SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
REINSURANCE GROUP OF AMERICA, INCORPORATED
(Name of Registrant as Specified in Its Charter)
(Name of Person Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[RGA logo]
Reinsurance Group
of America, Incorporated(R)
NOTICE OF THE ANNUAL MEETING OF
THE SHAREHOLDERS OF
REINSURANCE GROUP OF AMERICA, INCORPORATED
Chesterfield, Missouri
April 9, 2008
TO THE SHAREHOLDERS OF
REINSURANCE GROUP OF AMERICA, INCORPORATED
The Annual Meeting of the Shareholders of Reinsurance Group of
America, Incorporated will be held at the Company's offices located at 1370
Timberlake Manor Parkway, Chesterfield, Missouri on May 21, 2008, commencing
at 2:00 p.m., at which meeting only holders of record of the Company's common
stock at the close of business on March 21, 2008 will be entitled to vote, for
the following purposes:
1. To elect two directors for terms expiring in 2011;
2. To approve the Company's 2008 Management Incentive Plan;
3. To approve an amendment to the Company's Flexible Stock Plan;
and
4. To transact such other business as may properly come before the
meeting.
REINSURANCE GROUP OF AMERICA, INCORPORATED
By /s/ Steven A. Kandarian
Steven A. Kandarian
Chairman of the Board
/s/ James E. Sherman
James E. Sherman
Secretary
TABLE OF CONTENTS
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PAGE NO.
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Notice of the Annual Meeting of Shareholders......................................................................i
Information About the 2008 Annual Meeting and Proxy Voting........................................................1
Proxy Statement...................................................................................................1
Item 1 - Election of Directors....................................................................................2
Corporate Governance.........................................................................................4
Board of Directors and Committees............................................................................5
Compensation Discussion and Analysis.........................................................................7
Compensation Committee Report...............................................................................18
Executive Compensation......................................................................................18
Summary Compensation Table..............................................................................18
Grants of Plan-Based Awards in 2007.....................................................................19
Outstanding Equity Awards at 2007 Fiscal Year-End.......................................................21
Option Exercises and Stock Vested During Fiscal 2007....................................................24
Pension Benefits in Fiscal 2007.........................................................................25
Nonqualified Deferred Compensation in Fiscal 2007.......................................................27
Potential Payments Upon Termination or Change of Control................................................28
Director Compensation...................................................................................29
Securities Ownership of Directors, Management and Certain Beneficial Owners.................................30
Certain Relationships and Related Person Transactions.......................................................33
Independent Auditor.........................................................................................35
Item 2 - Approval of 2008 Management Incentive Plan..............................................................36
Item 3 - Approval of Amendment to the Flexible Stock Plan........................................................39
Equity Compensation Plan Information.............................................................................44
Additional Information...........................................................................................45
ii
INFORMATION ABOUT THE 2008 ANNUAL MEETING AND PROXY VOTING
EVEN THOUGH YOU MAY PLAN TO ATTEND THE MEETING IN PERSON, PLEASE MARK, DATE,
AND EXECUTE THE ENCLOSED PROXY AND MAIL IT PROMPTLY. A POSTAGE-PAID RETURN
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
[RGA logo]
Reinsurance Group
of America, Incorporated(R)
1370 Timberlake Manor Parkway
Chesterfield, Missouri 63017-6039
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PROXY STATEMENT
FOR THE
ANNUAL MEETING OF THE SHAREHOLDERS
TO BE HELD MAY 21, 2008
AT RGA'S OFFICES IN CHESTERFIELD, MISSOURI
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This Proxy Statement is furnished to the holders of common stock of
Reinsurance Group of America, Incorporated (the "Company" or "RGA") in
connection with the solicitation of proxies for use in connection with the
Annual Meeting of the Shareholders to be held at 2:00 p.m. May 21, 2008, and
all adjournments and postponements thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of the Shareholders. Such holders are
hereinafter referred to as the "Shareholders." The Company is first mailing
this Proxy Statement and the enclosed Annual Report to Shareholders for the
fiscal year ended December 31, 2007, on or about April 9, 2008.
Whether or not you expect to be present in person at the meeting, you
are requested to complete, sign, date, and return the enclosed form of proxy.
If you attend the meeting, you may vote by ballot. If you do not attend the
meeting, your shares of common stock can be voted only when represented by a
properly executed proxy.
Any person giving such a proxy has the right to revoke it at any time
before it is voted by giving written notice of revocation to the Secretary of
the Company, by duly executing and delivering a proxy bearing a later date, or
by attending the Annual Meeting and voting in person.
The close of business on March 21, 2008 has been fixed as the record
date for the determination of the Shareholders entitled to vote at the Annual
Meeting of the Shareholders. As of the record date, approximately 62,233,223
shares of common stock were outstanding and entitled to be voted at such
meeting. Shareholders will be entitled to cast one vote on each matter for
each share of common stock held of record on the record date.
The Board of Directors of the Company makes this proxy solicitation.
The solicitation will primarily be by mail and the expense thereof will be
paid by the Company. In addition, proxies may be solicited by telephone or
telefax by directors, officers, or regular employees of the Company.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDERS MEETING TO BE HELD MAY 21, 2008: THIS PROXY STATEMENT AND OUR
2007 ANNUAL REPORT TO SHAREHOLDERS ARE AVAILABLE AT www.rgare.com.
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ITEM 1 - ELECTION OF DIRECTORS
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The first item to be acted upon at the Annual Meeting is the election
of two directors of the Company for terms expiring at the Annual Meeting in
2011, or until their respective successors have been elected and have
qualified. Proxies cannot be voted for a greater number of persons than the
number of nominees named.
NOMINEES AND CONTINUING DIRECTORS
The Board of Directors is divided into three classes, each of which
generally contains either two or three directors, with the terms of office of
each class ending in successive years. Currently, the Board has eight
directors, with two vacancies. Certain information with respect to the
nominees for election as directors proposed by the Company and the other
directors whose terms of office as directors will continue after the Annual
Meeting is set forth below. Each of the directors has served in his or her
principal occupation for the last five fiscal years, unless otherwise
indicated.
Should any one or more of the nominees be unable or, for good cause,
unwilling to serve (which is not expected), the proxies (except proxies marked
to the contrary) will be voted for such other person or persons as the Board
of Directors of the Company may recommend. All of the nominees are currently
directors of the Company. All of the nominees for director have agreed to
serve if elected.
VOTE REQUIRED
The vote required to approve this Item 1 is a majority of the common
stock represented in person or by proxy at the Annual Meeting, provided the
total vote cast represents over 50% of the shares entitled to vote. As a
holder of common stock, MetLife, Inc. ("MetLife") is entitled to vote on this
proposal. MetLife beneficially owns and has shared voting power with respect
to approximately 52% of our outstanding shares. MetLife has informed us that
it intends to vote FOR this Item 1; therefore, approval of this Item 1 by the
shareholders is assured. The Company recommends a vote FOR the nominees for
election to the Board.
TO BE ELECTED AS DIRECTORS FOR TERMS ENDING IN 2011: DIRECTOR SINCE
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J. CLIFF EASON, 60 1993
Retired President and CEO of Southwestern Bell Telephone, SBC
Communications, Inc. ("SBC"), a position he held from September 2000
through January 2001. He served as President, Network Services, SBC
from October 1999 through September 2000; President, SBC
International of SBC, from March 1998 until October 1999; President
and CEO of Southwestern Bell Telephone Company ("SWBTC") from
February 1996 until March 1998; President and CEO of Southwestern
Bell Communications, Inc. from July 1995 through February 1996;
President of Network Services of SWBTC from July 1993 through June
1995; and President of Southwestern Bell Telephone Company of the
Midwest from 1992 to 1993. He held various other positions with
Southwestern Bell Communications, Inc. and its subsidiaries prior to
1992, including President of Metromedia Paging from 1991 to 1992. Mr.
Eason was a director of Williams Communications Group, Inc. until his
retirement in January 2001.
JOSEPH A. REALI, 55 2002
Senior Vice President and Tax Director of Metropolitan Life Insurance
Company ("Metropolitan Life") since 1999. Mr. Reali has served as the
MetLife liaison with RGA since July 2002. As Tax Director, Mr. Reali
is responsible for corporate tax issues at Metropolitan Life and
issues with respect to its holdings in RGA. Mr. Reali joined
Metropolitan Life in 1977 as an attorney in the Law Department, and
in 1985 he became a Vice President in the Tax Department. In 1993 he
was appointed Vice
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President and Corporate Secretary, and in 1997 he became a Senior
Vice President. Mr. Reali received a J.D. degree, cum laude, from
Fordham University School of Law and an LL.M degree in taxation from
New York University Law School. Mr. Reali serves as Counsel and
Secretary of the Metropolitan Life Foundation. He also serves as a
director and officer of a number of MetLife subsidiaries.
TO CONTINUE IN OFFICE UNTIL 2010:
---------------------------------
WILLIAM J. BARTLETT, 58 2004
Retired partner, Ernst & Young Australia. Mr. Bartlett was an
accountant and consultant with Ernst & Young for over 35 years and
advised numerous clients in the global insurance industry. Mr.
Bartlett was appointed a partner of Ernst & Young in Sydney,
Australia in July 1980, a position he held until his retirement in
June 2003. He served as chairman of the firm's global insurance
practice from 1991 to 2000, and was chairman of the Australian
insurance practice group from 1989 to 1998. He holds several
professional memberships in Australia (ACPA and FCA), South Africa
(CASA), and the United Kingdom (FCMA). Mr. Bartlett is a member of
the Australian Life Insurance Actuarial Standards Board and is a
consultant to the Australian Financial Reporting Council on Auditor
Independence.
ALAN C. HENDERSON, 62 2002
Retired President and Chief Executive Officer of RehabCare Group,
Inc. ("RehabCare") from June 1998 until June 2003. Prior to becoming
President and Chief Executive Officer, Mr. Henderson was Executive
Vice President, Chief Financial Officer and Secretary of RehabCare
from 1991 through May 1998. Mr. Henderson was a director of RehabCare
from June 1998 to December 2003, Angelica Corporation from March 2001
to June 2003, and General American Capital Corp., a registered
investment company, from October 1989 to April 2003.
A. GREIG WOODRING, 56 1993
President and Chief Executive Officer of the Company since 1993. Mr.
Woodring headed the reinsurance business at General American Life
Insurance Company ("General American") from 1986 until the Company's
formation in December 1992. He also serves as a director and officer
of a number of subsidiaries of the Company.
TO CONTINUE IN OFFICE UNTIL 2009:
---------------------------------
STUART I. GREENBAUM, 71 1997
Professor emeritus at the John M. Olin School of Business at
Washington University since January 2007. Mr. Greenbaum served as
Dean of the Olin School of Business from July 1995 to July 2005 and
as professor from July 1995 to January 2007. Prior to joining the
Olin School of Business, he spent 20 years at the Kellogg Graduate
School of Management at Northwestern University where he was Director
of the Banking Research Center and Norman Strunk Distinguished
Professor of Financial Institutions. Mr. Greenbaum has served on the
Federal Savings and Loan Advisory Council and the Illinois Task Force
on Financial Services, and has been a consultant for the American
Bankers Association, the Bank Administration Institute, the
Comptroller of the Currency, the Federal Reserve System, and the
Federal Home Loan Bank System, among others.
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STEVEN A. KANDARIAN, 55 2007
Executive Vice President and Chief Investment Officer of MetLife
since April 2005. From March 2004 to April 2005, he was an
independent financial consultant. Prior to that he was Executive
Director of the Pension Benefit Guaranty Corporation ("PBGC") from
December 2001 to February 2004. Before joining the PBGC, he held
positions of increasing responsibility at various firms and companies
involving private equity, investment banking and corporate mergers
and acquisitions.
GEORGETTE A. PILIGIAN, 43 2006
Senior Vice President and Chief Information Officer, Institutional
Business Metropolitan Life since February 2006. Ms. Piligian joined
Metropolitan Life in 1987 and has led various transformation efforts
and technology departments within the Company. In September of 1999,
she was appointed as a Vice President, in 2002 became the Chief
Information Officer for Corporate Systems and in 2003 became a Senior
Vice President. Ms. Piligian received her Bachelors Degree in
Business Computer Information Systems from Hofstra University.
CORPORATE GOVERNANCE
We have adopted an Employee Code of Business Conduct and Ethics (the
"Employee Code"), a Directors' Code of Conduct (the "Directors' Code"), and a
Financial Management Code of Professional Conduct (the "Financial Management
Code"). The Employee Code applies to all employees and officers of RGA and its
subsidiaries. The Directors' Code applies to directors of RGA and its
subsidiaries. The Financial Management Code applies to our chief executive
officer, chief financial officer, corporate controller, primary financial
officers in each business unit, and all professionals in finance and
finance-related departments. We intend to satisfy our disclosure obligations
under Item 5.05 of Form 8-K by posting on our website information about
amendments to, or waivers from, any provision of the Financial Management Code
that applies to our chief executive officer, chief financial officer, and
corporate controller.
In March 2004, the Board of Directors adopted Corporate Governance
Guidelines (revised July 2007), a revised Audit Committee Charter, charters
for the Compensation Committee and Nominating and Corporate Governance
Committee, and Policies on Communications (collectively "Governance
Documents"). The Codes and Governance Documents referenced above are available
on our website at www.rgare.com. Information on our website does not
constitute part of this Proxy Statement. We will provide without charge, upon
written or oral request, a copy of any of the Codes of Conduct or Governance
Documents. Requests should be directed to Investor Relations, Reinsurance
Group of America, Incorporated, 1370 Timberlake Manor Parkway, Chesterfield,
Missouri 63017 by electronic mail (investrelations@rgare.com), or by telephone
(636-736-7243).
DIRECTOR INDEPENDENCE
In accordance with the Corporate Governance Guidelines, the Board
undertook reviews of director independence in February 2007 and February 2008.
During each of these reviews, the Board received a report from our Law
Department noting that there were no transactions or relationships between RGA
or its subsidiaries and any of Messrs. Bartlett, Eason, Greenbaum, or
Henderson, nor any member of such director's immediate family. The purpose of
this review was to determine whether any of those directors had a material
relationship with us that would preclude such director from being independent
under the listing standards of the New York Stock Exchange ("NYSE") or our
Corporate Governance Guidelines.
As a result of this review, the Board affirmatively determined, in
its judgment, that each of the four directors named above are independent of
us and our management under the applicable standards. Messrs. Kandarian and
Reali and Ms. Piligian are considered non-independent directors because of
their
4
status as senior executives or officers of MetLife or its subsidiaries and
affiliates. Mr. Woodring is a non-independent director because he is our Chief
Executive Officer.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The Board of Directors has adopted Policies on Communications, which
describes the process for interested parties and shareholders to communicate
with our directors and the Board. The Policies on Communications are available
on our website at www.rgare.com. Information on our website does not
constitute part of this Proxy Statement. Interested parties and shareholders
may communicate directly with our directors, including the presiding director,
Mr. Kandarian, or with the lead independent director, Mr. Greenbaum, by
sending a written communication as follows:
General Counsel
Reinsurance Group of America, Incorporated
1370 Timberlake Manor Parkway
Chesterfield, MO 63017
The Policies on Communications provides that the General Counsel will
make a record of the receipt of any such communications. All properly
addressed communications will be delivered to the specified recipient(s) not
less than once each calendar quarter, and will not be directed to or reviewed
by management prior to receipt by such persons.
CONTROLLED COMPANY EXEMPTION
The listing standards of the NYSE require listed companies to have a
Board of Directors that has a majority of independent directors. There is an
exemption from this requirement for "controlled companies," which means a
company of which more than 50% of the voting power is held by an individual, a
group or another company. Controlled companies need not comply with the
requirement to have a majority of independent directors or Compensation
Committee and Nominating and Corporate Governance Committee, respectively,
composed entirely of independent directors. As of February 1, 2008, MetLife
beneficially owned approximately 52% of our outstanding shares; therefore, we
qualify as a "controlled company" under the NYSE listing standards. We rely on
the controlled company exemption in connection with the requirement to have a
majority of independent directors. However, we have chosen not to rely on the
exemption for the Compensation Committee and Nominating and Corporate
Governance Committee and, as of February 20, 2008, the Board determined that,
in its judgment, those two Committees were composed entirely of independent
directors.
OTHER MATTERS
In February 2007, the Board designated Mr. Kandarian as the presiding
director, whose primary responsibility is to preside over periodic executive
sessions of the Board in which the management director (Mr. Woodring) does not
participate. In February 2008, the Board confirmed Mr. Greenbaum as lead
independent director.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held a total of five regular meetings and one
special meeting during 2007. Each incumbent director attended at least 75% of
the meetings of the Board and committees on which he or she served during
2007. We do not have a policy with regard to attendance by Directors at the
annual meeting of shareholders. None of the non-management directors attended
the 2007 annual meeting of shareholders. The Board of Directors has an Audit
Committee established in accordance with section 3(a)(58)(A) of the Exchange
Act, a Compensation Committee, and a Nominating and Corporate Governance
Committee.
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AUDIT COMMITTEE
The Audit Committee met nine times in 2007, and consisted of Messrs.
Bartlett (Chairman), Eason, Greenbaum, and Henderson. The Committee is
directly responsible for the appointment, compensation, retention and
oversight of the work of our independent auditor. The Committee oversees our
accounting and financial reporting processes, the adequacy of our internal
control over financial reporting and disclosure controls and procedures, and
the integrity of our financial statements, pre-approves all audit and
non-audit services to be provided by the independent auditor, reviews reports
concerning significant legal and regulatory matters, and reviews the
performance of our internal audit function. The Committee also reviews and
discusses our filings on Forms 10-K and 10-Q and the financial information in
those filings. The Audit Committee works closely with management as well as
our independent auditor and internal auditor. A more detailed description of
the role and responsibilities of the Audit Committee is set forth in a written
charter, adopted by the Board of Directors, which is available on our website
(www.rgare.com). Information on our website does not constitute part of this
Proxy Statement. The Audit Committee has established procedures for the
receipt, retention, and treatment of complaints regarding accounting, internal
accounting controls, or auditing matters. Please see the Policies on
Communications, which is available on our website.
The Board of Directors has determined, in its judgment, that all of
the members of the Audit Committee are independent within the meaning of
Securities and Exchange Commission ("SEC") regulations applicable to audit
committees and the NYSE listing standards. The Board of Directors has
determined, in its judgment, that Messrs. Bartlett, Greenbaum and Henderson
are qualified as audit committee financial experts within the meaning of SEC
regulations, and the Board has determined that each of them has accounting and
related financial management expertise within the meaning of the NYSE listing
standards. The Audit Committee Charter provides that members of the Audit
Committee may not simultaneously serve on the audit committee of more than two
other public companies, unless he or she satisfactorily demonstrates that they
have the ability to devote the time and attention required to serve on
multiple audit committees.
COMPENSATION COMMITTEE
The Compensation Committee met six times during 2007, and consisted
of Messrs. Henderson (Chairman), Bartlett, Eason and Greenbaum. The Committee
meets as often as necessary to perform its duties and responsibilities, which
include establishing and overseeing our general compensation policies,
reviewing and approving the performance and compensation of the CEO and
certain other executive officers, and reviewing and recommending compensation
for other executives and employees to the Board of Directors. A more detailed
description of the role and responsibilities of the Compensation Committee is
set forth in a written charter adopted by the Board of Directors, which is
available on our website (www.rgare.com). Information on our website does not
constitute part of this Proxy Statement. The Board of Directors has
determined, in its judgment, that all of the Committee's members are
independent within the meaning of the NYSE listing standards.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Henderson, Bartlett, Eason and Greenbaum are not and have
never been officers or employees of RGA or any of its subsidiaries. None of
our inside directors or officers serve on the compensation committee of
another company of which a member of the Compensation Committee is an officer.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee met four times in
2007, and consisted of Messrs. Greenbaum (Chairman), Bartlett, Eason and
Henderson. This Committee is responsible for developing and implementing
policies and practices relating to corporate governance, including reviewing
and monitoring implementation of our Corporate Governance Guidelines. In
addition, the Committee identifies individuals qualified to become members of
the Board, consistent with the criteria established by the Board; develops and
reviews background information on candidates for the Board; and makes
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recommendations to the Board regarding such candidates. The Committee also
will prepare and supervise the Board's annual review of director independence
and the performance of self-evaluations to be conducted by the Board and
Committees. A more detailed description of the role and responsibilities of
the Nominating and Corporate Governance Committee is set forth in a written
charter adopted by the Board of Directors, which is available on our website
(www.rgare.com). Information on our website does not constitute part of this
Proxy Statement. The Board of Directors has determined, in its judgment, that
all of the Committee's members are independent within the meaning of the NYSE
listing standards. Shareholders wishing to propose nominees to the Committee
for consideration should notify in writing our Secretary in accordance with
the process described in "Additional Information - Shareholder Nominations and
Proposals." The Secretary will inform the members of the Committee of such
nominees.
COMPENSATION DISCUSSION AND ANALYSIS
Our Board of Directors has delegated to the Compensation Committee
(the "Committee") the authority to establish and oversee our general
compensation policies, review the performance and approve the compensation of
our CEO and other executive officers, and review and recommend compensation to
the Board of Directors for other executives and employees. The Committee also
produces an annual report on executive compensation for inclusion in our Proxy
Statement. In 2007, the Compensation Committee consisted of Messrs. Henderson
(Chairman), Bartlett, Eason, and Greenbaum. RGA Reinsurance Company, one of
our wholly owned indirect subsidiaries, employs all of our "executive
officers," including the seven officers who were reporting persons for
purposes of Section 16 of the Exchange Act on December 31, 2007, except for
Graham Watson, who is employed by RGA International Corporation.
COMPENSATION PHILOSOPHY AND OBJECTIVES
We design our compensation philosophy and objectives to:
o provide competitive total compensation opportunities that will
attract, retain and motivate high-performing executives;
o align the compensation plans to our business strategies;
o reinforce our pay for performance culture by making a significant
portion of compensation variable and based on company, business
unit and individual performance; and
o align the financial interests of our executives and shareholders
through stock-based incentives and by building executive ownership
in us.
We use two key financial performance measures and weights designed to
add emphasis to operating earnings to align our compensation plans to our
business strategies, reinforce our pay for performance culture using variable
compensation based on performance, and align the financial interests of our
executives. We measure performance under our management incentive plan (or
"MIP") based 75% on annual operating earnings (net income from continuing
operations less realized capital gains and losses and certain other
non-operating items) per share and 25% on annual consolidated revenues. For
our intermediate term bonus plan (or "ITB"), we measure performance based 67%
on a compounded annual growth rate for operating earnings per share and 33% on
a compounded annual growth rate for revenue, both calculated as of the end of
the three-year performance period. Commencing with the 2008 ITB awards,
operating return on average equity replaced growth in operating earnings as an
ITB measure. The Company has not adopted any policies regarding the adjustment
or recovery of awards or payments if the relevant performance measures upon
which they are based are restated or otherwise adjusted in a manner that would
reduce the size of an award or payment.
7
ELEMENTS OF COMPENSATION
Our compensation program consists of base salary, MIP, ITB, stock
options, and retirement and pension benefits. Our base salaries are designed
to provide part of a competitive total compensation package that will attract,
retain and motivate high-performing executives. The MIP is designed to
reinforce our pay for performance culture by making a significant portion of
an executive's compensation variable and based on Company, business unit and
individual performance. The MIP also aligns compensation with our short-term
business strategies. Our ITB and stock options are designed to reinforce our
pay for performance culture, align the financial interests of our executives
and shareholders, align compensation with our intermediate and long-term
business strategies, and provide a significant equity component as part of the
total compensation package. Finally, our retirement and pension benefits are
designed to provide another part of a competitive total compensation package
that permits us to attract and retain key members of our management team.
COMPENSATION CONSULTANT
In forming its recommendations on our overall compensation program,
the Committee has, from time to time, engaged an independent consulting firm
to provide advice about competitive compensation practices and determine how
our executive compensation compares to that of other comparable companies,
including publicly held insurance and reinsurance companies. Prior to 2007,
Watson Wyatt, a nationally recognized consulting firm, performed a variety of
compensation consulting services with respect to non-executive positions and
executive compensation analysis. Following a selection and interview process,
in January 2007 the Committee directly engaged Hewitt Associates to advise and
assist us with decisions relating to our executive compensation program,
including providing advice regarding incentive plan design, annual
comprehensive competitive market studies, competitive compensation data for
directors, technical advice on disclosure requirements relating to executive
compensation, and to apprise the Committee of compensation best practices.
Hewitt Associates' initial work consisted of a review of the elements and
structure of our total compensation program, analyzing the performance
measures used for the MIP and ITB, reviewing executive retirement plans and
evaluating alternative peer groups. The initial results of Hewitt Associates'
review were discussed in January 2007, and the Committee used input from
Hewitt Associates to help the Committee establish executive compensation for
2007.
MANAGEMENT PARTICIPATION AND INVOLVEMENT
Pursuant to the Compensation Committee charter, the Committee makes
all compensation decisions and approves the compensation of our executive
officers, and makes compensation recommendations for approval by our Board for
all other employees. Management plays a significant role in the
compensation-setting process. The most significant aspects of management's
role are:
o evaluating employee performance;
o recommending business performance targets, goals and objectives;
and
o recommending salary levels, cash bonus and equity incentive
awards.
Our chief executive officer works with the Committee chair to
establish the agenda for Committee meetings. Management also prepares relevant
information and reports for each Compensation Committee meeting. Our chief
executive officer also participates in Committee meetings at the Committee's
request to provide:
o background information regarding our strategic objectives;
o his evaluation of the performance of the executive officers; and
o compensation recommendations as to executive officers (other than
himself).
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Our executive officers and other members of management are also
available to Hewitt Associates or any other compensation consultant to provide
information regarding position descriptions, compensation history and other
information as requested, and to review draft results provided by the
Committee's compensation consultant.
Three of our directors are senior executives of MetLife, the
beneficial owner of approximately 52% of our outstanding common stock as of
February 1, 2008. The MetLife directors are invited to attend and participate
in Compensation Committee meetings, although they are not voting members of
the Committee. From time to time, the MetLife directors provide
recommendations or suggestions with respect to our executive compensation
arrangements and with respect to the setting of our chief executive officer's
compensation.
BENCHMARKING OF COMPENSATION
In 2005, Watson Wyatt performed an analysis of all elements of our
total direct compensation, including a competitive market assessment of the
pay levels for our executives at the Senior Vice President level and above,
which at that time included 26 positions. The analysis studied multiple
published surveys of executive compensation practices and included publicly
available information relating to a peer group of 12 publicly traded insurance
companies.
The analysis also included a review of five published surveys, two of
which were insurance-specific and three of which were general executive
compensation surveys. The scope of the survey review focused on our size in
terms of premiums, revenues, and asset levels, and also assessed published
survey data with respect to all 26 executive positions. Survey data was
collected on companies that were similar to our size based on premiums,
revenues and assets, and included specific data for the insurance industry
when available. The study of our peers focused on publicly-available
information, and thus focused on pay levels for their top five executives, as
this is the information that is publicly disclosed. Pay levels for our top
five executives were compared to peers based on highest-paid ranking, using
total cash compensation. As available, position-specific comparisons were also
made.
The peer companies studied in 2006 included:
Amerus Group Co PartnerRe Ltd.
Berkley (WR) Corp. Phoenix Companies Inc.
Everest Re Group Ltd. Protective Life Corp.
Jefferson-Pilot Corp. Renaissance Re Holdings Ltd.
Nationwide Financial Services Scottish Re Group Ltd.
Odyssey Re Holdings Corp. XL Capital Ltd.
The Committee defined the peer group based on various metrics,
including industry and size. The Committee determined that the peer companies
should consist of publicly-traded reinsurers (life and property-casualty) and
financial services companies, including direct competitors, which were
approximately one-half to 2.5 times our size (based on revenues, assets, and
other similar measures). We expect to update the peer company list
periodically in order to maintain an appropriate list of companies for pay
comparisons as a result of mergers and acquisitions, divestitures, growth in
our size and the size of those companies in the peer group, and other changes.
We used the analysis of Watson Wyatt and subsequent review and input
from Hewitt Associates as a starting point for our compensation determinations
in 2007 relating to base salary, total cash compensation, long-term incentives
and total direct compensation. We considered individual performance, internal
pay equity among positions and levels, and the relative importance of
positions to us. We also considered our financial performance as demonstrated
by revenue and earnings per share and various other factors that differentiate
us from our peers. Along with Hewitt Associates' review of our overall
performance and future growth targets, we established a compensation strategy
that we believe aligns our compensation with the market median in order to
allow us to retain our current talent and attract new talent.
9
The Committee determines a total compensation package for each of the
five executives who are identified in the Summary Compensation Table (whom we
refer to as our "named executive officers") that includes base salary, MIP
bonus, equity awards, and pension benefits. In determining the targeted
overall compensation for our chief executive officer, we considered not only
the factors described above, but also our performance over the previous two
years. We used a similar analysis to establish the targeted overall
compensation for our other named executive officers for 2007.
We target the median of the peer companies' pay for each element of
named executive officer compensation. The elements of compensation we targeted
consist of base salary, total cash compensation (base salary + annual
incentives), long-term incentive awards (equity grants) and total direct
compensation as reported by companies in the peer group (base salary + annual
incentives + long-term incentive awards). The review provided by Watson Wyatt
in January 2006 indicated that across the named executive officer positions,
in aggregate our salaries were at 82% of the peer group median; our total cash
compensation was below the peer group median at 61% of the median; our
long-term incentive award levels were at 57% of the peer group median; and our
aggregate total direct compensation was below the peer group median at 54%.
The competitive positioning of the total direct compensation is primarily
driven by the relatively low expected value of the long-term incentive awards.
The following table illustrates the peer company median data compared to RGA
target data for the last three years.
--------------------------------------------------------------------------------------------------------------------
BASE TOTAL CASH LONG-TERM TOTAL DIRECT
SALARY COMPENSATION INCENTIVES COMPENSATION(1)
--------------------------------------------------------------------------------------------------------------------
PEER COMPANY MEDIAN $2,633 $5,863 $4,696 $11,630
--------------------------------------------------------------------------------------------------------------------
RGA Named Executive Officer $2,169 $3,557 $2,670 $6,228
Aggregate (2005) (82.4%) (60.7%) (56.9%) (53.6%)
--------------------------------------------------------------------------------------------------------------------
RGA Named Executive Officer $2,360 $4,238 $3,792 $8,030
Aggregate (2006) (89.6%) (72.3%) (80.8%) (69.0%)
--------------------------------------------------------------------------------------------------------------------
RGA Named Executive Officer $2,560 $4,768 $2,960 $7,728
Aggregate (2007) (97.2%) (81.3%) (63.0%) (66.5%)
--------------------------------------------------------------------------------------------------------------------
All dollars in thousands
------------------------
1. The Total Direct Compensation of the peer group is not an arithmetic
total of the elements presented in this table, but instead reflects the
median Total Direct Compensation of the peer group. The Total Direct
Compensation amounts for RGA represent the sum of Total Cash Compensation
(which includes Base Salary) and Long-Term Incentives.
COMPANY COMPENSATION POLICIES
BASE SALARIES
In determining the base salaries of our named executive officers, the
Committee considers our compensation compared to that of the relevant market,
as determined by a review of published surveys. The Committee also considers
recommendations submitted to it by our chief executive officer, who provides
the Committee with details as to executive performance as compared to Company
performance and the executive's individual and divisional results. In February
2007, based upon an analysis of executive compensation, the recommendations of
our chief executive officer, and our subjective evaluation of individual
performance, we approved base salary increases for the named executive
officers. We were satisfied with the performance of each named executive
officer and approved salary increases that averaged 7.6% to more closely align
the named executive officers' base compensation with the market median.
2007 Salaries. In February 2007, based on our compensation strategy,
-------------
our goals for and analysis of targeted overall compensation, and Company
performance during the previous two years, we increased the 2007 base salary
for Greig Woodring, our chief executive officer, by 14.2% to $800,000. This
amount reflects a level that we concluded was appropriate based on our review
of his performance and leadership,
10
and our consideration of factors relating to motivation and retention. We used
a similar process to establish the following base salaries for 2007 for the
other named executive officers: Jack B. Lay, Senior Executive Vice President
and Chief Financial Officer - $420,000; David B. Atkinson, Executive Vice
President and Chief Operating Officer - $440,000; Paul A. Schuster, Senior
Executive Vice President, U.S. Operations - $420,000; and Graham Watson,
Senior Executive Vice President, International - $480,000.
2008 Salaries. In February 2008, we established base salaries for
-------------
2008 for the named executive officers, as follows: Greig Woodring, Chief
Executive Officer - $850,000; Jack B. Lay, Senior Executive Vice President and
Chief Financial Officer - $450,000; David B. Atkinson, Executive Vice
President and Chief Operating Officer - $300,000; Paul A. Schuster, Senior
Executive Vice President, U.S. Operations - $450,000; and Graham Watson,
Senior Executive Vice President, International - $510,000. The reduction in
Mr. Atkinson's 2008 compensation reflects the Company's accommodation of Mr.
Atkinson's interest toward a lesser role that will transition him to early
retirement.
ANNUAL MANAGEMENT INCENTIVES
Our management and professional level associates are eligible to
participate in our MIP, which provides annual cash incentive compensation
based on one or more of the following factors: our overall performance, the
performance of the participant's division or business unit, and individual
performance during the previous year. Under the MIP, participants may receive
a cash bonus each year.
We generally set MIP objectives during February of each year, and
determine results and awards the following February. MIP objectives are not
tied to our peer group, and are instead tied solely to our performance. Our
results in 2007 were measured 75% on annual operating earnings (net income
from continuing operations less realized capital gains and losses and certain
other non-operating items) per share and 25% on annual consolidated revenues.
Divisional results are based on each division's revenues and operating
earnings. Individual performance results are measured by progress on major
projects, production, client development, personal development or similar-type
goals in which the employee played a major role. While we intend to tie
individual performance to clearly articulated and objective measures, it is
necessary, and at times prudent, for management to use a certain degree of
discretion in evaluating individual results. Based on these criteria, the
Committee approves a schedule of participants, which includes individual
incentive allocations, a minimum performance level that must be met before any
payment to the individual can be made, as well as a target and a maximum. In
addition, overall Company performance must meet certain minimum levels, which
we refer to as the "trigger," as determined in advance by the Committee,
before any awards (including any portion of an award based solely on
individual performance) are made under the MIP. Awards are based on a
specified percentage of salary, which varies for each participant.
The MIP award is designed to serve as a short-term incentive. Targets
reflect our short-term goals for operating earnings per share and revenue
growth. The allocation of MIP awards between individual, division and
company-wide performance varies for each participant based on his or her job
responsibilities. In general, allocations for divisional and individual
performance are weighted more heavily for employees with less company-wide
responsibility, and allocations for company-wide performance are weighted more
heavily for executives with more company-wide responsibility. The MIP
allocation for all of the named executive officers is based solely on overall
company results with no specific allocation for divisional or individual
performance; accordingly, divisional and individual performance do not affect
the size or payout of individual awards to named executive officers. We do,
however, consider divisional and individual performance when evaluating an
executive officer's total compensation, and may, from time to time, establish
a specific MIP allocation for a particular business objective or project. The
types of individual performance that may be taken into consideration include
contributions toward revenue growth, earnings per share, return on equity
capital, expense management, or product or client development, as well as, in
certain cases, intangible items such as progress toward achievement of
strategic goals, leadership capabilities, development of staff, or progress on
major projects in which the officer played a key role.
11
2007 MIP Awards. In February 2007, the Compensation Committee
---------------
approved the performance goals and business criteria for the named executive
officers under the MIP for 2007, including the minimum, target and maximum
bonus opportunities, as a percentage of base salary. The targets we
established were meant to require substantial efforts by our management team
toward our strategic goals, but at the same time they are intended to be
within reach if such efforts are made, and also provide significant rewards
for extraordinary achievement. We believe that goals that are viewed as too
difficult to attain would not have the effect of providing appropriate
incentive.
--------------------------------------------------------------------------------------------------------------
APPLICABLE
PERFORMANCE PERCENTAGE
MEASURE WEIGHT THRESHOLD TARGET MAXIMUM ACTUAL ACHIEVED
--------------------------------------------------------------------------------------------------------------
Revenues 25% $5,450,000 $5,779,000 $6,109,000 $5,718,400 81.6%
(dollars in thousands)
--------------------------------------------------------------------------------------------------------------
Operating Earnings
Per Share 75% $4.80 $5.10 $5.40 $5.50 200%
--------------------------------------------------------------------------------------------------------------
Weighted Average 170.4%
--------------------------------------------------------------------------------------------------------------
In February 2008, the Committee approved the MIP awards for our named
executive officers for 2007 performance. The Committee determined that our
operating earnings in fiscal 2007 exceeded the amount for maximum bonus
awards, whereas revenue growth exceeded the amount for target but did not
reach the amount for maximum bonus awards. The average MIP award for 2007
performance as a percentage of salary for our named executive officers was
approximately 147%. The following table describes the minimum, target and
maximum bonus opportunities for the named executive officers, as a percentage
of base salary, as approved by the Committee in February 2007, and the MIP
payments for 2007 performance, as approved by the Committee in February 2008:
2007 BONUS AT 2007 BONUS AT 2007 BONUS AT MIP PAYMENT
NAME MINIMUM TARGET MAXIMUM FOR 2007
A. Greig Woodring 0% 100% 200% $1,363,200
Jack B. Lay 0% 80% 160% $572,544
David B. Atkinson 0% 80% 160% $599,808
Paul A. Schuster 0% 80% 160% $572,544
Graham Watson 0% 80% 160% $654,336
2008 MIP Program and Opportunities. In February 2008, the
----------------------------------
Compensation Committee approved the performance measures and bonus
opportunities for the 2008 MIP, as described in the table below. The design of
our fiscal year 2008 annual incentive plan, including the performance period
and the incentive opportunities, are substantially the same as for our fiscal
year 2007 annual incentive plan. Financial goals were set in the same manner
and with the same weightings as described for fiscal year 2007. Accordingly,
the 2008 MIP objectives for the named executive officers are tied solely to
overall company performance, measured 75% on annual operating earnings per
share and 25% on annual consolidated revenues, with awards based on a
specified percentage of salary. The targets we established are meant to
require substantial efforts by our management toward our strategic goals, but
at the same time they are intended to be within reach if such efforts are
made, and also provide significant rewards for extraordinary achievement. We
believe that goals that are viewed as too difficult to attain would not have
the effect of providing appropriate incentive.
12
2008 BONUS AT 2008 BONUS AT 2008 BONUS AT
MINIMUM TARGET MAXIMUM
A. Greig Woodring 0% 100% 200%
Jack B. Lay 0% 80% 160%
David B. Atkinson 0% 60% 120%
Paul A. Schuster 0% 80% 160%
Graham Watson 0% 80% 160%
INTERMEDIATE AND LONG-TERM INCENTIVES
Our Flexible Stock Plan, which was established in 1993, provides for
the award of various types of long-term equity incentives, including stock
options, stock appreciation rights, restricted stock, performance shares, and
other stock-based awards, to officers at the vice president level and above
who have the ability to favorably affect our stock price and financial
results. The face value of the annual award varies depending on the
individual's position, and ranges from a multiple of 0.5 to 4.0 times base
salary. The value of each annual equity incentive grant is evenly split
between grants of stock options and performance contingent restricted stock
("PCRS"). We believe this allocation allows us to reward the achievement of
intermediate and long-term goals equally, and was based both on comparisons to
the market and our desire to achieve an appropriate balance between the
overall risk and reward for incentive opportunities.
In 2007, we made equity incentive grants under our ITB consisting of
shares of PCRS and long-term equity incentive grants consisting of stock
options. Shares of PCRS and stock options are issued under our Flexible Stock
Plan.
The PCRS grants are designed to allow us to reward the achievement of
specific intermediate-term corporate financial performance goals with equity
that is earned on the basis of performance. The stock options are designed to
focus attention on accomplishment of long-term goals and do not have
performance criteria. We implemented the PCRS program because we believe it is
consistent with our pay-for-performance compensation philosophy and focuses on
financial performance. We continue to evaluate the appropriate mix of
long-term pay elements (i.e., stock options vs. PCRS or restricted shares) in
comparison to the market and to best support our strategy. We believe that
stock options provide the most appropriate vehicle for providing long-term
value to management because of the tie to shareholder value, while the PCRS
grants add an additional performance expectation for our management to focus
on growth in earnings per share (operating return on average equity starting
in 2008) and revenue over the intermediate-term.
As discussed above under "Benchmarking of Compensation," the
Committee determines a total compensation package for our named executive
officers based on an analysis of competitive market conditions and overall
company performance. Accordingly, the Committee did not consider individual
performance to a material extent in determining the size of PCRS and stock
option awards.
INTERMEDIATE-TERM BONUS PROGRAM
Our ITB program is a performance-driven incentive program implemented
in January 2004 under our Flexible Stock Plan. We believe this program
reinforces our strategic and intermediate-term financial and operating goals.
Incentive awards are intended to reflect management's involvement in our
performance and to encourage their continued contribution to our future. We
view incentive awards as an important means of aligning the economic interests
of management and shareholders.
Our management employees are eligible to participate in this program.
The purpose of the ITB is to reward participants if we achieve the rate of
growth in revenue and earnings per share (operating return on average equity
starting in 2008) that is approved each year by the Compensation Committee
when it considers annual grants. The ITB is an ongoing program with three-year
performance periods. Each year, a new three-year cycle begins, giving us the
opportunity to alter ITB performance measures as appropriate.
13
The three-year performance and reward period shifts attention toward
intermediate and longer-term sustained results.
The ITB consists of PCRS units that are granted at the beginning of
the performance period at target. The Compensation Committee also sets award
levels with a minimum level of performance that must be met before any payment
to the individual can be made, as well as a target and a maximum. If we do not
meet certain performance goals, the awards will not be made, and if we exceed
those performance goals, the award can be as much as 200% of the targeted
award opportunity. PCRS grants are not treated as outstanding shares until the
performance goals are met and awards are made, as determined and approved by
the Compensation Committee. Awards are made in shares of fully vested,
unrestricted common stock. The awards are also contingent upon the
participant's employment status with us at the end of the three-year
performance period.
We use compounded annual growth rates for revenue and operating
earnings per share as the performance measures for the ITB, calculated at the
end of the three-year performance period. When we establish the ITB targets
for a particular performance period, we may adjust those targets up or down so
they are set at amounts or ranges that are generally consistent with our
publicly disclosed intermediate-term growth rate goals.
The grants were made pursuant to the terms of the Flexible Stock Plan
and award agreements. Upon retirement of a holder of a PCRS grant made
pursuant to this plan, provided that the holder has attained age 55 and a
combination of age and service that equals at least 65, the units will be
pro-rated based on the number of months of the holder's participation during
the three-year performance period and the number of shares earned.
2005-2007 ITB Results. In February 2005, we established the minimum,
---------------------
target and maximum annual growth rate goals for revenue and operating earnings
per share for the 2005 ITB grant (2005-2007 performance period). We
established the ITB target and range for revenue and earnings per share growth
for the period beginning in 2005 at levels that are generally consistent with
our publicly disclosed goals for those measures. As a result, we believe that
achievement of the target earnings per share growth rate required a high level
of financial and operating performance. We believe the goals and ranges we
established for the 2005 grants of PCRS under the ITB were challenging but
achievable.
In January 2008, we reviewed the results for the 2005-2007
performance period and determined that our operating earnings for the
three-year performance period attained the level for maximum awards of 200%,
whereas actual results for revenue growth over the period were at 176.3% of
target. The weighted average of the two measures for the period was 192% of
target, and we approved payouts on that basis. The following table describes
the goals established in February 2005 and actual results determined in
January 2008:
------------------------------------------------------------------------------------------------------------
APPLICABLE
PERFORMANCE PERCENTAGE
MEASURE WEIGHT THRESHOLD TARGET MAXIMUM ACTUAL ACHIEVED
------------------------------------------------------------------------------------------------------------
Revenues 33% 6% 10% 13% 12.3% 176.3%
------------------------------------------------------------------------------------------------------------
Operating Earnings
Per Share 67% 6% 10% 13% 15.5% 200%
------------------------------------------------------------------------------------------------------------
Weighted Average 192%
------------------------------------------------------------------------------------------------------------
See "Option Exercises and Stock Vested During Fiscal 2007" for a
description of the share amount and value of the PCRS awards we approved for
the 2005 ITB grants.
14
2007-2009 ITB Awards. In February 2007, we established the ITB target
--------------------
and range for revenue and earnings per share growth for the 2007 PCRS grants.
The performance period for the 2007 PCRS grant began on January 1, 2007 and
will end on December 31, 2009. We established the ITB target and range for
revenue and earnings per share growth for the period beginning in 2007 at
levels that are consistent with our publicly disclosed intermediate-term goals
for those measures. As a result, we believe that achievement of the target
earnings per share growth rate will require a high level of financial and
operating performance. We believe the goals and ranges we established for the
2007 grants of PCRS under the ITB are challenging but achievable.
-------------------------------------------------------------------------------------
PERFORMANCE
MEASURE WEIGHT THRESHOLD TARGET MAXIMUM
-------------------------------------------------------------------------------------
Revenues 33% 8% 12% 16%
-------------------------------------------------------------------------------------
Operating Earnings
Per Share 67% 8% 12% 16%
-------------------------------------------------------------------------------------
See "Grants of Plan-Based Awards in 2007" for a description of the
2007 PCRS grants.
2008-2010 ITB Awards. In February 2008, we established the ITB
--------------------
targets and ranges for the 2008 PCRS grants. The performance period for the
2008 PCRS grant began on January 1, 2008 and will end on December 31, 2010. We
determined that the average over the period of operating return on average
equity (operating earnings divided by average adjusted equity) ("ROE") should
replace growth in operating earnings as a measure for the 2008 PCRS grants.
The ROE measure brings capital efficiency into the equation and is a pure
profit metric (i.e., not combined with growth elements). We also noted greater
usage of ROE among the peer companies. Additionally, we changed the revenue
measure to be cumulative over the 3-year period, which retains the pure growth
metric, but is a better measure over the long run because it is less affected
by fluctuations in mortality. We believe the change in the ITB measures
reflects a stronger framework to enhance shareholder value. We established the
ITB targets and ranges for revenue and ROE for the period beginning in 2008 at
levels that are consistent with our publicly disclosed intermediate-term goals
for those measures. As a result, we believe that achievement of the ITB
targets will require a high level of financial and operating performance. We
believe the goals and ranges we established for the 2008 grants of PCRS under
the ITB are challenging but achievable.
We approved the 2008 PCRS grants for the named executive officers, as
follows (number of shares represents the target award): Greig Woodring, Chief
Executive Officer - 11,601 shares; Jack B. Lay, Senior Executive Vice
President and Chief Financial Officer - 5,408 shares; David B. Atkinson,
Executive Vice President and Chief Operating Officer - 1,874 shares; Paul A.
Schuster, Senior Executive Vice President, U.S. Operations - 5,408 shares; and
Graham Watson, Senior Executive Vice President, International - 7,000 shares.
STOCK OPTIONS
Stock options are granted annually, and the number of options granted
is based on position level. Stock options are granted as part of a total
compensation package for our management. The Committee considers compensation
data of the peer group in determining the amount of options granted to our
named executive officers and considers market data from published surveys in
determining the amount of options granted to other employees.
The vesting schedule for recent grants of stock options is five
years, no portion of which vests in the first year, and 25% of which vests in
each of the four remaining years. Upon retirement of a holder of stock options
pursuant to this plan, provided that the holder has attained age 55 and a
combination of age and service that equals at least 65, the options continue
to vest in accordance with the vesting schedule.
15
Since 2006, our Compensation Committee has made the annual stock
option grants at its February meeting. The options are granted with an
exercise price equal to the fair market value on the grant date, which is the
date of the Committee meeting. The fair market value of a share of our common
stock on a particular date is the closing price of the shares on the NYSE on
the given date. The options expire 10 years after grant.
2007 Option Grant. In February 2007, we granted a total of 73,680
-----------------
options for common stock to our named executive officers. We made these grants
because we believe that stock options provide the most appropriate vehicle for
providing long-term value to management because of the tie to shareholder
value. The options have a strike price of $59.63, which is the closing price
of our stock on February 20, 2007, the date the grants were approved. The
vesting schedule, expiration and other terms are described above under "Stock
Options." The grants were made pursuant to the terms of the Flexible Stock
Plan and award agreements. See "Grants of Plan-Based Awards in 2007" for a
description of the 2007 option grants.
2008 Option Grant. In February 2008, we approved the 2008 stock
-----------------
option awards for the named executive officers, as follows: Greig Woodring,
Chief Executive Officer - 32,242 shares; Jack B. Lay, Senior Executive Vice
President and Chief Financial Officer - 15,030 shares; David B. Atkinson,
Executive Vice President and Chief Operating Officer - 5,208 shares; Paul A.
Schuster, Senior Executive Vice President, U.S. Operations - 15,030 shares;
and Graham Watson, Senior Executive Vice President, International - 15,030
shares. We made these grants because we believe that stock options provide the
most appropriate vehicle for providing long-term value to management because
of the tie to shareholder value. The options have a strike price of $56.03,
which is the closing price of our stock on February 20, 2008, the date the
grants were approved. The vesting schedule, expiration and other terms are
described above under "Stock Options." The grants were made pursuant to the
terms of the Flexible Stock Plan and award agreements.
EXECUTIVE STOCK OWNERSHIP GUIDELINES
In February 2004, in order to further align the interests of our
management and our shareholders, we revised the executive stock ownership
guidelines initially adopted in October 1996. The revised guidelines increased
the market value of our shares that executives should seek to hold, based on a
multiple of the executive's base salary, as follows: our Chief Executive
Officer (four times), Senior Executive Vice Presidents and Executive Vice
Presidents (three times), and Senior Vice Presidents (two times). The market
value of shares includes only those shares of common stock and restricted
shares that are directly or beneficially owned by the executive. Executives
who are subject to the guidelines must retain the net shares (net of
applicable taxes and, for options, the exercise cost) from any stock option
exercise or award of PCRS until they satisfy their respective stock ownership
requirement.
As of February 2008, each of our named executive officers has met his
stock ownership requirements through holdings of shares of our common stock,
including restricted stock.
TIMING OF REGULAR EQUITY GRANTS
We typically release earnings for the fourth quarter in late January
of the following year. The Compensation Committee meets in mid-February of
each year to approve regular grants of stock options and PCRS awards. Equity
grants are effective on and have a grant date of the same day as the Committee
meeting, and the exercise price for the stock option grants is the closing
price of our common stock on the NYSE on the day of the Committee meeting in
February. This timing and process is designed to ensure that our
fourth-quarter earnings information is fully disseminated to the market by the
time the stock option grants and related exercise price are determined. The
PCRS awards are measured by financial performance over a three-year period and
the market price of our common stock is not a factor in those calculations or
measures. In 2005 and prior years, we made annual equity incentive grants on
the date of the board and committee meetings in late January.
16
PERQUISITES
We compensate our executive officers in the form of cash, equity and
equity-based awards. Accordingly, we do not provide executive officers or
their families with perquisites such as planes, cars, or apartments, and we do
not reimburse executive officers or any of our employees for personal-benefit
perquisites such as club dues or other social memberships. Executive officers
and other employees may seek reimbursement for business-related expenses in
accordance with our business expense reimbursement policy.
PROFIT SHARING PLAN
All employees of RGA Reinsurance Company who meet the eligibility
requirements participate in the profit sharing plan. Effective January 1,
2001, we adopted a safe harbor design for the plan that provides for a match
of up to 4% of compensation. All eligible employees are also entitled to
receive a profit sharing award ranging from 0% to 6% of compensation depending
on whether we meet or exceed our minimum performance level and targets,
regardless of their 401(k) participation. A minimum performance level must be
met before the profit sharing award can be made. The minimum performance level
and targets for each year are established at the beginning of the year. To the
extent that the participant's cash compensation is less than limits set by the
IRS ($225,000 for 2007), a participant may elect to defer up to one-half of
his profit sharing award to the plan, while the other one-half is
automatically contributed to the plan.
As stated above, in fiscal 2007 we exceeded the target amount for
revenue growth but did not attain the maximum amount, whereas operating
earnings per share exceeded the maximum. Based on these results, in January
2008, the Board of Directors approved a profit sharing award of 5.0% for 2007.
RETIREMENT PLANS
Some of our employees, including our executive officers, participate
in the RGA Performance Pension Plan (or the "Pension Plan"), a qualified
defined benefit plan. The Pension Plan is a broad-based retirement plan that
is intended to provide a source of income during retirement for full-time
employees in the U.S. Some of our employees, including certain executive
officers, also participate in the RGA Reinsurance Company Augmented Benefit
Plan (or the "RGA Augmented Plan"), a non-qualified plan under which eligible
employees are entitled to additional retirement benefits not paid under the
Pension Plan and the RGA Reinsurance Company Profit Sharing Plan (or the "RGA
Profit Sharing Plan") due to Internal Revenue Code (the "Code") limits on the
amount of benefits that may accrue and be paid under the Pension Plan and the
RGA Profit Sharing Plan. The RGA Augmented Plan provides benefits based on an
employee's total compensation and without regard to certain limitations that
apply to broad-based, qualified retirement plans, in order for a participant's
retirement income provided under the plans to be based on his or her total
eligible compensation. The Augmented Plan is generally only available to the
associates at the vice president level and above who earn more than the
compensation limits under the qualified plans ($225,000 for 2007).
Additionally, employees at the vice president level and above are
eligible to participate in our Executive Deferred Savings Plan, a
non-qualified plan which allows participants to defer income, including
bonuses and incentive compensation, and to defer matching contributions
without regard to qualified plan limitations. Base pay and regular annual
incentive awards, but not long-term compensation, are treated as eligible pay
under the terms of our retirement plans. We sponsor tax-qualified pension and
savings plans, as well as non-qualified "parity" pension and savings plans
providing benefits to all employees whose benefits under the tax-qualified
plans are limited by the Code. The Committee periodically reviews our
retirement benefits to ensure that the benefits are appropriate and cost
effective as part of an overall compensation program intended to provide basic
economic security for our highly skilled and qualified workforce and at a
level consistent with competitive practices.
Messrs. Woodring, Atkinson, Lay and Schuster participate in the
Pension Plan and the RGA Augmented Plan. Mr. Watson is not eligible to
participate in the U.S. pension plans. To provide a similar retirement
benefit, he participates in a supplemental executive retirement plan sponsored
by RGA International Corporation, which has the same benefit structure as the
related plan for our executives at our
17
Canadian operating company. For additional details regarding executive
participation in our retirement plans, see "Pension Benefits in Fiscal 2007."
NO EMPLOYMENT AND SEVERANCE AGREEMENTS
Consistent with our pay-for-performance compensation philosophy, we
do not provide employment or severance agreements to any of our named
executive officers.
DEDUCTIBILITY OF COMPENSATION
The goal of the Committee is to comply with the requirements of Code
Section 162(m), to the extent deemed practicable, with respect to annual and
long-term incentive programs to avoid losing the deduction for
non-performance-based compensation in excess of $1,000,000 paid to our chief
executive officer, chief financial officer and three other most
highly-compensated executive officers (other than the CEO and CFO). We
generally structure our performance-based compensation plans with the
objective that amounts paid under those plans and arrangements are tax
deductible, including having the plans approved by our shareholders. However,
a portion of certain ITB awards may not be tax deductible, but we believe
those awards are appropriate to achieve our compensation objectives.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management. Based on its review and
discussions with management, the Compensation Committee recommended to the
Board of Directors that the Compensation Discussion and Analysis be included
in our Annual Report on Form 10-K for 2007 and our 2008 Proxy Statement. This
report is provided by the following independent directors, who comprise the
Committee:
Alan C. Henderson, Chairman
William J. Bartlett
J. Cliff Eason
Stuart I. Greenbaum
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
--------------------------
FISCAL YEAR 2007 AND 2006 COMPENSATION
--------------------------------------
-------------------------------------------------------------------------------------------------------------------------
CHANGE IN
PENSION
VALUE AND
NON-EQUITY NONQUALIFIED
INCENTIVE DEFERRED ALL
PLAN COMPEN- OTHER
NAME AND STOCK OPTION COMPEN- SATION COMPEN-
PRINCIPAL POSITION YEAR SALARY(1) BONUS AWARDS(2) AWARDS(3) SATION(4) EARNINGS(5) SATION(6) TOTAL
-------------------------------------------------------------------------------------------------------------------------
A. GREIG WOODRING 2007 $788,462 0 $1,338,911 $927,923 $1,368,825 $718,975 $92,648 $5,235,744
President and CEO ----------------------------------------------------------------------------------------------------
2006 $695,038 0 $1,648,767 $1,119,629 $951,990 $356,410 $37,896 $4,809,730
-------------------------------------------------------------------------------------------------------------------------
JACK B. LAY 2007 $417,115 0 $443,345 $267,562 $578,169 $187,931 $49,769 $1,943,891
Sr. EVP and CFO ----------------------------------------------------------------------------------------------------
2006 $389,231 0 $581,113 $219,969 $432,169 $85,595 $29,906 $1,737,983
-------------------------------------------------------------------------------------------------------------------------
DAVID B. ATKINSON 2007 $437,692 0 $456,574 $367,025 $605,433 $217,649 $56,079 $2,140,452
EVP and COO ----------------------------------------------------------------------------------------------------
2006 $419,077 0 $677,184 $295,737 $459,243 $116,839 $32,902 $2,000,982
-------------------------------------------------------------------------------------------------------------------------
PAUL A. SCHUSTER 2007 $417,115 0 $419,772 $264,072 $578,169 $179,906 $52,723 $1,911,757
Sr. EVP - U.S. Ops ----------------------------------------------------------------------------------------------------
2006 $389,231 0 $557,541 $220,145 $416,180 $89,530 $29,906 $1,702,533
-------------------------------------------------------------------------------------------------------------------------
GRAHAM WATSON 2007 $475,000 0 $666,440 $362,424 $703,005 $57,091 $10,016 $2,273,976
Sr. EVP - Int'l ----------------------------------------------------------------------------------------------------
2006 $445,385 0 $812,770 $376,423 $513,208 $154,472 $8,148 $2,310,406
-------------------------------------------------------------------------------------------------------------------------
18
------------------------
1. For Messrs. Woodring, Lay, Atkinson and Schuster, this column includes
any amounts deferred at the election of the executive officers under the
RGA Reinsurance Company Executive Deferred Savings Plan. Mr. Watson is
not a U.S. citizen and is not eligible to participate in the deferred
savings plan.
2. This column represents the dollar amount recognized for financial
statement reporting purposes for each fiscal year for the fair value of
PCRS units granted in such year, as well as grants of PCRS units and
restricted stock made in prior fiscal years, in accordance with SFAS
123R. Pursuant to SEC rules, the amounts shown disregard estimated
forfeitures related to service-based vesting conditions. For additional
information on the valuation assumptions, refer to note 18 of the RGA
financial statements in the Form 10-K for the year ended December 31,
2007, as filed with the SEC. See also "Grants of Plan-Based Awards in
2007" for information on awards made in 2007. These amounts reflect our
accounting expense for these awards, and do not correspond to the actual
value that will be recognized by the named executive officers.
3. This column represents the dollar amount recognized for financial
statement reporting purposes for each fiscal year for the fair value of
stock options granted to each of the named executive officers in such
year, as well as prior fiscal years, in accordance with SFAS 123R.
Pursuant to SEC rules, the amounts shown exclude the impact of estimated
forfeitures related to service-based vesting conditions. For additional
information on the valuation assumptions, refer to note 18 of the RGA
financial statements in the Form 10-K for the year ended December 31,
2007, as filed with the SEC. See also "Grants of Plan-Based Awards in
2007" for information on options granted in 2007. These amounts reflect
our accounting expense for these awards, and do not correspond to the
actual value that will be recognized by the named executive officers.
4. Includes, for all named executive officers, cash bonuses earned for
performance during each fiscal year and paid in March of the following
year (including any bonuses deferred at the election of the executive
officers) under the cash bonus portion of the MIP, which we describe in
the "Compensation Discussion and Analysis" ("CD&A"). The cash bonus
payments for 2007 performance were $1,363,200 for Mr. Woodring, $572,544
for Mr. Lay, $599,808 for Mr. Atkinson, $572,544 for Mr. Schuster, and
$654,336 for Mr. Watson. The cash bonus payments for 2006 performance
were $947,590 for Mr. Woodring, $427,769 for Mr. Lay, $454,843 for Mr.
Atkinson, $411,780 for Mr. Schuster, and $493,380 for Mr. Watson.
Also includes amounts paid in cash or deferred at the officer's election
each year under the RGA Profit Sharing Plan for Messrs. Woodring, Lay,
Atkinson and Schuster, which totaled $5,625 for 2007, and $4,400 for
2006. Also includes $48,669 paid to Mr. Watson in 2007 and $19,826 in
2006, in lieu of awards under the RGA Profit Sharing Plan, in which he is
not eligible to participate.
5. This column represents the sum of the change in pension value in each
fiscal year for each of the named executive officers. We do not pay
above-market or preferential earnings on any account balances, therefore,
this column does not reflect any amounts relating to nonqualified
deferred compensation earnings. See the Pension Benefits and Nonqualified
Deferred Compensation tables for additional information. The amount for
Mr. Watson represents the amount of Canadian dollars paid converted to US
dollars using the spot currency exchange rate in effect on the last
business day of each fiscal year.
6. Amount includes profit sharing and matching contributions, respectively,
of $81,398 and $11,250 for Mr. Woodring, $32,615 and $17,154 for Mr. Lay,
$37,428 and $18,651 for Mr. Atkinson, and $36,040 and $16,683 for Mr.
Schuster, made by RGA Reinsurance Company to the officers' accounts in
the RGA Profit Sharing Plan and the RGA Augmented Benefit Plan for the
2007 plan year. Amount for Mr. Watson represents contributions made to
his account for the 2007 plan year, by RGA International under its
retirement plan.
GRANTS OF PLAN-BASED AWARDS IN 2007
The following table provides information about equity and non-equity
awards granted to the named executive officers in 2007: (1) the grant date;
(2) the estimated future payouts under non-equity incentive plan awards, which
consist of potential payouts under the MIP award granted in 2007 for the 2007
performance period; (3) estimated future payouts under equity incentive plan
awards, which consist of potential payouts under the PCRS grants in 2007 for
the 2007-2009 performance period; (4) all other option awards, which consist
of the number of shares underlying stock options granted to the named
executive officers in 2007; (5) the exercise price of the stock options
granted, which reflects the closing price of RGA stock on the date of grant,
and (6) the grant date fair value of each equity grant calculated under SFAS
123R.
19
--------------------------------------------------------------------------------------------------------------------------
ALL
OTHER ALL OTHER GRANT
ESTIMATED FUTURE PAYOUTS ESTIMATED FUTURE PAYOUTS STOCK OPTION DATE FAIR
UNDER NON-EQUITY UNDER EQUITY INCENTIVE PLAN AWARDS: AWARDS: EXERCISE VALUE OF
INCENTIVE PLAN AWARDS(1) AWARDS (NUMBER OF SHARES)(2) NUMBER NUMBER OF OR BASE STOCK
OF SHARES SECURITIES PRICE OF AND
GRANT --------------------------------------------------------- OF STOCK UNDERLYING OPTION OPTION
NAME DATE THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM OR UNITS OPTIONS(3) AWARDS(4) AWARDS(5)
--------------------------------------------------------------------------------------------------------------------------
2/20/2007 0 $800,000 $1,600,000 --- --- --- --- --- --- ---
Woodring --- --- --- 0 9,721 19,442 --- --- --- $579,663
--- --- --- --- --- --- --- 31,058 $59.63 $581,406
--------------------------------------------------------------------------------------------------------------------------
2/20/2007 0 $336,000 $672,000 --- --- --- --- --- --- ---
Lay --- --- --- 0 3,480 6,960 --- --- --- $207,512
--- --- --- --- --- --- --- 11,119 $59.63 $208,148
--------------------------------------------------------------------------------------------------------------------------
2/20/2007 0 $352,000 $704,000 --- --- --- --- --- --- ---
Atkinson --- --- --- 0 2,900 5,800 --- --- --- $172,927
--- --- --- --- --- --- --- 9,265 $59.63 $173,441
--------------------------------------------------------------------------------------------------------------------------
2/20/2007 0 $336,000 $672,000 --- --- --- --- --- --- ---
Schuster --- --- --- 0 3,480 6,960 --- --- --- $207,512
--- --- --- --- --- --- --- 11,119 $59.63 $208,148
--------------------------------------------------------------------------------------------------------------------------
2/20/2007 0 $384,000 $768,000 --- --- --- --- --- --- ---
Watson --- --- --- 0 7,000 14,000 --- --- --- $417,410
--- --- --- --- --- --- --- 11,119 $59.63 $208,148
--------------------------------------------------------------------------------------------------------------------------
------------------------
1. These columns reflect the potential value of the payment for 2007
performance under the MIP for each named executive if the threshold,
target or maximum goals are satisfied for both performance measures. The
potential payments are performance-driven and are therefore completely at
risk. The performance measurements, salary and bonus multiples for
determining the payments are described in the CD&A. The 2008 bonus
payment for 2007 performance has been made based on the metrics described
in the CD&A, and is included in the Summary Compensation Table in the
column titled "Non-Equity Incentive Plan Compensation."
2. This column reflects the number of PCRS units granted in 2007 under our
Flexible Stock Plan, which will convert into shares of RGA stock at the
end of the three-year performance period if RGA achieves the specified
performance. The performance period commenced January 1, 2007 and ends
December 31, 2009. If the "trigger" is not met, no award will be made. If
the minimum level of performance is met, the award of shares starts at
50% (target is 100% and maximum is 200%). See discussion of ITB awards in
the CD&A.
3. This column reflects the number of stock options granted in 2007 to the
named executive officers. These options vest and become exercisable in
four equal annual installments of 25%, beginning on December 31, 2008.
4. This column reflects the exercise price per share of common stock for the
stock options granted, which is the closing price of the common stock on
February 20, 2007, the date the Compensation Committee approved the
grant.
5. This column reflects the full grant date fair value of PCRS units under
SFAS 123R and the full grant date fair value of stock options under SFAS
123R granted to the named executive officers in 2007. Generally, the full
grant date fair value is the amount that we would expense in our
financial statements over the award's vesting schedule. See note 2 of the
Summary Compensation Table for a discussion of fair value calculation
related to the PCRS. For PCRS units, fair value is calculated using the
closing price of RGA stock on the grant date of $59.63. For stock
options, fair value is calculated using the Black-Scholes value on the
date of grant of $18.72. The fair value shown for stock awards and option
awards is reported in accordance with SFAS 123R. For additional
information on the valuation assumptions, refer to note 18 of RGA's
financial statements in the Form 10-K for the year ended December 31,
2007, as filed with the SEC. These amounts reflect our accounting
expense, and do not correspond to the actual value that will be
recognized by the named executive officers. For example, the PCRS units
are subject to specified performance objectives over the performance
period, with one-third tied to growth in revenue and two-thirds tied to
growth in operating earnings. In addition, the value of options, if any,
realized by the optionee will not be determined until exercise.
20
INTERMEDIATE-TERM INCENTIVE AWARDS
The Compensation Committee approved grants of target awards of PCRS
on February 20, 2007. The grants were made pursuant to the terms of the
Flexible Stock Plan and a grant agreement. The Compensation Committee has
established as performance goals annual operating earnings (net income from
continuing operations less realized capital gains and losses and certain other
non-operating items) per share and annual consolidated revenues. At the
beginning of each three-year performance period, the Compensation Committee
grants to each named executive officer a target PCRS award that is payable in
shares of our common stock. The Compensation Committee also sets performance
levels with a minimum, target and maximum levels of performance. If we do not
meet the minimum performance goals, the PCRS awards will not be earned and no
common stock will be paid out, and if we exceed those performance goals, the
award can be as much as 200% of the targeted award opportunity. Grants of
performance-contingent restricted stock are not treated as outstanding shares
until the performance goals are met and awards are made, as determined and
approved by the Compensation Committee. Awards are made in shares of fully
vested, unrestricted common stock. The awards are also contingent upon the
recipient's continued employment with us at the end of the three-year
performance period.
STOCK OPTIONS
The options become exercisable in 25% increments on each of December
31, 2008, 2009, 2010 and 2011. Vesting will be accelerated upon the officer's
death or disability and upon a change in control of us (as such terms are
defined in the Flexible Stock Plan and option agreements). All stock option
grants were approved by the Compensation Committee on February 20, 2007.
EMPLOYMENT AGREEMENTS.
None of the named executive officers have written employment
agreements with us. For additional information see "Compensation Discussion
and Analysis" ("CD&A").
OUTSTANDING EQUITY AWARDS AT 2007 FISCAL YEAR-END
The following table provides information on the 2007 year-end
holdings of stock options, restricted stock and PCRS by our named executive
officers. This table includes unexercised and unvested option awards, unvested
restricted stock and unvested PCRS grants with performance conditions that
have not yet been satisfied. Each equity grant is shown separately for each
named executive. The vesting schedule for each grant is described in the
footnotes following this table, based on the option or stock award grant date.
The market value of the stock awards is based on the closing market price of
RGA stock as of December 31, 2007, the last business day of the year, which
was $52.48. The PCRS grants are subject to specified performance objectives
over the performance period, with 67% tied to growth in operating earnings per
share and 33% tied to growth in consolidated revenues. For additional
information about the option awards and stock awards, see the description of
equity incentive compensation in the CD&A.
21
A. GREIG WOODRING, PRESIDENT AND CEO
----------------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
----------------------------------------------------------------------------------------------------------------------
EQUITY INCENTIVE PLAN
AWARDS
------------------------
MARKET OR
EQUITY PAYOUT
INCENTIVE NUMBER OF VALUE OF
PLAN NUMBER UNEARNED UNEARNED
AWARDS: OF MARKET SHARES, SHARES,
NUMBER OF SHARES VALUE OF UNITS OR UNITS OR
NUMBER OF SECURITIES SECURITIES OR UNITS SHARES OR OTHER OTHER
UNDERLYING UNEXERCISED UNDERLYING OF STOCK UNITS OF RIGHTS RIGHTS
OPTIONS UNEXERCISED OPTION OPTION THAT STOCK THAT HAVE THAT HAVE
GRANT ---------------------------- UNEARNED EXERCISE EXPIRATION HAVE NOT THAT HAVE NOT NOT
DATE EXERCISABLE(1) UNEXERCISABLE OPTIONS PRICE DATE VESTED(2) NOT VESTED VESTED(3) VESTED(3)
----------------------------------------------------------------------------------------------------------------------
1/1/1998 15,000 $787,200
----------------------------------------------------------------------------------------------------------------------
1/1/1999 25,261 $36.00 1/1/2009
----------------------------------------------------------------------------------------------------------------------
1/1/2000 49,596 $23.19 1/1/2010
----------------------------------------------------------------------------------------------------------------------
1/1/2001 67,086 $29.81 1/1/2011
----------------------------------------------------------------------------------------------------------------------
1/1/2002 70,197 $31.91 1/1/2012
----------------------------------------------------------------------------------------------------------------------
1/29/2003 65,664 16,417 $27.29 1/29/2013
----------------------------------------------------------------------------------------------------------------------
1/28/2004 25,751 8,584 $39.61 1/28/2014
----------------------------------------------------------------------------------------------------------------------
1/27/2005 14,746 14,746 $47.47 1/27/2015
----------------------------------------------------------------------------------------------------------------------
2/21/2006 9,477 28,434 $47.48 2/21/2016
2/21/2006 31,996 $1,679,150
----------------------------------------------------------------------------------------------------------------------
2/20/2007 31,058 $59.63 2/20/2017
2/20/2007 9,721 $510,158
----------------------------------------------------------------------------------------------------------------------
JACK B. LAY, SENIOR EXECUTIVE VICE PRESIDENT AND CFO
----------------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
----------------------------------------------------------------------------------------------------------------------
EQUITY INCENTIVE PLAN
AWARDS
------------------------
MARKET OR
EQUITY PAYOUT
INCENTIVE NUMBER OF VALUE OF
PLAN NUMBER UNEARNED UNEARNED
AWARDS: OF MARKET SHARES, SHARES,
NUMBER OF SHARES VALUE OF UNITS OR UNITS OR
NUMBER OF SECURITIES SECURITIES OR UNITS SHARES OR OTHER OTHER
UNDERLYING UNEXERCISED UNDERLYING OF STOCK UNITS OF RIGHTS RIGHTS
OPTIONS UNEXERCISED OPTION OPTION THAT STOCK THAT HAVE THAT HAVE
GRANT ---------------------------- UNEARNED EXERCISE EXPIRATION HAVE NOT THAT HAVE NOT NOT
DATE EXERCISABLE(1) UNEXERCISABLE OPTIONS PRICE DATE VESTED(2) NOT VESTED VESTED(3) VESTED(3)
----------------------------------------------------------------------------------------------------------------------
1/1/1999 6,548 $343,639
----------------------------------------------------------------------------------------------------------------------
1/29/2003 21,620 5,405 $27.29 1/29/2013
----------------------------------------------------------------------------------------------------------------------
1/28/2004 9,112 3,038 $39.61 1/28/2014
----------------------------------------------------------------------------------------------------------------------
1/27/2005 5,266 5,267 $47.47 1/27/2015
----------------------------------------------------------------------------------------------------------------------
2/21/2006 2,830 8,491 $47.48 2/21/2016
2/21/2006 9,554 $501,394
----------------------------------------------------------------------------------------------------------------------
2/20/2007 11,119 $59.63 2/20/2017
2/20/2007 3,480 $182,630
22
DAVID B. ATKINSON, EXECUTIVE VICE PRESIDENT AND COO
----------------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
----------------------------------------------------------------------------------------------------------------------
EQUITY INCENTIVE PLAN
AWARDS
------------------------
MARKET OR
EQUITY PAYOUT
INCENTIVE NUMBER OF VALUE OF
PLAN NUMBER UNEARNED UNEARNED
AWARDS: OF MARKET SHARES, SHARES,
NUMBER OF SHARES VALUE OF UNITS OR UNITS OR
NUMBER OF SECURITIES SECURITIES OR UNITS SHARES OR OTHER OTHER
UNDERLYING UNEXERCISED UNDERLYING OF STOCK UNITS OF RIGHTS RIGHTS
OPTIONS UNEXERCISED OPTION OPTION THAT STOCK THAT HAVE THAT HAVE
GRANT ---------------------------- UNEARNED EXERCISE EXPIRATION HAVE NOT THAT HAVE NOT NOT
DATE EXERCISABLE(1) UNEXERCISABLE OPTIONS PRICE DATE VESTED(2) NOT VESTED VESTED(3) VESTED(3)
----------------------------------------------------------------------------------------------------------------------
1/1/1999 6,548 $343,639
----------------------------------------------------------------------------------------------------------------------
1/1/2001 29,350 $29.81 1/1/2011
----------------------------------------------------------------------------------------------------------------------
1/1/2002 28,831 $31.91 1/1/2012
----------------------------------------------------------------------------------------------------------------------
1/29/2003 27,848 6,963 $27.29 1/29/2013
----------------------------------------------------------------------------------------------------------------------
1/28/2004 10,935 3,645 $39.61 1/28/2014
----------------------------------------------------------------------------------------------------------------------
1/27/2005 6,320 6,320 $47.47 1/27/2015
----------------------------------------------------------------------------------------------------------------------
2/21/2006 2,830 8,491 $47.48 2/21/2016
2/21/2006 9,554 $501,394
----------------------------------------------------------------------------------------------------------------------
2/20/2007 9,265 $59.63 2/20/2017
2/20/2007 2,900 $152,192
----------------------------------------------------------------------------------------------------------------------
PAUL A. SCHUSTER, SENIOR EXECUTIVE VICE PRESIDENT - U.S. OPERATIONS
----------------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
----------------------------------------------------------------------------------------------------------------------
EQUITY INCENTIVE PLAN
AWARDS
------------------------
MARKET OR
EQUITY PAYOUT
INCENTIVE NUMBER OF VALUE OF
PLAN NUMBER UNEARNED UNEARNED
AWARDS: OF MARKET SHARES, SHARES,
NUMBER OF SHARES VALUE OF UNITS OR UNITS OR
NUMBER OF SECURITIES SECURITIES OR UNITS SHARES OR OTHER OTHER
UNDERLYING UNEXERCISED UNDERLYING OF STOCK UNITS OF RIGHTS RIGHTS
OPTIONS UNEXERCISED OPTION OPTION THAT STOCK THAT HAVE THAT HAVE
GRANT ---------------------------- UNEARNED EXERCISE EXPIRATION HAVE NOT THAT HAVE NOT NOT
DATE EXERCISABLE(1) UNEXERCISABLE OPTIONS PRICE DATE VESTED(2) NOT VESTED VESTED(3) VESTED(3)
----------------------------------------------------------------------------------------------------------------------
1/1/2002 20,762 $31.91 1/1/2012
----------------------------------------------------------------------------------------------------------------------
1/29/2003 20,153 5,039 $27.29 1/29/2013
----------------------------------------------------------------------------------------------------------------------
1/28/2004 9,112 3,038 $39.61 1/28/2014
----------------------------------------------------------------------------------------------------------------------
1/27/2005 5,266 5,267 $47.47 1/27/2015
----------------------------------------------------------------------------------------------------------------------
2/21/2006 2,830 8,491 $47.48 2/21/2016
2/21/2006 9,554 $501,394
----------------------------------------------------------------------------------------------------------------------
2/20/2007 11,119 $59.63 2/20/2017
2/20/2007 3,480 $182,630
----------------------------------------------------------------------------------------------------------------------
23
GRAHAM WATSON, SENIOR EXECUTIVE VICE PRESIDENT - INTERNATIONAL
----------------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
----------------------------------------------------------------------------------------------------------------------
EQUITY INCENTIVE PLAN
AWARDS
------------------------
MARKET OR
EQUITY PAYOUT
INCENTIVE NUMBER OF VALUE OF
PLAN NUMBER UNEARNED UNEARNED
AWARDS: OF MARKET SHARES, SHARES,
NUMBER OF SHARES VALUE OF UNITS OR UNITS OR
NUMBER OF SECURITIES SECURITIES OR UNITS SHARES OR OTHER OTHER
UNDERLYING UNEXERCISED UNDERLYING OF STOCK UNITS OF RIGHTS RIGHTS
OPTIONS UNEXERCISED OPTION OPTION THAT STOCK THAT HAVE THAT HAVE
GRANT ---------------------------- UNEARNED EXERCISE EXPIRATION HAVE NOT THAT HAVE NOT NOT
DATE EXERCISABLE(1) UNEXERCISABLE OPTIONS PRICE DATE VESTED(2) NOT VESTED VESTED(3) VESTED(3)
----------------------------------------------------------------------------------------------------------------------
1/1/1999 10,616 $36.00 1/1/2009
----------------------------------------------------------------------------------------------------------------------
1/1/2001 17,778 $29.81 1/1/2011
----------------------------------------------------------------------------------------------------------------------
1/1/2002 17,236 $31.91 1/1/2012
----------------------------------------------------------------------------------------------------------------------
1/29/2003 22,478 9,099 $27.29 1/29/2013
----------------------------------------------------------------------------------------------------------------------
1/28/2004 9,112 3,038 $39.61 1/28/2014
----------------------------------------------------------------------------------------------------------------------
1/27/2005 5,266 5,267 $47.47 1/27/2015
----------------------------------------------------------------------------------------------------------------------
2/21/2006 2,830 8,491 $47.48 2/21/2016
2/21/2006 14,000 $734,720
----------------------------------------------------------------------------------------------------------------------
2/20/2007 11,119 $59.63 2/20/2017
2/20/2007 7,000 $367,360
----------------------------------------------------------------------------------------------------------------------
-----------------------
1. Options with a grant date from 1998 through 2003 vest and become
exercisable in five equal annual installments of 20%, on December 31 of
the first, second, third, fourth and fifth years following the grant.
Options granted in 2004 and subsequent years vest and become exercisable
in four equal annual installments of 25%, on December 31 of the second,
third, fourth and fifth calendar years following the year of the grant.
2. Mr. Woodring was granted 15,000 shares of restricted stock effective
January 1, 1998, which vested on January 1, 2008. Messrs. Lay and
Atkinson were granted 6,548 shares of restricted stock effective January
1, 1999, which vest on January 1, 2009.
3. These columns reflect the number of shares and estimated market value of
grants of PCRS. On January 23, 2008, the Compensation Committee
determined that the 2005 PCRS award would be made at 192% of target. See
"Option Exercises and Stock Vested During Fiscal 2007" for more
information on the payout of those awards. In accordance with SEC rules,
the number of shares and estimated market value for the PCRS grants made
in 2006 are disclosed assuming they are awarded at the maximum (200%)
level, and the amounts for the PCRS grants made in 2007 are disclosed
assuming they are awarded at target (100%). The market or payout value is
estimated using the closing price, $52.48, of our common stock on
December 31, 2007, the last business day of the year. The performance
period for the 2006 PCRS grant is January 1, 2006 through December 31,
2008. The performance period for the 2007 PCRS grant is January 1, 2007
through December 31, 2009.
OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2007
The following table provides information for the named executive
officers on (1) stock option exercises during 2007, including the number of
shares acquired upon exercise and the value realized, and (2) the number of
shares awarded for the PCRS grants in 2005 (three-year performance period
ending December 31, 2007) and the value realized, each before payment of any
applicable withholding tax and broker commissions.
24
--------------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
--------------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES ACQUIRED VALUE REALIZED SHARES ACQUIRED VALUE REALIZED
NAME ON EXERCISE ON EXERCISE ON VESTING ON VESTING
--------------------------------------------------------------------------------------------------------------------
Woodring(1) 31,994 $806,793 23,911 $1,200,810
--------------------------------------------------------------------------------------------------------------------
Lay(2) 38,482 $1,238,293 8,541 $428,929
--------------------------------------------------------------------------------------------------------------------
Atkinson(3) 15,158 $396,315 10,247 $514,604
--------------------------------------------------------------------------------------------------------------------
Schuster(4) 44,657 $1,485,555 8,541 $428,929
--------------------------------------------------------------------------------------------------------------------
Watson(5) --- --- 13,451 $675,509
--------------------------------------------------------------------------------------------------------------------
-----------------------
1. Mr. Woodring exercised 31,994 options on December 18, 2007, with an
exercise price of $26.33 and a market price of $51.55. He remitted
approximately $300,000 in cash and 17,286 already-owned shares as payment
for the exercise price and taxes. He acquired 23,911 shares with a market
price of $50.22 on January 23, 2008, the award date for the 2005 PCRS
grant.
2. Mr. Lay exercised 38,482 options on May 17, 2007, with exercise prices of
$29.81 (19,287 shares) and $31.91 (19,195 shares). He sold 38,482 shares
on the same day at a market price of $63.04. He acquired 8,541 shares
with a market price of $50.22 on January 23, 2008, the award date for the
2005 PCRS grant.
3. Mr. Atkinson exercised 15,158 options on April 26, 2007, with an exercise
price of $36.00. He sold 23,207 shares at a market price of $62.15. He
acquired 10,247 shares with a market price of $50.22 on January 23, 2008,
the award date for the 2005 PCRS grant.
4. Mr. Schuster exercised 9,377 options on February 21, 2007, with an
exercise price of $36.00 and a market price for 7,360 shares he sold of
$59.36. Mr. Schuster retained the remaining shares. He exercised 17,251
options on April 27, 2007, with an exercise price of $23.19 and a market
price for all of the shares, which he sold, of $62.24. He exercised 9,561
options on April 30, 2007, with an exercise price of $29.81 and a market
price for all the shares, which he sold, of $62.85. He exercised 8,468
options on May 3, 2007, with an exercise price $29.81 and a market price
for all of the shares, which he sold, of $62.51. He acquired 8,541 shares
with a market price of $50.22 on January 23, 2008, the award date for the
2005 PCRS grant.
5. Mr. Watson acquired 13,451 shares with a market price of $50.22 on
January 23, 2008, the award date for the 2005 PCRS grant.
PENSION BENEFITS IN FISCAL 2007
Some of our employees participate in the RGA Performance Pension Plan
(the "Pension Plan"), a qualified defined benefit plan. Some of our employees
also participate in the RGA Reinsurance Company Augmented Benefit Plan (the
"RGA Augmented Plan"), a non-qualified plan under which eligible employees are
entitled to receive retirement benefits not paid under the Pension Plan and
the RGA Profit Sharing Plan due to Internal Revenue Code (the "Code") limits
on the amount of benefits that may accrue and be paid under the Pension Plan
and the RGA Profit Sharing Plan.
Messrs. Woodring, Atkinson, Lay and Schuster participate in the
Pension Plan and the RGA Augmented Plan. The monthly benefit payable for life
at age 65 for each individual is the sum of (a) and (b) below:
(a) The sum of (1) 1.05% of Final Average Monthly Compensation
(as defined below), multiplied by the number of years of
service earned as of December 31, 1995, plus (2) 0.65% of
the excess, if any, of Final Average Monthly Compensation
minus one-twelfth of the Social Security Maximum Wage
Average (as defined below), multiplied by the number of
years of service earned as of December 31, 1995; plus
(b) The actuarial equivalent of a lump sum benefit equal to the
sum of the amounts determined below for each full year of
service completed after December 31, 1995:
25
AGE ON JANUARY 1 OF THE PERCENTAGE OF FINAL AVERAGE
PLAN YEAR IN WHICH ANNUAL COMPENSATION CREDITED PERCENTAGE OF EXCESS
THE YEAR OF SERVICE IS EARNED COMPENSATION CREDITED
Up to 35 2% 1%
35 - 44 4% 2%
45 - 54 6% 3%
55 or over 8% 4%
"Social Security Maximum Wage Average" means the average of the
Social Security Wage Base in effect for each calendar year during the 35-year
period ending with the calendar year in which a participant attains the Social
Security retirement age. "Social Security Wage Base" means the maximum amount
of compensation that may be considered wages for FICA tax, or $97,500 for
2007. "Breakpoint" means 60% of the Social Security Wage Base raised to the
next highest $100 increment. "Excess Compensation" means the excess, if any,
of Final Average Annual Compensation minus the Breakpoint. "Final Average
Annual Compensation" means the highest average Benefit Salary for the five
consecutive years during the preceding ten years. "Benefit Salary" means
actual base salary, eligible bonuses and pre-tax salary deferrals made to the
profit sharing plan or a cafeteria plan and the CODA portion of the profit
sharing award. "Final Average Monthly Compensation" is one-twelfth of Final
Average Annual Compensation.
Payment of the specified retirement benefits is contingent upon
continuation of the plans in their present form until the officer retires. RGA
International Corporation maintains a Canadian Supplemental Executive
Retirement Plan, a non-qualified defined benefit plan pursuant to which
eligible executive officers are entitled to receive additional retirement
benefits. Mr. Watson participates in this plan and is not eligible to
participate in the Pension Plan or the RGA Augmented Plan.
Until January 1, 1994, we also maintained an Executive Supplemental
Retirement Plan (the "RGA Supplemental Plan"), a non-qualified defined benefit
plan pursuant to which eligible executive officers are entitled to receive
additional retirement benefits. Benefits under the RGA Supplemental Plan were
frozen as of January 1, 1994. The frozen annual benefit payable upon
retirement at age 65 is $36,719 for Mr. Woodring and $7,770 for Mr. Atkinson.
Retirement benefits under the RGA Supplemental Plan are payable at age 65 in
the form of a 15-year certain life annuity, with no direct or indirect
integration with Social Security benefits.
---------------------------------------------------------------------------------------------------------------------
NUMBER OF PRESENT VALUE PAYMENTS
YEARS CREDITED OF ACCUMULATED DURING LAST
NAME PLAN NAME SERVICE BENEFIT(1) FISCAL YEAR
---------------------------------------------------------------------------------------------------------------------
Woodring Performance Pension Plan 28 $527,957 ---
Augmented Benefit Plan 28 $2,990,009 ---
Supplemental Plan 15 $234,960 ---
---------------------------------------------------------------------------------------------------------------------
Lay Performance Pension Plan 16 $251,588 ---
Augmented Benefit Plan 16 $478,957 ---
---------------------------------------------------------------------------------------------------------------------
Atkinson Performance Pension Plan 20 $332,655 ---
Augmented Benefit Plan 20 $811,029 ---
Supplemental Plan 7 $44,465 ---
---------------------------------------------------------------------------------------------------------------------
Schuster Performance Pension Plan 16 $252,240 ---
Augmented Benefit Plan 16 $468,574 ---
---------------------------------------------------------------------------------------------------------------------
Watson RGA International Supplemental Executive
Retirement Plan 12 $1,380,801(2) ---
---------------------------------------------------------------------------------------------------------------------
-----------------------
1. The accumulated benefit is based on service and compensation (as
described above) considered by the plans for the period through December
31, 2007. The present value has been calculated assuming the earliest
retirement age at which the participant can elect an unreduced benefit.
For additional discussion of the assumptions, see note 10 of
26
RGA's financial statements in the Form 10-K for the year ended December
31, 2007, as filed with the SEC. As described in such note, the interest
assumption is 5.81%.
2. Represents Canadian $1,378,592 converted to US dollars using the spot
currency exchange rate in effect on the last business day of the 2007
fiscal year.
NONQUALIFIED DEFERRED COMPENSATION IN FISCAL 2007
The table below provides information on the non-qualified deferred
compensation of the named executive officers in 2007. Employees who hold the
office of vice president and above are able to defer up to 50% of their base
salary and up to 100% of their cash bonus payments under our Executive
Deferred Savings Plan ("EDSP"). With respect to distributions, participants
may elect to receive either a lump sum payment or 1 to 15 annual installments.
In addition, we also maintain the RGA Augmented Plan, a non-qualified plan
under which eligible employees are entitled to receive profit sharing and
matching contributions not paid to the employee under the RGA Profit Sharing
Plan, due to Code limits or a reduction in compensation pursuant to the
employee's participation in the EDSP. The contributions made into the
employee's non-qualified deferred compensation account are based upon the
maximum matching contribution rate we provide to other employees in connection
with the RGA Profit Sharing Plan.
The investment fund alternatives under the RGA Augmented Plan and
EDSP mirror those in the RGA Profit Sharing Plan, and we credit the
participant's non-qualified deferred compensation account(s) with the returns
he or she would have received in accordance with the investment alternatives
selected from time to time by the participant. We do not pay above-market or
preferential earnings, compensation or returns under the EDSP or Augmented
Plan, or any other plan.
The named executive officers cannot withdraw any amounts from
their deferred compensation balances until they either terminate employment or
reach the designated distribution date selected by the executive at the time
of their deferral election (in the case of benefits held in the executive's
EDSP account). No withdrawals or distributions were made in 2007.
--------------------------------------------------------------------------------------------------------------------
EXECUTIVE REGISTRANT AGGREGATE AGGREGATE AGGREGATE BALANCE
CONTRIBUTIONS IN CONTRIBUTIONS IN EARNINGS IN LAST WITHDRAWALS/ AT LAST FYE(3)
NAME LAST FY(1) LAST FY(1) FY(2) DISTRIBUTIONS
--------------------------------------------------------------------------------------------------------------------
Woodring --- $24,695 $26,786 --- $291,189
--------------------------------------------------------------------------------------------------------------------
Lay $44,296 $56,803 $24,122 --- $520,210
--------------------------------------------------------------------------------------------------------------------
Atkinson $22,904 $32,325 $361,109 --- $2,341,556
--------------------------------------------------------------------------------------------------------------------
Schuster --- $15,628 $11,009 --- $138,435
--------------------------------------------------------------------------------------------------------------------
Watson --- --- --- --- ---
--------------------------------------------------------------------------------------------------------------------
-----------------------
1. The amounts in this column are also included in the Summary Compensation
Table in the salary or other compensation columns (i.e., contributions to
the RGA Augmented Benefit Plan).
2. Reflects earnings credited to the participant's account during 2007 in
connection with the investment selections chosen from time to time by the
participant.
3. All of the executive and registrant contributions for 2007 are reported
in the Summary Compensation Table. In addition, the aggregate balance at
last fiscal year-end column reflects the following amounts that were
reported in the Summary Compensation Table in previous years: Woodring,
$239,708; Lay, $394,989; Atkinson, $1,925,218; and Schuster, $111,798.
27
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
As described in the CD&A, our named executive officers do not have
employment, severance or change of control agreements with our Company. The
information below describes and quantifies certain compensation that may or
will become payable under existing plans and agreements if the named executive
officer's employment had terminated on December 31, 2007, due to a change of
control, disability or death, given his or her compensation and service levels
as of such date and, where applicable, based on our closing stock price on
that date. These benefits are in addition to benefits available generally to
salaried employees such as distributions under the 401(k) and pension plans,
retiree medical benefits, disability benefits and accrued vacation pay.
Change of Control. Upon the occurrence of a change of control (as
defined below), any unvested stock options granted before the date of that
event could become exercisable if the Compensation Committee decided to
maintain the named executive officer's rights following a change in control.
Our Flexible Stock Plan and stock option grant agreements provide that the
Compensation Committee may accelerate the vesting periods or arrange for us to
purchase the options so the named executive officer receives the value that he
or she would have attained had the option been currently exercisable. In
addition, our Flexible Stock Plan and PCRS grant agreements provide that upon
a change of control, as soon as practicable following the end of the
applicable three-year performance period, we must deliver to the named
executive officer the number of shares that coincides with the target award
for each outstanding grant of PCRS.
Disability or Death. If one of the named executive officers were to
become disabled or die, any unvested stock options granted before the date of
such event would immediately vest and become exercisable. In addition, he or
she would receive a pro rata proportion of the shares of common stock that
would have been issued under any award of PCRS at the end of the three-year
performance period. The pro rata proportion is determined based on the number
of calendar months in the performance period during which he or she was
employed, divided by 36 months (the total number of months in the three-year
performance period).
Retirement. Upon the "retirement" (as defined below) of a named
executive officer, unvested stock options do not accelerate but continue to
vest in accordance with the vesting schedule and provisions specified in the
respective option grant agreement(s). Upon his or her retirement, the pro rata
distribution provisions described above under "Disability or Death" apply to
any PCRS grants. Due to the number of factors that affect the nature, amount
and timing of the vesting and exercise of stock options, or the actual award
following a PCRS performance period, the amounts paid to or received by the
named executive officer may differ and are undeterminable until actually
realized.
The named executive officers may participate in deferred compensation
plans that permit deferral of certain compensation. They also participate in
our defined contribution and defined benefit retirement plans. The last column
of the Nonqualified Deferred Compensation table reports each named executive's
aggregate balance at December 31, 2007, under each nonqualified deferred
compensation or defined contribution plan. The named executive officers are
entitled to receive the amount in their deferred compensation account in the
event of termination of employment or retirement. The Pension Benefits table
describes the general terms of each pension plan in which the named executive
officers participate, the years of credited service and the present value of
each named executive officer's accumulated pension benefit.
Definitions. "Change of Control" is defined in our Flexible Stock
Plan and, for this discussion, means (i) the acquisition, without Board
approval, of more than twenty percent (20%) of our outstanding common shares
through a tender offer, exchange offer or otherwise, (ii) our liquidation or
dissolution following a sale or other disposition of all or substantially all
of our assets, (iii) a merger or consolidation involving us which results in
us not being the surviving corporation, or (iv) a change in the majority of
the members of our Board of Directors during any two-year period not approved
by at least two-thirds of the Directors who were members at the beginning of
the two-year period.
28
"Retirement" is defined in the respective equity incentive grant
agreements and means disability, death or termination of employment due to
retirement of a named executive officer who has attained age 55 and a
combination of age and service that equals at least 65. Thus, named executive
officers who attain age 55 and have 10 years of service (which at December 31,
2007 includes Messrs. Woodring and Watson) satisfy the definition and are
eligible for the benefits described above associated with retirement.
The following table provides the value of equity awards that would
accelerate and become exercisable or vested upon the occurrence of a change of
control or if the named executive officer had become disabled or died as of
December 31, 2007. The value calculations are based upon our stock price as of
December 31, 2007 ($52.48), the last business day of the year, and in the case
of options reflect the payment of the respective option exercise price.
-----------------------------------------------------------------------------------------------
CHANGE OF CONTROL DISABILITY OR DEATH
----------------------------------------------------------------------------
PCRS PCRS
NAME OPTIONS (FULL AWARD AT TARGET) OPTIONS (PRO RATA)
-----------------------------------------------------------------------------------------------
Woodring $740,068 $1,349,733 $740,068 $729,769
-----------------------------------------------------------------------------------------------
Lay $244,094 $433,327 $244,094 $228,008
-----------------------------------------------------------------------------------------------
Atkinson $296,427 $402,889 $296,427 $217,862
-----------------------------------------------------------------------------------------------
Schuster $234,874 $433,327 $234,874 $228,008
-----------------------------------------------------------------------------------------------
Watson $337,146 $734,720 $337,146 $367,360
-----------------------------------------------------------------------------------------------
DIRECTOR COMPENSATION
Directors who also serve as officers of our Company, MetLife, or any
subsidiaries of such companies do not receive any additional compensation for
serving our Company as members of the Board of Directors or any of our
committees. During 2007, this group of directors consisted of Messrs. Launer,
Kandarian, Reali, Ms. Piligian and Mr. Woodring. Effective January 1, 2005,
the Board revised the compensation for directors who are not employees of our
Company, MetLife, or any subsidiaries of such companies ("non-employee
directors"), and that compensation arrangement continued in 2007. In 2007,
non-employee directors were paid an annual retainer fee of $50,000 (except the
chair of the Audit Committee, who received an annual retainer fee of $62,000,
and the chair of any other Committee, who received an annual retainer fee of
$58,000). Non-employee directors were paid $3,000 for each Board and Committee
meeting attended in person, and $1,500 for participating in a telephonic Board
or Committee meeting. If applicable, a non-employee director serving as
Chairman of the Board would receive an annual retainer of $83,000, a $4,000
fee for each Board meeting attended in person and $2,000 for participating in
a telephonic Board meeting, and an annual grant of 1,600 shares of stock. We
also reimburse directors for out-of-pocket expenses incurred in connection
with attending Board and Committee meetings. Mr. Bartlett also serves as a
director of our Australian holding and operating companies, and receives an
annual retainer of AUS $75,000 and superannuation pension benefits AUS $6,750
for those services.
During 2007, the group of non-employee directors consisted of Messrs.
Bartlett, Eason, Greenbaum and Henderson. Each non-employee director is issued
1,200 shares of stock effective on the date of the February Board meeting.
Non-employee directors may elect to receive phantom shares in lieu of
their annual retainer (including the stock portion) and meeting fees. A
phantom share is a hypothetical share of our common stock based upon the fair
market value of the common stock at the time of the grant. Phantom shares are
not distributed until the director ceases to be a director by reason of
retirement as a director, at which time we will issue cash or shares of common
stock in an amount equal to the value of the phantom shares.
29
All such stock and options are issued pursuant to the Flexible Stock
Plan for Directors, which was amended and restated at the annual meeting held
May 28, 2003. Phantom shares are granted under the Phantom Stock Plan for
Directors, which was last amended at the annual meeting held May 28, 2003.
--------------------------------------------------------------------------------------------------------------------
CHANGE IN
PENSION
VALUE AND
NONQUALIFIED
FEES EARNED NON-EQUITY DEFERRED
OR PAID IN STOCK OPTION INCENTIVE PLAN COMPENSATION ALL OTHER
NAME CASH(1) AWARDS(2) AWARDS(3) COMPENSATION EARNINGS COMPENSATION TOTAL
--------------------------------------------------------------------------------------------------------------------
William J. Bartlett $147,500 $71,556 --- --- --- $68,567(4) $287,623
--------------------------------------------------------------------------------------------------------------------
J. Cliff Eason $141,500 $71,556 --- --- --- --- $213,056
--------------------------------------------------------------------------------------------------------------------
Stuart I. Greenbaum $161,500 $71,556 --- --- --- --- $233,056
--------------------------------------------------------------------------------------------------------------------
Alan C. Henderson $151,000 $71,556 --- --- --- --- $222,556
--------------------------------------------------------------------------------------------------------------------
-----------------------
1. This column reflects the amount of compensation earned in 2007 for Board
and committee service.
2. This column reflects the award of 1,200 shares of common stock on
February 20, 2007, at a closing market price of $59.63. The aggregate
grant date fair value computed in accordance with FAS 123R is $71,556.
The stock is issued as part of the directors' annual compensation. We
ceased granting shares of restricted stock to directors in 2005, however,
400 shares of the final grant on January 27, 2005 were unvested as of
December 31, 2007 (the remaining 400 shares vested on January 1, 2008).
For additional information on the valuation assumptions, refer to note 18
of the RGA financial statements in the Form 10-K for the year ended
December 31, 2007, as filed with the SEC. Pursuant to SEC rules, the
amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions.
3. We ceased granting stock options to directors in 2003. The following
directors have outstanding option awards at 2007 fiscal year-end: Eason -
10,500; Greenbaum - 17,933; and Henderson - 6,000.
4. Represents compensation for services as a director of our Australian
holding and operating companies. Converted to U.S. dollar amount using
the average AUD/USD exchange rate for 2007.
SECURITIES OWNERSHIP OF DIRECTORS, MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
OWNERSHIP OF SHARES OF RGA
--------------------------
The following table sets forth, as of February 1, 2008, certain
information with respect to: (1) each person known by us to be the beneficial
owner of 5% or more of our outstanding common stock, and (2) the ownership of
common stock by (i) each of our directors and nominees, (ii) each of our named
executive officers, and (iii) all directors, nominees, and executive officers
as a group.
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER(2) BENEFICIAL OWNERSHIP(1) CLASS(2)
---------------- -------------------- -----
SIGNIFICANT SHAREHOLDERS:
MetLife, Inc. 32,243,539(3) 52%
200 Park Avenue
New York, New York 10166-0188
Wellington Management Company, LLP 4,870,951(4) 7.9%
75 State Street
Boston, Massachusetts 02109
30
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER(2) BENEFICIAL OWNERSHIP(1) CLASS(2)
---------------- -------------------- -----
DIRECTORS, NOMINEES AND NAMED EXECUTIVE OFFICERS:
A. Greig Woodring, Director, 454,595(5) *
President and Chief Executive Officer
William J. Bartlett, Director 4,300 *
J. Cliff Eason, Director 17,550(6) *
Stuart I. Greenbaum, Director 23,433(7) *
Alan C. Henderson, Director 11,796(8) *
Steven A. Kandarian, Director(3) -- **
Joseph A. Reali, Director(3) -- **
Georgette A. Piligian, Director(3) -- **
David B. Atkinson, 151,872(9) *
Executive Vice President and Chief Operating Officer
Jack B. Lay, 83,061(10) *
Senior Executive Vice President and Chief Financial Officer
Paul A. Schuster, 94,005(11) *
Senior Executive Vice President - U.S. Operations
Graham Watson, 156,718(12) *
Senior Executive Vice President - International ---------
All directors and executive officers as a group (14 persons) 1,072,908(13) 1.71%
-----------------
*Less than one percent.
**Not applicable.
1. Unless otherwise indicated, each named person has sole voting and
investment power over the shares listed as beneficially owned. None of
the shares held by directors, nominees or named executive officers are
pledged as security.
2. For purposes of this table, "beneficial ownership" is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), pursuant to which a person or group of persons
is deemed to have "beneficial ownership" of any shares of common stock
that such person has the right to acquire within 60 days. For computing
the percentage of the class of securities held by each person or group of
persons named above, any shares which such person or persons has the
right to acquire within 60 days (as well as the shares of common stock
underlying fully vested stock options) are deemed to be outstanding for
the purposes of computing the percentage ownership of such person or
group but are not deemed to be outstanding for the purposes of computing
the percentage ownership of any other person or group. No director,
nominee or named executive officer owns more than one percent of our
outstanding common stock.
3. The amount in the table reflects the total beneficial ownership of
MetLife, Metropolitan Life, GenAmerica Financial, LLC, and General
American Life Insurance Company and contained in a Schedule 13D/A filed
with the SEC on February 22, 2008. Each of the filing companies shares
voting and dispositive power with each other.
31
Mr. Kandarian is an executive officer, and Mr. Reali and Ms. Piligian are
senior officers, of MetLife. Each of them disclaims beneficial ownership
of the shares beneficially owned by MetLife and its subsidiaries.
4. As reported on a Schedule 13G/A filed February 14, 2008, Wellington
Management Company, LLP ("WMC") is an investment adviser. Shares are
owned of record by clients of WMC, none of which is known to have
beneficial ownership of more than five percent of our outstanding shares.
WMC has shared voting power of 3,584,626 shares and shared dispositive
power of 4,842,151 shares.
5. Includes for Mr. Woodring 344,195 shares of common stock subject to stock
options that are exercisable within 60 days.
6. Includes for Mr. Eason 10,500 shares of common stock subject to stock
options that are exercisable within 60 days.
7. Includes for Mr. Greenbaum 15,683 shares of common stock subject to stock
options that are exercisable within 60 days.
8. Includes for Mr. Henderson 6,000 shares of common stock subject to stock
options that are exercisable within 60 days.
9. Includes 113,077 shares of common stock subject to stock options that are
exercisable within 60 days and 30,000 shares for which Mr. Atkinson
shares voting and investment power with his spouse. Also includes 6,548
restricted shares of common stock that are subject to forfeiture in
accordance with the terms of the specific grant, as to which Mr. Atkinson
has no investment power.
10. Includes 44,233 shares of common stock subject to stock options that are
exercisable within 60 days and 16,816 shares for which Mr. Lay shares
voting and investment power with his spouse. Also includes 6,548
restricted shares of common stock that are subject to forfeiture in
accordance with the terms of the specific grant, as to which Mr. Lay has
no investment power.
11. Includes 63,162 shares of common stock subject to stock options that are
exercisable within 60 days, and 20,181 shares for which Mr. Schuster
shares voting and investment power with his spouse.
12. Includes 94,415 shares of common stock subject to stock options that are
exercisable within 60 days and 6,187 shares owned by Intercedent Limited,
a Canadian corporation of which Mr. Watson has a majority ownership
interest.
13. Includes a total of 745,538 shares of common stock subject to stock
options that are exercisable within 60 days; and 13,096 shares of
restricted common stock that are subject to forfeiture in accordance with
the terms of the specific grant, as to which the holder has no investment
power.
OWNERSHIP OF SHARES OF METLIFE
------------------------------
The following table sets forth, as of February 1, 2008, certain
information with respect to the following individuals to the extent they own
shares of common stock of MetLife, our parent: (i) each of our directors and
nominees; (ii) each of our named executive officers; and (iii) all directors,
nominees, and executive officers as a group.
PERCENT
-------
BENEFICIAL OWNER AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1) OF CLASS
---------------- -------------------------------------------- --------
DIRECT INDIRECT(2)
------ -----------
Steven A. Kandarian, Director 38,333(3) --- *
Joseph A. Reali, Director 133,965(4) 170(5) *
Georgette A. Piligian, Director 47,425(6) 20(7) *
A. Greig Woodring, Director, President & CEO 90 --- *
Jack B. Lay, Senior EVP and CFO 200(8) --- *
David B. Atkinson, EVP and COO --- --- *
Paul A. Schuster, Senior EVP - U.S. Operations --- --- *
Graham Watson, Senior EVP - International --- --- *
------- ---
All directors and executive officers as a group 220,013(9) 190 *
(14 persons)
-----------------------
*Less than one percent.
32
1. Unless otherwise indicated, each named person has sole voting and
investment power over the shares listed as beneficially owned.
2. Unless otherwise noted, represents shares held through the MetLife
Policyholder Trust, which has sole voting power over such shares.
3. Includes 38,333 shares of MetLife common stock subject to stock options
that are exercisable within 60 days.
4. Includes 109,125 shares of MetLife common stock subject to stock options
that are exercisable within 60 days, and 21,840 deferred share units
payable in shares of MetLife common stock under MetLife's Deferred
Compensation Plan for Officers.
5. Includes 10 shares jointly held with Mr. Reali's spouse with whom Mr.
Reali shares investment power.
6. Includes 44,035 shares of MetLife common stock subject to stock options
that are exercisable within 60 days and 3,390 deferred share units
payable in shares of MetLife common stock under MetLife's Deferred
Compensation Plan for Officers.
7. Includes 20 shares jointly held with Ms. Piligian's spouse, with whom she
shares investment power.
8. Includes 200 shares of MetLife common stock subject to stock options that
are exercisable within 60 days.
9. Includes a total of 191,693 shares of MetLife common stock subject to
stock options that are exercisable within 60 days and 24,870 deferred
share units payable in shares of MetLife common stock under MetLife's
Deferred Compensation Plan for Officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive
officers, and persons who beneficially own more than ten percent of a
registered class of our equity securities, to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the SEC and the NYSE. Directors,
executive officers, and greater than 10% shareholders are required by SEC
regulation to furnish us with copies of all Forms 3, 4, and 5 they file.
Based solely on our review of the copies of such forms we have
received or that were filed with the SEC, or written representations from
certain reporting persons, we believe that all our directors, executive
officers, and greater than 10% beneficial owners complied with all filing
requirements applicable to them with respect to transactions during 2007,
except a Form 4 was not filed for an option exercise and sale of 8,468 shares
on May 3, 2007 for Mr. Schuster. Those transactions were reported on a Form 5
filed February 7, 2008.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Review and Approval of Related Person Transactions. We do not have
any agreements, transactions or relationships with related persons such as
directors, nominees, executive officers, or immediate family members of such
individuals. At least annually we review all relationships between our Company
and our directors and executive officers and their immediate family members to
determine whether such persons have a direct or indirect material interest in
any transaction with us. Our legal staff is primarily responsible for the
development and implementation of processes and controls to obtain information
from the directors, nominees and executive officers with respect to related
person transactions. If such a transaction arose, our legal staff would
determine, based on the facts and circumstances, whether we or a related
person has a direct or indirect material interest in the transaction. As
required under SEC rules, related person transactions that are determined to
be directly or indirectly material to us are disclosed in our Proxy Statement
and other SEC filings.
The current related person transactions to which we or our
subsidiaries are parties are reinsurance agreements, administrative service
agreements, a product license and a registration rights agreement, all of
which are with MetLife, our majority shareholder. The charges for reinsurance,
administrative and corporate services and the license fee are based on
arms-length negotiations and pricing that we believe is comparable to the fees
that would be charged to our other clients or incurred for services provided
by a third party vendor.
33
Any agreements between RGA Reinsurance Company, our primary operating company
and a Missouri insurance company, and another subsidiary or affiliate of
MetLife must be filed for review and approval by the Missouri Department of
Insurance ("MDOI"). The MDOI requires that the fees be fair, reasonable and
less than or equal to the cost for such services from a third party.
In July 2007, our board of directors adopted a policy as part of its
corporate governance guidelines that requires advance approval by our board of
directors before any of the following persons knowingly enter into any
transaction with our company or any of our subsidiaries or affiliates through
which such person receives any direct or indirect financial, economic or other
similar benefit or interest. The individuals covered by the policy include:
o any director
o any nominee for director
o any executive officer
o any holder of more than five percent of our voting securities
o any immediate family member of such a person, as that term is
defined in the policy, and
o any charitable entity or organization affiliated with such
person or any immediate family member of such person.
Transactions covered by the policy include any contract, arrangement,
understanding, relationship, transaction, contribution or donation of goods or
services, but exclude transactions with any of the following:
o MetLife, our majority shareholder, if the transaction is
entered into in the ordinary course of our business and the
terms are comparable to those that are or would be negotiated
with an unrelated client or vendor, or
o any charitable entity or organization affiliated with a
director, nominee for director, executive officer, or any
immediate family member of such a person if the amount involved
is $2,500 or less.
Each of the transactions below that commenced in or after July 2007
was ratified or pre-approved in accordance with the foregoing policy, other
than reinsurance agreements that fall within the exception described above.
On January 6, 2000, MetLife acquired 100% of GenAmerica Financial
Corporation, our predecessor parent, including its beneficial ownership of RGA
shares, which was approximately 48% at December 31, 1999. This acquisition,
together with direct investments in our Company in 1999, 2002 and 2003, made
MetLife our majority shareholder with beneficial ownership of approximately
52% of all outstanding shares (as of February 1, 2008). Currently, three of
our eight directors are executives or senior officers of MetLife.
Reinsurance Business. We have arms-length direct policies and
reinsurance agreements with MetLife and some of its affiliates. Under these
agreements, we had net premiums of approximately $250.9 million in 2007,
$227.8 million in 2006 and $226.7 million in 2005. The net premiums reflect
the net business assumed from and ceded to such affiliates of MetLife. Our
pre-tax income (loss), excluding interest income allocated to support the
business, was approximately $16.0 million in 2007, $10.9 million in 2006 and
($11.3) million in 2005. Our reinsurance treaties with MetLife are generally
terminable by either party on 90 days written notice, but only with respect to
future new business; existing business generally is not terminable, unless the
underlying policies terminate or are recaptured. Under these treaties, MetLife
is permitted to reassume all or a portion of the risk formerly ceded to us
after an agreed-upon period of time, or in some cases, due to changes in our
financial condition or ratings. Recapture of business previously ceded
34
does not affect premiums ceded prior to the recapture of such business, but
would reduce premiums in subsequent periods.
Registration Rights. On November 24, 2003, our Company, MetLife,
Metropolitan Life, General American and Equity Intermediary Company (which is
now dissolved) entered into a registration rights agreement, which superseded
then existing agreements with General American and Equity Intermediary
Company. Under the terms of the agreement, MetLife and its affiliates were
entitled, subject to certain limitations and conditions, to "piggyback" and
demand registration rights and we were required to bear certain expenses
associated with the registration of any shares held by MetLife or its
affiliates. In March 2005, we registered the shares held by MetLife on a Form
S-3 registration statement, which was renewed in a Form S-3 filing in February
2006. We paid a registration fee to the SEC of approximately $173,200 in
connection with the original registration, and incurred certain other legal
and accounting expenses to register the shares. Although the MetLife shares
are now registered, various other provisions of the agreement remain operable.
Administrative Services. General American Life Insurance Company,
which we refer to as "General American," and MetLife have historically
provided our Company and its subsidiary, RGA Reinsurance Company, with certain
limited administrative services, such as corporate risk management and
corporate travel services. The cost of these services was approximately $2.8
million in 2007, $2.4 million in 2006 and $1.7 million in 2005.
Effective January 1, 1997, General American entered into an
administrative services agreement with RGA Reinsurance Company whereby General
American provides services necessary to handle the policy and treaty
administration functions for certain bank-owned life insurance policies. RGA
Reinsurance Company paid General American approximately $30,000 in 2005. The
agreement has been terminated and no amounts were paid in 2007 or 2006.
Product License Agreement. RGA Reinsurance Company has a product
license and service agreement with MetLife, which is terminable by either
party on 30 days notice. Under this agreement, we have licensed the use of our
electronic underwriting product to MetLife and provide Internet hosting
services, installation and modification services for the product. Revenue
under this agreement from MetLife was approximately $0.6 million in 2007, $0.7
million in 2006 and $1.6 million in 2005.
INDEPENDENT AUDITOR
Deloitte & Touche LLP ("Deloitte") was our independent auditing firm
for the fiscal year ended December 31, 2007, and we expect to select this firm
again for the year ending December 31, 2008. A representative of Deloitte is
expected to be present at the 2008 Annual Meeting to respond to appropriate
questions and to make a statement if he or she so desires.
The aggregate fees billed to us for the fiscal years ending December
31, 2007 and 2006 by our principal accounting firm, Deloitte & Touche, LLP,
the member firms of Deloitte Touche Tohmatsu, and their respective affiliates
(collectively, the "Deloitte Entities") are as follows:
FISCAL YEAR
2007 2006
Audit Fees(1) $3,883,500 $3,710,709
Audit Related Fees(2) 138,157 380,834
---------- ----------
Total audit and audit-related fees 4,021,657 4,091,543
Tax Fees(3) 170,187 192,278
All Other Fees(4) --- 14,273
---------- ----------
Total Fees $4,191,844 $4,298,094
========== ==========
35
-----------------------
1. Includes fees for the audit of our Company's and its subsidiaries' annual
financial statements, reviews of our quarterly financial statements, and
Sarbanes-Oxley Section 404 attestation.
2. Includes fees for services rendered by the Deloitte Entities for matters
such as employee benefit plan audits, assistance with internal control
reporting requirements, and services associated with SEC registration
statements, periodic reports and securities offerings.
3. Includes fees for tax services rendered by the Deloitte Entities, such as
consultation related to tax planning and compliance.
4. De minimis fees for other types of permitted services.
All audit related services, tax services and other services were
pre-approved by the Audit Committee, which concluded that the provision of
such services by the Deloitte Entities was compatible with the maintenance of
that firm's independence in the conduct of its auditing functions. The Audit
Committee has adopted a Pre-Approval Policy which provides for pre-approval of
audit, audit-related and tax services on an annual basis and, in addition,
individual engagements anticipated to exceed pre-established thresholds must
be separately approved. The policy authorizes the Committee to delegate to one
or more of its members pre-approval authority with respect to permitted
services.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed our 2007 audited
financial statements with management. The Audit Committee also discussed with
the independent accountants the matters required to be discussed by SAS 114
(Codification of Statements on Auditing Standard, AU 380). The Audit Committee
has received the written disclosures and the letter from the independent
accountants required by Independence Standards Board Standard No. 1, and has
discussed with those accountants their independence. Based on those reviews
and discussions, the Audit Committee recommended to our Board of Directors
that the audited financial statements be included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2007, for filing with the SEC.
This report is provided by the following independent directors, who comprise
the Committee:
William J. Bartlett, Chairman
J. Cliff Eason
Stuart I. Greenbaum
Alan C. Henderson
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ITEM 2 - APPROVAL OF 2008 MANAGEMENT INCENTIVE PLAN
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The second item to be acted upon at the Annual Meeting is a proposal
to approve the 2008 Management Incentive Plan (the "2008 MIP"). In 1993, the
Board of Directors of the Company first adopted the Management Incentive Plan.
The Company's shareholders approved the Management Incentive Plan at the
annual meetings of shareholders in 1996 and 2003.
The classes of employees eligible to participate in the 2008 MIP are
associates who are designated annually by the Compensation Committee, which we
refer to as "participants." As of March 2008, approximately 770 employees
participated in the existing Management Incentive Plan. The 2008 MIP provides
for awards to be granted to participants in any of the following forms, as
determined by the Compensation Committee: cash, performance shares, restricted
stock or other stock-based compensation. Any stock-based awards may be issued
pursuant to the Flexible Stock Plan. Please see "Item 3 - Approval of
Amendment to the Flexible Stock Plan" for additional information on that plan.
Shareholder approval is being sought so that awards pursuant to the
2008 MIP will qualify as performance-based compensation for purposes of
Section 162(m) of the Internal Revenue Code (the "Code"),
36
which limits to $1,000,000 the amount deductible for non-performance-based
compensation paid to the chief executive officer, chief financial officer, and
three other most highly-compensated executive officers (other than the CEO and
CFO). If approved, the 2008 MIP will apply to compensation payable beginning
after 2008 with the existing Management Incentive Plan continuing to apply
through 2008.
The principal features of the 2008 MIP, as amended, are described
below. This description is subject to and qualified in its entirety by the
full text of the 2008 MIP, a copy of which is attached as an appendix to this
Proxy Statement (filed with the SEC on or about April 9, 2008), and
incorporated herein by reference. The Proxy Statement and appendices are
available through the Company's website (www.rgare.com) or at the SEC website
(www.sec.gov/edgar). Information on our website does not constitute part of
this Proxy Statement. You also may obtain a copy of the Management Incentive
Plan from us upon written request.
GENERAL PLAN PROVISIONS
Like the existing Management Incentive Plan, the purpose of the 2008
MIP is to motivate superior, focused and prudent performance on the part of
associates for the ultimate benefit of shareholders. Awards are determined and
payable annually using an overall three-part structure: (1) no awards will be
payable in any fiscal year in which performance criteria fall below a
specified amount known as the "trigger"; (2) to assure fiscal soundness and
provide solid funding for all awards, a meaningful portion of every
participant's award opportunity is linked to Company and division performance
against key financial objectives; and (3) a meaningful portion of many, but
not all, participants' awards are tied to his/her unit's and/or individual
performance (unit results will be evaluated using either financial and/or
operational measures).
The Compensation Committee of the Board of Directors (the
"Committee") has ultimate approval authority for awards under the 2008 MIP and
will annually monitor and approve participation and opportunity levels,
Company goals, the general design and mix of opportunity, total awards and
performance goals and their achievement. The Company's management will
recommend all awards under the 2008 MIP to the Committee for approval. The
Vice President of Human Resources is the general administrator of the 2008 MIP
and will maintain records, prepare summary materials for the Committee and
ensure the payment of awards net of all applicable withholding.
Each member of the Committee must be a "non-employee director" as
defined in Rule 16b-3 promulgated by the SEC. The Board of Directors has
designated a Committee consisting solely of individuals who constitute
"outside directors" as defined in Section 162(m) of the Code.
Awards are based upon attainment of pre-established goals relating to
overall Company performance or the performance of a subsidiary, division,
business unit, or an individual. The pre-established goals may include one or
more of the following:
o operating earnings or income; operating earnings per share; net
income; total or net revenues; gross or net premiums;
shareholder return and/or value; retained earnings; book value
or book value per share; gross or net margin; profit returns and
margins; operating or net cash flow; financial return ratios;
return on equity; return on average adjusted equity; return on
assets; return on invested capital; earnings per share growth;
change in embedded value; embedded value of new business;
o budget achievement; expenses; expense control; market
capitalization; stock price; market share; working capital; cash
available to Company from a subsidiary or subsidiaries;
dividends; ratings; business trends; economic value added; and
o product development; client development; leadership; project
progress; project completion; quality; customer satisfaction;
diversity and corporate governance.
37
The goals may be stated in terms of absolute levels or relative to
another company or companies or to an index or indices.
No award will be payable unless and until the Committee certifies
that the performance goals and any other material terms have been met. No
award will be payable for any year in which the performance criteria falls
below a specified amount, or trigger. The maximum annual award that can be
granted to any participant for any calendar year is $3,000,000.
The performance goals for each participant and the amount of
compensation payable if those goals are met will be established for each plan
year (or other performance period) by the Committee no later than 90 days
after the commencement of the period of service to which the performance goals
relate (which will generally be the beginning of the plan year) and while the
outcome of whether or not those goals will be achieved is substantially
uncertain. However, in no event will such goals be established after 25% of
the period of service to which the goals relate has elapsed. Such goals and
the compensation payable for each plan year if the goals are achieved,
including the portion of such compensation payable in cash, or otherwise, will
be set forth in each participant's award agreement. Any restricted stock,
performance shares, or other stock-based compensation may be granted under the
Flexible Stock Plan, as determined by the Committee. Any payment under any
award will be made within the calendar year following the applicable plan year
(or other period of performance) to which such award relates. The Committee
will have the discretion to reduce the compensation which would otherwise be
payable upon the achievement of one or more performance goals in whole or in
part to the extent that it deems appropriate.
The 2008 MIP will remain in effect until amended or terminated by the
Committee. Presently, the Committee intends to maintain the 2008 MIP
indefinitely, but reserves the right to amend or terminate it at any time if
the Committee deems such action to be in the best interests of the Company or
its shareholders or employees.
A participant who is no longer actively employed by the Company on
the date awards are determined and paid to other participants for any year (or
other performance period) will forfeit all rights to any award for such year,
except in the case of termination due to retirement at or after the age of 55,
total disability or death. In such cases, the Committee will, in its
discretion, authorize an applicable award, generally on a pro rated basis, but
only if the applicable performance goals have been met. A participant whose
individual performance is deemed to be unsatisfactory will forfeit his or her
award if such forfeiture is approved by the Committee.
Awards may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution. The Company will have the right to deduct or withhold, or
require a participant to remit to the Company, an amount sufficient to satisfy
Federal, state and local, domestic or foreign, tax withholding.
Because awards under the 2008 MIP are subject to the discretion of
the Committee, awards to be received by individual participants are not
determinable. Please see "Compensation Discussion and Analysis" and "Executive
Compensation" for a discussion of awards under our current Management
Incentive Plan for our named executive officers.
FEDERAL INCOME TAX CONSEQUENCES
Cash Awards. Awards payable in cash are includable in the
participant's gross income when paid and deductible by the Company when paid
or accrued.
Performance Shares, Restricted Stock and Other Stock-Based Awards.
The tax consequences of these types of awards are described in the discussion
of "Federal Income Tax Consequences" under Item 3.
The foregoing statement is only a summary of certain federal income
tax consequences of the 2008 MIP and is based on the Company's understanding
of present federal tax laws and regulations.
38
VOTE REQUIRED
The vote required to approve this Item 2 is a majority of the common
stock represented in person or by proxy at the Annual Meeting, provided the
total votes cast represent over 50% of the shares entitled to vote. As a
holder of common stock, MetLife is entitled to vote on this proposal. MetLife
beneficially owns and has shared voting power with respect to approximately
52% of the Company's outstanding shares. MetLife has informed the Company that
it intends to vote for this Item 2; therefore approval of this Item 2 by the
shareholders is assured.
RECOMMENDATION OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors has approved the
proposal regarding the 2008 MIP and recommends that shareholders vote FOR the
proposal.
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ITEM 3 - APPROVAL OF AMENDMENT TO THE FLEXIBLE STOCK PLAN
-------------------------------------------------------------------------------
The third item to be acted upon at the Annual Meeting is a proposal
to consider and approve the amendment of our Flexible Stock Plan to provide
for the material terms of the performance goals to be used for determining
certain awards to executive officers covered under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), under our Flexible
Stock Plan (the "Plan").
Under Section 162(m), shareholder approval of the material terms of
the performance measures used for determining awards to our associates under
the Plan is required to enable the Company to obtain a deduction for awards
paid under the Plan in excess of $1,000,000 to the chief executive officer,
chief financial officer, and three other most highly-compensated executive
officers (other than the CEO and CFO) for a given year. As described under the
caption "Performance Goals" below, the amendment to the Plan will expressly
provide for such goals.
FLEXIBLE STOCK PLAN
The Board of Directors originally adopted the Plan in February 1993
and, on March 31, 1993, our shareholders approved the Plan. The Plan was
amended and restated effective July 1, 1998. On May 24, 2000 and May 28, 2003,
our shareholders approved amendments to the Plan that increased the number of
shares under the Plan for which options, stock appreciation rights, restricted
stock, performance shares and other stock-based awards are granted. On May 26,
2004, our shareholders approved an amendment to eliminate the "evergreen"
provision that provided for an automatic increase of 5% each year in the
number of authorized shares available for issuance under the Plan. On May 23,
2007, our shareholders approved an increase in the total number of shares
authorized for issuance by 3,000,000, for a total of 9,260,077.
The Plan provides for the grant of stock options, stock appreciation
rights, restricted stock, performance shares and cash and other stock-based
awards to our employees, employees and owners of entities that have a direct
or indirect ownership interest in us or in which we have a direct or indirect
ownership interest, individuals who are employed by or owners of our client
companies or suppliers, and individuals who are employed by or owners of
companies that render services to us (collectively, the "participants"). As of
March 2008, approximately 165 employees participate in the Plan.
Under the Plan, a maximum of 9,260,077 shares are presently
authorized for issuance from treasury stock or authorized but unissued shares.
As of March 1, 2008, equity-based awards to purchase or receive 3,362,877
shares of common stock were granted to participants and outstanding under the
Plan, and 3,379,540 shares have been exercised by, awarded to or received by
participants. As of March 3, 2008, the closing price of our common stock on
the NYSE was $54.22 per share.
39
The principal features of the Plan, as amended, are described below.
This description is subject to and qualified in its entirety by the full text
of the Plan, including subsequent plan amendments (which were filed with the
SEC as an exhibit to this Proxy Statement on or about April 9, 2008) and
incorporated herein by reference. The Plan and amendments, as filed with the
SEC, are also available on our website (www.rgare.com), or on the SEC website
(www.sec.gov/edgar). Information on our website does not constitute part of
this Proxy Statement. You may also obtain a copy of the Plan upon written
request.
The Plan provides for benefits to be awarded to eligible participants
in the form of stock options, stock appreciation rights, restricted stock,
performance shares, cash awards and other stock-based awards. If any benefit
expires or is terminated, surrendered, cancelled or forfeited, the shares
covered by such benefit will be added back to the shares available for use
under the Plan.
If our stock is changed by reason of any stock dividend, spin-off,
split-up, spin-out, recapitalization, merger, consolidation, reorganization,
combination or exchange of shares, then the number and class of shares
available for benefits, the number of shares subject to any outstanding
benefits and the price thereof will be appropriately adjusted.
The Compensation Committee of the Board of Directors (the
"Committee") administers the Plan. The Committee currently consists of four of
our outside directors. Each member of the Committee must be a "non-employee
director" as defined in Rule 16b-3 promulgated by the SEC. The Board of
Directors has designated a Committee consisting solely of individuals who
constitute "outside directors" as defined in Section 162(m) of the Code. The
Committee, by majority action, is authorized to determine the individuals to
whom the benefits will be granted, the type and amount of such benefits and
the terms of the benefit grants, as well as to interpret the Plan and to make
all other determinations necessary or advisable for the administration of the
Plan to the extent not contrary to the provisions of the Plan. The Committee
makes its determinations under the Plan based upon the recommendations of our
chief executive officer and management, information made available to the
Committee and its judgment as to the best interests of RGA and our
shareholders. In certain circumstances, the Committee may delegate all or any
part of its authority under the Plan to our employees or another committee.
Because awards are subject to the discretion of the Committee, future awards
are not determinable. Please see "Compensation Discussion and Analysis" and
"Executive Compensation" for discussion of 2007 awards to our named executive
officers under the Plan.
Under the Plan, the Committee may award: (a) stock options
exercisable into shares of our common stock which may or may not qualify as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code, as amended; (b) stock appreciation rights; (c) restricted shares
of our common stock; (d) performance shares (including performance contingent
restricted stock), (e) cash awards, and (f) other stock-based awards and
benefits. As provided in the Plan, the Committee has complete discretion to
determine the type and number of benefits granted to any participant and the
terms and conditions that attach to each grant. Such terms and conditions are
not necessarily uniform among different participants. The receipt by a
participant of one type of grant under the Plan does not entitle the
participant to receipt of any other type of grant. Payment for shares of
common stock purchased upon exercise of any option or any other benefit
granted under the Plan that requires payment by a participant to us will be
made in cash, or with the consent of the Committee or as provided in the
applicable individual award document, by the tender of shares of common stock
having a fair market value equal to the purchase price, or in other property,
rights and credits, to the extent permitted by law, or any combination of the
foregoing.
Stock Options. The Committee may grant stock options, which entitle
the participant to purchase our common stock at a price established by the
Committee, and that price will not be less than the fair market value of our
common stock on the date of the grant. "Fair market value" means the closing
price of shares on the NYSE on a given date. The Committee determines the term
of the stock options, including the times and conditions under which the
options become exercisable. The maximum number of shares with respect to which
incentive stock options are issuable under the Plan is 150,000 shares. The
maximum number of shares with respect to which options may be granted to any
participant in any one-year period may not exceed 200,000 shares. For purposes
of the preceding sentence, shares of common stock covered by an option that is
40
cancelled will count against the maximum number of shares that may be granted
to any participant in any one-year period, and if the exercise price under an
option is reduced, the transaction will be treated as a cancellation of the
option and a grant of a new option.
Stock Appreciation Rights ("SARs"). The Committee may grant SARs,
which gives the participant a right to receive payment in an amount equal to
the appreciation, if any, in the fair market value of a share from the date of
the grant to the date of its payment. Such payment is made in cash, in common
stock or in any combination of cash and common stock, as the Committee may
determine. The maximum number of SARs that may be granted to any participant
in any one-year period is 15,000. For purposes of the preceding sentence, any
SARs that are cancelled will count against the maximum number of SARs that may
be granted to any participant in any one-year period, and if the fair market
value of a share on which appreciation under a SAR is calculated is reduced,
the transaction will be treated as a cancellation of the SAR and the grant of
a new SAR.
Restricted Stock. The Committee may grant benefits under the Plan in
the form of Restricted Stock. Shares of Restricted Stock are issued and
delivered at the time of the grant but are subject to forfeiture as provided
in the grantee's individual agreement. The grantee may be entitled to full
voting and dividend rights with respect to all shares of Restricted Stock from
the date of grant, but cannot transfer such shares until all restrictions have
been satisfied. Grants are made at a per share cost equal to the par value.
Performance Shares. Performance Shares are the right of an individual
to whom a grant of such shares is made to receive shares or cash equal to the
fair market value of such shares at a future date in accordance with the terms
of such grant. Generally, such right is based upon the attainment of targeted
profit and/or performance objectives.
Cash Awards. Cash Awards are benefits payable in cash. The Committee
may grant Cash Awards at such times and in such amounts as it deems
appropriate. The amount of any cash award in any fiscal year to any
participant who is subject to Section 16 of the Securities Exchange Act of
1934 cannot exceed the greater of $100,000 or 50% of his cash compensation
(excluding any cash award under the Plan) for such fiscal year.
Other Stock-Based Awards and Other Benefits. An Other Stock-Based
Award is an award that is valued in whole or in part by reference to, or is
otherwise based on, Company common stock. The Committee may grant other types
of benefits under the Plan if the Committee believes that such benefits would
further the purposes for which the Plan was established.
In the event of a "change in control" (as defined below) the
Committee may provide such protection as it deems necessary to maintain a
participant's rights. The Committee may, among other things, (i) accelerate
the exercise or realization of any benefit, (ii) purchase a benefit upon the
participant's request for cash equal to the amount which could have been
attained upon the exercise or realization of the benefit had it been currently
exercisable or payable, (iii) adjust the benefit as the Committee deems
appropriate, and (iv) cause the benefit to be assumed by the surviving
corporation. A "change of control" generally means (i) the acquisition,
without the approval of the Board, by any person or entity, other than us and
certain related entities, of more than 20% of the outstanding shares of common
stock through a tender offer, exchange offer or otherwise; (ii) the
liquidation or dissolution of us following a sale or other disposition of all
or substantially all of our assets; (iii) a merger or consolidation involving
us which results in our not being the surviving parent corporation; or (iv) a
change in the majority of the members of the Board of Directors during any
two-year period not approved by at least two-thirds of the Directors who were
members at the beginning of the two-year period.
The Plan will remain in effect until terminated by the Board of
Directors. The Board, in its sole discretion, may terminate the Plan at any
time and, from time to time, may amend or modify the Plan. However, the Board
may not amend the Plan, without obtaining shareholder approval in a manner (i)
which would cause options which are intended to qualify as incentive stock
options to fail to qualify, (ii) which would cause the Plan to fail to meet
the requirements of Rule 16b-3 of the Securities Exchange Act of 1934 or
Section 162(m) of the Code, or (iii) which would violate applicable law. No
amendment, modification or
41
termination of the Plan will adversely affect a participant's right to any
benefit granted under the Plan prior to such amendment or termination.
Non-qualified stock options, grants of PCRS units and restricted stock are the
forms of benefits that have been granted under the Plan.
PERFORMANCE GOALS
The Flexible Stock Plan permits the Committee, in its discretion, to
condition any of the awards upon achievement of one or more performance goals.
In order for awards to constitute performance-based compensation for purposes
of Section 162(m), the Committee has recommended, and our Board of Directors
has approved, an amendment to the Plan to specify the goals applicable to
performance-based awards under the Plan. Under the amendment, awards intended
to constitute performance-based compensation will be based upon attainment of
pre-established goals relating to overall Company performance or the
performance of a subsidiary, division, business unit or an individual. The
pre-established goals may include one or more of the following:
o operating earnings or income; operating earnings per share; net
income; total or net revenues; gross or net premiums;
shareholder return and/or value; retained earnings; book value
or book value per share; gross or net margin; profit returns and
margins; operating or net cash flow; financial return ratios;
return on equity; return on average adjusted equity; return on
assets; return on invested capital; earnings per share growth;
change in embedded value; embedded value of new business;
o budget achievement; expenses; expense control; market
capitalization; stock price; market share; working capital; cash
available to Company from a subsidiary or subsidiaries;
dividends; ratings; business trends; economic value added; and
o product development; client development; leadership; project
progress; project completion; quality; customer satisfaction;
diversity and corporate governance.
The goals may be stated in terms of absolute levels or relative to another
company or companies or to an index or indices.
In order to permit compliance with Section 162(m), the Committee has
determined to make such awards in accordance with the following procedures: No
later than the 90th day of each performance year, the Committee will establish
an objective performance goal for that performance year and while the outcome
of whether or not those goals will be achieved is substantially uncertain.
However, in no event will such goals be established after 25% of the period of
service to which the goals relate has elapsed. The Committee must certify the
attainment of the applicable performance goal before an award is made. The
Committee may decrease the actual award amount paid to a covered person for
any performance year based on such secondary goals and considerations as may
be determined by the Committee in its sole discretion.
The Committee will not change the material terms of the performance
goals or the maximum amount payable with respect to any award to a covered
officer, without first obtaining shareholder approval.
FEDERAL INCOME TAX CONSEQUENCES
Stock Options. No income will ordinarily be realized by a participant
on the grant of a stock option, and we will not be entitled to a deduction at
such time. If a participant exercises an incentive stock option and does not
dispose of the shares acquired within two years from the date of the grant, or
within one year from the date of exercise of the option, no income will
generally be realized by the participant at the time of exercise. We will not
be entitled to a deduction by reason of the exercise.
If a participant disposes of the shares acquired pursuant to an
incentive stock option within two years from the date of grant of the option
or within one year from the date of exercise of the option, the participant
will experience a disqualifying disposition and will realize ordinary income
at the time of disposition equal to
42
the excess, if any, of the lesser of (a) the amount realized on the
disposition, or (b) the fair market value of the shares on the date of
exercise, over the participant's basis in the shares. We generally will be
entitled to a deduction in an amount equal to such income in the year of the
disqualifying disposition. If a participant disposes of the shares acquired
pursuant to an incentive stock option following the later of the date (a) two
years from the date of grant of the option or (b) one year from the date of
exercise of the option, the difference, if any, between the amount realized
from the sale and the exercise price will be taxed as a capital gain or
capital loss.
The excess of the fair market value of the shares at the time an
incentive stock option is exercised over the exercise price is tax preference
income taken into account in computing the alternative minimum tax applicable
to the optionee. If, however, a disqualifying disposition occurs in the year
in which the incentive stock option is exercised, the maximum amount that will
be included for purposes of alternative minimum tax is the gain on the
disposition of the shares.
Upon the exercise of a non-qualified option, the excess, if any, of
the fair market value of the stock on the date of exercise over the purchase
price is ordinary income to the holder as of the date of exercise. We
generally will be entitled to a deduction equal to such excess amount in the
year of exercise.
SARs. No income will be realized by a participant upon the grant of
an SAR, and we will not be entitled to a deduction at such time. Upon the
exercise of a SAR, the excess, if any, of the fair market value of the stock
on the date of exercise over the fair market value of the stock on the date of
grant is ordinary income to the holder as of the date of exercise. We
generally will be entitled to a deduction equal to such excess amount in the
year of exercise.
Restricted Stock. Unless a timely Section 83(b) election is made, as
described in the following paragraph, a participant generally will not
recognize taxable income upon the grant of restricted stock because the
restricted stock generally will be nontransferable and subject to a
substantial risk of forfeiture. A participant will recognize ordinary income
when the restrictions that impose a substantial risk of forfeiture of the
shares of common stock or the transfer restrictions (collectively, the
"Restrictions") lapse. The amount recognized will be equal to the difference
between the fair market value of the shares at the time the Restrictions lapse
and the original purchase price paid for the shares, if any. The ordinary
income recognized by a participant with respect to restricted stock will be
subject to applicable tax withholding by us. If a timely Section 83(b)
election has not been made, any dividends received with respect to common
stock subject to the Restrictions will be treated as additional compensation
income and not as dividend income.
A participant may elect, pursuant to Section 83(b) of the Code, to
recognize as ordinary income the fair market value of the restricted stock
upon grant, notwithstanding that the restricted stock would otherwise not be
includable in gross income at that time. If the election is made within 30
days of the date of grant, then the participant would include in gross income
an amount equal to the difference between the fair market value of the
restricted stock on the date of grant and the purchase price paid for the
restricted stock, if any. Any change in the value of the shares after the date
of grant will be taxed as a capital gain or capital loss only if and when the
shares are disposed of by the participant. If the Section 83(b) election is
made, the participant's holding period for capital gains begins on the date of
grant.
The Section 83(b) election is irrevocable. If a Section 83(b)
election is made and the participant then forfeits the restricted stock, the
participant may not deduct as a loss the amount previously included in gross
income. A participant's tax basis in shares of restricted stock received will
be equal to the sum of the amount (if any) the participant paid for the common
stock and the amount of ordinary income recognized by the participant as a
result of making Section 83(b) election or upon the lapse of the Restrictions.
Unless a Section 83(b) election is made, the participant's holding period for
the shares for purposes of determining gain or loss on a subsequent sale will
begin on the date the Restrictions on the shares lapse. In general, we will be
entitled to a deduction at the same time, and in an amount equal to, the
ordinary income recognized by a participant with respect to shares of
restricted stock. If, subsequent to the lapse of the Restrictions on the
43
shares, the participant sells the shares, the difference, if any, between the
amount realized from the sale and the tax basis in the shares of the
participant will be taxed as a capital gain or capital loss.
Performance Shares. A participant generally will not recognize
taxable income upon the grant of performance shares. Instead, a participant
will recognize as ordinary income, and we will have as a corresponding
deduction, any cash delivered and the fair market value of any common stock
delivered in payment of an amount due under the performance share award. The
ordinary income the participant recognizes will be subject to applicable tax
withholding by us. Upon selling any shares of common stock received by a
participant in payment of an amount due under a performance share award, the
participant generally will recognize a capital gain or loss in an amount equal
to the difference between the sale price of the shares of common stock and the
participant's tax basis in the shares of common stock.
Cash Awards. Awards payable in cash are includible in the
participant's gross income when paid and deductible by us when paid or
accrued.
Other Stock-Based Awards or Benefits. The tax consequences associated
with any other stock-based award or other benefits will vary depending on the
specific terms of the award, including whether the award has a readily
ascertainable fair market value, whether or not the award is subject to
forfeiture provisions or restrictions on transfer, the nature of the property
to be received by the participant under the award, the applicable holding
period (if any) and the participant's tax basis.
The foregoing statement is only a summary of certain federal income
tax consequences of the Flexible Stock Plan and is based on our understanding
of present federal tax laws and regulations.
VOTE REQUIRED
The vote required to approve this Item 3 is a majority of the common
stock represented in person or by proxy at the Annual Meeting, provided the
total votes cast represent over 50% of the shares entitled to vote. As a
holder of common stock, MetLife is entitled to vote on this proposal. MetLife
beneficially owns and has shared voting power with respect to approximately
52% of our outstanding shares. MetLife has informed us that it intends to vote
FOR this Item 3; therefore, approval of this Item 3 by the shareholders is
assured.
RECOMMENDATION OF THE BOARD
In accordance with its charter, the Compensation Committee of the
Board of Directors recommended to the Board of Directors that it approve the
proposal regarding the establishment of performance measures as described
above. The Board of Directors recommends that shareholders vote FOR the
proposal.
EQUITY COMPENSATION PLAN INFORMATION
The following table presents Equity Compensation Plan information as
of December 31, 2007:
-----------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE NUMBER OF SECURITIES
BE ISSUED UPON EXERCISE EXERCISE PRICE OF REMAINING AVAILABLE FOR
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, ISSUANCE UNDER EQUITY
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COMPENSATION PLANS
-----------------------------------------------------------------------------------------------------------------
Equity Compensation Plans
Approved by Security Holders 2,981,022(1) $37.98(2),(3) 3,234,851(4)
-----------------------------------------------------------------------------------------------------------------
Equity Compensation Plans
Not Approved by Security
Holders --- --- ---
-----------------------------------------------------------------------------------------------------------------
TOTAL 2,981,022 $37.98(2),(3) 3,234,851(4)
-----------------------------------------------------------------------------------------------------------------
44
-----------------------
1. Includes the number of securities to be issued upon exercises under the
following plans: Flexible Stock Plan - 2,917,219; Flexible Stock Plan for
Directors - 32,183; and Phantom Stock Plan for Directors - 31,620.
2. Does not include 354,149 PCRS units to be issued under the Flexible Stock
Plan, or 31,620 phantom units to be issued under the Phantom Stock Plan
for Directors because those securities do not have an exercise price
(i.e., a unit is a hypothetical share of our common stock with a value
equal to the fair market value of our common stock).
3. Reflects the blended weighted-average exercise price of outstanding
options under the Flexible Stock Plan ($38.06) and Flexible Stock Plan for
Directors ($31.51).
4. Includes the number of securities remaining available for future issuance
under the following plans: Flexible Stock Plan - 3,092,962; Flexible Stock
Plan for Directors - 112,653; and Phantom Stock Plan for Directors -
29,236.
ADDITIONAL INFORMATION
VOTING
The affirmative vote of the holders of a majority of the shares of
our common stock entitled to vote which are present in person or represented
by proxy at the 2008 Annual Meeting is required to approve Items 1, 2 and 3
and to act on any other matters properly brought before the meeting (other
than the other specified proposals), provided the total votes cast represent
over 50% of the shares entitled to vote. Voting results will be disclosed in
our Form 10-Q for the period ending June 30, 2008. Shares represented by
proxies which are marked "withhold authority" with respect to the election of
any one or more nominees for election as directors and proxies which are
marked "abstain" or which deny discretionary authority on other matters will
be counted for the purpose of determining the number of shares represented by
proxy at the meeting. Such proxies will thus have the same effect as if the
shares represented thereby were voted against such nominee or nominees and
against such other matters, respectively. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on
a particular matter (i.e., a "broker non-vote"), those shares will not be
considered as present and entitled to vote with respect to that matter, unless
they result in a failure to obtain total votes cast of more than 50% of the
shares entitled to vote. If no specification is made on a duly executed proxy,
the proxy will be voted FOR Items 1, 2 and 3, and in the discretion of the
persons named as proxies on such other business as may properly come before
the meeting.
As of February 1, 2008, MetLife beneficially owned approximately 52%
of the shares of RGA common stock entitled to vote at the meeting. MetLife has
indicated its intention to vote its shares FOR each of the proposals to be
voted upon at the meeting, and the vote of MetLife will be sufficient to
approve all items.
We know of no other matters to come before the meeting. If any other
matters properly come before the meeting, the proxies solicited hereby will be
voted on such matters in accordance with the judgment of the persons voting
such proxies.
SHAREHOLDER NOMINATIONS AND PROPOSALS
As described in our Corporate Governance Guidelines, the Nominating
and Corporate Governance Committee will consider shareholder nominations for
Directors that meet the notification, timeliness, consent and information
requirements of our Articles of Incorporation. The Committee makes no
distinctions in evaluating nominees for positions on the Board based on
whether or not a nominee is recommended by a shareholder, provided that the
procedures with respect to nominations referred to above are followed.
Potential candidates for nomination as Director candidates must provide
written information about their qualifications and participate in interviews
conducted by individual Board members, including the Chairs of the Audit or
Nominating and Governance Committees. Candidates are evaluated using the
criteria adopted by the Board to determine their qualifications based on the
information supplied by the candidates and information obtained from other
sources. The Committee will recommend candidates for election as Director only
if the Committee determines, in its judgment, that they have the following
specific, minimum
45
qualifications that have been recommended by the Nominating
and Governance Committee to, and approved by, the Board:
o Financial Literacy. Such person should be "financially literate"
as such qualification is interpreted by the Board of Directors
in its business judgment.
o Leadership Experience. Such person should possess significant
leadership experience, such as experience in business,
finance/accounting, law, education or government, and shall
possess qualities reflecting a proven record of accomplishment
and ability to work with others.
o Commitment to Our Values. Such person shall be committed to
promoting our financial success and preserving and enhancing our
business and ethical reputation, as embodied in our Codes of
Conduct.
o Absence of Conflicting Commitments. Such person should not have
commitments that would conflict with the time commitments of a
Director of RGA.
o Reputation and Integrity. Such person shall be of high repute
and recognized integrity and not have been convicted in a
criminal proceeding (excluding traffic violations and other
minor offenses). Such person shall not have been found in a
civil proceeding to have violated any federal or state
securities or commodities law, and shall not be subject to any
court or regulatory order or decree limiting his or her business
activity, including in connection with the purchase or sale of
any security or commodity.
o Other Factors. Such person shall have other characteristics
considered appropriate for membership on the Board of Directors,
including an understanding of marketing and finance, sound
business judgment, significant experience and accomplishments
and educational background.
Shareholder proposals submitted under the process prescribed by the
SEC (in Rule 14a-8 of the Exchange Act) for presentation at the 2009 Annual
Meeting must be received by us by December 10, 2008, for inclusion in our
Proxy Statement and proxy relating to that meeting. Upon receipt of any such
proposal, we will determine whether or not to include such proposal in the
Proxy Statement and proxy in accordance with regulations governing the
solicitation of proxies.
In order for a Shareholder to nominate a candidate for director,
under our Restated Articles of Incorporation, timely notice of the nomination
must be given to us in advance of the meeting. Ordinarily, such notice must be
given not less than 60 nor more than 90 days before the meeting (but if we
give less than 70 days notice of the meeting, or prior public disclosure of
the date of the meeting, then the Shareholder must give such notice within 10
days after notice of the meeting is mailed or other public disclosure of the
meeting is made, whichever occurs first). The shareholder filing the notice of
nomination must describe various matters as specified in our Amended and
Restated Articles of Incorporation, including such information as name,
address, occupation, and number of shares held.
In order for a shareholder to bring other business before a
Shareholder meeting, timely notice must be given to us within the time limits
described above. Such notice must include a description of the proposed
business, the reasons therefore, and other matters specified in our Amended
and Restated Articles of Incorporation. The Board or the presiding officer at
the Annual Meeting may reject any such proposals that are not made in
accordance with these procedures or that are not a proper subject for
shareholder action in accordance with applicable law. The foregoing time
limits also apply in determining whether notice is timely for purposes of
rules adopted by the SEC relating to the exercise of discretionary voting
authority. These requirements are separate from and in addition to the
requirements a shareholder must meet to have a proposal included in our Proxy
Statement.
46
In each case, the notice must be given to our Secretary, whose
address is 1370 Timberlake Manor Parkway, Chesterfield, Missouri 63017-6039.
Any Shareholder desiring a copy of our Restated Articles of Incorporation or
Bylaws will be furnished a copy, without charge, upon written request to the
Secretary.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries
such as brokers to satisfy delivery requirements for proxy statements with
respect to two or more shareholders sharing the same address by delivering a
single proxy statement addressed to those shareholders. This process, which is
commonly referred to as "householding," potentially provides extra convenience
for shareholders and cost savings for companies. Some brokers household proxy
materials, delivering a single proxy statement to multiple shareholders
sharing an address unless contrary instructions have been received from the
affected shareholders. Once you have received notice from your broker that
they will be householding materials to your address, householding will
continue until you are notified otherwise or until you revoke your consent.
If, at any time, you no longer wish to participate in householding and would
prefer to receive a separate proxy statement or if your household currently
receives multiple copies and would like to participate in householding in the
future, please notify your broker.
ACCESS TO PROXY MATERIALS AND ANNUAL REPORT
This Proxy Statement and our 2007 Annual Report to Shareholders may
be viewed online at www.rgare.com. You may request a physical copy of this
Proxy Statement, form of proxy card and our Annual Report to Shareholders,
without charge, by writing to us at 1370 Timberlake Manor Parkway,
Chesterfield, Missouri 63017-6039, Attention Secretary.
47
REINSURANCE GROUP OF AMERICA, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby appoint Jack B. Lay, James E. Sherman and
William L. Hutton, or any of them, the true and lawful attorneys-in-fact,
agents and proxies of the undersigned to represent the undersigned at the
Annual Meeting of the Shareholders of REINSURANCE GROUP OF AMERICA,
INCORPORATED to be held May 21, 2008, commencing at 2:00 p.m., St. Louis time,
at the Company's offices at 1370 Timberlake Manor Parkway, Chesterfield,
Missouri 63017, and at any and all adjournments and postponements of said
meeting, and to vote all the shares of Common Stock of the Company standing on
the books of the Company in the name of the undersigned as specified and in
their discretion on such other business as may properly come before the
meeting.
PLEASE COMPLETE, SIGN AND DATE OTHER SIDE AND RETURN PROMPTLY.
------------------------------------------------------------------------
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------------
FOLD AND DETACH HERE
April 9, 2008
Dear Shareholder:
We invite you to attend the 2008 Annual Meeting of Shareholders of
Reinsurance Group of America, Incorporated, to be held on May 21, 2008 at
the Company's offices at 1370 Timberlake Manor Parkway, Chesterfield, Missouri
63017 at 2:00 p.m.
It is important that your shares are represented at the meeting. Whether
or not you plan to attend the meeting, please review the enclosed proxy
materials, complete the proxy form above, detach it, and return it promptly
in the envelope provided.
The proxy statement and our 2007 Annual Report to Shareholders may be
viewed online at www.rgare.com.
Please
Mark Here / /
for Address
Change or
Comments
SEE REVERSE SIDE
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING:
ELECTION OF DIRECTORS
1. To elect two directors for terms expiring in 2011;
01 J. Cliff Eason FOR all nominees WITHHOLD AUTHORITY
02 Joseph A. Reali listed (except as marked to vote for all
to the contrary) nominees listed
/ / / /
(INSTRUCTION: to withhold authority to vote for any individual nominee,
strike a line through the nominee's name on the list above.)
2. To approve the Company's 2008 Management FOR AGAINST ABSTAIN
Incentive Plan and; [ ] [ ] [ ]
3. To approve an amendment to the Company's FOR AGAINST ABSTAIN
Flexible Stock Plan. [ ] [ ] [ ]
The undersigned hereby acknowledges receipt of the Notice of the
2008 Annual Meeting of Shareholders and the accompanying Proxy
Statement.
This proxy will be voted as specified. If no specification is made, this
proxy will be voted FOR Items 1, 2 and 3.
Dated:__________________________________________________________, 2008
______________________________________________________________________
Signature
______________________________________________________________________
Signature if held jointly
If Shares are owned in joint names, both owners must sign. If address at
left is incorrect, please write in the correct information.
PLEASE SIGN AS REGISTERED AND RETURN PROMPTLY TO:
REINSURANCE GROUP OF AMERICA, INCORPORATED, MIDTOWN STATION, PO BOX 870,
NEW YORK, NY 10138
------------------------------------------------------------------------------
FOLD AND DETACH HERE
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN TIME
THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED,
SIGNED AND RETURNED YOUR PROXY CARD.
--------------------------------------- -----------------------------------------
INTERNET TELEPHONE
http://www.proxyvoting.com/rga 1-866-540-5760
Use the internet to vote your proxy. Use any touch-tone telephone to
Have your proxy card in hand when OR vote your proxy. Have your proxy
you access the web site. card in hand when you call.
--------------------------------------- -----------------------------------------
If you vote your proxy by Internet or by telephone, you do NOT need
to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and
return it in the enclosed postage-paid envelope.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIAL FOR THE
SHAREHOLDERS MEETING TO BE HELD MAY 21, 2008. THE PROXY STATEMENT
AND ANNUAL REPORT MAY BE VIEWED ONLINE AT WWW.RGARE.COM
REINSURANCE GROUP OF AMERICA, INCORPORATED
2008 MANAGEMENT INCENTIVE PLAN
EFFECTIVE MAY 21, 2008
GENERAL PLAN PURPOSE AND STRUCTURE
The purpose of the Reinsurance Group of America, Incorporated 2008 Management
Incentive Plan ("MIP") is to motivate superior, focused, and prudent
performance on the part of associates for the ultimate benefit of shareholders
and associates. The MIP is further intended to provide flexibility to the
Company in its ability to motivate, attract and retain the services of
associates and provide appropriate incentive compensation opportunities to
associates for achievement of established goals.
Awards under the MIP are intended to qualify as "other performance based
compensation" under Section 162(m)(4)(c) of the Internal Revenue Code of 1986,
as amended, and the regulations thereunder. The MIP shall be interpreted and
construed in a manner consistent with such purpose.
DEFINITIONS
The following words and phrases, when used below, unless the context clearly
otherwise requires, shall have the following respective meanings:
a. Award. Any right granted to a Participant under the MIP to
-----
receive Compensation that is computed based upon the
attainment of one or more Performance Goals.
b. Award Agreement. Any written agreement, contract, or other
---------------
instrument or document (including, without limitation, a
performance grid or worksheet) evidencing an Award.
c. Company. Reinsurance Group of America, Incorporated and its
-------
direct and indirect subsidiaries.
d. Compensation. The payment under an Award to which a
------------
Participant is entitled under the MIP.
e. Participant. An eligible associate of Reinsurance Group of
-----------
America, Incorporated or one of its direct or indirect
subsidiaries who is designated by the Compensation
Committee, pursuant to the paragraph entitled
"Participation" below, as a participant in the MIP.
f. Performance Criteria. The criteria, or any combination of
--------------------
criteria, that the Compensation Committee selects for
purposes of establishing the Performance Goal or Performance
Goals for a Participant for a Plan Year (or other period of
performance). The Performance Criteria that will be used to
establish Performance Goals are limited to the following:
o operating earnings or income; operating earnings per
share; net income; total or net revenues; gross or net
premiums; shareholder return and/or value; retained
earnings; book value or book value per share; gross or
net margin; profit returns and margins; operating or
net cash flow; financial return ratios; return on
equity; return on average adjusted equity; return on
assets; return on
invested capital; earnings per share growth; change in
embedded value; embedded value of new business;
o budget achievement; expenses; expense control; market
capitalization; stock price; market share; working
capital; cash available to Company from a subsidiary or
subsidiaries; dividends; ratings; business trends;
economic value added; and
o product development; client development; leadership;
project progress; project completion; quality; customer
satisfaction; diversity and corporate governance.
g. Performance Goals. The goals established in writing by the
-----------------
Compensation Committee for the Plan Year based upon any one
or more of the Performance Criteria. The Performance Goals
may be expressed in terms of overall Company performance or
the performance of a subsidiary, division, business unit, or
an individual. The Performance Goals may be stated in terms
of absolute levels or relative to another company or
companies or to an index or indices.
h. Plan Year. The year on which the MIP is operated, which is
---------
presently the calendar year.
PLAN ADMINISTRATION
1. The MIP shall be administered by the Compensation Committee of the
Board of Directors of Reinsurance Group of America, Incorporated or
subcommittee thereof (the "Compensation Committee"). The Compensation
Committee shall consist of at least two individuals, each of whom
qualifies as (a) a "non-employee director" as defined in Rule 16b-3
of the General Rules and Regulations of the Securities Exchange Act
of 1934, as amended and (b) an "outside director" as defined in
Section 162(m) of the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
2. Subject to any specific designation in the MIP and any limitations on
its authority as delegated by the Board of Directors, the
Compensation Committee has the exclusive power, authority and
discretion to:
o Designate Participants to receive Awards;
o Determine the number of Awards to be granted;
o Determine the terms and conditions of any Award
granted pursuant to the MIP, including, without
limitation, any restrictions or limitations on the
Award and any schedule for lapse of forfeiture
restrictions, based in each case on such
considerations as the Compensation Committee, in its
sole discretion, determines;
o Determine whether, to what extent, and pursuant to
what circumstances an Award may be canceled, forfeited
or surrendered;
o Prescribe the form of each Award Agreement, which need
not be identical for each Participant;
o Decide all other matters that must be determined in
connection with an Award;
o Establish, adopt or revise an rules and regulations as
it may deem necessary or advisable to administer the
MIP;
o Interpret the terms of, and any matter arising
pursuant to, the MIP or any Award Agreement; and
2
o Make all other decisions and determinations that may
be required pursuant to the MIP or an Award Agreement
as the Compensation Committee deems necessary or
advisable to administer the MIP.
3. The Compensation Committee's interpretation of the MIP, any Awards
granted pursuant to the MIP, any Award Agreement and all decisions
and determinations by the Compensation Committee with respect to the
MIP are final, binding and conclusive on all parties.
PARTICIPATION
Participants in the MIP shall be determined annually by the Compensation
Committee, in its sole discretion. Participation in one year does not
guarantee participation in subsequent years. No individual shall have any
right to be granted an Award pursuant to the MIP.
AWARDS AND PERFORMANCE GOALS
Awards. Awards may be granted to Participants in such amounts and upon such
------
terms, and at any time and from time to time, as shall be determined by the
Compensation Committee, subject to all terms and conditions of the MIP and the
applicable Awards. Subject to the terms of the MIP and the applicable Award,
after the applicable Plan Year (or other period of performance) has ended, a
Participant with an Award shall be entitled to receive Compensation, at the
time specified herein, to be determined as a function of and to the extent the
applicable Performance Goals have been achieved. To protect shareholders, no
awards of any kind will be payable for any fiscal year in which the
performance criteria falls below a specified amount also known as the Trigger.
Establishing Performance Goals. The Performance Goals for each Participant and
------------------------------
the amount of Compensation payable if those goals are met shall be established
in writing for each Plan Year (or other period of performance) by the
Compensation Committee no later than 90 days after the commencement of the
period of service to which the Performance Goals relate (which will generally
be the beginning of the Plan Year) and while the outcome of whether or not
those goals will be achieved is substantially uncertain. However, in no event
will such goals be established after 25% of the period of service to which the
goals relate has elapsed. Such goals and the Compensation payable for each
Plan Year (or other period) if the goals are achieved shall be set forth in
each Participant's Award Agreement.
Certification. No Compensation shall be payable to any Participant for any
-------------
Plan Year (or other period of performance) unless and until the Compensation
Committee certifies that the Performance Goals and any other material terms
were in fact satisfied.
NEGATIVE DISCRETION
The Compensation Committee shall have the discretion to reduce Compensation
which would otherwise be payable upon attainment of one or more Performance
Goals in whole or in part to the extent that it deems appropriate.
MAXIMUM COMPENSATION
The maximum amount of Compensation which shall be payable to any Participant
for any Plan Year shall not exceed $3,000,000.
3
INCENTIVE AWARDS AND BENEFIT PLANS
The Compensation Committee, in its discretion, may elect to pay Compensation
in cash or in the form of performance shares, restricted stock, or other
stock-based awards. Any such stock-based Compensation may be under an
applicable stock-based plan, as determined by the Compensation Committee.
Compensation shall be included as "eligible compensation" for the Company's
Retirement, Group Life Insurance and Disability plans, unless otherwise
excluded by prevailing plan documents and/or local regulations.
OTHER ADMINISTRATIVE ISSUES
1. The MIP shall remain in effect until amended or terminated by the
Compensation Committee. The Company intends to maintain the MIP
indefinitely but reserves the right to amend or terminate it by
Compensation Committee action at any time if the Compensation
Committee so determines in its sole discretion.
2. Participation in the MIP is not a guarantee of employment,
participation in one year does not guarantee participation in
subsequent years, and participation shall be determined on an
individual basis as approved by the Compensation Committee.
3. A Participant whose active employment with the Company has been
terminated prior to the date Awards are determined and paid to other
participants for such Plan Year (or other period) shall forfeit all
rights to any Award for such period. However, if termination is due
to retirement (at or after age 55), total disability (as determined
by the Compensation Committee on the basis of appropriate medical
evidence) or death, the Compensation Committee, in its sole
discretion, may authorize an applicable Award, generally on a pro
rated basis, but only to the extent the applicable performance goals
have been met. Such Award shall be determined on a case-by-case
basis. Any payment under any Award shall be made within the calendar
year following the applicable Plan Year (or other period of
performance) to which such Award relates.
4. A Participant whose individual performance is deemed to be
unsatisfactory will forfeit his or her MIP Award if such forfeiture
is approved by the Compensation Committee.
5. No Compensation will be payable under the MIP, as amended, unless the
material terms upon which Compensation may be paid under the MIP is
approved by the shareholders of Reinsurance Group of America,
Incorporated.
6. Awards may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, a Participant's rights under the
MIP shall be asserted during the Participant's lifetime only by the
Participant or the Participant's legal representative.
7. The Company shall have the power and right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient
to satisfy Federal, state and local, domestic or foreign, tax
withholding.
4
AMENDMENT TO THE
REINSURANCE GROUP OF AMERICA, INCORPORATED
FLEXIBLE STOCK PLAN
AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1998
WHEREAS, Reinsurance Group of America, Incorporated (the "Company")
established the Reinsurance Group America, Incorporated Flexible Stock Plan
(the "Plan") to enhance the ability of the Company to reward and provide stock
based incentives to its key employees; and
WHEREAS, the Company's shareholders previously approved the Plan and
amendments thereto; and
WHEREAS, the Board of Directors of the Company reserved the right to
amend the Plan in section 6.1 thereof; and
WHEREAS, on March 20, 2008, the Board of Directors approved an
amendment to the Plan to establish performance objectives upon which award
grants made pursuant to the Plan may be based;
NOW, THEREFORE, the Company hereby amends the Plan by appending the
following Appendix A to the end of the Plan:
"APPENDIX A
-----------
All Performance Shares granted pursuant to Article XVI of this Plan, and any
other compensation granted pursuant to this Plan that is intended to
constitute performance based compensation within the meaning of Section
162(m)(4)(C) of the Code, shall be subject to attainment of one or more of the
performance objectives as described in this Appendix A. This Appendix A sets
forth all applicable performance objectives upon which a grant of Performance
Shares under Sections 16.1 and 16.2 of the Plan or any other Benefit may be
conditioned.
The performance objectives for a particular Benefit shall be established in
writing in the applicable Agreement. The performance objectives may be
expressed in terms of overall Company performance or the performance of a
Subsidiary, division, business unit, or an individual. The performance
objectives may be stated in terms of absolute levels or relative to another
company or companies or to an index or indices.
The performance objectives shall be based upon any one or more of the
performance criteria set forth below and shall not be based on any other
formal or informal performance criteria:
o operating earnings or income; operating earnings per share; net
income; total or net revenues; gross or net premiums; shareholder
return and/or value; retained earnings; book value or book value per
share; gross or net margin; profit returns and margins; operating or
net cash flow; financial return ratios; return on equity; return on
average adjusted equity; return on assets; return on invested
capital; earnings per share growth; change in embedded value;
embedded value of new business;
o budget achievement; expenses; expense control; market capitalization;
stock price; market share; working capital; cash available to Company
from a subsidiary or subsidiaries; dividends; ratings; business
trends; economic value added; and
o product development; client development; leadership; project
progress; project completion; quality; customer satisfaction;
diversity and corporate governance."
IN WITNESS WHEREOF, Reinsurance Group of America, Incorporated hereby adopts
the foregoing amendment this _____ day of _____________, 2008.
REINSURANCE GROUP OF AMERICA,
INCORPORATED
/s/ A. Greig Woodring
-------------------------------------
A. Greig Woodring
President and Chief Executive Officer
AMENDMENT TO THE
REINSURANCE GROUP OF AMERICA, INCORPORATED
FLEXIBLE STOCK PLAN
AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1998
WHEREAS, Reinsurance Group of America, Incorporated (the "Company")
established the Reinsurance Group of America, Incorporated Flexible Stock Plan
(the "Plan") to enhance the ability of the Company to reward and provide stock
based incentives to its key employees; and
WHEREAS, the Company's shareholders previously approved the Plan and
amendments thereto; and
WHEREAS, on January 25, 2007, the Board of Directors of the Company
approved an amendment to the Plan, subject to shareholder approval, to
increase the total number of shares authorized for issuance under the Plan by
3,000,000 shares.
NOW, THEREFORE, the Company hereby amends the Plan as follows:
1. Effective upon the date of approval of this amendment by the
Company's shareholders, Section 3.1 of the Plan is amended in its entirety to
read as follows:
3.1 Number of Shares. The number of Shares which may be
issued or sold or for which Options, SARs or Performance Shares may
be granted under the Plan shall be 9,260,077 Shares. Such Shares may
be authorized but unissued Shares, Shares held in the treasury, or
both.
2. Capitalized terms used herein shall have the same meanings
ascribed to them in the Plan.
IN WITNESS WHEREOF, Reinsurance Group of America, Incorporated hereby
adopts the foregoing amendment this 23rd day of May, 2007.
REINSURANCE GROUP OF AMERICA,
INCORPORATED
/s/ A. Greig Woodring
-------------------------------------
A. Greig Woodring
President and Chief Executive Officer
Appendix A
AMENDMENT TO THE
REINSURANCE GROUP OF AMERICA, INCORPORATED
FLEXIBLE STOCK PLAN
AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1998
WHEREAS, Reinsurance Group of America, Incorporated (the "Company")
established the Reinsurance Group of America, Incorporated Flexible Stock Plan
(the "Plan") to enhance the ability of the Company to reward and provide stock
based incentives to its key employees; and
WHEREAS, the Company's shareholders previously approved the Plan and
amendments thereto; and
WHEREAS, on January 28, 2004, the Board of Directors of the Company
approved an amendment to the Plan, subject to shareholder approval, to
eliminate the provision for a 5% annual increase in the number of Shares
allocated to the Plan.
NOW, THEREFORE, the Company hereby amends the Plan as follows:
1. Effective upon the date of approval of this amendment by the
Company's shareholders, Section 3.1 of the Plan is amended in its entirety to
read as follows:
3.1 Number of Shares. The number of Shares which may be
issued or sold or for which Options, SARs or Performance Shares may
be granted under the Plan shall be 6,260,077 Shares. Such Shares may
be authorized but unissued Shares, Shares held in the treasury, or
both.
2. Capitalized terms used herein shall have the same meanings
ascribed to them in the Plan.
IN WITNESS WHEREOF, Reinsurance Group of America, Incorporated hereby
adopts the foregoing amendment this 26th day of May, 2004.
REINSURANCE GROUP OF AMERICA,
INCORPORATED
/s/ A. Greig Woodring
------------------------------------
A. Greig Woodring
President and Chief Executive Officer
SECOND AMENDMENT TO THE
REINSURANCE GROUP OF AMERICA, INCORPORATED
FLEXIBLE STOCK PLAN
AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1998
WHEREAS, Reinsurance Group of America, Incorporated (the "Company")
established the Reinsurance Group of America, Incorporated Flexible Stock Plan
(the "Plan") to enhance the ability of the Company to reward and provide stock
based incentives to its key employees; and
WHEREAS, the Company's shareholders previously approved the Plan and
an amendment thereto; and
WHEREAS, on March 15, 2000, the Board of Directors of the Company
approved an amendment to the Plan, subject to shareholder approval, to
increase the total number of shares authorized for issuance under the Plan by
1,500,000 shares; and
WHEREAS, the Company's shareholders approved the amendment on May 24,
2000; and
WHEREAS, on January 29, 2003, the Compensation Committee of the Board
of Directors of the Company approved a second amendment to the Plan, subject
to shareholder approval, to increase the total number of shares authorized for
issuance under the Plan by 1,500,000 shares.
NOW, THEREFORE, the Company hereby amends the Plan as follows:
1. Effective upon the date of approval of this amendment by the
Company's shareholders, Section 3.1 of the Plan is amended in its entirety to
read as follows:
3.1 Number of Shares. The number of Shares which may be
----------------
issued or sold or for which Options, SARs or Performance
Shares may be granted under the Plan shall be 6,260,077
Shares. Such number of Shares shall increase annually,
effective as of the first day of each Fiscal Year, by the
number of Shares equal to 5% of the number of Shares
allocated to this Plan as of the first day of such Fiscal
Year. Such Shares may be authorized but unissued Shares,
Shares held in the treasury, or both.
2. Capitalized terms used herein shall have the same meanings
ascribed to them in the Plan.
IN WITNESS WHEREOF, Reinsurance Group of America, Incorporated hereby
adopts the foregoing amendment this 28th day of May, 2003.
REINSURANCE GROUP OF AMERICA, INCORPORATED
By: /s/ A. Greig Woodring
-------------------------------------
A. Greig Woodring, President and
Chief Executive Officer
AMENDMENT TO THE
REINSURANCE GROUP OF AMERICA, INCORPORATED
FLEXIBLE STOCK PLAN
AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1998
WHEREAS, Reinsurance Group of America, Incorporated (the "Company")
established the Reinsurance Group of America, Incorporated Flexible Stock Plan
(the "Plan") to enhance the ability of the Company to reward and provide stock
based incentives to its key employees; and
WHEREAS, the Company's shareholders previously approved the Plan and
an amendment thereto; and
WHEREAS, on March 15, 2000, the Board of Directors of the Company
approved a second amendment to the Plan, subject to shareholder approval, to
increase the total number of shares authorized for issuance under the Plan by
1,500,000 shares.
NOW, THEREFORE, the Company hereby amends the Plan as follows:
1. Effective upon the date of approval of this amendment by the
Company's shareholders, Section 3.1 of the Plan is amended in its entirety to
read as follows:
3.1 Number of Shares. The number of Shares which may be
----------------
issued or sold or for which Options, SARs or Performance
Shares may be granted under the Plan shall be 3,486,564
Shares. Such number of Shares shall increase annually,
effective as of the first day of each Fiscal Year,
commencing with the Fiscal Year beginning in 2001, by the
number of Shares equal to 5% of the number of Shares
allocated to this Plan as of the first day of such Fiscal
Year. Such Shares may be authorized but unissued Shares,
Shares held in the treasury, or both.
2. Capitalized terms used herein shall have the same meanings
ascribed to them in the Plan.
IN WITNESS WHEREOF, Reinsurance Group of America, Incorporated hereby
adopts the foregoing amendment this 16th day of March, 2000.
REINSURANCE GROUP OF AMERICA, INCORPORATED
By: /s/ A. Greig Woodring
-------------------------------------
A. Greig Woodring, President and
Chief Executive Officer
REINSURANCE GROUP OF AMERICA, INCORPORATED
FLEXIBLE STOCK PLAN
AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1998
REINSURANCE GROUP OF AMERICA, INCORPORATED
FLEXIBLE STOCK PLAN
TABLE OF CONTENTS
Page
----
ARTICLE I - NAME AND PURPOSE
1.1 Name 1
1.2 Purpose 1
ARTICLE II - DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION
2.1 General Definitions 1
(a) Affiliate 1
(b) Agreement 1
(c) Benefit 1
(d) Board 1
(e) Cash Award 1
(f) Change of Control 1
(g) Code 1
(h) Company 1
(i) Committee 1
(j) Common Stock 2
(k) Effective Date 2
(l) Employee 2
(m) Employer 2
(n) Exchange Act 2
(o) Fair Market Value 2
(p) Fiscal Year 2
(q) ISO 2
(r) NQSO 2
(s) Option 2
(t) Other Stock Based Award 2
(u) Parent 2
(v) Participant 2
(w) Performance Share 2
(x) Plan 2
(y) Restricted Stock 3
(z) Rule 16b-3 3
(aa) SEC 3
(bb) Share 3
(cc) SAR 3
(dd) Subsidiary 3
2.2 Other Definitions 3
2.3 Conflicts in Plan 3
ARTICLE III - COMMON STOCK
3.1 Number of Shares 3
3.2 Reusage 3
3.3 Adjustments 3
ARTICLE IV - ELIGIBILITY
4.1 Determined By Committee 4
ii
ARTICLE V - ADMINISTRATION
5.1 Committee 4
5.2 Authority 4
5.3 Delegation 5
5.4 Adjudication of Claims 5
ARTICLE VI - AMENDMENT
6.1 Power of Board 5
6.2 Limitation 5
ARTICLE VII - TERM AND TERMINATION
7.1 Term 6
7.2 Termination 6
ARTICLE VIII - MODIFICATION OR TERMINATION OF BENEFITS
8.1 General 6
8.2 Committee's Right 6
ARTICLE IX - CHANGE OF CONTROL
9.1 Right of Committee 6
ARTICLE X - AGREEMENTS AND CERTAIN BENEFITS
10.1 Grant Evidenced by Agreement 7
10.2 Provisions of Agreement 7
10.3 Certain Benefits 7
ARTICLE XI - REPLACEMENT AND TANDEM AWARDS
11.1 Replacement 7
11.2 Tandem Awards 7
ARTICLE XII - PAYMENT, DIVIDENDS, DEFERRAL AND WITHHOLDING
12.1 Payment 7
12.2 Dividend Equivalents 8
12.3 Deferral 8
12.4 Withholding 8
ARTICLE XIII - OPTIONS
13.1 Types of Options 8
13.2 Shares for ISOs 8
13.3 Grant of ISOs and Option Price 8
13.4 Other Requirements for ISOs 8
13.5 NQSOs 8
13.6 Determination by Committee 8
13.7 Limitation Shares Covered by Options 9
ARTICLE XIV - SARS
14.1 Grant and Payment 9
14.2 Grant of Tandem Award 9
14.3 ISO Tandem Award 9
14.4 Payment of Award 9
14.5 Limitation on SARs. 9
iii
ARTICLE XV - RESTRICTED STOCK
15.1 Description 9
15.2 Cost of Restricted Stock 9
15.3 Non-Transferability 10
ARTICLE XVI - PERFORMANCE SHARES
16.1 Description 10
16.2 Grant 10
ARTICLE XVII - CASH AWARDS
17.1 Grant 10
17.2 Limitation on Amount 10
17.3 Restrictions 10
ARTICLE XVIII - OTHER STOCK BASED AWARDS AND OTHER BENEFITS
18.1 Other Stock Based Awards 10
18.2 Other Benefits 10
ARTICLE XIX - MISCELLANEOUS PROVISIONS
19.1 Underscored References 10
19.2 Number and Gender 11
19.3 Governing Law 11
19.4 Purchase for Investment 11
19.5 No Employment Contract 11
19.6 No Effect on Other Benefits 11
iv
REINSURANCE GROUP OF AMERICA, INCORPORATED
FLEXIBLE STOCK PLAN
ARTICLE I
---------
NAME AND PURPOSE
----------------
1.1 Name. The name of this Plan is the "Reinsurance Group of
----
America, Incorporated Flexible Stock Plan."
1.2 Purpose. The Company has established this Plan to attract,
-------
retain, motivate and reward Employees and other individuals, to encourage
ownership of the Company's Common Stock by Employees and other individuals,
and to promote and further the best interests of the Company by granting cash
and other awards.
ARTICLE II
----------
DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION
----------------------------------------------
2.1 General Definitions. The following words and phrases, when
-------------------
used in the Plan, unless otherwise specifically defined or unless the context
clearly otherwise requires, shall have the following respective meanings:
(a) Affiliate. A Parent or Subsidiary of the Company.
---------
(b) Agreement. The document which evidences the grant of any
---------
Benefit under the Plan and which sets forth the Benefit and the
terms, conditions and provisions of, and restrictions relating to, such
Benefit.
(c) Benefit. Any benefit granted to a Participant under the
-------
Plan.
(d) Board. The Board of Directors of the Company.
-----
(e) Cash Award. A Benefit payable in the form of cash.
----------
(f) Change of Control. The acquisition, without the approval of
-----------------
the Board, by any person or entity, other than the Company or a Related
Entity, of more than 20% of the outstanding Shares through a tender offer,
exchange offer or otherwise; the liquidation or dissolution of the Company
following a sale or other disposition of all or substantially all of its
assets; a merger or consolidation involving the Company which results in the
Company not being the surviving parent corporation; or any time during any
two-year period in which individuals who constituted the Board at the start of
such period (or whose election was approved by at least two-thirds of the then
members of the Board who were members at the start of the two-year period) do
not constitute at least 50% of the Board for any reason. A Related Entity is
the Parent, a Subsidiary or any employee benefit plan (including a trust
forming a part of such a plan) maintained by the Parent, the Company or a
Subsidiary.
(g) Code. The Internal Revenue Code of 1986, as amended. Any
----
reference to the Code includes the regulations promulgated pursuant to the
Code.
(h) Company. Reinsurance Group of America, Incorporated.
-------
(i) Committee. The Committee described in Section 5.1.
---------
1
(j) Common Stock. Any class of the Company's common stock.
------------
(k) Effective Date. The date that the Plan is approved by the
--------------
shareholders of the Company which must occur within one year before or after
approval by the Board. Any grants of Benefits prior to the approval by the
shareholders of the Company shall be void if such approval is not obtained.
(l) Employee. Any person employed by the Employer.
--------
(m) Employer. The Company and all Affiliates.
--------
(n) Exchange Act. The Securities Exchange Act of 1934, as
------------
amended.
(o) Fair Market Value. The closing price of Shares on the New
-----------------
York Stock Exchange on a given date, or, in the absence of sales on a given
date, the closing price on the New York Stock Exchange on the last day on
which a sale occurred prior to such date.
(p) Fiscal Year. The taxable year of the Company which is the
-----------
calendar year.
(q) ISO. An Incentive Stock Option as defined in Section 422 of
---
the Code.
(r) NQSO. A Non-Qualified Stock Option, which is an Option that
----
does not qualify as an ISO.
(s) Option. An option to purchase Shares granted under the Plan.
------
(t) Other Stock Based Award. An award under ARTICLE XVIII that
-----------------------
is valued in whole or in part by reference to, or is otherwise based on,
Common Stock.
(u) Parent. Any corporation (other than the Company or a
------
Subsidiary) in an unbroken chain of corporations ending with the Company, if,
at the time of the grant of an Option or other Benefit, each of the
corporations (other than the Company or a Subsidiary) owns stock possessing
50% or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. The Company's present Parent is
General American Life Insurance Company.
(v) Participant. An individual who is granted a Benefit under
-----------
the Plan. Benefits may be granted only to Employees, employees and owners of
entities which are not Affiliates but which have a direct or indirect
ownership interest in an Employer or in which an Employer has a direct or
indirect ownership interest, individuals who, and employees and owners of
entities which, are customers and suppliers of an Employer, individuals who,
and employees and owners of entities which, render services to an Employer,
and individuals who, and employees and owners of entities which, have
ownership or business affiliations with any individual or entity previously
described.
(w) Performance Share. A Share awarded to a Participant under
-----------------
ARTICLE XVI of the Plan.
(x) Plan. The Reinsurance Group of America, Incorporated
----
Flexible Stock Plan and all amendments and supplements to it.
2
(y) Restricted Stock. Shares issued under ARTICLE XV of the
----------------
Plan.
(z) Rule 16b-3. Rule 16b-3 promulgated by the SEC under the
----------
Exchange Act, as amended, or any successor rule in effect from time to time.
(aa) SEC. The Securities and Exchange Commission.
---
(bb) Share. A share of Common Stock.
-----
(cc) SAR. A Stock Appreciation Right, which is the right to
---
receive an amount equal to the appreciation, if any, in the Fair Market Value
of a Share from the date of the grant of the right to the date of its payment.
(dd) Subsidiary. Any corporation, other than the Company, in an
----------
unbroken chain of corporations beginning with the Company if, at the time of
grant of an Option or other Benefit, each of the corporations, other than the
last corporation in the unbroken chain, owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
2.2 Other Definitions. In addition to the above definitions,
-----------------
certain words and phrases used in the Plan and any Agreement may be defined in
other portions of the Plan or in such Agreement.
2.3 Conflicts in Plan. In the case of any conflict in the terms
-----------------
of the Plan relating to a Benefit, the provisions in the ARTICLE of the Plan
which specifically grants such Benefit shall control those in a different
ARTICLE.
ARTICLE III
-----------
COMMON STOCK
------------
3.1 Number of Shares. The number of Shares which may be issued
----------------
or sold or for which Options, SARs or Performance Shares may be granted under
the Plan shall initially be 825,000 Shares. Such number of Shares shall
increase annually, effective as of the first day of each Fiscal Year,
commencing with the Fiscal Year beginning in 1994, by the number of Shares
equal to 5% of the number of Shares allocated to this Plan as of the first day
of such Fiscal Year. Such Shares may be authorized but unissued Shares, Shares
held in the treasury, or both.
3.2 Reusage. If an Option or SAR expires or is terminated,
-------
surrendered, or cancelled without having been fully exercised, if Restricted
Shares or Performance Shares are forfeited, or if any other grant results in
any Shares not being issued, the Shares covered by such Option or SAR, grant
of Restricted Shares, Performance Shares or other grant, as the case may be,
shall again be available for use under the Plan.
3.3 Adjustments. If there is any change in the Common Stock of
-----------
the Company by reason of any stock dividend, spin-off, split-up, spin-out,
recapitalization, merger, consolidation, reorganization, combination or
exchange of shares, the number of SARs and number and class of shares
available for Options and grants of Restricted Stock, Performance Shares and
Other Stock Based Awards and the number of Shares subject to outstanding
Options, SARs, grants of Restricted Stock and Performance Shares which are not
vested, and Other Stock Based Awards, and the price thereof, as applicable,
shall be appropriately adjusted by the Committee.
3
ARTICLE IV
----------
ELIGIBILITY
-----------
4.1 Determined By Committee. The Participants and the Benefits
-----------------------
they receive under the Plan shall be determined solely by the Committee. In
making its determinations, the Committee shall consider past, present and
expected future contributions of Participants and potential Participants to
the Employer, including, without limitation, the performance of, or the
refraining from the performance of, services.
ARTICLE V
---------
ADMINISTRATION
--------------
5.1 Committee. The Plan shall be administered by the Committee.
---------
The Committee shall consist of three or more members of the Board each of whom
is a "Non-Employee Director" as defined in Rule 16b-3 and who is an "outside
director" as defined in Code Section 162(m)(4)(C)(i). The members of the
Committee shall be appointed by and shall serve at the pleasure of the Board,
which may from time to time appoint members in substitution for members
previously appointed and fill vacancies, however caused, in the Committee. The
Committee may select one of its members as its Chairman and shall hold its
meetings at such times and places as it may determine. A majority of its
members shall constitute a quorum. All determinations of the Committee shall
be made by a majority of its members. Any decision or determination reduced to
writing and signed by a majority of the members shall be fully as effective as
if it had been made by a majority vote at a meeting duly called and held.
5.2 Authority. Subject to the terms of the Plan, the Committee
---------
shall have discretionary authority to:
(a) determine the individuals to whom Benefits are granted, the
type and amounts of Benefits to be granted and the time of all such grants;
(b) determine the terms, conditions and provisions of, and
restrictions relating to, each Benefit granted;
(c) interpret and construe the Plan and all Agreements;
(d) prescribe, amend and rescind rules and regulations relating
to the Plan;
(e) determine the content and form of all Agreements;
(f) determine all questions relating to Benefits under the Plan;
(g) maintain accounts, records and ledgers relating to Benefits;
(h) maintain records concerning its decisions and proceedings;
(i) employ agents, attorneys, accountants or other persons for
such purposes as the Committee considers necessary or desirable;
4
(j) take, at anytime, any action permitted by Section 9.1
irrespective of whether any Change of Control has occurred or is imminent; and
(k) do and perform all acts which it may deem necessary or
appropriate for the administration of the Plan and carry out the purposes of
the Plan.
5.3 Delegation. Except as required by Rule 16b-3 with respect to
----------
grants of Options, Stock Appreciation Awards, Performance Shares, Other Stock
Based Awards, or other Benefits to individuals who are subject to Section 16
of the Exchange Act or as otherwise required for compliance with Rule 16b-3,
Code Section 162(m), or other applicable law, the Committee may delegate all
or any part of its authority under the Plan to any Employee, Employees or
committee.
5.4 Adjudication of Claims. The Committee shall have full and
----------------------
complete discretionary authority to make all determinations as to the right to
Benefits under the Plan. In the event that a Participant believes he has not
received the Benefits to which he is entitled under the Plan, a claim shall be
made in writing to the Committee. The claim shall be reviewed by the
Committee. If the claim is approved or denied, in full or in part, the
Committee shall provide a written notice of approval or denial within 90 days
with, in the case of a denial, the specific reasons for the denial and
specific reference to the provisions of the Plan and/or Agreement upon which
the denial is based. A claim shall be deemed denied if the Committee does not
take any action within the aforesaid 90 day period. If a claim is denied or
deemed denied and a review is desired, the Participant shall notify the
Committee in writing within 60 days of the receipt of notice of denial or the
date on which the claim is deemed to be denied, as the case may be. In
requesting a review, the Participant may review the Plan or any document
relating to it and submit any written issues and comments he may deem
appropriate. The Committee shall then review the claim and provide a written
decision within 60 days. This decision, if adverse to the Participant, shall
state the specific reasons for the decision and shall include reference to
specific provisions of the Plan and/or Agreement on which the decision is
based. The Committee's decision on review shall be final and binding.
ARTICLE VI
----------
AMENDMENT
---------
6.1 Power of Board. Except as hereinafter provided, the Board
--------------
shall have the sole right and power to amend the Plan at any time and from
time to time.
6.2 Limitation. The Board may not amend the Plan, without
----------
approval of the shareholders of the Company:
(a) in a manner which would cause Options which are intended to
qualify as ISOs to fail to qualify;
(b) in a manner which would cause the Plan to fail to meet the
requirements of Rule 16b-3 or Code Section 162(m); or
(c) in a manner which would violate applicable law.
5
ARTICLE VII
-----------
TERM AND TERMINATION
--------------------
7.1 Term. The Plan shall commence as of the Effective Date and,
----
subject to the terms of the Plan, including those requiring approval by the
shareholders of the Company and those limiting the period over which ISOs or
any other Benefits may be granted, shall continue in full force and effect
until terminated.
7.2 Termination. The Plan may be terminated at any time by the
-----------
Board.
ARTICLE VIII
------------
MODIFICATION OR TERMINATION OF BENEFITS
---------------------------------------
8.1 General. Subject to the provisions of Section 8.2, the
-------
amendment or termination of the Plan shall not adversely affect a
Participant's right to any Benefit granted prior to such amendment or
termination.
8.2 Committee's Right. Any Benefit granted may be converted,
-----------------
modified, forfeited or cancelled, in whole or in part, by the Committee if and
to the extent permitted in the Plan or applicable Agreement or with the
consent of the Participant to whom such Benefit was granted.
ARTICLE IX
----------
CHANGE OF CONTROL
-----------------
9.1 Right of Committee. In order to maintain a Participant's
------------------
rights in the event of a Change in Control, the Committee, in its sole
discretion, may, in any Agreement evidencing a Benefit, or at any time prior
to, or simultaneously with or after a Change in Control, provide such
protection as it may deem necessary. Without, in any way, limiting the
generality of the foregoing sentence or requiring any specific protection, the
Committee may:
(a) provide for the acceleration of any time periods relating to
the exercise or realization of such Benefit so that such Benefit may be
exercised or realized in full on or before a date fixed by the Committee;
(b) provide for the purchase of such Benefit, upon the
Participant's request, for an amount of cash equal to the amount which could
have been attained upon the exercise or realization of such Benefit had such
Benefit been currently exercisable or payable;
(c) make such adjustment to the Benefits then outstanding as the
Committee deems appropriate to reflect such transaction or change; and/or
(d) cause the Benefits then outstanding to be assumed, or new
Benefits substituted therefor, by the surviving corporation in such change.
6
ARTICLE X
---------
AGREEMENTS AND CERTAIN BENEFITS
-------------------------------
10.1 Grant Evidenced by Agreement. The grant of any Benefit
----------------------------
under the Plan may be evidenced by an Agreement which shall describe the
specific Benefit granted and the terms and conditions of the Benefit. The
granting of any Benefit shall be subject to, and conditioned upon, the
recipient's execution of any Agreement required by the Committee. Except as
otherwise provided in an Agreement, all capitalized terms used in the
Agreement shall have the same meaning as in the Plan, and the Agreement shall
be subject to all of the terms of the Plan.
10.2 Provisions of Agreement. Each Agreement shall contain such
-----------------------
provisions that the Committee shall determine to be necessary, desirable and
appropriate for the Benefit granted which may include, but not be limited to,
the following with respect to any Benefit: description of the type of Benefit;
the Benefit's duration; its transferability; if an Option, the exercise price,
the exercise period and the person or persons who may exercise the Option; the
effect upon such Benefit of the Participant's death or termination of
employment; the Benefit's conditions; when, if, and how any Benefit may be
forfeited, converted into another Benefit, modified, exchanged for another
Benefit, or replaced; and the restrictions on any Shares purchased or granted
under the Plan.
10.3 Certain Benefits. Except as otherwise expressly provided in
----------------
an Agreement, any Benefit granted to an individual who is subject to Section
16 of the Exchange Act shall be not transferable other than by will or the
laws of descent and distribution and shall be exercisable during his lifetime
only by him, his guardian or his legal representative.
ARTICLE XI
----------
REPLACEMENT AND TANDEM AWARDS
-----------------------------
11.1 Replacement. The Committee may permit a Participant to
-----------
elect to surrender a Benefit in exchange for a new Benefit.
11.2 Tandem Awards. Awards may be granted by the Committee in
-------------
tandem. However, no Benefit may be granted in tandem with an ISO except SARs.
ARTICLE XII
-----------
PAYMENT, DIVIDENDS, DEFERRAL AND WITHHOLDING
--------------------------------------------
12.1 Payment. Upon the exercise of an Option or in the case of
-------
any other Benefit that requires a payment to the Company, the amount due the
Company is to be paid:
(a) in cash;
(b) by the tender to the Company of Shares owned by the optionee
and registered in his name having a Fair Market Value equal to the amount due
to the Company;
7
(c) in other property, rights and credits, including the
Participant's promissory note if permitted under applicable law; or
(d) by any combination of the payment methods specified in (a),
(b) and (c) above.
Notwithstanding, the foregoing, any method of payment other than (a) may be
used only with the consent of the Committee or if and to the extent so
provided in an Agreement. The proceeds of the sale of Common Stock purchased
pursuant to an Option and any payment to the Company for other Benefits shall
be added to the general funds of the Company or to the Shares held in
treasury, as the case may be, and used for the corporate purposes of the
Company as the Board shall determine.
12.2 Dividend Equivalents. Grants of Benefits in Shares or Share
--------------------
equivalents may include dividend equivalent payments or dividend credit
rights.
12.3 Deferral. The right to receive any Benefit under the Plan
--------
may, at the request of the Participant, be deferred for such period and upon
such terms as the Committee shall determine, which may include crediting of
interest on deferrals of cash and crediting of dividends on deferrals
denominated in Shares.
12.4 Withholding. The Company, at the time any distribution is
-----------
made under the Plan, whether in cash or in Shares, may withhold from such
distribution any amount necessary to satisfy federal, state and local income
tax withholding requirements with respect to such distribution. Such
withholding may be in cash or in Shares.
ARTICLE XIII
------------
OPTIONS
-------
13.1 Types of Options. It is intended that both ISOs and NQSOs
----------------
may be granted by the Committee under the Plan.
13.2 Shares for ISOs. The number of Shares for which ISOs may be
---------------
granted on or after the Effective Date shall not exceed 150,000 Shares.
13.3 Grant of ISOs and Option Price. Each ISO must be granted to
------------------------------
an Employee and granted within ten years from the Effective Date. The purchase
price for Shares under any ISO shall be no less than the Fair Market Value of
the Shares at the time the Option is granted.
13.4 Other Requirements for ISOs. The terms of each Option which
---------------------------
is intended to qualify as an ISO shall meet all requirements of Section 422 of
the Code.
13.5 NQSOs. The terms of each NQSO shall provide that such Option
-----
will not be treated as an ISO. The purchase price for Shares under any NQSO
shall be equal to or greater than the Fair Market Value of the Shares at the
time the Option is granted.
13.6 Determination by Committee. Except as otherwise provided in
--------------------------
Section 13.2 through Section 13.5, the terms of all Options shall be
determined by the Committee.
8
13.7 Limitation on Shares Covered by Options. The maximum number
---------------------------------------
of Shares with respect to which such Options may be granted to any Participant
in any 1 year period shall not exceed 200,000 shares. For purposes of the
preceding sentence, the Shares covered by an Option that is cancelled shall
count against the maximum number of Shares, and, if the exercise price under
an Option is reduced, the transaction shall be treated as a cancellation of
the Option and a grant of a new Option.
ARTICLE XIV
-----------
SARS
----
14.1 Grant and Payment. The Committee may grant SARs. Upon
-----------------
electing to receive payment of a SAR, a Participant shall receive payment in
cash, in Common Stock, or in any combination of cash and Common Stock, as the
Committee shall determine.
14.2 Grant of Tandem Award. The Committee may grant SARs in
---------------------
tandem with an Option, in which case: the exercise of the Option shall cause a
correlative reduction in SARs standing to a Participant's credit which were
granted in tandem with the Option; and the payment of SARs shall cause a
correlative reduction of the Shares under such Option.
14.3 ISO Tandem Award. When SARs are granted in tandem with an
----------------
ISO, the SARs shall have such terms and conditions as shall be required for
the ISO to qualify as an ISO.
14.4 Payment of Award. SARs shall be paid, to the extent payment
----------------
is elected by the Participant (and is otherwise due and payable), as soon as
practicable after the date on which such election is made.
14.5 Limitation on SARs. The maximum number of SARs which may be
------------------
granted to any Participant in any 1 year period shall not exceed 15,000 SARs.
For purposes of the preceding sentence, any SARs that are cancelled shall
count against the maximum number of SARs, and, if the Fair Market Value of a
Share on which the appreciation under a SAR will be calculated is reduced, the
transaction shall be treated as a cancellation of the SAR and a grant of a new
SAR.
ARTICLE XV
----------
RESTRICTED STOCK
----------------
15.1 Description. The Committee may grant Benefits in Shares
-----------
available under ARTICLE III of the Plan as Restricted Stock. Shares of
Restricted Stock shall be issued and delivered at the time of the grant but
shall be subject to forfeiture until provided otherwise in the applicable
Agreement or the Plan. Each certificate representing Shares of Restricted
Stock shall bear a legend referring to the Plan and the risk of forfeiture of
the Shares and stating that such Shares are nontransferable until all
restrictions have been satisfied and the legend has been removed. The grantee
shall be entitled to full voting and dividend rights with respect to all
shares of Restricted Stock from the date of grant.
15.2 Cost of Restricted Stock. Grants of Shares of Restricted
------------------------
Stock shall be made at a per Share cost to the Participant equal to par value.
9
15.3 Non-Transferability. Shares of Restricted Stock shall not
-------------------
be transferable until after the removal of the legend with respect to such
Shares.
ARTICLE XVI
-----------
PERFORMANCE SHARES
------------------
16.1 Description. Performance Shares are the right of an
-----------
individual to whom a grant of such Shares is made to receive Shares or cash
equal to the Fair Market Value of such Shares at a future date in accordance
with the terms of such grant. Generally, such right shall be based upon the
attainment of targeted profit and/or performance objectives.
16.2 Grant. The Committee may grant an award of Performance
-----
Shares. The number of Performance Shares and the terms and conditions of the
grant shall be set forth in the applicable Agreement.
ARTICLE XVII
------------
CASH AWARDS
-----------
17.1 Grant. The Committee may grant Cash Awards at such times
-----
and (subject to Section 17.2) in such amounts as it deems appropriate.
17.2 Limitation on Amount. The Amount of any Cash Award in any
--------------------
Fiscal Year to any Participant who is subject to Section 16 of the Exchange
Act shall not exceed the greater of $100,000 or 50% of his cash compensation
(excluding any Cash Award under this ARTICLE XVII) for such Fiscal Year.
17.3 Restrictions. Cash Awards may be subject or not subject to
------------
conditions (such as an investment requirement), restricted or nonrestricted,
vested or subject to forfeiture and may be payable currently or in the future
or both.
ARTICLE XVIII
-------------
OTHER STOCK BASED AWARDS AND OTHER BENEFITS
-------------------------------------------
18.1 Other Stock Based Awards. The Committee shall have the
------------------------
right to grant Other Stock Based Awards which may include, without limitation,
the grant of Shares based on certain conditions, the payment of cash based on
the performance of the Common Stock, and the grant of securities convertible
into Shares.
18.2 Other Benefits. The Committee shall have the right to
--------------
provide types of Benefits under the Plan in addition to those specifically
listed, if the Committee believes that such Benefits would further the
purposes for which the Plan was established.
ARTICLE XIX
-----------
MISCELLANEOUS PROVISIONS
------------------------
19.1 Underscored References. The underscored references
----------------------
contained in the Plan are included only for convenience, and they shall not be
construed as a part of the Plan or in any respect affecting or modifying its
provisions.
10
19.2 Number and Gender. The masculine and neuter, wherever used
-----------------
in the Plan, shall refer to either the masculine, neuter or feminine; and,
unless the context otherwise requires, the singular shall include the plural
and the plural the singular.
19.3 Governing Law. This Plan shall be construed and
-------------
administered in accordance with the laws of the State of Missouri.
19.4 Purchase for Investment. The Committee may require each
-----------------------
person purchasing Shares pursuant to an Option or other award under the Plan
to represent to and agree with the Company in writing that such person is
acquiring the Shares for investment and without a view to distribution or
resale. The certificates for such Shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer. All
certificates for Shares delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem
advisable under all applicable laws, rules and regulations, and the Committee
may cause a legend or legends to be put on any such certificates to make
appropriate references to such restrictions.
19.5 No Employment Contract. The adoption of the Plan shall not
----------------------
confer upon any Employee any right to continued employment nor shall it
interfere in any way with the right of the Employer to terminate the
employment of any of its Employees at any time.
19.6 No Effect on Other Benefits. The receipt of Benefits under
---------------------------
the Plan shall have no effect on any benefits to which a Participant may be
entitled from the Employer, under another plan or otherwise, or preclude a
Participant from receiving any such benefits.
11