SCHEDULE 14A
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the registration / X /
Filed by a party other than the registrant / /
/ / 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 Section 240.14a-11(c) or
Section 240.14a-12
AMERICAN FINANCIAL GROUP, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement of 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(k)(4)
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:
/ / 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:
AMERICAN FINANCIAL GROUP, INC.
One East Fourth Street
Cincinnati, Ohio 45202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on May 28, 1998
To our Shareholders:
The Annual Meeting of Shareholders of American Financial
Group, Inc. will be held on Thursday, May 28, 1998, at 10:30
a.m., at The Cincinnatian Hotel, 601 Vine Street, Cincinnati,
Ohio. The purposes of the meeting are:
1. To elect eight directors; and
2. To transact such other business as may
properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on
March 31, 1998 are entitled to receive notice of and to vote at
the meeting or any adjournment thereof.
You are invited to be present at the meeting so that you can
vote in person. Whether or not you plan to attend the meeting,
please date, sign and return the accompanying proxy form in the
enclosed, postage-paid envelope. If you do attend the meeting,
you may either vote by proxy or revoke your proxy and vote in
person. You may also revoke your proxy at any time before the
vote is taken at the meeting by written revocation or by
submitting a later-dated proxy form.
Sincerely,
Carl H. Lindner
Chairman of the Board and
Chief Executive Officer
Cincinnati, Ohio
April 21, 1998
AMERICAN FINANCIAL GROUP, INC.
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of American
Financial Group, Inc. ("AFG" or the "Company") for use at the
Annual Meeting of Shareholders (the "Meeting") to be held on
Thursday, May 28, 1998, at 10:30 a.m. and any adjournment
thereof. The approximate mailing date of this Proxy Statement
and accompanying proxy form is April 21, 1998. At the Meeting,
shareholders will be asked to elect eight directors and to
transact such other business as may properly come before the
Meeting or any adjournment thereof.
VOTING AT THE MEETING
Record Date; Shares Outstanding
As of March 31, 1998, the record date for determining
shareholders entitled to notice of and to vote at the Meeting
(the "Record Date"), the Company had outstanding one class of
voting securities, its common stock, without par value ("Common
Stock"). At the Record Date, 59,947,762 shares of Common Stock
were outstanding, excluding 18,666,614 shares beneficially owned
by American Financial Corporation ("AFC") and 1,368,691 shares
held by American Premier Underwriters, Inc. ("APU"), each a
subsidiary of the Company. Under Ohio state law, the shares held
by subsidiaries are not entitled to vote and are therefore not
considered to be outstanding for purposes of the Meeting. Each
share of outstanding Common Stock is entitled to one vote on each
matter to be presented at the Meeting. Abstentions (including
instructions to withhold authority to vote for one or more
nominees) and broker non-votes are counted for purposes of
determining a quorum but will not be cast with respect to any
item voted on at the Meeting. As a result, abstentions and
broker non-votes will have no effect on the outcome of any matter
voted on at the Meeting.
Cumulative Voting
All shareholders have cumulative voting rights in the
election of directors and one vote per share on all other
matters. Cumulative voting allows a shareholder to multiply the
number of shares owned on the Record Date by the number of
directors to be elected and to cast the total for one nominee or
distribute the votes among the nominees as the shareholder
desires. Nominees who receive the greatest number of votes will
be elected. In order to invoke cumulative voting, notice of
cumulative voting must be given in writing to an executive
officer of the Company not less than 48 hours before the time
fixed for the holding of the Meeting.
Proxies
If a choice is specified on a properly executed proxy form,
the shares will be voted accordingly. If a proxy form is signed
without a preference indicated, those shares will be voted "FOR"
the election of the eight nominees proposed by the Board of
Directors. The authority solicited by this Proxy Statement
includes discretionary authority to cumulate votes in the
election of directors. If any other matters properly come before
the Meeting or any adjournment thereof, each properly executed
proxy form will be voted in the discretion of the proxies named
therein.
Shareholders may vote in person or by proxy at the Meeting.
Proxies given may be revoked at any time by filing with the
Company either a written revocation or a duly executed proxy
bearing a later date, or shareholders may appear at the Meeting
and vote in person.
Solicitation of proxies is being made by management at the
direction of the Company's Board of Directors, without additional
compensation, through the mail, in person, by facsimile or by
telephone. The cost will be borne by the Company. In addition,
the Company will request brokers and other custodians, nominees
and fiduciaries to forward proxy soliciting material to the
beneficial owners of shares held of record by such persons, and
the Company will reimburse them for their expenses in so doing.
The Company has also retained Morrow & Co., Inc. to aid in the
solicitation of proxies for a fee estimated at $4,000 plus out of
pocket expenses.
2
Adjournment and Other Matters
Approval of a motion for adjournment or other matters
brought before the Meeting requires the affirmative vote of a
majority of the shares voting at the Meeting. Management knows
of no other matters to be presented at the Meeting other than
those stated in the Notice.
Principal Shareholders
The following shareholders are the only persons known by the
Company to own beneficially 5% or more of its outstanding Common
Stock as of March 31, 1998:
Amount of Beneficial Ownership
Obtainable
Name and Address upon Exer-
of Common Stock cies of Percent of
Beneficial Owner Held (a) Options (b) Total Class (c)
- ------------------ ----------- ---------- ----- ----------
Carl H. Lindner
One East Fourth Street 6,683,227(d) 51,818 6,735,045 11.2%
Cincinnati, Ohio 45202
Carl H. Lindner III
One East Fourth Street 4,719,929 (e) 410,000 5,129,929 8.5%
Cincinnati, Ohio 45202
S. Craig Lindner
One East Fourth Street 4,720,231(f) 254,727 4,974,958 8.3%
Cincinnati, Ohio 45202
Keith E. Lindner
250 East Fifth Street 4,720,231(g) 250,000 4,970,231 8.3%
Cincinnati, Ohio 45202
The American Financial
Group, Inc. Retirement 4,402,433 - - - 4,402,433 7.3%
and Savings Plan (h)
One East Fourth Street
Cincinnati, Ohio 45202
(a) Unless otherwise noted, the holder has sole voting and
dispositive power with respect to the shares listed.
3
(b) Represents shares of Common Stock which may be acquired
within 60 days of March 31, 1998 through the exercise of
options granted under the Company's Stock Option Plan. The
Lindner family members listed above hold options (both
vested and unvested) to purchase the following numbers of
shares of Common Stock:
Carl H. Lindner 51,818
Keith E. Lindner 490,000
Carl H. Lindner III 490,000
S. Craig Lindner 490,000
(c) The percentages of outstanding shares of Common Stock
beneficially owned (within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934) by Carl H. Lindner III,
S. Craig Lindner and Keith E. Lindner are 7.4%, 7.0% and
10.6%, respectively, after attributing the shares held in
various trusts for the benefit of the minor children of S.
Craig Lindner and Carl H. Lindner III (for which Keith E.
Lindner acts as trustee with voting and dispositive power)
to Keith E. Lindner.
(d) Includes 3,290,002 shares held by his spouse, but excludes
5,021,328 shares held in two trusts for the benefit of his
family for which third parties act as trustees with voting
and dispositive power. Also excludes 112,941 shares held in
a charitable foundation over which Mr. Lindner has sole
voting and dispositive power but no pecuniary interest.
(e) Includes 18,528 shares held by a trust over which his spouse
has voting and dispositive power and 646,264 shares which
are held in various trusts for the benefit of his minor
children for which Keith E. Lindner acts as trustee with
voting and dispositive power.
(f) Includes 68,625 shares held by his spouse as custodian for
their minor children or in a trust over which his spouse has
voting and dispositive power and 775,714 shares which are
held in various trusts for the benefit of their minor
children for which Keith E. Lindner acts as trustee with
voting and dispositive power.
4
(g) Excludes 1,421,978 shares (described in footnotes (e) and
(f) above) which are held in various trusts for the benefit
of the minor children of his brothers, Carl H. Lindner III
and S. Craig Lindner, over which Keith E. Lindner has sole
voting and dispositive power but no pecuniary interest.
(h) The members of the Administrative Plan Committee of the
American Financial Group, Inc. Retirement and Savings Plan
(the "RASP") direct the voting of the securities held by the
RASP. Both of the members of such Committee are executives
of the Company.
Carl H. Lindner, S. Craig Lindner, Carl H. Lindner III,
Keith E. Lindner and trusts for their benefit (collectively, the
"Lindner Family") are the beneficial owners of approximately 44%
of the Company's Common Stock. The Lindner Family may be deemed
to be controlling persons of the Company.
PROPOSAL Election of Directors
The Board of Directors has nominated eight directors to hold
office until the next Annual Meeting of Shareholders and until
their successors are elected and qualified. If any of the
nominees should become unable to serve as a director, the proxies
will be voted for any substitute nominee designated by the Board
of Directors but, in any event, no proxy may be voted for more
than eight nominees. The eight nominees who receive the greatest
number of votes will be elected.
The nominees for election to the Board of Directors are CARL
H. LINDNER, KEITH E. LINDNER, CARL H. LINDNER III, S. CRAIG
LINDNER, THEODORE H. EMMERICH, JAMES E. EVANS, THOMAS M. HUNT and
WILLIAM R. MARTIN. All of these nominees were elected directors
at the last Annual Meeting of Shareholders of the Company's
predecessor held on May 29, 1997. See "Management" below for
information concerning the background, securities holdings,
remuneration and certain other matters relating to the nominees.
The Board of Directors recommends that shareholders vote FOR
the election of these eight nominees as directors.
5
MANAGEMENT
The directors, nominees and executive officers of the
Company and its predecessors are:
Director or
Executive
Age* Position Since
----- ------------------------ -----------
Carl H. Lindner 78 Chairman of the Board and
Chief Executive Officer 1959
S. Craig Lindner 43 Co-President and a Director 1979
Keith E. Lindner 38 Co-President and a Director 1981
Carl H. Lindner III 44 Co-President and a Director 1980
Theodore H. Emmerich 71 Director 1988
James E. Evans 52 Senior Vice President and
General Counsel and a Director 1976
Thomas M. Hunt 74 Director 1982
William R. Martin 69 Director 1994
Thomas E. Mischell 50 Senior Vice President - Taxes 1985
Fred J. Runk 55 Senior Vice President 1978
and Treasurer
- -------------------------
*As of March 31, 1998
Carl H. Lindner (Chairman of the Executive Committee) Mr.
Lindner is the Chairman of the Board and Chief Executive Officer
of the Company. During the past five years, Mr. Lindner has also
been Chairman of the Board and Chief Executive Officer of AFC, a
diversified financial services company which became a subsidiary
of the Company as a result of a transaction occurring in April
1995. He is Chairman of the Board of Directors of American
Annuity Group, Inc. ("AAG") and Chiquita Brands International,
Inc. ("Chiquita"). Mr. Lindner is the father of Carl H. Lindner
III, S. Craig Lindner and Keith E. Lindner.
S. Craig Lindner (Member of the Executive Committee) Since
March 1996, Mr. Lindner has served as Co-President and a director
of the Company. For over five years, Mr. Lindner has been
President of AAG, an 81%-owned subsidiary of AFC that markets tax-
deferred annuities principally to employees of educational
institutions. Mr. Lindner is also President of American Money
6
Management Corporation ("AMMC"), a subsidiary of AFC which
provides investment services for the Company and its affiliated
companies. Mr. Lindner is also a director of AAG and AFC.
Keith E. Lindner (Member of the Executive Committee) Since
March 1996, Mr. Lindner has served as Co-President and a director
of the Company. In March 1997, Mr. Lindner was named Vice
Chairman of the Board of Directors of Chiquita, a worldwide
marketer and producer of bananas and other food products in which
the Company has a 37.5% ownership interest. For more than five
years prior to that time, Mr. Lindner had been President and
Chief Operating Officer and a director of Chiquita. Mr. Lindner
is also a director of AFC.
Carl H. Lindner III (Member of the Executive Committee) Mr.
Lindner was President of the Company from February 1992 until he
became Co-President in March 1996. During the last five years,
Mr. Lindner has been President of Great American Insurance
Company ("Great American"), the principal property and casualty
insurance subsidiary of AFC. Mr. Lindner is also a director of
AFC.
Theodore H. Emmerich (Chairman of the Audit Committee;
Member of the Compensation Committee) Until his retirement in
1986, Mr. Emmerich was managing partner of the Cincinnati office
of the independent accounting firm of Ernst & Whinney. He is
also a director of AFC, Carillon Fund, Inc., Carillon Investment
Trust, Gradison Custodial Trust, Gradison-McDonald Municipal
Custodial Trust, Gradison-McDonald Cash Reserve Trust and Summit
Investment Trust.
James E. Evans Since April 1995, Mr. Evans has served as
Senior Vice President and General Counsel of the Company. For
more than five years, he has also been Vice President and General
Counsel of AFC. Mr. Evans is also a director of AFC.
Thomas M. Hunt (Member of the Compensation Committee)
During the past five years, Mr. Hunt has been Chairman of the
Board of Hunt Petroleum Corporation, an oil and gas production
company. He is also a director of AFC.
William R. Martin (Chairman of the Compensation Committee;
Member of the Audit Committee) During the past five years, Mr.
Martin has been Chairman of the Board (since 1993) and President
and Chief Executive Officer (until 1993) of MB Computing, Inc., a
computer software and services company. Mr. Martin is also a
director of AAG and AFC.
7
Thomas E. Mischell is Senior Vice President - Taxes of the
Company. He has served as a Vice President of AFC for over five
years.
Fred J. Runk is Senior Vice President and Treasurer of the
Company. He has served as Vice President and Treasurer of AFC
for more than five years.
In December 1993, Great American Communications Company,
which subsequently changed its name to Citicasters Inc.,
completed a comprehensive financial restructuring that included a
prepackaged plan of reorganization under Chapter 11 of the
Bankruptcy Code. Messrs. Carl H. Lindner, Mischell and Runk had
been executive officers of that company within two years before
its bankruptcy reorganization. The Company sold its interest in
Citicasters in September 1996.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires AFG's officers,
directors and persons who own more than ten percent of AFG's
Common Stock to file reports of ownership with the Securities and
Exchange Commission and to furnish AFG with copies of these
reports. The Company believes that all filing requirements were
met during 1997.
Securities Ownership
The following table sets forth information, as of March 31,
1998, concerning the beneficial ownership of equity securities of
the Company and its subsidiaries by each director, nominee for
director, the executive officers named in the Summary
Compensation Table (see "Compensation" below) and by all
directors and executive officers as a group. Such information is
based on data furnished by the persons named. Except as set
forth in the following table, no director or executive officer
beneficially owned 1% or more of any class of equity security of
the Company or any of its subsidiaries outstanding at March 31,
1998.
8
Amount and Nature of Beneficial Ownership (a) (b)
-------------------------------------------------
Shares of Common Stock
Shares of Common Obtainable on Exercise
Name of Beneficial Owner Stock Held of Options (c)
- -----------------------------------------------------------------------------
- -
Carl H. Lindner (d) 6,683,227 (e) 51,818
Carl H. Lindner III (d) 4,719,929 (f) 410,000
S. Craig Lindner (d) 4,720,231 (g) 254,727
Keith E. Lindner (d) 4,720,231 (h) 250,000
Theodore H. Emmerich 4,844 14,819
James E. Evans 104,301 67,000
Thomas M. Hunt 4,172 14,819
William R. Martin 35,044 8,000
All directors and executive
officers as a group
(10 persons) (d) 21,286,197 1,143,183
(a) Unless otherwise indicated, the persons named have sole
voting and dispositive power over the shares reported.
(b) Does not include the following ownership interests in
subsidiaries of the Company: Messrs. Emmerich, Evans, Hunt,
S.C. Lindner and Martin, and all directors and executive
officers as a group beneficially own 1,561, 19,638, 382,
69,308, 10,632 and 114,273 shares, respectively, of the
common stock of AAG and Mr. Martin and all directors and
executive officers as a group beneficially own 40,126 and
60,684 shares, respectively, of the preferred stock of AFC.
Also excludes the following ownership of Chiquita common
stock: Messrs. Emmerich, C.H. Lindner and K.E. Lindner, and
all directors and executive officers as a group beneficially
own 1,000, 44,873, 13,759 and 263,963 shares, respectively.
(c) Consists of shares of Common Stock purchasable within 60
days of March 31, 1998 through the exercise of the vested
portion of stock options granted under the Company's Stock
Option Plan.
9
(d) The shares set forth for Carl H. Lindner, Carl H. Lindner
III, S.C. Lindner and Keith E. Lindner and all directors
and officers as a group constituted 11.2%, 8.5%, 8.3%, 8.3%
and 36.7%, respectively, of the Common Stock outstanding at
March 31, 1998. For information as to the percentage of
outstanding shares beneficially owned (within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934) by
such Lindner family members, see "Principal Shareholders."
(e) Includes 3,290,002 shares held by his spouse. Excludes
5,021,328 shares held in trusts for the benefit of his
family for which third parties serve as trustee. Also
excludes 112,941 shares held in a charitable foundation over
which Mr. Lindner has sole voting and dispositive power but
no pecuniary interest.
(f) Includes 18,528 shares held by a trust over which his spouse
has voting and dispositive power and 646,264 shares which
are held in various trusts for the benefit of his minor
children for which Keith E. Lindner acts as trustee with
voting and dispositive power.
(g) Includes 68,625 shares held by his spouse as custodian for
their minor children or in a trust over which his spouse has
voting and dispositive power and 775,714 shares which are
held in various trusts for the benefit of their minor
children for which Keith E. Lindner acts as trustee with
voting and dispositive power.
(h) Excludes 1,421,978 shares (described in footnotes (f) and
(g)), which are held in various trusts for the benefit of
the minor children of his brothers, Carl H. Lindner III and
S. Craig Lindner, over which Keith E. Lindner has sole
voting and dispositive power but no pecuniary interest.
10
COMPENSATION
The following table summarizes the aggregate cash
compensation for 1997, 1996 and 1995 of the Company's Chairman of
the Board and Chief Executive Officer and its four other most
highly compensated executive officers during 1997 (the "Named
Executive Officers"). Such compensation includes amounts paid by
AFG and its subsidiaries and certain affiliates during the years
indicated.
SUMMARY COMPENSATION TABLE
---------------------------
Annual Compensation Long-Term
Compensation
-------------------------------- ---------------
Securities Under
Name Other Annual lying All Other
and Salary Bonus Compensation Options Granted Compensation
Principal Position Year (a) (b) (c) (# of Shares) (d)
- ----------------------------------------------------------------------------------------
Carl H. Lindner 1997 $957,000 $370,000 $107,000 --- $75,000
Chairman of the Board 1996 913,000 900,000 156,000 --- 118,400
and Chief Executive 1995 1,364,000 900,000 254,000 --- 169,000
Offiver
Keith E. Lindner 1997 957,000 370,000 14,000 50,000 31,000
Co-President 1996 917,000 900,000 28,000 --- 31,000
1995 935,000 900,000 --- 400,000 30,000
Carl H. Lindner III 1997 957,000 370,000 117,000 50,000 34,000
Co-President 1996 917,000 900,000 174,000 --- 60,500
1995 1,076,000 900,000 223,000 --- 103,000
S. Craig Lindner 1997 957,000 370,000 132,000 50,000 34,000
Co-President 1996 917,000 900,000 137,000 --- 32,000
1995 1,121,000 900,000 142,000 388,181 83,000
James E. Evans 1997 957,000 350,000 2,000 30,000 260,000
Senior Vice President 1996 917,000 639,000 14,000 --- 49,500
and General Counsel 1995 948,000 850,000 10,000 150,000 58,000
(a) This column includes salary paid by Chiquita to Carl H.
Lindner of $200,000 in 1997 and 1996 and $269,000 in 1995,
and to Keith E. Lindner of $381,000 in 1997, $900,000 in
1996 and $935,000 in 1995.
11
(b) Bonuses are for the year shown, regardless of when paid.
Approximately one-fourth of the 1997 and 1996 bonus for each
individual was paid in shares of AFG Common Stock.
(c) This column includes amounts for personal homeowners and
automobile insurance coverage, and the use of corporate
aircraft and value of automobiles as follows.
Aircraft &
Name Year Insurance Automobile
- -------------------------------------------------------------------
Carl H. Lindner 1997 $19,000 $88,000
1996 16,000 140,000
1995 18,000 236,000
Keith E. Lindner 1997 6,000 8,000
1996 12,000 16,000
1995 -- --
Carl H. Lindner III 1997 23,000 94,000
1996 19,000 155,000
1995 17,000 206,000
S. Craig Lindner 1997 26,000 106,000
1996 23,000 114,000
1995 20,000 122,000
James E. Evans 1997 -- 2,000
1996 -- 14,000
1995 -- 10,000
(d) Includes Company or subsidiary contributions or allocations
under the (i) defined contribution retirement plans and (ii)
employee savings plan in which the following Named Executive
Officers participate (and related accruals for their benefit
under the Company's benefit equalization plan which
generally makes up certain reductions caused by Internal
Revenue Code limitations in the Company's contributions to
certain of the Company's retirement plans) and Company paid
group life insurance as set forth below. For Mr. Evans
only, this column also includes the fair market value of a
special 1997 award of 5,000 shares of AFG Common Stock.
12
AFG
Auxiliary Retirement Directors' Savings Term
Name Year RASP Plan Fees Plan Life
- --------------------------------------------------------------------------
Carl H. Lindner 1997 $30,000 -- $2,000 $15,000 $28,000
1996 21,400 $55,000 4,500 14,500 23,000
1995 30,000 56,000 18,000 25,000 40,000
Keith E. Lindner 1997 30,000 -- -- -- 1,000
1996 30,000 -- -- -- 1,000
1995 30,000 -- -- -- --
Carl H. Lindner III 1997 30,000 -- 2,000 -- 2,000
1996 30,000 28,500 -- -- 2,000
1995 30,000 67,000 -- -- 6,000
S. Craig Lindner 1997 30,000 -- 2,000 -- 2,000
1996 30,000 -- -- -- 2,000
1995 30,000 -- -- 51,000 2,000
James E. Evans 1997 30,000 -- 2,000 -- 5,000
1996 30,000 -- -- 14,500 5,000
1995 30,000 -- -- 25,000 3,000
13
Stock Options
The tables set forth below disclose stock options granted
to, or exercised by, the Named Executive Officers during 1997, as
well as the number and value of unexercised options held by them
at December 31, 1997.
OPTION GRANTS IN 1997
-----------------------
Individual Grants
-------------------------------------------------------
Potential Realizable
Number of Securities Percent of Exercise Value at Assumed Annual
Underlying Options Total Price per Rates of Stock Price
Options Share Appreciation for Option
Granted to (fair market Term (b)
Granted (a) Employees at date Expiration
Name (# of shares) in 1997 of grant Date 5% 10%
- ----------------------------------------------------------------------------------------------
Carl H. Lindner - - - - - - -
Carl H. Lindner III AFG 50,000 6.5% $37.88 3/14/07 $1,191,12 $3,018,548
S. Craig lindner AFG 50,000 6.5% $37.88 3/14/07 $1,191,12 $3,018,548
Keith E. Lindner AFG 50,000 6.5% $37.88 3/14/07 $1,191,12 $3,018,548
James E. Evans AFG 30,000 3.9% $37.88 3/14/07 $ 714,676 $1,811,129
(a) The options were granted under the Company's Stock Option
Plan and cover Company Common Stock. They vest (become
exercisable) to the extent of 20% per year, beginning one
year from the respective dates of grant, and become fully
exercisable in the event of death, disability or retirement
or in the event of involuntary termination of employment
without cause within one year after a change of control of
the Company.
(b) Represents the hypothetical future values that would be
realizable if all of the options were exercised immediately
prior to their expiration in 2007 and the market price of
the Company's Common Stock had appreciated in value through
the year 2007 at the annual rate of 5% (to $61.70 per share)
or 10% (to $98.25 per share). Such hypothetical future
values have not been discounted to their respective present
values, which are lower.
14
AGGREGATED OPTION EXERCISES IN 1997 AND 1997 YEAR-END OPTION
VALUES
Shares Number of Securities
Acquir- Underlying Unexer- Value of Unexercised
ed on cised Options In-the-Money Options
Exer- at Year End at Year End (a)
cise -------------------- --------------------
(# of Value Exer- Unexer- Exer- Unexer-
Name Company Shares) Realized cisable cisable cisable cisable
- ----------------------------------------------------------------------------------
Carl H. Lindner AFG - - 41,818 10,000 $703,187 $121,225
Carl H. Lindner III AFG - - 400,000 50,000 $6,536,883 $121,625
S. Craig Lindner AFG - - 167,091 282,909 $2,744,976 $3,927,940
Keith E. Lindner AFG - - 160,000 290,000 $2,614,800 $4,043,825
James E. Evans AFG - - 61,000 120,000 $624,083 $995,700
AFEI(b)115,000 $1,878,750 - - - -
(a) The value of unexercised in-the-money options is calculated
based on the closing market price on December 31, 1997 for
the Company's Common Stock on the New York Stock Exchange
of $40.3125 per share.
(b) American Financial Enterprises, Inc., formerly an 83%-owned
subsidiary of the Company, which became wholly-owned in
December 1997.
Compensation Committee Report
The Compensation Committee of the Board of Directors
consists of three directors, none of whom is an employee of the
Company or any of its subsidiaries. The Committee's functions
include reviewing and making recommendations to the Board of
Directors with respect to the compensation of the Company's
senior executive officers, as defined from time to time by the
Board. The term senior executive officers currently includes the
Chairman of the Board and Chief Executive Officer (the "CEO"),
the Co-Presidents and each other executive officer whose annual
base salary exceeds $500,000. The Compensation Committee has the
exclusive authority to grant stock options under the Company's
Stock Option Plan to employees of the Company and its
subsidiaries, including senior executive officers.
15
Compensation of Executive Officers. The Company's
compensation policy for all executive officers of the Company has
three principal components: annual base salary, annual incentive
bonuses and stock option grants.
Before decisions were made regarding 1997 compensation for
senior executives, the Committee first had discussions with
senior executives to solicit their thoughts regarding
compensation. Based in part on such discussions as well as the
Company's financial results for the preceding year, the Committee
deliberated and formed its recommendations, and presented its
determinations regarding salary and bonus to the full Board for
its review and approval. The compensation decisions discussed in
this report conformed with recommendations made by the Committee,
the CEO and the Co-Presidents.
Annual Base Salaries. The Committee approved annual base
salaries and salary increases for senior executive officers that
were appropriate, in the Committee's subjective judgment, for
their respective positions and levels of responsibilities. In
March 1997, the Committee approved the 1997 salaries of the CEO,
the Co-Presidents and the other senior executive officers, noting
that such salaries would be about 5% more than in 1996 and 1995.
Annual Bonuses. As in 1996, in 1997 the Committee developed
an annual bonus plan for the CEO, the Co-Presidents and the
senior executive officers that would make a substantial portion
of their total compensation dependent on the Company's
performance, including achievement of pre-established earnings
per share targets.
The annual bonus plan for 1997 made 60% of each
participant's annual bonus dependent on the Company attaining
certain earnings per share targets and 40% on the Company's
overall performance, as determined by the Committee. A
significant aspect of the 1997 annual bonus plan is that it
provided that 25% of any bonuses be paid in Common Stock. As in
the grant of stock options discussed below, the Committee
believes that payment of a substantial portion of annual bonuses
in Common Stock align further the interests of the Company's
senior executives with those of its shareholders. The Committee
also selected the senior executive officers whose 1997 bonus
would be subject to this plan, including the CEO, the Co-
Presidents and the Senior Vice Presidents. The Committee
recommended to the Board the earnings per share targets that were
the measure for the greater part of such bonus payments.
16
Under the 1997 annual bonus plan, the bonus target amount
for the CEO and each of the Co-Presidents was $925,000, with 0%
to 150% of $555,000 (60% of $925,000) to be paid depending on the
Company's earnings per share for 1997 allocable to insurance
operations (as determined pursuant to the Committee's annual
bonus plan guidelines) and 0% to 150% of $370,000 (40% of
$925,000) to be paid based on the Company's performance, as
determined by the Committee. In recommending the 1997 annual
bonus plan to the Board for adoption in March 1997, the Committee
noted that no bonus should be paid under the plan if 1997
earnings per share from insurance operations are less than 75% of
the 1997 goals for such earnings. Such earnings per share were
less than 75% of the 1997 goals and as a result, no 1997 bonus
allocable to the earnings per share component was paid.
The Committee then evaluated the Company's performance
during 1997. The Committee considered a number of factors, with
no relative weight being given to any specific factor. In
determining that each of the CEO and the Co-Presidents should
receive $370,000 (100% of the target amount under the company
performance component), the Committee concluded that a number of
1997 developments enhanced the value and operations of the
Company, including maintaining the debt-to-capital ratio in a
range desirable for investment grade companies, other favorable
operating criteria, successfully completing comprehensive
restructurings to simplify the Company's corporate structure,
selling a technology subsidiary and the upgrade of the debt
ratings of the Company and certain Company subsidiaries. The
Board adopted all of the Committee's recommendations with respect
to the determination of amounts paid under the annual bonus plan
for 1997. Under the 1997 Plan, 25% of the bonus payment was paid
in Common Stock.
The annual base salary and bonuses received by the CEO and
the Co-Presidents from the Company and its affiliates are
virtually identical because the Committee views them as working
as a management team whose skills and areas of expertise
complement each other.
In 1993, Congress enacted a $1 million ceiling on tax-
deductible remuneration paid after January 1, 1994 to the five
most highly compensated executive officers of a publicly held
corporation. The limitation does not apply to remuneration
payable solely on account of the attainment of one or more
performance goals pursuant to a plan approved by the compensation
committee of outside directors. The Company does not anticipate
that this limitation will apply to the compensation paid to any
of its employees in 1997.
17
Stock Option Grants. Stock options represent an important
part of the Company's performance-based compensation system. The
Committee believes that Company shareholders' interests are well
served by aligning the Company's senior executives' interests
with those of its shareholders through the grant of stock options
in addition to paying a portion of any annual bonus in Common
Stock. Options under the Company's Stock Option Plan are granted
at exercise prices equal to the fair market value of Common Stock
on the date of grant and vest at the rate of 20% per year. The
Committee believes that these features provide an optionee with
substantial incentive to maximize the Company's long-term
success. Options for 50,000 shares were granted to the Co-
Presidents and additional options were granted to the other
senior executives of the Company in 1997. No options were
granted to the CEO in 1997.
Other Information. In April 1998, the Committee discussed
the 1998 salaries, bonuses and stock option grants of the CEO,
the Co-Presidents and certain other senior executives. The
Committee approved the 1998 salaries for such persons which are
the same as in 1997 for the CEO and each of the Co-Presidents and
the bonus target amounts for them for 1998, which are the same as
in 1997. Earlier in 1998, the Committee granted each of the Co-
Presidents options to purchase 40,000 shares.
Members of the Compensation
Committee: William R. Martin, Chairman
Theodore H. Emmerich
Thomas H. Hunt
18
Performance Graph
The following graph compares the cumulative total
shareholder return on the Company's Common Stock with the
cumulative total return of the Standard & Poor's ("S&P") 400
Midcap Index and the S&P Property-Casualty Insurance Index.
(Assumes $100 invested on December 31, 1992 in APU Common Stock
(as the predecessor to AFG) and the two indexes, including
reinvestment of dividends.)
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
AFG Common Stock $100 $133.81 $110.77 $134.85 $171.49 $187.92
S&P 400 Midcap Index $100 $113.95 $109.87 $143.86 $171.49 $226.80
S&P Property-Casualty $100 $ 98.23 $103.04 $139.51 $169.53 $246.60
Insurance Index
Certain Transactions
AFG and its subsidiaries have had and expect to continue to
have transactions with AFG's directors, officers, principal
shareholders, their affiliates and members of their families.
AFG believes that the financial terms of these transactions are
comparable to those that would apply to unrelated parties and are
fair to AFG.
Members of the Lindner Family are the principal owners of
Provident Financial Group, Inc. ("Provident"). AFC provides
security guard and surveillance services at the main office of
Provident for which Provident paid $92,000 in 1997. Provident
leases its main banking and corporate office from AFC for which
Provident paid rent of $1,963,000 in 1997. In addition, a former
subsidiary of AFG provided Year 2000 programming and consulting
services to Provident in 1997 for which Provident paid $164,000.
In July 1997, Carl H. Lindner and a subsidiary of AFG
purchased 51% and 49%, respectively, of common stock of a newly
incorporated entity formed to acquire the assets of a company
engaged in the production of ethanol. The AFG subsidiary
invested $4.9 million and Mr. Lindner invested $5.1 million; the
asset purchase was completed in December 1997. In connection
with their investment, the AFG subsidiary and Mr. Lindner entered
into a Shareholders' Agreement which provides, among other
things, for restrictions on the transfer
19
of shares of such company and that Mr. Lindner will have the
ability to nominate a majority of such company's directors.
Certain AFG subsidiaries have entered into a credit facility
under which the ethanol producer may borrow up to $10 million at
a rate of prime plus 3%. The highest outstanding balance during
1997 was $1.2 million, all of which was repaid in 1997.
In December 1997, AFG purchased $138,000 of ice cream from
United Dairy Farmers, Inc. ("UDF"). UDF is owned by one of Carl
H. Lindner's brothers and his family.
During 1997, AFG and its subsidiaries chartered an aircraft
from an entity owned by one of Carl H. Lindner's brothers. The
total charges for such aircraft usage was $678,000.
Directors' Compensation
Pursuant to the Non-Employee Directors' Compensation Plan
(the "Directors' Plan") implemented in 1996, all directors who
are not officers or employees of the Company are paid the
following fees: an annual retainer of $40,000; an additional
annual retainer of $12,000 for each Board Committee on which the
non-employee director serves; and an attendance fee of $1,000 for
each Board or Committee meeting attended. Non-employee directors
who become directors during the year receive a pro rata portion
of these annual retainers. The retainers and fees to be paid
under the Directors' Plan are reviewed by the Board of Directors
from time to time and are subject to change at its discretion.
In order to align further the interests of the Company's non-
employee directors with the interests of shareholders, the
Directors' Plan provides that a minimum of 50% of such directors'
annual retainers are paid through the issuance of shares of AFG
Common Stock.
The Board of Directors has a program under which a retiring
Company director (other than an officer or employee of the
Company or any of its subsidiaries) will, if he has met certain
eligibility requirements, receive upon his retirement (in a lump
sum or, at his election, in deferred payments) an amount equal to
five times the then current annual director's fee. For purposes
of this program, retirement means resignation as a Company
director or not being nominated for reelection by shareholders as
20
a Company director. To be eligible for the retirement benefit, a
person must have served as a Company director for at least four
years while not an officer or employee of the Company or any of
its subsidiaries. In addition, a Company director will not
become eligible for the retirement benefit until reaching age 55.
A director who receives a retirement benefit must provide
consulting services to the Company on request for five years
following retirement without further compensation (except
reimbursement for expenses). Under the program, a death benefit
equal to the retirement benefit will be paid (in lieu of any
retirement benefit under the program) to the designated
beneficiary or legal representative of any person who dies while
serving as a Company director, whether or not eligible for a
retirement benefit at time of death. This death benefit will not
be available to a director who at any time during the two years
immediately preceding death was an officer or employee of the
Company or any of its subsidiaries.
In addition to providing for the grant of stock options to
key employees, the Stock Option Plan provides for automatic
annual grants of options to each non-employee director of the
Company. During 1997, each non-employee director was granted an
option under the foregoing provisions of the Stock Option Plan to
purchase 1,000 shares at an exercise price of $37.75 per share on
June 1, 1997, the exercise price being the fair market value of
the Company's Common Stock on the date of grant.
Committees and Meetings of the Board of Directors
The Company's Board of Directors held seven meetings and
took action in writing seven times in 1997. The Company's Board
of Directors has an Executive Committee, an Audit Committee and a
Compensation Committee. There is no Nominating Committee.
Executive Committee: The Executive Committee consists of
Carl H. Lindner (Chairman), Carl H. Lindner III, S. Craig Lindner
and Keith E. Lindner. The Committee's functions include
analyzing the future development of the business affairs and
operations of the Company, including further expansion of
businesses in which the Company is engaged and acquisitions and
dispositions of businesses. With certain exceptions, the
Executive Committee is generally authorized to exercise the
powers of the Board of Directors between meetings of the Board of
Directors. The Executive Committee consulted among themselves
informally many times throughout the year and took action in
writing on twelve occasions in 1997.
21
Audit Committee. The Audit Committee consists of Theodore
H. Emmerich (Chairman) and William R. Martin. Neither is an
officer or employee of the Company or any of its subsidiaries.
The Committee's functions include recommending to the Board of
Directors the engagement of independent accounting firms to audit
the financial statements of the Company and its subsidiaries and
to provide other audit-related services and recommending the
terms of such firms' engagements; reviewing the engagement of
independent accounting firms to provide non-audit services,
including the terms of their engagements; reviewing the adequacy
and implementation of the Company's internal audit function;
reviewing the policies, procedures and principles of the
management of the Company for purposes of conformity to the
standards required by the Foreign Corrupt Practices Act;
establishing procedures designed to provide and encourage timely
access to the Committee by the independent accounting firms
engaged by the Company, its internal audit department and its
principal financial officers; and conducting such investigations
relating to the Company's financial affairs as the Committee or
the Board of Directors deems desirable. The Committee's
functions also include supervising, reviewing and reporting to
the Board of Directors on the performance of management
committees of the Company responsible for the administration of
the employee benefit plans of the Company and its subsidiaries.
The Audit Committee met five times in 1997.
Compensation Committee The Compensation Committee consists
of William R. Martin (Chairman), Theodore H. Emmerich and Thomas
M. Hunt. The functions of the Compensation Committee are
discussed under "Compensation - Compensation Committee Report."
The Compensation Committee met two times and took action in
writing on six occasions in 1997.
INDEPENDENT AUDITORS
The accounting firm of Ernst & Young LLP served as the
Company's independent auditors for the fiscal year ended December
31, 1997. Representatives of that firm will attend the Meeting
and will be given the opportunity to comment, if they so desire,
and to respond to appropriate questions that may be asked by
shareholders. No auditor has yet been selected for the current
year because it is generally the practice of the Company not to
select independent auditors prior to the annual shareholders
meeting.
22
NOMINATIONS AND SHAREHOLDER PROPOSALS
In accordance with the Company's Code of Regulations (the
"Regulations"), the only candidates eligible for election at a
meeting of shareholders are candidates nominated by or at the
direction of the Board of Directors and candidates nominated at
the meeting by a shareholder who has complied with the procedures
set forth in the Regulations. Shareholders will be afforded a
reasonable opportunity at the 1998 Annual Meeting to nominate
candidates for the office of director. However, the Regulations
require that a shareholder wishing to nominate a director
candidate must have first given the Secretary of the Company at
least five and not more than thirty days prior written notice
setting forth or accompanied by (a) the name and residence of the
shareholder and of each nominee specified in the notice, (b) a
representation that the shareholder was a holder of record of the
Company's voting stock and intended to appear, in person or by
proxy, at the meeting to nominate the persons specified in the
notice and (c) the consent of each such nominee to serve as
director if so elected.
If a shareholder desires to have a proposal included in the
proxy statement for the 1999 annual shareholders meeting, such
proposal must be received by the Company's Secretary at his
office by December 31, 1998 in order to be considered for
inclusion.
REQUESTS FOR FORM 10-K
The Company will send, upon written request, without charge,
a copy of the Company's most current Annual Report on Form 10-K
to any shareholder who writes to Fred J. Runk, Senior Vice
President and Treasurer, American Financial Group, Inc., One East
Fourth Street, Cincinnati, Ohio 45202.
By order of the Board of Directors,
James C. Kennedy
Vice President and Secretary
Cincinnati, Ohio
April 21, 1998
23
AMERICAN FINANCIAL GROUP, INC.
One East Fourth Street
Cincinnati, Ohio 45202
24
1. Election of Directors:
/ / FOR AUTHORITY to elect the / / WITHHOLD AUTHORITY to vote for
nominees listed below (except every nominee listed below
those whose names have been
crossed out)
Carl H. Lindner Theodore H. Emmerich
Carl H. Lindner III James E. Evans
S. Craig Lindner Thomas M. Hunt
Keith E. Lindner William R. Martin
To vote your shares, please mark, sign, date and return this proxy form using
the enclosed envelope.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
