Great American Financial Resources, Inc. DEF 14A
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
Filed by the
Registrant x
Filed by a Party other than the
Registrant o
Check the appropriate box:
|
|
|
o Preliminary
Proxy Statement
|
|
o Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|
x Definitive
Proxy Statement |
|
|
o Definitive
Additional Materials |
|
|
o Soliciting
Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
|
GREAT AMERICAN FINANCIAL RESOURCES, INC.
(Name of Registrant as Specified in its
Charter)
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|
|
x |
No fee required.
|
o |
Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
|
|
|
|
|
(1) |
Title of each class of securities to which
transaction applies: |
|
|
(2) |
Aggregate number of securities to which
transaction applies: |
|
|
(3) |
Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is calculated and
state how it was determined): |
|
|
(4) |
Proposed maximum aggregate value of
transaction: |
|
|
(5) |
Total fee paid: |
|
|
o |
Fee paid previously with preliminary materials.
|
|
o |
Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
|
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement
No.:
(3) Filing Party:
(4) Date Filed:
250 East Fifth Street
Cincinnati, Ohio 45202
Notice of Annual Meeting of Stockholders
and Proxy Statement
To be Held on May 18, 2006
Dear Stockholder:
We invite you to attend our Annual Meeting of Stockholders on Thursday, May 18, 2006, in
Cincinnati, Ohio. At the meeting, you will hear a report on our operations and have an opportunity
to meet your companys directors and executives.
This booklet includes the formal notice of the meeting and the proxy statement. The proxy
statement tells you more about the agenda and procedures for the meeting. It also describes how
your Board of Directors operates and provides information about the director candidates.
All stockholders are important to us. We want your shares to be represented at the meeting and
urge you either to use our telephone voting system or to complete, sign, date and return your proxy
form.
|
|
|
|
|
Sincerely, |
|
|
|
|
|
Carl H. Lindner
Chairman of the Board |
Cincinnati, Ohio
March 31, 2006
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF GREAT AMERICAN FINANCIAL RESOURCES, INC.
|
|
|
Date:
|
|
Thursday, May 18, 2006 |
|
|
|
Time:
|
|
11:00 a.m., Eastern Daylight Savings Time |
|
|
|
Place:
|
|
The Cincinnatian Hotel |
|
|
Sixth and Vine Streets |
|
|
Cincinnati, Ohio |
|
|
|
Purpose:
|
|
1. Elect Directors |
|
|
|
2. Approve the Non-Employee Directors Compensation Plan |
|
|
|
3. Ratify Ernst & Young LLP as our Independent Registered Public
Accountants for 2006 |
|
|
|
4. Conduct other business if properly raised |
|
|
|
Record Date:
|
|
March 31, 2006. Stockholders listed in our records on that
date are entitled to receive notice of and to vote at the
meeting. |
|
|
|
Mailing Date:
|
|
The approximate mailing date of this proxy statement and
accompanying proxy form is April 21, 2006. |
Your vote is important. Whether or not you attend the meeting, you may vote your shares using the
toll-free telephone voting system described on page 3, or by mailing a signed proxy form, which is
the bottom portion of the enclosed perforated form. If you do attend the meeting, you may either
vote by proxy or revoke your proxy and vote in person. You may also revoke your proxy at any time
before the vote is taken at the meeting by written revocation, using the telephone voting system or
by submitting a later-dated proxy form.
1
GENERAL INFORMATION
Record Date; Shares Outstanding
As of March 31, 2006, the record date for determining stockholders entitled to notice of and to
vote at the meeting, we had 47,367,452 shares of common stock outstanding and eligible to vote.
Each share of outstanding common stock is entitled to one vote on each matter to be presented at
the meeting. Stockholders do not have cumulative voting rights in the election of directors.
Abstentions (including instructions to withhold authority to vote for one or more nominees) and
broker non-votes will not have any effect with respect to the election of directors but will be
counted as votes against the other proposals.
Proxies and Voting Procedures
Registered stockholders may vote by using a toll-free telephone number, by completing a proxy form
and mailing it to the proxy tabulator, or by attending the meeting and voting in person. The
telephone voting facilities will open following the mailing of materials on April 21, 2006, and
close at 9:00 a.m. Eastern Daylight Savings Time on the meeting date. The telephone voting
procedures are designed to authenticate stockholders by use of a proxy control to allow
stockholders to confirm that their instructions have been properly recorded.
Stockholders whose shares are held in the name of a broker, bank or other nominee should refer to
the proxy card or the information forwarded by such broker, bank or other nominee to see what
voting options are available.
To vote by telephone, stockholders should call toll-free 1-800-PROXIES (1-800-776-9437) using any
touch-tone telephone and have their proxy form at hand. To vote by mail, stockholders should
complete and sign the bottom portion of the proxy form and return only that portion to the proxy
tabulator.
Solicitation of proxies through the mail, in person and otherwise, is being made by management at
the direction of the Board of Directors, without additional compensation. We will pay all costs of
soliciting proxies. In addition, we will request brokers and other custodians, nominees and
fiduciaries to forward proxy soliciting material to the beneficial owners of shares held of record
by such persons, and we will reimburse them for their expenses.
The execution of a proxy or vote by phone does not affect the right to vote in person at the
meeting, and a proxy or vote by phone may be revoked by the person giving it prior to the exercise
of the powers conferred by it. A stockholder may revoke a prior vote by writing to our Secretary
at our principal offices or by properly executing and delivering a proxy bearing a later date (or
recording a later telephone vote) or by voting in person at the meeting. In addition, persons
attending the meeting in person may withdraw their proxies. Attending the meeting will not serve
to vote your proxy unless you vote at the meeting.
If a choice is specified on a properly executed proxy form, the shares will be voted accordingly.
If a proxy form is signed without a preference indicated, those shares will be voted FOR the
election as directors of the eight nominees proposed by the Board of Directors, FOR approval of
the Non-Employee Directors Compensation Plan and FOR the ratification of Ernst & Young LLP as our
independent public accountants for 2006. If any other matters properly come before the meeting or
any adjournment thereof, each properly executed proxy form will be voted in the discretion of the
proxies named therein.
2
Adjournment and Other Matters
Approval of a motion for adjournment or other matters brought before the meeting requires the
affirmative vote of a majority of the shares voting at the meeting. We know of no other matters to
be presented at the meeting other than those stated in this document.
PRINCIPAL STOCKHOLDERS
As of the record date, the only person known to us to own beneficially more than 5% of our common
stock was American Financial Group, Inc. (AFG), One East Fourth Street, Cincinnati, Ohio 45202.
AFG owns shares directly and indirectly through its subsidiaries. AFG beneficially owned
38,565,995 shares or approximately 81.4% of the shares outstanding as of the record date.
PROPOSAL NO. 1-ELECTION OF DIRECTORS
The Board of Directors oversees the management of the company on your behalf. The Board reviews
our long-term strategic plans and exercises direct decision-making authority in key areas such as
choosing the Chief Executive Officer, setting the scope of his authority to manage our day-to-day
business, and evaluating managements performance.
The Board of Directors has nominated eight individuals to hold office until the next annual meeting
of stockholders and until their successors are elected and qualified. If any of the nominees
should become unable to serve as a director, the proxies will be voted for any substitute nominee
designated by the Board of Directors but, in any event, no proxy may be voted for more than eight
nominees. The eight nominees who receive the greatest number of votes will be elected.
In accordance with our Certificate of Incorporation, the only candidates eligible for election at
the annual meeting are candidates nominated by the Board of Directors and candidates nominated at
the meeting by a stockholder who has complied with the procedures set forth in the Certificate of
Incorporation.
The persons nominated by the Board of Directors to serve as directors for the ensuing year are CARL
H. LINDNER, S. CRAIG LINDNER, ROBERT A. ADAMS, KENNETH C. AMBRECHT, RONALD G. JOSEPH, JOHN T.
LAWRENCE III, WILLIAM R. MARTIN and CHARLES R. SCHEPER. The eight nominees receiving the highest
numbers of votes will be elected as directors.
The nominees for election to the Board of Directors are:
|
|
|
Carl H. Lindner
Age 86
Director since 1987
|
|
Carl H. Lindner has been Chairman of the Board since
1987. Mr. Lindner also serves as Chairman of the
Board of AFG, a diversified financial services
company. Carl H. Lindner is the father of S. Craig
Lindner. |
|
|
|
S. Craig Lindner
Age 51
Director since 1993
|
|
S. Craig Lindner was elected Chief Executive Officer
in November 1999. Mr. Lindner is President of
American Money Management Corporation (AMM), a
subsidiary of AFG which provides investment services
for AFG and its affiliated companies, including us.
He is also Co-Chief Executive Officer and a director
of AFG. |
3
|
|
|
Robert A. Adams
Age 60
Director since 1992
|
|
Robert A. Adams served as Executive Vice President
since December 1992 and a director since 1993. He
also served as Chief Operating Officer until November
1999. Mr. Adams retired as an employee of Great
American Financial Resources in December 2001. |
|
|
|
Kenneth C. Ambrecht
Age 60
Director since 2004
|
|
Kenneth C. Ambrecht has been a director since July
2004. In December 2005, Mr. Ambrecht organized KCA
Associates, LLC. KCA Associates serves as a
consultant to several companies, advising them with
respect to financings and financial transactions.
From July 2004 to December 2005, Mr. Ambrecht served
as a Managing Director for the investment banking
firm of First Albany Capital. For more than five
years prior thereto he was a Managing Director with
Royal Bank Canada Capital Markets. Mr. Ambrecht also
serves as a director of AFG and Fortescue Metals
Group Limited, an Australian Mining Company. |
|
|
|
Ronald G. Joseph
Age 69
Director since 1994
|
|
Ronald G. Joseph has been a director since March
1994. For more than five years, Mr. Joseph has been
Chief Executive Officer and attorney of various
Cincinnati-based automobile dealerships and real
estate holdings. |
|
|
|
John T. Lawrence III
Age 54
Director since 1994
|
|
John T. Lawrence III has been a director since March
1994. For more than five years, Mr. Lawrence has
been a Senior Vice President with UBS Financial
Services, Inc., a national investment banking firm. |
|
|
|
William R. Martin
Age 77
Director since 1994
|
|
William R. Martin has been a director since March
1994. Although currently retired, Mr. Martin was
previously President of both Tominy, Inc. and M.B.
Computing, Inc., which are privately held software
development companies. Mr. Martin is also a director
of AFG. |
|
|
|
Charles R. Scheper
Age 53
Director since 1999
|
|
Charles R. Scheper was elected Chief Operating
Officer in November 1999 and has been a director
since May 2002. |
In March 2002, Chiquita Brands International, Inc., a leading international marketer, producer and
distributor of bananas and other quality fresh and processed food products, completed a
comprehensive financial restructuring that included a prepackaged plan of reorganization filed in
November of the prior year under Chapter 11 of the Bankruptcy Code. Carl H. Lindner was an
executive officer and director of Chiquita at the time of the bankruptcy filing.
The Board of Directors recommends that stockholders vote for the election of the eight
nominees listed above. We have been informed that AFG intends to vote its shares FOR the above
nominees.
4
PROPOSAL NO. 2-APPROVAL OF NON-EMPLOYEE DIRECTORS
COMPENSATION PLAN
After a review of our compensation programs and policies for non-employee directors, and reflecting
on the desire to align more closely the Board of Directors compensation practices with those of
other public insurance holding companies and the interests of all of our stockholders, the Board
adopted the Non-Employee Directors Compensation Plan in February, 2006, subject to approval by our
stockholders. If approved by our stockholders, the Plan will become effective on May 18, 2006, the
date of stockholder approval, and will continue in effect until the earlier of its termination by
the Board or the Plans tenth anniversary. Our Board has approved the Plan, and is recommending it
to the stockholders for their approval because the Board believes it is important for non-employee
directors to be provided compensation commensurate with their contributions to our success.
This summary of the material terms of the Plan is qualified in its entirety by the full text of the
Plan, a copy of which is set forth as Annex I to this Proxy Statement.
The Plan provides for the grant to non-employee directors of retainers and meeting fees in
cash and annual restricted stock grants. The shares with respect to which awards may be made under
the Plan may be shares that are currently authorized but unissued. The total number of shares
reserved for issuance under the Plan is 150,000. Each director who is not our employee or an
employee of one of our subsidiaries is entitled to participate in the Plan. As of the record date,
four directors of the Company were eligible to receive awards under the Plan.
Retainers and Meeting Fees
Under the Plan, our non-employee directors will be paid an annual retainer for their service as a
member of the Board, an additional annual retainer for service on Board committees, including
additional amounts paid for service as Chairman of a Board committee, and an attendance fee for
each Board or committee meeting attended, each in amounts which shall be established from time to
time by the Board of Directors without stockholder approval. We will pay all such retainers and
meeting fees in cash, quarterly in arrears, as soon as practicable following the end of each
calendar quarter. The following are the retainer and meeting fees set forth in the Plan:
|
|
|
|
Annual Board Retainer |
|
$ |
30,000 |
Annual Committee Chair Retainer |
|
$ |
10,000 |
Fee per Board Meeting |
|
$ |
2,000 |
Fee per Committee Meeting |
|
$ |
1,750 |
5
Restricted Stock Grant
Under the Plan, on June 1 of each year during which a non-employee director is a member of our
Board of Directors, such director shall be granted restricted shares of our common stock. The
number of shares of our common stock to be issued to each non-employee director will be determined
by dividing $40,000 by the average of the per share high and low sale prices reported on the New
York Stock Exchange for the ten trading days ending on the last business day prior to June 1 of the
applicable year. The value of this restricted stock grant may be changed by the Board of Directors
from time to time without stockholder approval.
Plan Benefits
The following table sets forth the benefits which would have been received for our last completed
fiscal year if the Plan had then been in effect:
|
|
|
|
|
|
|
|
|
Position |
|
Cash |
|
Number of Shares |
All current executive officers, as a group |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
All current directors who are not executive
officers, as a group (4 persons) |
|
$ |
245,000 |
|
|
|
9,691 |
|
|
|
|
|
|
|
|
|
|
All employees who are not executive
officers,
as a group |
|
|
0 |
|
|
|
0 |
|
Amendment and Termination
Our Board of Directors may suspend or terminate the Plan or any portion of it at any time, and may
amend it from time to time as the Board may deem advisable except that the Board shall not have the
authority to amend the plan without the approval of stockholders to increase the number of shares
of our common stock which may be issued under the Plan, materially modify the requirements as to
eligibility for participating in the Plan, or extend the termination date of the Plan. In
addition, the amount, pricing and timing of our common stock issuances pursuant to the Plan shall
not be amended more than once every six months, other than to comply with changes in the Internal
Revenue Code or other applicable law.
Transferability
In order to address certain provisions of federal securities laws, non-employee directors are
prevented from disposing of shares received under the Plan within six months from the date of
issuance.
Registration
Following approval by the stockholders, the Company intends to register with the SEC the issuance
of shares under the Plan.
Interest of Certain Persons in Matters to be Acted Upon
Each of the non-employee directors has a direct interest in the approval of the Plan, which will
make additional shares of common stock available to non-employee directors.
United States Income Tax Consequences of the Plan
The following paragraphs provide a summary of the material U.S. federal income tax consequences of
the Plan based upon current laws and regulations. These laws and regulations are subject to change.
This summary does not address state, local or foreign tax consequences to which a participant in
the Plan may be subject. We suggest that participants consult with their individual tax advisors to
determine the applicability of the tax rules to the awards granted to them under the Plan.
Plan participants will realize ordinary income at the time of grant in an amount equal to the fair
market value of the shares of our common stock received and/or the retainer and meeting cash
payments, as applicable. Gains or losses realized by the participant upon disposition of such AFG
shares will be treated as capital gains and losses, with the basis in such shares equal to the fair
market value of the shares at the time of grant. We will be entitled to a deduction equal to an
amount of income includible in the participants income.
The Board of Directors recommends that stockholders vote FOR the approval of the Non-Employee
Directors Compensation Plan. We have been informed that AFG intends to vote its shares FOR the
above nominees.
PROPOSAL NO. 3-RATIFICATION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Ernst & Young LLP, to serve as our independent registered public
accounting firm for 2006, and stockholders are asked to ratify that selection at the Annual
Meeting. Representatives of Ernst & Young LLP will be present at the Annual Meeting. Such
representatives will have the opportunity to make a statement if they desire to do so, and to
respond to appropriate questions.
The Board of Directors recommends that stockholders vote FOR the proposal to ratify the
appointment of Ernst & Young LLP as our independent registered public accounting firm for 2006. We
have been informed that AFG intends to vote its shares FOR ratification of the appointment of Ernst
& Young LLP.
7
EQUITY COMPENSATION PLAN INFORMATION
The following reflects certain information about shares of our common stock authorized for issuance
(at December 31, 2005) under equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities available for |
|
|
Number of securities to be |
|
Weighted-average exercise |
|
future issuance under equity |
|
|
issued upon exercise of |
|
price of |
|
compensation plans (excluding |
Equity Compensation Plans |
|
outstanding options |
|
outstanding options |
|
securities reflected in first column) |
Approved by stockholders |
|
|
3,169,065 |
|
|
$ |
17.09 |
|
|
|
3,005,991 |
(1) |
Not approved by stockholders |
|
|
162,690 |
|
|
$ |
17.66 |
|
|
|
2,860,333 |
(2) |
|
|
|
(1) |
|
Includes options exercisable into 2.2 million shares available for issuance under Stock
Option Plans for employees and directors, 0.8 million shares issuable under our Employee Stock
Purchase Plan and 53,775 shares issuable under our 1997 Directors Stock Option Plan. |
|
(2) |
|
Represents shares issuable under our Deferred Compensation Plan (0.2 million shares) adopted
in 1994, our Agent Stock Purchase Plan (0.9 million shares) adopted in 1994, our Agent Stock
Option Plan (1.4 million shares) adopted in 1998 and amended in 2004 and our Bonus Plan (0.4
million shares) adopted in 1998. |
Under the Deferred Compensation Plan, certain highly compensated employees may defer a portion of
their annual salary and/or bonus. Participants may elect to have the value of deferrals (i) earn a
fixed rate of interest set annually, or (ii) fluctuate based on the market value of our common
stock, as adjusted to reflect stock splits, distributions, dividends, and a 7-1/2% match to
participant deferrals.
Under the Agent Stock Purchase Plan, selected agents are able to utilize commissions earned from
the sale of insurance products issued by our subsidiaries to purchase our common stock at 92.5% of
the fair market value. The Plan provides that up to 1,000,000 of our common stock may be issued.
Under the Agent Stock Option Plan, selected agents are able to earn options to purchase our common
stock based on the amount and quality of premium the agents produce from the sale of insurance
products issued by our subsidiaries. The options have an exercise price equal to the fair market
value of our common stock at the time of grant. The options include vesting provisions based on
future premium production and other factors. The Plan provides that up to 1,500,000 of our common
stock may be issued upon the exercise of options.
Under GAFRIs Bonus Plan covering the majority of the Companys officers, participants may be
required to receive 25% of their annual bonus in the form of GAFRI Common Stock. The Bonus Plan
provides for the issuance of up to 500,000 shares of GAFRI Common Stock as partial payment of
annual bonuses.
8
MANAGEMENT
Our directors, nominees and executive officers are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director or |
|
|
|
|
|
|
|
|
Executive |
Name |
|
Age (1) |
|
Position |
|
Since |
|
Carl H. Lindner
|
|
|
86 |
|
|
Chairman of the Board
|
|
|
1987 |
|
|
|
|
|
|
|
|
|
|
|
|
S. Craig Lindner
|
|
|
51 |
|
|
Chief Executive Officer and President,
Director
|
|
|
1993 |
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. Adams
|
|
|
60 |
|
|
Director
|
|
|
1992 |
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth C. Ambrecht
|
|
|
60 |
|
|
Director
|
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
Ronald G. Joseph
|
|
|
69 |
|
|
Director
|
|
|
1994 |
|
|
|
|
|
|
|
|
|
|
|
|
John T. Lawrence III
|
|
|
54 |
|
|
Director
|
|
|
1994 |
|
|
|
|
|
|
|
|
|
|
|
|
William R. Martin
|
|
|
77 |
|
|
Director
|
|
|
1994 |
|
|
|
|
|
|
|
|
|
|
|
|
Charles R. Scheper
|
|
|
53 |
|
|
Director and Chief Operating Officer
|
|
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
John B. Berding
|
|
|
43 |
|
|
Executive Vice President, Investments
|
|
|
1993 |
|
|
|
|
|
|
|
|
|
|
|
|
Richard L. Magoteaux
|
|
|
46 |
|
|
Senior Vice President
|
|
|
1996 |
|
|
|
|
|
|
|
|
|
|
|
|
Christopher P. Miliano
|
|
|
47 |
|
|
Executive Vice President, Chief Financial
|
|
|
1993 |
|
|
|
|
|
|
|
|
|
|
|
|
James E. Moffett
|
|
|
46 |
|
|
Officer and Treasurer
Senior Vice President
|
|
|
2001 |
|
|
|
|
|
|
|
|
|
|
|
|
Mark F. Muething
|
|
|
46 |
|
|
Executive Vice President, General Counsel
and Secretary
|
|
|
1993 |
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Prager
|
|
|
46 |
|
|
Executive Vice President and Chief
Actuary
|
|
|
2002 |
|
9
John B. Berding was elected Executive Vice President in May 1999. During that time, he has also
been a Senior Vice President, and effective March 2002, an Executive Vice President of AMM.
Richard L. Magoteaux was elected Senior Vice President in May 2001. Prior to that time, he served
as Vice President for over five years.
Christopher P. Miliano was elected Treasurer in May 2004, Executive Vice President in May 2002 and
Chief Financial Officer in May 2001. Prior to that time, he served as Vice President and
Controller for over five years.
James E. Moffett was elected Senior Vice President in May 2001. In June 2000, Mr. Moffett was
employed by the Company as a Vice President and Chief Operating Officer of Loyal American Life
Insurance Company. Prior to that time, he was employed by Thomas Group, Inc., a Dallas based
strategy and operations consulting firm.
Mark F. Muething was elected Executive Vice President, General Counsel and Secretary in May 1999.
Michael J. Prager was elected Executive Vice President in November 2005 and Senior Vice President
and Chief Actuary in May 2002. Prior to that time he served in various capacities since joining
the Company in June 2000. Prior to that time, Mr. Prager was an independent consultant with
respect to actuarial and general insurance matters.
See ELECTION OF DIRECTORS for information on our directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who own
more than ten percent of our common stock to file reports of ownership with the Securities and
Exchange Commission and to furnish us with copies of these reports. Based solely on a review of
the reports of ownership furnished to us, we believe that all filing requirements were met during
2005.
Securities Ownership
The following table sets forth information, as of March 31, 2006 concerning the beneficial
ownership of our equity securities by each director, nominee for director, the executive officers
named in the Summary Compensation Table (see Compensation below) and by all of these individuals
and executive officers not named in the Summary Compensation Table as a group. Such information is
based on data furnished by the persons named. Except as set forth in the following table, no
director or executive officer beneficially owned 1% or more of any class of our equity securities
outstanding at March 31, 2006. Unless otherwise indicated, the persons named have sole voting and
dispositive power over the shares reported.
10
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of Beneficial Ownership (a) |
|
|
Shares of Common |
|
|
Name of Beneficial Owner |
|
Stock Held(a)(g) |
|
Percent of Class |
|
Robert A. Adams |
|
|
313,792 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
Kenneth C. Ambrecht |
|
|
4,600 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
Ronald G. Joseph |
|
|
79,404 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
John T. Lawrence III |
|
|
47,578 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
Carl H. Lindner |
|
|
536,808 |
(b) |
|
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
S. Craig Lindner |
|
|
139,763 |
(b) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
William R. Martin |
|
|
44,861 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
Charles R. Scheper |
|
|
416,814 |
(c) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
Christopher P. Miliano |
|
|
102,142 |
(d) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
Mark F. Muething |
|
|
229,378 |
(e) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
Michael J. Prager |
|
|
96,729 |
(f) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
All Directors and
Executive Officers as a
Group (14 persons) |
|
|
2,384,842 |
|
|
|
4.9 |
% |
(a) |
|
Unless otherwise indicated, the persons named have sole voting and dispositive power over
the shares listed opposite their names. The amounts listed include the following number of shares which may be acquired pursuant to options which are exercisable within 60 days: Mr.
Adams 97,588; Mr. Ambrecht 4,600; Mr. Joseph 29,114; Mr. Lawrence 29,114; Mr. Martin -
29,114; Mr. Scheper 360,000; Mr. Miliano 83,350; Mr. Muething 137,500; and Mr. Prager -
84,000. |
|
(b) |
|
Messrs. Carl H. Lindner and S. Craig Lindner disclaim beneficial ownership of the shares
owned by AFG, of which Mr. Carl H. Lindner is Chairman of the Board and a principal
stockholder and Mr. S. Craig Lindner is a director, officer and principal stockholder. See
Principal Stockholders. |
|
(c) |
|
Includes 3,965 shares allocated to Mr. Schepers account in the ESORP and 32,430 share
equivalents allocated to Mr. Schepers account in the Great American Financial Resources, Inc.
Deferred Compensation Plan (Deferred Compensation Plan). |
|
(d) |
|
Includes 7,512 shares allocated to Mr. Milianos account in the ESORP. |
|
(e) |
|
Includes 6,664 shares allocated to Mr. Muethings account in the ESORP and 43,710 share
equivalents allocated to Mr. Muethings account in the Deferred Compensation Plan. |
|
(f) |
|
Includes 2,768 shares allocated to Mr. Pragers account in the ESORP and 8,329 share
equivalents allocated to Mr. Pragers account in the Deferred Compensation Plan. |
|
(g) |
|
Messrs. Adams, Ambrecht, Joseph, Lawrence, Carl H. Lindner, S. Craig Lindner, Martin,
Scheper, Miliano, Muething and Prager also beneficially own; 149; 1,864; 51,000; 4,000;
9,018,672; 6,431,283; 69,938; 149; 149; 219 and 149 shares, respectively, of common stock of
AFG. |
11
COMPENSATION
The following table summarizes information concerning the annual and long-term compensation for
services in all capacities to us and our subsidiaries for the three years ended December 31, 2005
paid to our Chief Executive Officer and our four other most highly compensated executive officers
during 2005 (the Named Executive Officers).
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term |
|
|
|
|
Annual Compensation |
|
Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying |
|
All |
Name and |
|
|
|
|
|
|
|
|
|
Annual |
|
Other Annual |
|
Options |
|
Other |
Principal |
|
|
|
|
|
|
|
|
|
Compensation |
|
Compensation |
|
Granted |
|
Compensation |
Position |
|
Year |
|
Salary |
|
Bonus |
|
(a) |
|
(# of Shares) |
|
(b) |
|
S. Craig Lindner |
|
|
2005 |
|
|
$ |
525,020 |
|
|
$ |
425,865 |
|
|
$ |
810 |
|
|
|
|
|
|
|
|
|
Chief Executive Officer and |
|
|
2004 |
|
|
$ |
524,291 |
|
|
$ |
426,605 |
|
|
$ |
810 |
|
|
|
|
|
|
|
|
|
President |
|
|
2003 |
|
|
$ |
484,673 |
|
|
$ |
201,372 |
|
|
$ |
810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles R. Scheper |
|
|
2005 |
|
|
$ |
525,020 |
|
|
$ |
425,865 |
|
|
$ |
2,622 |
|
|
|
50,000 |
|
|
$ |
25,000 |
|
Chief Operating Officer |
|
|
2004 |
|
|
$ |
524,291 |
|
|
$ |
426,605 |
|
|
$ |
7,475 |
|
|
|
50,000 |
|
|
$ |
25,000 |
|
|
|
|
2003 |
|
|
$ |
484,673 |
|
|
$ |
201,372 |
|
|
$ |
9,997 |
|
|
|
50,000 |
|
|
$ |
25,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark F. Muething |
|
|
2005 |
|
|
$ |
300,015 |
|
|
$ |
189,450 |
|
|
$ |
966 |
|
|
|
20,000 |
|
|
$ |
22,203 |
|
Executive Vice President, |
|
|
2004 |
|
|
$ |
281,844 |
|
|
$ |
144,037 |
|
|
$ |
1,258 |
|
|
|
20,000 |
|
|
$ |
19,077 |
|
General Counsel and |
|
|
2003 |
|
|
$ |
261,327 |
|
|
$ |
99,698 |
|
|
$ |
563 |
|
|
|
20,000 |
|
|
$ |
17,738 |
|
Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher P. Miliano |
|
|
2005 |
|
|
$ |
290,004 |
|
|
$ |
152,613 |
|
|
$ |
896 |
|
|
|
20,000 |
|
|
$ |
20,347 |
|
Executive Vice President, |
|
|
2004 |
|
|
$ |
236,608 |
|
|
$ |
116,930 |
|
|
$ |
8,528 |
|
|
|
20,000 |
|
|
$ |
15,905 |
|
Chief Financial Officer and |
|
|
2003 |
|
|
$ |
199,808 |
|
|
$ |
81,500 |
|
|
$ |
622 |
|
|
|
20,000 |
|
|
$ |
13,505 |
|
Treasurer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Prager |
|
|
2005 |
|
|
$ |
280,019 |
|
|
$ |
147,350 |
|
|
$ |
881 |
|
|
|
20,000 |
|
|
$ |
20,273 |
|
Executive Vice President |
|
|
2004 |
|
|
$ |
245,079 |
|
|
$ |
125,434 |
|
|
$ |
501 |
|
|
|
20,000 |
|
|
$ |
16,790 |
|
and Chief Actuary |
|
|
2003 |
|
|
$ |
227,308 |
|
|
$ |
90,716 |
|
|
$ |
480 |
|
|
|
20,000 |
|
|
$ |
15,715 |
|
(a) |
|
The amount listed under Other Annual Compensation for 2005 are for the premiums paid for
group life coverage in excess of $50,000 per individual. |
(b) |
|
Amounts listed under All Other Compensation for each of the named persons reflect amounts
contributed to our retirement plan. |
12
Stock Options
The tables below show stock options granted to, or exercised by, the Named Executive Officers
during 2005, and the number and value of unexercised options held by them at December 31, 2005.
STOCK OPTION GRANTS IN 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total Stock |
|
|
|
|
|
|
|
|
|
Potential Realized Value at |
|
|
|
|
|
|
Options |
|
|
|
|
|
|
|
|
|
Assumed Rates of |
|
|
Stock |
|
Granted to |
|
|
|
|
|
|
|
|
|
Stock Price Appreciation |
|
|
Options |
|
Employees in |
|
Exercise |
|
Expiration |
|
For Stock Option Term (a) |
Name |
|
Granted |
|
Fiscal Year |
|
Price(b) |
|
Date(c) |
|
0% |
|
5% |
|
10% |
|
S. Craig Lindner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles R. Scheper |
|
|
50,000 |
|
|
|
11.6 |
% |
|
$ |
16.46 |
|
|
|
3/16/2015 |
|
|
|
|
|
|
$ |
517,580 |
|
|
$ |
1,311,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark F. Muething |
|
|
20,000 |
|
|
|
4.6 |
% |
|
$ |
16.46 |
|
|
|
3/16/2015 |
|
|
|
|
|
|
$ |
207,032 |
|
|
$ |
524,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher P. Miliano |
|
|
20,000 |
|
|
|
4.6 |
% |
|
$ |
16.46 |
|
|
|
3/16/2015 |
|
|
|
|
|
|
$ |
207,032 |
|
|
$ |
524,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Prager |
|
|
20,000 |
|
|
|
4.6 |
% |
|
$ |
16.46 |
|
|
|
3/16/2015 |
|
|
|
|
|
|
$ |
207,032 |
|
|
$ |
524,660 |
|
|
|
|
(a) |
|
The Potential Realizable Value is calculated based on a market price for our common stock of
$16.46 for the stock options granted on March 16, 2005. |
|
(b) |
|
The closing price for our common stock on March 15, 2005 was $16.46. |
|
(c) |
|
The stock options become exercisable in 20% increments on each of the first five
anniversaries of the date of grant. |
AGGREGATED OPTION EXERCISES IN 2005
AND 2005 YEAR-END OPTION VALUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
Value of |
|
|
Shares |
|
|
|
Underlying Unexercised |
|
Unexercised |
|
|
Acquired on |
|
Value |
|
Options |
|
In-the-Money Options |
|
|
Exercise |
|
Realized |
|
At Year End |
|
At Year End (a) |
Name |
|
(# of Shares) |
|
(b) |
|
Exercisable |
|
Unexercisable |
|
Exercisable |
|
Unexercisable |
|
S. Craig Lindner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles R. Scheper |
|
|
|
|
|
|
|
|
|
|
304,000 |
|
|
|
156,000 |
|
|
$ |
838,660 |
|
|
$ |
597,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark F. Muething |
|
|
70,795 |
|
|
$ |
508,772 |
|
|
|
118,000 |
|
|
|
59,500 |
|
|
$ |
284,470 |
|
|
$ |
233,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher P.
Miliano |
|
|
33,880 |
|
|
|
233,058 |
|
|
|
63,850 |
|
|
|
59,500 |
|
|
$ |
88,834 |
|
|
$ |
233,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Prager |
|
|
|
|
|
|
|
|
|
|
65,000 |
|
|
|
65,000 |
|
|
$ |
199,020 |
|
|
$ |
249,680 |
|
|
|
|
(a) |
|
The Value of Unexercised In-the-Money Options at Fiscal Year End is calculated based on a
market price for our common stock on December 30, 2005 of $19.84 per share. For options on
which the exercise price is greater than $19.84 per share, the value is assumed to be $0. |
|
(b) |
|
The value realized on the exercise of stock options is calculated by subtracting the exercise
price from the market value of our common stock on the date of exercise. |
13
Organization and Policy Committee Report
The members of the Organization and Policy Committee of the Board of Directors are Ronald G. Joseph
and John T. Lawrence III, neither of whom is an employee of Great American Financial Resources or
any of its subsidiaries. The Committees functions include approving recommendations with respect
to the compensation of each executive officer of the company and providing a report to the Board of
Directors on those matters. The cash compensation paid to the executive officers for 2005 was
comprised principally of annual base salaries and payments under the Corporate Bonus Plan. Stock
options are granted to executive officers to provide long-term incentive based compensation. In
determining compensation for executive officers, the Committee gives some consideration to the
compensation paid to executive officers of companies engaged in similar lines of business.
Annual Base Salaries. The Committee approves annual base salaries and salary increases for
executive officers that are appropriate for their positions and levels of responsibilities. The
Committee takes into consideration the Companys long-term performance in establishing annual base
salaries for executive officers.
Corporate Bonus Plan. Each of the named executive officers was eligible to participate in the
Corporate Bonus Plan. The Bonus Plan compensates participants based on the Companys financial and
operational performance. Under the Bonus Plan, the Organization and Policy Committee approved a
target bonus for each participant based on such persons duties and responsibilities and expected
contributions during the year. The Committee also reviewed premium, financial and operational
goals for the company as well as individual goals for each participant. Based on the specific
responsibilities of the participant, the Committee allocated a total of 100% among the premium,
financial, operational, and individual goals. Based on the attainment of these goals, participants
in the Bonus Plan could earn up to 125% of the target bonus amounts. The bonuses reported in the
Summary Compensation Table are amounts paid to participating executive officers in the first
quarter of the subsequent year.
Compensation of the Chief Executive Officer. In evaluating the base salary and bonus for the Chief
Executive Officer, the Committee evaluates the duties and responsibilities while giving some
consideration to the compensation paid to persons holding similar positions with other companies.
Some consideration is also given to the compensation paid to the Companys Chief Operating Officer.
Stock Options. Stock options represent a performance-based portion of our compensation system.
The Committee believes that stockholders interests are well served by aligning the interests of
our executive officers with those of stockholders by the grant of stock options. Incentive stock
options are granted with an exercise price equal to the fair market value of our common stock on
the date of grant and become exercisable at the rate of 20% per year. The Committee believes that
these features provide executive officers with substantial incentives to maximize our long-term
success.
Internal Revenue Code Section 162. Provisions of the Internal Revenue Code provide that
compensation in excess of $1 million per year paid to the Chief Executive Officer as well as other
executive officers listed in the compensation table will not be deductible unless the compensation
is performance based and the related compensation is approved by stockholders. Because no officer
received more than $1 million in compensation, Section 162 was not considered by the Committee in
determining 2005 compensation. The Committee intends to consider Section 162 in the future with a
goal that all compensation will be deductible.
14
The Organization and Policy Committee:
Ronald G. Joseph (Chairman)
John T. Lawrence III
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on our common stock with the
cumulative total return of the Standard & Poors (S&P) 500 Stock Index and the S&P Insurance
(Life/Health) Index (S&P Life). (Assumes $100 invested on December 31, 2000 in our common stock
and the two indexes, including reinvestment of dividends.)
PERFORMANCE GRAPH INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2000 |
|
|
2001 |
|
|
2002 |
|
|
2003 |
|
|
2004 |
|
|
2005 |
|
Great American Financial Resources |
|
|
100 |
|
|
|
98.57 |
|
|
|
90.99 |
|
|
|
86.51 |
|
|
|
93.18 |
|
|
|
106.95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500 Index |
|
|
100 |
|
|
|
88.11 |
|
|
|
68.64 |
|
|
|
88.33 |
|
|
|
97.94 |
|
|
|
102.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500 Life & Health Insurance Index |
|
|
100 |
|
|
|
92.27 |
|
|
|
77.29 |
|
|
|
98.23 |
|
|
|
119.99 |
|
|
|
147.00 |
|
15
CERTAIN TRANSACTIONS
Great American Financial Resources and AMM, a wholly-owned subsidiary of AFG, are parties to an
Investment Services Agreement under which AMM provides investment services to our insurance
subsidiaries in accordance with guidelines. We and our subsidiaries pay AMM a fee based on AMMs
cost of providing these services. Investment charges paid by us to AMM were $4.6 million in 2005.
We, GALIC and certain of our subsidiaries are members of AFGs consolidated tax group. We and
GALIC have separate tax allocation agreements with AFG which designate how tax payments are shared
by members of the tax group. In general, both companies compute taxes on a separate return basis.
GALIC is obligated to make payments to (or receive benefits from) AFG based on taxable income
without regard to temporary differences. If GALICs taxable income (computed on a statutory
accounting basis) exceeds a current period net operating loss of ours, the taxes payable or
receivable by GALIC associated with the excess are payable to or receivable from AFG. If the AFG
tax group utilizes any of our net operating losses or deductions that originated prior to 1993, AFG
will pay us an amount equal to the benefit received. During 2005, we and our subsidiaries which
are included in the AFG consolidated tax group incurred income tax expense of $23.9 million.
We paid $2.9 million to AFG for various information technology services (primarily outsourcing) in
2005. We paid approximately $215,000 to AFG for services related to purchases from third party
vendors. All of these transactions were based on fair market value.
During 2005, we paid the Cincinnatian Hotel approximately $147,000 for lodging and meeting
accommodations. The hotel is owned by a subsidiary of AFG.
In July 2000, AFGs principal insurance subsidiary, GAI, entered into a thirty-two year agreement
with the Cincinnati Reds, pursuant to which the Reds home stadium was named Great American Ball
Park. Until January 2006, Carl H. Lindner was the Chief Executive Officer of the Reds. A
subsidiary of AFG and certain members of the Lindner family were part owners of the Reds during
2005. We participate in the stadium naming rights agreement, and accordingly, paid GAI
approximately $694,000 under the agreement in 2005. Our payments to GAI will average approximately
$720,000 annually over the term of the agreement.
An AFG subsidiary owns a 29% interest in an aircraft, the remaining interests in which are owned by
Carl H. Lindner and his two brothers. Each owner is committed to use and pay for a minimum number
of flight hours. Capital costs and fixed operating costs are allocated generally in proportion to
ownership; variable operating costs are allocated generally in proportion to usage. Mr. Lindner
has assigned his usage to the AFG subsidiary along with the obligation to pay for allocated
operating costs, but Mr. Lindner continues to pay allocated capital costs. Total charges paid by
GAFRI for use of this aircraft during 2005 were approximately $164,000.
16
Directors Compensation
Our employees do not receive any additional compensation for serving as members of the Board of
Directors or any of its committees. Directors who are not employees receive an annual retainer of
$30,000 for Board membership and an additional annual retainer of $5,000 for serving as Chairman of
a Board Committee. Under our Directors Compensation Plan, non-employee directors receive at least
50% of their retainers in common stock. In addition, directors who are not employees are paid a
fee of $2,000 for attendance at each Board meeting, and $1,500 for attendance at each committee
meeting. All directors are reimbursed for expenses incurred in attending board and committee
meetings. If Proposal No. 2 is approved by stockholders, the compensation paid to non-employee
directors will change. See Proposal No. 2- Approval of Non-Employee Directors Compensation Plan.
Under the 1997 Directors Stock Option Plan, each March 1, each non-employee director receives a
stock option to purchase 3,000 shares of our common stock, with an exercise price based on the
average market price of our common stock for the ten trading days preceding the grant date. If
Proposal No. 2 is approved by stockholders, non-employee directors will receive restricted stock in
lieu of options. See Proposal No. 2 Approval of Non-Employee Directors Compensation Plan.
CORPORATE GOVERNANCE, THE BOARD OF DIRECTORS
AND BOARD COMMITTEES
Corporate Governance Matters
The corporate governance rules of the New York Stock Exchange (the NYSE) do not require that a
majority of the members of our Board of Directors be independent, as provided under NYSE rules,
because we are a controlled company in that more than 50% of our voting power is held by AFG. As
a result, we do not have a majority of independent directors on our Board.
There are three Committees of the Board of Directors the Audit Committee, the Executive Committee
and the Organization and Policy Committee. As detailed below, the Organization and Policy
Committee performs the functions generally delegated to Compensation and Nominating Committees of
other Boards of Directors. As a controlled company under NYSE rules, we are not required to have
solely independent directors on our Audit Committee and our Organization and Policy Committee.
However, each of Kenneth C. Ambrecht, Ronald G. Joseph, John T. Lawrence III and William R. Martin,
the members of the Audit Committee, Ronald G. Joseph and John T. Lawrence III, the members of the
Organization and Policy Committee, does meet the requirements of independent directors under the
rules of the NYSE. Each of our Audit Committee and Organization and Policy Committee operates
under written charters.
We have adopted a Code of Ethics that applies to all of our directors, officers (including our
Chief Executive Officer, Chief Financial Officer, Controller and any person performing similar
functions) and employees. We have also adopted Corporate Governance Guidelines.
Stockholders may communicate directly with directors by sending written communication to the
attention of the Corporate Secretary at our principal offices. It is our practice not to screen
such correspondence before it is forwarded to the director to whom it is addressed or to the
Chairman, if addressed to the full Board of Directors.
17
NYSE rules require non-management directors to meet regularly in executive sessions. William R.
Martin was selected to preside over the three meetings of non-management directors held in 2005.
Stockholders and other interested parties may communicate with any of the non-management directors,
individually or as a group, by sending the written communication to the attention of the Corporate
Secretary at our principal offices.
Copies of our Audit Committee Charter, Organization and Policy Committee Charter, Code of Ethics
and Corporate Governance Guidelines are available, without charge, by written request to Mark F.
Muething; Executive Vice President, General Counsel and Secretary; Great American Financial
Resources, Inc.; 250 East Fifth Street; Cincinnati, Ohio 45202 and are also available on our
website at http://www.GAFRI.com. We will disclose on our website any waivers granted from or
amendments to our Code of Ethics within four business days of such waiver or amendment.
Board of Directors
Our Board of Directors held five meetings and took action in writing one time in 2005. Directors
are encouraged to attend the Annual Meeting of Stockholders. At the Annual Meeting of Stockholders
held in May 2005, all directors were in attendance.
Audit Committee
The Audit Committee consists of four members: William R. Martin (Chairman), Kenneth C. Ambrecht,
John T. Lawrence III and Ronald G. Joseph, none of whom is an officer or employee of ours or any of
our subsidiaries. As provided in its charter, the Audit Committees functions include:
recommending to the Board of Directors the firm to be appointed as independent accountants to audit
our consolidated financial statements and to provide other audit-related services and recommending
the terms of such firms engagement; reviewing the scope and results of the audit with the
independent accountants; reviewing with management and the independent accountants our interim and
year-end operating results; reviewing the adequacy and implementation of our internal accounting
and auditing procedures; and reviewing the non-audit services to be performed by the independent
accountants and considering the effect of such performance on the accountants independence. The
Audit Committee held eleven meetings in 2005.
The Board has determined that William R. Martin, Chairman of the Audit Committee, is an audit
committee financial expert, as that term is defined in the rules of the Securities and Exchange
Commission. All members of the Audit Committee are deemed to be independent, as that term is
defined in the rules of the New York Stock Exchange.
The Audit Committee has adopted a policy that our independent accountants may not render any
services to us outside the scope of the audit engagement letter without pre-approval of the Audit
Committee. The Audit Committee has delegated to William R. Martin, Chairman of the Committee,
authority to pre-approve audit and non-audit services outside of meetings of the Audit Committee.
Management and the independent accountants are required to provide a written request, including a
description of the services to be provided and an estimate of the fee to be charged, in connection
with any request for pre-approval. The full Audit Committee may also pre-approve such services.
In 2005, all services rendered outside the scope of the audit engagement letter were pre-approved
without reliance on the de minimus safe harbor exception from the pre-approval requirements.
18
Executive Committee
The Executive Committee consists of three members: S. Craig Lindner (Chairman), Carl H. Lindner and
Charles R. Scheper. The Committee is generally authorized to exercise the powers of the Board of
Directors between meetings of the Board of Directors, except that the Committees authority does
not extend to certain fundamental matters, such as: amending our By-laws; filling vacancies on the
Board of Directors; declaring a dividend; electing or removing our principal officers; adopting or
approving a plan of merger, consolidation or sale of a substantial portion of our assets; our
dissolution or reorganization or establishing or designating any class or series of our stock (or
fixing or determining the relative rights and preferences thereof). The Executive Committee did
not meet in 2005.
Organization and Policy Committee
The Organization and Policy Committee consists of two members: Ronald G. Joseph and John T.
Lawrence III, neither of whom is an officer of ours or any of our subsidiaries.
As provided in its charter, the Organization and Policy Committees functions include: reviewing
the duties and responsibilities of our principal officers; approving the compensation of our
principal officers and providing a report to the Board of Directors on those matters; reviewing our
compensation and personnel policies; administering bonus and stock option plans; reviewing and
making recommendations to the Board of Directors with respect to employee retirement policies; and
supervising, reviewing and reporting to the Board of Directors on the performance of the management
committee responsible for the administration and investment management of our pension and savings
plans. The Organization and Policy Committee held three meetings and took action in writing on two
occasions in 2005.
The responsibilities of the Organization and Policy Committee include reviewing and providing
advice with respect to the nomination of candidates for the Board of Directors. Except as provided
below, the Board of Directors is responsible for the actual nomination of directors. The Committee
does not impose any minimum requirements in considering candidates but rather reviews the overall
business, industry and financial experience of candidates. The Committee has not retained any
third party to identify or evaluate nominees. In addition, no person has recommended a candidate
to the Committee in the last year. Our Certificate of Incorporation includes procedures whereby
any stockholder of record may nominate one or more persons as candidates for the office of
director. In order to utilize this procedure, a stockholder is required to give written notice of
the intent to nominate a candidate at least five but not more than 30 days prior to the meeting of
stockholders at which the election of directors will take place. Such procedures do not require
any consideration or review by the Organization and Policy Committee.
19
Audit Committee Report
As provided in its charter, the Audit Committee is responsible for providing independent oversight
of our accounting functions and internal controls.
Management is responsible for our internal controls and the financial reporting process. The
independent accountants are responsible for performing an independent audit of the consolidated
financial statements in accordance with generally accepted auditing standards and for issuing a
report thereon. The Committees responsibility is to monitor and oversee these processes.
Additionally, the Audit Committee engages an accounting firm to be engaged as our independent
accountants.
In this context, the Committee has met and held discussions with management and the independent
accountants. Management represented to the Committee that the consolidated financial statements
were prepared in accordance with generally accepted accounting principles, and the Committee has
reviewed and discussed the consolidated financial statements with management and the independent
accountants. The Committee discussed with the independent accountants matters required to be
discussed by Statement on Auditing Standards No. 61 (Communications with Audit Committees).
The independent accountants also provided to the Committee the written disclosures and the letter
required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and the Committee discussed with the independent accountants that firms independence.
As part of its discussions, the Committee determined that Ernst & Young LLP was independent of the
Company.
Based on the Committees discussions with management and the independent accountants and the
Committees review of the representation of management and the report of the independent
accountants to the Committee, the Committee recommended the Board of Directors include the audited
consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31,
2005 filed with the Securities and Exchange Commission.
The Audit Committee
William R. Martin (Chairman)
Kenneth C. Ambrecht
Ronald G. Joseph
John T. Lawrence III
20
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The accounting firm of Ernst & Young LLP served as our independent registered public accountants
for the fiscal year ended December 31, 2005. Representatives of that firm will attend the meeting
and will be given the opportunity to make a statement if they desire to do so and to respond to
appropriate questions that may be asked by stockholders.
Fees Paid to the Independent Accountants
The following table sets forth the fees billed by Ernst & Young for Audit and other services. The
Audit Committee considers the non-audit services provided in satisfying itself as to Ernst &
Youngs independence.
|
|
|
|
|
|
|
2005 |
|
2004 |
Audit Fees |
|
$1,607,925 |
|
$1,403,922 |
|
|
|
|
|
Audit-Related Fees |
|
$88,871 |
|
$231,102 |
|
|
|
|
|
Tax Fees |
|
$0 |
|
$0 |
|
|
|
|
|
All Other Fees |
|
$0 |
|
$0 |
The Audit Committee approved all of the engagements pursuant to which these services were provided.
Audit fees included fees related to services rendered in connection with the annual audit of our
consolidated financial statements, the quarterly review of the consolidated financial statements
included in our quarterly reports on Form 10-Q, reviews of and other services related to
registration statements, audits of the statutory financial statements of our insurance subsidiaries
and the review of our system of internal controls required by the Sarbanes-Oxley Act of 2002.
Audit-related fees for 2004 and 2005 related to a review of the controls in our fixed and variable
lines of business. Audit related fees for 2005 also included amounts related to assistance
provided in connection with a regulatory examination of one of the Companys insurance
subsidiaries.
21
NOMINATIONS AND STOCKHOLDER PROPOSALS
The Organization and Policy Committee will consider stockholder suggestions for nominees for
director. Suggestions for director consideration may be submitted to our Secretary at our
principal executive offices. Suggestions received by the Secretarys office by December 31 will be
considered by the Committee for nomination at the next Annual Meeting of Stockholders.
Stockholders may also make nominations for director by complying with the procedures described
above under the caption COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS Organization and
Policy Committee.
Other than the items listed in this Proxy Statement to be submitted to stockholders, management
knows of no other matters to be presented at the Annual Meeting upon which a vote may be taken.
The Proxy Form used by us for the Annual Meeting typically grants authority to managements proxies
to vote in their discretion on any matters that come before the Meeting as to which adequate notice
has not been received. In order for a notice to be deemed adequate for next years Annual Meeting,
it must be received by February 26, 2007. In order for a proposal to be considered for inclusion
in our proxy statement for that meeting, it must have been received by December 1, 2006.
REQUESTS FOR FORM 10-K
We will send, upon written request, without charge, a copy of our current Annual Report on Form
10-K to any stockholder who writes to Mark F. Muething, Executive Vice President, General Counsel
and Secretary, Great American Financial Resources, Inc., 250 East
Fifth Street, Cincinnati, Ohio 45202.
22
GREAT AMERICAN FINANCIAL RESOURCES, INC.
NON-EMPLOYEE DIRECTORS COMPENSATION PLAN
The purpose of the Non-Employee Directors Compensation Plan (Plan) of Great American
Financial Resources, Inc. (the Company) is to provide compensation to the Companys non-employee
directors to be paid in cash and through the issuance of shares of the Companys common stock
(Common Stock).
Directors who are not employees of the Company or of a Company subsidiary are paid an annual
retainer (Board Retainer), an additional annual retainer paid for service as Chairman of a Board
committee (Chair Retainer) and an attendance fee for each Board or Committee meeting attended
(Meeting Fees), in amounts which shall be established, from time to time, by the Board of
Directors. The amounts established by the Board of Directors for the retainers and fees shall be
set forth on the attached Schedule 1.
1. Payment Of Compensation To Non-Employee Directors.
(a) Retainers and Meeting Fees in Cash. The Board Retainer and Chair Retainer (if
applicable) shall be paid by the Company in cash, quarterly in arrears, as soon as practicable
following the end of each calendar quarter. The Meeting Fees accrued during each calendar quarter,
if any, shall be paid by the Company at the end of such quarter in cash, together with the
applicable quarterly retainers. The amount of the Board Retainer and Chair Retainer may be changed
by the Board of Directors from time to time without stockholder approval.
(b) Restricted Stock Grant. On or about June 1 of each year during which a
non-employee director is a member of the Companys Board of Directors, such non-employee director
shall receive a restricted stock grant payable in shares of Common Stock. The number of shares of
Common Stock to be issued to each non-employee director pursuant to this Section shall be
determined by dividing $40,000 (the Stock Grant Value) by the average of the per share Fair
Market Value of the Common Stock (as defined in Section 2 below) for the ten trading days ending on
the last business day prior to June 1 of the applicable year; the resulting number shall then be
rounded up to the nearest share. The Board of Directors may change the Stock Grant Value to be
granted to non-employee directors pursuant to this Section from time to time, or may determine that
a fixed number of shares be granted in lieu of using the Stock Grant Value method described
above, in each case without stockholder approval.
2. Fair Market Value Of Company Common Stock.
The Fair Market Value of a share of Common Stock shall be the average of the high and low
sales prices of the shares on such date on the New York Stock Exchange (NYSE) Composite Tape (or
the principal market in which the Common Stock is traded, if the shares are not listed on the NYSE
on such date) or, if the shares were not traded on such date, then the average of the high and low
sales prices of the shares on the next preceding trading day during which the shares were traded.
24
3. Restrictive Legend; Holding Period For Shares Of Common Stock.
(a) In order to address certain provisions of the Federal securities laws, including Section
16(b) of the Securities Exchange Act of 1934, all certificates representing shares of Common Stock
issued pursuant to the Plan shall bear the following restrictive legend which will prevent the
recipient from disposing of such shares for six months from the date of issuance:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED UNTIL THE EXPIRATION OF THE
SIX MONTH PERIOD BEGINNING ON THE DATE OF THE ORIGINAL ISSUANCE BY GREAT AMERICAN
FINANCIAL RESOURCES, INC. (THE COMPANY) AS PROVIDED BY SECTION 3 OF THE COMPANYS
NON-EMPLOYEE DIRECTORS COMPENSATION PLAN, A COMPLETE AND CORRECT COPY OF THE FORM OF
WHICH WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHIN FIVE DAYS AFTER
RECEIPT OF A WRITTEN REQUEST.
When the legend requirement imposed by this Section terminates, the Company (at its expense)
shall, upon request of the holder of the certificate, issue a replacement certificate representing
such shares without the legend.
4. No Right To Continuance As A Director.
Neither the action of the Company in establishing the Plan nor the issuance of Common Stock
hereunder shall be deemed to create any obligation on the part of the Board of Directors to
nominate any non-employee director for reelection by the Companys stockholders or to be evidence
of any agreement or understanding, express or implied, that the non-employee director has a right
to continue as a director for any period of time or at any particular rate of compensation.
5. Shares Subject To The Plan.
One hundred fifty thousand (150,000) shares of Common Stock are authorized for issuance under
the Plan in accordance with the provisions hereof. The Company shall at all times during the term
of the Plan retain as authorized and unissued Common Stock at least the number of shares from time
to time required under the provisions of the Plan, or otherwise assure itself of its ability to
perform its obligations hereunder.
6. Effective Date And Expiration Of Plan.
Pursuant to NYSE rules, the Plan is subject to approval by a majority of the votes cast at the
next annual meeting of stockholders of the Company by the holders of shares of Common Stock
entitled to vote thereon, and, if so approved, shall be effective on the date of such approval (the
Effective Date). Unless earlier terminated by the Board of Directors pursuant to Section 8, the
Plan shall terminate on the tenth anniversary of the Effective Date. No shares of Common Stock
shall be issued pursuant to the Plan after its termination date.
25
7. Payment In Event Of Death.
If a non-employee director dies, any portion of his or her compensation pursuant to the Plan
then unpaid shall be paid to the beneficiaries of the director named in the most recent beneficiary
designation filed with the Secretary of the Company. In the absence of such a designation, such
compensation shall be paid to, or as directed by, the directors personal representative, in one or
more installments as the non-employee director may have elected in writing.
8. Amendment, Suspension And Termination Of Plan.
The amount, pricing, and timing of Company Common Stock issuances pursuant to the Plan shall
not be amended more than once every six months, other than to comport with changes in the Internal
Revenue Code of 1986, as amended, the Employee Retirement Income Security Act of 1974, as amended,
or the rules thereunder.
The Board of Directors may suspend or terminate the Plan or any portion of it at any time, and
may amend it, subject only to the preceding paragraph, from time to time in such respects as the
Board may deem advisable in order that any awards hereunder shall conform to any change in
applicable laws or regulations or in any other respect the Board may deem to be in the best
interests of the Company; provided, however, that no such amendment shall, without the further
approval with the affirmative vote of shareholders entitled to cast at least a majority of the
total number of votes represented at a meeting of shareholders of the Company, increase the number
of shares of Common Stock which may be issued under the Plan, materially modify the requirements as
to eligibility for participating in the Plan, or extend the termination date of the Plan.
26
SCHEDULE 1
(AS IN EFFECT ON THE EFFECTIVE DATE OF THE PLAN)
|
|
|
|
|
Cash |
|
|
|
|
Annual Board Retainer |
|
$ |
30,000 |
|
|
|
|
|
|
Annual Committee Chair Retainer |
|
$ |
10,000 |
|
|
|
|
|
|
Fee per Board Meeting |
|
$ |
2,000 |
|
|
|
|
|
|
Fee per Committee Meeting |
|
$ |
1,750 |
|
|
|
|
|
|
Restricted Stock Award |
|
|
|
|
Annual Award (in shares of Common Stock) |
|
$ |
40,000 |
|
27
ANNUAL MEETING OF SHAREHOLDERS OF
GREAT
AMERICAN FINANCIAL RESOURCES, INC.
May 18, 2006
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
¯
Please detach along perforated line and mail in the envelope
provided.¯
|
|
|
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF DIRECTORS AND FOR PROPOSALS 2 AND 3.
|
|
|
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE ý |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN |
1. Election of Directors:
|
|
|
2. |
|
Proposal to approve the Great American Financial Resources, Inc. Non-Employee Directors Compensation Plan.
|
|
o |
|
o |
|
o |
|
|
|
NOMINEES: |
|
|
|
|
|
|
|
|
|
|
o
|
|
FOR ALL NOMINEES |
¡ CARL H. LINDNER
¡ S. CRAIG LINDNER
¡ ROBERT A. ADAMS
¡ KENNETH C. AMBRECHT
¡ RONALD G. JOSEPH
¡ JOHN T. LAWRENCE III
¡ WILLIAM R. MARTIN
¡ CHARLES R. SCHEPER
|
|
|
|
|
3.
|
|
Proposal to ratify Ernst
& Young LLP as the Companys Independent Registered Public Accounting Firm for 2006. |
|
o |
|
o |
|
o |
o
|
|
WITHHOLD
AUTHORITY FOR ALL NOMINEES |
|
|
|
|
|
o |
|
FOR ALL EXCEPT (See instructions below) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSTRUCTION: To withhold authority to vote for any individual
nominee(s), mark FOR ALL EXCEPT
and fill in the circle next to each nominee you wish to withhold, as shown here:
n
|
|
|
|
|
|
|
|
|
To change the address on your
account, please check the box at
right and indicate your new address
in the address space above, Please
note that changes to the registered
name(s) on the account may not be
submitted via this method.
|
o |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
of Shareholder
|
|
Date:
|
|
Signature
of Shareholder
|
|
Date:
|
|
|
|
|
|
|
|
|
n
|
|
Note:
|
|
Please sign exactly as your name or names appear on this
Proxy. When shares are
held jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in the partnership name by authorized person.
|
|
n
|
GREAT AMERICAN FINANCIAL RESOURCES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Christopher P. Miliano and Mark F. Muething, and
each of them, proxies of the undersigned, each with the power of substitution,
to vote all shares of Common Stock which the undersigned would be entitled to
vote at the Annual Meeting of Shareholders of the Company to be held on May 18,
2006, at 11:00 a.m., Eastern Time, and on such other matters as may properly come
before the meeting, and any adjournment of such meeting thereof.
(Continued
and to be signed on the reverse side.)
ANNUAL MEETING OF STOCKHOLDERS OF
GREAT AMERICAN FINANCIAL RESOURCES, INC.
May 18, 2006
|
|
|
|
|
|
|
PROXY VOTING INSTRUCTIONS
|
|
|
MAIL - Date, sign and mail your proxy card in the
envelope provided as soon as possible.
- or -
TELEPHONE -
Call toll-free 1-800-PROXIES
(1-800-776-9437) from
any touch-tone telephone and follow the instructions.
Have your proxy card available when you call.
|
|
|
|
|
|
|
COMPANY NUMBER
|
|
|
|
|
|
ACCOUNT NUMBER
|
|
|
|
|
|
|
|
|
|
|
|
You may enter your voting instructions at 1-800-PROXIES up
until 11: 59 PM Eastern Time the day before the cut-off or meeting date.
â Please
detach along perfor`ated line and mail in the envelope provided
IF you are not voting via telephone or the Internet. â
n
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF DIRECTORS AND FOR PROPOSAL 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
ý
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN |
1.
|
|
Election of Directors: |
|
|
2. |
|
Proposal to approve the Great American Financial Resources,
Inc. Non-Employee Directors Compensation Plan. |
|
o |
|
o |
|
o |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOMINEES: |
|
|
|
|
|
|
|
|
|
|
|
|
o
|
|
FOR ALL NOMINEES
|
|
¡ |
|
CARL H. LINDNER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¡
¡
¡ |
|
S. CRAIG LINDNER
ROBERT A. ADAMS
KENNETH C. AMBRECHT
|
|
|
|
|
3. |
|
Proposal
to ratify Ernst & Young LLP as the Companys
Independent Registered Public Accounting Firm for 2006. |
|
o |
|
o |
|
o |
o
|
|
WITHHOLD AUTHORITY FOR ALL NOMINEES
|
|
¡ |
|
RONALD G. JOSEPH
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¡ |
|
JOHN T. LAWRENCE III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¡ |
|
WILLIAM R. MARTIN |
|
|
|
|
o
|
|
FOR ALL EXCEPT (See instruction below)
|
|
¡ |
|
CHARLES R. SCHEPER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark FOR ALL EXCEPT and fill in the circle next to
each nominee you wish to
withhold, as shown here: = |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s)
on the account may not be submitted
via this method. |
|
o |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
of Shareholder
|
|
Date:
|
|
Signature
of Shareholder
|
|
Date:
|
|
|
|
|
Note: |
|
Please sign exactly as your name or names appear on this Proxy.
When shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name
by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person. |
n
n