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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
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
EMC INSURANCE GROUP INC.
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(Name of Registrant as Specified in Its Charter)
EMC INSURANCE GROUP INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
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(4) Proposed maximum aggregate value of transaction:
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/ / 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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1Set forth the amount on which the filing fee is calculated and state how it was
determined.
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[COPYWHITE]
April 27, 1995
Dear Stockholder,
I am pleased to extend to you my personal invitation to attend the 1995
Annual Meeting of Stockholders of EMC Insurance Group Inc. (the "Company") on
May 25, 1995 at 10:00 A.M. at the offices of the Company at 717 Mulberry Street,
Des Moines, Iowa 50309.
The accompanying Notice of Annual Meeting and Proxy Statement contains a
description of the formal business to be acted upon by the stockholders. At the
meeting, I intend to discuss the Company's 1994 performance and its plans for
1995. Certain members of the Company's Board of Directors and Officers of the
Company, as well as representatives of KPMG Peat Marwick LLP, the Company's
independent accountants, will be available to answer any questions you may have.
While I am looking forward to seeing you at the meeting, it is very
important that those of you who cannot personally attend assure that your shares
be represented. I urge you, therefore, to sign and date the enclosed form of
proxy and return it promptly in the accompanying envelope. If you attend the
meeting, you may, if you wish, withdraw any proxy previously given and vote your
shares in person.
Sincerely,
Bruce G. Kelley
President & CEO
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EMC INSURANCE GROUP INC.
NOTICE OF
1995 ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 1995
TO THE STOCKHOLDERS OF EMC INSURANCE GROUP INC.:
Notice is hereby given that the Annual Meeting of the Stockholders of EMC
Insurance Group Inc. (the "Company"), an Iowa corporation, will be held on
Thursday, May 25, 1995 at 10:00 a.m. local time, at the Company's offices, 717
Mulberry Street, Des Moines, Iowa for the following purposes:
1. To elect a Board of Directors;
2. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent certified public accountants for the current fiscal year;
and
3. To transact such other business as may come before the meeting or any
adjournment thereof.
Each share of the Company's Common Stock will be entitled to one vote upon
all matters described above. Stockholders of record at the close of business on
April 4, 1995 will be entitled to notice of and to vote at the meeting. The
stock transfer books of the Company will not be closed.
April 27, 1995
BY ORDER OF THE BOARD OF DIRECTORS
PHILIP T. VAN EKEREN, Secretary
PLEASE VOTE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY. AN
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED
FOR YOUR CONVENIENCE.
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EMC INSURANCE GROUP INC.
717 MULBERRY STREET
DES MOINES, IOWA 50309
PROXY STATEMENT
1995 ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 1995
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of EMC Insurance Group Inc. (the "Company") of proxies
from the holders of the Company's $1.00 par value Common Stock (the "Common
Stock") for use at the 1995 Annual Meeting of Stockholders to be held on May 25,
1995, and at any adjournment thereof (the "Annual Meeting").
This proxy statement, the accompanying form of proxy and the Company's 1994
Annual Report to Stockholders are first being sent to the Company's stockholders
on or about April 27, 1995.
The accompanying proxy may be revoked by the person giving it at any time
prior to its being voted; such revocation may be accomplished by a letter, or by
a properly signed proxy bearing a later date, filed with the Secretary of the
Company prior to the Annual Meeting. If the person giving the proxy is present
at the meeting and wishes to vote in person, he or she may withdraw his or her
proxy at that time.
The Company has borne all costs of solicitation of proxies. In addition to
solicitation by mail, there may be incidental personal solicitations made by
directors, officers, and regular employees of the Company, its parent, Employers
Mutual Casualty Company ("Employers Mutual") and their subsidiaries. The cost of
solicitation, including payments to nominees who at the request of the Company
mail such material to their customers, will be borne by the Company.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDER
All stockholders of record of the Common Stock at the close of business on
April 4, 1995 are entitled to notice of and to vote at the Annual Meeting. The
vote of a majority of the shares voted at the Annual Meeting, at which a quorum
is present, is required to elect the Directors and to approve the other
proposals presented at the Annual Meeting. At the close of business on April 4,
1995, there were 10,642,364 shares of outstanding Common Stock, each entitled to
one vote per share on all matters to be voted upon at the Annual Meeting. The
Company's stockholders do not have cumulative voting rights. Abstentions and
broker non-votes will be treated as shares that are present and entitled to vote
for purposes of determining the presence of a quorum, but as unvoted for
purposes of determining the approval of any matter submitted to the shareholders
for a vote.
On April 4, 1995, Employers Mutual, 717 Mulberry Street, Des Moines, Iowa,
owned 7,150,747 shares, or approximately 67 percent of the outstanding Common
Stock of the Company. Employers Mutual intends to retain ownership of a majority
of the Company's Common Stock at all times in the future. This majority stock
ownership will give Employers Mutual the right to determine whether or not all
of the proposals presented at the Annual Meeting are carried and will give it
the right to elect all of the directors of the Company. The Company is aware of
no other stockholder who owns more than five (5) percent of the Company's Common
Stock.
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The Company's operations are interrelated with the operations of Employers
Mutual and are largely dependent upon a continuing relationship with Employers
Mutual. The Company does not anticipate any disruptions in this relationship.
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, the stockholders will elect a board of seven
directors to serve for terms extending until the 1996 Annual Meeting of
Stockholders and until their respective successors are duly elected and
qualified. Proxies in the accompanying form which are received by the management
of the Company in response to this solicitation will, unless contrary
instructions are given therein, be voted in favor of the seven nominees for
director listed in the table below. The Board of Directors of the Company has no
reason to believe that any of such nominees may not be available to serve or
will not serve as a director if elected; however, if any nominee is not so
available at the time of the election, the proxies may be voted in the
discretion of the persons named therein for the election of a substitute
nominee.
Robb B. Kelley, Director and Chairman of the Board of the Company since its
founding in 1974, resigned from those offices during 1994. Mr. Kelley had been
Chief Executive Officer of the Company since its inception and until he retired
from active employment in 1992. He has also served as Chairman, Chief Executive
Officer and President of Employers Mutual during many of his 56 years of service
to that company. Mr. Kelley's vast knowledge and experience will be greatly
missed by the Board and the Company.
Therese M. Vaughan, who had served the Company as a Director since 1992,
also resigned from the Board in 1994 in order to accept appointment to the
office of Commissioner of Insurance for the State of Iowa.
The table below contains certain information with respect to the Board of
Directors' nominees for election as directors.
DIRECTOR POSITION WITH
NAME AGE SINCE THE COMPANY
- ------------------------------------ --- -------- -----------------------------------------------
George C. Carpenter III............. 67 1981 Director
Elwin H. Creese..................... 63 1994 Senior Vice President, Treasurer and Director
David J. Fisher..................... 58 1985 Director
Bruce G. Kelley..................... 41 1991 President, Chief Executive Officer and Director
George W. Kochheiser................ 69 1974 Chairman of the Board and Director
Raymond A. Michel................... 69 1981 Director
Fredrick A. Schiek.................. 60 1994 Executive Vice President, Chief Operating
Officer and Director
George C. Carpenter III was Executive Director of Iowa Public Television
from November 1985 until his retirement in April 1993. During the period from
1984 through 1985 he was Vice President of Palmer Communications and prior to
that he was Vice President and General Manager of WHO Broadcasting Company, a
division of Palmer Communications. He was employed by WHO Broadcasting Company
for 20 years.
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Elwin H. Creese has been Senior Vice President and Treasurer of the Company
and of Employers Mutual since 1993. He was Vice President and Treasurer of the
Company and of Employers Mutual from 1985 until 1993. Mr. Creese has been
employed by Employers Mutual since 1984.
David J. Fisher has been Chairman of the Board and President of Onthank
Company, a Des Moines based wholesale distributor of floor, window and wall
covering products, since 1978. He is a member of the Board of Directors of the
Greater Des Moines YMCA, the Iowa Lutheran Hospital Foundation, the University
of Iowa Foundation, Liberty Savings Bank and the State of Iowa Terrace Hill
Commission. Mr. Fisher also serves as Chairman of the Governor's Committee on
Government Spending Reform.
Bruce G. Kelley is President and Chief Executive Officer of the Company and
of Employers Mutual, since 1992. He was President and Chief Operating Officer of
the Company and of Employers Mutual from 1991 to 1992 and was Executive Vice
President of both companies from 1989 to 1991. Mr. Kelley has been employed with
Employers Mutual since 1985 and a director of that company since 1984. He is a
Director of Brenton Bank, N.A. of Des Moines.
George W. Kochheiser is Chairman of the Board, since 1994, and was
President and Chief Operating Officer of the Company and of Employers Mutual,
from 1982 until his retirement in 1991. Mr. Kochheiser also serves as a Director
of Employers Mutual and had been an employee of that company since 1949.
Raymond A. Michel is a member of the Board of Directors of Koss
Construction Company, a highway and airport construction firm, and was its
Chairman and Chief Executive Officer from 1972 until his retirement in 1989. He
has been affiliated with that company in one capacity or another since 1955.
Fredrick A. Schiek has been Executive Vice President and Chief Operating
Officer of the Company and of Employers Mutual since 1992. He was Vice President
of Employers Mutual from 1983 until 1992. Mr. Schiek has been employed with
Employers Mutual since 1959.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 1994, the Board of Directors of the
Company held four regular meetings. In 1994, each member of the Board of
Directors attended at least 75 percent of the aggregate of (i) the total number
of meetings of the Board of Directors held and (ii) the total number of meetings
held by all committees of the Board of Directors on which they served.
The Board of Directors has an Executive Committee and the members are Bruce
G. Kelley, Fredrick A. Schiek and George W. Kochheiser. The Executive Committee
did not meet during the year ended December 31, 1994. The Executive Committee
has authority to exercise all of the authority of the Board of Directors when
the Board is not in session, with the exception of certain actions which, under
Iowa law and the By-Laws, require Board action; these include amending the
Company's Articles of Incorporation, declaring dividends, adopting a plan of
merger or consolidation of the Company, appointing or removing executive
officers, designating candidates for election as directors or filling director
vacancies, approving or recommending to the Company's stockholders a voluntary
dissolution or revocation of its Charter, or amending the Company's By-Laws.
The Board has an Audit Committee, the members of which are George C.
Carpenter III, David J. Fisher and Raymond A. Michel. The Audit Committee held
two meetings in 1994. The Committee met with management and the independent
auditors in connection with its review of matters relating to the Company's
annual financial statements and the Company's system of internal accounting
controls. The Committee met
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with the Company's independent auditors and internal auditors, with and without
management present, to discuss appropriate matters.
The Board has an Investment Committee, the members of which are Bruce G.
Kelley, Elwin H. Creese and George W. Kochheiser. The Committee has the
authority to monitor the investments of the Company and to make decisions on the
appropriateness of the types of securities accounts held, the amount of Company
funds to be allocated to each and when funds should be transferred from one
account to another, when it is deemed to be in the best interest of the Company.
The Investment Committee did not meet during 1994; however, the Investment
Committees of the Company's property and casualty subsidiaries held numerous
meetings during the year with respect to their individual portfolios.
An Inter-Company Committee was established in 1984 by mutual agreement of
the Boards of Directors of the Company and Employers Mutual. The three members
of the Board's Audit Committee also serve as the members of the Inter-Company
Committee. Employers Mutual is represented on the Inter-Company Committee by
three members of its Board of Directors. The primary responsibility of the
Inter-Company Committee is to review all major transactions between the two
entities. The Inter-Company Committee held one meeting during 1994.
The Board of Directors does not have a standing nominating committee. The
functions that would normally be performed by such a committee are carried on by
the Board of Directors as a whole.
DIRECTORS' COMPENSATION
In 1994, each member of the Company's Board of Directors who was not an
officer or employee of the Company was entitled to $800 for each board meeting
or committee meeting attended, plus expenses, and a $8,000 annual fee payable
irrespective of attendance at meetings. If two or more committee meetings are
held on one day, the maximum fee permitted is $800, except in the event of an
Audit Committee meeting and an Inter-Company Committee meeting being held on the
same day in which case two meeting fees are paid. Also, when a committee meeting
is held on the same day as a board meeting, the maximum fee paid is $800.
SECURITY OWNERSHIP OF MANAGEMENT
The following information is furnished as to the Common Stock of the
Company owned beneficially as of April 4, 1995, by each of the Company's
directors and nominees and by each executive officer of Employers Mutual. The
information concerning beneficial ownership has been furnished by the persons
listed below or
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was determined by the Company from reports filed by such persons with the
Securities and Exchange Commission regarding such ownership.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OWNERSHIP (1) OF CLASS
----------------- --------
George C. Carpenter III........................................... 3,484 (2)
Elwin H. Creese................................................... 22,889(3) (2)
David J. Fisher................................................... 1,261 (2)
Bruce G. Kelley................................................... 177,555(4) 1.7%
George W. Kochheiser.............................................. 46,162 (2)
Raymond A. Michel................................................. 4,000 (2)
Fredrick A. Schiek................................................ 21,488(5) (2)
John D. Isenhart.................................................. 20,588(6) (2)
Philip T. Van Ekeren.............................................. 21,872(7) (2)
All Directors and Executive Officers as a Group(11 persons,
including
those listed above)............................................. 354,241 3.3%
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(1) All named holders of the Common Stock listed in this table have sole voting
and investment power with respect to the shares held, except as stated
otherwise below.
(2) The percent of shares owned does not exceed one percent of the total shares
of Common Stock outstanding.
(3) Elwin H. Creese directly owns 13,011 shares of Common Stock and has
presently exercisable options to purchase 9,878 shares, which shares are
included in the table. See "Compensation of Management -- Stock Options."
(4) Bruce G. Kelley owns 9,040 shares of Common Stock directly and 118,622
shares indirectly. Of the 118,622 shares indirectly owned, 103,500 are owned
by a limited partnership of which he is a general partner, 11,252 are owned
by his children and he has power of attorney over 3,870 shares owned by an
unrelated party. In addition, he owns presently exercisable options to
purchase 49,893 shares of Common Stock, which shares are included in the
table. See "Compensation of Management -- Stock Options."
(5) Fredrick A. Schiek directly owns 8,578 shares of Common Stock and has
presently exercisable options to purchase 12,910 shares, which shares are
included in the table. See "Compensation of Management -- Stock Options."
(6) John D. Isenhart directly owns 7,378 shares of Common Stock and has
presently exercisable options to purchase 13,210 shares, which shares are
included in the table. See "Compensation of Management -- Stock Options."
(7) Philip T. Van Ekeren directly owns 8,672 shares of Common Stock and has
presently exercisable options to purchase 13,200 shares, which shares are
included in the table. See "Compensation of Management -- Stock Options."
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COMPENSATION OF MANAGEMENT
The Company has no employees of its own and, consequently, it has no
payroll, no employee benefit plans and no compensation committee of its Board.
Therefore, all compensation and all benefits reported on in this proxy statement
are established by the Employers Mutual Board of Directors or by one or another
of its Committees. Approximately 12 employees of Employers Mutual devote a
portion of their time performing administrative duties for the Company. In
general, during 1994 the Company's business was conducted by employees of
Employers Mutual and of two of the Company's subsidiaries, Illinois EMCASCO
Insurance Company and Farm and City Insurance Company.
Three of the Company's property and casualty insurance subsidiaries, Dakota
Fire Insurance Company, EMCASCO Insurance Company and Illinois EMCASCO Insurance
Company, and two subsidiaries of Employers Mutual, are parties to reinsurance
pooling agreements with Employers Mutual (collectively, the "Pooling
Agreement"). The compensation of Employers Mutual's officers during 1994 was
shared by the Company's property and casualty companies in accordance with their
interests in the pool. Likewise, the compensation of the officers of the
Company's subsidiary companies (exclusive of two subsidiaries) was charged as an
expense to the Pooling Agreement and as such was shared by all of the parties to
the Pooling Agreement in accordance with their interests in the pool. The
compensation paid to officers of Farm and City Insurance Company was not
allocated to the Pooling Agreement and was consequently borne entirely by the
Company.
The participation of the Company's property and casualty insurance
subsidiaries in the Pooling Agreement during 1994 was 22 percent and this
percentage represents the portion of the compensation expenses described below
which were allocated to the Company during the year.
The compensation of the executive officers of Employers Mutual is initially
determined by a Senior Executive Compensation and Stock Option Committee
composed of four members of its Board of Directors, and subsequently approved by
the full Board of Directors of Employers Mutual.
Employers Mutual and its non-life subsidiary companies (including the
Company) collectively had assets that totaled $1,289,722,903 at year-end 1994
and had written premiums of $583,288,995 for the year.
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The following table sets forth information with respect to compensation
paid by Employers Mutual to its Chief Executive Officer and the four next most
highly compensated executive officers for services in all capacities.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION(1) INCENTIVE
-------------------------- OTHER ANNUAL STOCK OPTION ALL OTHER
NAME AND SALARY BONUS COMPENSATION GRANTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(2) (#)(3) ($)(4)
- ------------------------------- ---- ------- ------- ------------ ------------ ------------
Bruce G. Kelley................ 1994 245,237 110,781 10,000 2,294
President & Chief 1993 235,075 90,106 34,000 2,898
Executive Officer 1992 232,759 81,856 4,000 2,807
Frederick A. Schiek............ 1994 182,265 73,152 6,000 5,884
Executive Vice 1993 175,372 59,503 12,000 4,382
President & COO 1992 152,949 46,342 5,000 3,541
1994 133,026 46,708 1,000 3,596
John D. Isenhart............... 1993 127,412 37,921 1,550 3,673
Sr Vice President 1992 122,178 35,115 1,000 3,312
Philip T. Van Ekeren........... 1994 125,985 44,234 1,000 4,591
Sr Vice President 1993 120,743 35,911 2,250 4,520
& Secretary 1992 -- -- -- --
Elwin H. Creese................ 1994 124,910 43,856 1,000 4,342
Sr Vice President 1993 119,902 35,671 2,250 4,092
& Treasurer 1992 113,786 32,701 1,000 3,846
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(1) Compensation deferred at election of executive includable in category and
year earned.
(2) Total of other annual compensation for each of the named executives did not
exceed the reporting thresholds.
(3) All stock options granted were at option prices equal to the fair market
value of the stock on the date of grant, have a term of ten years and vest
at a rate of 20 percent per year commencing in the second year of the term.
(4) The amounts shown for all other compensation include employer matching
contributions to the Employers Mutual 401K Plan and excess group life
insurance premiums. During 1994, contributions to the 401K Plan on behalf of
Messrs. Kelley, Schiek, Isenhart, Van Ekeren and Creese, respectively , were
$1,500, $1,500, $1,500, $1,500 and $1,279. Excess life insurance premiums
paid during 1994 on behalf of Messrs. Kelley, Schiek, Isenhart, Van Ekeren
and Creese were $794, $4,384, $2,096, $3,091 and $3,063, respectively.
STOCK OPTIONS
The following table sets forth details regarding stock options granted to
the named executive officers during 1994. In addition, the table shows the
hypothetical gain, or "option spreads", that would exist for the respective
options. The gains are based on assumed rates of annual compound stock
appreciation of five and
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10 percent over the full term of the options. The stock option plans utilize the
Common Stock of the Company, with the Company receiving the full fair market
value at the date of exercise for all stock issued under the plans.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE
VALUES BASED ON
NUMBER ASSUMED RATES OF
OF % OF EXERCISE STOCK PRICE
OPTIONS TOTAL PRICE APPRECIATION (3)
GRANTED OPTIONS ($/SH) EXPIRATION -----------------
NAME (#) (1) GRANTED (2) DATE 5% ($) 10% ($)
- ---------------------------------------- -------- ------- -------- ---------- ------ -------
Bruce G. Kelley......................... 10,000 15.5 8.81 4/1/04 55,400 140,400
Fredrick A. Schiek...................... 6,000 9.3 8.81 4/1/04 33,240 84,240
John D. Isenhart........................ 1,000 1.6 8.81 4/1/04 5,540 14,040
Philip T. Van Ekeren.................... 1,000 1.6 8.81 4/1/04 5,540 14,040
Elwin H. Creese......................... 1,000 1.6 8.81 4/1/04 5.540 14,040
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(1) All grants of options shown are for ten year terms and the options vest at
20 percent per year commencing on the first anniversary of the grant date.
(2) The exercise price of all options was 100 percent of the fair market value
of the stock on the date of grant.
(3) The potential realizable values indicated are based on the assumption that
the stock price appreciates at the annual rate shown from the date of grant
until the expiration date. These numbers do not reflect the historical
increase in the price of the stock and do not represent the Company's
estimate of future appreciation in the stock price.
The following table sets forth information with respect to the named
executive officers concerning the exercise of stock options during 1994, the
realized gains from those exercises, and the number of unexercised options held
as of December 31, 1994 and the amount of unrealized gains represented by them
on that date.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
YEAR-END (#) YEAR-END ($)
VALUE
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) (1) UNEXERCISABLE UNEXERCISABLE (2)
- ---------------------------------------- --------------- -------- ------------- -----------------
Bruce G. Kelley......................... -- -- 42,693/45,200 45,275/14,108
Frederick A. Schiek..................... -- -- 12,990/20,410 10,962/ 6,353
John D. Isenhart........................ -- -- 11,910/ 4,190 13,284/ 2,126
Philip T. Van Ekeren.................... -- -- 11,900/ 4,750 12,999/ 2,126
Elwin H. Creese......................... -- -- 9,300/ 4,750 9,673/ 2,126
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(1) Value realized is the market value on the date/s of exercise less the
exercise price/s.
(2) The value of unexercised options/SARs is calculated by subtracting the
exercise price/s from the market value of the stock at year-end. The
year-end market value was $9.50.
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RETIREMENT PLANS
The following table reflects the estimated annual retirement benefit that
will be available to the executives named in the Summary Compensation Table. It
assumes that all retirement plans remain in effect as they are currently
structured and a normal retirement age of 65. The assumed annual earnings shown
have been computed to reflect a range adequate to cover the current salaries of
the named executives with provision for reasonable increases in future
compensation.
ASSUMED YEARS OF SERVICE AT NORMAL RETIREMENT DATE
ANNUAL --------------------------------------------
EARNINGS 15 20 25 30
- ------------ ------- ------- ------- -------
$150,000........................................... 41,358 55,147 68,927 82,716
200,000........................................... 56,358 75,148 93,926 112,716
250,000........................................... 71,358 95,149 118,925 142,716
300,000........................................... 86,358 115,150 143,924 172,716
350,000........................................... 101,358 135,151 168,923 202,716
400,000........................................... 116,358 155,152 193,922 232,716
450,000........................................... 131,358 175,153 218,921 262,716
500,000........................................... 146,358 195,154 243,920 292,716
The Employers Mutual Retirement Annuity Plan (the "Pension Plan") is a cash
balance form of defined benefit plan and it covers all employees of Employers
Mutual and its subsidiaries and of the subsidiaries of the Company. Under the
plan, each individual participant's retirement benefit is expressed as an
account balance, similar to that of a defined contribution plan.
The formula for determination of the retirement benefit of participants is
based on a combination of covered compensation and interest paid on a
participant's accumulated account balance. Each year a participant's account is
credited with; 1) a plan defined percentage of their covered compensation for
the year and 2) interest on the prior year-end account balance at the rate
established by the Pension Benefit Guaranty Corporation (PBGC). The
participant's account balance is "defined" annually based on these factors
without regard to the actual investment performance of the plan's funds.
Employers Mutual also sponsors a defined contribution plan, the Employers
Mutual Casualty Company 401k Savings Plan (the "401K Plan"). This plan is
available to all employees of Employers Mutual and the subsidiary companies of
it and of the Company. Under the 401K Plan, the employer matches 50 percent of
the first two percent that an employee defers. With the exception of the highly
compensated group, the employee participants can make tax qualified deferrals of
up to 19 percent of their covered compensation to this plan.
Employers Mutual also has a non-qualified Supplemental Executive Retirement
Plan (the "SERP"), the purpose of which is to restore retirement benefits to
those employees who are prevented from receiving full benefits from the Pension
Plan because of restrictions imposed on the amount of covered compensation that
can be credited to, and the maximum benefits that can be received from,
qualified pension plans. This plan is unfunded and any payments made to
participants will be from the general accounts of the sponsoring companies.
All of the individuals named in the Summary Compensation Table are
participants in the Pension Plan, the 401K Plan and the SERP. For retirement
benefit purposes, during 1994 the number of full years of service accrued and
the compensation for Messrs. Kelley, Schiek, Isenhart, Van Ekeren, and Creese
were nine and $338,102, 35 and $247,253, 31 and $173,043, 34 and $169,542, and
10 and $163,644, respectively. For 1994,
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pursuant to the requirements of the Internal Revenue Code, as amended,
compensation crediting under the Pension Plan and the 401K Plan was limited to
$150,000.
EXECUTIVE COMPENSATION REPORT
The compensation of the executive officers is initially determined by the
Senior Executive Compensation and Stock Option Committee (the "Committee") of
the Board of Directors of Employers Mutual, with subsequent approval by its
Board of Directors. None of the Committee members are employees of Employers
Mutual and none are employees or directors of the Company.
COMPENSATION PHILOSOPHY
The general intent of Employers Mutual is to provide an executive
compensation structure that will allow for a level of compensation that is
competitive within the insurance industry and, more particularly, with a peer
group of companies within the property and casualty insurance industry. That
peer group is comprised of companies which are similar in size, have comparable
insurance products and which have been identified as the competition with
respect to such things as the quality of the products and services provided and
which tend to compete in the same targeted markets as does Employers Mutual.
It is also the intention of Employers Mutual to provide a level of
compensation that will allow it to attract and retain highly qualified,
motivated executives who will enhance the ability of Employers Mutual to
continue its long history of steady growth and financial strength.
EXECUTIVE COMPENSATION COMPONENTS
The compensation of Employers Mutual executives is primarily provided
through the use of three major components in its compensation structure. Each of
those components is designed to achieve a particular result and to allow for
measurement of individual and collective executive performance.
The basic component of executive compensation is base salary. On an annual
basis, the Committee reviews the salary of each individual executive officer,
using as a guideline the average base pay of other industry and peer company
executives with like positions, and with strong reliance upon the Chief
Executive Officer's report on the overall performance and progress of each
executive during the past year.
Through the use of an annual incentive bonus program, the executives have
the opportunity to gain additional compensation based upon the overall
performance of Employers Mutual and its subsidiaries. That bonus program
measures performance as compared to that of the property and casualty insurance
industry as a whole with respect to such specific areas as combined loss and
expense ratio and the growth in surplus as regards policyholders for the program
year. The Committee reviews the bonus program on an annual basis and makes
changes to it if and when such changes are deemed to be appropriate.
Employers Mutual has also made available a long-term incentive compensation
opportunity for its senior executives by the use of incentive stock option
grants. The Common Stock of the Company is utilized for those grants. Because of
the Pooling Agreement that Employers Mutual has with two of its subsidiaries,
and with three subsidiary companies of the Company, the Committee believes that
superior performance by the senior executives of Employers Mutual will have a
significant impact on the performance of the Common Stock of the Company,
thereby providing long-term appreciation in the value of the options held by the
executives. The Committee has drafted formal guidelines for granting stock
options to eligible executives. Those guidelines provide for base option award
ranges for executives based upon their level of authority and
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responsibility, in addition to providing for the granting of discretionary
option awards to executives based upon such factors as individual performance,
attainment of agreed goals and objectives and other contributions to overall
results.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
For 1994, the Committee recommended that the base salary of Bruce G.
Kelley, Chief Executive Officer, be increased to $246,180, an increase of 4.5
percent over the base salary paid him during 1993. The Committee arrived at that
figure as a minimum for the position based upon a salary range imputed from
surveys of base salaries being paid to Chief Executive Officers of bonus paying
insurance industry and peer group companies. The full Board of Directors of
Employers Mutual approved that recommendation.
Under the Bonus Program, Mr. Kelley has received a bonus of $110,781 for
1994 performance. In addition, the Committee and the Board of Directors approved
a grant of 10,000 incentive stock options for him, the particulars of which are
expanded upon in the foregoing Summary Compensation and Stock Option tables.
Based on published results for the countrywide property and casualty
industry during 1994, the combined companies' loss and expense ratio was 7.2
percent better than the industry. For the year, there was an addition to the
companies' surplus of $12,281,649 and net premiums written increased to
$583,288,995 as compared with $562,816,504 for 1993.
Senior Executive Compensation and Stock Option Committee:
William H. Brenton, Chairman
Richard W. Booth
Blaine A. Briggs
Lanning Macfarland, Jr.
COMPENSATION COMMITTEE INTERLOCKS
William H. Brenton is Chairman of the Executive Committee and Vice Chairman
of the Board of Brenton Banks, Inc. and a member of the Board of Directors of
Brenton Bank, N.A. of Des Moines. Employers Mutual and certain of its
subsidiaries, including the Company, maintain a number of accounts in banks
owned by Brenton Banks, Inc. and its subsidiaries.
Bruce G. Kelley also serves as a member of the Board of Directors of
Brenton Bank, N.A. of Des Moines.
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STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock to the NASDAQ Total Return Index for U. S. companies and
the Peer Group Index, which is the Media General Industry Group 262 as adjusted
to remove life insurance companies, over a five-year period beginning December
31, 1989 and ending December 31, 1994. The total stockholder return assumes
$100.00 invested at the beginning of the period in the Company's Common Stock,
the NASDAQ Market Index and the Peer Group Index, as adjusted. It also assumes
reinvestment of all dividends for the period.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG EMC INSURANCE GROUP INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
EMC IN-
MEASUREMENT PERIOD SURANCE GROUP INDUSTRY
(FISCAL YEAR COVERED) INC. INDEX BROAD MARKET
1989 100 100 100
1990 92.33 84.89 81.12
1991 135.38 107.70 104.14
1992 128.07 126.99 105.16
1993 150.99 130.06 126.14
1994 159.76 128.82 132.44
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The operations of the Company are directly interrelated with the operations
of Employers Mutual. Under the terms of the Pooling Agreement, each
participating company cedes to Employers Mutual all of its insurance business
and assumes from Employers Mutual an amount equal to its participation in the
pool. All losses, settlement expenses and other underwriting and administrative
expenses are prorated among the parties on the basis of participation in the
pool. The aggregate participation of the Company's property and casualty
insurance subsidiaries was 22 percent during 1994. The pool participants limit
the maximum net loss which can arise from large risks or risks in concentrated
areas of exposure by reinsuring with other insurers and reinsurers. Effective
January 1, 1993 the Pooling Agreement was amended so that the voluntary assumed
reinsurance business written by Employers Mutual is no longer subject to cession
to the pool members.
EMC Reinsurance Company ("EMC Re") has an agreement with Employers Mutual
whereby EMC Re accepts a 95 percent quota share of Employers Mutual's assumed
reinsurance business, exclusive of certain
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reinsurance contracts. Under the agreement, EMC Re receives 95 percent of the
premiums and assumes 95 percent of all related loss and settlement expenses of
the business. Effective January 1, 1993 the quota share agreement was amended to
provide that losses in excess of $1,000,000 per event are retained by Employers
Mutual. Employers Mutual retained $7,389,233 of losses and settlement expense
under this agreement in 1994. EMC Re paid $2,094,715 to Employers Mutual for
this additional protection. EMC Re also paid 95 percent of the outside
reinsurance protection Employers Mutual purchases to protect itself from
catastrophic losses. This cost is recorded as a reduction to premiums written
and it amounted to $2,563,041 in 1994.
Under the quota share agreement in 1994, EMC Re assumed a total of
$39,899,335 in reinsurance premiums from Employers Mutual and, in return, it
paid Employers Mutual $9,387,371 as reimbursement for its acquisition expenses.
EMC Re has an aggregate excess of loss treaty with Employers Mutual which
provides protection against losses resulting from multiple catastrophes. The
coverage provided by this treaty is $2,000,000 in excess of $2,500,000 of losses
retained by EMC Re, excess of $200,000 per single catastrophe. The Maximum
recovery under this treaty in any one year is $4,000,000. During 1994, EMC Re
did not recover any losses under this agreement. Total premiums paid to
Employers Mutual during the year under this treaty amounted to $557,842.
Effective December 31, 1994, EMC Re commuted several reinsurance contracts
that it had with Employers Mutual. There was no income or loss effect from these
commutations.
In addition to amounts paid pursuant to the Pooling Agreement, the Company
paid Employers Mutual $373,774 in 1994 to cover administrative overhead incurred
by Employers Mutual in providing investment services. The allocation of charges
to the Company is based on both the number of the Company's investment
transactions and the dollar value of the Company's investment portfolio in
relation to the corresponding number of transactions in, and value of, the
investment portfolios of Employers Mutual and its property and casualty
subsidiaries. Based on this allocation, the Company believes such fees to be
reasonable.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, independent certified public accountants, audited
the accounts of the Company for the year ended December 31, 1994. The Board of
Directors has selected KPMG Peat Marwick LLP as auditors for 1995 and the
stockholders are asked to ratify that selection. During 1994 in connection with
its audit function, KPMG Peat Marwick LLP provided services to the Company which
included the examination of the annual consolidated financial statements,
assistance with requirements of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, auditing certain employee benefit plans and
consultation regarding various financial and accounting matters.
A representative of KPMG Peat Marwick LLP will be present at the Annual
Meeting, and will be given an opportunity to make a statement and to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THIS
APPOINTMENT. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED IN THE
ABSENCE OF DIRECTION TO THE CONTRARY.
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OTHER MATTERS
The Board of Directors knows of no matters other than those described above
that may come before the Annual Meeting. As to other matters, if any, that
properly may come before the Annual Meeting, the Board of Directors intends that
proxies in the accompanying form will be voted in respect thereof in accordance
with the judgment of the person or persons voting the proxies.
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Stockholder proposals for inclusion in the Company's Proxy Statement for
the 1996 Annual Meeting of Stockholders must be received by the Company not
later than December 28, 1995. The person submitting the proposal must have been
a record or beneficial owner of the Company's Common Stock for at least one
year, and the securities so held must have a market value of at least $1,000.
Any such proposal will be included in the Proxy Statement for the 1996 Annual
Meeting, if the rules of the Securities and Exchange Commission are satisfied
with respect to the timing and form of such proposal, and if the content of such
stockholder's proposal is determined by the Company to be appropriate under
rules promulgated by the Commission.
April 27, 1995
BY ORDER OF THE BOARD OF DIRECTORS
Philip T. Van Ekeren, Secretary
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EMC INSURANCE GROUP INC.
PROXY FOR COMMON STOCK
ANNUAL MEETING OF STOCKHOLDERS--MAY 25,1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Bruce G. Kelley and George W.
Kochheiser, or either of them, Proxies, each with the power to
appoint his substitute, and hereby authorizes them to represent and
to vote, as designated below, all the shares of stock of EMC
Insurance Group Inc. held of record by the undersigned on April 4,
1995, at the Annual Meeting of Stockholders to be held on May 25,
1995 or any adjournment thereof.
1. ELECTION OF / / FOR all nominees listed below / / WITHHOLD AUTHORITY
DIRECTORS (except as marked to the contrary below) to vote for all nominees listed below
George C. Carpenter III, Elwin H. Creese, David J. Fisher, Bruce G.
Kelley, George W. Kochheiser, Raymond A. Michel, Fredrick A. Schiek
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided below.)
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2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY. / / FOR /
/ AGAINST / / ABSTAIN
3. OTHER BUSINESS
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
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- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
Please sign exactly as name appears below. When shares are held by
joint
tenants,
both
should
sign.
When
signing
as
attorney,
executor,
administrator,
trustee
or
guardian,
please
give
full
title
as
such.
If a
corporation,
please
sign
in
full
corporate
name
by
President
or
other
authorized
officer.
If a
partnership,
please
sign
in
partnership
name
by
authorized
person.
Dated:
--------------------------------
, 1995
--------------------------------
Signature
--------------------------------
Signature
if
held
jointly
- --------------------------------------------------------------------------------
---------------------------------
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.