DEF 14A of Arch Capital Group Ltd.
Filed Mar 28, 2024 · FY20230000947484-24-000035
ITEM 1—ELECTION OF DIRECTORS
ITEM 1—ELECTION OF DIRECTORS Our Board is composed of 12 members, divided into three classes, serving staggered three-year terms. The Board intends to present for action at the Annual Meeting the election of Laurie S. Goodman and John M. Pasquesi to serve as Class II Directors for a term of three years and until their respective successors are duly elected and qualified or their earlier resignation or removal. Such nominees were recommended by the Nominating and Governance Committee for approval by the Board. Unless authority to vote for these nominees is withheld, the enclosed proxy will be voted for these nominees, except that the persons designated as proxies reserve discretion to cast their votes for other persons in the unanticipated event that any of these nominees is unable or declines to serve. After approximately 14 years of service on the Board, Eric W. Doppstadt, a current Class II Director will not stand for re-election following the completion of his current term. In addition, after 10 years of service on the Board, Louis J. Paglia, a current Class I Director, will resign from the Board effective as of the Annual Meeting.
Nominees
Nominees
Nominees
| Laurie S. Goodman | | | | n | 68 years old | Ms. Goodman is an institute fellow at the Urban Institute and Founder of its Housing Finance Policy Center. Before joining the Urban Institute in 2013, Ms. Goodman spent 30 years at several Wall Street firms. From 2008 to 2013, she was Senior Managing Director at Amherst Securities Group, LP. From 1993 to 2008, Ms. Goodman was head of global fixed income research and Manager of U.S. securitized products research at UBS and predecessor firms. Before that, she was a senior fixed income analyst, a mortgage portfolio manager and a senior economist at the Federal Reserve Bank of New York. Ms. Goodman serves on the board of directors of a real estate investment trust, MFA Financial, and is an adviser to The Amherst Group, LLC. She previously served on the board of directors of Home Point Capital Inc. and was a member of the Federal Reserve Bank of New York’s Financial Advisory Roundtable, the Bipartisan Policy Center’s Housing Commission, Fannie Mae’s Affordable Housing Advisory Council as well as the Consumer Financial Protection Bureau’s Consumer Advisory Board. Ms. Goodman has a B.A. in Mathematics from the University of Pennsylvania and an A.M. and Ph.D. in Economics from Stanford University. Ms. Goodman’s qualifications for service on our Board include her extensive analytics and strategy experience, her housing finance expertise and her service on boards of directors of other companies. | | n | Director since May 2018 | | | n | Class II Director of Arch Capital | | | n | Audit Committee | | | n | Nominating and Governance Committee | | | n | Underwriting Oversight Committee | |
Nominees
| John M. Pasquesi | | | | n | 64 years old | Mr. Pasquesi has been Chair of the Board of Arch Capital since September 2019 and a director of Arch Capital since October 2001. From November 2017 to September 2019, he was Lead Director. Mr. Pasquesi is the Managing Member of Otter Capital LLC, a private equity investment firm he founded in January 2001. He holds an A.B. from Dartmouth College and an M.B.A. from Stanford Graduate School of Business. Mr. Pasquesi’s qualifications for service on our Board include his investment skills, extensive experience in evaluating and overseeing companies in a wide range of industries, including the insurance industry, and service on boards of directors of other companies. | | n | Director since October 2001 | | | n | Class II Director of Arch Capital | | | n | Executive Committee | | | n | Finance, Investment and Risk Committee | | | n | Underwriting Oversight Committee | |
Required Vote
Required Vote A majority of the votes cast will be required to elect the above nominees as Class II Directors of Arch Capital.
Required Vote
| | THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL. |
Required Vote
| | 2024 PROXY STATEMENT | | 18 |
Appointed Directors, Continuing Directors and Senior Management
Appointed Directors, Continuing Directors and Senior Management The following individuals are our appointed and continuing directors:
Appointed Directors, Continuing Directors and Senior Management
| John L. Bunce, Jr. | | | | n | 65 years old | Mr. Bunce is a Managing Director and Founder of Greyhawk Capital Management, LLC and Managing Director and Founder of Steel Box, LLC. Both Greyhawk and Steel Box are investment organizations. Mr. Bunce has served as a director of numerous public and private companies and he continues to serve on several private company boards and as an Overseer of the Hoover Institution. He holds an A.B. from Stanford University and an M.B.A. from Harvard Business School. Mr. Bunce’s qualifications for service on our Board include his corporate finance background, investment skills, extensive experience in evaluating and overseeing companies in a wide range of industries and service on boards of directors of other companies. | | n | Director since November 2001 | | | n | Class III Director of Arch Capital | | | n | Term expires 2025 | | | n | Executive Committee | | | n | Finance, Investment and Risk Committee | | | n | Nominating and Governance Committee | |
Appointed Directors, Continuing Directors and Senior Management
| Francis Ebong | | | | n | 43 years old | Mr. Ebong is a Managing Director, Turtle Capital, LLC. He most recently served as Managing Director, Program Management at X, Alphabet’s in-house research and development division, where he was tasked with launching technologies to improve the lives of billions of people. He has an extensive background in technology and innovation, including serving as the Director of Global Operations and Partnerships at Facebook from 2015 to 2017, where he led a global team responsible for launches including FB Live, Marketplace and Messenger. Prior to Facebook, Mr. Ebong was the Head of Operations at Postmates and has experience working at Apple and Deloitte. Mr. Ebong is a veteran of the U.S. Navy and has a degree from the U.S. Naval Academy and an M.B.A. from the George Washington School of Business. Mr. Ebong’s qualifications for service on our Board include his extensive operational experience and his technology management skills. | | n | Director since August 2021 | | | n | Class I Director of Arch Capital | | | n | Term expires 2026 | | | n | Audit Committee | | | n | Compensation and Human Capital Committee | | | n | Nominating and Governance Committee | |
Appointed Directors, Continuing Directors and Senior Management
| Marc Grandisson | | | | n | 56 years old | Mr. Grandisson is the Chief Executive Officer of Arch Capital as well as a member of our Board, both positions he has served in since March 2018. From March 2018 to December 2020, he was also President of Arch Capital, and from January 2016 to March 2018, he was President and Chief Operating Officer of Arch Capital. Prior to that role, he was Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group from 2005 to 2015 and the Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group from February 2014 to December 2015. He joined Arch Reinsurance Ltd. (“Arch Re Bermuda”) in October 2001 as Chief Actuary. He subsequently held various leadership roles, including Chief Underwriting Officer and Actuary, President and Chief Operating Officer, eventually being named President and Chief Executive Officer at Arch Re Bermuda. Prior to joining Arch, he held various positions with the Berkshire Hathaway Group, F&G Re, Inc. and Tillinghast/Towers Perrin. He holds a B.Sc. in Actuarial Science from Université Laval in Canada and an M.B.A. from The Wharton School of the University of Pennsylvania. He is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Mr. Grandisson’s qualifications for service on our Board include his financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations. | | n | With Arch since October 2001 | | | n | Chief Executive Officer of Arch Capital | | | n | Director since March 2018 | | | n | Class III Director of Arch Capital | | | n | Term expires 2025 | | | n | Executive Committee | |
Appointed Directors, Continuing Directors and Senior Management
| 19 | | 2024 PROXY STATEMENT | |
Appointed Directors, Continuing Directors and Senior Management
| Moira Kilcoyne | | | | n | 62 years old | Ms. Kilcoyne is a technology industry veteran with extensive financial services experience. From 2013 to 2016, she served as Managing Director, Co-Chief Information Officer of Morgan Stanley where she co-headed the company’s global technology and data business and she also sat on the firm’s Management Committee. Prior to becoming Managing Director, Co-Chief Information Officer, Ms. Kilcoyne held a number of senior technology roles within Morgan Stanley. She currently serves on the board of directors of Quilter plc and is a member of the Board of Governors of FINRA. Prior board roles have included Citrix Systems, Inc. and as a Trustee of Manhattan College. Ms. Kilcoyne has a B.S. in Mathematics from Manhattan College. Ms. Kilcoyne’s qualifications for service on our Board include her more than 30 years of experience in the technology industry, her extensive financial services experience and service on boards of directors of other companies. | | n | Director since January 2020 | | | n | Class III Director of Arch Capital | | | n | Term expires 2025 | | | n | Audit Committee | | | n | Compensation and Human Capital Committee | | | n | Nominating and Governance Committee | |
Appointed Directors, Continuing Directors and Senior Management
| Eileen Mallesch | | | | n | 68 years old | Ms. Mallesch has more than 30 years of finance and risk experience, including serving as Senior Vice President and Chief Financial Officer for Nationwide’s Property and Casualty segment from 2005 to 2009. Prior to that, she was Chief Financial Officer, Senior Vice President at Genworth (2003 to 2005) and General Electric’s (2000 to 2003) Group Insurance and Life Insurance businesses. Ms. Mallesch has broad finance and business strategy expertise in the insurance, telecommunications and consumer products industries. Her significant board experience includes current positions on the boards of Brighthouse Financial and Fifth Third Bancorp. She previously served on the boards of Bob Evans, Libbey Inc., and State Auto Financial. Ms. Mallesch has a B.S. in Accounting from the City University of New York and is a CPA. Ms. Mallesch’s qualifications for service on our Board include her extensive senior management and operating experience in the insurance industry and her service on boards of directors of other companies. | | n | Director since August 2021 | | | n | Class I Director of Arch Capital | | | n | Term expires 2026 | | | n | Audit Committee | | | n | Underwriting Oversight Committee | |
Appointed Directors, Continuing Directors and Senior Management
| Brian S. Posner | | | | n | 62 years old | Mr. Posner has been a private investor since March 2008 and is the President of Point Rider Group LLC and Point Rider Group (UK) Ltd., both being consulting and advisory services firms focused on financial, technology, bio-pharmaceutical and other services-related companies. From 2005 to March 2008, Mr. Posner served as the President, Chief Executive Officer and Co-Chief Investment Officer of ClearBridge Advisors, LLC, an asset management company and a wholly owned subsidiary of Legg Mason (since acquired by Franklin Resources). Prior to that, in 2000, Mr. Posner co-founded Hygrove Partners LLC, a private investment fund and served as the Managing Member for five years. He served as a portfolio manager and an analyst at Fidelity Investments from 1987 to 1996 and, from 1997 to 1999, at Warburg Pincus Asset Management/Credit Suisse Asset Management where he also served as Co-Chief Investment Officer and director of research. Mr. Posner is a Charter Trustee of Northwestern University and serves on the Advisory Board at Northwestern’s Center for the Study of Diversity and Democracy. He previously served on the board of directors of Biogen Inc. and as Chair of the AQR Funds, among others. He holds a B.A. from Northwestern University and an M.B.A. from the University of Chicago Booth School of Business. Mr. Posner’s qualifications for service on our Board include his strong financial background, investment skills and extensive experience as a leading institutional investment manager and advisor, as well as his general expertise in matters pertaining to the financial services industry. | | n | Director since November 2010 | | | n | Class I Director of Arch Capital | | | n | Term expires 2026 | | | n | Compensation and Human Capital Committee | | | n | Finance, Investment and Risk Committee | |
Appointed Directors, Continuing Directors and Senior Management
| | 2024 PROXY STATEMENT | | 20 |
Appointed Directors, Continuing Directors and Senior Management
| Eugene S. Sunshine | | | | n | 74 years old | Mr. Sunshine retired at the end of August 2014 as the Senior Vice President for Business and Finance at Northwestern University, the university’s chief financial and administrative officer. Before joining Northwestern in 1997, he was Senior Vice President for Administration at The Johns Hopkins University. Prior to Johns Hopkins, Mr. Sunshine held positions as New York State Deputy Commissioner for Tax Policy and New York State Treasurer as well as Director of Energy Conservation for the New York State Energy Office. Mr. Sunshine is a former member of the boards of Chicago Board Options Exchange, Kaufman Hall and Associates, Keypath Education, Bloomberg L.P., National Mentors Holdings, Nuveen Investments and Kaufman Hall & Associates. He holds a B.A. from Northwestern University and a Master of Public Administration degree from Syracuse University’s School of Citizenship and Public Affairs. Mr. Sunshine’s qualifications for service on our Board include his strong financial background and extensive executive management and operating experience. | | n | Director since July 2014 | | | n | Class III Director of Arch Capital | | | n | Term expires 2025 | | | n | Audit Committee | | | n | Compensation and Human Capital Committee | | | n | Nominating and Governance Committee | |
Appointed Directors, Continuing Directors and Senior Management
| John D. Vollaro | | | | n | 79 years old | Mr. Vollaro has been a Senior Advisor of Arch Capital since April 2009 and has served as a director of Arch Capital since November 2009. He was Executive Vice President and Chief Financial Officer of Arch Capital from January 2002 to March 2009 and Treasurer of Arch Capital from May 2002 to March 2009. Prior to joining us, Mr. Vollaro acted as an independent consultant in the insurance industry since March 2000. Prior to March 2000, Mr. Vollaro was President and Chief Operating Officer of W.R. Berkley Corporation from January 1996 and a director from September 1995 until March 2000. Mr. Vollaro was Chief Executive Officer of Signet Star Holdings, Inc., a joint venture between W.R. Berkley Corporation and General Re Corporation, from July 1993 to December 1995. Mr. Vollaro served as Executive Vice President of W.R. Berkley Corporation from 1991 until 1993, Chief Financial Officer and Treasurer of W.R. Berkley Corporation from 1983 to 1993 and Senior Vice President of W.R. Berkley Corporation from 1983 to 1991. Mr. Vollaro’s qualifications for service on our Board include his strong financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations. | | n | With Arch since 2002 | | | n | Director since November 2009 | | | n | Class I Director of Arch Capital | | | n | Term expires 2026 | | | n | Finance, Investment and Risk Committee | | | n | Underwriting Oversight Committee | |
Appointed Directors, Continuing Directors and Senior Management
| 21 | | 2024 PROXY STATEMENT | |
Appointed Directors, Continuing Directors and Senior Management
The following individuals are members of senior management, including our executive officers, who do not serve as directors of Arch Capital:
Appointed Directors, Continuing Directors and Senior Management
| François Morin | | | | n | 56 years old | Mr. Morin is Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital, a position he has held since May 2018. Prior to such position, Mr. Morin served as Senior Vice President, Chief Risk Officer and Chief Actuary of Arch Capital, a position he held since May 2015. He joined Arch Capital in October 2011 as Chief Actuary and Deputy Chief Risk Officer. From January 1990 through September 2011, Mr. Morin served in various roles for Towers Watson & Co. and its predecessor firm, Towers Perrin Forster & Crosby, including its actuarial division, Tillinghast. He holds a B.Sc. in Actuarial Science from Université Laval in Canada. He is a Fellow of the Casualty Actuarial Society, a Chartered Financial Analyst, a Chartered Enterprise Risk Analyst and a Member of the American Academy of Actuaries. | | n | With Arch since October 2011 | | | n | Executive Vice President, Chief Financial Officer and Treasurer, Arch Capital | |
Appointed Directors, Continuing Directors and Senior Management
| Nicolas Papadopoulo | | | | n | 61 years old | Mr. Papadopoulo is President and Chief Underwriting Officer of Arch Capital and CEO of Arch Worldwide Insurance Group, a position he has held since January 2021. From September 2017 to December 2020, Mr. Papadopoulo was Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for Property and Casualty Operations. From July 2014 to September 2017, Mr. Papadopoulo was Chairman and Chief Executive Officer of Arch Reinsurance Group at Arch Capital. He joined Arch Re Bermuda in December 2001 where he held a variety of underwriting roles. Prior to joining Arch, he held various positions at Sorema N.A. Reinsurance Group, a U.S. subsidiary of Groupama and he was also an insurance examiner with the Ministry of Finance, Insurance Department, in France. Mr. Papadopoulo graduated from École Polytechnique in France and École Nationale de la Statistique et de l’Administration Economique in France with a master’s degree in statistics. He is also a Member of the International Actuarial Association and a Fellow at the French Actuarial Society. | | n | With Arch since December 2001 | | | n | President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group | |
Appointed Directors, Continuing Directors and Senior Management
| Maamoun Rajeh | | | | n | 53 years old | Mr. Rajeh has served as Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group since October 2017. From July 2014 to September 2017, he was Chairman and Chief Executive Officer of Arch Re Bermuda. He joined Arch Re Bermuda in 2001 as an underwriter, ultimately becoming Chief Underwriting Officer in November 2005. Most recently, he was President and Chief Executive Officer of Arch Reinsurance Europe Underwriting Designated Activity Company (“Arch Re Europe”) from October 2012 to July 2014. From 1999 to 2001, Mr. Rajeh served as Assistant Vice President at HartRe, a subsidiary of The Hartford Financial Services Group, Inc. Mr. Rajeh also served in several business analysis positions at the United States Fidelity and Guarantee Company between 1992 and 1996 and as an underwriter at F&G Re from 1996 to 1999. He has a B.S. from The Wharton School of Business of the University of Pennsylvania and he is a Chartered Property Casualty Underwriter. | | n | With Arch since December 2001 | | | n | Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group | |
Appointed Directors, Continuing Directors and Senior Management
| | 2024 PROXY STATEMENT | | 22 |
Appointed Directors, Continuing Directors and Senior Management
| David E. Gansberg | | | | n | 51 years old | Mr. Gansberg was named Chief Executive Officer of Arch Capital’s Global Mortgage Group on March 1, 2019. From February 2013 through February 2019, he was the President and Chief Executive Officer of Arch Mortgage Insurance Company. From July 2007 to February 2013, Mr. Gansberg was Executive Vice President and a director at Arch Re (U.S.). Prior to that, he held various underwriting, operational and strategic roles at Arch Re Bermuda and Arch Capital Services LLC, where he joined in December 2001. Prior to joining Arch, Mr. Gansberg held various positions with ACE Bermuda and Cigna Property and Casualty. He holds a B.S. in Actuarial Mathematics from the University of Michigan. | | n | With Arch since December 2001 | | | n | Chief Executive Officer, Global Mortgage Group, Arch Capital | |
Appointed Directors, Continuing Directors and Senior Management
| Jennifer Centrone | | | | n | 51 years old | Ms. Centrone is the Executive Vice President, Chief Human Resources Officer of Arch Capital Services LLC, where she is responsible for leading the organization’s talent and culture strategies. Prior to joining Arch, Ms. Centrone was Senior Vice President, Human Resources at Voya Financial from August 2015 to May 2019, where she was responsible for leading key talent, organizational and transformational strategies. Before Voya Financial, Ms. Centrone held senior human resources roles at both The Hartford Financial Services Group, Inc. and Accenture. She holds a B.A. in English Writing and Literature from Fairfield University. | | n | With Arch since June 2019 | | | n | Executive Vice President, Chief Human Resources Officer of Arch Capital Services LLC | |
Appointed Directors, Continuing Directors and Senior Management
| Chris Hovey | | | | n | 57 years old | Mr. Hovey is Chief Operations Officer of Arch Capital Services LLC. From July 2018 to January 2020, Mr. Hovey served as Executive Vice President and Chief Information Officer at Arch Capital Services LLC. Prior to that, he held the role of Chief Operating Officer of Arch Mortgage Insurance Company. Before joining Arch, Mr. Hovey acted as Chief Operating Officer for PMI Mortgage Insurance Co. (“PMI”) since 2011. He also served as Senior Vice President of servicing operations and loss management for PMI, which he originally joined in 2002. Mr. Hovey holds a B.A. from San Francisco State University and an M.B.A. from Saint Mary’s College in Moraga, California. | | n | With Arch since January 2014 | | | n | Chief Operations Officer of Arch Capital Services LLC | |
Appointed Directors, Continuing Directors and Senior Management
| Louis T. Petrillo | | | | n | 58 years old | Mr. Petrillo has been President and General Counsel of Arch Capital Services LLC since April 2002. From May 2000 to April 2002, he was Senior Vice President, General Counsel and Secretary of Arch Capital. From 1996 until May 2000, Mr. Petrillo was Vice President and Associate General Counsel of Arch Capital’s reinsurance subsidiary. Prior to that time, Mr. Petrillo practiced law at the New York firm of Willkie Farr & Gallagher LLP. He holds a B.A. from Tufts University and a law degree from Columbia University. | | n | With Arch since January 1996 | | | n | President and General Counsel of Arch Capital Services LLC | |
Appointed Directors, Continuing Directors and Senior Management
| 23 | | 2024 PROXY STATEMENT | |
Appointed Directors, Continuing Directors and Senior Management
| Jay Rajendra | | | | n | 43 years old | Mr. Rajendra is the Chief Strategy and Innovation Officer at Arch Capital. He is responsible for pursuing new business models and technologies while leading Arch’s analytics capabilities to improve profitability and growth. Mr. Rajendra joined Arch in 2016 in the role of Chief Analytics Officer for Arch Capital, a position he held until January 2020. Prior to joining Arch, Mr. Rajendra was Head of Business Solutions for XL Catlin’s Strategic Analytics team. Before XL, Mr. Rajendra was a Senior Consultant at Towers Watson in both North America and Europe, where he advised large international (re)insurers and start-ups on pricing, strategy and mergers and acquisitions (“M&A”). He is a Fellow of the Institute of Actuaries, Fellow of the Casualty Actuarial Society and Member of the American Academy of Actuaries. He holds a combined Bachelors and Masters in Mathematics from Oxford University and an M.B.A. from Massachusetts Institute of Technology. | | n | With Arch since August 2016 | | | n | Chief Strategy and Innovation Officer at Arch Capital | |
Appointed Directors, Continuing Directors and Senior Management
| Christine Todd | | | | n | 57 years old | Ms. Todd is Senior Vice President, Chief Investment Officer at Arch Capital and President of Arch Investment Management Ltd. (“AIM”) and has responsibility for setting the firm’s investment strategy and managing the day-to-day operations of the investment portfolio. Prior to joining Arch, Ms. Todd was Head of Fixed Income, U.S., for Amundi US from February 2019 to May 2021. She has also held executive roles at Neighborly Investments; Standish Mellon Asset Management Company LLC; and Gannett, Welsh & Kotler. She is a Chartered Financial Analyst and holds a B.A. from Georgetown University and an M.B.A. from Boston University. | | n | With Arch since June 2021 | | | n | Senior Vice President, Chief Investment Officer of Arch Capital | |
Appointed Directors, Continuing Directors and Senior Management
Succession Planning We have a robust talent and succession planning process. On an annual basis, management prepares a talent and succession plan for our CEO and for each member of our executive management team, focusing on high performing and high potential talent, diverse talent and the succession plan for each position. On an annual basis, our Board receives a comprehensive succession plan for the CEO and for each member of our executive management team. Our Board has delegated primary oversight responsibility for succession planning for our CEO to our Nominating and Governance Committee, and for our other members of our executive management team to the Compensation and Human Capital Committee. Our Board continues to regularly evaluate its succession planning to ensure that we are well-positioned to execute our corporate strategy.
Appointed Directors, Continuing Directors and Senior Management
| | 2024 PROXY STATEMENT | | 24 |
Director Compensation
Director Compensation The Compensation and Human Capital Committee is responsible for reviewing and making recommendations to the Board regarding all matters pertaining to compensation paid to directors for Board, committee and committee chair services. In making non-employee director compensation recommendations, the Compensation and Human Capital Committee takes various factors into consideration, including, but not limited to, input received from the Compensation and Human Capital Committee’s independent consultant, the responsibilities of directors generally, as well as committee chairs, and the form and amount of compensation paid to directors by comparable companies. The Board reviews the recommendations of the Compensation and Human Capital Committee and determines the form and amount of director compensation. The following table provides information concerning the compensation of our directors for the year ended December 31, 2023. Directors who also serve as employees of the Company do not receive payment for service as directors. In addition to the arrangements described below, all non-employee directors are entitled to reimbursement for their reasonable out-of-pocket expenses in connection with their travel to and attendance at meetings of the Board or committees. For a complete understanding of the table, refer to the footnotes and the narrative disclosures that follow the table. Please also refer to the “2023 Summary Compensation Table” for Mr. Grandisson’s compensation.
Director Compensation
| Name | Committee Chair | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | | John L. Bunce, Jr. | NC | 150,007 | 124,985 | — | 274,992 | | Eric W. Doppstadt | | 125,007 | 124,985 | — | 249,992 | | Francis Ebong | | 154,596 | 124,985 | 24,618 | 304,199 | | Laurie S. Goodman | | 150,007 | 124,985 | 25,000 | 299,992 | | Moira Kilcoyne | CC** | 154,596 | 124,985 | — | 279,581 | | Eileen Mallesch | AC | 179,596 | 124,985 | — | 304,581 | | Louis J. Paglia | UC | 175,007 | 124,985 | 25,000 | 324,992 | | John M. Pasquesi * | EC | 260,007 | 124,985 | 25,000 | 409,992 | | Brian S. Posner | FC | 175,007 | 124,985 | 2,500 | 302,492 | | Eugene S. Sunshine | | 150,007 | 124,985 | 25,000 | 299,992 | | John D. Vollaro | | 500,000(4) | — | 64,313(5) | 564,313 | | Thomas R. Watjen | ** | 150,007 | 124,985 | — | 274,992 |
Director Compensation
AC = Audit Committee Chair, CC = Compensation and Human Capital Committee Chair, EC = Executive Committee Chair, FC = Finance, Investment and Risk Committee Chair, NC = Nominating and Governance Committee Chair, UC = Underwriting Oversight Committee Chair * Chair of the Board ** Mr. Watjen served as the Compensation and Human Capital Committee Chair until he was succeeded by Ms. Kilcoyne on December 31, 2023.
Director Compensation
| 25 | | 2024 PROXY STATEMENT | |
Director Compensation
(1) Each non-employee member of our Board is entitled to receive an annual cash retainer fee in the amount of $125,000. Each such director may elect to receive the retainer fee in the form of common shares instead of cash. If so elected, the number of shares distributed to the non-employee director will be equal to 100% of the amount of the annual retainer fee otherwise payable divided by the fair market value of our common shares on the date of grant. This column includes the annual retainer (whether paid in cash or, at the election of the director, in common shares) and the fees for service as Chair of the Board, committee chair and Audit Committee member. For the 2022-2023 annual period, Ms. Mallesch received a pro-rated Audit Committee Chair retainer when she assumed the role on February 27, 2023, from Mr. Posner, who remained a member of the Audit Committee through December 31, 2023. On February 27, 2023, Mr. Posner assumed the Finance, Investment and Risk Committee Chair from Mr. Doppstadt. Also, Ms. Kilcoyne and Mr. Ebong joined the Audit Committee on February 27, 2023 and received a prorated 2022-2023 Audit Committee member fee. In addition, Mss. Goodman and Mallesch and Messrs. Doppstadt, Ebong, Paglia, Posner and Watjen received their annual retainer fees in the form of cash and Ms. Kilcoyne and Messrs. Bunce and Sunshine received their annual retainers in the form of 1,714 common shares. Additionally, Mr. Pasquesi elected to receive his annual retainer and Chair of the Board fee in shares in the form of 1,714 common shares for each fee. The following table sets forth the fees payable to our chairs and Audit Committee members:
Director Compensation
| Committee Chair/Member | Annual Fee ($) | | Audit Committee Chair | 50,000 | | Audit Committee Member | 25,000 | | Chair of the Board | 125,000 | | Compensation and Human Capital Committee Chair | 25,000 | | Executive Committee Chair | 10,000 | | Finance, Investment and Risk Committee Chair | 25,000 | | Nominating and Governance Committee Chair | 25,000 | | Underwriting Oversight Committee Chair | 50,000 |
Director Compensation
(2)Each year, the non-employee directors are granted a number of restricted shares equal to $125,000 divided by the closing price on the date of grant (i.e., the first day of the annual period of compensation for the non-employee directors), and such shares vest on the one-year anniversary of grant date. The grant date fair value indicated in the table has been calculated in accordance with FASB ASC Topic 718 Compensation—Stock Compensation, using assumptions set forth in the notes accompanying our financial statements. See note 22, “Share-Based Compensation,” on pages 164-167 of the notes accompanying our consolidated financial statements included in our 2023 Annual Report. On May 4, 2023, each non-employee director received 1,714 common shares, which will vest on May 4, 2024. The aggregate number of share awards outstanding (i.e., unvested) as of December 31, 2023, for each of the non-employee directors was 1,714 common shares, except for Mr. Watjen whose outstanding share awards were forfeited upon his resignation from the Board on December 31, 2023. (3)The amounts in the “All Other Compensation” column for Ms. Goodman, and Messrs. Ebong, Paglia, Pasquesi, Posner and Sunshine consist of matching gifts made under the Company’s matching gift program. Under the matching gift program in 2023, the Company matched eligible contributions to qualified charitable organizations on a dollar-for-dollar basis, up to a maximum of $25,000 per calendar year. During 2023, the Company made an aggregate of approximately $127,118 in matching contributions on behalf of the directors noted in the table above. (4) Mr. Vollaro is a Senior Advisor and an employee of the Company. Mr. Vollaro’s employment agreement provides that he receives an annual base salary of $250,000 and a bonus determined by the Compensation and Human Capital Committee and the Board for his role as Senior Advisor of the Company. For 2023, Mr. Vollaro received a cash bonus of $250,000. In addition, Mr. Vollaro is a member of the Finance, Investment and Risk Committee and Underwriting Oversight Committee of the Board. A description of Mr. Vollaro’s employment agreement is included below. (5) The amount for Mr. Vollaro includes $39,840 in contributions to our defined contribution plan. In addition, the total amount includes payment for club dues and tax preparation services, none of which exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Vollaro.
Director Compensation
| | 2024 PROXY STATEMENT | | 26 |
Director Compensation
Employment Agreement with John Vollaro Our employment agreement with John Vollaro provides for his employment as Senior Advisor of Arch Capital to continue until terminated by either party by providing at least six months’ prior written notice. His base salary is $250,000 per annum, and the target rate for his annual cash bonus is 100% of his annual base salary. Mr. Vollaro is eligible to receive share-based awards at the discretion of the Board and is also entitled to participate in employee benefit programs and other fringe benefits customarily provided to similarly situated senior executives. The Company will reimburse him for his reasonable expenses incurred traveling between Bermuda and the United States. If Mr. Vollaro’s employment is terminated by us without cause, he will be entitled to receive the base salary and target annual bonus which would have been paid to him under his employment agreement for the period through six months after the date of termination of employment (the “Severance Amount”). The Severance Amount would be payable over 12 months. The agreement further provides that if Mr. Vollaro’s employment is terminated by reason of his death or permanent disability, he (or his estate) will be entitled to receive an amount equal to the Severance Amount, in each case, (i) offset by any proceeds received from any insurance coverages provided by the Company and (ii) such amount, will be paid to him (or his estate) promptly upon death or permanent disability, as applicable. Mr. Vollaro’s medical insurance coverage benefits will continue for up to 12 months after the date of termination in the event that his employment ends due to permanent disability, or he is terminated other than for cause. Mr. Vollaro has agreed that, during the employment period and for a period of two years after termination of employment for cause or as a result of his resignation, he will not compete with the businesses of Arch Capital or any of its subsidiaries as such businesses exist or are in process or being planned as of the date of termination. If we terminate Mr. Vollaro’s employment without cause, the term of his noncompetition period will extend for one year following termination. Mr. Vollaro also agreed that he will not, for a period of two years following his date of termination, induce or attempt to induce any of our employees to leave his or her position with us or induce any customer to cease doing business with us. Matters Relating to Director Share Ownership In an effort to further align the interests of the non-employee directors with the interests of shareholders, the Company has adopted: Share Ownership Guidelines: Share ownership guidelines require the directors to retain common shares having a value of at least three times the annual cash retainer fee payable to the director. Starting in 2024, the share ownership guidelines are increasing from three to five times the annual cash retainer fee payable to the director. Each non-employee director has five years to comply with the guidelines, and stock options, SARs and unvested restricted shares/units do not count toward the requirement. Share Holding Requirements: Until our non-employee directors meet their target ownership levels, they must retain an amount equal to 50% of the net profit shares received from Arch Capital’s equity awards. Net profit shares are the shares remaining after payment of taxes owed on vesting of restricted stock or on vesting and payout under restricted stock units. Under the director share holding requirements, net profit shares would also include shares remaining after payment of the exercise price of an option and taxes owed on exercise of options or SARs or on vesting and payout under performance shares, although our non-employee directors do not currently hold or receive Arch Capital performance shares, options or SARs. No Hedging Permitted: As part of our Code of Business Conduct, our officers, directors and other employees are not permitted to engage in hedging activities with respect to Arch Capital’s common shares or any other publicly- traded equity or debt securities issued by Arch Capital or any of its subsidiaries. Specifically, they may not engage in short sales, purchase or sale of financial instruments or derivatives, including puts and calls, that hedge or offset any change in the market value of such securities. In addition, our officers, directors and other employees may not otherwise engage in transactions that are designed to, or have, the same effect.
Compensation Discussion and Analysis
| CEO Target Mix of Pay | Other NEOs Target Mix of Pay | | As illustrated above for our CEO, 75% of target compensation was performance-based and 65% consists of long-term incentives. | As illustrated above for our other NEOs, 71% of target compensation was performance-based and 53% consists of long-term incentives. |
Compensation Discussion and Analysis
2023 Performance at a Glance 1 Excludes the effects of stock options, restricted and performance stock units outstanding. 2 See “Annex B—Non-GAAP Financial Measures.” 3 A lower GAAP combined ratio, a measure of underwriting performance, indicates a higher underwriting margin. 2023 was a year of exceptional performance across our diversified platform that resulted in new records in both underwriting income and premium growth. The Company generated $4.4 billion of net income available to Arch common shareholders (“Net Income”) and $3.2 billion of after-tax operating income—a 207% and 74% increase, respectively, from our 2022 results. See “Annex B—Non-GAAP Financial Measures” for additional information on our non-GAAP measures. We continued our topline growth trajectory of the past several years with a 20.1% increase in gross premiums written (“GPW”) and 21.6% increase in net premiums written (“NPW”) from 2022. Building on momentum of prior years and capitalizing on hard market conditions, our insurance and reinsurance property and casualty (“P&C”) businesses delivered significant growth. In 2023, the P&C units wrote
Book Value and Tangible Book Value per Common Share
1 See “Annex B—Non-GAAP Financial Measures.” 2 Annualized growth rate from December 31, 2001 to December 31, 2023. Excludes the effects of stock options, restricted and performance stock units outstanding.
Risk Management and Compensation Policies
Risk Management and Compensation Policies In line with the Company’s requirements for managing risks associated with the Company’s compensation programs, the Compensation and Human Capital Committee seeks to ensure our executive compensation program does not encourage executives to take excessive risks that are inconsistent with the long-term success of the Company. We emphasize long-term results both in our short-term and long-term incentive programs. Under our short-term incentive program, each underwriting year is measured individually and the results are calculated over a 10-year development period. Our long-term incentive program includes a substantial component of performance-based compensation, which is earned based on achieved performance against preselected performance goals over a three-year performance period. Our compensation philosophy and governance features are also complemented by the following policies: (i) a clawback policy, (ii) a no hedging policy and (iii) share ownership guidelines and share holding requirements that are designed to align our compensation with long-term shareholder interests. See “Additional Compensation Policies and Practices” for further detail. We believe our approach to the evaluation of performance and the design of our compensation programs assist in mitigating excessive risk-taking that could harm our Company and believe there is no excessive risk inherent in our programs.
Role of Compensation Consultant
Role of Compensation Consultant Our Compensation and Human Capital Committee has sole authority to select, retain and terminate any consultants or advisors used to provide independent advice to the Compensation and Human Capital Committee and evaluate executive compensation, including sole authority to approve the fees and any other retention terms for any such consultant or advisor. The Compensation and Human Capital Committee engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent executive compensation consultant to assist in establishing compensation policies and programs. During 2023, Meridian: ▪reviewed and advised the Compensation and Human Capital Committee on matters concerning compensation of the CEO and our other NEOs; ▪reported on all aspects of short-term and long-term compensation program design, including incentive mix; ▪assessed the companies in the Compensation Peer Group for continued appropriateness; ▪reported on emerging trends and developments in executive compensation and corporate governance; ▪prepared formal presentations for the Compensation and Human Capital Committee regarding executive compensation; ▪reviewed compensation benchmarking analysis for each of the Company’s senior executives; and ▪reviewed and advised on director compensation. Meridian did not provide any other services to the Company and no other fees were paid to Meridian except fees related to their services to the Compensation and Human Capital Committee. The Compensation and Human Capital Committee believes that Meridian is independent and no conflict of interest exists.
Competitors for Setting Pay and Comparing Performance
Competitors for Setting Pay and Comparing Performance For purposes of making compensation decisions and for evaluating our financial performance relative to peers, we used compensation and financial data derived from the Compensation Peer Group listed below. We annually review the companies in our Compensation Peer Group with Meridian. Prior to the Compensation and Human Capital Committee making 2023 compensation decisions, the Compensation and Human Capital Committee conducted a formal review of the Compensation Peer Group, with assistance from Meridian, resulting in a recommendation to keep the same Compensation Peer Group as in effect for the prior year, which was approved by the Compensation and Human Capital Committee. The table below describes the multi-step filtering exercise used in the Compensation Peer Group selection process:
Competitors for Setting Pay and Comparing Performance
| Compensation Peer Group Selection Process | | | Step 1: Industry Filters | Select industries relative to Arch Capital’s business operations. | | Step 2: Size Filters | Filter companies based on revenue and asset size. | | Step 3: Additional Subjective Filters | Review business descriptions and additional financial measures. |
Competitors for Setting Pay and Comparing Performance
| Purpose of the Compensation Peer Group | | | Pay Comparisons | Determine competitive pay levels and identify differences from general industry market data. | | | Assess ability to attract, retain, engage and motivate top talent. | | Compensation Structure | Provide benchmarks for compensation structure (pay mix, performance metrics, leverage, vehicles, etc.). | | | Use as a foundation or reference when making design changes to the compensation program. | | Performance Comparisons | Assess performance relative to companies facing similar business challenges. | | | Use as an input to setting incentive plan goals. | | Financial Performance | Company performance is measured in absolute terms, as well as versus prior year results, and in relative terms in comparison with the performance of peer companies in our Compensation Peer Group on the same financial metrics. |
Competitors for Setting Pay and Comparing Performance
| 2023 Compensation Peer Group | | American Financial Group, Inc. | | Arthur J. Gallagher & Co. | | Assurant, Inc. | | AXIS Capital Holdings Limited | | Cincinnati Financial Corporation | | CNA Financial Corporation | | Everest Group, Ltd. | | First American Financial Corporation | | The Hanover Insurance Group, Inc. | | The Hartford Financial Services Group | | Markel Corporation | | Old Republic International Corporation | | RenaissanceRe Holdings Ltd. | | Selective Insurance Group, Inc. | | The Travelers Companies, Inc. | | W.R. Berkley Corporation | | Willis Towers Watson Public Limited Company |
Competitors for Setting Pay and Comparing Performance
The Compensation and Human Capital Committee utilizes a separate peer group to measure relative TSR performance in our performance share awards (the “Performance Peer Group”). There is significant overlap between the two peer groups, with 14 companies included in both groups, but there are differences that reflect the different purposes of the compensation and performance peer groups. The Compensation Peer Group is used primarily to benchmark our compensation against companies that we compete with for talent, while the Performance Peer Group is more focused on companies that participate in similar lines of business in order to more closely measure our relative TSR performance. In establishing the Performance Peer Group for 2023, the Compensation and Human Capital Committee started with the Compensation Peer Group, added Essent Group Ltd., Fairfax Financial Holdings Limited, MGIC Investment Corporation and Radian Group, Inc. and removed Arthur J. Gallagher & Co., First American Financial Corporation and Willis Towers Watson Public Limited Company, resulting in the 18 companies listed below under “Elements of Compensation—Long Term Incentive Plan.” Shareholder Engagement and Results of Say-on-Pay Votes At our 2023 annual general meeting of shareholders, approximately 93.9% of the votes cast approved the Company’s executive compensation programs and the resulting compensation described in the 2023 Proxy Statement. Based on this high level of support, the Compensation and Human Capital Committee determined that shareholders support our compensation practices and will continue to work to ensure that our NEOs’ interests are aligned with our shareholders’ interests to support long-term value creation. In addition, we continue to engage our largest institutional shareholders in discussions regarding our executive compensation program and other governance matters, including our ESG program, as outlined above (see “Proxy Summary”). We remain committed to listening to feedback from shareholders when designing, reviewing and evaluating our compensation programs and policies.
Short-Term Annual Cash Incentive
Short-Term Annual Cash Incentive For each executive participant, target annual cash incentive award levels are established, stated as a percentage of base salary. These levels are influenced by external market data and adjusted as appropriate to take into consideration various factors such as consistent high performance and value delivery to the Company, internal equity, retention and succession. Short-term annual cash incentive award levels are designed to provide formulaic payouts to our senior executives and serve as a critical tool for rewarding the achievement of annual corporate and individual goals. Amounts are earned based on the attainment of quantitative and qualitative strategic accomplishments for the relevant year. The table below sets forth the established target bonus award levels for our NEOs as of December 31, 2023:
Short-Term Annual Cash Incentive
| 2023 NEO Target Short-Term Incentive Opportunity | | | | | Name | Base Salary | Target (%) | Target Bonus | | Marc Grandisson | $1,225,000 | 200% | $2,450,000 | | François Morin | $750,000 | 140% | $1,050,000 | | Nicolas Papadopoulo | $850,000 | 165% | $1,402,500 | | Maamoun Rajeh | $780,000 | 140% | $1,092,000 | | David E. Gansberg | $780,000 | 140% | $1,092,000 |
Overview
Overview At the beginning of each annual performance period, the Compensation and Human Capital Committee approves the financial performance metrics and reviews the strategic goals that will be considered when determining the ultimate amount of the performance-based annual cash incentive awarded upon completion of the calendar year, including establishing specific targets, thresholds and maximums for each financial performance metric. Performance below the threshold would result in no payout related to the financial metrics. For 2023, financial performance metrics were given a weighting of 70% and strategic goals were given a weighting of 30%. The financial metrics are measured based on the financial performance achieved by each of the segments (i.e., Insurance, Reinsurance and Mortgage (collectively the “underwriting units”) and the investment unit) under our existing incentive compensation formula plans. Such plans typically base payouts on the achievement of ROE targets, reflecting the rate of return we earn on our capital, which supports our goal of growth in TBVPS and aligns our executives’ compensation with shareholder returns. At the beginning of each underwriting year, the segment-level ROE scale, which establishes the threshold, target and maximum performance levels under the formula plans, is approved by the Compensation and Human Capital Committee. The threshold, target and maximum payout percentages as well as the 2023 underwriting year ROE scale are set forth in the following table:
Overview
| Level of Performance1 | ROE Scale | Payout Factor | | Threshold | 7.50% | 27.0% | | Target | 13.74% | 100.0% | | Maximum | 20.61% | 200.0% |
Performance Criteria
| Performance Criteria | Measurement | | Weights for Corporate Executives | Weights for Unit Executives | Range of Payout Percentages | | Financial Metrics— Group Level | The incentive compensation payout multiple at the group level is based on each of the underwriting units’ incentive compensation formula plan multiples and is determined as follows: | | 70% | 20% for Reinsurance and Mortgage Executives 50% for President role | 0–200% | | | 1 | Convert the payout levels for each unit to an ROE-equivalent, which is inferred1 using the current underwriting year’s ROE scale. | | | | | | 2 | Derive a group-wide ROE supporting the incentive compensation formula plans using the unit-specific inferred ROEs, weighted by the capital allocated (or deployed) to each underwriting unit. | | | | | | 3 | Compare the group-wide ROE to the target level ROE for the current year in order to assess the relative performance of the group. | | | | | | 4 | Compute the group-level payout multiple using the applicable scale. | | | | | Financial Metrics— Segment Level | The incentive compensation payout level for each unit executive measured under this category is equal to his respective unit’s incentive compensation formula plan multiple (total bonus payout dollars for the unit for the current year expressed as a percentage of the aggregate target bonus pool for the unit for the current year), as described in “Overview” above. | | 0% | 50% for Reinsurance and Mortgage Executives 20% for President role | 0–200% | | Strategic Goals2 | Based on each executive’s year-end performance evaluation measuring the achievement of strategic objectives. | | 30% | 30% | 0–250% | | Total | | | 100% | 100% | 0–200% |
Performance Criteria
1 An ROE equivalent for a given unit is inferred by determining the ROE that would be required under the current underwriting year’s ROE scale to produce a payout multiple equal to the unit’s actual incentive compensation formula plan payout. 2 For the strategic criteria, payout percentages over 200% may only be used if the overall financial criteria payout percentage is 100% (i.e., target level of performance) or higher. The overall maximum bonus payment cannot exceed 200% of the target amount.
2023 Year ROE Scale/Financial Goals/Payout Scale
2023 Year ROE Scale/Financial Goals/Payout Scale The two tables below show the (i) 2023 year ROE scale and (ii) payout scale at the threshold, target and maximum levels for each level of financial goal achievement. Each year, in connection with setting the current year’s threshold, target and maximum ROE measures, the Compensation and Human Capital Committee reviews prevailing financial and economic conditions and uncertainties, the current interest rate environment and peer analysis. The Compensation and Human Capital Committee endeavors to set target ROE measures that are rigorous and responsive to the continued challenging environment in the insurance, reinsurance and mortgage industry and that deliver a pay-for-performance culture. For 2023, the Compensation and Human Capital Committee set the ROE target at 13.74%.
2023 Year ROE Scale/Financial Goals/Payout Scale
| Range of Payouts as % of Target - Financial Goals - Group Level | Threshold | Target | Maximum | | Payout as a % of Target1 | 20% | 100% | 200% | | Level of Goal Achievement Required | 85% | 100% | 115% |
2023 Year ROE Scale/Financial Goals/Payout Scale
| Range of Payouts as % of Target - Financial Goals - Segment Level | Threshold | Target | Maximum | | Payout as a % of Target1 | 20% | 100% | 200% | | Level of Goal Achievement Required | 50% | 100% | 150% |
2023 Year ROE Scale/Financial Goals/Payout Scale
1 Payout for performance achievement between stated levels is interpolated on a straight-line basis. The table below shows the payout percentages at each performance rating for strategic performance criteria:
2023 Year ROE Scale/Financial Goals/Payout Scale
| Strategic Performance Rating | Payout1 | | Exceptional Achievements | 250% | | Exceeds Expectations | 150% | | Meets Expectations | 100% | | Needs Development | 50% | | Unsatisfactory | 0% |
2023 Year ROE Scale/Financial Goals/Payout Scale
1 For the strategic criteria (30% weighting), payout modifiers over 200% may only be used if the overall financial goals (70% weighting) achieve the target level of performance or higher. Also, maximum payout as a percentage of target is capped at 200%. See “2023 Compensation Decisions for NEOs” for details of annual short-term cash incentives paid to the NEOs and discussion of the strategic goals.
2023 Year ROE Scale/Financial Goals/Payout Scale
| 45 | | 2024 PROXY STATEMENT | |
Long-Term Incentive Plan
Long-Term Incentive Plan
Overview
Overview The Company grants long-term equity-based incentive awards to link the compensation of our NEOs directly to corporate performance over the long term and align the interests of executives to our shareholders. A majority of the economic value is granted in performance-based vehicles. The mix of such long-term awards is approximately (i) 80% performance-based, consisting of 55% performance shares and 25% stock options and (ii) 20% time-based restricted shares. The performance shares are subject to both service-based conditions and performance-based vesting conditions and directly link pay with performance and create shareholder alignment. The stock options also align executives’ interests with those of shareholders and focus on driving stock price. Time-based restricted shares promote direct retention and shareholder alignment. These awards make up a significant component of total direct compensation, and we believe that the combination of awards supports our pay-for-performance philosophy by encouraging long-term performance and shareholder value creation. Long-term incentive award grants are generally made annually at the beginning of each year, and the performance shares have three-year overlapping performance periods. In addition, during the year, additional equity awards may be granted for critical retention situations, newly hired employees and special recognition. The summary below describes the vesting conditions and other relevant data relating to the annual long-term equity program.
Overview
| Performance Shares 55% of Economic Value | | Stock Options 25% of Economic Value | | Restricted Shares 20% of Economic Value | | Performance Period: 3 years. Underlying Value: Denoted in shares of Arch Capital. Metrics: Tangible Book Value per share growth over the 3-year performance period, with a TSR modifier of +/- 25%, relative to the TSR of our Performance Peer Group as discussed within “How We Make Compensation Decisions—Selected Competitors” and as shown below. Opportunities: Pre-established threshold, target and maximum opportunities (e.g., 50%, 100%, 200%). Below threshold performance results in 0% shares earned. Payout: Earned shares vest in March following the end of the performance period, with the number of vested shares dependent upon the level of goal achievement. | + | Vesting: 3-year ratable commencing on the first anniversary of the grant date. Underlying Value: Denoted in non-qualified stock options evaluated using the Black-Scholes methodology. Exercise Price: Equal to the closing share price on the grant date. Life: 10-year maximum term. Black-Scholes Methodology: The grant date fair value is calculated in accordance with the Black-Scholes model. The expected life assumption for options is based on the Company’s historical exercise experience of six years (of a 10-year maximum term). Expected volatility is based on the Company’s daily historical trading data of its common shares. | + | Vesting: 3-year ratable commencing on the first anniversary of the grant date. Underlying Value: Denoted in shares of Arch Capital. Payout: In shares. Dividends: Accrue and are paid out upon vesting. |
Overview
| 2023 Performance Peer Group | | American Financial Group, Inc. | | Assurant, Inc. | | AXIS Capital Holdings Limited | | Cincinnati Financial Corporation | | CNA Financial Corporation | | Essent Group Ltd. | | Everest Group, Ltd. | | Fairfax Financial Holdings Limited | | The Hanover Insurance Group, Inc. | | The Hartford Financial Services Group | | Markel Corporation | | MGIC Investment Corporation | | Old Republic International Corporation | | Radian Group Inc. | | RenaissanceRe Holdings Ltd. | | Selective Insurance Group, Inc. | | The Travelers Companies, Inc. | | W.R. Berkley Corporation |
2023 Long-Term Incentive Awards
2023 Long-Term Incentive Awards The Compensation and Human Capital Committee endeavors to set rigorous goals for the performance share awards. The awards granted in 2023 will pay out at target if our TBVPS grows at an 11% annual rate over the three-year period. As noted above, the resulting vesting level is secondarily modified by the relative TSR modifier. Earned awards can increase from 1% to 25% if TSR is greater than the 65th percentile of the Performance Peer Group, or decrease from 1% to 25% if TSR is less than the 35th percentile of the Performance Peer Group. Awards are not modified if TSR performance is between the 35th and 65th percentiles. The maximum number of shares that can be earned is 200% of target. The table below sets forth the threshold, target and maximum performance levels for TBVPS:
2023 Long-Term Incentive Awards
| Level of Performance | Growth in TBVPS | Shares Earned as a % of Target | | Threshold | 6% | 50% | | Target | 11% | 100% | | Maximum | 16% | 200% |
2023 Long-Term Incentive Awards
The Compensation and Human Capital Committee sets award targets for long-term incentive compensation for our NEOs based, in part, on Compensation Peer Group analysis and extensive review of competitive benchmarking data. For 2023, the Compensation and Human Capital Committee increased the long-term incentive grant for the NEOs by approximately 15% above the target award value in recognition of the Company’s outstanding performance in 2022. The target value of the award and the actual grant value stated as a percentage of base salary, are summarized in the table below:
2023 Long-Term Incentive Awards
| Name | 2023 Target Grant Value (% of Base Salary) | 2023 Actual Grant Value (% of Base Salary) | | Marc Grandisson | 450% | 515% | | François Morin | 200% | 230% | | Nicolas Papadopoulo | 300% | 345% | | Maamoun Rajeh | 200% | 230% | | David E. Gansberg | 200% | 230% |
2023 Long-Term Incentive Awards
| 47 | | 2024 PROXY STATEMENT | |
2023 Long-Term Incentive Awards
2023 Compensation Decisions for Named Executive Officers
2023 Short-Term Cash Incentive Plan Payout
2023 Short-Term Cash Incentive Plan Payout The group financial performance metrics represent the weighted average results under the plan formula for the insurance, reinsurance, mortgage and investment units determined for 2023. The level of goal achievement for the group during 2023 for open underwriting years was 127.3%, exceeding the maximum Level of Goal Achievement Required of 115% as indicated in “Elements of Compensation Program—2023 Year ROE Scale/Financial Goals/Payout Scale,” which resulted in a payout factor of 200.0% of target for the group financial goal portion of bonuses. The level of goal achievement for the individual units under the financial goal portion of the Short-Term Cash Incentive Plan for the open underwriting years was 128.7%, 140.9% and 144.1% for the Insurance, Reinsurance and Mortgage segments, respectively, resulting in payout factors of 157.3%, 181.7% and 188.3% of target, respectively. The strategic performance results, which make up 30% of the calculation, are highlighted in the following pages covering each individual NEOs’ compensation.
2021 Performance Shares Plan Payout
2021 Performance Shares Plan Payout As stated above, the Company uses performance shares as part of its Long‐Term Incentive (“LTI”) Compensation Plan. Under the terms of the LTI Plan, the final number of shares ultimately earned by the eligible executives is a function of the absolute growth in the TBVPS of the Company’s common shares over a three-year performance period, supplemented by a TSR modifier. The starting TBVPS for the 2021 grants was $28.63. At the end of 2023, the TBVPS grew to $44.99, a 16.26% annualized increase over the performance period, resulting in a payout percentage of 200%, based on TBVPS growth. Based on Arch Capital’s TSR over the three‐year performance period of 122.9%, which placed it in the 100th percentile of our Performance Peer Group, the resulting TSR multiplier was 125.0%.
2021 Performance Shares Plan Payout
| Annual Change in TBVPS | Payout Percentage | TSR Percentile | Shares Modifier | | <6% | 0% | ≤20% | 75% | | 6% | 50% | 35% | 100% | | 11% | 100% | 65% | 100% | | ≥16% | 200% | ≥80% | 125% |
2021 Performance Shares Plan Payout
Based on the two calculations above, the indicated final payout was 200.0% for the performance shares granted in 2021 that vested on March 4, 2024, which was the maximum payout.
2021 Performance Shares Plan Payout
| | 2024 PROXY STATEMENT | | 48 |
2021 Performance Shares Plan Payout
| Chief Executive Officer | | | | | | | | | | Marc Grandisson Chief Executive Officer | | | | | | | | | | Strategic Goals | | | | | | | | | | In early 2023, the Compensation and Human Capital Committee reviewed and approved Mr. Grandisson’s 2023 strategic objectives. During the year, the Compensation and Human Capital Committee reviewed updates on the progress toward achievement of the objectives and final determinations were made in February 2024. The resulting determination by the Compensation and Human Capital Committee was that he had performed with respect to his pre-established strategic objectives at a level translating to a 200% payout factor. Highlights are summarized below: Mr. Grandisson’s strategic goals were based on Company performance, including in relation to the Performance Peer Group, progress on key strategic initiatives and succession planning. Under Mr. Grandisson’s leadership, the Company’s financial results were outstanding as highlighted in “2023 Performance at a Glance” section. Book value per common share was up 43.9%, annualized net income return on average common equity and annualized after-tax operating return on average common equity were 29.7% and 21.6%, respectively, compared to 11.6% and 14.8%, respectively, in 2022. The Company’s stock price was up 18.3% in 2023. In addition, the Company was once again named a “Most Honorable Company” placing in the top-three overall in every category by Institutional Investor. The Company was also named Best Places to Work by U.S. News and World Report. The Compensation and Human Capital Committee evaluated Mr. Grandisson’s oversight in developing the Company’s global strategy focusing on revenue growth, operating efficiencies, innovation and increased profitability. The Committee also evaluated Mr. Grandisson’s oversight of succession planning and maximizing Executive Leadership Team effectiveness, while also continuing to inspire the Senior Leadership Team (“SLT”) of the Company’s top ~150 leaders. The Committee also reviewed Mr. Grandisson’s oversight of key strategic initiatives in the areas of analytics, M&A, employee engagement, D&I, and ESG programs and policies, as well as continued progress on global IT transformation and Arch Management System, both of which are multi-year initiatives to upgrade and refresh core processes and systems that will generate productivity, efficiency and consumer centric solutions. | | | | | | | | | | Compensation Decisions | | | | | | | | | | ■ Base Salary, Short- and Long-Term Incentive Target | Mr. Grandisson did not have any change to base salary or short- and long-term incentive targets in 2023. For 2024 compensation decisions, the Compensation and Human Capital Committee reviewed and benchmarked Mr. Grandisson’s compensation against the Company’s Compensation Peer Group. Based on that review, in order to maintain market competitiveness at our target positioning as described in “How We Make Compensation Decisions,” Mr. Grandisson’s base salary was increased to $1,300,000 from $1,225,000 in January 2024 and his long-term incentive target was increased to 560% of base salary from 450% of base salary. His short-term incentive remains at 200% of base salary. | | | | | | | | | ■ Short-Term Cash Incentive | The Compensation and Human Capital Committee reviewed Mr. Grandisson’s performance against his strategic goals, which resulted in a payout factor of 200% on the portion of his bonus that was based on strategic performance. | | | | | | | | | | 2023 STI Metric | | | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout (Max 2x) | | | Financial Performance—Group | | | 200% | 70% | 140% | $2,450,000 | $3,430,000 | | | Strategic Performance | | | 200% | 30% | 60% | | 1,470,000 | | | TOTAL | | | | 100% | 200% | | $4,900,000 | | ■ Long-Term Incentive | On February 24, 2023, the Compensation and Human Capital Committee approved the annual award summarized in the table below. The amount includes a 15% increase to the grant target in recognition of the Company’s outstanding performance in 2022. The performance shares are reflected at target since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. | | | | | | | | | | | Performance Shares | | Stock Options | | Time-Based Restricted Shares | | | | | Grant Date | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total | | | Feb. 24, 2023 | 50,193 | $3,471,850 | 67,242 | $1,578,304 | 18,252 | $1,262,491 | $6,312,645 | | ■ 2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2021 grants was $28.63. At the end of 2023, TBVPS grew to $44.99, a 16.26% annualized increase over the performance period, resulting in a payout percentage of 200%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 122.9%, which placed it in the 100th percentile of our Performance Peer Group, the resulting TSR multiplier was 125.0%, and the overall payout factor was calculated at 200.0%, which was the maximum payout. | | | | | | | | | | 2021 Grant (Target) | Approved Payout Factor | | Total Vested | Adjustment to Target Shares Awarded | | Value of Adjustment to Target Shares at 12/31/20232 | | | | 69,095 | 200.0% | | 138,190 | 69,095 | | $5,131,686 | | | 1 The total long-term incentive value provided in the summary above for performance share awards differs from the grant date fair value reported in the “2023 Summary Compensation” and “2023 Grants of Plan-Based Awards” Tables. The values in the summary above were based on the closing price of our shares on the grant date and the target number of shares. The values in the “2023 Summary Compensation” and “2023 Grants of Plan-Based Awards” Tables were computed at the grant date in accordance with ASC Topic 718. Stock options are valued on the grant date based on the Black-Scholes option pricing methodology (refer to “Elements of Compensation Program—Long-Term Incentive Plan”) and restricted shares are valued based on the closing price of our common shares on the grant date. 2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | | | | | | | | |
2021 Performance Shares Plan Payout
| 49 | | 2024 PROXY STATEMENT | |
2021 Performance Shares Plan Payout
| Chief Financial Officer | | | | | | | | | | François Morin Executive Vice President, Chief Financial Officer and Treasurer | | | | | | | | | | Strategic Goals | | | | | | | | | | Mr. Morin’s strategic goals were based on our financial strength ratings, strategic initiatives, updating of financials systems, finance operations and processes and succession planning. Mr. Morin worked successfully at managing investor, rating agency and auditor relations to keep our financial strength ratings strong. He also led capital management decisions across the group resulting in 21.6% growth in net written premium and after-tax operating income growth of 74.2% from 2022. The Compensation and Human Capital Committee evaluated Mr. Morin’s role in strategic initiatives, including corporate structuring designed to enhance Company capital and provide financial flexibility for the future. In addition, Mr. Morin led the successful implementation of Phase 1 of the multi-year finance transformation to implement a single Enterprise Resource Planning (“ERP”) solution across the group. Mr. Morin also continued to identify the next generation of leaders through the SLT and succession planning process and encouraged team building for the various corporate functions by helping to lead a first-ever Corporate Collaboration Conference for 160-plus employees across the corporate functions. Mr. Morin also joined the Company’s mentorship program and mentors a number of individuals across different teams. | | | | | | | | | | Compensation Decisions | | | | | | | | | | ■ Base Salary | Mr. Morin’s base salary was increased to $750,000 from $675,000 in January 2023 following our annual benchmarking review, company growth and continued high performance. For 2024 compensation decisions, Mr. Morin’s base salary was increased to $800,000 from $750,000 following our annual benchmarking review, effective January 1, 2024. | | | | | | | | | ■ Short-Term Cash Incentive | The Compensation and Human Capital Committee reviewed Mr. Morin’s performance against his strategic goals, which resulted in a payout factor of 210% on the portion of his bonus that was based on strategic performance. | | | | | | | | | | 2023 STI Metric | | | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout (Max 2x) | | | Financial Performance—Group | | | 200% | 70% | 140% | $1,050,000 | $1,470,000 | | | Strategic Performance | | | 210% | 30% | 63% | | 630,000 | | | TOTAL | | | | 100% | 203% | | $2,100,000 | | | Effective January 1, 2023, Mr. Morin’s Short-Term Cash Incentive target was increased to 140% of base salary from 135% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Morin’s Short-Term Cash Incentive target was increased to 150% of base salary from 140% of base salary following our annual benchmarking review, effective January 1, 2024. | | | | | | | | | ■ Long-Term Incentive | On February 24, 2023, the Compensation and Human Capital Committee approved the annual award summarized in the table below. The amount includes a 15% increase to the grant target in recognition of the Company’s outstanding performance in 2022. The performance shares are reflected at target since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. | | | | | | | | | | | Performance Shares | | Stock Options | | Time-Based Restricted Shares | | | | | Grant Date | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total | | | Feb. 24, 2023 | 13,716 | $948,736 | 18,375 | $431,298 | 4,988 | $345,020 | $1,725,054 | | ■ 2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2021 grants was $28.63. At the end of 2023, TBVPS grew to $44.99, a 16.26% annualized increase over the performance period, resulting in a payout percentage of 200%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 122.9%, which placed it in the 100th percentile of our Performance Peer Group, the resulting TSR multiplier was 125.0%, and the overall payout factor was calculated at 200.0%, which was the maximum payout. | | | | | | | | | | 2021 Grant (Target) | Approved Payout Factor | | Total Vested | Adjustment to Target Shares Awarded | | Value of Adjustment to Target Shares at 12/31/20232 | | | | 20,729 | 200.0% | | 41,458 | 20,729 | | $1,539,543 | | | 1 The total long-term incentive value provided in the summary above for performance share awards differs from the grant date fair value reported in the “2023 Summary Compensation” and “2023 Grants of Plan-Based Awards” Tables. The values in the summary above were based on the closing price of our shares on the grant date and the target number of shares. The values in the “2023 Summary Compensation” and “2023 Grants of Plan-Based Awards” Tables were computed at the grant date in accordance with ASC Topic 718. Stock options are valued on the grant date based on the Black-Scholes option pricing methodology (refer to “Elements of Compensation Program—Long-Term Incentive Plan”) and restricted shares are valued based on the closing price of our common shares on the grant date. 2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | | | | | | | | |
2021 Performance Shares Plan Payout
| | 2024 PROXY STATEMENT | | 50 |
2021 Performance Shares Plan Payout
| President and Chief Underwriting Officer | | | | | | | | | | Nicolas Papadopoulo President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group | | | | | | | | | | Strategic Goals | | | | | | | | | | Mr. Papadopoulo’s strategic goals included growth strategies, strategic initiatives, leadership development, and D&I initiatives. Mr. Papadopoulo continues to build alignment and common strategies around future growth for all of Arch’s segments, i.e., Insurance, Reinsurance and Mortgage. Under Mr. Papadopoulo’s leadership, Insurance group net written premiums grew 16.7% from 2022. The Compensation and Human Capital Committee also evaluated Mr. Papadopoulo’s role in strategic initiatives, including sponsoring the expansion of the Shared Service Operating Model and prioritization of next steps for the companywide transformation agenda after the successful implementation of the HR Talent Acquisition and IT End User Support pilots. Mr. Papadopoulo also focused on further expanding the use of strategic analytics and digital partnership successes to continue to drive innovation and increase profitability, and he continued to support the development of leaders and the framework specific to the next generation of successors. Mr. Papadopoulo also promoted the Company’s D&I initiatives across business units, including segment specific D&I goals and continues to serve as Executive Sponsor of the Women and Allies Employee Network. | | | | | | | | | | Compensation Decisions | | | | | | | | | | ■ Base Salary | Mr. Papadopoulo’s base salary was increased to $850,000 from $800,000 in January 2023 following our annual benchmarking review, company growth and continued high performance. For 2024 compensation decisions, Mr. Papadopoulo’s base salary was increased to $900,000 from $850,000 following our annual benchmarking review, effective January 1, 2024. | | | | | | | | | ■ Short-Term Cash Incentive | The Compensation and Human Capital Committee reviewed Mr. Papadopoulo’s performance against his strategic goals, which resulted in a payout factor of 225% on the portion of his bonus that was based on strategic performance. | | | | | | | | | | 2023 STI Metric | | | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout (Max 2x) | | | Financial Performance—Group | | | 200% | 50% | 100% | $1,402,500 | $1,402,500 | | | Financial Performance—Segment | | | 164% | 20% | 32.8% | | 460,020 | | | Strategic Performance | | | 225% | 30% | 67.5% | | 942,480 | | | TOTAL | | | | 100% | 200.3% | | $2,805,000 | | | Effective January 1, 2023, Mr. Papadopoulo’s Short-Term Cash Incentive target was increased to 165% of base salary from 150% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Papadopoulo’s Short-Term Cash Incentive target was increased to 185% of base salary from 165% of base salary following our annual benchmarking review, effective January 1, 2024. | | | | | | | | | ■ Long-Term Incentive | On February 24, 2023, the Compensation and Human Capital Committee approved the annual award summarized in the table below. The amount includes a 15% increase to the grant target in recognition of the Company’s outstanding performance in 2022. The performance shares are reflected at target since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. | | | | | | | | | | | Performance Shares | | Stock Options | | Time-Based Restricted Shares | | | | | Grant Date | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total | | | Feb. 24, 2023 | 23,337 | $1,614,220 | 31,264 | $733,829 | 8,486 | $586,977 | $2,935,026 | | ■ 2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2021 grants was $28.63. At the end of 2023, TBVPS grew to $44.99, a 16.26% annualized increase over the performance period, resulting in a payout percentage of 200%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 122.9%, which placed it in the 100th percentile of our Performance Peer Group, the resulting TSR multiplier was 125.0%, and the overall payout factor was calculated at 200.0%, which was the maximum payout. | | | | | | | | | | 2021 Grant (Target) | Approved Payout Factor | | Total Vested | Adjustment to Target Shares Awarded | | Value of Adjustment to Target Shares at 12/31/20232 | | | | 36,851 | 200.0% | | 73,702 | 36,851 | | $2,736,924 | | | 1 The total long-term incentive value provided in the summary above for performance share awards differs from the grant date fair value reported in the “2023 Summary Compensation” and “2023 Grants of Plan-Based Awards” Tables. The values in the summary above were based on the closing price of our shares on the grant date and the target number of shares. The values in the “2023 Summary Compensation” and “2023 Grants of Plan-Based Awards” Tables were computed at the grant date in accordance with ASC Topic 718. Stock options are valued on the grant date based on the Black-Scholes option pricing methodology (refer to “Elements of Compensation Program—Long-Term Incentive Plan”) and restricted shares are valued based on the closing price of our common shares on the grant date. 2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | | | | | | | | |
2021 Performance Shares Plan Payout
| 51 | | 2024 PROXY STATEMENT | |
2021 Performance Shares Plan Payout
| Reinsurance Unit Executive | | | | | | | | | | Maamoun Rajeh Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group | | | | | | | | | | Strategic Goals | | | | | | | | | | Mr. Rajeh’s strategic goals were based on reinsurance growth and profitability, strategic initiatives, leadership development, D&I and inclusion initiatives and enhancing the reinsurance group’s brand and reputation in the market. Under Mr. Rajeh’s direction of the Reinsurance group, they generated $9.1 billion in gross premium written, 31% more than in 2022, including a bottom line profit of $1.1 billion, a record for the group. The Compensation and Human Capital Committee also evaluated Mr. Rajeh’s role in strategic initiatives, including leading the development of a distribution strategy in the face of increased broker bargaining power and underwriting commoditization. Mr. Rajeh focused on leadership development, which continues to yield strong internal candidates for key roles, including two newly promoted Chief Underwriting Officers (“CUOs”) and for the first time, the reinsurance group has two women in CUO roles. Mr. Rajeh increased his media engagement activities to promote the group’s message, which continues to establish the Company as a thought leader and trendsetter in the industry. | | | | | | | | | | Compensation Decisions | | | | | | | | | | ■ Base Salary | Mr. Rajeh’s base salary was increased to $780,000 from $725,000 in January 2023 following our annual benchmarking review, company growth and continued high performance. For 2024 compensation decisions, Mr. Rajeh’s base salary was increased to $850,000 from $780,000 following our annual benchmarking review, effective January 1, 2024. | | | | | | | | | ■ Short-Term Cash Incentive | The Compensation and Human Capital Committee reviewed Mr. Rajeh’s performance against his strategic goals, which resulted in a payout factor of 200% on the portion of his bonus that was based on strategic performance. | | | | | | | | | | 2023 STI Metric | | | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout (Max 2x) | | | Financial Performance—Group | | | 200% | 20% | 40% | $1,092,000 | $436,800 | | | Financial Performance—Segment1 | | | 181.6% | 50% | 90.8% | | 991,500 | | | Strategic Performance | | | 200% | 30% | 60% | | 655,200 | | | TOTAL | | | | 100% | 190.8% | | $2,083,500 | | | 1 The payout factor was reduced for amounts calculated under the reinsurance segment’s formula approach under the short-term cash incentive plan attributable to performance for prior underwriting years, for which Mr. Rajeh has previously received payment. | | | | | | | | | | Effective January 1, 2023, Mr. Rajeh’s Short-Term Cash Incentive target was increased to 140% of base salary from 135% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Rajeh’s Short-Term Cash Incentive target was increased to 165% of base salary from 140% of base salary following our annual benchmarking review, effective January 1, 2024. | | | | | | | | | ■ Long-Term Incentive | On February 24, 2023, the Compensation and Human Capital Committee approved the annual award summarized in the table below. The amount includes a 15% increase to the grant target in recognition of the Company’s outstanding performance in 2022. The performance shares are reflected at target since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. | | | | | | | | | | | Performance Shares | | Stock Options | | Time-Based Restricted Shares | | | | | Grant Date | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total | | | Feb. 24, 2023 | 14,273 | $987,263 | 19,121 | $448,808 | 5,190 | $358,992 | $1,795,063 | | ■ 2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2021 grants was $28.63. At the end of 2023, TBVPS grew to $44.99, a 16.26% annualized increase over the performance period, resulting in a payout percentage of 200%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 122.9%, which placed it in the 100th percentile of our Performance Peer Group, the resulting TSR multiplier was 125.0%, and the overall payout factor was calculated at 200.0%, which was the maximum payout. | | | | | | | | | | 2021 Grant (Target) | Approved Payout Factor | | Total Vested | Adjustment to Target Shares Awarded | | Value of Adjustment to Target Shares at 12/31/20232 | | | | 22,264 | 200.0% | | 44,528 | 22,264 | | $1,653,547 | | | 1 The total long-term incentive value provided in the summary above for performance share awards differs from the grant date fair value reported in the “2023 Summary Compensation” and “2023 Grants of Plan-Based Awards” Tables. The values in the summary above were based on the closing price of our shares on the grant date and the target number of shares. The values in the “2023 Summary Compensation” and “2023 Grants of Plan-Based Awards” Tables were computed at the grant date in accordance with ASC Topic 718. Stock options are valued on the grant date based on the Black-Scholes option pricing methodology (refer to “Elements of Compensation Program—Long-Term Incentive Plan”) and restricted shares are valued based on the closing price of our common shares on the grant date. 2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | | | | | | | | |
2021 Performance Shares Plan Payout
| | 2024 PROXY STATEMENT | | 52 |
2021 Performance Shares Plan Payout
| Mortgage Unit Executive | | | | | | | | | | David E. Gansberg Chief Executive Officer, Global Mortgage Group | | | | | | | | | | Strategic Goals | | | | | | | | | | Mr. Gansberg’s strategic goals were based on growth and diversification, strategic initiatives, leadership development, and D&I initiatives. Under Mr. Gansberg’s leadership, the Mortgage group earned $1.1 billion of underwriting income in a challenging year due to industry-wide reductions in mortgage originations. Also, the group generated significant financial benefit from calling several outstanding notes that no longer provided capital benefit. The Compensation and Human Capital Committee also evaluated Mr. Gansberg’s oversight of strategic initiatives including international growth in Australia and growth in gross written premium of 80% over 2022 from European Significant Risk Transfer transactions. Under Mr. Gansberg’s guidance, the group continues to enhance analytics by building better real-time analytics on housing industry and economic trends and competitor pricing. The group is diversifying business beyond primary mortgage insurance by operationalizing second lien insurance business and restarting the whole loan acquisition business. Mr. Gansberg continues to support the development and coaching of his leadership team and under his direction, the Mortgage group was named one of the Best Places To Work for the fifth consecutive year by Triad Business Journal. | | | | | | | | | | Compensation Decisions | | | | | | | | | | ■ Base Salary | Mr. Gansberg’s base salary was increased to $780,000 from $725,000 in January 2023 following our annual benchmarking review, company growth and continued high performance. For 2024 compensation decisions, Mr. Gansberg’s base salary was increased to $850,000 from $780,000 following our annual benchmarking review, effective January 1, 2024. | | | | | | | | | ■ Short-Term Cash Incentive | The Compensation and Human Capital Committee reviewed Mr. Gansberg’s performance against his strategic goals, which resulted in a payout factor of 200% on the portion of his bonus that was based on strategic performance. | | | | | | | | | | 2023 STI Metric | | | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout (Max 2x) | | | Financial Performance—Group | | | 200% | 20% | 40% | $1,092,000 | $436,800 | | | Financial Performance—Segment1 | | | 179.2% | 50% | 90% | | 978,481 | | | Strategic Performance | | | 200% | 30% | 60% | | 655,200 | | | TOTAL | | | | 100% | 190% | | $2,070,481 | | | 1 The payout factor was reduced for amounts calculated under the mortgage segment’s formula approach under the short-term cash incentive plan attributable to performance for prior underwriting years in recognition of the fact that an additional bonus amount of $97,219 was paid to Mr. Gansberg in March 2024 for those prior underwriting years due to his continued participation in the Mortgage segment’s separate formulaic bonus plan for those prior years. | | | | | | | | | | Effective January 1, 2023, Mr. Gansberg’s Short-Term Cash Incentive target was increased to 140% of base salary from 135% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Gansberg’s Short-Term Cash Incentive target was increased to 165% of base salary from 140% of base salary following our annual benchmarking review, effective January 1, 2024. | | | | | | | | | ■ Long-Term Incentive | On February 24, 2023, the Compensation and Human Capital Committee approved the annual award summarized in the table below. The amount includes a 15% increase to the grant target in recognition of the Company’s outstanding performance in 2022. The performance shares are reflected at target since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. | | | | | | | | | | | Performance Shares | | Stock Options | | Time-Based Restricted Shares | | | | | Grant Date | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total | | | Feb. 24, 2023 | 14,273 | $987,263 | 19,121 | $448,808 | 5,190 | $358,992 | $1,795,063 | | ■ 2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2021 grants was $28.63. At the end of 2023, TBVPS grew to $44.99, a 16.26% annualized increase over the performance period, resulting in a payout percentage of 200%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 122.9%, which placed it in the 100th percentile of our Performance Peer Group, the resulting TSR multiplier was 125.0%, and the overall payout factor was calculated at 200.0%, which was the maximum payout. | | | | | | | | | | 2021 Grant (Target) | Approved Payout Factor | | Total Vested | Adjustment to Target Shares Awarded | | Value of Adjustment to Target Shares at 12/31/20232 | | | | 22,264 | 200.0% | | 44,528 | 22,264 | | $1,653,547 | | | 1 The total long-term incentive value provided in the summary above for performance share awards differs from the grant date fair value reported in the “2023 Summary Compensation” and “2023 Grants of Plan-Based Awards” Tables. The values in the summary above were based on the closing price of our shares on the grant date and the target number of shares. The values in the “2023 Summary Compensation” and “2023 Grants of Plan-Based Awards” Tables were computed at the grant date in accordance with ASC Topic 718. Stock options are valued on the grant date based on the Black-Scholes option pricing methodology (refer to “Elements of Compensation Program—Long-Term Incentive Plan”) and restricted shares are valued based on the closing price of our common shares on the grant date. 2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | | | | | | | | |
2021 Performance Shares Plan Payout
| 53 | | 2024 PROXY STATEMENT | |
2021 Performance Shares Plan Payout
2024 Long-Term Incentive Awards In February 2024, and as will be described in more detail in the 2025 Proxy Statement, the Company made annual cycle long-term incentive grants in the form of performance shares, stock options and time-based restricted stock to the NEOs. The Compensation and Human Capital Committee sets award targets for long-term incentive compensation for our NEOs based, in part, on Compensation Peer Group analysis, extensive review of competitive benchmarking data and an evaluation of performance. As discussed in “2023 Compensation Decisions for NEOs,” the Compensation and Human Capital Committee increased the long-term incentive target for the NEOs. For the 2024 annual cycle grants, each of the NEOs received the following:
2021 Performance Shares Plan Payout
| Name | 2024 Target (% of Base Salary) | February 2024 Annual Cycle Grants1 | | Marc Grandisson2 | 560% | $7,280,000 | | François Morin2 | 230% | $1,840,000 | | Nicolas Papadopoulo2 | 380% | $3,420,000 | | Maamoun Rajeh2 | 300% | $2,550,000 | | David E. Gansberg2 | 300% | $2,550,000 |
2021 Performance Shares Plan Payout
1 Similar to the annual cycle long-term incentive awards granted in 2023 and, as described in “2023 Compensation Decisions for NEOs,” the Company granted 55% in performance shares (measured by economic value), 25% in stock options and 20% in time-based restricted shares in February 2024. 2 Messrs. Grandisson, Morin, Papadopoulo, Rajeh and Gansberg’s February 2024 grant increased as a result of their January 1, 2024 base salary and long-term incentive target change, as described in “2023 Compensation Decisions for NEOs.” Additional Compensation Policies and Practices Arch Capital’s compensation philosophy and related governance features are also complemented by several specific elements that are designed to align our compensation with long-term shareholder interests. These elements include the following:
Share Holding Requirements for Executives
Share Holding Requirements for Executives To ensure each of our senior executives meets our share ownership guidelines, the Company requires that each senior executive retain 50% of the net profit shares received from Company equity awards until the executive meets target ownership levels. Net profit shares are the shares remaining after payment of the exercise price of an option and taxes owed on exercise of options or SARs, vesting of restricted stock or vesting and payout under restricted stock units and performance shares. See also “Director Compensation—Matters Relating to Director Share Ownership” for a description of share retention guidelines that require our non-employee directors to maintain designated levels of ownership of common shares of Arch Capital.
Double-Trigger Change in Control Provision
Double-Trigger Change in Control Provision The equity-based compensation award agreements for the NEOs provide that, in the event the officer’s employment is terminated by the Company other than for cause, or by the officer for good reason, within two years following the consummation of a change in control in which the awards are assumed by the acquirer, unvested awards would immediately vest, and the options and SARs would have a remaining term of 90 days from termination.
Options and SARs
Options and SARs Our plans do not permit granting of stock options or SARs at an exercise price below the closing price on the grant date and also do not allow for repricing or reducing the exercise price of a stock option or SAR. We also do not allow out-of-the-money options or SARs to be exchanged for cash or other property.
Executive Compensation Tables
| 2023 Summary Compensation Table |
Executive Compensation Tables
| Name and Principal Position | Year | Salary ($)(1) | Annual Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | | Marc Grandisson | 2023 | 1,225,000 | — | 4,972,757 | 1,578,304 | 4,900,000 | 426,191 | 13,102,252 | | Chief Executive Officer and Class III Director, Arch Capital | 2022 | 1,225,000 | — | 4,285,510 | 1,378,188 | 4,745,700 | 467,241 | 12,101,639 | | | 2021 | 1,000,000 | — | 3,482,784 | 1,125,018 | 3,300,000 | 428,211 | 9,336,013 | | François Morin | 2023 | 750,000 | — | 1,358,907 | 431,298 | 2,100,000(6) | 316,372 | 4,956,577 | | Executive Vice President, Chief Financial Officer and Treasurer, Arch Capital | 2022 | 675,000 | — | 1,049,474 | 337,509 | 1,822,500(6) | 326,227 | 4,210,710 | | | 2021 | 675,000 | — | 1,044,861 | 337,504 | 1,822,500(6) | 298,034 | 4,177,899 | | Nicolas Papadopoulo | 2023 | 850,000 | — | 2,312,048 | 733,829 | 2,805,000 | 441,658(7) | 7,142,535 | | President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group | 2022 | 800,000 | — | 1,865,812 | 600,026 | 2,256,500 | 433,889(7) | 5,956,227 | | | 2021 | 800,000 | — | 1,857,478 | 600,008 | 2,192,600 | 450,812(7) | 5,900,898 | | Maamoun Rajeh | 2023 | 780,000 | | 1,414,052 | 448,808 | 2,083,500(9) | 546,343 | 5,272,703 | | Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group | 2022 | 725,000 | | 1,127,234 | 362,510 | 1,431,400 | 547,379 | 4,193,523 | | | 2021 | 725,000 | 3,600,451(8) | 1,122,227 | 362,506 | 1,548,400 | 560,148 | 7,918,732 | | David E. Gansberg | 2023 | 780,000 | 97,219(10) | 1,414,052 | 448,808 | 2,070,481 | 198,934(7) | 5,009,494 | | Chief Executive Officer, Global Mortgage Group, Arch Capital | 2022 | 725,000 | 266,321(10) | 1,127,234 | 362,510 | 1,608,079 | 184,139(7) | 4,273,283 | | | 2021 | 725,000 | 398,000(10) | 1,122,227 | 362,506 | 1,513,200 | 110,671(7) | 4,231,604 |
Executive Compensation Tables
| 2023 | Grants of Plan-Based Awards |
Executive Compensation Tables
| Outstanding Equity Awards at 2023 Fiscal Year-End |
Pay Versus Performance
Pay Versus Performance
Pay Versus Performance
| Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(2) | Average Summary Compensation Table Total for Non-PEO NEOs(3) | Average Compensation Actually Paid to Non-PEO NEOs(4) | Value of Initial Fixed $100 Investment Based On: | | | | | | | | | | Total Shareholder Return(5) | Peer Group Total Shareholder Return(6) | Net Income (thousands)(7) | Operating ROE(8) | | 2023 | 13,102,252 | 21,589,156 | 5,595,327 | 8,510,086 | 173.16 | 168.05 | 4,403,000 | 21.6% | | 2022 | 12,101,639 | 20,596,816 | 4,658,436 | 7,460,450 | 146.37 | 151.65 | 1,436,197 | 14.8% | | 2021 | 9,336,013 | 16,348,981 | 5,557,283 | 7,443,067 | 103.64 | 127.58 | 2,093,405 | 11.5% | | 2020 | 8,779,832 | 2,801,587 | 3,881,973 | 2,994,739 | 84.10 | 106.96 | 1,363,909 | 4.8% |
Pay Versus Performance
(1)The dollar amounts reported represent the amount of total compensation reported for Mr. Grandisson, our Chief Executive Officer, for each corresponding year in the “Total” column of the Summary Compensation Table. Refer to “Compensation—Executive Compensation Tables—Summary Compensation Table.” (2)The dollar amounts reported represent the amount of compensation actually paid to Mr. Grandisson, computed as required by Item 402(v) of Regulation S-K. That computation does not reflect the actual amount of compensation earned by or paid to Mr. Grandisson during the applicable year. Refer to the “PEO Summary Compensation Total to Compensation Actually Paid Reconciliation” table below. (3)The dollar amounts reported represent the average of the amounts reported for the Company’s NEOs as a group, excluding Mr. Grandisson, for each corresponding year in the “Total” column of the Summary Compensation Table. Refer to “Compensation—Executive Compensation Tables—Summary Compensation Table.” The names of each of the NEOs included for purposes of calculating the average amounts in each applicable year are as follows: François Morin, Nicolas Papadopoulo, Maamoun Rajeh and David E. Gansberg. (4)The dollar amounts reported represent the average amount of compensation actually paid to the Company’s NEOs as a group, excluding Mr. Grandisson, computed as required by Item 402(v) of Regulation S-K. That computation does not reflect the actual average amount of compensation earned by or paid to the Non-PEO NEOs as a group during the applicable year. Refer to the “Average of Non-PEO NEO Summary Compensation Total to Compensation Actually Paid Reconciliation” table below. (5)Represents the Company’s cumulative TSR assuming reinvestment of dividends for the measurement period beginning at market close on December 31, 2019, through the end of the applicable year. (6)Represents the cumulative TSR assuming reinvestment of dividends of the S&P 500 P&C Index for the measurement period beginning at the market close on December 31, 2019, through the end of the applicable year. (7)The dollar amounts reported represent the amount of Net Income reflected in the Company’s audited financial statements for the applicable year. (8)Represents the Operating ROE as described in “Annex B—Non-GAAP Financial Measures” for the applicable year.
Pay Versus Performance
| | 2024 PROXY STATEMENT | | 66 |
Pay Versus Performance
PEO Summary Compensation Total to Compensation Actually Paid Reconciliation:
Pay Versus Performance
| Year | Reported Summary Compensation Table Total for PEO | Reported Value of Equity Awards(a) | Equity Award Adjustments(b) | Reported Change in the Actuarial Present Value of Pension Benefits(c) | Pension Benefit Adjustments(c) | Compensation Actually Paid to PEO | | 2023 | 13,102,252 | (6,551,061) | 15,037,965 | — | — | 21,589,156 |
Pay Versus Performance
(a)The reported value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year. (b)Refer to the “PEO Equity Award Adjustments” table below. (c)Arch does not provide Pension Benefits to its CEO. PEO Equity Award Adjustments:
Pay Versus Performance
| Year | Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year(a) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years(a) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years and Vested in the Year(a) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | Total Equity Award Adjustments | | 2023 | 7,052,239 | 7,006,817 | — | 978,909 | — | — | 15,037,965 |
Pay Versus Performance
(a)The valuation assumptions differ from those disclosed as of the grant date of equity awards due to the fluctuation in the stock price and the corresponding Black-Scholes and Monte Carlo value simulations valued as of the corresponding dates in accordance with Item 402(v) of Regulation S-K. In calculating the Black-Scholes value of the option awards, the expected life input, based on the original expected life established at grant date, as used for financial reporting purposes, was adjusted downward in proportion to the degree to which the options were in-the-money relative to their exercise price and upward in proportion to the degree to which the options were out-of-the-money relative to their exercise price, as applicable. Average of Non-PEO NEO Summary Compensation Total to Compensation Actually Paid Reconciliation:
Pay Versus Performance
| Year | Average Reported Summary Compensation Table Total for Non-PEO NEOs | Average Reported Value of Equity Awards(a) | Average Equity Award Adjustments(b) | Average Reported Change in the Actuarial Present Value of Pension Benefits(c) | Average Pension Benefit Adjustments(c) | Average Compensation Actually Paid to Non-PEO NEOs | | 2023 | 5,595,327 | (2,140,451) | 5,055,210 | — | — | 8,510,086 |
Pay Versus Performance
(a)The average reported value of equity awards represents the average of total of the amounts reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year. (b)Refer to the “Average of Non-PEO NEO Equity Award Adjustments” table below. (c)Arch does not provide Pension Benefits to its Non-PEO NEOs. Average of Non-PEO NEO Equity Award Adjustments:
Pay Versus Performance
| Year | Average Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year(a) | Year over Year Average Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years(a) | Average Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year | Year over Year Average Change in Fair Value of Equity Awards Granted in Prior Years and Vested in the Year(a) | Average Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year | Average Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | Total Average Equity Award Adjustments | | 2023 | 2,304,202 | 2,477,790 | — | 273,218 | — | — | 5,055,210 |
Pay Versus Performance
(a)The average valuation assumptions differ from those disclosed as of the grant date of equity awards due to the fluctuation in the stock price and the corresponding Black-Scholes and Monte Carlo value simulations valued as of the corresponding dates in accordance with Item 402(v) of Regulation S-K. In calculating the Black-Scholes value of the option awards, the expected life input, based on the original expected life established at grant date, as used for financial reporting purposes, was adjusted downward in proportion to the degree to which the options were in-the-money relative to their exercise price and upward in proportion to the degree to which the options were out-of-the-money relative to their exercise price, as applicable.
Pay Versus Performance
| 67 | | 2024 PROXY STATEMENT | |
Most Important Measures to Determine Fiscal Year 2023 Compensation Actually Paid
Most Important Measures to Determine Fiscal Year 2023 Compensation Actually Paid The three items listed below represent the most important metrics used to link compensation actually paid for our NEOs for Fiscal Year 2023 to the Company’s performance, as further described in “Compensation—Compensation Discussion and Analysis,” in the section titled “Elements of Compensation Program” sub-sections called “Short-Term Annual Cash Incentive” and “Long-Term Incentive Plan.” ▪Operating ROE ▪Growth in TBVPS ▪Relative TSR (the Company’s TSR as compared to a performance peer group established by the Compensation and Human Capital Committee)
Analysis of the Information Presented in the Pay versus Performance Table
Analysis of the Information Presented in the Pay versus Performance Table As described in more detail in the section “Compensation—Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. While the Company utilizes several performance measures to align executive compensation with Company performance, all of those Company measures are not presented in the Pay Versus Performance table. In accordance with Item 402(v) of Regulation S-K, the Company is providing the following descriptions of the relationships between information presented in the Pay Versus Performance table.
Compensation Actually Paid and Company Cumulative TSR
Compensation Actually Paid and Company Cumulative TSR As demonstrated by the following graph, the amount of compensation actually paid to Mr. Grandisson and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Mr. Grandisson) strongly aligns with the Company’s cumulative TSR over the four years presented in the table. The alignment is because a significant portion of the compensation actually paid to Mr. Grandisson and to the other NEOs is comprised of equity awards. As described in more detail in the section “Compensation—Compensation Discussion and Analysis,” the Company targets that approximately 65% of the value of total compensation awarded for Mr. Grandisson and 53% of the value awarded for the other NEOs be comprised of equity awards, including restricted shares, performance-based restricted shares and stock options.
Compensation Actually Paid and Company Cumulative TSR
| Compensation Actually Paid vs. Cumulative TSR |
Compensation Actually Paid and Net Income
Compensation Actually Paid and Net Income As demonstrated by the following graph, the amount of compensation actually paid to Mr. Grandisson and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Mr. Grandisson) is generally aligned with the Company’s Net Income for 2020, 2021 and 2023. Although Net Income decreased in 2022, compensation actually paid increased largely due to the fact that a significant portion of compensation paid to Mr. Grandisson and the Company’s NEOs as a group (excluding Mr. Grandisson) is comprised of equity awards, with TSR increasing by 18.3% for the year, as described above. For 2022, the decrease in Net Income was driven by significant volatility in the capital markets and elevated catastrophic activity. The Company does not utilize Net Income as a performance measure in the overall executive compensation program.
Compensation Actually Paid and Net Income
| Compensation Actually Paid vs. Net Income |
Compensation Actually Paid and Net Income
| | 2024 PROXY STATEMENT | | 68 |
Compensation Actually Paid and Operating ROE
Compensation Actually Paid and Operating ROE As demonstrated by the following graph, the amount of compensation actually paid to Mr. Grandisson and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Mr. Grandisson) strongly aligns with the Company’s growth in Operating ROE for the four years presented in the table. Compensation actually paid increased largely due to the fact that a significant portion of compensation paid to Mr. Grandisson and the Company’s NEOs as a group (excluding Mr. Grandisson) is comprised of equity awards, with TSR increasing by 18.3% for the year. While the Company uses numerous financial and non-financial performance measures for the purpose of evaluating performance for the Company’s compensation programs, the Company has determined that Operating ROE is the financial performance measure that, in the Company’s assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table) used by the Company to link compensation actually paid to the Company’s NEOs, for the most recently completed fiscal year, to Company performance. The Company utilizes Operating ROE when setting goals in the Company’s short-term incentive compensation programs. Additionally, growth in Operating ROE is reflected in TBVPS, which is utilized in setting goals for the performance-based restricted shares that are awarded to the Company’s NEOs.
Compensation Actually Paid and Operating ROE
| Compensation Actually Paid vs. Operating ROE |
CEO Pay Ratio — 86 to 1
CEO Pay Ratio — 86 to 1 We determined each employee’s consistently applied compensation measure, which was equal to the sum of the following pay components: ▪2023 base salary; ▪bonuses paid during 2023; ▪variable incentive compensation paid during 2023; and ▪the fair value of all equity grants made during 2023. We annualized the 2023 base salary for full-time employees who were not employed by us for all of 2023. Amounts paid in currencies other than U.S. dollars were converted into U.S. dollars based on the applicable exchange rate at December 31, 2023. Based on each employee’s consistently applied compensation measure, we were able to identify the median employee who was a full-time, permanent employee based in the United States. After identifying the median employee, we calculated the median employee’s annual total compensation for 2023 using the same requirements applied to calculate our CEO annual total compensation as set forth in the “2023 Summary Compensation Table,” and then added the estimated value of the median employee’s health plan benefits. Based on the foregoing, the annual total compensation calculated for the median employee for 2023 was $147,294. For purposes of the pay ratio rule, the annual total compensation calculated for our CEO for 2023, was $12,676,061, as set forth in the “2023 Summary Compensation Table,” plus $34,843, the estimated value of our CEO’s health plan benefits, or $12,710,904. Accordingly, for 2023, our CEO to median employee pay ratio was 86 to 1 .
Nominees
Nominees The persons named below have been nominated to serve as Designated Company Directors of our non-U.S. subsidiaries indicated below. Unless authority to vote for a nominee is withheld, the enclosed proxy will be voted for the nominee, except that the persons designated as proxies reserve discretion to cast their votes for other persons in the unanticipated event that the nominee is unable or declines to serve.
Nominees
| Arch Capital Holdings Ltd. | Arch Investment Management Ltd. | | François Morin; Chiara Nannini | François Morin; Christine Todd | | Arch Credit Risk Services (Bermuda) Ltd. | Arch Global Services Holdings Ltd. | | Brian Chen; Seamus Fearon; Alan Tiernan | Chris Hovey; François Morin | | Arch Investment Property Holdings Ltd. | Alternative Re Holdings Limited, Alternative Re Limited | | François Morin; David J. Mulholland | François Morin; Chiara Nannini | | Arch Reinsurance Ltd. | Arch Underwriters Ltd. | | Crystal Doughty; Matthew Dragonetti; Jerome Halgan; Maamoun Rajeh; William Soares | Crystal Doughty; Matthew Dragonetti; Jerome Halgan; Maamoun Rajeh | | Arch Investment Holdings I Ltd., Arch Investment Holdings II Ltd., Arch Investment Holdings III Ltd., Arch Investment Holdings IV Ltd. | Other Non-U.S. Subsidiaries, as Required or Designated Under Bye-Law 75 (except as otherwise indicated herein) | | François Morin; David J. Mulholland; Christine Todd | François Morin; Maamoun Rajeh |
Nominees
Brian Chen, 35, is Senior Vice President of Credit Risk Transfer and Services at Arch Re Bermuda. Mr. Chen joined Arch in 2020 and leads Arch’s participation in GSE CRT reinsurance deals as well as its underwriting services platform to other reinsurers. Prior to joining Arch, Mr. Chen worked in various capital markets roles at Fannie Mae from 2011 to 2014 and from 2018 to 2020. Between 2014 and 2018, Mr. Chen worked in sell-side equity research at Autonomous Research covering mortgage and insurers, servicers and mortgage tech. Mr. Chen holds a B.S. in Financial Mathematics from the University of Virginia and is a CFA® Charterholder. Crystal Doughty, 39, is Chief Underwriting Officer, Property of Arch Re Bermuda, a position she has held since August 2023. Prior to such position, Ms. Doughty was Senior Underwriter and Third-Party Capital Portfolio Manager with Arch Re Bermuda. Prior to joining Arch Re Bermuda in January 2021, she held various roles at Markel, starting in 2006, including Senior Vice President Underwriting Retro, Property International and North American Reinsurance, Senior Vice President of the sidecar, New Point and Assistant Vice President Reserving Actuary for all lines of business including but not limited to Casualty and Specialty, Marine and Property. She holds an Honours B.Sc. in Actuarial Science and Statistics from University of Toronto and is an Associate of the Casualty Actuarial Society. Matthew Dragonetti, 54, is President and Head of Property for Arch Re Bermuda, a position he has held since November 2017. From 2012 to 2017, Mr. Dragonetti was the Head of Worldwide Property. He joined Arch Re Bermuda in November 2001 as a Senior Underwriter for U.S. Treaty Property, ultimately becoming Head of U.S. Property in 2005. Before joining Arch Re Bermuda, he served as Vice President at Odyssey Re and prior to that, he was a Vice President of Property Treaty for Terra Nova (Bermuda) Holdings Ltd. from 1998 to 2000. He started his reinsurance career at F&G Re as an Assistant Vice President international property from 1995 to 1998. Mr. Dragonetti has a B.S. in Economics from Pennsylvania State University and an M.B.A. from Northeastern University.
Nominees
| 77 | | 2024 PROXY STATEMENT | |
Nominees
Seamus Fearon, 43, serves as CEO, International Mortgage Group of Arch Capital. Mr. Fearon joined Arch Capital in September 2012 and previously served as the Chief Actuary of the Global Mortgage Group. Prior to joining Arch, Mr. Fearon was Associate Director and Actuary for KPMG Dublin from 2008 to 2012. From 2003 to 2008, he was Pricing Actuary for Aviva General Insurance Ltd. Mr. Fearon is a Fellow of the Institute and Faculty of Actuaries and holds a B.Sc. in Actuarial Mathematics from Dublin City University. He also completed the Program for Leadership Development from Harvard Business School. Jerome Halgan, 50, was appointed Chief Executive Officer of Arch Re Bermuda in January 2018. Mr. Halgan joined Arch in 2009 as Senior Underwriter with Arch Re Bermuda before being promoted to Chief Underwriting Officer in June 2012. He then took on the role of President of Arch Re (U.S.) in August 2014, a position he held until January 2016, when he was named Chairman, President and Chief Executive Officer of Arch Re (U.S.) before assuming his current role. Prior to Arch, Mr. Halgan worked with the Berkshire Hathaway Reinsurance Group as a Vice President from 2001 to 2009 and with Sorema N.A. Reinsurance Group from 1996 to 2001 with responsibilities within property underwriting and business analysis. Mr. Halgan holds an M.B.A. from the Stern School of Business and an engineering degree from the École Supérieure d’Électricité in France. Chris Hovey, 57, is Chief Operations Officer of Arch Capital Services LLC. From July 2018 to January 2020, Mr. Hovey served as Executive Vice President and Chief Information Officer at Arch Capital Services LLC. Prior to that, he held the role of Chief Operating Officer of Arch Mortgage Insurance Company. Before joining Arch, Mr. Hovey acted as Chief Operating Officer for PMI since 2011. He also served as Senior Vice President of servicing operations and loss management for PMI, which he originally joined in 2002. Mr. Hovey holds a B.A. from San Francisco State University and an M.B.A. from Saint Mary’s College in Moraga, California. François Morin, 56, is Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital, a position he has held since May 2018. Prior to such position, Mr. Morin served as Senior Vice President, Chief Risk Officer and Chief Actuary of Arch Capital, a position he held since May 2015. He joined Arch Capital in October 2011 as Chief Actuary and Deputy Chief Risk Officer. From January 1990 through September 2011, Mr. Morin served in various roles for Towers Watson & Co. and its predecessor firm, Towers Perrin Forster & Crosby, including its actuarial division, Tillinghast. He holds a B.Sc. in Actuarial Science from Université Laval in Canada. He is a Fellow of the Casualty Actuarial Society, a Chartered Financial Analyst, a Chartered Enterprise Risk Analyst and a Member of the American Academy of Actuaries. David J. Mulholland, 57, has served as Senior Vice President and Chief PM, Onshore Portfolios at AIM since March 2022. Prior to March 2022, he served as Senior Vice President & Chief Administrative Officer at AIM from November 2011. Prior to that, he served as Vice President at AIM, which he joined in January 2006. Prior to that time, he spent 11 years at STW Fixed Income Management where he held the title of Principal and Portfolio Manager. From 1990 to 1994, he worked as a money market and foreign exchange trader in the treasury department of the Bank of Butterfield in Bermuda. Mr. Mulholland holds a B.S. with a concentration in finance from Boston University. Chiara Nannini, 44, has practiced law at Conyers since 2008, where she has been a director since 2017. Ms. Nannini obtained a B.A. in Politics and Italian from the University of Virginia in 2003 and received her law degree from the London School of Economics and Political Science in 2006. Since joining Conyers, Ms. Nannini was based in Conyers’ São Paulo, Brazil office from 2010 to 2013. Maamoun Rajeh, 53, has served as Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group since October 2017. From July 2014 to September 2017, he was Chairman and Chief Executive Officer of Arch Re Bermuda. He joined Arch Re Bermuda in 2001 as an underwriter, ultimately becoming Chief Underwriting Officer in November 2005. Most recently, he was President and Chief Executive Officer of Arch Re Europe from October 2012 to July 2014. From 1999 to 2001, Mr. Rajeh served as Assistant Vice President at HartRe, a subsidiary of The Hartford Financial Services Group, Inc. Mr. Rajeh also served in several business analysis positions at the United States Fidelity and Guarantee Company between 1992 and 1996 and as an underwriter at F&G Re from 1996 to 1999. He has a B.S. from The Wharton School of Business of the University of Pennsylvania and he is a Chartered Property Casualty Underwriter.
Nominees
| | 2024 PROXY STATEMENT | | 78 |
Nominees
William Soares, 44, is Chief Underwriting Officer, Casualty and Specialty of Arch Re Bermuda, a position he has held since August 2023. Prior to such position, Mr. Soares served as Head of Specialty and Head of Customized Products. He joined Arch Re Bermuda in 2006 as a Casualty Underwriter. Prior to joining Arch Re Bermuda, he was an Assurance Manager in the reinsurance department for Ernst & Young in Bermuda. He graduated in 2002 with a B.A. in Economics from Harvard University. Mr. Soares is a CFA® Charterholder who holds the Chartered Property Casualty Underwriter and Associate in Reinsurance designations. Alan Tiernan, 38, serves as Global Chief Actuary and International Chief Operating Officer for the Mortgage Group of Arch Capital. Mr. Tiernan joined Arch Capital in October 2014 as an Actuary in the Group Actuarial and Risk team before becoming Chief Actuary of the Global Mortgage Group of Arch Capital in April 2020. Prior to joining Arch, Mr. Tiernan held various actuarial pricing roles with Zurich Insurance plc in Dublin from 2013-2014 and with Aviva General Insurance Ltd. in Dublin from 2008-2012. Mr. Tiernan holds a Bachelor’s Degree in Actuarial and Financial Studies from University College Dublin and is a Fellow of the Institute and Faculty of Actuaries in the U.K., the Casualty Actuarial Society in the U.S. and the Society of Actuaries in Ireland. Christine Todd, 57, is Senior Vice President, Chief Investment Officer of Arch Capital and President of AIM. She joined Arch in June 2021 and has responsibility for setting the firm’s investment strategy and managing the day-to-day operations of the investment portfolio. Prior to joining Arch, Ms. Todd was Head of Fixed Income, U.S., for Amundi US from February 2019 to May 2021. She has also held executive roles at Neighborly Investments, Standish Mellon Asset Management Company LLC and Gannett, Welsh & Kotler. She is a Chartered Financial Analyst and holds a B.A. from Georgetown University and an M.B.A. from Boston University.