DEF 14A of Mercury General Corp, Mar 26, 2024

DEF 14A of Mercury General Corp

Filed Mar 26, 2024 · FY20230000064996-24-000014

Open on EDGAR

  1. ELECTION OF DIRECTORS

    ELECTION OF DIRECTORS The Board of Directors of the Company has nominated and recommends for election as directors the following nine persons to serve until the next Annual Meeting of Shareholders and until their respective successors shall have been duly elected and shall qualify. The enclosed proxy will be voted in favor of the persons nominated unless otherwise indicated. If any of the nominees should be unable to serve or should decline to do so, the discretionary authority provided in the proxy will be exercised by the present Board of Directors to vote for a substitute or substitutes to be designated by the Board of Directors. The Board of Directors has no reason to believe that any substitute nominee or nominees will be required. The proxy will not be voted for more than nine nominees. The table below indicates the position with the Company, tenure as director and age of each nominee as of March 26, 2024.

  2. ELECTION OF DIRECTORS

    | Name | Position with the Company | Age | Director Since | | George Joseph | Chairman of the Board | 102 | 1961(1) | | Gabriel Tirador | Chief Executive Officer and Director | 59 | 2003 | | Victor G. Joseph | President and Chief Operating Officer and Director | 37 | 2024 | | George G. Braunegg | Director | 66 | 2018 | | Ramona L. Cappello | Director | 64 | 2018 | | James G. Ellis | Director | 77 | 2014 | | Vicky Wai Yee Joseph | Director | 72 | 2021 | | Joshua E. Little | Director | 53 | 2017 | | Martha E. Marcon | Director | 75 | 2008 |

  3. ELECTION OF DIRECTORS

    (1)Date shown is the date Mr. George Joseph was elected a director of Mercury Casualty Company, a predecessor of the Company. Mr. George Joseph was elected a director of the Company in 1985. Directors are elected at each annual meeting of the shareholders for one year and hold office until their successors are elected and qualified. Executive officers serve at the pleasure of the Board of Directors. Other than Mr. George Joseph being an uncle to Charles Toney, the Company’s Vice President and Chief Actuary, and father to Victor Joseph, the Company’s President and Chief Operating Officer, and Vicky Joseph being wife to Mr. George Joseph and mother to Victor Joseph, there are no family relationships among any of the Company’s directors, executive officers or nominees for director or executive officer. Eight of the nine nominees for election to the Board of Directors have extensive management and leadership experience gained through executive and professional service in insurance and other industries. In these roles, these director nominees have developed attributes and skills in management of capital, risk and operations. In addition, a majority of the director nominees have longstanding relationships with the Company, with four of the nine director nominees serving on the Board of Directors or in executive positions with the Company for at least ten years and with average Board tenure of more than 20 years. This experience with the Company provides the members of the Board of Directors a thorough understanding of the Company’s market and business operations, policies and processes, rules and regulations, risks and mitigating solutions and controls environment. The Nominating/Corporate Governance Committee’s process for identifying, evaluating and recommending qualified candidates for nomination to the Board of Directors is described starting on page 7 under “Director Nomination Process.” Set forth below are the names of the nominees for election to the Board of Directors, along with their present positions, principal occupations and public company directorships held in the past five years and the specific individual qualifications and skills of such directors that contribute to the overall effectiveness of the Board of Directors and its committees. George Joseph, Chairman of the Board of Directors, has served as Chairman since 1961. He held the position of Chief Executive Officer of the Company for 45 years between 1961 and December 2006. He has more than 60 years’ experience in all phases of the property and casualty insurance business. The Company believes that Mr. George Joseph’s expertise and experience in the insurance industry and in underwriting, claims management and rate making in particular, as well as his role as founder of the Company and his longstanding service as Chairman and Chief Executive Officer, qualify him for service on the Board of Directors. Gabriel Tirador, Chief Executive Officer of the Company, has served as Chief Executive Officer since January 1, 2007 and as President from October 2001 to December 2023. He was the Company’s Vice President and Chief Financial Officer from February 1998 until October 2001. From January 1997 to February 1998, he served as Vice President and Controller of the Automobile Club of Southern California. Prior to that, he served as the Company’s assistant controller from March 1994 to December 1996. Mr. Tirador has over 30 years’ experience in the property and casualty insurance industry and is an inactive certified public accountant. The Company believes that Mr. Tirador’s executive management and related experience in the property and casualty insurance industry as well as his accounting and financial reporting expertise, including experience as an auditor with KPMG LLP and in senior financial management positions, qualify him for service on the Board of Directors. Victor Joseph, President and Chief Operating Officer, has been employed by the Company in various capacities since 2009, and was appointed Vice President and Chief Underwriting Officer in July 2017, Executive Vice President and Chief Operating Officer in January 2022, and President and Chief Operating Officer in January 2024. Mr. Victor Joseph is the son of Mr. George Joseph and Ms. Vicky Wai Yee Joseph. The Company believes that Mr. Victor Joseph’s executive management and related experience in various areas of the Company and the property and casualty insurance industry qualify him for service on the Board of Directors. George G. Braunegg is an Associate Professor of the Practice of Accounting in the Leventhal School of Accounting and the Marshall School of Business at the University of Southern California (USC). Professor Braunegg teaches Financial Accounting for Mergers and Acquisitions and Financial Statement Analysis in the Graduate School and Managerial Accounting in the Undergraduate Program. Prior to teaching at USC, Professor Braunegg was an Executive Vice President and Co-Founding Principal of CAST Management Consultants Inc. (CAST) from 1986 to 2017 when he and his fellow Principals sold the firm to West Monroe Partners. During his tenure at CAST, Professor Braunegg served on the firm’s Board of Directors and was the Corporate Secretary. From 1981 to 1986, he worked as an Auditor and as a Financial Services Consultant at KPMG. The Company believes that Professor Braunegg’s extensive experience in executive management and his 35-year management consulting career advising senior management of numerous large public companies qualify him for service on the Board of Directors of the Company. Ramona L. Cappello has been serving as a Partner at CEO Coaching International since 2019 as well as CEO and Founder of Sun Harvest Salt, LLC since 2014. From 2005 to 2013, Ms. Cappello was Founder, CEO and a board member of Corazonas Foods, Inc. From 2002 to 2005, she was Senior Vice President of Mauna Loa Macadamia Nut Corporation. Prior to 2002, she ran several major businesses for companies including Nestle, Kendall-Jackson Wines and Celestial Seasonings. Ms. Cappello currently serves on the boards of directors of Felbro Food Products and Dominicks Foods as well as on the Boards of Councilors for USC Dornsife College of Letters, Arts and Sciences and USC Kaufman School of Dance. She formerly served on the compensation committee, the corporate governance committee and the audit committee of the board of directors of True Drinks Holdings, Inc., a public company, as well as on the boards of directors of four private entities: USC Board of Trustees, Nielsen Massey Vanillas, Inc., Luxco, Inc. and IPS All Natural, LLC. The Company believes that Ms. Cappello’s extensive experience in executive management positions as well as her experience on the boards of directors of public and private companies qualify her for service on the Board of Directors of the Company. James G. Ellis served as the Dean of the Marshall School of Business at the University of Southern California from 2007 until June 2019. Prior to his appointment as Dean in April 2007, Mr. Ellis was the Vice Provost, Globalization, for USC and prior to that he was Vice Dean, External Relations. Mr. Ellis was a professor in the Marketing Department of the Marshall School of Business from 1997 until retiring in 2021. From 1990 to 1997, he served as Chairman and Chief Executive Officer of Port O’Call Pasadena, an upscale home accessory retailer and was President and CEO of American Porsche Design from 1985 to 1990. Mr. Ellis has also served on the boards of directors of numerous public and private companies over the years. The Company believes that Mr. Ellis’ extensive experience in executive management and senior academic positions qualify him for service on the Board of Directors.

  4. ELECTION OF DIRECTORS

    Vicky Wai Yee Joseph has served as a director on the Company's Board of Directors since October 2021. She is the spouse of Mr. George Joseph, the Company's largest shareholder. She brings deep commitment to the Company and deep-rooted passion for its customers and the industry. Joshua E. Little has been a shareholder in the law firm of Dentons Durham Jones Pinegar P.C. since 2006. Mr. Little is also the President, Chief Executive Officer and Chairman of the Board of Directors of the law firm. Mr. Little has also been a member of the Dentons Global Board of Directors since January 2024. Prior to joining Dentons Durham Jones Pinegar P.C., Mr. Little was an attorney at the law firm of Latham & Watkins LLP. The Company believes that Mr. Little’s extensive experience advising public companies and companies in the insurance industry as well as his experience in corporate governance matters and his extensive history with the Company qualify him for service on the Board of Directors. Martha E. Marcon has been retired since January 2006. For more than 20 years prior to January 2006, Ms. Marcon was a partner of KPMG LLP in Los Angeles, California. She served as the firm’s National Resource Partner - Insurance Industry and the Western Region Insurance Industry Leader. In 2020, Ms. Marcon joined the board of directors of Guild Holdings Company upon its initial public offering, serving as chair of the audit committee and member of the governance committee. Until June 2021, Ms. Marcon also served on the board of directors, the audit committee and risk committee of Foresters Financial, which is an international insurance and financial services organization. She also serves on the board of the companies comprising the Nonprofits Insurance Alliance and chairs its audit committees. The Company believes that Ms. Marcon’s accounting and financial reporting expertise, particularly related to insurance organizations, and her experience as a certified public accountant for 28 years and an auditor specializing in the insurance industry with KPMG LLP for more than 20 years qualify her for service on the Board of Directors.

  5. Conclusion

    Conclusion With compensation based on annual base salary, performance-based cash bonuses, long-term incentives and participation in non-discriminatory profit sharing and employee benefits plans, the Company’s executive compensation plan avoids the more complex compensation practices used by some companies. There are no severance agreements covering any executive officers of the Company, although we may pay severance or provide termination benefits to our executive officers as needed. No executive officers have change of control or “parachute” payments arrangements other than with respect to cash bonuses awarded and earned but unpaid on the date of a change of control. No loans or loan policy exists with respect to executive officers. There are no deferred compensation programs in effect aside from the qualified Section 401(k) plan and no supplemental executive retirement or similar plans exist for executive officers. While future events may dictate the addition of different or additional compensation methods, there is no present plan to change the simple compensation policy now in effect.

  6. Summary Compensation Table

    Summary Compensation Table The table below summarizes the total compensation paid or earned by the Company’s Chief Executive Officer, Chief Financial Officer and each of its three other most highly compensated executive officers, the named executive officers, for the fiscal years ended December 31, 2023, 2022 and 2021.

  7. Summary Compensation Table

    | Name and Principal Position | Year | Salary | Bonus (1) | Equity Awards | Non-equity Incentive Plan Compensation | All Other Compensation (2) | Total | | George Joseph | 2023 | $1,197,741 | $350,145 | $— | $— | $81,192 | $1,629,078 | | Chairman of the Board | 2022 | 1,152,503 | 49,224 | — | — | 76,841 | 1,278,568 | | | 2021 | 1,117,689 | 441,058 | — | — | 99,809 | 1,658,556 | | Gabriel Tirador | 2023 | $1,220,767 | $387,331 | $— | $— | $90,250 | $1,698,348 | | Chief Executive Officer | 2022 | 1,174,657 | 50,152 | — | — | 83,246 | 1,308,055 | | Director | 2021 | 1,139,175 | 468,115 | — | — | 88,658 | 1,695,948 | | Theodore Stalick | 2023 | $841,770 | $198,760 | $— | $— | $18,310 | $1,058,840 | | Senior Vice President | 2022 | 820,307 | 35,885 | — | — | 18,354 | 874,546 | | Chief Financial Officer | 2021 | 793,462 | 239,048 | — | — | 21,531 | 1,054,041 | | Wilson Pang | 2023 | $537,500 | $561,250 | $— | $— | $11,550 | $1,110,300 | | Vice President | | | | | | | | | Chief Technology Officer | | | | | | | | | Christopher Graves | 2023 | $576,923 | $275,718 | $— | $— | $18,913 | $871,554 | | Vice President | 2022 | 557,084 | 100,034 | — | — | 19,135 | 676,253 | | Chief Investment Officer | 2021 | 539,861 | 199,245 | — | — | 29,890 | 768,996 |

  8. Summary Compensation Table

    (1)Includes the annual one-half-month’s bonus awarded to all employees of the Company. For 2023, also includes annual bonuses paid to the named executive officers as follows: Mr. George Joseph, $298,990, Mr. Tirador, $335,211, Mr. Stalick, $162,000, Mr. Pang, $140,938, and Mr. Graves, $250,000. For 2023, also includes a sign-on payment of $400,000 for Mr. Pang in connection with the commencement of his employment. For 2022, also includes annual bonuses paid to the named executive officers as follows: Mr. George Joseph, $0, Mr. Tirador, $0, Mr. Stalick, $0, and Mr. Graves, $75,000. For 2021, also includes annual bonuses paid to the named executive officers as follows: Mr. George Joseph, $393,467, Mr. Tirador, $419,377, Mr. Stalick, $204,163, and Mr. Graves, $175,000. (2)See All Other Compensation table below.

  9. Grants of Plan-Based Awards

    Grants of Plan-Based Awards The following table contains information regarding grants of plan-based awards to the named executive officers during the fiscal year ended December 31, 2023.

  10. Grants of Plan-Based Awards

    | Name | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | | | | Threshold ($) | Target ($) | Maximum ($) | | George Joseph | — | — | — | | Gabriel Tirador | — | — | — | | Theodore Stalick | — | — | — | | Wilson Pang | — | — | — | | Christopher Graves | — | — | — |

  11. Grants of Plan-Based Awards

    (1)For 2023, our named executive officers were eligible to receive bonuses on a discretionary basis. As a result, there was no set threshold, target or maximum amount.

  12. Discussion of Summary Compensation and Grants of Plan-Based Awards Tables

    Discussion of Summary Compensation and Grants of Plan-Based Awards Tables The Company’s executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table and the Grants of Plan-Based Awards table was paid or awarded, are described above under “Compensation Discussion and Analysis.” No named executive officer has an employment agreement that provides a specific term of employment. Accordingly, the employment of each executive officer may be terminated at any time at the discretion of the Board of Directors.

  13. Outstanding Equity Awards at 2023 Fiscal Year-End

    Outstanding Equity Awards at 2023 Fiscal Year-End The following table includes certain information with respect to the value of all unexercised options and unvested stock awards previously awarded to the named executive officers at December 31, 2023.

  14. Outstanding Equity Awards at 2023 Fiscal Year-End

    | | Option Awards (1) | | | | Stock Awards | | | | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested | | Name | | | | | | | | George Joseph | — | — | $— | — | — | $— | | Gabriel Tirador | 12,500 | — | 43.01 | 2/7/2028 | — | — | | Theodore Stalick | — | — | — | — | — | — | | Wilson Pang | — | — | — | — | — | — | | Christopher Graves | — | — | — | — | — | — |

  15. Outstanding Equity Awards at 2023 Fiscal Year-End

    (1)All stock option awards have a term of ten years from the date of grant and become exercisable in four equal installments on the first through fourth anniversaries of the grant date.

  16. Option Exercises and Stock Vested

    Option Exercises and Stock Vested The following table includes certain information with respect to the options exercised by and the stocks vested for the named executive officers during the fiscal year ended December 31, 2023.

  17. Option Exercises and Stock Vested

    | | Option Awards | | Stock Awards | | | | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | | Name | | | | | | George Joseph | — | $— | — | $— | | Gabriel Tirador | — | — | — | — | | Theodore Stalick | — | — | — | — | | Wilson Pang | — | — | — | — | | Christopher Graves | — | — | — | — |

  18. Director Compensation Table

    Director Compensation Table The table below summarizes the compensation paid by the Company for the fiscal year ended December 31, 2023 to directors who served on the Board during 2023, other than Messrs. George Joseph and Tirador whose director compensation for 2023 is disclosed above in the “All Other Compensation Table.” Mr. Victor Joseph joined the Board on January 1, 2024.

  19. Director Compensation Table

    | Name | Fees Earned or Paid in Cash | | George G. Braunegg | $96,900 | | Ramona L. Cappello | 83,700 | | James G. Ellis | 75,100 | | Vicky Wai Yee Joseph | 60,000 | | Joshua E. Little | 87,000 | | Martha E. Marcon | 122,600 |

  20. Director Compensation Table

    During 2023, each of the Company’s directors received a $7,500 quarterly fee and $7,500 for each Board meeting attended and reimbursement for their out-of-pocket expenses incurred in attending such meetings. In addition, members of Board committees received additional compensation for service on Board committees. The chair of the Audit Committee received $7,500 per regular Audit Committee meeting attended, and each member of the Audit Committee received $4,500 per Audit Committee meeting attended. The chair of the Compensation Committee received $4,300 per Compensation Committee meeting attended, and each member of the Compensation Committee received $2,700 per meeting attended. The chair of the Nominating/Corporate Governance Committee received $4,300 per meeting attended, and each other member of the Nominating/Corporate Governance Committee received $2,700 per meeting attended plus, in each case, reimbursement of their out-of-pocket expenses incurred in attending such meetings. The chair of the Investment Committee received a fee of $4,300 and each non-management member of the Investment Committee received $2,700 per meeting attended. The lead independent director received an annual retainer of $24,000. None of the Company’s non-employee directors receive equity awards. In accordance with the Company’s Corporate Governance Guidelines, the Company’s senior management annually reports to the Compensation Committee regarding the status of the Company’s non-employee director compensation, including consideration of direct and indirect forms of compensation to the non-employee directors such as charitable contributions by the Company to organizations in which a non-employee director is involved. Following its review of the report, the Compensation Committee recommends any changes in non-employee director compensation to the Chairman of the Board. Any changes in non-employee director compensation are considered and approved by the Board of Directors after a full discussion.

  21. Pay Ratio Disclosure

    Pay Ratio Disclosure As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the relationship of the annual total compensation of the Company’s employees and the annual total compensation of Gabriel Tirador, Chief Executive Officer. The pay ratio included in this information is a reasonable estimate calculated in a manner that is intended to be consistent with Item 402(u) of Regulation S-K. For 2023, the Company’s last completed fiscal year: •the median of the annual total compensation of all employees of the Company (other than Mr. Tirador) was $80,100; and •the annual total compensation of Mr. Tirador, as reported in the Summary Compensation Table included elsewhere in this Proxy Statement, was $1,698,348. Based on this information, for 2023, the ratio of the median of the total compensation of all employees of the Company to the annual total compensation of Mr. Tirador was 1 to 21. The Company determined that, as of December 31, 2023, its employee population consisted of 4,110 individuals (including Mr. Tirador). The Company’s employee workforce consists of full and part time employees. For purposes of measuring the compensation of the Company’s employees, it selected total annual cash compensation for 2023 as the most appropriate measure of compensation, which was consistently applied to all employees included in the calculation. With respect to the total annual compensation of the “median employee” for purposes of the ratio disclosed above, the Company identified and calculated the elements of such employee’s compensation for 2023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in the annual total compensation reflected above.

  22. Pay Versus Performance Disclosure

    Pay Versus Performance Disclosure The table below summarizes the compensation earned and paid to the Company's principal executive officer ("PEO") and non-PEO named executive officers ("Non-PEO NEOs"), the cumulative total shareholder return ("TSR") of the Company and its peer group, the Company's net income (loss), and underwriting profit (loss), a financial performance measure specific to the Company (“Company-Selected Measure”), for the fiscal years ended December 31, 2023, 2022, 2021 and 2020.

  23. Pay Versus Performance Disclosure

    | Year | Summary Compensation Table Total for PEO (1) | Compensation Actually Paid to PEO (1) (6) | Average Summary Compensation Table Total for Non-PEO NEOs (2) | Average Compensation Actually Paid to Non-PEO NEOs (2) (6) | Value of Initial Fixed $100 Investment Based On: | | Net Income (Loss) | Underwriting Profit (Loss) (Company-Selected Measure) (5) | | | | | | | Total Shareholder Return (3) | Peer Group Total Shareholder Return (3) (4) | | | | 2023 | $1,698,348 | $1,698,348 | $1,167,443 | $1,167,443 | $92.34 | $160.07 | $96,335,874 | $(231,655,187) | | 2022 | 1,308,055 | 1,347,555 | 838,226 | 840,201 | 81.33 | 141.87 | (512,672,098) | (344,067,476) | | 2021 | 1,695,948 | 1,707,323 | 1,021,821 | 1,022,389 | 120.71 | 128.24 | 247,937,243 | 65,010,451 | | 2020 | 2,882,942 | 2,892,692 | 1,579,540 | 1,580,028 | 113.69 | 103.14 | 374,606,536 | 246,672,928 |

  24. Pay Versus Performance Disclosure

    (1)PEO was Gabriel Tirador for 2023, 2022, 2021 and 2020. (2)Non-PEO NEOs were George Joseph, Theodore Stalick, Wilson Pang, and Christopher Graves for 2023; George Joseph, Victor Joseph, Theodore Stalick, and Christopher Graves for 2022; and George Joseph, Theodore Stalick, Christopher Graves, and Jeffrey Schroeder for 2021 and 2020. (3)For the relevant fiscal year, represents the cumulative TSR of the Company and its peer group. TSR amounts reported in the table assume an initial fixed investment of $100 at the beginning of the earliest year in the table, and that all dividends, if any, were reinvested. (4)This peer group represents the same industry peer group used for purposes of Item 201(e) of Regulation S-K and included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on February 13, 2024, and consists of Alleghany Corporation, Allstate Corporation, American Financial Group, Arch Capital Group Ltd, Berkley (W.R.), Berkshire Hathaway 'B', Chubb Corporation, Cincinnati Financial Corporation, CNA Financial Corporation, Erie Indemnity Company, Hanover Insurance Group, Markel Corporation, Old Republic International, Progressive Corporation, RLI Corporation, Selective Insurance Group, and Travelers Companies, Inc. (5)Underwriting profit means the Company’s net premiums earned, less (a) losses and loss adjustment expenses, (b) policy acquisition costs, and (c) other operating expenses, each as determined in accordance with U.S. generally accepted accounting principles (“GAAP”) and as presented in the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on February 13, 2024. (6)The adjustments made to Summary Compensation Table Total for PEO and Average Summary Compensation Table Total for Non-PEO NEOs to determine Compensation Actually Paid to PEO and Average Compensation Actually Paid to Non-PEO NEOs, respectively, were as follows:

  25. Pay Versus Performance Disclosure

    | Adjustments | 2023 | | 2022 | | 2021 | | 2020 | | | | PEO | Average of Non-PEO NEOs | PEO | Average of Non-PEO NEOs | PEO | Average of Non-PEO NEOs | PEO | Average of Non-PEO NEOs | | Deduction for amounts reported under the "Stock Awards" and "Option Awards" columns in the Summary Compensation Table. | $— | $— | $— | $— | $— | $— | $— | $— | | Increase/deduction for option awards granted during prior year that were outstanding and unvested as of the year end, determined based on change in ASC 718 fair value from the prior year end to the year end. | — | — | — | — | (11,250) | (563) | 16,250 | 813 | | Increase/deduction for option awards granted during prior year that vested during the year, determined based on change in ASC 718 fair value from the prior year end to vesting date. | — | — | 39,500 | 1,975 | 22,625 | 1,131 | (6,500) | (325) | | Total adjustments | — | — | 39,500 | 1,975 | 11,375 | 568 | 9,750 | 488 |

  26. Pay Versus Performance Disclosure

    Stock option grant date fair values are calculated by the Company based on the Black-Scholes option pricing model as of date of grant. Adjustments have been made using stock option fair values as of each measurement date using the stock price as of the measurement date and updated assumptions (i.e., term, volatility, dividend yield, risk free rates) as of the measurement date. The fair value of stock option awards as of each valuation date is calculated in accordance with Accounting Standards Codification Topic 718 (“ASC 718”) adopted by the Financial Accounting Standards Board. For additional information about the assumptions used in calculating the grant date fair value of these awards, refer to the notes to the Company’s consolidated financial statements included in the Company's Annual Reports on Form 10-K for the fiscal years ended 2023, 2022 2021 and 2020, as filed with the SEC. The tabular list of three of the most important performance measures used to link compensation actually paid to the Company's NEOs to its performance is shown below:

  27. Pay Versus Performance Disclosure

    | Pay Versus Performance Tabular List | | Underwriting Profit | | Operating Income (1) | | Combined Ratio (2) |

  28. Pay Versus Performance Disclosure

    (1)Operating income is net income excluding realized investment gains and losses, net of tax. Operating income provides a valuable measure of the Company's ongoing performance that may be obscured by the effect of net realized investment gains and losses. Realized investment gains and losses may vary significantly between periods and are generally driven by external economic developments such as capital market conditions. Accordingly, operating income highlights the results from ongoing operations and the underlying profitability of the Company's core insurance business. (2)Combined ratio is equal to loss ratio plus expense ratio. Loss ratio is calculated by dividing losses and loss adjustment expenses by net premiums earned, each as determined in accordance with GAAP. Expense ratio is calculated by dividing the sum of policy acquisition costs and other operating expenses by net premiums earned, each as determined in accordance with GAAP. The graphs below compare the Compensation Actually Paid to PEO and Average Compensation Actually Paid to Non-PEO NEOs with (i) the Company's cumulative TSR, (ii) its peer group TSR, (iii) its net income (loss), and (iv) its underwriting profit (loss), the Company-Selected Measure, in each case, for the fiscal years ended December 31, 2020, 2021, 2022 and 2023. TSR amounts reported in the graph assume an initial fixed investment of $100, and that all dividends, if any, were reinvested.