SCHEDULE 14A INFORMATION
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White Mountains Insurance Group
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Notice of 2002
Annual General Meeting
of Members (Shareholders)
and Proxy Statement
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[WHITE MOUNTAINS INSURANCE GROUP LOGO]
Table of Contents
Page
----
NOTICE OF 2002 ANNUAL GENERAL MEETING OF MEMBERS................................................. 2
PROXY STATEMENT.................................................................................. 3
PROPOSAL 1: ELECTION OF COMPANY'S DIRECTORS ................................................. 3
Procedures for Nominating Directors....................................................... 6
Voting Securities and Principal Holders Thereof........................................... 7
Compensation of Directors................................................................. 9
Compensation of Executive Officers........................................................ 10
Compensation Plans........................................................................ 12
Reports of the Committees on Executive Compensation....................................... 13
Report of the Audit Committee............................................................. 16
Fees Billed by the Company's Independent Auditor for Services Performed in 2001........... 16
Member Return Graph....................................................................... 17
Compensation Committee Interlocks and Insider Participation in Compensation Decisions 18
PROPOSAL 2: ELECTION OF DIRECTORS OF
FUND AMERICAN REINSURANCE COMPANY, LTD................................... 18
PROPOSAL 3: ELECTION OF DIRECTORS TO ANY
NEW NON-UNITED STATES OPERATING SUBSIDIARIES............................. 18
PROPOSAL 4: APPROVAL OF THE APPOINTMENT OF INDEPENDENT AUDITOR............................... 18
OTHER MATTERS................................................................................. 19
White Mountains Insurance Group, Ltd. (the "Company" and, together with its
subsidiaries, "White Mountains") is a Bermuda-domiciled insurance holding
company. White Mountains' operations are conducted through its subsidiaries and
affiliates in the businesses of property and casualty insurance and reinsurance.
White Mountains' insurance operations principally include: (i) OneBeacon
Insurance Group LLC ("OneBeacon", formerly CGU Corporation), a Boston-based
property and casualty holding company and (ii) Folksamerica Holding Company,
Inc. ("Folksamerica"), a New York-based property and casualty reinsurance
holding company.
The 2002 Annual General Meeting will be confined to a discussion and Member
vote on the proposals set forth in this Proxy Statement and on such other
matters properly brought before the meeting. As in past years, management will
provide Members and all interested parties with a summary of White Mountains'
current operations at an informational meeting to be held at 10:00 a.m. Eastern
Time on Thursday, May 23, 2002 at the Waldorf Astoria Hotel in New York City.
Detailed instructions for participating in the informational meeting, either in
person or via live web cast will be posted at www.whitemountains.com
approximately 30 days in advance of the meeting.
1
WHITE MOUNTAINS INSURANCE GROUP, LTD.
NOTICE OF 2002 ANNUAL GENERAL MEETING OF MEMBERS
TO BE HELD MAY 20, 2002
March 22, 2002
Notice is hereby given that the 2002 Annual General Meeting of Members of
White Mountains Insurance Group, Ltd. will be held on Monday, May 20, 2002, at
9:00 a.m. Atlantic Time at the Princess Hotel, Hamilton, Bermuda. At this
meeting you will be asked to consider and vote upon the following proposals:
1) to elect five of the Company's directors to Class II with a term
ending 2005,
2) to elect the Board of Directors of Fund American Reinsurance Company,
Ltd., a wholly-owned reinsurance company organised under the laws of
Bermuda,
3) to elect the Board of Directors of any new non-United States
subsidiary, as designated by the Company's Board of Directors,
4) to approve the appointment of PricewaterhouseCoopers as the Company's
Independent Auditor for 2002.
The Company's audited financial statements for the year ended December 31,
2001, as approved by the Company's Board of Directors, will be presented at this
Annual General Meeting.
Members of record of Common Shares on the record date, Friday, March 22,
2002, (i) who are individuals, may attend and vote at the meeting in person or
by proxy or (ii) which are corporations or other entities, may have their duly
authorised representative attend and vote at the meeting in person or by proxy.
A list of all Members entitled to vote at the meeting will be open for public
examination during regular business hours beginning April 1, 2002 at the
Company's registered office located at Clarendon House, 2 Church Street,
Hamilton HM DX, Bermuda.
All Members are invited to attend this meeting.
By Order of the Board of Directors,
Dennis P. Beaulieu
Corporate Secretary
MEMBERS ARE INVITED TO COMPLETE AND SIGN THE ACCOMPANYING PROXY CARD TO BE
RETURNED TO WHITE MOUNTAINS INSURANCE GROUP, LTD., C/O EQUISERVE TRUST COMPANY,
POST OFFICE BOX 8643, EDISON, NEW JERSEY 08818-9052, IN THE ENVELOPE PROVIDED,
WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING. MEMBERS WHO HOLD THEIR COMMON
SHARES IN A BROKERAGE ACCOUNT, AN EMPLOYEE BENEFIT PLAN OR THROUGH A NOMINEE
WILL LIKELY HAVE THE ADDED FLEXIBILITY OF VOTING THEIR SHARES BY TELEPHONE OR
OVER THE INTERNET.
2
WHITE MOUNTAINS INSURANCE GROUP, LTD.
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation
of proxies on behalf of the Company's Board of Directors (the "Board") for the
2002 Annual General Meeting of Members (the "2002 Annual Meeting"), to be held
on May 20, 2002 at the Princess Hotel, Hamilton, Bermuda. The solicitation of
proxies will be made primarily by mail, and the Proxy Statement and related
proxy materials will be distributed to registered Members on or about April 1,
2002.
Holders of the Company's common shares ("Members"), par value $1.00 per
share ("Common Shares"), as of the close of business on Friday, March 22, 2002,
the record date, are entitled to vote at the meeting.
You can ensure that your Common Shares are properly voted at the meeting by
completing, signing, dating and returning the enclosed proxy card in the
envelope provided. Members who hold their Common Shares in a brokerage account,
an employee benefit plan or through a nominee will likely have the added
flexibility of voting their Common Shares by telephone or over the internet. A
Member has the right to appoint another person (who need not be a Member) to
represent the Member at the meeting by completing an alternative form of proxy
which can be obtained from the Corporate Secretary or by notifying the
Inspectors of Election (see page 19). Every Member entitled to vote has the
right to do so either in person or by one or more persons authorised by a
written proxy executed by such Member and filed with the Corporate Secretary.
Any proxy duly executed will continue in full force and effect unless revoked by
the person executing it in writing or by the filing of a subsequent proxy.
Sending in a signed proxy will not affect your right to attend the meeting
and vote. If a Member attends the meeting and votes in person, his or her proxy
is considered revoked.
PROPOSAL 1
ELECTION OF THE COMPANY'S DIRECTORS
The Board is divided into three classes (each a "Class"). Each Class serves
a three-year term.
At the 2002 Annual Meeting, John J. Byrne, Mark J. Byrne, George J.
Gillespie, III, John D. Gillespie and Frank A. Olson are nominated to be elected
to Class II with terms ending in 2005. THE BOARD RECOMMENDS A VOTE FOR PROPOSAL
1 WHICH CALLS FOR THE ELECTION OF THE 2002 NOMINEES.
The current Members of the Board and terms of each Class are set forth
below:
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Director
Director Age since
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Class I - Term Ending in 2004
Patrick M. Byrne 39 1997
Steven E. Fass 56 2000
K. Thomas Kemp 61 1994
Gordon S. Macklin 73 1987
Joseph S. Steinberg 58 2001
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Class II - Term Ending in 2002*
John J. ("Jack") Byrne 69 1985
Mark J. Byrne 40 2001
George J. Gillespie, III 71 1986
John D. Gillespie 43 1999
Frank A. Olson 69 1996
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Class III - Term Ending in 2003
Raymond Barrette 51 2000
Howard L. Clark, Jr. 58 1986
Robert P. Cochran 52 1994
Arthur Zankel 70 1992
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* Nominated at the 2002 Annual Meeting to a term ending in 2005.
The following information with respect to the principal occupation,
business experience, recent business activities involving White Mountains and
other affiliations of the nominees and directors has been furnished to the
Company by the nominees and directors.
3
CLASS I
PATRICK M. BYRNE has been a director of the Company since 1997. Mr. Byrne
serves as Chairman and CEO of Overstock.com, an internet shopping service.
Mr. Byrne formerly served as President and CEO of Fecheimer Bros. Co., a
manufacturer of uniforms and accessories, from 1997 to 1999 and President and
CEO of Centricut, LLC, a manufacturer of industrial torch consumable parts,
from 1994 to 1999. Mr. Byrne's father, Jack Byrne, is Chairman of the Company.
STEVEN E. FASS has been a director of the Company since 2000. Mr. Fass has
served as President and Chief Executive Officer of Folksamerica and its
subsidiaries including Folksamerica Reinsurance Company since 1984. He joined
Folksamerica as its Vice President, Treasurer and Chief Financial Officer in
1980. Mr. Fass is a director of Olympus Re Holdings, Ltd.
K. THOMAS KEMP has served as President of the Company since June 2001 and
has been a director since 1994. Mr. Kemp previously served as Deputy Chairman
from January 2000 to June 2001 and as the Company's President and CEO from 1997
to 2000 and served as Executive Vice President from 1993 to 1997 and its Vice
President, Treasurer and Secretary from 1991 to 1993. Mr. Kemp is also a
director of Fund American Reinsurance Company, Ltd., Folksamerica, Main Street
America Holdings, Inc. and Amlin plc.
GORDON S. MACKLIN has served as Deputy Chairman of the Company since June
2001 and has been a director of the Company since 1987. Mr. Macklin has formerly
served as Chairman of White River Corporation, an information services company,
from 1993 to 1998, as Chairman of Hambrecht and Quist Group, a venture capital
and investment banking company, from 1987 until 1992, and as President of the
National Association of Securities Dealers, Inc. from 1970 until 1987. He is
Chairman of Fund American Reinsurance Company, Ltd., a director of Worldcom,
Inc., Martek Biosciences Corporation, MedImmune Inc., Overstock.com and
Spacehab, Inc., and is a trustee, director or managing general partner (as the
case may be) of 48 of the investment companies in the Franklin Templeton Group
of Funds.
JOSEPH S. STEINBERG has been a director of the Company since June 2001. Mr.
Steinberg has served as the President of Leucadia National Corporation since
1978. Mr. Steinberg is also a director of Allcity Insurance Company, MK Gold
Company and Jordan Industries, Inc. In addition, Mr. Steinberg is Chairman of
Olympus Re Holdings, Ltd., Olympus Reinsurance Company Ltd. and HomeFed
Corporation.
CLASS II
JOHN J. ("JACK") BYRNE was appointed CEO of the Company in February 2002
and has served as Chairman of the Company since 1985. Mr. Byrne formerly served
as Chairman of the Board of Managers of OneBeacon from June 2001 to December
2001, as CEO of the Company from January 2000 to June 2001, as President and CEO
of the Company from 1990 to 1997 and as CEO from 1985 to 1990. Mr. Byrne is a
manager of OneBeacon and also serves as a director of Folksamerica,
Overstock.com and as Chairman of Montpelier Re Holdings Ltd. Two of Mr. Byrne's
sons, Patrick Byrne and Mark Byrne, are also directors of the Company.
MARK J. BYRNE was appointed a director of the Company in November 2001. He
serves as President and Chief Executive Officer of West End Capital Management
Limited ("West End"). Mr Byrne was Chief Executive Officer of General Re
Financial Products from March 2000 to February 2002 and, prior to forming West
End, held a variety of trading and management positions at Salomon Brothers,
Pacific Investment Management Company, Lehman Brothers Inc. ("Lehman") and
Credit Suisse First Boston. He is a director of Markel Corporation. Mr. Byrne's
father, Jack Byrne, is Chairman of the Company.
GEORGE J. GILLESPIE, III has been a director of the Company since 1986.
Mr. Gillespie has been a Partner in the law firm of Cravath, Swaine & Moore
("CS&M") since 1963. He is also a director of The Washington Post Company. CS&M
has been retained by White Mountains from time to time to perform legal
services. See "Certain Relationships and Related Transactions" and "Compensation
Committee Interlocks and Insider Participation in Compensation Decisions."
Mr. Gillespie's son, John Gillespie, is also a director of the Company.
4
JOHN D. GILLESPIE has served as Managing Director of OneBeacon since June
2001 and has been a director of the Company since 1999. He is also the founder
and Managing Partner of his own investment firm, Prospector Partners, LLC
("Prospector"), in Hartford, Connecticut. Prior to forming Prospector,
Mr. Gillespie was President of the T. Rowe Price Growth Stock Fund and the New
Age Media Fund, Inc. Mr. Gillespie is a manager of OneBeacon and also serves as
a director of Folksamerica and Montpelier Re Holdings Ltd. White Mountains owns
limited partnership investment interests which are managed by Mr. Gillespie. See
"Certain Relationships and Related Transactions." Mr. Gillespie's father,
George Gillespie, is also a director of the Company.
FRANK A. OLSON has been a director of the Company since 1996. He serves as
Chairman of The Hertz Corporation ("Hertz"). Mr. Olson served as the CEO of
Hertz from 1977 to 1999 and has been with that company since 1964. He is also a
director of Amerada Hess Corporation and Becton Dickinson and Company.
CLASS III
RAYMOND BARRETTE has served as Managing Director and Chief Executive
Officer of OneBeacon since June 2001, serving as Chairman of its Board of
Managers since December 2001, and has been a director of the Company since 2000.
Mr. Barrette formerly served as President of the Company from 2000 to June 2001
and served as Executive Vice President and Chief Financial Officer of the
Company from 1997 to 2000. He was formerly a consultant with Tillinghast-Towers
Perrin from 1994 to 1996 and was with Fireman's Fund Insurance Company from 1973
to 1993. Mr. Barrette is also Chairman of Folksamerica and serves as a director
of Montpelier Re Holdings Ltd.
HOWARD L. CLARK, Jr. has been a director or advisor to the Board since
1986. He is currently Vice Chairman of Lehman and was Chairman and CEO of
Shearson Lehman Brothers Inc. from 1990 to 1993. Prior to joining Shearson
Lehman Brothers Inc., Mr. Clark was Executive Vice President and Chief Financial
Officer of American Express. He is also a director of Lehman Brothers, Maytag
Corporation, H Power Corp. and Walter Industries, Inc. Lehman provides various
services to White Mountains from time to time. See "Certain Relationships and
Related Transactions" and "Compensation Committee Interlocks and Insider
Participation in Compensation Decisions."
ROBERT P. COCHRAN has been a director of the Company since 1994.
Mr. Cochran was a founding principal of Financial Security Assurance Holdings
Ltd. ("FSA") and has served FSA in various capacities since 1985. He has been
President and CEO and a director of FSA since 1990 and became Chairman in 1997.
He is also Chairman of Financial Security Assurance Inc. and Financial Security
Assurance (U.K.) Ltd.
ARTHUR ZANKEL has been a director or advisor to the Board since 1992. He
served as a General Partner of First Manhattan Co. from 1965 to 1999 and was
Co-Managing Partner of First Manhattan from 1979 to 1997. Mr. Zankel is
currently Senior Managing Member of High Rise Capital Management LP. See
"Certain Relationships and Related Transactions" and "Compensation Committee
Interlocks and Insider Participation in Compensation Decisions." Mr. Zankel is
also a director of Citigroup, Inc. and AbleCo.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee, comprised of Messrs. Clark, Olson, Steinberg and
Zankel, has general responsibility for the oversight and surveillance of the
accounting, reporting and financial control practices of White Mountains. The
Audit Committee annually reviews the qualifications of the Independent Auditor,
makes recommendations to the Board as to their selection and reviews the plan,
fees and results of their audit. Mr. Clark is Chairman of the Audit Committee.
5
The Compensation Committee, comprised of Messrs. Patrick Byrne, Cochran,
Olson, Steinberg and Zankel, oversees White Mountains' share-based compensation
and benefit policies and programs, including administration of the White
Mountains Insurance Group Long-Term Incentive Plan (the "Incentive Plan") and
related non-qualified deferred compensation plans. Mr. Cochran is Chairman of
the Compensation Committee.
The Human Resources Committee, comprised of Messrs. Patrick Byrne, Clark,
Cochran, George Gillespie, Olson, Steinberg and Zankel, sets the annual salaries
and bonuses for officers and certain other key employees. Mr. Cochran is
Chairman of the Human Resources Committee.
The Investment Committee is an advisory committee to the Board and is
comprised of Messrs. Barrette, Jack Byrne, John Gillespie, Kemp, Zankel, certain
Members of senior management and investment professionals. The Investment
Committee formulates the Company's investment policy and oversees all the
Company's significant investing activities. John Gillespie is Chairman of the
Investment Committee. On June 1, 2001, the responsibilities of the Investment
Committee were delegated to a new Investment Committee established at OneBeacon.
MEETINGS OF THE BOARD OF DIRECTORS
During 2001 the following meetings of the Board were held: six meetings of
the full Board, one meeting of the Audit Committee, two meetings of the
Compensation Committee, one meeting of the Human Resources Committee and one
meeting of the Investment Committee. In 2001 each director attended more than
75% of all meetings of the Board including its various committees, except
Mr. Barrette who was unable to attend the meeting of the Investment Committee.
During 2001 there were three additional meetings of the Audit Committee
held solely to review the Company's quarterly financial information prior to the
release of such information to the public. At such meetings, the Company
encourages the participation of all members of the Audit Committee but only
requires participation by its Chairman. Mr. Clark attended all such meetings
during 2001.
PROCEDURES FOR NOMINATING DIRECTORS
Under the Company's Bye-laws, nominations for the election of directors may
be made by the Board or by any Member entitled to vote for the election of
directors (a "Qualified Member"). A Qualified Member may nominate persons for
election as directors only if written notice of such Qualified Member's intent
to make such nomination is delivered to the Secretary not later than: (i) with
respect to an election to be held at an annual general meeting 90 days prior to
the anniversary date of the immediately preceding annual general meeting or not
later than 10 days after notice or public disclosure of the date of the annual
general meeting is given or made available to Qualified Members, whichever date
is earlier, and (ii) with respect to an election to be held at a special general
meeting for the election of directors, the close of business on the seventh day
following the date on which notice of such meeting is first given to Qualified
Members.
Each such notice shall set forth: (a) the name and address of the Qualified
Member who intends to make the nomination and of the person or persons to be
nominated; (b) a representation that the Qualified Member is a holder of record
of Common Shares entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the notice; (c) a description of all arrangements or understandings between the
Qualified Member and each such nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the Qualified Member; (d) such other information regarding each
nominee proposed by such Qualified Member as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the United
States Securities and Exchange Commission (the "SEC") had each such nominee been
nominated, or intended to be nominated, by the Board; and (e) the consent of
each such nominee to serve as a director of the Company if so elected. The
chairman of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure.
6
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
VOTING RIGHTS OF MEMBERS
As of March 22, 2002, there were 8,284,181 Common Shares outstanding.
Members of record of Common Shares shall be entitled to one vote per Common
Share, provided that if and so long as the votes conferred by "Controlled Common
Shares" (as defined below) of any person constitute ten percent (10%) or more of
the votes conferred by the outstanding Common Shares of the Company, each
outstanding Common Share comprised in such Controlled Common Shares shall confer
only a fraction of a vote that would otherwise be applicable according to the
following formula:
[(T divided by 10)-1] divided by C
Where: "T" is the aggregate number of votes conferred by all the
outstanding Common Shares; and "C" is the number of votes conferred by the
Controlled Common Shares of such person.
"Controlled Common Shares" in reference to any person means:
(i) all Common Shares directly, indirectly or
constructively owned by such person within the meaning
of Section 958 of the Internal Revenue Code of 1986, as
amended, of the United States of America; and
(ii) all Common Shares directly, indirectly or constructively
owned by any person or "group" of persons within the
meaning of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations
promulgated thereunder; provided that this clause
(ii) shall not apply to (a) any person (or any group
that includes any person) that has been exempted from
the provisions of this clause or (b) any person or group
that the Board, by the affirmative vote of at least
seventy-five percent (75%) of the entire Board, may
exempt from the provisions of this clause.
The limitations set forth above do not apply to any Member which is a
"Byrne Entity" (as defined below) for any matter submitted to the vote of
Members, except with respect to the election of directors. "Byrne Entity" means
any of Mr. Jack Byrne, any foundation or trust established by Messrs.
Jack Byrne, Mark Byrne, Patrick Byrne, and any associate or affiliate of any of
them (or any group of which any of them is a part), as defined under Section
13(d) of the United States Securities Exchange Act of 1934, as amended.
If, as a result of giving effect to the forgoing provisions or otherwise,
the votes conferred by the Controlled Common Shares of any person would
otherwise represent 10% or more of the votes conferred by all the outstanding
Common Shares, the votes conferred by the Controlled Common Shares of such
person shall be reduced in accordance with the foregoing provisions. Such
process shall be repeated until the votes conferred by the Controlled Common
Shares of each person represent less than 10% of the votes conferred by all
Common Shares.
7
PRINCIPAL HOLDERS OF COMMON SHARES
To the knowledge of the Company, there was no person or entity beneficially
owning more than 5% of Common Shares outstanding as of March 22, 2002, except as
shown below. Common Shares are the only class of the Company's securities that
are eligible to vote.
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Number of
Common Shares Percent of
Name and address of beneficial owner beneficially owned (a) Class (b)
-----------------------------------------------------------------------------------------------------------------------
Berkshire Hathaway Inc. 1440 Kiewit Plaza, Omaha, NE 68131 1,714,285 17.1%
Franklin Mutual Advisers LLC 51 JFK Parkway, Short Hills, NJ 07078 (c) 1,184,246 14.3%
Jack Byrne 28 Gates Street, White River Junction, VT 05001 (d) 1,150,101 13.9%
-----------------------------------------------------------------------------------------------------------------------
(a) The Common Shares shown as beneficially owned by Berkshire Hathaway Inc.
("Berkshire") represent Common Shares issuable upon the exercise of
warrants to acquire Common Shares. Berkshire cannot vote the Common Shares
underlying the warrants until they are exercised.
(b) Represents the percentage of total Common Shares outstanding at March 22,
2002 for all holders shown above except Berkshire. For Berkshire, this
figure represents Berkshire's percentage of all Common Shares outstanding
assuming the exercise of its warrants to acquire 1,714,285 Common Shares
which are currently exercisable.
(c) The Common Shares beneficially owned by Franklin Mutual Advisors LLC were
acquired for investment purposes on behalf of client investment advisory
accounts.
(d) Includes 650,000 Common Shares owned directly by the Jack Byrne 2001 GRAT
No. 1 which are deemed to be indirectly beneficially owned by Mr. Byrne.
Does not include 25,000 unearned Restricted Common Shares ("Restricted
Shares") and 53,863 Common Shares contributed to trusts and charitable
foundations for which Mr. Byrne disclaims beneficial ownership, but for
which his spouse retains voting power.
8
BENEFICIAL STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 22, 2002, beneficial ownership
of Common Shares by each director of the Company, by certain named Executive
Officers, and by all Directors and Executive Officers as a group.
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Number of Common Shares owned
----------------------------------------------
Directors and Executive Officers Beneficially(a)(b) Economically(c)
------------------------------------------------------------------------------------------------------------------------
Raymond Barrette 29,384 104,942
Jack Byrne (d) 1,150,101 1,205,101
Mark J. Byrne 196,031 196,031
Patrick M. Byrne 236,008 236,008
Howard L. Clark, Jr. 1,000 1,000
Robert P. Cochran 25,000 25,000
Steven E. Fass 5,315 19,015
George J. Gillespie, III 1,000 1,000
John D. Gillespie (e) 101,676 135,676
K. Thomas Kemp 93,141 111,227
Gordon S. Macklin 15,000 17,000
Frank A. Olson 3,000 3,000
James J. Ritchie 2 16,600
Joseph S. Steinberg (f) 0 0
Arthur Zankel 11,600 11,600
All Directors and Executive Officers as a group (18 persons) (g) 1,873,762 2,113,706
========================================================================================================================
(a) The Common Shares beneficially owned by Messrs Jack Byrne, Mark Byrne,
Patrick Byrne, John Gillespie, Kemp and all Directors and Executive
Officers as a group represent 13.9%, 2.4%, 2.8%, 1.2%, 1.1% and 22.6% of
the total Common Shares outstanding at March 22, 2002, respectively. All
other Directors and Executive Officers beneficially owned less than 1% of
the total Common Shares outstanding at that date. Beneficial ownership
has been determined in accordance with Rule 13d-3(d)(1) of the Securities
Exchange Act of 1934.
(b) Includes vested and unexercised options ("Options") to acquire 1,465 and
1,800 Common Shares for Messrs. Barrette and Fass, respectively. Excludes
unearned Restricted Shares.
(c) Incremental Common Shares shown as economically owned by Directors and
Executive Officers represent unearned performance share awards, unvested
Option awards, unearned Restricted Shares and earned phantom shares on
compensation deferred.
(d) Does not include 53,863 Common Shares contributed to trusts and charitable
foundations for which Mr. Byrne disclaims beneficial ownership, but for
which his spouse retains voting power.
(e) Includes 100,000 Common Shares owned by various funds of Prospector in
which Mr. Gillespie is either general manager or investment manager.
Mr. Gillespie disclaims beneficial ownership of such Common Shares owned by
Prospector except to the extent of his pecuniary interest in such funds.
(f) Does not include any interest in 375,000 Common Shares (approximately 4.5%
of the total Common Shares outstanding) owned by Leucadia. Mr. Steinberg
is the President of Leucadia and, together with certain family members,
Mr. Steinberg currently beneficially owns approximately 16.7% of the
common shares of Leucadia. By virtue of his beneficial ownership of
Leucadia, Mr. Steinberg may be deemed to be the indirect beneficial
owner of his pro rata share of the Common Shares owned by Leucadia.
(g) Includes, in addition to the listed Directors and Executive Officers,
Common Shares owned by: (i) John P. Cavoores, OneBeacon's President and
Chief Operating Officer who became an Executive Officer in February 2002,
(ii) Dennis P. Beaulieu, the Company's Treasurer and Corporate Secretary,
and (iii) J. Brian Palmer, the Company's Chief Accounting Officer.
Messrs. Beaulieu and Palmer were Executive Officers during 2001.
COMPENSATION OF DIRECTORS
COMPENSATION OF DIRECTORS
Messrs. Patrick Byrne, Clark, Cochran, George Gillespie, Olson, Steinberg
and Zankel each received a retainer of $60,000 during 2001 and fees of $1,000
for each Board meeting and committee meeting attended through October 2001 and
$2,000 per Board meeting and committee meeting thereafter. The annual retainer
relates to the twelve month period from May 2001 to May 2002. Mr. Mark Byrne
received a prorated retainer of $25,000 which relates to the five month period
from December 2001 to May 2002. Messrs. Clark and Cochran also received
additional retainers of $5,000 and $10,000 during 2001 for their roles as
Chairman of the Audit Committee and Chairman of the Compensation and Human
Resources Committees, respectively. Messrs. Jack Byrne, Barrette, Fass,
John Gillespie, Kemp and Macklin did not receive compensation for their role as
a director during 2001.
9
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following tables set forth certain information regarding the salary,
incentive compensation and benefits paid by White Mountains with respect to 2001
to its President (its Principal Executive Officer), its four most highly
compensated Executive Officers and two former Executive Officers (collectively,
the "Named Executive Officers").
----------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
----------------------------------- ------------------------------------
Annual Compensation Awards Payouts
----------------------------------- ---------------------- -----------
Other Restricted
Annual Share Securities All Other
Name and Compen- Awards Underlying LTIP Compen-
Principal Position Year Salary($) Bonus ($) sation($) ($)(a) Options (#) Payouts ($) sation ($)(b)
----------------------------------------------------------------------------------------------------------------------
K. THOMAS KEMP 2001 $269,615 $ 0 $ 0 $1,896,000 0 $5,940,000 $ 63,247
President 2000 182,000 75,000 0 0 0 0 129,900
1999 400,000 1,308,809 0 0 0 2,600,000 269,490
----------------------------------------------------------------------------------------------------------------------
JOHN D. GILLESPIE 2001 400,000 110,000 0 1,384,000 0 0 3,219
Managing Director of 2000 0 0 0 0 0 0 0
OneBeacon 1999 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------------
JACK BYRNE 2001 398,077 0 0 8,650,000 0 0 43,674
Chairman 2000 282,692 350,000 0 0 0 0 9,100
1999 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------------
RAYMOND BARRETTE 2001 398,077 0 0 7,044,500 0 3,960,000 44,766
Chairman and CEO of 2000 333,654 350,000 0 0 9,000 0 15,627
OneBeacon 1999 262,692 1,278,776 0 0 0 1,105,000 462,291
----------------------------------------------------------------------------------------------------------------------
JAMES J. RITCHIE 2001 300,422 0 0 346,000 0 0 40,167
Managing Director and CFO 2000 0 0 0 0 0 0 0
OneBeacon 1999 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------------
DAVID G. STAPLES 2001 165,288 13,200 0 1,348,000 0 1,320,000 9,923
Vice President of 2000 147,308 150,000 0 0 9,000 0 5,169
OneBeacon (c) 1999 135,077 1,081,313 0 0 0 520,000 19,489
----------------------------------------------------------------------------------------------------------------------
REID T. CAMPBELL 2001 124,519 15,000 0 1,348,000 0 1,320,000 7,807
Vice President of 2000 108,077 150,000 0 0 9,000 0 6,177
OneBeacon (c) 1999 99,077 129,918 0 0 0 520,000 14,816
----------------------------------------------------------------------------------------------------------------------
(a) Represents the value of 2001 Restricted Share awards as of their respective
award dates. Restricted Shares vest approximately two years from the date
of grant based on continuous service by the employee throughout such
period. Holders of Restricted Shares are entitled to receive Common Share
dividends and such amounts are included in All Other Compensation above.
Restricted Shares awarded in February 2001 (vesting December 2002) to
Messrs. Kemp, Gillespie, Byrne, Barrette, Ritchie, Staples and Campbell
were 5,000; 0; 0; 3,750; 0; 1,000 and 1,000 shares, respectively.
Restricted Shares awarded in June 2001 (vesting June 2003) to
Messrs. Kemp, Gillespie, Byrne, Barrette, Ritchie, Staples and Campbell
were 1,000; 4,000; 25,000; 17,000; 1,000; 3,000 and 3,000 shares,
respectively. The aggregate value as of December 31, 2001 of all
outstanding Restricted Shares awarded during 2001 held by Messrs. Kemp,
Gillespie, Byrne, Barrette, Ritchie, Staples and Campbell were $2,088,000;
$1,392,000; $8,700,000; $7,221,000; $348,000; $1,392,000 and $1,392,000,
respectively.
(b) Amounts include, when applicable, 401(k) Savings Plan employer matching
contributions (which did not exceed $10,200 per individual), dividends on
Restricted Shares, principal credited to a former non-qualified deferred
compensation plan (applicable only for 1999), director fees and retainers
paid by companies in which White Mountains is entitled to board
representation and imputed income items relating to corporate-provided
housing, personal use of White Mountains' aircraft and the value of life
insurance provided in excess of $50,000 of coverage. The amounts for 2001
relating to such imputed income items for Messrs. Kemp, Gillespie, Byrne,
Barrette, Ritchie, Staples and Campbell were $2,095; $450; $43,674;
$30,816; $38,090; $250 and $139, respectively. The amounts for 2001, 2000
and 1999 relating to director fees and retainers of affiliates include
$45,952; $119,700 and $71,650 for Mr. Kemp, $0; $9,100 and $0 for Mr. Byrne
and $0; $9,685 and $22,450 for Mr. Barrette. The 1999 amount for
Mr. Barrette also includes $42,545 in reimbursements principally associated
with a Company-sponsored relocation and a $351,917 phantom stock award
resulting from the sale of the Company's former mortgage operations.
(c) As a result of the OneBeacon acquisition, on June 1, 2001 Messrs. Staples
and Campbell no longer met the definition of an Executive Officer.
10
OPTION GRANTS IN LAST FISCAL YEAR
No Options were granted to Named Executive Officers during 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table summarizes, for the Named Executive Officers, Options
exercised during the Company's latest fiscal year, and the number and
in-the-money value of Options outstanding as of the end of the fiscal year.
---------------------------------------------------------------------------------------------------------------------------
As of December 31, 2001
-------------------------------- ------------------------------
Number of Securities Underlying Value of Unexercised In-the-
Unexercised Options at Fiscal Money Options at
Year ended December 31, 2001 Year-End (#) Fiscal Year-End ($)
------------------------------ -------------------------------- ------------------------------
Common Shares Value
Name Acquired Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---------------------------------------------------------------------------------------------------------------------------
K. Thomas Kemp 0 $ 0 0 0 $ 0 $ 0
John D. Gillespie 0 0 0 0 0 0
John J. Byrne 0 0 0 0 0 0
Raymond Barrette 335 78,005 1,465 7,200 336,627 1,654,412
James J. Ritchie 0 0 0 0 0 0
David G. Staples 0 0 1,800 7,200 413,603 1,654,412
Reid T. Campbell 0 0 1,800 7,200 413,603 1,654,412
---------------------------------------------------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
The following table summarizes the Incentive Plan awards made to the Named
Executive Officers during the latest fiscal year exclusive of awards of
Restricted Shares which have been presented in the Summary Compensation Table.
The Long-Term Incentive awards presented below consisted of performance shares.
A performance share derives its value from the market value of a Common Share
when earned.
---------------------------------------------------------------------------------------------------------------------
Performance Estimated Future Payouts (a)
Number of period for ---------------------------------------
Name Common Shares (#) payout Threshold (#) Target (#) Maximum (#)
---------------------------------------------------------------------------------------------------------------------
K. Thomas Kemp 2,000 3 yrs. 0 2,000 4,000
John D. Gillespie 15,000 3 yrs. 0 15,000 30,000
John J. Byrne 15,000 3 yrs. 0 15,000 30,000
Raymond Barrette 15,000 3 yrs. 0 15,000 30,000
James J. Ritchie 8,600 3 yrs. 0 8,600 17,200
David G. Staples 3,000 3 yrs. 0 3,000 6,000
Reid T. Campbell 2,500 3 yrs. 0 2,500 5,000
---------------------------------------------------------------------------------------------------------------------
(a) Performance shares are payable upon completion of pre-defined business
goals and are valued based on the market value of Common Shares at the time
awards are earned. With respect to all of the 2001 performance shares
awarded to Messrs. Kemp, Staples and Campbell and 50% of the 2001
performance shares awarded to Messrs. Byrne, Barrette, Gillespie and
Ritchie, "Target" performance is the attainment of a corporate annualized
return on equity ("ROE") of 12.1% after tax as measured by the Company's
growth in its intrinsic business value. With respect to 50% of the 2001
performance shares awarded to Messrs. Byrne, Barrette and Ritchie, "Target"
performance is the attainment of an insurance operations trade ratio of
105% (the "Trade Ratio") on OneBeacon's core insurance operations. With
respect to 50% of the 2001 performance shares awarded to Mr. Gillespie,
"Target" performance is the attainment of a return on invested assets of
100 basis points over the applicable return on the two-year United States
treasury bill. See "Reports of the Compensation Committees on Executive
Compensation-Compensation Committee" for additional information concerning
the 2001 awards of performance shares to the Named Executive Officers which
includes a discussion of the criteria for "Threshold" and "Maximum"
determinations.
11
COMPENSATION PLANS
PENSION PLANS. Employees of OneBeacon are eligible to receive retirement
benefits under a qualified defined benefit pension plan sponsored by OneBeacon
(the "Pension Plan"). The Pension Plan provides OneBeacon's employees with
annual retirement income beginning at age 65 equal to the product of (x) the
total number of years of participation in the Pension Plan (but not more than 40
years) and (y) 1.3% of the average annual compensation for the highest
consecutive 60 month period in the 120 month period prior to retirement ("Final
Average Compensation") plus .45% of such Final Average Compensation in excess of
Social Security Covered Compensation as defined by the Internal Revenue Service.
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the United States Internal Revenue Code, impose maximum limitations on the
annual amount of pension benefits which may be paid under the Pension Plan. As a
result, OneBeacon also sponsors a non-qualified supplemental retirement plan
(the "Supplemental Pension Plan") which provides additional retirement benefits
to highly-paid employees and their beneficiaries. Retirement benefits provided
under the Supplemental Pension Plan represent the difference between (a) the
benefits which would be payable to such persons under the Pension Plan without
taking into consideration the limitations imposed by ERISA and the Internal
Revenue Code and (b) the maximum annual benefits to which such persons are
entitled under the Pension Plan by reason of such limitations.
Remuneration covered by the Pension Plan and the Supplemental Pension Plan
includes salary and, to a lesser extent annual bonus. Long-term incentive awards
under the Incentive Plan are excluded from all pension benefits provided by
OneBeacon. Due to the timing of the OneBeacon acquisition, at December 31, 2001,
Messrs. Gillespie, Byrne, Barrette, Ritchie, Staples and Campbell each had only
..6 years of credited service with OneBeacon for purposes of accruing pension
benefits, therefore, their respective accrued pension benefits were
insignificant. Mr. Kemp, as an employee of the Company, is not eligible to
receive pension benefits.
DEFERRED COMPENSATION PLANS. The Named Executive Officers are eligible to
participate in various unfunded, nonqualified plans for the purpose of deferring
current compensation for retirement savings (the "Deferred Compensation Plans").
Pursuant to the Deferred Compensation Plans, participants may defer all or a
portion of qualifying remuneration payable by the Company or OneBeacon which can
be invested in various investment options generally available to the investment
community. Amounts credited to the deferred compensation accounts of such
individuals have been included in the Summary Compensation Table.
OTHER COMPENSATION ARRANGEMENTS
Pursuant to the Incentive Plan, under some circumstances Options may become
fully exercisable, Restricted Shares may immediately vest and performance shares
may become partially or fully payable. Such circumstances are more fully
described in the Incentive Plan.
Pursuant to an employment agreement dated December 6, 2000, Mr. Ritchie is
entitled to receive his annual base salary of $300,000 should OneBeacon end his
employment for any reason prior to December 31, 2002.
Pursuant to an employment agreement dated January 1, 2001, Mr. John
Gillespie is entitled to receive an annual base salary of $400,000, an annual
bonus of up to 200% of his base salary, minimum grants of performance shares,
participation in employee benefit and fringe benefit plans and an indemnity.
Under this agreement, Mr. Gillespie may continue his active involvement with his
investment management business, Prospector, so long as Mr. Gillespie devotes the
requisite time required to fulfill his responsibilities to OneBeacon. The
agreement specifies procedures pursuant to which Prospector's funds have the
ability to invest first in opportunities appropriate for both White Mountains
and such funds. Either party can terminate the employment agreement upon 30 days
notice, and upon termination Mr. Gillespie is entitled to accrued compensation
and a cash payment equal to a pro rated value of his unearned performance share
awards.
12
Pursuant to revenue sharing agreements, Mr. Gillespie has agreed to pay
White Mountains a portion of the revenues and distributions allocable to him in
connection with his investment management business, in return for White
Mountains agreeing to pay the operational expenses of his investment management
companies. During 2001, White Mountains received a net payment of $504,600 from
Mr. Gillespie under such revenue sharing agreements. In addition, in September
2001, White Mountains entered into a five-year lease at a market-based rate for
a building owned by Mr. Gillespie and trusts for the benefit of members of his
family. At December 31, 2001, White Mountains had $82 million invested in funds
managed by Prospector.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Clark is Vice Chairman of Lehman. Lehman has, for a number of years,
provided investment banking services to White Mountains. Lehman was the
arranger, the administrative agent and a lender under the $875.0 million credit
facility used to acquire OneBeacon.
Mr. George Gillespie is a partner at CS&M. CS&M has, for many years,
provided legal services to White Mountains.
White Mountains owns limited partnership investment interests which are
managed by Mr. John Gillespie. See "Other Compensation Agreements."
At December 31, 2001, White Mountains had limited partnership investment
interests in High Rise Partners, L.P. White Mountains also owns investments that
are managed by High Rise Capital Management L.P., of which Mr. Zankel is the
senior Managing Member.
White Mountains believes that the above transactions were on terms that
were reasonable and competitive and, in the case of Lehman, were obtained
through a competitive bid process. White Mountains believes that such
transactions did not serve to impair the independence of any of the parties
involved. Additional transactions of this nature may be expected to take place
in the ordinary course of business in the future.
REPORTS OF THE COMMITTEES ON EXECUTIVE COMPENSATION
The Human Resources Committee and the Compensation Committee (collectively,
the "Committees") are comprised entirely of non-employee directors. The
Committees are responsible for developing, administering and monitoring the
executive compensation policies of the Company and OneBeacon. Salary and bonus
compensation for the Named executive Officers is established by the Human
Resources Committee. Share-based compensation (performance shares, Options and
Restricted Shares) is established by the Compensation Committee.
White Mountains' executive compensation policies are designed with one goal
in mind - maximization of Member value over long periods of time. The Committees
believe that this goal is best pursued by utilising a pay-for-performance
program which serves to attract and retain superior executive talent and provide
management with performance-based incentives to maximize Member value. Through
this compensation program, the Committees seek to maximize Member value by
aligning closely the financial interests of White Mountains' management with
those of its Members.
The Committees believe that the most appropriate measure of Member value
created (or lost) is the Company's ROE as measured by growth in its intrinsic
value. In determining intrinsic value, the Committees will consider growth in
economic value per share with some attention to growth in tangible book value
per share, market value per share and such other relevant values, as the
Committees may determine, in reaching a balanced conclusion about performance.
This proprietary measure is viewed by management and the directors as being a
conservative measure of the economic value of White Mountains and includes the
cost of all projected compensation awards. The Committees believe that, over
long periods of time, maximizing the Company's ROE will optimize Member returns.
13
The Committees believe that the performance-based compensation for key
employees should be payable only if the Company achieves truly superior returns
for its Members. Therefore, the target of many of White Mountains'
performance-based compensation programs are directly linked to achievement of an
annualized ROE at least equal to the market yield available from a ten- year
United States Treasury note plus 700 basis points, or currently 12%. The
Committees believe that this return is a challenging target for the Company in
its current form.
Compensation of White Mountains' management team, including the Named
Executive Officers, consists primarily of three components: base salary, annual
bonus and long-term incentive awards.
HUMAN RESOURCES COMMITTEE
BASE SALARY. Base salary for each Named Executive Officer is established
annually, on or about March 1. When establishing base salaries of the Named
Executive Officers, the Human Resources Committee considers numerous factors
including each Named Executive Officer's qualifications, corporate
responsibilities, performance since their last salary adjustment and, except for
the CEO, the recommendations of the CEO.
ANNUAL BONUS. For 2001 the target annual bonus pool for the Named Executive
Officers was equal to 50% of eligible base salary at a 12.1% annual ROE with no
bonus pool resulting from a ROE of 5.1% or less. When establishing the aggregate
size of the annual bonus pool, the Human Resources Committee considers numerous
factors including performance versus the objectives set forth in the Company's
Annual Business Plan, in particular the Company's financial performance for the
latest fiscal year as measured by ROE, and the recommendations of the CEO
After establishing the aggregate size of the annual bonus pool, the Human
Resources Committee then considers the distribution of the bonus pool among the
key employees. Each participant's allocation of the pool is determined after
considering numerous factors including individual achievements as compared to
objectives included in the Annual Business Plan, the contribution of such
achievements to the Company's overall financial performance and the
recommendations of the CEO.
The CEO typically receives an annual bonus equal to the average bonus
percentage received by all officers eligible to participate in the bonus pool.
For 2001 the Human Resources Committee determined that the financial
results of the Company did not warrant a bonus pool. The principal factor
considered by the Human Resources Committee in making this determination was the
Company's 2001 ROE performance which was determined to be below the threshold of
5.1%, as measured by its change in economic value per Common Share, versus a
12.1% target ROE.
In light of the completion of the OneBeacon transaction and favorable
investment results attained during 2001, the Human Resources Committee created a
modest special purpose bonus pool for a select group of employees pursuant to
which Messrs. John Gillespie, Staples and Campbell received $110,000, $13,200
and $15,000, respectively. No other Named Executive Officers received a bonus
for 2001.
ROBERT P. COCHRAN, CHAIRMAN
PATRICK M. BYRNE
HOWARD L. CLARK, JR.
GEORGE J. GILLESPIE, III
FRANK A. OLSON
JOSEPH S. STEINBERG
ARTHUR ZANKEL
COMPENSATION COMMITTEE
LONG-TERM INCENTIVE AWARDS. The Incentive Plan provides for granting various
types of share-based incentive awards including Restricted Shares, Options and
performance shares to the Named Executive Officers and certain other key
employees of the Company and its subsidiaries.
Over the past several years the Company has consistently used performance
shares in its long-term compensation plans. Performance shares are payable only
upon completion of pre-defined business goals and are valued based on the market
value of Common Shares at the time awards are earned.
14
For 2001, the Compensation Committee determined that awards of Restricted
Shares would be an effective supplement to performance share grants and would
provide an effective means of retention in the form of long-term incentive
compensation to certain key employees.
The Compensation Committee believes that awards of performance shares are
an attractive method of providing incentives for management to strive to
maximize Member value over the long term. This belief is predicated on the
following factors: (i) such awards are earned over multi-year periods; (ii) such
awards are generally made in the form of Common Shares or derivatives thereof,
which helps to align the interests of management with those of the Company's
Members; and (iii) performance shares are contingent upon the achievement of a
12.1% ROE over the applicable performance period which further aligns the
interests of management and the Company's Members.
In 2001 Messrs. Kemp, Gillespie, Byrne, Barrette, Ritchie, Staples and
Campbell were granted 2,000; 15,000; 15,000; 15,000; 8,600; 3,000 and 2,500
performance shares, respectively, by the Compensation Committee. The performance
period for such awards began on January 1, 2001 and will continue through
December 31, 2003. With respect to the 2001 performance shares awarded to
Messrs. Kemp, Staples and Campbell, performance is the attainment of a ROE of
12.1% after tax which would result in such performance shares being fully earned
("Target"). At a ROE of 5.1% or less, no such performance shares would be earned
("Threshold") and at a ROE at or above 23%, 200% of such performance shares
would be earned ("Maximum"). With respect to 50% of the 2001 performance shares
awarded to Messrs. Byrne, Barrette and Ritchie, performance is the attainment of
a ROE of 12.1% after tax as defined above. With respect to the remaining 50% of
the 2001 performance shares awarded to these individuals, performance is the
attainment of a OneBeacon core insurance operations Trade Ratio of 105%.
OneBeacon's Trade Ratio is similar to an insurance company's combined ratio but
has been modified to divide general operating expenses by earned premiums rather
than written premiums. With respect to the Trade Ratio aspect of the attainment
goals, at a Trade Ratio of 107% or more, no such performance shares would be
earned ("Threshold") and at a Trade Ratio of 101% or less, 200% of such
performance shares would be earned ("Maximum").
With respect to 50% of the 2001 performance shares awarded to Mr.
Gillespie, performance is the attainment of a ROE of 12.1% after tax as defined
above. With respect to the remaining 50% of the 2001 performance shares awarded
to Mr. Gillespie, "Target" performance is the attainment of a return on invested
assets of 100 basis points over the applicable return on the applicable two-year
United States treasury bill. With respect to the investment return aspect of the
attainment goals, at an investment return equal to or less than the two-year
treasury, no such performance shares would be earned ("Threshold") and at an
investment return equal to or greater than 200 basis points over the two-year
treasury, 200% of such performance shares would be earned ("Maximum").
In 2001 the Named Executive Officers received Restricted Shares which vest
approximately two years from the date of grant based on continuous service
throughout such period. Restricted Shares awarded in February 2001 (vesting
December 2002) to Messrs. Kemp, Gillespie, Byrne, Barrette, Ritchie, Staples and
Campbell were 5,000; 0; 0; 3,750; 0; 1,000 and 1,000 shares, respectively.
Restricted Shares awarded in June 2001 (vesting June 2003) to Messrs. Kemp,
Gillespie, Byrne, Barrette, Ritchie, Staples and Campbell were 1,000; 4,000;
25,000; 17,000; 1,000; 3,000 and 3,000 shares, respectively.
Messrs. Kemp, Gillespie, Byrne, Barrette, Ritchie, Staples and Campbell
had, pursuant to a 1999 grant, 9,000; 0; 0; 6,000; 0; 2,000 and 2,000
performance shares eligible for payout, respectively, subject to the attainment
of a 13% target ROE. During the 1999 to 2001 performance period, the Company
attained a ROE of 28.2% calculated in accordance with the Incentive Plan. In
light of the excellent ROE attained during the performance period, the
Compensation Committee determined that 200% of such performance shares were
fully earned on February 27, 2002. The dollar value of such performance shares
earned are included in the Summary Compensation Table.
ROBERT P. COCHRAN, CHAIRMAN
PATRICK M. BYRNE
FRANK A. OLSON
JOSEPH S. STEINBERG
ARTHUR ZANKEL
15
REPORT OF THE AUDIT COMMITTEE
In connection with audit of the Company's financial statements for the year
ended December 31, 2001, the Audit Committee has: (1) reviewed and discussed the
audited financial statements with management; (2) reviewed and discussed with
the Independent Auditor the matters required by Statement of Auditing Standards
No. 61; and (3) reviewed and discussed with the Independent Auditor the matters
required by Independence Standards Board Statement No. 1. Based on these reviews
and discussions, the Audit Committee has determined its Independent Auditor to
be independent and have recommended to the Board that the audited financial
statements be included in the Annual Report on Form 10-K for filing with the SEC
and for presentation to the Members at the 2002 Annual Meeting.
The Audit Committee has established a Charter which outlines its primary
duties and responsibilities. The Audit Committee Charter, which has been
approved by the Board, is reviewed at least annually and is updated as
necessary. The Audit Committee Charter was furnished to the Company's Members in
its 2001 Proxy Statement.
HOWARD L. CLARK JR., CHAIRMAN
FRANK A. OLSON
JOSEPH S. STEINBERG
ARTHUR ZANKEL
FEES BILLED BY THE COMPANY'S INDEPENDENT AUDITOR FOR SERVICES
PERFORMED IN 2001
AUDIT FEES. Aggregate fees billed for the 2001 audit of the Company's financial
statements including quarterly reviews totalled $1,637,900.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. No such services
were performed during 2001.
ALL OTHER FEES. Aggregate fees billed for all other services performed in 2001
totalled $4,026,800. These fees related primarily to: (i) tax compliance and
consulting services for existing companies and consulting and tax structuring
services relating to acquisition activities, (ii) information technology
feasibility studies and (iii) audit services related to capital raising
activities.
16
MEMBER RETURN GRAPH
The following graph shows the five-year cumulative total return for a
Member who invested $100 in Common Shares (NYSE symbol "WTM") as of the close of
business on December 31, 1996, assuming re-investment of dividends. Cumulative
returns for the five-year period ended December 31, 2001 are also shown for the
Standard & Poor's 500 Stocks (Property & Casualty) Capitalization Weighted Index
("S&P P&C") and the Standard & Poor's 500 Stocks Capitalization Weighted Index
("S&P 500") for comparison.
As stated herein, White Mountains' various compensation plans are based on
its growth in its economic value which is believed to be a conservative proxy
for its intrinsic business value. The Company's long-term goal is to maximize
its intrinsic business value per Common Share which will, in turn, affect its
market value per Common Share.
[CHART OF FIVE-YEAR CUMULATIVE TOTAL RETURN]
1997 1998 1999 2000 2001
WTM $127.3 $149.1 $129.8 $346.1 $378.7
S&P P&C 145.5 135.4 100.9 157.1 144.5
S&P 500 133.4 171.5 207.6 188.7 166.2
17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION IN COMPENSATION DECISIONS
The Company notes certain relationships and transactions pertaining to
Messrs. Clark, George Gillespie and Zankel who are Members of the Compensation
Committee and/or the Human Resources Committee. See "Certain Relationships and
Related Transactions."
CERTAIN FILINGS UNDER SECTION 16
Pursuant to SEC rules relating to the reporting of changes in beneficial
ownership of Common Shares, the Executive Officers, Directors and greater than
10% Members are believed to have filed all reports required under Section 16 on
a timely basis during 2001.
PROPOSAL 2
ELECTION OF DIRECTORS OF FUND AMERICAN REINSURANCE COMPANY, LTD.
("FUND AMERICAN RE")
Bye-law 77 of the Company provides that the boards of directors of any
wholly-owned subsidiary of the Company incorporated under the laws of Bermuda,
such as Fund American Re, or any other company designated by the Board, be
elected by the Company's Members.
Proposal 2 calls for the election of Messrs. Kemp, Fass, Anders Henriksson
(President of Fund American Re) and Ms. Sheila E. Nicoll, (President and Chief
Executive Officer of Olympus Re Holdings, Ltd, a reinsurance company organised
under the laws of Bermuda) to the board of directors of Fund American Re. The
proposal also calls for the election of Ms. Elinor M. Lucas (an associate of
Conyers, Dill & Pearman, the Company's Bermuda counsel) as an alternative to any
one or more of the directors of Fund American Re.
Messrs. Kemp, Fass and Henriksson and Ms. Lucas will not receive any
compensation for their services as a director of Fund American Re. Ms. Nicoll is
expected to receive an annual director retainer of $5,000. Biographical
information relating to Messrs. Kemp and Fass is presented under Proposal 1
"Election of the Company's Directors."
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 2 WHICH CALLS FOR THE ELECTION OF
THE DIRECTORS OF FUND AMERICAN RE.
PROPOSAL 3
ELECTION OF DIRECTORS TO ANY NEW NON- UNITED STATES OPERATING SUBSIDIARIES
Bye-law 77 of the Company provides that the boards of directors of any
wholly-owned subsidiary of the Company which is incorporated under the laws of
Bermuda, or any other company designated by the Board, be elected by the
Company's Members.
Proposal 3 calls for the election of Messrs. Kemp and Fass to any
wholly-owned, non-United States operating subsidiary that may be formed by the
Company in the future. Messrs. Kemp and Fass will not receive any compensation
for their services as a director of any newly-formed, non-United States company.
Biographical information relating to Messrs. Kemp and Fass is presented under
Proposal 1 "Election of the Company's Directors."
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 3 WHICH CALLS FOR THE ELECTION OF
MESSRS. KEMP AND FASS TO ANY NEW NON-UNITED STATES OPERATING SUBSIDIARIES.
PROPOSAL 4
APPROVAL OF THE APPOINTMENT OF INDEPENDENT AUDITOR
Subject to Member approval, the Audit Committee of the Board has appointed
PricewaterhouseCoopers ("PwC") as White Mountains' Independent Auditor for 2002.
Representatives from PwC will attend the 2002 Annual Meeting, will be provided
with the opportunity to make a statement and will be available to answer
appropriate questions.
PwC has served as the Company's Independent Auditor for three years, as
Folksamerica's Independent Auditor for more than 20 years, and as OneBeacon's
Independent Auditor for more than 25 years.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 4 APPROVING THE APPOINTMENT OF PWC
AS WHITE MOUNTAINS' INDEPENDENT AUDITOR FOR 2002.
18
OTHER MATTERS
MANNER OF VOTING PROXIES
Common Shares represented by all valid proxies received will be voted in
the manner specified in the proxies. Where specific choices are not indicated,
the Common Shares represented by all valid proxies received will be voted FOR
each of the proposals named earlier in this Proxy Statement.
Should any matter not described above be acted upon at the meeting, the
persons named in the proxy card will vote in accordance with their judgment. The
Board knows of no other matters which are to be considered at the 2002 Annual
Meeting.
VOTES REQUIRED FOR APPROVAL
The proposals require the affirmative vote of a majority of the voting
power held by holders of Common Shares present at the 2002 Annual Meeting, in
person or by proxy, provided a quorum is present.
INSPECTORS OF ELECTION
EquiServe Trust Company of New York, P.O. Box 2500, Jersey City, New Jersey
07303-2500, has been appointed as Inspectors of Election for the 2002 Annual
Meeting. Representatives of EquiServe will attend the 2002 Annual Meeting to
receive votes and ballots, supervise the counting and tabulating of all votes
and ballots, and determine the results of the vote.
COSTS OF SOLICITATION
The solicitation of proxies will be made primarily by mail, however,
directors, officers, employees and agents of the Company may also solicit
proxies by telephone, telegram or personal interview. Solicitation costs will be
paid by the Company. Upon request, the Company will reimburse banks, brokerage
houses and other custodians, nominees and fiduciaries for their reasonable
expenses incurred in forwarding proxy materials to their principals.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Exchange Act of 1934. In accordance therewith, the Company files reports, proxy
statements and other information with the SEC. THE COMPANY WILL PROVIDE TO EACH
PERSON TO WHOM A COPY OF THIS PROXY STATEMENT IS DELIVERED, UPON REQUEST AND
WITHOUT CHARGE, COPIES OF ALL DOCUMENTS (EXCLUDING EXHIBITS UNLESS SPECIFICALLY
REQUESTED) FILED BY THE COMPANY WITH THE SEC. Written or telephone requests
should be directed to the Corporate Secretary, White Mountains Insurance Group,
Ltd., 28 Gates Street, White River Junction, Vermont, 05001, telephone number
(802) 295-4500. Additionally, all such documents are available at the Company's
registered office at Clarendon House, 2 Church Street, Hamilton, HM DX Bermuda.
OFFICES OF THE COMPANY
The Company's headquarters is located at Crawford House, 23 Church Street,
Hamilton, HM 11, Bermuda (with a mailing address of 12 Church Street, Suite 322,
Hamilton HM 11, Bermuda), its principal executive office is located at 28 Gates
Street, White River Junction, Vermont, 05001, and its registered office is
located at Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda.
www.whitemountains.com
All reports, including press releases, SEC filings and other information
relating to White Mountains are available for viewing or download at our
website.
PROPOSALS BY MEMBERS FOR THE 2003 ANNUAL MEETING OF MEMBERS
Member proposals (other than those proposals to nominate persons as
directors) must be received in writing by the Secretary of the Company no later
than December 31, 2002 and must comply with the requirements of the SEC in order
to be considered for inclusion in the Company's proxy statement relating to the
Annual Meeting to be held in 2003.
By Order of the Board of Directors,
DENNIS P. BEAULIEU, Corporate Secretary
March 22, 2002
19
PROXY
WHITE MOUNTAINS INSURANCE GROUP, LTD.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL GENERAL MEETING TO BE HELD MAY 20, 2002
The undersigned hereby appoints K. Thomas Kemp and Gordon S. Macklin, and each
of them, proxies with full power of substitution, to vote all Common Shares of
the undersigned at the 2002 Annual General Meeting of Members to be held May 20,
2002, and at any adjournment thereof, upon all subjects that may properly come
before the meeting including the matters described in the proxy statement
furnished herewith, subject to any directions indicated on the reverse of this
card or below. If no directions are given, the proxies will vote FOR the
election of the Company's directors, FOR the election of Fund American Re's
directors, FOR the election of the directors of any new non-United States
subsidiary and FOR the approval of the appointment of PricewaterhouseCoopers as
Independent Auditor for 2002, and at their discretion on any other matter that
may properly come before the meeting.
Your vote for the election of the Company's directors may be indicated on the
reverse side. The following directors are being nominated at this meeting for
election to terms ending in 2005.
John J. Byrne George J. Gillespie, III Frank A. Olson
Mark J. Byrne John D. Gillespie
Your vote for the election of Fund American Re's directors may be indicated on
the reverse side. The following directors are being nominated to serve until
their resignation or removal from office.
K. Thomas Kemp Anders Henriksson Elinor M. Lucas (alt.)
Steven E. Fass Sheila E. Nicoll
Your vote for the election of the directors of any new non-United States
subsidiary may be indicated on the reverse side. The following directors are
being nominated to serve until their resignation or removal from office.
K. Thomas Kemp Steven E. Fass
(Change of address/comments)
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(If you have written in the above space, please mark the corresponding box
on the reverse side of this card.)
Your vote is important! Please sign and date on the reverse side and return
promptly in the enclosed postage-paid envelope or otherwise to White Mountains
Insurance Group, Ltd., c/o EquiServe Trust Company, Post Office Box 8085,
Edison, New Jersey 08818-9052.
SEE REVERSE
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE SIDE
X Please mark your votes as in this example.
This proxy when properly executed will be voted in the manner directed herein.
If no directions are made, this proxy will be voted FOR the election of the
Company's directors, FOR the election of Fund American Re's directors, FOR the
election of the directors of any new non-United States subsidiary, and FOR the
approval of the appointment of PricewaterhouseCoopers as Independent Auditor for
2002.
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The Board of Directors recommends a vote "FOR" Proposals 1, 2, 3 and 4.
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FOR WITHHELD FOR WITHHELD FOR WITHHELD FOR AGAINST ABSTAIN
1. Election 2. Election of 3. Election of the 4. Approval of
of Company / / / / directors of / / / / directors of / / / / Independent / / / / / /
directors Fund American Re any new non-US Auditors
subsidiary
FOR, except vote withheld(?) FOR, except vote withheld FOR, except vote withheld from Change of Address
the following nominee(s) from the following nominee(s): the following nominee(s):
Comments on Reverse Side / /
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The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or any
adjournment thereof.
Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such.
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SIGNATURE(S) DATE