UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
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Check the appropriate box:
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COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Markel Corporation
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(Name of Registrant as Specified In Its Charter)
Markel Corporation
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[LOGO] Markel Corporation
Notice of Annual Meeting of Shareholders
To the Shareholders of Markel Corporation:
Notice is hereby given that the 2002 Annual Meeting of Shareholders of
Markel Corporation (the "Company") will be held at the Jefferson Hotel,
Franklin & Adams Streets, Richmond, Virginia, on Tuesday, May 21, 2002,
starting at 4:30 p.m.
The purposes for which the meeting is being held are:
1. To elect a Board of Directors consisting of 9 persons to serve for
the ensuing year;
2. To ratify or reject the selection by the Board of Directors of KPMG
LLP as the Company's independent auditors for the year ending December 31,
2002; and
3. To transact such other business as may properly come before the
meeting.
It is important that your shares be represented and voted. Shareholders,
whether or not they expect to attend the meeting in person, are requested to
date, sign and return the accompanying proxy card in the envelope provided, on
which no postage is needed if mailed in the United States.
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 2001 is being mailed to you with this Notice and the Proxy
Statement.
You are cordially invited to attend the meeting.
By Order of the Board of Directors
Secretary
March 27, 2002
[LOGO] Markel Corporation
4521 Highwoods Parkway
Glen Allen, Virginia 23060
-----------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 2002
-----------------
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Markel Corporation (the "Company") for use at the Annual Meeting
of Shareholders of the Company to be held May 21, 2002, or any adjournments
thereof, for the purposes set forth in this Proxy Statement and the attached
Notice of Annual Meeting of Shareholders. This Proxy Statement and the related
form of proxy are first being mailed to the shareholders of the Company on or
about March 27, 2002. The Board of Directors has fixed the close of business on
March 18, 2002, as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting and any adjournments thereof.
Each holder of record of the Company's Common Stock, no par value (the "Common
Stock"), on the record date will be entitled to one vote for each share then
registered in his or her name with respect to each matter properly brought
before the meeting. As of the close of business on the record date, 9,822,554
shares of Common Stock were outstanding and entitled to vote at the meeting.
If sufficient proxies are not returned in response to this solicitation,
supplementary solicitations may also be made by mail, telephone, electronic
communication or personal interview by directors, officers and regular
employees of the Company, none of whom will receive additional compensation for
these services. The Company may retain an outside proxy solicitation firm to
assist in the solicitation of proxies, but at this time does not have plans to
do so. Costs of solicitation of proxies will be borne by the Company, which
will reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in
forwarding proxy materials to the beneficial owners of shares held by them.
The shares represented by all properly executed proxies received by the
Secretary of the Company and not revoked as herein provided will be voted as
set forth herein, unless the shareholder directs otherwise in the proxy, in
which event such shares will be voted in accordance with such directions. Any
proxy may be revoked at any time before the shares to which it relates are
voted, either by written notice (which may be in the form of a substitute proxy
bearing a later date delivered to the secretary of the meeting) or by attending
the meeting and voting in person.
March 27, 2002
PRINCIPAL SHAREHOLDERS
The following table and footnotes set forth information with respect to
beneficial ownership of equity securities of the Company as of February 15,
2002, except as otherwise noted, by (i) each director; (ii) each executive
officer named in the Summary Compensation Table; (iii) each person known to the
Company to be the beneficial owner of more than 5% of its outstanding Common
Stock; and (iv) all directors and executive officers as a group. For purposes
of this table, "beneficial ownership" includes, as required by applicable
regulations, shares over which a person has or shares voting or investment
power. Except as otherwise indicated, each of the persons named below has sole
voting and investment power with respect to the shares of Common Stock
beneficially owned by that person.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
Common
Name Stock Percent
---- --------- -------
Alan I. Kirshner............................... 67,431(a) *
Anthony F. Markel.............................. 372,104(b) 3.79%
Steven A. Markel............................... 559,780(c) 5.70%
Darrell D. Martin.............................. 59,318(d) *
Thomas S. Gayner............................... 26,069(e) *
Mark J. Byrne.................................. 15,311(f) *
Douglas C. Eby................................. 5,906 *
Leslie A. Grandis.............................. 19,114(g) *
Stewart M. Kasen............................... 11,550 *
Gary L. Markel................................. 356,369(h) 3.63%
Jeremy D. Cooke................................ 8,078(i) *
Paul W. Springman.............................. 18,796(j) *
All directors and executive officers as a group 1,495,981(k) 15.21%
Robert E. Torray & Co., Inc.................... 790,175(l) 8.05%
Torray Corp.
Robert E. Torray
6610 Rockledge Drive, Suite 450
Bethesda, MD 20817
Ariel Capital Management, Inc.................. 743,275(m) 7.57%
John W. Rogers, Jr.
200 E. Randolph Drive, Suite 2900
Chicago, IL 60601
--------
* Less than 1% of class.
(a) Includes 230 shares held by Mr. Kirshner's wife as to which he disclaims
beneficial ownership.
(b) Includes 57,483 shares held in Grantor Retained Annuity Trusts for which
Mr. Anthony F. Markel is trustee and partial beneficiary. Includes 2,443
shares held in trust for his children and for which Mr. Anthony F. Markel
is trustee and partial beneficiary. Includes 2,657 shares held as trustee
for the benefit of Mr. Anthony F. Markel's children as to which he
disclaims beneficial ownership. Includes 2,850 shares held as trustee for
the benefit of his children as to which he disclaims beneficial ownership.
Includes 6,000 shares held by Mr. Markel's wife as to which shares he
disclaims beneficial ownership.
(c) Mr. Steven A. Markel's business address is 4521 Highwoods Parkway, Glen
Allen, VA 23060. Includes 86,726 shares held as co-trustee for the benefit
of the Lewis C. Markel Residuary Trust, 23,935 shares held as co-trustee
for the benefit of Mr. Kirshner's children, 23,845 shares held as
co-trustee with Gary L. Markel for the benefit of Mr. Anthony F. Markel's
children, 4,040 shares owned by Mr. Steven A. Markel's children and 18,000
shares held as trustee under a trust for non-employee directors under the
Company's
2
1989 Stock Option Plan, as to all of which shares Mr. Markel disclaims
beneficial ownership. Includes 2,600 shares held by a charitable remainder
trust for which Mr. Steven A. Markel is a co-trustee and in which he and his
wife retain a partial interest. Mr. Markel does not have investment or
voting control over any Markel shares held in the trust and accordingly he
disclaims beneficial ownership as to these shares.
(d) Includes 10,000 shares represented by options granted under the Company's
1986 Stock Option Plan which may be exercised within sixty days of December
31, 2001. Includes 3,500 shares held by Mr. Martin's wife as to which
shares he disclaims beneficial ownership.
(e) Includes 3,500 shares represented by options granted under the Company's
1986 Stock Option Plan which may be exercised within sixty days of December
31, 2001. Includes 447 shares held as trustee for the benefit of his wife.
(f) Includes 15,241 shares owned by a corporation as to which Mr. Byrne has
voting or dispositive power but as to which he disclaims beneficial
ownership.
(g) Includes 525 shares held by Mr. Grandis' wife as to which shares he
disclaims beneficial ownership.
(h) Includes 23,845 shares held as co-trustee with Mr. Steven A. Markel for the
benefit of Mr. Anthony F. Markel's children as to which he disclaims
beneficial ownership. Includes 321,030 shares held by the Markel Family
Limited Partnership. Mr. Gary L. Markel is the sole general partner of, and
holder of 99.9% of the beneficial interests in, the Markel Family Limited
Partnership. Includes 2,444 shares held in trust for his child and for
which Mr. Gary L. Markel is trustee and partial beneficiary. Includes 2,850
shares held as trustee for the benefit of his child.
(i) Includes 4,000 shares represented by options granted under the Company's
1986 Stock Option Plan which may be exercised within sixty days of December
31, 2001.
(j) Includes 1,000 shares represented by options granted under the Company's
1986 Stock Option Plan which may be exercised within sixty days of December
31, 2001. Includes 200 shares held by Mr. Springman's wife as to which he
disclaims beneficial ownership.
(k) Includes 18,500 shares represented by options granted under the Company's
1986 Stock Option Plan which may be exercised within sixty days of December
31, 2001. Includes 190,349 shares as to which beneficial ownership is
disclaimed.
(l) Based upon an Amended Schedule 13G filed by the named individual and
entities on February 14, 2002. Robert E. Torray & Co., Inc. has shared
voting and investment power with respect to these shares. In accordance
with written procedures adopted by his employer, Mr. Douglas C. Eby,
President of Robert E. Torray & Co., Inc., exercises no voting or
investment control over these Markel shares.
(m) Based upon an Amended Schedule 13G filed by the named individual and entity
on January 23, 2002.
3
ELECTION OF DIRECTORS
Nominees
A board of nine directors is to be elected at the meeting to serve until the
next annual meeting of shareholders and the election and qualification of their
successors. The Company's Board of Directors presently consists of the nine
directors who are named below as nominees and Mr. Byrne who is retiring from
the Board.
Each of the nominees has consented to being named as a nominee in this Proxy
Statement, has agreed to serve if elected, and has furnished to the Company the
information set forth in the following table as of December 31, 2001.
It is expected that each of the nominees will be able to serve, but in the
event that any such nominee is unable to serve for any reason (which event is
not now anticipated), the proxies reserve discretion to vote or refrain from
voting for a substitute nominee or nominees.
Shareholders may withhold authority to vote for any of the nominees on the
accompanying proxy. In the election of directors, the nine nominees receiving
the greatest number of votes will be elected even if they do not receive a
majority. Abstentions and broker non-votes will count towards a quorum but will
have no effect on any action taken at the meeting.
Name, Age, Positions with the Company or Principal Occupation Director
for Past Five Years, and Other Information Since
------------------------------------------------------------- --------
ALAN I. KIRSHNER, 66................................................................................. 1978
Chairman of the Board of Directors and Chief Executive Officer since September 1986. President
from 1979 to March 1992.
ANTHONY F. MARKEL, 59................................................................................ 1978
President and Chief Operating Officer since March 1992. Executive Vice President from 1979 to
March 1992. Director of Open Plan Systems, Inc.; Hilb, Rogal and Hamilton Company.
STEVEN A. MARKEL, 53................................................................................. 1978
Vice Chairman since March 1992. Treasurer from October 1986 to August 1993. Executive Vice
President from October 1986 to March 1992. Director of S&K Famous Brands, Inc.
DARRELL D. MARTIN, 53................................................................................ 1991
Executive Vice President and Chief Financial Officer since March 1992. Chief Financial Officer
since 1988.
THOMAS S. GAYNER, 40................................................................................. 1998
Chief Investment Officer since January 2001. Vice President, Equity Investments from May 1995 to
December 2000. President, Markel Gayner Asset Management Corporation, an investment advisory
subsidiary of the Company, since December 1990.
DOUGLAS C. EBY, 42................................................................................... 2001
President of Robert E. Torray & Co. Inc., an independent money management firm located in
Bethesda, Maryland. Vice President of The Torray Fund, an investment fund managed by Robert E.
Torray & Co. Inc.
LESLIE A. GRANDIS, 57................................................................................ 1987
Secretary since February 1989. Partner, McGuireWoods LLP, Richmond, Virginia, attorneys-at-law,
since 1974. Director of Cornerstone Realty Income Trust, Inc.; CSX Trade Receivables Corporation.
4
Name, Age, Positions with the Company or Principal Occupation Director
for Past Five Years, and Other Information Since
------------------------------------------------------------- --------
STEWART M. KASEN, 62................................................................................... 1987
President, Schwarzschild Jewelers, Richmond, Virginia, since September 2001. Private investor from
October 1999 to August 2001. Chairman, President and Chief Executive Officer of Factory Card
Outlet Corp. from May 1998 to October 1999; Factory Card Outlet filed a petition for bankruptcy on
March 23, 1999. Private Investor from 1996 to 1998. Director of K2 Inc.; Department 56, Inc.; and
The Singer Companies.
GARY L. MARKEL, 55..................................................................................... 1978
President, Gary Markel & Associates, Inc., St. Petersburg, Florida, an independent insurance agency
since December 1984. President, Gary Markel Surplus Lines Brokerage, Inc.
Committees of the Board of Directors
The Board of Directors has a Compensation Committee and an Audit Committee.
The Company does not have a nominating committee.
Audit Committee members for 2001 included Mr. Kasen, Mr. Grandis and Mr. Eby
(since May 2001) with Mr. Kasen serving as Chairman. Compensation Committee
members during 2001 were Mr. Kasen (Chairman), Mr. Byrne and Mr. Gary Markel.
The Board of Directors, in its business judgment, has determined that all
members of the Audit Committee are "independent," as defined in the applicable
listing standards of the New York Stock Exchange.
During 2001 the Board of Directors held four regular and two special
meetings. There were six meetings of the Audit Committee and two meetings of
the Compensation Committee during 2001.
Compensation of Directors
Each non-employee director other than Mr. Byrne received for services as a
director during 2001 an annual fee of $10,000, plus $1,250 for each regular
director's meeting attended and reimbursement of expenses incurred in
connection with attending meetings. Mr. Byrne received no compensation for
service as a director but received reimbursement for expenses. Committee
members received a fee of $1,250 for each committee meeting attended on a day
other than a regularly scheduled board meeting. Non-employee directors are also
eligible to participate, up to the total amount of fees received by the
director, in the Company's Employee Stock Purchase and Bonus Plan (the "Stock
Plan"). Under this plan amounts specified by a director are withheld from a
director's fees and forwarded to an independent administrator who purchases
shares of the Company's Common Stock on behalf of the director participant. In
addition the Company provides a "bonus" of one share for every ten share (20
share if a Company loan is made) net increase in shares owned under the plan in
a calendar year. Mr. Eby also participated in the Stock Plan during 2001,
purchasing 137 shares for approximately $25,500 and received 14 bonus shares
worth approximately $2,588 at the time of the award. The Company also offers
loans to all employees and non-employee directors to facilitate the purchase of
shares under this plan. Messrs. Kasen and Grandis availed themselves of this
opportunity during 1997 and Mr. Eby did so in 2001. See "Certain Transactions."
Non-employee Director Stock Option Plan
In 1989, the Company established a Stock Option Plan for Non-Employee
Directors (the "Directors Plan") which provided for one-time automatic awards
to non-employee directors of options to purchase 6,000 shares of the Company's
Common Stock. This plan terminated, as to future grants, on December 31, 1998.
The Directors Plan was amended in early 1999 to permit participants to defer
receipt of shares of Common Stock upon exercise of options. At December 31,
1999, three non-employee directors had exercised options and deferred receipt
of shares under the Directors Plan.
5
Family Relationships
Anthony F. Markel and Gary L. Markel are brothers, and Steven A. Markel is
their first cousin.
EXECUTIVE COMPENSATION
The following table provides compensation information for the Company's
Chief Executive Officer and all other executive officers. Mr. Cooke, Mr.
Springman and Mr. Gayner became executive officers for 2000.
SUMMARY COMPENSATION TABLE(1),(2)
Annual Compensation
------------------- Other Annual All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation Compensation ($)(3)
--------------------------- ---- ---------- --------- ------------ -------------------
Alan I. Kirshner...................... 2001 $395,000 $ 0 -- $133,417
Chairman and CEO 2000 $395,000 $158,000 -- $149,300
1999 $375,000 $262,500 -- $145,024
Anthony F. Markel..................... 2001 $395,000 $ 0 -- $118,819
President and COO 2000 $395,000 $158,000 -- $110,872
1999 $375,000 $262,500 -- $100,562
Steven A. Markel...................... 2001 $395,000 $ 0 -- $ 91,981
Vice Chairman 2000 $395,000 $158,000 -- $ 86,094
1999 $375,000 $262,500 -- $ 78,224
Darrell D. Martin..................... 2001 $320,000 $ 0 -- $ 45,589
Executive Vice President and CFO 2000 $320,000 $128,000 -- $ 58,148
1999 $275,000 $192,500 -- $ 49,114
Jeremy D. Cooke....................... 2001 $401,583 $207,375 $593,853(4) $ 23,514
President, Markel International, Ltd. 2000 $358,833 $197,500 $617,982(4) $ 26,920
Paul W. Springman..................... 2001 $315,000 $167,000 -- $ 74,284
President, Markel North America 2000 $300,000 $369,200 $ 87,531(5) $ 24,415
Thomas S. Gayner...................... 2001 $225,000 $320,278(6) -- $ 27,602
Chief Investment Officer 2000 $200,000 $267,146(6) -- $ 28,553
--------
(1) In accordance with applicable rules of the Securities and Exchange
Commission, this table excludes all amounts paid under group life, health,
hospitalization, medical reimbursement and relocation plans which do not
discriminate in scope, terms or operation in favor of executive officers or
directors. This table also excludes for each executive officer the value of
perquisites if they do not exceed the lesser of $50,000 or 10% of bonus and
salary for such executive officer.
(2) At December 31, 2001 Mr. Martin, Mr. Cooke, Mr. Springman and Mr. Gayner
held restricted bonus shares received in connection with the Company's 1998
stock loan plan. The number of shares held and their value at December 31,
2001 was 73 and $13,074; 17 and $3,113; 11 and $ 1,961; 19 and $3,384, for
Mr. Martin, Mr. Cooke, Mr. Springman and Mr. Gayner, respectively. If
dividends were paid on shares of Common Stock the same dividend would be
paid on restricted bonus shares. The Company has never paid a cash dividend
on its Common Stock and does not anticipate paying cash dividends in the
near future.
(3) Amounts shown in this column include the Company's contributions under the
Company's Retirement Savings (401k) Plan in the amount of $15,300 for each
executive. In the case of Messrs. Kirshner and Anthony and Steven Markel,
the amounts shown also include accruals of $118,117 for Mr. Kirshner,
$103,519 for Anthony Markel and $76,681 for Steven Markel pursuant to
Employment Agreements which provide for deferred compensation and earnings
thereon. Includes for Mr. Martin, Mr. Cooke, Mr. Springman and Mr. Gayner,
$30,289, $8,214, $8,984 and $9,802, respectively, representing the
difference
6
between the interest rate charged on loans made to them under the Company's
stock loan plans and 120% of the applicable federal long-term rate at the
time the loan was made (a rate presumed for certain purposes under
Securities and Exchange Commission regulations to be a maximum market
rate). Includes $50,000 for Mr. Springman and $2,500 for Mr. Gayner
representing the value of bonus shares awarded in 2001 in connection with
new stock loans in 2001. See "Certain Transactions." In accordance with
applicable rules the information in this footnote relates only to 2001.
(4) Includes $345,765 and $194,209 in 2001 and $364,037 and $193,457 in 2000
for tax equalization payments and foreign housing allowance, respectively,
related to Mr. Cooke's overseas assignment. The Company is entitled to a
repayment from Mr. Cooke pursuant to tax equalization agreements with him
when his calendar year tax returns are completed and filed and these
amounts will be reported as a reduction in this footnote in the year in
which repayments are received. See "Certain Transaction--Other
Transactions."
(5) Represents relocation expenses reimbursed by the Company during 2000.
(6) Includes bonus derived from the revenues of Markel Gayner Asset Management
Corporation, an investment advisory subsidiary of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Messrs. Kasen, Byrne and Gary Markel are members of the Compensation
Committee of which Mr. Kasen is Chairman. The Compensation Committee has
responsibility for establishing and reviewing the compensation of the Chairman
and CEO, the Vice-Chairman, the President and the Executive Vice President &
Chief Financial Officer ("Senior Executive Officers"), and administering the
1993 Incentive Stock Plan. Compensation for other executive officers is
recommended by the Vice-Chairman and President.
The Company's compensation packages for Senior Executive Officers for 2001
consisted of base salary, annual performance based bonuses, contributions to
retirement plans and in the case of Messrs. Kirshner, Anthony Markel and Steven
Markel, deferred compensation benefits.
In general, base salary levels are set at the minimum levels believed by the
Committee to be sufficient to attract and retain qualified executives when
considered with other components of the Company's compensation structure.
Annual base salaries for Senior Executive Officers were set at $395,000
($320,000 for Mr. Martin) effective as of January 1, 2000 and have not been
adjusted since that date. In establishing salaries, including Mr. Kirshner's
salary as Chief Executive Officer, the Committee considers years of service,
level of experience and areas of responsibility, the annual rate of inflation
and the Company's operating performance.
In addition to base salary, the Company has approved a bonus plan for Senior
Executive Officers in which cash bonuses are paid based on increases in the
book value of the Company's Common Stock (the "Executive Bonus Plan"). The
Committee believes that consistent increases in book value will enhance the
value of the Company and will, over time, result in higher stock prices.
Bonuses for other executive officers are based primarily on underwriting
results of the operations reporting to them for operational officers and
investment results and advisory fee income for the chief investment officer. In
all cases at least a portion of the bonus is based on the Company's five-year
compound growth in book value.
7
Bonus Plan For Senior Executive Officers
Under the Executive Bonus Plan, bonuses for Senior Executive Officers,
expressed as a percentage of base salary, are awarded based on a five-year
average of the compound growth in book value per share of Common Stock as set
forth in the following table.
5 Year Average Compound Growth Bonus as %
In Adjusted Book Value Per Share of Base Salary
-------------------------------- --------------
Under 15% 0%
15% 25%
16% 40%
17% 55%
18% 70%
19% 85%
20% 100%
21% 115%
22% 130%
23% 145%
24% 160%
25% 175%
Over 25% Discretionary
The five-year average compound growth in adjusted book value per share for
2001 was 9% and accordingly no bonus was earned under the Executive Bonus Plan.
For purposes of this plan, book value calculations are adjusted to exclude
the benefit of issuing equity securities at prices above the preceding year end
book value per share and to exclude the goodwill amortization costs resulting
from a transaction in which equity securities are issued.
The Committee has not historically made annual stock option grants to
executive officers but has made grants from time to time to attract new
officers.
Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a
$1,000,000 limit on the amount of U. S. compensation that will be deductible
for U. S. tax purposes by the Company with respect to each of the Chief
Executive Officer and the four other most highly compensated executive
officers. Performance based compensation that meets certain requirements will
not be subject to the deduction limit. The Committee, with the assistance of
the Company's legal counsel, has reviewed the impact of Section 162(m) on the
Company and believes it is unlikely that the U.S. compensation to be paid to
any executive officer during the fiscal year ending December 31, 2002 will
exceed the limit. The Committee will continue to monitor the impact of the
Section 162(m) limit and will attempt to avoid loss of tax deductions in future
years as long as doing so is consistent with the Committee's objectives for
management compensation.
MEMBERS OF THE COMPENSATION COMMITTEE
Stewart M. Kasen, Chairman, Gary L. Markel, Mark J. Byrne
8
Performance Graph
The following graph compares the cumulative total return (based on share
price) on the Company's Common Stock with the cumulative total return of
companies included in the S&P 500 Index and the Dow Jones Property and Casualty
Insurance Companies Index. This information is provided in accordance with SEC
requirements and is not necessarily indicative of future results.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
[CHART]
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Markel Corporation..................... 100 173 201 172 201 200
S&P 500................................ 100 133 171 208 189 166
Dow Jones Property & Casualty Insurance 100 141 134 99 162 156
--------
* $100 invested on 12/31/96 in stock or index--including reinvestment of
dividends. Fiscal years ending December 31.
Employment Agreements
The Company has entered into employment agreements with Mr. Kirshner and Mr.
Anthony Markel and Mr. Steven Markel which provide for the employment of those
individuals as executive officers. Each agreement has an initial term of one
year and is automatically renewed for additional terms of one year unless
either party gives 60 days notice of non-renewal. If the Company chooses not to
renew, the Company will be deemed to have
9
terminated the executive's employment without cause. The agreements provide for
a base annual salary, currently $395,000 for Messrs. Kirshner, Anthony Markel
and Steven Markel. Each executive has agreed to preserve the confidentiality of
the Company's proprietary data and has also agreed not to compete with the
Company for a period of two years following termination. In the event of an
executive's death or disability, the Company will continue to pay base salary
and benefits for twelve months. In the event the agreement is terminated by the
Company for cause or voluntarily by the executive, the Company's obligations
under the agreement will terminate. In the event the agreement is terminated by
the Company without cause, the Company will pay the executive his base salary
for twenty-four months from the date of termination. The agreements also
provide for annual salary reviews, bonuses by the Board of Directors, and
certain additional benefits.
The employment agreements also provide each executive with a deferred
compensation benefit pursuant to which the Company will set aside annually an
amount equal to between 8% and 16% of the executive's base salary plus interest
at the rate of 8% per annum on the amount set aside from the date of each
installment of base salary. The deferred compensation benefit is payable at a
time elected by the executive upon at least six month's advance notice or
failing an election upon the executive's death or termination of employment.
Payments may be limited to the extent necessary to prevent the payments from
becoming non-deductible to the Company under Section 162(m) of the Internal
Revenue Code. Amounts accrued for the year ended December 31, 2001, are
included in the Summary Compensation Table in the "All Other Compensation"
column.
The Company has entered into a similar agreement with Mr. Martin at a
current annual base salary of $320,000. The agreement with Mr. Martin does not
provide for deferred compensation benefits.
The Company has an understanding with Mr. Cooke set forth in a memorandum
dated August 16, 2000, concerning the terms of his employment. The
understanding reflects a commitment on Mr. Cooke's part to serve until at least
August 2003 and provide at least nine months notice if he does not intend to
serve beyond that date. The Company will provide 12 months notice of
termination except in the case of termination for cause. The understanding also
provides for a base annual salary, currently $414,750, a guaranteed bonus of
50% of salary for 2000 and 2001, payment by the Company of housing costs for
Mr. Cooke in the U.K., a tax equalization agreement to reimburse Mr. Cooke for
potential adverse tax consequences of his overseas assignment, and certain
additional benefits.
Certain Transactions
Loan Program
In order to encourage employee and director share ownership, the Company's
Stock Plan includes a loan program component available to all employees and
non-employee directors to facilitate the purchase of shares of the Company's
Common Stock (the "Loan Program"). The Loan Program also provides for the award
of bonus shares to participants at the rate of one bonus share for every 20 new
shares purchased through the Loan Program. In 1998, an additional restricted
bonus feature was added which awards bonus shares at the same one for 20 share
rate, but the restricted shares vest 20% a year commencing on the second
anniversary of the purchase. In 2000, the Loan Program was further amended to
eliminate the restricted share award feature on a prospective basis and instead
to provide for an incentive payment if the Company's growth in book value goals
are met. This incentive payment feature was extended to all outstanding loans
as well.
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The incentive payment is based on a five-year compound annual growth in book
value ("Company Incentive Payment") as follows:
5 year Average Compound Annual Company Incentive Payment
Growth in Adjusted Book Value Per Share as % of Original Loan Balance
--------------------------------------- -----------------------------
Under 15% 0%
15% 1.25%
16% 2.0%
17% 2.75%
18% 3.5%
19% 4.25%
20% 5%
21% 5.75%
22% 6.5%
23% 7.25%
24% 8.0%
25% 8.75%
Over 25% Discretionary
For these purposes, book value will be calculated in the same manner as the
Company's Bonus Plan for Executive Officers. This means book value will be
adjusted to exclude the benefit of issuing equity securities at prices above
the preceding year end book value per share and to exclude the goodwill
amortization costs resulting from a transaction in which equity securities are
issued.
The five-year average compound growth in adjusted book value per share for
2001 was 9% and accordingly no Company Incentive Payment was made under the
Loan Program.
One-half of the calculated annual incentive payment will be applied to a
participant's outstanding indebtedness to reduce the amount of the required
balloon payment or the loan balance and one-half of the calculated annual
incentive payment, net of taxes required to be withheld on the entire Company
Incentive Payment, will be paid directly to the participant by March 31 of a
given year. If a loan commitment is received on or before July 1 of a year, a
participant will be eligible for one-half of the applicable incentive payment,
if any, for the year in which the loan is made.
Messrs. Springman and Gayner participated in the Loan Program in 2001,
borrowing $1,000,000 and $50,000, respectively. They received bonus share
awards of 274 and 14 shares, respectively. The value of the bonus shares
awarded to Mr. Springman and Mr. Gayner is included in the "All Other
Compensation" column of the Summary Compensation Table.
Messrs. Kasen and Grandis, non-employee directors, participated in the Loan
Program in 1997, each borrowing a total of $500,000 and each purchasing 3,427
shares. They each also received 171 bonus shares with an approximate value at
the time of the award of $25,000. Mr. Eby participated in the Loan Program
during 2001, borrowing $1,000,000 to purchase 5,494 shares. Mr. Eby received
275 bonus shares valued at $50,000 in connection with this purchase.
All loans made under the Loan Program bear interest at 3% and are generally
due and payable within 10 years of the loan date. The unsecured loans are full
recourse and are partially amortizing, requiring a balloon payment at maturity
in the case of Messrs. Cooke, Gayner, Martin, Springman and Eby and are fully
amortizing in the case of Messrs. Grandis and Kasen. The loan may be prepaid at
any time, must be repaid in the event of an employee's termination, or in the
event a non-employee director ceases to be a director, and the interest rate
and payment terms are adjusted to terms comparable to market rates and terms in
the event a participant sells or
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pledges the shares purchased pursuant to the Loan Program (including bonus
shares awarded in connection with the Loan Program) without the Company's prior
consent.
The largest aggregate amount of principal and interest outstanding during
2001 on stock loans made to the named executive officers and directors was as
follows: Jeremy D. Cooke--$251,722; Douglas C. Eby--$1,022,500; Thomas S.
Gayner--$314,759; Leslie A. Grandis--$404,263; Stewart M. Kasen--$404,263;
Darrell D. Martin--$928,224; Paul W. Springman--$1,164,545.
Other Transactions
In April 2000 the Company made a loan to Mr. Kirshner in the amount of
$859,000. This loan was made to induce Mr. Kirshner to agree to a restructuring
of the supplemental retirement benefit accrued under his employment agreement.
Had Mr. Kirshner not agreed to such a restructuring, approximately $660,000
would have been non-deductible compensation expense to the Company. The loan to
Mr. Kirshner is in the form of a demand note which bears interest at 8% per
annum, the same rate at which interest accrues on the deferred compensation
benefits payable to Mr. Kirshner. It is expected that Mr. Kirshner will repay
the note over time as distributions are made of the deferred compensation
benefits. The largest aggregate amount of principal and interest outstanding on
this loan during 2001 was $763,490. At December 31, 2001 the loan balance was
$500,490.
During 2001 the Company paid Mr. Cooke $91,833 more than amounts due. This
amount was reimbursed, without interest, out of Mr. Cooke's 2001 bonus paid in
March 2002. In addition, in connection with tax equalization agreements, Mr.
Cooke became obligated to reimburse the Company $67,313 during 2001. This
amount was paid by Mr. Cooke in February 2002.
The Company owns a 1/8th interest in Dominion Citation Group, L.C.
("Dominion"), a limited liability company formed to own and operate a private
aircraft. The Company's initial investment in Dominion was approximately
$160,000. Steven Markel and Anthony Markel also purchased individually 1/8th
interests in Dominion on the same terms as those afforded to the Company. In
May of 1999 Mr. Kirshner also purchased a 1/8th interest in Dominion. Ownership
interests in Dominion entitle the member to use of the aircraft for a specified
number of hours at rates believed to be more favorable than those generally
available in the market. In November 2001, Dominion repurchased Mr. Anthony
Markel's interest for $164,000.
McGuireWoods LLP, of which Leslie A. Grandis is a partner, provides legal
services to the Company.
Stock Plans For Employees
The Company has outstanding options under the 1986 Stock Option Plan which
expired on November 3, 1996. As of January 31, 2001, 99,000 shares were
available for issuance under the 1993 Incentive Stock Plan. It is the Company's
current policy to use option and other stock award plans sparingly. No options
or other awards were granted to executive officers during 2001.
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The following table provides information, as of December 31, 2001,
concerning options held by the individuals included in the Summary Compensation
Table.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR -END OPTION VALUES
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Acquired Value Options at FY-End (#) FY-End ($)(2)
on Exercise Realized ------------------------- -------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
Jeremy D. Cooke.. -- -- 4,000 1,000 370,600 92,650
Thomas S. Gayner. 500 76,625 3,500 -- 501,900 --
Darrell D. Martin -- -- 10,000 -- 1,379,000 --
Paul W. Springman 1,000 138,250 1,000 -- 143,400 --
--------
(1) Difference between fair market value and exercise price on date of exercise.
(2) Difference between fair market value and exercise price at fiscal year end.
Compensation Committee Interlocks And Insider Participation
As noted earlier, the members of the Compensation Committee are Messrs.
Kasen, Byrne and Gary Markel. Mr. Kasen participated in the Company's Loan
Program during 1997 and as a result had indebtedness outstanding to the Company
at December 31, 2001 of $353,635. See "Certain Transactions--Loan Program."
Gary Markel & Associates, Inc. and Gary Markel Surplus Lines Brokerage,
Inc., entities owned by Gary L. Markel, place insurance with and on behalf of
the Company. During 2001, the Company paid $610,065 in commissions to those
entities. In addition, Gary Markel Surplus Lines Brokerage, Inc. placed certain
insurance coverages on behalf of the Company and received $237,285 in
commissions from independent insurance carriers in connection with such
placements.
SELECTION OF AUDITORS
KPMG LLP, independent certified public accountants, has been selected by the
Board of Directors as independent auditors of the Company for the current
fiscal year, subject to ratification or rejection by the shareholders.
Representatives of KPMG LLP are expected to be present at the Annual Meeting of
Shareholders and will have an opportunity to make a statement if they so desire
and are expected to be available to respond to appropriate questions from the
shareholders. In the event the shareholders do not ratify the selection of KPMG
LLP the selection of other independent auditors will be considered by the Board
of Directors.
Report of the Audit Committee
The Audit Committee acts under a written charter adopted by the Board of
Directors. The Committee's primary function is to assist the Board of Directors
in its oversight of the Company's financial reporting process. Management is
responsible for the preparation, presentation and integrity of the Company's
financial statements; accounting and financial reporting principles; internal
controls; and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditors, KPMG
LLP, are responsible for performing an independent audit of the consolidated
financial statements in accordance with generally accepted auditing standards.
In performing its oversight role, the Audit Committee has reviewed and
discussed the audited financial statements with management and the independent
auditors. The Audit Committee has also discussed with the independent auditors
the matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, and has received the written disclosures
and the letter from the independent auditors required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees. The Audit
Committee has considered whether the provision of non-audit services (none of
which related to financial information systems design and implementation) by
the independent auditors is
13
compatible with maintaining the auditors' independence and has discussed with
the auditors the auditors' independence. Based on the review and discussions
described in this Report, and subject to the limitations on its role and
responsibilities described below and in its charter, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.
The members of the Audit Committee are not experts in accounting or auditing
and rely without independent verification on the information provided to them
and on the representations made by management and the independent auditors.
Accordingly, the Audit Committee's oversight does not provide an independent
basis to determine that the Company's financial statements have been prepared
in accordance with generally accepted accounting principles or that the audit
of the Company's financial statements by KPMG LLP has been carried out in
accordance with generally accepted auditing standards.
MEMBERS OF THE AUDIT COMMITTEE
Stewart M. Kasen, Chairman, Douglas C. Eby, Leslie A. Grandis
Audit Fees
The aggregate fees billed to the Company in 2001 by KPMG LLP for audit
services, including (i) actuarial audit support, (ii) subsidiary statutory
audits and (iii) reviews of the consolidated financial statements included in
the Company's Forms 10-Q and 10-K, were $2,103,602.
All Other Fees
The aggregate fees billed to the Company during 2001 by KPMG LLP for all
non-audit services were $841,414, consisting of $219,413 in audit related fees
and $622,001 in non-audit fees. Audit related services consisted of services
related to SEC registration statements and filings and employee benefit plan
audits. Non-audit related services consisted of tax consulting services,
consulting services regarding the organization of the information technology
function in the UK, pension consulting services in the UK, and executive tax
services. None of the services provided by KPMG LLP consisted of financial
information systems design or implementation services.
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the meeting. However, if any other matters are properly presented, or if
any question arises as to whether any matter has been properly presented and is
a proper subject for shareholder action, the persons named as proxies in the
accompanying proxy intend to vote the shares represented by such proxy in
accordance with their best judgment.
14
SHAREHOLDER PROPOSALS FOR NEXT MEETING
Any shareholder desiring to make a proposal to be acted upon at the next
Annual Meeting of Shareholders must present the proposal to the Company at its
principal executive offices in Glen Allen, Virginia, no later than November 27,
2002 in order for the proposal to be included in the Company's proxy materials.
Any such proposal should meet the applicable requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations
thereunder.
For shareholder proposals not included in the Company's proxy statement for
the 2003 Annual Meeting, the persons named by the Board of Directors proxy will
be entitled to exercise discretionary voting power in the circumstances set
forth in Rule 14a-4(c) of the Exchange Act unless the shareholder making a
proposal (i) notifies the Company Secretary of the proposal by February 10,
2003 and (ii) otherwise follows the procedures specified in Rule 14a-4(c).
By Order of the Board of Directors
Leslie A. Grandis
Secretary
March 27, 2002
15
-- FOLD AND DETACH HERE --
MARKEL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 21, 2002
The undersigned, having received the Annual Report to Shareholders and the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement dated
March 27, 2002 hereby appoints Alan I. Kirshner, Anthony F. Markel and Steven
A. Markel (each with power to act alone) as proxies, with full power of
substitution, and hereby authorizes them to represent and vote, as directed
below, all the shares of Common Stock of Markel Corporation, held of record by
the undersigned on March 18, 2002, at the Annual Meeting of Shareholders to be
held on May 21, 2002, and any adjournment thereof.
The Board of Directors recommends a vote "FOR" Proposals 1 and 2.
(1) Election of Directors
[_] FOR all nominees listed [_] WITHHOLD AUTHORITY to vote for all
(except as indicated to the contrary) nominees listed
Nominees: Douglas C. Eby, Thomas S. Gayner, Leslie A. Grandis, Stewart
M. Kasen, Alan I. Kirshner, Anthony F. Markel, Gary L. Markel, Steven A.
Markel, Darrell D. Martin
(INSTRUCTION: To withhold authority to vote for any individual nominee
writes the nominee's name on the line provided below.)
---------------------------------------------
(Please date and sign on the reserve side)
- FOLD AND DETACH HERE -
(2) To ratify or reject the selection by the Board of Directors of KPMG LLP as
the Company's independent auditors for the year ending December 31, 2002.
[_] FOR [_] AGAINST [_] ABSTAIN
(3) In their discretion, on such other matters as may properly come before the
meeting, or, if any nominee listed in Proposal 1 above is unable to serve
for any reason, to vote or refrain from voting for a substitute nominee or
nominees.
This proxy when properly executed will be voted as directed. WHERE NO DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
Please sign your name(s) exactly as they
appear hereon. If signer is a
corporation, please sign the full
corporate name by duly authorized
officer. If an attorney, guardian,
administrator, executor, or trustee,
please give full title as such. If a
partnership, sign in partnership name by
authorized person.
Signature:
__________________________________________
Dated:
____________________________________, 2002
PLEASE COMPLETE, DATE, SIGN AND RETURN
THIS PROXY PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
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