, 48, a Director since 1999, has been Chief
Executive Officer of the Company since January 2000. Mr.
Culver has been President of the Company and Chief Executive
Officer of Mortgage Guaranty Insurance Corporation ("MGIC")
since January 1999, President of MGIC since May 1996, and
held senior executive positions with MGIC for more than five
years before then. He is a member of the Executive Committee
of the Board of Directors. Mr. Culver holds a B.B.A. degree
and an M.S. degree from the University of Wisconsin-Madison. 370,751(5)
[McIntosh Photo] WILLIAM A. MCINTOSH, 61, a Director since 1996, has been
adjunct professor of finance at Howard University,
Washington, D.C. since August 1998. He served as an adjunct
faculty member of Wellesley College from January through May
2000. He has been a financial consultant and was an
executive committee member and a managing director at
Salomon Brothers Inc, an investment banking firm, when he
retired in 1995 after 35 years of service. Mr. McIntosh is a
Director of Mason Street Funds, Inc. He is Chairman of the
Securities Investment Committee of the Board of Directors.
Mr. McIntosh is a graduate of Xavier University, Ohio. 8,507(2)(3)
5
9
SHARES
BENEFICIALLY
OWNED(1)
------------
[Muma Photo] LESLIE M. MUMA, 56, a Director since 1995, has been Chief
Executive Officer of Fiserv, Inc., a financial industry
automation products and services firm, since March 1999. Mr.
Muma has been President of Fiserv since 1984. He is a member
of the Audit and Executive Committees of the Board of
Directors. Mr. Muma holds degrees in Theoretical Mathematics
and Business from the University of South Florida. 13,702(2)(3)
DIRECTORS CONTINUING IN OFFICE
TERM ENDING 2002
[Bush Photo] MARY K. BUSH, 52, a Director since 1991, has been President
of Bush & Company, an international financial advisory firm,
since 1991. Ms. Bush was Managing Director and Chief
Operating Officer of the Federal Housing Finance Board, a
U.S. government agency, from 1989 to 1991, Vice
President-International Finance of the Federal National
Mortgage Association, a secondary mortgage institution, from
1988 to 1989, and served the President of the United States
as a member of the Board of the International Monetary Fund
from 1984 to 1988. She is a Director of Brady Corporation,
RJR Tobacco Holdings, Inc. and Texaco, Inc., a Trustee of
Pioneer Funds and a member of the Advisory Board of
Washington Mutual Investors Fund. Ms. Bush is Chairperson of
the Audit Committee of the Board of Directors. She is a
graduate of Fisk University and holds an MBA degree from the
University of Chicago. 4,785(2)(3)
[Engelman Photo] DAVID S. ENGELMAN, 63, a Director since 1993, is a private
investor. Mr. Engelman was Chairman, President and Chief
Executive Officer of UnionFed Financial Company from 1991
until March 1997, and he held the same positions at its
subsidiary, Union Federal Bank, until the Office of Thrift
Supervision appointed a receiver for the bank in August
1996. Mr. Engelman is a Director of Fleetwood Enterprises,
Inc., Quaker City Bancorp, Inc. and its banking subsidiary
Quaker City Bank. He is a member of the Risk Management and
Securities Investment Committees of the Board of Directors.
Mr. Engelman is a graduate of the University of Arizona. 9,385(2)(3)(6)
6
10
SHARES
BENEFICIALLY
OWNED(1)
------------
[Jastrow Photo] KENNETH M. JASTROW, II, 53, a Director since 1994, has been
Chairman and Chief Executive Officer of Temple-Inland Inc.,
a holding company with interests in paper, forest products
and financial services, since January 2000. Mr. Jastrow
served as President and Chief Operating Officer of
Temple-Inland Inc. from 1998 to 2000 and held senior
executive positions with that company and its subsidiaries
for more than five years before then. He is a member of the
Management Development Committee of the Board of Directors.
Mr. Jastrow is a graduate of the University of Texas. 5,669(2)(3)
[Kearney Photo] DANIEL P. KEARNEY, 61, a Director since 1999, is a business
consultant and private investor. He served as Executive Vice
President and Chief Investment Officer of Aetna, Inc., a
provider of health and retirement benefit plans and
financial services, from 1991 to 1998. Mr. Kearney was
President and Chief Executive Officer of the Resolution
Trust Corporation Oversight Board from 1990 to 1991, a
principal of Aldrich, Eastman & Waltch, Inc., a pension fund
advisor, from 1988 to 1989, and a managing director at
Salomon Brothers Inc, an investment banking firm, from 1977
to 1988. Mr. Kearney is a Director of Fiserv, Inc., Great
Lakes REIT and MBIA, Inc. He is a member of the Audit
Committee of the Board of Directors. Mr. Kearney holds a
B.A. degree and an M.A. degree from Michigan State
University and a J.D. degree from the University of Chicago
Law School. 4,724(3)
- ---------------
(1) Ownership information is for shares of Common Stock as of January 31, 2001.
Unless otherwise noted, all directors have sole voting and investment powers
with respect to the shares. Common Stock beneficially owned by each director
represents less than 1% of the total number of shares outstanding.
(2) Includes 2,000 shares held under the Company's 1993 Restricted Stock Plan
for Non-Employee Directors. The directors have sole voting power and no
investment power over these shares.
(3) Includes shares held under the Deposit Share Program for Non-Employee
Directors under the Company's 1991 Stock Incentive Plan as follows: Mr.
Abbott -- 4,448; Ms. Bush -- 2,785; Dr. Case -- 4,309; Mr. Engelman -- 4,379;
Mr. Jastrow -- 3,394; Mr. Kearney -- 1,224; Mr. Lubar -- 3,718; Mr.
McIntosh -- 4,390; and Mr. Muma -- 3,408. Directors have sole voting power and
no investment power over these shares.
(4) Excludes 4,000 shares owned by a trust of which Mr. Lubar's wife is a
co-trustee; 12,000 shares owned by Mr. Lubar's wife; and an aggregate of 48,000
shares owned by Mr. Lubar's four adult children. Mr. Lubar disclaims beneficial
ownership of all these shares.
(5) Includes 345,600 shares which Mr. Culver had the vested right to acquire as
of January 31, 2001, or which become vested within sixty days thereafter
pursuant to stock options; 7,968 shares held in the Company's Profit Sharing and
Savings Plan and Trust; and 5,471 restricted shares over which Mr. Culver has
sole voting power but no investment power.
(6) Includes 4,075 shares for which voting and investment powers are shared by
Mr. Engelman as
co-trustee.
7
11
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met six times during 2000, and each incumbent
director attended at least 75% of the meetings of the Board and committees of
the Board on which he or she served that were held while he or she was a
director. The committees of the Board of Directors include the Audit Committee
and the Management Development Committee.
AUDIT COMMITTEE
The members of the Audit Committee are Ms. Bush, Mr. Kearney and Mr. Muma.
The Audit Committee held six meetings during 2000. The Board determined that the
members of the Audit Committee are independent as that term is used in the rules
of the New York Stock Exchange pertaining to audit committees. The Board adopted
a charter for the Audit Committee, which appears as Exhibit A to this Proxy
Statement.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee assists the Board of Directors in carrying out the
Board's oversight responsibilities in connection with the Company's accounting
policies and financial reporting practices, internal controls and the audit
process. The ultimate responsibility for the fairness of the Company's financial
statements, however, rests with the Company's management. The independent
accountants are intended to be the primary check on management's performance in
this regard.
The Audit Committee reviewed and discussed with management and
PricewaterhouseCoopers LLP ("PwC"), the Company's independent accountants, the
Company's audited financial statements for the year ended December 31, 2000. The
Audit Committee discussed with PwC the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Audit Committee also received from PwC the written disclosures required by
the Independence Standards Board's Standard No. 1 (Independence Discussions with
Audit Committees) and discussed with PwC their independence from the Company and
its management.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000, which is to be filed with the Securities and
Exchange Commission. These are the same financial statements that appear in the
Company's Annual Report to Shareholders.
MEMBERS OF THE AUDIT COMMITTEE:
Mary K. Bush
Daniel P. Kearney
Leslie M. Muma
AUDIT AND OTHER FEES
During the year ended December 31, 2000, PwC billed the Company fees for
services of the following types:
Audit Fees.................. $406,500
All Other Fees.............. $468,656
"Audit Fees" includes PwC's review of the Company's quarterly financial
statements. "All Other Fees" does not include services for designing or
implementing hardware or software systems underlying the financial statements or
generating information that is significant to the Company's financial statements
taken as a whole. There were no such fees for 2000. The Audit Committee
considered whether the services included within "All Other Fees" were compatible
with maintaining PwC's independence.
MANAGEMENT DEVELOPMENT COMMITTEE
The members of the Management Development Committee are Messrs. Jastrow and
Lubar. The Management Development Committee held two meetings during 2000. This
Committee oversees the compensation program for the Company's senior management,
administers the Company's stock option plans and recommends to the Board
candidates to fill senior management positions and vacancies on the Board of
Directors and committees.
The Management Development Committee will consider nominees to the Board of
Directors who are recommended by shareholders. Recommendations must be submitted
in writing to the Committee, in care of the Secretary of the Company, by
December 1 of the year preceding the applicable Annual Meeting of Shareholders
and must include a description of the proposed nominee's qualifications,
background information and his or her consent to serve as a director.
8
12
COMPENSATION OF DIRECTORS
Annual and Meeting Fees: Directors who are employees of the Company or any
of its subsidiaries are not compensated for their service on the Board.
Directors who are not employees of the Company or of Northwestern Mutual receive
an annual fee for their services of $24,000, plus $2,000 for each Board of
Directors meeting attended, and $1,000 for each committee meeting attended other
than in connection with a Board of Directors meeting. A director who also serves
as chairperson of a Board committee receives an additional $2,000 annual fee.
Fees that would have been paid to executive officers of Northwestern Mutual for
their services as directors were paid to Northwestern Mutual. The Company
reimburses directors for travel, lodging and related expenses incurred in
connection with attending Board of Directors and committee meetings.
Deferred Compensation Plan: Under the Company's Deferred Compensation Plan
for Non-Employee Directors, an eligible director may elect to defer payment of
all or part of the annual and meeting fees until the director's death,
disability, termination of service as a director or to another date specified by
the director. A director who participates in this plan may elect to have his or
her deferred compensation account either credited quarterly with interest
accrued at an annual rate equal to the six-month U.S. Treasury Bill rate
determined at the closest preceding January 1 and July 1 of each year or
translated on a quarterly basis into share units. Each share unit is equal in
value to a share of the Company's Common Stock and is ultimately distributed in
cash only. If a director defers fees into share units, dividend equivalents in
the form of additional share units are credited to the director's account as of
the date of payment of cash dividends on the Company's Common Stock. Mr. Culver,
because of his employment by the Company, and Messrs. Ericson and Zore, because
of their employment by Northwestern Mutual, are not eligible to participate in
this plan.
Deposit Share Program: The Company's 1991 Stock Incentive Plan includes a
Deposit Share Program under which an eligible director may deposit up to 100% of
the annual and meeting fees for the preceding year. The funds are used to
purchase shares of Common Stock at fair market value which are then deposited
with the Company. The Company matches each share deposited with one and one-half
shares of restricted Common Stock ("Restricted Stock"). A director who had
deferred annual and meeting fees during the preceding year into share units (see
"Deferred Compensation Plan" above) may reduce the amount that would otherwise
be required to be deposited to purchase Common Stock by the amount so deferred.
For matching purposes, the amount so deferred is treated as if shares had been
purchased and deposited and one and one-half shares of Restricted Stock are
awarded for each such share.
The Restricted Stock vests on the third anniversary of the award and,
except for gifts to family members, may not be transferred prior to vesting. If
the shares of Restricted Stock have not vested when a director's service on the
Board of Directors ends, they will be forfeited unless service as a director
ends on account of the director's death or a Permissible Event or the Management
Development Committee waives the forfeiture. All of the director's shares of
Restricted Stock vest on death. A Permissible Event is termination of service as
a director because either (a) the director is no longer eligible for reelection
to the Board of Directors under the Company's retirement policy, or (b) the
director has taken a position with or is providing services to a governmental,
charitable or educational institution whose policies prohibit continued service
on the Company's Board of Directors, or (c) continued service as a director
would be a violation of law. If a director ceases to be a director by reason of
a Permissible Event, the Restricted Stock will continue to vest during the
balance of the three-year vesting period if (i) the director enters into a
non-competition agreement with the Company on or before the date that the
director retires or resigns, and (ii) the director complies with the agreement
for the balance of the three-year vesting period. The shares of Restricted Stock
will immediately become vested upon a change in control of the Company, as
defined by the agreement relating to the Restricted Stock. Messrs. Culver,
Ericson and Zore are not eligible to participate in the Deposit Share Program.
Former Restricted Stock Plan: Non-employee directors elected to the Board
of Directors before 1997 were each awarded, on a one-time basis, 2,000 shares of
Common Stock under the Company's 1993 Restricted Stock Plan for Non-Employee
Directors. The shares are restricted from transfer until the director ceases to
be a director of the Company by reason of death, disability or retirement, as
defined by the agreement relating to the shares, and are forfeited if the
director leaves the Board for another reason unless the forfeiture is waived by
the plan administrator. In 1997, the Board decided that no new
9
13
awards of Common Stock will be made under the plan. Messrs. Ericson and Zore,
because of their employment by Northwestern Mutual, were not eligible to
participate in the plan.
REPORT OF THE MANAGEMENT DEVELOPMENT COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
The Management Development Committee ("Committee") of the Board of
Directors submits this report on the compensation of the Company's senior
management.
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program is designed to attract,
retain, motivate and reward high-quality professionals. The Committee's approach
to executive compensation emphasizes pay for performance over fixed salary, plus
compensation linked to shareholder value in the form of stock options and
restricted stock. The principal objectives of the program are to:
- link executive compensation to Company performance;
- align the interests of management and shareholders by providing a
substantial portion of an executive's compensation opportunity in the
form of Company stock; and
- maintain competitive pay levels to attract and retain high-quality
executives.
The key components of the Company's executive compensation program are base
salary, annual performance bonus (a portion of which is paid in restricted
stock) and stock options. The Committee reviews compensation levels of the
Company's executives each year, using compensation survey data prepared by
independent consultants. The Committee believes that the Company's peer group
for executive talent is not limited to the companies included in the Standard &
Poor's industry index used for the performance graph comparison of shareholder
return. Therefore, the compensation survey data obtained by the Committee cover
a variety of publicly-traded financial guaranty and insurance companies.
BASE SALARY
The Committee reviews the salary ranges and base salaries of the senior
executives each January, comparing the compensation levels of the Company's
executives to comparable positions in the companies represented in the survey
data. Salary ranges of the Company's senior executives are targeted at the
median compensation levels for comparable positions within the comparative group
of companies. The decision to set salary range midpoints at the 50th percentile
of competitive pay levels reflects the Committee's belief that a substantial
portion of the senior executives' annual pay should be linked to the achievement
of performance goals and increases in shareholder value.
Mr. Culver's compensation is addressed under "Compensation of the Chief
Executive Officer" below. For 2000, the Committee increased the salary range
midpoints of the other senior executives by 3.3%, representing the average
salary range movement reflected in the compensation survey data, and increased
the salaries of those executives who were below their adjusted salary midpoints
to approximate the new midpoint of their respective positions. The salaries
shown for the named officers in the Summary Compensation Table which follows
this report reflect payment for the first three months of the year at the salary
rates in effect prior to the adjustments, which became effective in April 2000.
ANNUAL PERFORMANCE BONUS
Annual bonuses are awarded to senior executives based upon achievement of
corporate goals and individual performance. Under the executive compensation
program, the Company's net income must exceed a threshold amount before any
bonuses can be paid and must equal or exceed a net income target in order for
senior executives to be eligible for maximum bonus awards. The Committee
establishes the net income threshold and net income target in January of each
year based on an assessment of the business environment and the Company's
financial plan for that year. For 2000, the Committee set the target at an
amount equal to the net income projected in the Company's 2000 financial plan
and set as the threshold an amount equal to the Company's actual earnings for
the prior year, exclusive of capital gains.
The Committee has established five tiers applicable to bonus opportunities,
with maximums ranging from 60% to 200% of base salary in effect at the time of
bonus award. Based upon the Committee's belief that executive compensation
should be linked to increases in shareholder value, each executive is awarded
shares of restricted Company stock with a
10
14
market value equal to one-third of the executive's bonus and the balance of the
annual bonus is paid in cash. Ownership of the restricted shares vests one year
from the date of award.
The maximum bonus level for each senior executive was determined by the
Committee in January 2000, and in the case of one named executive officer,
modified in January 2001, in all cases based upon Mr. Culver's views. Mr.
Culver's views generally reflected his subjective judgment as to the ability of
each senior executive to influence the Company's competitiveness and
profitability. Actual bonus amounts paid to the senior executives were decided
in January 2001, when Mr. Culver recommended bonus awards for the other senior
executives based upon, in general, his subjective evaluation of each executive's
performance during the year and contributions to the Company's success. The
Committee approved the recommended bonus amounts based on the maximum bonus
opportunities without change.
STOCK OPTIONS
The award of stock options to senior executives is designed to link the
interests of management with the interests of other shareholders in the
Company's long-term success. Under the Company's stock incentive plan, stock
options are granted at the market value on the date of grant. As a result,
senior executives will realize a gain from the options only if the price of the
Company's common stock increases in the future, benefiting all shareholders.
The Committee awards stock options to senior executives on an annual basis.
Options awarded every third year (including the option grants in 2000) vest
based upon the achievement of corporate performance goals as established by the
Committee, reflecting the Committee's emphasis on performance-based
compensation. Options awarded in the other years will vest over a five-year
period on the basis of continued employment. The number of options granted in
the year in which the options are subject to performance-based vesting will
represent about one-half of the options granted in each three-year cycle.
Information on the stock option grants during 2000 to Mr. Culver and the other
named executive officers is set forth in the table under "Executive
Compensation -- Option Grants in 2000."
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Culver's base salary was adjusted by the Committee to $475,000, which
is below the salary range midpoint for the Chief Executive Officer position, but
represents an increase of 10.5%, in recognition of Mr. Culver's promotion to
Chief Executive Officer of the Company effective January 2000.
For 2000, the Committee assigned Mr. Culver to the bonus tier with the
highest bonus opportunity, 200% of his base salary. The Committee's decision to
assign Mr. Culver to this bonus category was based on a subjective evaluation of
his ability to influence the Company's profitability and reflected the
Committee's desire to make Mr. Culver's performance bonus competitive with bonus
opportunities available to CEOs in the peer group of companies reflected in the
compensation survey data. In January 2001, in acknowledgement of the Company's
results for 2000 (including its net income, return on equity and growth in
primary insurance in force), and based upon the Committee's subjective
evaluation of Mr. Culver's performance, the Committee awarded Mr. Culver a
performance bonus of $950,000 an amount equal to 200% of his base salary. As
described above, two-thirds of the bonus, or $633,339, was paid in cash and the
balance of the bonus amount was awarded in the form of 5,471 shares of
restricted Company stock valued at the then current market price ($57.88) per
share. The shares will vest in one year.
Mr. Culver was granted 150,000 stock options in January 2000 under the
Committee's plan for stock option grants to senior executives described above.
The options have a term of ten years and vest (subject to acceleration under
certain circumstances) on January 26th of each of the five years following
January 26, 2000, in which the Company's earnings per share are at least 10%
more than its earnings per share for the immediately preceding fiscal year. The
rate at which the stock options vest is equal to the percent which the Company's
earnings per share for that year is of $31.21, a five-year aggregate earnings
target approved by the Committee in connection with the grant of the stock
options. Any options which remain unvested on January 26, 2005, are eligible to
vest on January 26, 2009. The options are exercisable at $45.375 per share, the
closing price of the stock on the New York Stock Exchange on the date of the
grant.
TAX DEDUCTIBILITY LIMIT
Under the Internal Revenue Code, certain compensation in excess of $1
million paid during a year to any of the executive officers named in the
11
15
Summary Compensation Table for that year is not deductible. The Committee
believes that the effect of such compensation on income tax expense for 2000 was
not material. The Committee believes it is in the Company's interest to preserve
flexibility to pay compensation that will not qualify for the income tax
deduction because it is based on subjective factors.
MEMBERS OF THE MANAGEMENT DEVELOPMENT COMMITTEE:
Sheldon B. Lubar, Chairman
Kenneth M. Jastrow, II
12
16
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock for the last five fiscal years with the cumulative total
return on the Standard & Poor's 500 Stock Index and the Standard & Poor's 500
Insurance (Property-Casualty) Index (the peer group index which has included the
Company since November, 1998). The graph assumes $100 was invested on December
31, 1995, in each of the Company's Common Stock, the Standard & Poor's 500 Stock
Index and the Standard & Poor's 500 Insurance (Property-Casualty) Index, and
that all dividends were reinvested.
[PERFORMANCE GRAPH]
- ------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
- ------------------------------------------------------------------------------------------------
S&P 500 $123 $164 $211 $255 $232
- ------------------------------------------------------------------------------------------------
S&P 500 Insurance (Property-Casualty) 122 174 158 115 182
- ------------------------------------------------------------------------------------------------
MGIC Investment Corporation 140 246 148 224 251
- ------------------------------------------------------------------------------------------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Daniel Gross, the Chief Executive Officer of Enhance Financial Services
Group Inc. ("Enhance") served as a director of the Company prior to resigning
from the Board of Directors in November, 2000 and, along with Messrs. Jastrow
and Lubar, was a member of the Management Development Committee. MGIC and
Enhance, which was acquired by Radian Group, Inc. in February, 2001, are the
principal owners of two joint ventures--Credit-Based Asset Servicing and
Securitization LLC ("C-BASS") and Sherman Financial Group LLC ("Sherman").
During 2000, while Mr. Gross was a member of the Board, MGIC and Enhance
contributed capital to Sherman, and MGIC and Enhance each sold a portion of its
interest in C-BASS to members of C-BASS' senior management. In addition, C-BASS
manages various mortgage-related securities beneficially owned by each of the
Company and Enhance that were acquired through C-BASS, and the joint ventures
sublease space from Enhance. Significant decisions affecting a joint venture
must be jointly agreed to by MGIC and Enhance. In general, each has a right of
first refusal for proposed transfers of the other's interest, a right to join in
a sale of the other's interest, and a right to cause the joint venture to be
sold to a third party if one of them declines to purchase the other's interest.
The disclosure above is for informational purposes only. Mr. Gross
indicated he did not believe that he had an indirect material interest in these
matters which would require disclosure of them under the rules of the Securities
and Exchange Commission.
13
17
EXECUTIVE COMPENSATION
The following tables provide information concerning compensation, stock
option awards and aggregated stock option exercises as they relate to the Chief
Executive Officer and the four other most highly compensated executive officers
of the Company or of its principal subsidiary, Mortgage Guaranty Insurance
Corporation ("MGIC") in 2000. The Company's retirement benefits are also
described below.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- -------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
COMPENSATION AWARDS STOCK COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(2) ($)(3) OPTIONS(#) ($)(4)
- --------------------------- ---- --------- -------- ------------ ---------- ---------- ------------
Curt S. Culver 2000 463,482 633,339 1,230 316,661 150,000 59,105
President and Chief 1999 419,252 566,678 766 283,322 175,000 62,052
Executive Officer 1998(1) 335,165 315,000 2,534 -0- -0- 33,832
J. Michael Lauer 2000 277,710 280,046 979 139,954 50,000 28,974
Executive Vice President 1999 267,585 270,009 820 135,000 25,000 28,485
and Chief Financial 1998(1) 264,462 234,000 1,360 -0- -0- 28,612
Officer
Lawrence J. Pierzchalski 2000 243,846 245,026 417 122,474 50,000 33,621
Executive Vice President- 1999 238,789 240,029 360 119,971 25,000 33,122
Risk Management 1998(1) 241,269 211,500 1,321 -0- -0- 43,503
James S. MacLeod 2000 235,692 238,057 475 118,943 50,000 53,120
Executive Vice President- 1999 226,061 182,442 391 91,158 25,000 52,657
Field Operations 1998(1) 225,577 154,000 1,179 -0- -0- 52,800
Jeffrey H. Lane 2000 208,846 210,006 917 104,994 37,500 10,100
Senior Vice President and 1999 202,577 164,007 718 81,993 20,000 9,600
General Counsel 1998(1) 199,731 129,500 783 -0- -0- 9,600
- ---------------
(1) Reflects one extra pay period for 1998.
(2) The amounts shown in this column represent reimbursements for the payment of
taxes related to income imputed in connection with the Supplemental Executive
Retirement Plan referred to below. Other Annual Compensation for the years shown
in the table does not include perquisites and other personal benefits because
the aggregate amount of such compensation for each of the named individuals in
each year did not exceed the lesser of (a) $50,000 or (b) 10% of the combined
salary and bonus for the named individual in each year.
(3) For 2000, the amounts shown in this column are the New York Stock Exchange
closing price on the date of the award of $57.88, multiplied by the number of
shares as follows: Mr. Culver--5,471; Mr. Lauer--2,418; Mr. Pierzchalski--2,116;
Mr. MacLeod--2,055; and Mr. Lane--1,814. For 1999, the amounts shown are the New
York Stock Exchange closing price on the date of award multiplied by the number
of shares. All shares vest on the first anniversary of the award. Dividends are
paid on the restricted shares.
(4) The 2000 amounts included in All Other Compensation consist of:
14
18
VALUE OF SPLIT
PROFIT MATCHING DOLLAR
SHARING 401(k) LIFE INSURANCE TOTAL OTHER
NAME CONTRIBUTIONS CONTRIBUTIONS PREMIUMS(a) COMPENSATION(b)
- ---- ------------- ------------- -------------- ---------------
Curt S. Culver $8,500 $1,600 $46,538 $59,105
J. Michael Lauer 8,500 1,600 18,874 28,974
Lawrence J. Pierzchalski 8,500 1,600 23,521 33,621
James S. MacLeod 8,500 1,600 43,020 53,120
Jeffrey H. Lane 8,500 1,600 -0- 10,100
- ---------------
(a) The amount shown represents the full dollar amount paid by or on behalf of
MGIC for the whole life portion of the split-dollar life insurance. The premium
attributed to the term portion of such insurance was paid by the named executive
officers. MGIC will be reimbursed for premiums paid upon the officer's
termination of employment.
(b) Includes supplemental long term disability insurance premiums paid on behalf
of Mr. Culver of $2,467.
- --------------------------------------------------------------------------------
OPTION GRANTS IN 2000
INDIVIDUAL GRANTS(1)
--------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE VALUE($)(2)
- ---- ---------- ------------ -------------- ---------- -----------
Curt S. Culver 150,000 15.72 45.375 1/26/2010 3,343,050
J. Michael Lauer 50,000 5.24 45.375 1/26/2010 1,114,350
Lawrence J. Pierzchalski 50,000 5.24 45.375 1/26/2010 1,114,350
James S. MacLeod 50,000 5.24 45.375 1/26/2010 1,114,350
Jeffrey H. Lane 37,500 3.93 45.375 1/26/2010 835,763
- ---------------
(1) The options vest on each of the next five anniversaries of the January 26,
2000 grant date if the Company's earnings per share are at least 10% more than
its earnings per share for the immediately preceding fiscal year. The rate at
which the options vest is the percent that the Company's earnings per share for
that year is of $31.21. Any portion of the options remaining unvested on January
26, 2005 will become vested on January 26, 2009 if the executive is then
employed by the Company.
(2) Grant date present values were determined under the Black Scholes option
pricing model using the following assumptions: expected stock price volatility
of 0.3322; all options are exercised at the end of the seventh year of the
option term; a dividend yield of 0.15%; and a risk-free rate of return of 6.76%,
which was the yield on a U.S. Government Zero Coupon Bond with a maturity equal
to the term of the grant. No adjustments are made for risk of forfeiture or non-
transferability. Determining the grant date present value by use of this model
is permitted by rules of the Securities and Exchange Commission; however, use of
this model does not constitute an endorsement or an acknowledgement that such
model can accurately determine the value of options. The actual value realized
from an option will be measured by the difference between the stock price and
the exercise price on the date the option is exercised.
15
19
AGGREGATED OPTION EXERCISES IN 2000 AND YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 2000 AT DECEMBER 31, 2000(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME DURING 2000(#) ($)(1) (#) (#) ($) ($)
- ---- --------------- -------- ----------- ------------- ----------- -------------
Curt S. Culver 50,000 1,882,950 217,000 348,000 7,513,825 9,033,675
J. Michael Lauer 150,000 7,204,177 134,760 100,240 5,794,435 2,468,065
Lawrence J. Pierzchalski 50,000 2,477,503 92,760 100,240 3,618,310 2,468,065
James S. MacLeod 56,000 2,722,252 94,760 100,240 3,721,935 2,468,065
Jeffrey H. Lane -0- -0- 57,320 80,180 1,806,420 2,013,424
- ---------------
(1) Value realized is the market value at the close of business on the date
immediately preceding the date of exercise less the exercise price.
(2) Value is based on the closing price of $67.4375 for the Common Stock on the
New York Stock Exchange at year-end 2000, less the exercise price.
- --------------------------------------------------------------------------------
PENSION BENEFITS
The Company maintains a Pension Plan for the benefit of substantially all
employees of the Company and maintains a Supplemental Executive Retirement Plan
(the "Supplemental Plan") for designated employees, including executive
officers. The Supplemental Plan provides benefits that cannot be provided by the
Pension Plan because of limitations in the Internal Revenue Code on benefits
that can be provided by a qualified pension plan, such as the Company's Pension
Plan.
Under the Pension Plan and the Supplemental Plan taken together, the
executive officers named above earn an annual pension credit for each year of
employment equal to 2% of the officer's eligible compensation for that year. At
retirement, in general, the annual pension credits are added together to
determine the employee's accrued pension benefit. However, the annual pension
credits for service prior to 1998 for each employee with at least five years of
vested service on January 1, 1998 will generally be equal to 2% of the
employee's average eligible compensation for the five years ended December 31,
1997. Eligible employees with credited service for employment prior to October
31, 1985 also receive a past service benefit, which is generally equal to the
difference between the amount of pension the employee would have been entitled
to receive for service prior to October 31, 1985 under the terms of a prior plan
had such plan continued, and the amount the employee is actually entitled to
receive under an annuity contract purchased when the prior plan was terminated.
Retirement benefits vest on the basis of a graduated schedule over a
seven-year period of service. Full pension benefits are payable upon retirement
at or after age 65 (age 62 if the employee has completed at least seven years of
service), and reduced benefits are payable beginning at age 55. The estimated
annual benefits payable upon retirement at age 62 to Messrs. Culver, Lauer,
Pierzchalski, MacLeod and Lane under the Pension Plan and the Supplemental Plan
taken together, based on pension benefits earned through December 31, 2000 and
an annual compensation increase of 3%, are $485,226, $152,051, $261,682,
$170,504 and $153,160, respectively.
CHANGE OF CONTROL AGREEMENTS
Each of Messrs. Culver, Lauer, Pierzchalski, MacLeod and Lane is a party to
a Key Executive Employment and Severance Agreement with the Company (a "KEESA").
If a change in control of the Company occurs and the executive's employment is
terminated within three years after the change in control (this three-year
period is referred to as the "employment period"), other than for cause or
disability, or if the executive terminates his employment for good reason, the
executive is entitled to a lump sum termination payment equal to twice the sum
of his annual base salary, his maximum bonus award and an amount for pension
accruals and profit
16
20
sharing and matching contributions. If the employment termination occurs during
the employment period but more than three months after the change in control,
the termination payment is reduced. The executive is also entitled to certain
other benefits and the continuation of medical and other specified employee
benefits during the remainder of the employment period. The KEESA provides that
all unvested stock options and restricted stock become fully vested at the date
of the change in control. If the excise tax under Section 280G of the Internal
Revenue Code would apply to the benefits provided under the KEESA, the executive
is entitled to receive a payment so that he is placed in the same position as if
the excise tax did not apply.
While the executive is employed during the employment period, the executive
is entitled to a base salary no less than the base salary in effect prior to the
change in control and to a bonus opportunity of no less than 75% of the maximum
bonus opportunity in effect prior to the change in control. The executive is
also entitled to participate in medical and other specified benefits.
The terms "change in control of the Company," "cause," "disability" and
"good reason" are defined in the KEESA. The Company has entered into the same or
similar agreements with 37 other officers.
OTHER INFORMATION
The Company has an agreement with Northwestern Mutual Investment Services,
LLC, a subsidiary of Northwestern Mutual (the "NML subsidiary"), pursuant to
which the NML subsidiary was retained to manage specified accounts in the
Company's long-term investment portfolio, and to provide accounting and
reporting services to the Company. The agreement may be canceled by the Company
upon 90 days prior written notice and by the NML subsidiary upon 180 days prior
written notice. The Company paid the NML subsidiary $1,056,459 in fees during
2000 under the agreement. The Company believes the terms of the agreement are no
less favorable to the Company than could have been obtained from an unaffiliated
third party. It is expected that the Company will continue to use the services
of the NML subsidiary during 2001.
During 2000, MGIC purchased disability coverage for its employees from
Northwestern Mutual and MGIC paid Northwestern Mutual an aggregate of $281,492
in premiums for such coverage. Also during 2000, MGIC paid an aggregate of
$229,002 to Northwestern Mutual in split-dollar life insurance premiums for the
whole life portion of the life insurance coverage issued by Northwestern Mutual
on Messrs. Culver, Lauer, Pierzchalski and MacLeod and three other employees
pursuant to a split-dollar collateral assignment program. In each case, the
premiums paid were determined by Northwestern Mutual's published rates and the
split-dollar life insurance premiums will be repaid to MGIC upon the termination
of employment of each insured person.
Pursuant to a Common Stock Purchase Agreement entered into in 1984 between
the Company and Northwestern Mutual, Northwestern Mutual has the right under
certain conditions to require the Company to file a registration statement under
the Securities Act of 1933 for the sale of its shares of the Company's Common
Stock, or to participate in a registration of Common Stock otherwise initiated
by the Company. The Company is generally required to pay all costs associated
with any such registration (other than applicable underwriting commissions and
discounts) and to indemnify Northwestern Mutual against certain liabilities
under the Securities Act of 1933.
During 2000, MGIC and other subsidiaries of the Company provided mortgage
insurance and other services to, or received services from, unaffiliated
companies of which certain non-employee directors were executive officers,
directors or 10% or greater equity owners. These transactions were made in the
ordinary course of business and are not considered material to the Company, nor
are they required to be disclosed under the rules of the Securities and Exchange
Commission. Similar transactions are expected in 2001.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of the Company's Common Stock (other than certain investment advisers
with respect to shares held for third parties), to file reports of their
beneficial ownership of Company stock and changes in stock ownership with the
Securities and Exchange Commission and the New York Stock Exchange. Based upon
copies of the reports furnished to the Company and statements by the executive
officers, directors and greater than ten percent beneficial owners subject to
Section 16(a), the Company believes that all
17
21
Section 16(a) forms were timely filed in 2000, except for one report prepared by
the Company on behalf of Patrick Sinks, a Senior Vice President of the Company,
which reported the exercise of an option, but inadvertently failed to report the
sale of the option shares on the same date. The error was corrected in an
amended report prepared by the Company on behalf of Mr. Sinks.
ITEM 2 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed the accounting firm of PricewaterhouseCoopers LLP ("PwC") as
independent accountants of the Company for the fiscal year ending December 31,
2001. The shareholders are being asked to ratify this appointment at the Annual
Meeting. A representative of PwC is expected to attend the meeting and will be
given an opportunity to make a statement and respond to appropriate questions.
SHAREHOLDER VOTE REQUIRED
The affirmative vote of a majority of the votes cast on this matter is
required for the ratification of the appointment of PwC as independent
accountants. Abstentions and "broker non-votes" will not be counted as "votes
cast."
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PWC AS INDEPENDENT ACCOUNTANTS. THE SHARES WILL BE VOTED FOR
RATIFICATION, UNLESS INDICATED OTHERWISE ON THE PROXY.
OTHER MATTERS
SHAREHOLDER PROPOSALS
Any shareholder who wants to include a proposal in the proxy material for
the Company's 2002 Annual Meeting must submit the proposal to the Company on or
before November 26, 2001. The rules of the Securities and Exchange Commission
also establish other requirements for shareholder proposals of this type.
Under the Company's Bylaws, a shareholder who wants to bring business
before the Annual Meeting of Shareholders, other than a proposal included in the
Company's proxy material, or who wants to nominate directors at the Annual
Meeting must satisfy the following requirements: (1) be a shareholder of record
entitled to vote at the Annual Meeting and also be a shareholder of record at
the time the following notice is given; and (2) give notice to the Company's
Secretary in writing that is received at the Company's principal offices not
less than 45 days nor more than 70 days before the first anniversary of the date
set forth in the Company's proxy statement for the prior Annual Meeting as the
date on which the Company first mailed such proxy materials to shareholders. For
the 2002 Annual Meeting, the relevant dates are no later than February 9, 2002
and no earlier than January 15, 2002.
In the case of business other than nominations for directors, the notice
must, among other requirements, briefly describe such business, the reasons for
conducting the business and any material interest of the shareholder in such
business. In the case of director nominations, the notice must, among other
requirements, give various information about the nominees, including information
that would be required to be included in a proxy statement of the Company had
each such nominee been proposed for election by the Board of Directors of the
Company.
MANNER AND COST OF PROXY SOLICITATION
The cost of soliciting proxies will be paid by the Company. In addition to
soliciting proxies by mail, employees of the Company may solicit proxies by
telephone, facsimile or personal interview. The Company also has engaged D.F.
King & Co., Inc. to provide proxy solicitation services for a fee of $7,000,
plus expenses, including charges by brokers and other custodians, nominees and
fiduciaries to forward proxy soliciting material to the beneficial owners of the
Company's Common Stock.
OTHER BUSINESS
At the date of mailing of this Proxy Statement, the Board of Directors knew
of no other business to be presented at the Annual Meeting. Under the Company's
Bylaws as described under "Other Matters -- Shareholder Proposals," because no
notice of any other business was given to the Company, no business may be
brought before the Annual Meeting by a shareholder.
18
22
EXHIBIT A
MGIC INVESTMENT CORPORATION
AUDIT COMMITTEE CHARTER
STRUCTURE
The Audit Committee shall be comprised of three or more directors as
determined by the Board of Directors, each of whom shall be independent
directors as defined by the New York Stock Exchange. All members of the
Committee shall have the ability to read and understand fundamental financial
statements, and at least one member of the Committee shall have accounting or
related financial management expertise (which may include being or having been a
CEO or other senior officer with financial oversight responsibilities).
The members of the Committee shall be appointed annually by the Board, and
the Board shall appoint one of the members as Chairperson for the Committee.
AUTHORITY
The Audit Committee shall have unrestricted access to any Company activity
within the scope of its duties and responsibilities. The Committee shall have
direct access to the independent accountants and internal auditors and is
empowered to retain persons from within (or, in special circumstances, outside)
the Company having special competence as necessary in its judgment to perform
special investigations and assist the Committee in fulfilling its necessary
responsibilities enumerated in this charter.
RESPONSIBILITIES
The Audit Committee has been established by the Board of Directors to
assist the Board in carrying out its oversight responsibilities in connection
with the Company's accounting policies and financial reporting practices,
internal controls, audit process, and certain compliance matters. It is
recognized, however, that the ultimate responsibility for the fairness of the
Company's financial statements rests with the Company's management, and that the
independent accountants are intended to be the primary check on management's
performance in this regard. Subject to these considerations, the Audit Committee
shall:
- Oversee the Company's accounting and financial reporting practices.
- Oversee the Company's processes for assessing risks (other than those
reviewed by the Risk Management and Securities Investment Committees of
the Board) and the system of internal controls in place to manage the
risks.
- Oversee the Company's processes for monitoring compliance with laws,
regulations and its Code of Business Conduct.
- Oversee the internal audit function and the independent accountants.
- Serve as a focal point for communication between the Board, the
independent accountants, the internal auditors, and the Company's
financial management.
MEETINGS
The Committee shall seek to meet six times annually (four quarterly
meetings, one telephonic meeting to review the annual earnings release prior to
release to the public, and one telephonic meeting to review Management's
Discussion and Analysis). The Internal Audit Director will act as Committee
Secretary and prepare minutes of the meetings. After the minutes are approved by
the Committee, a copy will be sent to the Secretary of the Company for filing in
the Company's minute books. The approved minutes of the Committee, as is the
case with the minutes of all of the Committees of the Board, are available for
review by any interested Director.
The internal auditors, independent accountants and representatives of
management may meet alone with the Committee and have the authority and are
expected to contact the Committee on any matters requiring its attention. As
necessary or desirable, the Chairperson may request that members of management,
the Internal Audit Director and representatives of the independent accountants
be present at Committee meetings.
A-1
23
DUTIES
In meeting its responsibilities, the Audit Committee shall perform the
duties listed below. The degree of effort that the Committee devotes to the
performance of any particular duty shall be determined in the judgment of the
Committee. It is expressly recognized that, unless the Committee decides
otherwise, some duties need not be performed each year.
1. Review and update this charter, at least annually, as conditions
dictate. Submit the charter to the Board of Directors for approval and
have the charter included in the Company's proxy statement at least
once every three years in accordance with SEC regulations.
2. The independent accountants are ultimately accountable to the Board of
Directors and the Audit Committee. Therefore, the Audit Committee shall
recommend to the Board the appointment of the independent accountants
(subject to ratification by the shareholders), assess the performance
of the independent accountants, and, if appropriate, recommend to the
Board the discharge of such firm.
3. Review the audit services/fees and any material non-audit services/fees
to be performed by the independent accountants.
4. Obtain a formal written statement annually from the independent
accountants delineating all relationships between the independent
accountants and the Company, discuss with the independent accountants
any disclosed relationships or services that may impact the objectivity
and independence of the independent accountants, and take, or recommend
that the Board take, appropriate action to satisfy itself of the
independence of the independent accountants. Review any other matters
of which the Committee becomes aware which would impair the
independence of the independent accountants.
5. Review the proposed audit scope and approach of the independent
accountants for the annual financial statement examination.
6. After completion of the annual independent audit, review with the
independent accountants the results of the audit and discuss certain
matters required to be communicated to audit committees in accordance
with SAS 61. Consider the independent accountants' judgments regarding
the quality and appropriateness of the Company's accounting principles
as applied in its financial reporting.
7. Review the financial information included in the annual earnings
release with management and the independent accountants prior to
release to the public. Review the material portions of the annual
financial statements, including Management's Discussion and Analysis,
with management and the independent accountants prior to filing of the
Company's Form 10-K. Recommend to the Board of Directors that the
audited financial statements be included in the Company's Annual Report
on Form 10-K.
8. Review the material activities of the internal audit function,
including:
- The appointment or dismissal of the Internal Audit Director.
- Internal Audit's charter.
- Internal Audit's annual audit plan and changes thereto, and
coordination with the independent accountants.
- Any difficulties encountered in the course of their audits, including
any restrictions on the scope of work performed or access to required
information.
- Internal Audit's independence and effectiveness.
- Internal Audit's resources and expertise.
- Corrective actions taken by management to address the findings and
recommendations of the internal auditors.
9. Review the Company's processes for assessing risks (other than those
reviewed by the Risk Management and Securities Investment Committees of
the Board) and the effectiveness of the Company's system of internal
controls in place to manage the risks through a review of the reports
of the independent accountants and the internal auditors, and
discussions with management, the Internal Audit Director, and the
independent accountants.
A-2
24
10. The Chairperson will review the financial information included in the
quarterly earnings release with management prior to release to the
public. The Committee will discuss with the independent accountants
certain matters required to be communicated to audit committees in
accordance with SAS 61 prior to the Company's filing of Form 10-Q.
11. Review significant reports of examinations made by regulatory agencies
and management's responses thereto.
12. Review with management and the independent accountants significant
accounting and financial reporting developments and their impact on the
Company's financial statements.
13. Review with management the adequacy of statements of policy regarding
conflicts of interest and business conduct, the means used to monitor
compliance and address exceptions, and the results of the monitoring
programs.
14. Review with the Company's counsel and compliance officer the processes
for monitoring compliance with laws and regulations, and review any
legal, regulatory and compliance matters that could have a material
impact on the Company's financial statements.
15. Review the policies, procedures and audit results associated with
officers' expenses.
16. Annually prepare a report to shareholders as required by the SEC that
is included in the Company's annual proxy statement.
17. Report after each Committee meeting a summary of the Committee's
activities to the full Board of Directors.
18. Perform any other activities consistent with this charter as the
Committee or the Board deems necessary or appropriate.
A-3
25
MGIC INVESTMENT CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 10, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MGIC INVESTMENT CORPORATION
The undersigned hereby appoints CURT S. CULVER and SHELDON B. LUBAR, and either one of them, as proxy and attorney-in-fact of
the undersigned, with full power of substitution, to represent and vote as designated below, all shares of Common Stock of MGIC
Investment Corporation which the undersigned is entitled to vote at the Annual Meeting of Shareholders of such Corporation to be
held in Vogel Hall, Marcus Center for the Performing Arts, 123 East State Street, Milwaukee, Wisconsin, on Thursday, May 10, 2001,
9:00 a.m. Central Time, and at any adjournment.
THIS PROXY, WHEN PROPERLY SIGNED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED BELOW BY THE UNDERSIGNED
SHAREHOLDER. IF NO CHOICES ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN ITEM 1 AND FOR ITEM 2.
The undersigned acknowledges receipt of the Annual Report of the Corporation and the Notice of the Annual Meeting and
accompanying Proxy Statement of the Corporation.
\/ DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED \/
------ -------
| |
| |
| |
MGIC INVESTMENT CORPORATION 2001 ANNUAL MEETING
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED IN ITEM 1 AND FOR ITEM 2.
1. ELECTION OF DIRECTORS: 1 - JAMES A. ABBOTT 2 - THOMAS M. HAGERTY [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
3 - SHELDON B. LUBAR listed to the left to vote for all
(except as specified nominees listed to
below). the left.
-------------------------
(Instructions: To withhold authority to vote for any indicated nominee, write the number(s) -------> [ ]
of the nominee(s) in the box provided to the right.) -------------------------
2. Ratify the appointment of PricewaterhouseCoopers LLP as the independent accountants of
the Corporation. [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In his discretion, each Proxy is authorized to vote upon such other business as may properly come before the meeting or any
adjournment.
Date NO. OF SHARES
----------------------
Check appropriate box
Indicate changes below:
Address Change? [ ] Name Change? [ ] ------------------------------------------
| |
| |
| |
| |
------------------------------------------
SIGNATURE(S) IN BOX
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ABOVE. JOINT OWNERS SHOULD EACH
SIGN PERSONALLY. A CORPORATION SHOULD SIGN
FULL CORPORATE NAME BY DULY AUTHORIZED
OFFICERS AND AFFIX CORPORATE SEAL. WHEN
SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, GIVE
FULL TITLE.