DEF 14A of James River Group Holdings, Inc.
Filed Sep 18, 2024 · FY20230001104659-24-100777
Nominees for Election as Directors
Nominees for Election as Directors The nominees for election as directors were recommended to our Board and approved for nomination by the Nominating and Corporate Governance Committee of our Board. Unless otherwise specified in the accompanying proxy, the shares voted on the proxy will be cast in favor of the election of Matthew B. Botein, Thomas L. Brown, Frank N. D’Orazio, Kirstin M. Gould, Dennis J. Langwell, Christine LaSala, Peter B. Migliorato and Ollie L. Sherman, Jr. Each of the nominees has consented to being named as a nominee in this proxy statement. If, for any reason, any nominee is unable or unwilling to serve, the persons named in the proxy will use their best judgment in selecting and voting for a substitute candidate or our Board of Directors may reduce the size of our Board and eliminate the vacancy. Our Board of Directors, however, has no reason to believe that any of the nominees will be unable or unwilling to be a candidate for election at the time of the Annual Meeting. The following table identifies the nominees for election as directors at the Annual Meeting and their age as of September 4, 2024.
Nominees for Election as Directors
| NAME | AGE | POSITION | | Matthew B. Botein | 51 | Director | | Thomas L. Brown | 68 | Director | | Frank N. D’Orazio | 56 | Chief Executive Officer and Director | | Kirstin M. Gould | 57 | Director | | Dennis J. Langwell | 66 | Director | | Christine LaSala | 73 | Director | | Peter B. Migliorato | 65 | Director | | Ollie L. Sherman, Jr. | 73 | Non-Executive Chairman of the Board |
Nominees for Election as Directors
The nominees for election as directors will serve until the Company’s 2025 annual general meeting of shareholders and until their successors are duly elected and qualified.
Nominees for Election as Directors
| | MATTHEW B. BOTEIN |
Nominees for Election as Directors
| | Matthew B. Botein has served on our Board of Directors since January 2023. Mr. Botein is a co-founder of Gallatin Point Capital LLC (“Gallatin Point”), a private investment firm founded in 2017, and serves as a Managing Partner of Gallatin Point. Prior to founding Gallatin Point, Mr. Botein served as co-head and Chief Investment Officer for Alternatives of BlackRock Alternative Investors (“BAI”) from 2009 through 2017 and as an advisor to BAI from 2017 through 2020. Prior to joining BAI, Mr. Botein served as a Managing Director and member of the Management Committee at Highfields Capital Management, a Boston-based private investment partnership. He also served as a member of the private equity departments at The Blackstone Group and Lazard Frères & Co. LLC. Mr. Botein currently serves on the board of directors of Fortuna Holdings Limited (parent of Lloyd’s insurer Canopius), Bowhead Insurance Holdings LP, Tower Hill Risk Management, LLC, Trusted Resource Underwriters Exchange (TRUE) and Northeast Bancorp (Nasdaq: NBN). Mr. Botein previously served on the board of directors of PennyMac Financial Services (NYSE: PFSI), Aspen Insurance Holdings (NYSE: AHL), CoreLogic Inc. (NYSE: CLGX), First American Corporation (NYSE: FAF), PennyMac Mortgage Investment Trust (NYSE: PMT) and numerous private companies. He also serves as a member of the Beth Israel Lahey / CJP Board of Managers and as a trustee of Boston Medical Center. Mr. Botein received a Bachelor of Arts degree (magna cum laude) from Harvard College and a M.B.A degree (with high distinction) from Harvard Business School, where he was awarded Baker and Loeb scholarships. | | We believe Mr. Botein’s qualifications to serve on our Board of Directors include his extensive investment management and investment banking experience and knowledge of financial institutions and his experience as a public company board member. | |
Nominees for Election as Directors
| | THOMAS L. BROWN |
Nominees for Election as Directors
| | Thomas L. Brown has served on our Board of Directors since October 2021. Mr. Brown retired in 2019 as the Senior Vice President and Chief Financial Officer of RLI Corp. (“RLI”), a NYSE listed specialty insurer serving diverse niche property, casualty and surety markets. He previously served as Vice President and Chief Financial Officer at RLI from 2011 to 2017. Prior to that, Mr. Brown was a partner at PricewaterhouseCoopers LLP, where he served for ten years as its Central Region Financial Services Leader and led teams responsible for the banking, insurance, capital markets, real estate and investment management business sectors. Mr. Brown currently serves on the board of directors of the Chicago Shakespeare Theater and Old National Bancorp, a Nasdaq listed company, and served on the board of First Midwest Bancorp, Inc. from 2017 until its acquisition by Old National Bancorp in February 2022. In 2020, Mr. Brown joined the board of directors of Easter Seals DuPage & Fox Valley, and he previously served on the board of Easter Seals Central Illinois. From 2004 to 2017, Mr. Brown served on the board of trustees of Illinois Wesleyan University. Mr. Brown received a Bachelor of Science degree in Accounting from Illinois Wesleyan University in 1979. He is a certified public accountant. | | We believe Mr. Brown’s qualifications to serve on our Board of Directors include his management experience at RLI, his knowledge of the property and casualty insurance industry, his financial and accounting expertise and his experience as a public company board member. | |
Nominees for Election as Directors
| | FRANK N. D’ORAZIO |
Nominees for Election as Directors
| | Frank N. D’Orazio has served as our Chief Executive Officer and a director and as Chief Executive Officer of James River Group, Inc. since November 2020. Mr. D’Orazio formerly served as Corporate Chief Operating Officer and Chief of Staff of Allied World Assurance Company Holdings, Ltd. (“Allied World”), a global provider of property, casualty and specialty insurance and reinsurance, from March 2019 through January 2020. Prior to that, Mr. D’Orazio served as President, Underwriting and Global Risk of Allied World from December 2014 through February 2019. From September 2009 to December 2014, Mr. D’Orazio served as the President — Bermuda and International Insurance of Allied World Ltd. From June 2003, when Mr. D’Orazio joined Allied World, through September 2009, Mr. D’Orazio held leadership roles with increasing responsibility in the company’s general casualty business and in underwriting. Before joining Allied World, Mr. D’Orazio worked for the insurance market arm of Munich-American Re-Insurance from August 1994 to May 2003, where he held a succession of underwriting and management positions. Prior to that Mr. D’Orazio held various underwriting positions in the excess casualty division of the Chubb Group of Insurance Companies from June 1990 to July 1994. Mr. D’Orazio received a B.A. from Fairfield University. | | We believe Mr. D’Orazio’s qualifications to serve on our Board of Directors include his extensive experience as an executive officer in the insurance industry and significant insurance, underwriting and enterprise risk management knowledge, as well as his extensive knowledge of the Company’s day to day operations based upon his service as our Chief Executive Officer. | |
Nominees for Election as Directors
| | KIRSTIN M. GOULD |
Nominees for Election as Directors
| | Kirstin M. Gould has served on our Board of Directors since October 2021. Ms. Gould served as Executive Vice President, General Counsel and Corporate Secretary of XL Group Ltd (“XL”), a NYSE listed global insurance and reinsurance company, until XL was acquired by AXA, S.A. in 2018. Ms. Gould joined XL in 2000 and served in various leadership roles during her tenure, including leading the marketing and communications function from 2007-2015 while concurrently serving as General Counsel from September 2007. From 2005-2011, Ms. Gould chaired the Policy Committee of the Association of Bermuda Insurers and Reinsurers (ABIR), which is a trade association of international property and casualty insurers and reinsurers. Ms. Gould currently serves on the board of Pacific Life Re Global Limited where she is a member of the Risk, Audit and Remuneration Committees. She is also the founder of Harrington Advisors LLC, a consulting company focused on strategic advice including M&A, corporate governance and insurance regulatory matters. Ms. Gould began her career in private practice with the law firms Dewey Ballantine LLP in New York (1991-1995) and Clifford Chance LLP in New York and London (1996-2000). Ms. Gould received a Bachelor of Arts degree (summa cum laude) from the State University of New York at Albany and a Juris Doctor degree (cum laude) from the State University of New York at Buffalo School of Law. | | We believe Ms. Gould’s qualifications to serve on our Board of Directors include her executive leadership at XL, as well as her extensive experience in corporate governance, risk management, insurance regulatory matters and mergers and acquisitions. | |
Nominees for Election as Directors
| | DENNIS J. LANGWELL |
Nominees for Election as Directors
| | Dennis J. Langwell has served on our Board of Directors since April 2023. He retired in 2021 from Liberty Mutual Group Inc., a holding company of Liberty Mutual Insurance Operations (“Liberty Mutual”), a global provider of insurance products and services, where he most recently served as Vice Chairman of Insurance Operations. Mr. Langwell joined Liberty Mutual in 1993 and served in various leadership roles during his tenure, including as President — Global Risk Solutions from 2018 to 2021 and as Executive Vice President and Chief Financial Officer from 2003 to 2018. Mr. Langwell previously worked in finance and reporting roles for Liberty Mutual and other insurance companies and began his career at KPMG (Peat Marwick). Mr. Langwell currently serves on the boards of Safety Insurance Group, Inc. and Companion Protect, and as a member of the board of trustees at Providence College and the USS Constitution Museum (Chairman). Mr. Langwell also serves as an advisory board member to Owl.co, a Canadian based insurance technology organization providing AI guided claim insights, since January 2024. Mr. Langwell received a Bachelor of Science degree (magna cum laude) in Accounting from Providence College. He is a former certified public accountant. Mr. Langwell is also a private investor in real estate activities. | | We believe Mr. Langwell’s qualifications to serve on our Board of Directors include his executive leadership experience at Liberty Mutual, his knowledge of the property and casualty industry and his financial and accounting expertise. | |
Nominees for Election as Directors
| | CHRISTINE LASALA |
Nominees for Election as Directors
| | Christine LaSala has served on our Board of Directors since July 2024. She retired as Chair of Willis North America Inc., a subsidiary of Willis Group Holdings, plc (“Willis”) in 2016. Prior to joining Willis in early 2014, Ms. LaSala served for ten years as the President and CEO of the World Trade Center Captive Insurance Company (“WTC Captive”), a U.S. government-funded, not-for-profit corporation providing liability insurance to the City of New York and over 100 private contractors. Prior to her service at WTC Captive, Ms. LaSala served in various leadership roles during her twenty-five year tenure at Johnson & Higgins (an insurance brokerage firm acquired by Marsh & McClellan), including serving as the firm’s only woman partner and President of Johnson & Higgins New York. Ms. LaSala currently serves on the board of Sedgwick, a leading provider of claims management, loss adjusting and technology-enabled risk, benefits and business solutions, since October 2021. She served on the board of directors of Beazley plc for eight years, including in a variety of board leadership roles such as Senior Independent Director and Interim Chair, prior to stepping down in April 2024. She also served on the board of directors of FCC Services Captive Insurance Company from January 2020 to July 2022. Ms. LaSala received a Bachelor of Arts degree in Philosophy from the College of New Rochelle. | | We believe Ms. LaSala’s qualifications to serve on our Board of Directors include her executive leadership experience at Willis and WTC Captive, her knowledge of the property and casualty insurance industry and her experience as a board member of large companies in the insurance industry. | |
Nominees for Election as Directors
| | PETER B. MIGLIORATO |
Nominees for Election as Directors
| | Peter B. Migliorato has served on our Board of Directors since October 2022. He retired in 2021 as a partner of Deloitte Consulting (“Deloitte”), where he most recently served as Lead Client Service Partner to insurance clients. Mr. Migliorato also served as the North American Insurance Consulting practice leader with Deloitte in the property & casualty, life & retirement, and employee benefits sectors. Mr. Migliorato joined Deloitte in 2001 and served in various leadership roles during his twenty-year tenure. Before joining Deloitte, Mr. Migliorato served as an equity partner at Emergence Consulting and C-Change Consulting, two start-up strategy consultancies, from 1998 to 2001 and as Senior Vice President, Marketing and Business Development at Marketing Technologies International, a data sciences firm, from 1997 to 1998. Prior to that, he led the Insurance Practice, served clients across multiple industries, and was Chief of Staff to the CEO of Gemini Consulting, a global management consulting firm, from 1985 to 1997. Mr. Migliorato serves as an advisory board member to Machine Cover, Inc., an insurance technology company, since June 2021 and to Owl.co, a Canadian based insurance technology organization providing AI guided claim insights, since April 2023. He served on the board of directors of State Automobile Mutual Insurance Company, the mutual holding company parent of State Auto Financial Corporation (“State Auto”) from March 2021 until State Auto was acquired by Liberty Mutual Holding Company Inc. in March 2022; and as an advisory board member to Safekeep, Inc., an insurance technology company, from June 2021 until its acquisition by CCCIS in February 2022. Mr. Migliorato received a Bachelor of Arts degree with dual majors in History and Geology from Oberlin College where he was also a member of the Phi Beta Kappa academic honor society. | | We believe Mr. Migliorato’s qualifications to serve on our Board of Directors include his extensive experience at Deloitte advising insurance companies on implementation of growth strategies, executing mergers and acquisitions and implementing technology and data platforms, his knowledge of the property and casualty insurance industry and his experience as an advisory board member to two insurance technology companies. | |
Nominees for Election as Directors
| | OLLIE L. SHERMAN, JR. |
Nominees for Election as Directors
| | Ollie L. Sherman, Jr. has served on our Board of Directors since May 2016, served as our Lead Independent Director from April 2022 through July 2023 and has served as Non-Executive Chairman of the Board since July 2023. Mr. Sherman retired as a Managing Principal with Towers Watson in 2010. At Towers Watson, Mr. Sherman functioned as a consulting actuary and practice manager for Tower Watson’s property and casualty division for over 25 years. Prior to joining Towers Watson, Mr. Sherman was employed by the Travelers Insurance Company for ten years where he had overall responsibility for countrywide workers’ compensation pricing. Mr. Sherman graduated from the University of Virginia with a B.S. in Applied Mathematics, and he is a Fellow of the Casualty Actuarial Society. | | We believe Mr. Sherman’s qualifications to serve on our Board of Directors include his extensive experience as a consulting actuary in property and casualty insurance, as well as his knowledge of the Company gained from his service on our Board. | |
Nominees for Election as Directors
There are no family relationships among any of our directors or executive officers.
Compensation of Directors
Compensation of Directors Our non-employee directors (excluding J. Adam Abram, whose director compensation is described below, and Mr. Botein) receive an annual cash retainer in the amount of $125,000 per year, payable in four equal installments at the beginning of each quarter, and, excluding Mr. Sherman, an annual RSU award with a fair market value of $50,000 per year. Mr. Sherman receives an annual RSU award with a fair market value of $100,000, which is an increased amount in recognition of his service as the Non-Executive Chairman of the Board. Non-employee directors that join the Board after annual grants are made during the first quarter receive a pro-rated RSU award for the period of service during the one-year period commencing on the date of grant of RSUs to continuing directors. In this regard, Mr. Langwell, who joined our Board on April 5, 2023, received a pro-rated RSU award in the amount of 2,321 common shares, which was granted on December 19, 2023. The number of shares represented by Mr. Langwell’s RSU award was determined based upon the closing share price on the date he joined the Board. The awards of RSUs are made from the Company’s 2014 Non-Employee Director Incentive Plan and vest in full on the first anniversary of the date of the grant (or, in the case of pro-rata grants made to a new director, on the first anniversary of the date of grant of RSUs to the continuing directors). In addition to the aforementioned compensation, the Chairperson of our Audit Committee is paid additional cash compensation in the amount of $25,000 per year for service in such capacity. Additionally, commencing with the fourth quarter of 2023, each of the Compensation and Human Capital Committee Chairperson and Nominating and Corporate Governance Committee Chairperson are paid an additional $12,500 per year, which amounts were pro-rated for 2023. Mr. Abram, as our Non-Executive Chairman, was paid a monthly retainer of $18,750 in cash during 2023 until he left the Board following our annual general meeting held on July 27, 2023. Mr. Botein, who joined the Board in 2023, does not receive compensation for his service as a director, pursuant to the terms of the Investment Agreement relating to the issuance of our Series A Preferred Shares described under “Certain Relationships and Related Transactions — Related Party Transactions”. The following table sets forth information concerning compensation earned by our non-employee directors during the year ended December 31, 2023.
Compensation of Directors
| NAME | FEES EARNED OR PAID IN CASH(1) ($) | STOCK AWARDS(2) ($) | ALL OTHER COMPENSATION(3) ($) | TOTAL ($) | | J. Adam Abram | $128,831 | — | — | $128,831 | | Matthew B. Botein | — | — | — | — | | Thomas L. Brown | $150,000 | $49,983 | $488 | $200,471 | | Kirstin M. Gould | $128,125 | $49,983 | $488 | $178,596 | | Dennis J. Langwell | $92,376 | $22,514 | — | $114,890 | | Peter B. Migliorato | $125,000 | $49,983 | — | $174,983 | | Michael T. Oakes | $71,671 | $49,983 | $12,988 | $134,642 | | Patricia H. Roberts | $128,125 | $49,983 | $488 | $178,596 | | Ollie L. Sherman, Jr. | $125,000 | $99,982 | $488 | $225,470 |
Compensation of Directors
(1) The cash compensation paid to Messrs. Abram, Langwell and Oakes was pro-rated based upon the portion of the year that such individuals served as directors during 2023. Mr. Langwell joined the Board in April 2023. Messrs. Abram and Oakes served as directors until our 2023 annual general meeting of shareholders. (2) Represents the aggregate grant date fair value of restricted share units awarded under the 2014 Non-Employee Director Incentive Plan (the “2014 Director Plan”), calculated in accordance with FASB ASC Topic 718. The stock awards represent grants of the following number of RSUs: (i) 2,013 RSUs for each of Mr. Brown, Ms. Gould, Mr. Migliorato, Mr. Oakes and Ms. Roberts, which had a grant date fair value for each equity award computed in accordance with FASB ASC Topic 718, excluding the impact of estimated forfeitures for service-based vesting conditions, of $49,983, (ii) 2,321 RSUs for Mr. Langwell, which had a grant date fair value for each equity award computed in accordance with FASB ASC Topic 718, excluding the impact of estimated forfeitures for service-based vesting conditions, of $22,514, and (iii) 5,214 RSUs for Mr. Sherman, which had a grant date fair value for each equity award computed in accordance with FASB ASC Topic 718, excluding the impact of estimated forfeitures for service-based vesting conditions, of $99,982. With the exception of Mr. Oakes, who forfeited his RSUs when he resigned from the Board, each amount of RSUs identified in the prior sentence with respect to a director were the only outstanding awards held by such director at December 31, 2023. (3) Represents dividends paid to directors that had accrued on unvested restricted share units and were paid at the time awards vested. Additionally, the amount of all other compensation reported for Mr. Oakes includes a payment in the amount of $12,500, compensating him for a portion of his 2023 RSU award that was forfeited when he left the Board following our annual general meeting of shareholders.
WEIGHTING OF COMPENSATION COMPONENTS
| As a general guideline, we use a target allocation of one-third of a named executive officer’s total compensation to base salary, one-third to the target level amount of annual cash incentive compensation and one-third to equity awards, although this may vary depending upon a particular named executive officer’s responsibilities. The equity award is evenly divided between Service Based RSUs and the target level amount of the PRSUs. | | | When determining the amount of each element of compensation, however, there may be some deviation from those target allocations due to multiple factors, including market conditions, individual and Company performance and our desire to attract and retain executives. | |
EXECUTIVE COMPENSATION COMPONENTS
| | BASE SALARY | | DISCRETIONARY BONUSES | | EQUITY AWARDS |
EXECUTIVE COMPENSATION COMPONENTS
Short-Term Incentive Plan. The James River Group Holdings, Ltd. Short-Term Incentive Plan (the “STI Plan”) is designed to provide incentives to designated senior officers of the Company to achieve certain financial and strategic performance targets and to link executive compensation to shareholder results by rewarding competitive and superior performance. Under the STI Plan, participants had the opportunity to receive a cash incentive award based upon the level of achievement of the performance goals. For the named executive officers that are chief executives of the Company or one of its segments, and the Chief Financial Officer of the Company, the target amount was set at 100% of each such executive officer’s 2023 base salary, in acknowledgement of the greater responsibilities of such executive officers as compared to others. Mr. Hoffmann, who does not have a corresponding position, received a target cash incentive amount of 75% of his 2023 base salary. Payouts for threshold performance are equivalent to 50% of the target amount, and the payout for maximum performance is 150% of the target amount. The payout amount for performance falling between threshold and target, or target and maximum, is determined by linear interpolation. Based upon a review of the peer group’s short-term compensation practices and the Company’s strategic plan and historical performance levels, the Committee recommended to the Board, and the Board approved, the use of three performance metrics. Two of these are financial performance metrics: adjusted combined ratio and adjusted earnings before interest and taxes (EBIT), which are non-GAAP financial measures. The Committee believes that the financial performance metrics based on combined ratio and EBIT are appropriate, as they are industry standard measures of profitability. The third performance metric was based upon the achievement of Company strategic goals for 2023, the achievement of which were non-formulaic, and determined on a subjective basis. The Company’s 2023 strategic goals were identified by the Committee as among the most important goals in a broader set of companywide objectives identified by Mr. D’Orazio for 2023, and focused on continuing technology improvements, to be delivered within the scheduled time frame and within the applicable budget, improvement of our program review process and quarterly analysis regarding department profitability, and creation of innovation councils intended to improve efficiency and customer experience.
CALCULATION OF ADJUSTED EBIT
CALCULATION OF ADJUSTED EBIT Adjusted EBIT is calculated as net income of the Company before interest and income taxes, and excluding the portion of favorable or unfavorable prior year reserve development for which the Company’s subsidiaries ceded the risk under retroactive reinsurance agreements and the related changes in the amortization of the deferred gain. For a member of our senior management with companywide responsibility, which includes Mr. D’Orazio, Ms. Doran and Mr. Hoffmann, adjusted Company combined ratio, adjusted EBIT and the strategic goals are each weighted one-third in determining the actual incentive award payout. For a member of senior management who is (or was) a business segment leader or whose responsibilities are (or were) primarily focused on a single business segment, including Messrs. Schmitzer, McCafferty and Heinlein, the only variation in the performance metrics and weighting is that the adjusted combined ratio metric is split evenly between the Company’s adjusted combined ratio and the adjusted combined ratio of the applicable segment that such member of senior management performs (or performed) services for, so each is weighted 16.667% of such person’s short-term incentive opportunity. Payouts for achievement of threshold, target and maximum performance levels by named executive officers are set at 50%, 100% and 150% of the target opportunity, respectively. Performance falling between these levels is determined by linear interpolation. Short-Term Incentive Payout Determination Pursuant to the terms of the STI Plan, the Committee is authorized, in its sole discretion, to adjust or modify the calculation of any performance criterion in connection with, among other things, extraordinary nonrecurring items as described in accounting principles and/or in management’s discussion and analysis of financial condition and results of operations appearing in our Annual Report on Form 10-K; acquisitions or divestitures; any other specific unusual or nonrecurring events or objectively determinable category thereof. In recognition of the influence that our strategic activities had in 2023 on the Company’s adjusted combined ratio and adjusted EBIT performance measures, the Board, upon recommendation of the members of the Committee, exercised its discretion to increase the cash incentive award amounts for the 2023 performance period above those that would have otherwise been payable based on the actual achievement of such performance measures under the plan. The strategic activities consisted of the sale of the renewal rights of our individual risk worker’s compensation business, the Company’s sale of JRG Re on April 16, 2024 (the “JRG Re Transaction”) pursuant to a Stock Purchase Agreement entered into on November 8, 2023, and the Company’s exploration of strategic alternatives. The Board, at the recommendation of the Committee determined that these actions were in the best interest of the Company and its shareholders, and were beyond the control of management, and thus viewed it as appropriate to exclude their effects on performance. Specifically, the calculation of the adjusted EBIT performance measure was adjusted to exclude (i) actual expenses in the aggregate amount of $56.4 million pertaining to the three strategic actions to the extent that they would have otherwise been included in the calculation of the 2023 Adjusted EBIT performance measure, and (ii) the loss on the sale of JRG Re in the amount of $80.4 million. The amount payable in connection with the achievement of the Adjusted Combined Ratio performance measure for the Company utilized the minimum threshold performance amount of 99.9% in recognition of the management team’s contributions to the strategic objectives. The Committee discussed the Company’s achievement of the strategic goals with Mr. D’Orazio and reviewed related materials, evaluating the level of achievement on a companywide basis. The Committee determined that the strategic goals were achieved at target. The 2023 threshold, target and maximum financial metrics, actual performance, adjusted performance and adjusted performance as a percentage of target, for each financial performance goal (group adjusted combined ratio and adjusted EBIT for Mr. D’Orazio, Ms. Doran and Mr. Hoffmann, group and segment adjusted combined ratio and adjusted EBIT for Messrs. Schmitzer, McCafferty and Heinlein) are set forth in the table below:
CALCULATION OF ADJUSTED EBIT
| NAME | 2023 STI PLAN UNADJUSTED PAYMENT | 2023 STI PLAN ADJUSTED PAYMENT | 2023 STI PLAN ADJUSTED PAYMENT AS A % OF TARGET | | Frank N. D’Orazio | $321,886 | $773,300 | 80.0% | | Sarah C. Doran | $190,476 | $457,600 | 80.0% | | Richard J. Schmitzer | $298,800 | $556,063 | 83.0% | | Daniel J. Heinlein | $125,191 | $269,556 | 71.7% | | Michael J. Hoffmann | $110,389 | $265,200 | 80.0% | | Terence M. McCafferty(1) | $232,311 | $385,325 | 88.6% |
CALCULATION OF ADJUSTED EBIT
(1) Mr. McCafferty’s employment with the Company ended December 2, 2023. Pursuant to a Separation and Release Agreement, Mr. McCafferty received a pro-rated payment of the STI Plan award based upon the level of achievement of the performance goals for the 2023 fiscal year, with the pro-rated amount determined based upon the period that Mr. McCafferty was employed by the Company during 2023. The table above reflects his pro-rated payout. For additional information regarding the Separation and Release Agreement, see “Potential Payments upon Termination or Change in Control — Quantification of Termination Benefits”. Equity Awards. Commencing in 2023, equity awards to our executive officers under the Company’s 2014 Long-Term Incentive Plan (the “2014 LTIP”) were made pursuant to the to the long-term incentive plan approved by the Board upon recommendation from the Committee (the “LTI Plan”). The LTI Plan is designed to align compensation of designated senior officers of the Company, including the named executive officers, with Company performance and shareholder interests over the long-term. Awards under the LTI Plan are made in the form of PRSUs (50% of the total long-term incentive opportunity) and Service Based RSUs (50% of the total long-term incentive opportunity). PRSUs The performance period for the PRSUs awarded in 2023 is January 1, 2023 through December 31, 2025, and the awards have a target value equal to 50% of such named executive officer’s 2022 annual base salary. Each PRSU represents a contingent right to receive one Company common share based upon the level of achievement of certain performance metrics during the performance period. To receive a payout, a participant must remain employed through the settlement of the award, subject to certain exceptions described under “Potential Payments upon Termination or Change in Control — Equity Awards” below. Based upon a review of our peer group’s long-term compensation practices, and the Company’s own business, the Committee recommended to the Board, and the Board approved, the use of two financial performance metrics, which are evenly weighted. The financial performance metrics are (i) the Company’s adjusted operating return on average adjusted tangible common equity, and (ii) growth in adjusted tangible common equity per common share. Both of these measures are non-GAAP measures. The Committee chose these metrics because it believes that these measures are indicators of the Company’s long-term financial performance.
CALCULATION OF GROWTH IN ADJUSTED TANGIBLE COMMON EQUITY PER COMMON SHARE
| NAME | 2023 PRSU AWARD AT TARGET LEVEL | NUMBER OF SHARES REPRESENTED BY PRSU AT TARGET LEVEL | 2023 SERVICE BASED RSU AWARD | NUMBER OF SHARES REPRESENTED BY SERVICE BASED RSU | | Frank N. D’Orazio | $462,500 | 18,626 | $462,500 | 18,626 | | Sarah C. Doran | $275,000 | 11,075 | $275,000 | 11,075 | | Richard J. Schmitzer | $325,000 | 13,089 | $325,000 | 13,089 | | Daniel J. Heinlein | $182,500 | 7,349 | $182,500 | 7,349 | | Michael J. Hoffmann | $212,500 | 8,558 | $212,500 | 8,558 | | Terence M. McCafferty | $210,000 | 8,457 | $210,000 | 8,457 |
CALCULATION OF GROWTH IN ADJUSTED TANGIBLE COMMON EQUITY PER COMMON SHARE
Each of the PRSU target level number of shares and number of shares represented by the Service Based RSU is determined by (i) multiplying the named executive officer’s base salary by 50%, and (ii) dividing that amount by our closing share price on the Nasdaq stock market on the date of grant. Service Based RSUs The Service Based RSUs awarded in 2023 have a fair market value equal to 50% of the named executive officer’s 2022 base salary, and will vest in three substantially equal annual installments commencing on the first anniversary of the grant date, provided that the recipient remains employed, subject to certain exceptions under “Potential Payments upon Termination or Change in Control — Equity Awards” below. Timing of Grant Date Commencing with the equity awards granted in 2022, the grant date and pricing of our annual equity awards, awarded in February each year upon approval of the Committee and the Board, are on the second trading day following the public dissemination of our fiscal year-end earnings release. The Committee and Board adopted this practice so that the number of shares that are subject to awards would take into account the trading price of our shares after the markets respond, positively or negatively, to our announced financial results. Welfare Benefits and Perquisites. Our named executive officers are provided welfare benefits that are generally the same as our other employees, such as Company-paid life insurance, contributions to the Company’s 401(k) Plan, medical, dental and vision plan coverage and long and short-term disability insurance. In addition to the above benefits, Ms. Doran, Mr. Hoffmann and Mr. Heinlein, prior to his separation from the Company in connection with the JRG Re Transaction, are entitled to receive benefits based upon their required work for the Company in Bermuda. The Company implemented these benefits for its executive officers in 2008, when the Company formed its holding and reinsurance company in Bermuda. These benefits consist of: • payment of certain housing expenses in Bermuda for Mr. Heinlein; • payment of travel costs for Mr. Heinlein; • tax equalization gross-up payments or other Bermuda tax payments (collectively, “Tax Equalization Payments”) to which Mr. Heinlein, Mr. Hoffmann or Ms. Doran may be subject with respect to payments or benefits that such named executive officer receives under his or her employment agreement; and payment of U.S. tax preparation expenses for Mr. Heinlein and Mr. Hoffmann. We make the above housing, travel and tax benefits available to the specified named executive officers employed by the Company or its former Bermuda subsidiary based upon the unique challenges of performing work in the Bermuda market, including the cost of living and maintaining a residence, travel to and from the island and additional tax expenses primarily resulting from the housing and travel benefits. We believe that providing these benefits is common practice for other Bermuda based insurers, and is consistent with our goal to attract and retain talented executive officers. The actual benefits received by the specified named executive officers in connection with performing work in Bermuda is identified in the Summary Compensation Table. Additionally, on one occasion in 2023, family members of an executive officer accompanied the officer on a corporate chartered aircraft and stayed in Company-paid accommodations. There was no incremental cost to the Company for this travel as the aircraft was already going to a specific destination for the business travel and there were vacant seats available. Leadership Recognition Program. In addition to the other benefits paid to our named executive officers, Mr. Schmitzer receives an annual retention payment under the James River Management Company, Inc. Leadership Recognition Program (the “Recognition Program”). The Recognition Program was adopted by James River Management Company, Inc., one of the Company’s subsidiaries, effective September 30, 2011, to help attract and retain key employees of our excess and surplus lines business. Under the Recognition Program, the Chief Executive Officer of our U.S. holding company, or in the case of executive officers of the Company, our Board of Directors, upon recommendation of the Committee, selects the employees who participate in the Recognition Program and determines the annual dollar amount to be credited to each participant’s account under the Recognition Program. The dollar amount credited to a participant’s account under the Recognition Program each year is paid to the participant in five equal annual installments, commencing as of the end of the second plan year beginning after the year in which the amount was credited to the participant’s account. Participants must be employed at the time of payment of an installment to be entitled to receive the payment. All amounts credited to a participant’s account remain unvested until paid and may be reduced, modified or terminated at the sole discretion of the Company. The Company may amend, modify or terminate the Recognition Program at any time, including, without limitation, to comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended, so as not to trigger any unintended tax consequences prior to the distribution of benefits under the program. There are no vested rights to amounts under the Recognition Program at any time prior to the payment of such amounts, and all amounts under the Recognition Program are at all times discretionary obligations of the Company, which may be reduced or terminated by the Company at any time. Except as otherwise stated above, the Recognition Program is administered by the board of directors of our U.S. holding company. In 2017, we determined to cease making new dollar credits to accounts under the Recognition Program. The determination was made in recognition of the fact that following our 2014 initial public offering, we were able to make regular equity awards to our executives. All amounts previously credited to Mr. Schmitzer’s account were paid in accordance with the terms of the Recognition Program. Mr. Schmitzer received a payout under the terms of the Recognition Program in 2023 of $40,250 based on amounts credited to his account in prior years. This amount represents Mr. Schmitzer’s final payment under the program.
TERMINATION BENEFITS
TERMINATION BENEFITS Employment Agreement Benefits Each of our named executive officers is party to an employment agreement with us that provides for certain benefits if his or her employment is terminated under certain circumstances, with the exception of Mr. McCafferty, whose employment with the Company ended December 2, 2023, and Mr. Heinlein, whose employment with the Company ended in connection with the JRG Re Transaction. This arrangement provides the continuing named executive officers with a core level of assurance that their actions on behalf of the Company and its shareholders can proceed without the potential distraction of short-term issues that may affect the Company (e.g., a strategic transaction involving the Company) and helps ensure that our continuing named executive officers continue to act in the best interests of the Company. In addition, the agreements contain measures that protect the Company past the date of the named executive officer’s termination, such as confidentiality, non-compete and non-solicitation requirements and the requirement that named executive officers execute a general release in favor of the Company in order to receive benefits. Continuing named executive officers may also receive benefits with respect to unpaid amounts under the STI Plan and unvested equity awards under our 2014 LTIP. The key terms of the separation arrangements are described below in “Potential Payments Upon Termination or Change in Control.” Mr. McCafferty entered into a Separation and Release Agreement with us in connection with his separation from the Company. For a discussion of certain benefits Mr. McCafferty is entitled to under the agreement, please see “Potential Payments upon Termination or Change in Control — Quantification of Termination Benefits”. Retention Awards On July 25, 2024, the Board, acting at the recommendation of the Committee, approved the grant of cash retention awards (the “Retention Awards”) to the Company’s senior leadership team, including awards to Ms. Doran, Mr. Schmitzer and Mr. Hoffmann, but excluding Mr. D’Orazio. The Retention Awards are to be paid in two equal installments on or immediately prior to each of December 31, 2024 and June 30, 2025, subject to the recipient remaining continuously employed by the Company on the applicable payment date; provided that earlier payment may occur as described below. Retention award payments may be made earlier than the applicable payment dates in the event of a recipient’s involuntary termination by the Company without cause, or upon termination of employment due to death or disability, in each case prior to a payment date (cause and disability are as defined in the recipient’s employment agreement, if the recipient is party to such an agreement, or otherwise, as defined in the 2014 LTIP). Upon the occurrence of such an event, a lump sum payment of the unpaid amounts shall be made on the next regular payroll date that is at least ten business days following the effective date of the termination of employment. Additionally, in the event of a change in control of the Company prior to a payment date, all unpaid amounts under the Retention Awards shall be paid in a lump sum on the effective date of the change in control. For purposes of the Retention Awards, change in control shall have its meaning set forth in the 2014 LTIP. The 2014 LTIP generally defines a change in control as: (i) the purchase or other acquisition by any person or entity of beneficial ownership of 50% or more of either the then outstanding common shares of the Company or the then outstanding voting securities of the Company entitled to vote generally in the election of directors, (ii) the consummation of a reorganization, merger, amalgamation or consolidation involving the Company such that persons who were the shareholders of the Company immediately prior to any such transaction do not immediately thereafter own 50% of the outstanding common shares and combined voting power entitled to vote generally in the election of directors of the surviving entity or (iii) a liquidation or dissolution of the Company or the sale of all or substantially all of the assets of the Company. The aggregate amount of the Retention Awards made to Ms. Doran, Mr. Schmitzer and Mr. Hoffmann are $572,000, $669,955 and $331,500, respectively.
Summary Compensation Table
Summary Compensation Table The following table provides information regarding the compensation of our named executive officers:
Summary Compensation Table
| NAME AND PRINCIPAL POSITION | YEAR | SALARY ($) | BONUS ($) | SHARE AWARDS(1) ($) | NON-EQUITY INCENTIVE PLAN COMPENSATION ($) | ALL OTHER COMPENSATION(2) ($) | TOTAL ($) | | Frank N. D’Orazio, Chief Executive Officer | 2023 | $959,318 | — | $924,967 | $773,300 | $63,106 | $2,720,691 | | | 2022 | $912,500 | — | $1,274,998 | $881,155 | $53,282 | $3,121,935 | | | 2021 | $850,000 | $425,000 | — | — | $42,980 | $1,317,980 | | Sarah C. Doran, Chief Financial Officer | 2023 | $568,333 | — | $549,985 | $457,600 | $41,170 | $1,617,088 | | | 2022 | $544,167 | — | $590,236 | $523,930 | $48,737 | $1,707,070 | | | 2021 | $512,500 | $257,500 | $249,994 | — | $35,570 | $1,055,564 | | Richard J. Schmitzer, President and Chief Executive Officer, Excess and Surplus Lines segment | 2023 | $666,629 | — | $650,000 | $556,063 | $76,509 | $1,949,201 | | | 2022 | $648,750 | — | $642,388 | $618,085 | $86,677 | $1,995,900 | | | 2021 | $642,500 | $312,917 | $329,574 | — | $195,371 | $1,480,362 | | Daniel J. Heinlein, Former President and Chief Executive Officer, JRG Re(3) | 2023 | $373,669 | — | $364,951 | $269,556 | $251,974 | $1,260,150 | | | 2022 | $362,500 | — | $402,497 | $336,165 | $280,273 | $1,381,435 | | | 2021 | $348,317 | $175,000 | $169,912 | — | $226,270 | $919,499 | | Michael J. Hoffmann, Group Chief Underwriting Officer | 2023 | $439,167 | — | $424,990 | $265,200 | $27,884 | $1,157,241 | | Terence M. McCafferty, Former President and Chief Executive Officer, Specialty Admitted Insurance segment(4) | 2023 | $397,697 | — | $419,975 | $385,325 | $143,228 | $1,346,225 | | | 2022 | $416,667 | — | $399,996 | $404,124 | $35,050 | $1,255,837 | | | 2021 | $397,708 | $320,000 | $386,245 | — | $36,347 | $1,140,300 |
Summary Compensation Table
(1) Represents the aggregate grant date fair value of PRSUs and Service Based RSUs awarded under the 2014 LTIP computed in accordance with FASB ASC Topic 718. For the PRSUs, the value at the grant date is based upon the probable outcome of the performance conditions, excluding the effect of estimated forfeitures. For the 2023 PRSU awards, if the maximum performance is achieved, the share award portion of the amount for Mr. D’Orazio, Ms. Doran, Mr. Schmitzer, Mr. Heinlein, Mr. Hoffmann and Mr. McCafferty would be $924,967, $549,985, $650,000, $364,951, $424,990 and $419,975. See Note 14 — “Equity Awards” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a description of the assumptions that were used in determining the dollar amounts recognized for financial statement reporting purposes of equity awards. (2) See the immediately following table for a breakdown of the compensation included in the All Other Compensation column. (3) Mr. Heinlein’s employment with the Company ended April 16, 2024, the date the sale of JRG Re was completed. Mr. McCafferty’s employment with the Company ended December 2, 2023. Pursuant to a Separation and Release Agreement, Mr. McCafferty received a pro-rated payment of his STI Plan award based upon the level of achievement of the performance goals for the 2023 fiscal year, with the pro-rated amount determined based upon the period that Mr. McCafferty was employed by the Company during 2023. The following table provides a breakdown of the amounts set forth in the All Other Compensation column of the Summary Compensation Table:
Summary Compensation Table
| NAME | 401(K) PLAN CONTRIBUTION ($) | TRANSPORTATION(a) ($) | HOUSING(b) ($) | TAXES(c) ($) | RETENTION AWARD(d) ($) | ACCRUED DIVIDENDS PAID UPON VESTING OF RSU AWARDS ($) | OTHER(e) ($) | TOTAL ALL OTHER COMPENSATION ($) | | Frank N. D’Orazio | $19,800 | — | — | — | — | $42,793 | $513 | $63,106 | | Sarah C. Doran | $19,800 | — | — | — | — | $20,857 | $513 | $41,170 | | Richard J. Schmitzer | $19,800 | — | — | — | $40,250 | $15,946 | $513 | $76,509 | | Daniel J. Heinlein | $19,800 | $22,522 | $138,096 | $48,944 | — | $9,454 | $13,158 | $251,974 | | Michael J. Hoffmann | $19,800 | — | — | — | — | $1,171 | $6,913 | $27,884 | | Terence M. McCafferty | $19,800 | — | — | — | — | $12,915 | $110,513 | $143,228 |
Summary Compensation Table
(a) For Mr. Heinlein, the transportation benefit represents home leave and travel costs incurred for travel to Bermuda, as well as the cost of any occasional family travel to Bermuda paid for by the Company. (b) The housing benefit represents the cost of housing and utilities in Bermuda paid or reimbursed by the Company for Mr. Heinlein. Mr. Heinlein’s family lives in housing paid for by the Company. There is no incremental cost allocated for family use of this home. (c) The tax benefit represents Tax Equalization Payments made to Mr. Heinlein. (d) Represents amount of retention award paid in 2023 pursuant to the James River Management Company, Inc. Leadership Recognition Program. The amount shown for each named executive officer includes company-paid life insurance. The amount shown for Messrs. Heinlein and Hoffmann also includes tax preparation services. The amount shown for Mr. McCafferty also includes a payment of $110,000 for reimbursement of legal fees. The amount shown for Mr. Heinlein also includes club membership fees paid by the Company for the purpose of business entertainment.
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table provides information regarding grants of equity awards to our named executive officers during 2023 and threshold, target and maximum annual incentive opportunities for named executive officers for performance in 2023 pursuant to the STI Plan and the LTI Plan. All equity awards granted to our named executive officers in 2023 were in the form of RSUs and PRSUs and were made under our 2014 LTIP.
Grants of Plan-Based Awards
| NAME | GRANT DATE | DATE OF BOARD ACTION (IF DIFFERENT FROM GRANT DATE)(1) | ESTIMATED FUTURE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS(2) | | | ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS(3) | | | ALL OTHER STOCK AWARDS: NUMBER OF SHARES OF STOCK OR UNITS (#)(2) | GRANT DATE FAIR VALUE OF STOCK AND OPTION AWARDS ($)(4) | | | | | THRESHOLD ($) | TARGET ($) | MAXIMUM ($) | THRESHOLD (#) | TARGET (#) | MAXIMUM (#) | | | | Frank N. D’Orazio | 3/1/2023 | 2/16/2023 | | | | 9,313 | 18,626 | 37,253 | | $462,484 | | | 3/1/2023 | 2/16/2023 | | | | | | | 18,626 | $462,484 | | | 3/1/2023 | | $483,313 | $966,625 | $1,449,938 | | | | | | | Sarah C. Doran | 3/1/2023 | 2/16/2023 | | | | 5,537 | 11,075 | 22,150 | | $274,992 | | | 3/1/2023 | 2/16/2023 | | | | | | | 11,075 | $274,992 | | | 3/1/2023 | | $286,000 | $572,000 | $858,000 | | | | | | | Richard J. Schmitzer | 3/1/2023 | 2/16/2023 | | | | 6,544 | 13,089 | 26,178 | | $325,000 | | | 3/1/2023 | 2/16/2023 | | | | | | | 13,089 | $325,000 | | | 3/1/2023 | | $334,978 | $669,955 | $1,004,933 | | | | | | | Daniel J. Heinlein | 3/1/2023 | 2/16/2023 | | | | 3,674 | 7,349 | 14,699 | | $182,476 | | | 3/1/2023 | 2/16/2023 | | | | | | | 7,349 | $182,476 | | | 3/1/2023 | | $187,975 | $375,950 | $563,925 | | | | | | | Michael J. Hoffmann | 3/1/2023 | 2/16/2023 | | | | 4,279 | 8,558 | 17,116 | | $212,495 | | | 3/1/2023 | 2/16/2023 | | | | | | | 8,558 | $212,495 | | | 3/1/2023 | | $165,750 | $331,500 | $497,250 | | | | | | | Terence M. McCafferty | 3/1/2023 | 2/16/2023 | | | | 4,228 | 8,457 | 16,915 | | $209,987 | | | 3/1/2023 | 2/16/2023 | | | | | | | 8,457 | $209,987 | | | 3/1/2023 | | $217,350 | $434,700 | $652,050 | | | | | |
Grants of Plan-Based Awards
(1) On February 16, 2023, the Board, at the recommendation of the Committee, approved the equity awards to be granted to the named executive officers, but in accordance with the Committee and Board’s policy, the grant date was not until the second trading day following the public dissemination of the Company’s 2022 fiscal year-end earnings release. (2) The amounts shown represent each named executive officer’s threshold, target and maximum annual incentive opportunities for performance in 2023, pursuant to the STI Plan. The actual amount of each named executive officer’s award is determined after completion of the performance period as discussed in our Compensation Discussion and Analysis. The annual cash incentive awards earned by our named executive officers for performance in 2023 were paid during the first quarter of 2024. (3) The amounts shown represent each named executive officer’s threshold, target and maximum amount of PRSUs granted in 2023. The PRSUs have a performance period of January 1, 2023 to December 31, 2025. The actual amount of each named executive officer’s award is based on the achievement of certain performance goals as discussed in our Compensation Discussion and Analysis. The grant date fair value of the RSUs and PRSUs, as applicable, was calculated in accordance with FASB ASC Topic 718.
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End The following table sets forth the outstanding equity awards held by our named executive officers on December 31, 2023.
Outstanding Equity Awards at Fiscal Year-End
| | | OPTION AWARDS | | | | STOCK AWARDS | | | | | NAME | GRANT DATE | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) EXERCISABLE | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) UNEXERCISABLE | OPTION EXERCISE PRICE ($) | OPTION EXPIRATION DATE | NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED (#) | MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED ($)(1) | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED (#)(4) | EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED ($)(4) | | Frank N. D’Orazio | 3/2/2022(2) | — | — | — | — | 41,464 | $383,127 | — | — | | | 3/1/2023(2) | — | — | — | — | 18,626 | $172,104 | — | — | | | 3/1/2023(4) | — | — | — | — | — | — | 18,626 | $172,104 | | Sarah C. Doran | 2/17/2021(2) | — | — | — | — | 1,659 | $15,329 | — | — | | | 3/2/2022(2) | — | — | — | — | 19,195 | $177,362 | — | — | | | 3/1/2023(2) | — | — | — | — | 11,075 | $102,333 | — | — | | | 3/1/2023(4) | — | — | — | — | — | — | 11,075 | $102,333 | | Richard J. Schmitzer | 2/17/2021(2) | — | — | — | — | 2,187 | $20,208 | — | — | | | 3/2/2022(2) | — | — | — | — | 20,891 | $193,033 | — | — | | | 3/1/2023(2) | — | — | — | — | 13,089 | $120,942 | — | — | | | 3/1/2023(4) | — | — | — | — | — | — | 13,089 | $120,942 | | Daniel J. Heinlein | 2/14/2017(3) | 6,266 | — | $42.17 | 2/14/2024 | — | — | — | — | | | 2/17/2021(2) | — | — | — | — | 1,128 | $10,423 | — | — | | | 3/2/2022(2) | — | — | — | — | 13,090 | $120,952 | — | — | | | 3/1/2023(2) | — | — | — | — | 7,349 | $67,905 | — | — | | | 3/1/2023(4) | — | — | — | — | — | — | 7,349 | $67,905 | | Michael J. Hoffmann | 3/2/2022(2) | — | — | — | — | 11,707 | $108,173 | — | — | | | 3/1/2023(2) | — | — | — | — | 8,558 | $79,076 | — | — | | | 3/1/2023(4) | — | — | — | — | — | — | 8,558 | $79,076 | | Terence M. McCafferty | 3/1/2023(4)(5) | — | — | — | — | — | — | 8,457 | $78,143 |
Outstanding Equity Awards at Fiscal Year-End
(1) Market value is calculated as the number of common shares indicated multiplied by $9.24, which was the closing price of the Company’s common shares on December 29, 2023, the last trading day of 2023, as reported by the Nasdaq Stock Market. (2) Vesting occurs in three equal annual installments beginning on the first anniversary of the grant date. (3) Vesting occurred in three equal annual installments beginning on the first anniversary of the grant date. (4) The number of shares reported assumes vesting of the PRSUs at target level based upon the achievement of adjusted net operating income and adjusted tangible common equity performance metrics for the three-year performance period ending December 31, 2025. The market value is determined by multiplying the share amount by $9.24, which was the closing price of our common shares on December 29, 2023, the last trading day of 2023, as reported by the Nasdaq Stock Market. Pursuant to the Separation and Release Agreement, upon completion of the performance period, Mr. McCafferty will receive a pro-rated portion of the PRSU award based upon actual performance, with the pro-rated period based upon the portion of the performance period Mr. McCafferty was employed by the Company.
Option Exercises and Stock Vested
Option Exercises and Stock Vested The following table presents certain information concerning the exercise of stock options and the vesting of stock awards held by our named executive officers during 2023.
Option Exercises and Stock Vested
| | OPTION AWARDS | | STOCK AWARDS | | | NAME | NUMBER OF SHARES ACQUIRED ON EXERCISE (#) | VALUE REALIZED ON EXERCISE ($) | NUMBER OF SHARES ACQUIRED ON VESTING (#) | VALUE REALIZED ON VESTING ($)(1) | | Frank N. D’Orazio | — | — | 41,621 | $802,457 | | Sarah C. Doran | — | — | 18,841 | $407,375 | | Richard J. Schmitzer | — | — | 16,784 | $400,156 | | Daniel J. Heinlein | — | — | 10,197 | $243,463 | | Michael J. Hoffmann | — | — | 5,853 | $143,457 | | Terence M. McCafferty | — | — | 14,756 | $309,543 |
Option Exercises and Stock Vested
(1) The value realized equals the closing sales price of our common shares on the vesting date as reported on the Nasdaq Stock Market, multiplied by the number of shares as to which the RSUs vested.
Pension Benefits & Nonqualified Deferred Compensation
Pension Benefits & Nonqualified Deferred Compensation We do not provide a pension plan for any of our employees and no named executive officers participated in a nonqualified deferred compensation plan during 2023.
Pay versus Performance
Pay versus Performance In accordance with rules adopted by the Securities and Exchange Commission pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive compensation for our principal executive officers (“PEOs”) and Non-PEO NEOs and Company performance for the fiscal years listed below. The Compensation and Human Capital Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown.
Pay versus Performance
| YEAR | SUMMARY COMPENSATION TABLE TOTAL FOR PEO 1(1) ($) | COMPENSATION ACTUALLY PAID TO PEO 1(1)(2)(3) ($) | SUMMARY COMPENSATION TABLE TOTAL FOR PEO 2(1) ($) | COMPENSATION ACTUALLY PAID TO PEO 2(1)(2)(3) ($) | AVERAGE SUMMARY COMPENSATION TABLE TOTAL FOR NON-PEO NEOS(1) ($) | AVERAGE COMPENSATION ACTUALLY PAID TO NON-PEO NEOS(1)(2)(3) ($) | VALUE OF INITIAL FIXED $100 INVESTMENT BASED ON:(4) | | NET INCOME ($ THOUSANDS) | ADJUSTED EBIT ($ THOUSANDS)(5) | | | | | | | | | TOTAL SHAREHOLDER RETURN ($) | PEER GROUP TOTAL SHAREHOLDER RETURN ($) | | | | (a) | (b) | (c) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | $2,720,691 | $1,589,888 | — | — | $1,465,981 | $945,280 | $24.44 | $168.05 | $(107,684) | $116,823 | | 2022 | $3,121,935 | $2,880,460 | — | — | $1,585,061 | $1,516,446 | $54.55 | $151.65 | $30,973 | $91,827 | | 2021 | $1,317,980 | $116,822 | — | — | $1,164,640 | $571,782 | $74.51 | $127.58 | $(172,799) | $(187,112) | | 2020 | $3,341,745 | $3,421,961 | $2,836,889 | $904,195 | $1,569,940 | $1,687,932 | $122.71 | $106.96 | $4,824 | $21,970 |
Pay versus Performance
Frank N. D’Orazio has served as our PEO for each year presented after November 2020 (“PEO 1”) and J. Adam Abram was our PEO until November 2020 (“PEO 2”). The individuals comprising the Non-PEO NEOs for each year presented are listed below.
Pay versus Performance
| 2020 | 2021 | 2022 | 2023 | | Sarah C. Doran | Sarah C. Doran | Sarah C. Doran | Sarah C. Doran | | Daniel J. Heinlein | Daniel J. Heinlein | Daniel J. Heinlein | Daniel J. Heinlein | | Terence M. McCafferty | Terence M. McCafferty | Terence M. McCafferty | Terence M. McCafferty | | Richard J. Schmitzer | Richard J. Schmitzer | Richard J. Schmitzer | Richard J. Schmitzer | | Robert P. Myron | Robert P. Myron | | Michael J. Hoffmann |
Pay versus Performance
The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the Company’s NEOs. These amounts reflect the Summary Compensation Table Total with certain adjustments as described in footnote 3 below. (3) Compensation Actually Paid reflects the exclusions and inclusions of certain amounts for PEO 1 and the Non-PEO NEOs as set forth below. Equity values are calculated in accordance with FASB Topic 718. Amounts in the Exclusion of Share Awards column are the totals from the Share Awards column set forth in the Summary Compensation Table.
Pay versus Performance
| YEAR | SUMMARY COMPENSATION TABLE TOTAL FOR PEO 1 ($) | EXCLUSION OF SHARE AWARDS FOR PEO 1 ($) | INCLUSION OF EQUITY VALUES FOR PEO 1 ($) | COMPENSATION ACTUALLY PAID TO PEO 1 ($) | | 2023 | $2,720,691 | $(924,967) | $(205,836) | $1,589,888 |
Pay versus Performance
| YEAR | AVERAGE SUMMARY COMPENSATION TABLE TOTAL FOR NON-PEO NEOS ($) | AVERAGE EXCLUSION OF SHARE AWARDS FOR NON-PEO NEOS ($) | AVERAGE INCLUSION OF EQUITY VALUES FOR NON-PEO NEOS ($) | AVERAGE COMPENSATION ACTUALLY PAID TO NON-PEO NEOS ($) | | 2023 | $1,465,981 | $(481,980) | $(38,721) | $945,280 |
Pay versus Performance
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
Pay versus Performance
| YEAR | YEAR-END FAIR VALUE OF EQUITY AWARDS GRANTED DURING YEAR THAT REMAINED UNVESTED AS OF LAST DAY OF YEAR FOR PEO 1 ($) | CHANGE IN FAIR VALUE FROM LAST DAY OF PRIOR YEAR TO LAST DAY OF YEAR OF UNVESTED EQUITY AWARDS FOR PEO 1 ($) | VESTING-DATE FAIR VALUE OF EQUITY AWARDS GRANTED DURING YEAR THAT VESTED DURING YEAR FOR PEO 1 ($) | CHANGE IN FAIR VALUE FROM LAST DAY OF PRIOR YEAR TO VESTING DATE OF UNVESTED EQUITY AWARDS THAT VESTED DURING YEAR FOR PEO 1 ($) | FAIR VALUE AT LAST DAY OF PRIOR YEAR OF EQUITY AWARDS FORFEITED DURING YEAR FOR PEO 1 ($) | VALUE OF DIVIDENDS OR OTHER EARNINGS PAID ON EQUITY AWARDS NOT OTHERWISE INCLUDED FOR PEO 1 ($) | TOTAL – INCLUSION OF EQUITY VALUES FOR PEO 1 ($) | | 2023 | $348,948 | $(482,774) | — | $(72,010) | — | — | $(205,836) |
Pay versus Performance
| YEAR | AVERAGE YEAR-END FAIR VALUE OF EQUITY AWARDS GRANTED DURING YEAR THAT REMAINED UNVESTED AS OF LAST DAY OF YEAR FOR NON-PEO NEOS ($) | AVERAGE CHANGE IN FAIR VALUE FROM LAST DAY OF PRIOR YEAR TO LAST DAY OF YEAR OF UNVESTED EQUITY AWARDS FOR NON-PEO NEOS ($) | AVERAGE VESTING-DATE FAIR VALUE OF EQUITY AWARDS GRANTED DURING YEAR THAT VESTED DURING YEAR FOR NON-PEO NEOS ($) | AVERAGE CHANGE IN FAIR VALUE FROM LAST DAY OF PRIOR YEAR TO VESTING DATE OF UNVESTED EQUITY AWARDS THAT VESTED DURING YEAR FOR NON-PEO NEOS ($) | AVERAGE FAIR VALUE AT LAST DAY OF PRIOR YEAR OF EQUITY AWARDS FORFEITED DURING YEAR FOR NON-PEO NEOS ($) | AVERAGE VALUE OF DIVIDENDS OR OTHER EARNINGS PAID ON EQUITY AWARDS NOT OTHERWISE INCLUDED FOR NON-PEO NEOS ($) | TOTAL – AVERAGE INCLUSION OF EQUITY VALUES FOR NON-PEO NEOS ($) | | 2023 | $154,990 | $(163,088) | $5,487 | $29,963 | $(66,073) | — | $(38,721) |
Pay versus Performance
The Peer Group TSR set forth in this table utilizes the S&P 500 Property & Casualty Insurance (S&P P&C Index), which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report for the year ended December 31, 2023. This is the first year that the S&P 500 P&C Index was added to the Annual Report. The comparison assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in the Company and the S&P P&C Index, respectively. The peer group used in last year’s Pay Versus Performance disclosure was the compensation peer group referenced in the Compensation Discussion and Analysis of the 2023 proxy statement. The Peer Group TSR for S&P 500 Property & Casualty and the CD&A Peer Group would have been as follows:
Pay versus Performance
| | 2023 | 2022 | 2021 | 2020 | | S&P 500 Property & Casualty Insurance | $168.05 | $151.65 | $127.58 | $106.96 | | 2022 CD&A Peer Group | $139.41 | $109.74 | $112.77 | $97.13 |
Pay versus Performance
Historical stock performance is not necessarily indicative of future stock performance. The following table shows the peer group constituents.
Pay versus Performance
| 2022 | 2023 | | Amerisafe, Inc. | S&P 500 Property & Casualty Insurance | | Argo Group International Holdings, Ltd. | | | Donegal Group Inc. | | | Employers Holdings, Inc. | | | Global Indemnity Group, LLC | | | Hallmark Financial Services, Inc. | | | HCI Group, Inc. | | | Kinsale Capital Group, Inc. | | | ProAssurance Corporation | | | RLI Corp. | | | SiriusPoint Ltd. | | | United Fire Group, Inc. | | | United Insurance Holdings Corp. | | | Universal Insurance Holdings, Inc. | |
Pay versus Performance
As noted in the Compensation Discussion and Analysis, “Adjusted EBIT” is one of the financial metrics used to determine short-term compensation under our STI Plan. Adjusted EBIT is calculated as net income of the Company before interest and income taxes, and excluding the portion of favorable or unfavorable prior year reserve development for which the Company’s subsidiaries ceded the risk under retroactive reinsurance agreements and the related changes in the amortization of deferred gain. Please refer to the Compensation Discussion and Analysis for further discussion of the Committee’s calculation of Adjusted EBIT for the most recent fiscal year.
NARRATIVE DISCLOSURE TO PAY VERSUS PERFORMANCE TABLE
NARRATIVE DISCLOSURE TO PAY VERSUS PERFORMANCE TABLE Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Total Shareholder Return (“TSR”) The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, the Company’s cumulative TSR over the four most recently completed fiscal years, and the Peer Group TSR over the same period. Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Net Income The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, and our Net Income during the four most recently completed fiscal years. Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Adjusted EBIT The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, and our Adjusted EBIT during the four most recently completed fiscal years.
PERFORMANCE MEASURES USED TO LINK COMPANY PERFORMANCE AND COMPENSATION ACTUALLY PAID TO NEOs
PERFORMANCE MEASURES USED TO LINK COMPANY PERFORMANCE AND COMPENSATION ACTUALLY PAID TO NEOs The following performance measures represent the most important financial performance measures used by us to link compensation actually paid to our NEOs to performance for the fiscal year ended December 31, 2023: • Adjusted Combined Ratio • Adjusted EBIT Since fewer than three financial performance measures were used by the Company to link compensation actually paid to the Company’s NEOs for the fiscal year ended December 31, 2023 to Company performance, we have listed all such measures that were used.
Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control
QUANTIFICATION OF TERMINATION BENEFITS
| EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION | WITHOUT CAUSE; FOR GOOD REASON OR NON-RENEWAL TERMINATION (WITHOUT CHANGE IN CONTROL) | WITHOUT CAUSE OR FOR GOOD REASON (WITH CHANGE IN CONTROL) | NON-RENEWAL TERMINATION (WITH CHANGE IN CONTROL) | DEATH OR DISABILITY | RETIREMENT | | Separation Payment | $1,449,938 | $2,899,876 | $2,899,876 | — | — | | Insurance | $35,646 | $35,646 | $35,646 | — | — | | Non-Equity Incentive Plan Compensation | $966,625 | $966,625 | $966,625 | $966,625 | — | | Service Based RSUs (amount includes accrued dividends payable upon vesting) | — | $575,542 | $175,829 | $175,829 | — | | PRSUs (amount includes accrued dividends payable upon vesting) | — | $58,604(1) | $58,604(1) | $58,604 | — |
QUANTIFICATION OF TERMINATION BENEFITS
| EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION | WITHOUT CAUSE; FOR GOOD REASON OR NON-RENEWAL TERMINATION (WITHOUT CHANGE IN CONTROL) | WITHOUT CAUSE OR FOR GOOD REASON (WITH CHANGE IN CONTROL) | NON-RENEWAL TERMINATION (WITH CHANGE IN CONTROL) | DEATH OR DISABILITY | RETIREMENT | | Separation Payment | $1,144,000 | $1,430,000 | $1,430,000 | — | — | | Insurance | $19,613 | $19,613 | $19,613 | — | — | | Non-Equity Incentive Plan Compensation | $457,600 | $457,600 | $457,600 | $572,000 | — | | Relocation Expenses from North Carolina | $100,000 | $100,000 | $100,000 | — | — | | Service Based RSUs (amount includes accrued dividends payable upon vesting) | — | $307,571 | $104,548 | $104,548 | — | | PRSUs (amount includes accrued dividends payable upon vesting) | — | $34,843(1) | $34,843(1) | $34,843 | — |
QUANTIFICATION OF TERMINATION BENEFITS
| EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION | WITHOUT CAUSE OR FOR GOOD REASON (WITHOUT CHANGE IN CONTROL) | NON-RENEWAL TERMINATION (WITHOUT CHANGE IN CONTROL) | WITHOUT CAUSE OR FOR GOOD REASON (WITH CHANGE IN CONTROL) | NON-RENEWAL TERMINATION (WITH CHANGE IN CONTROL) | DEATH OR DISABILITY | RETIREMENT | | Separation Payment | $1,004,932 | $669,955 | $2,009,865 | $1,339,910 | — | — | | Insurance | $15,804 | $15,804 | $15,804 | $15,804 | — | — | | Non-Equity Incentive Plan Compensation | $556,063 | $556,063 | $556,063 | $556,063 | $669,955 | $556,063 | | Service Based RSUs (amount includes accrued dividends payable upon vesting) | — | — | $348,656 | $123,560 | $123,560 | $41,187 | | PRSUs (amount includes accrued dividends payable upon vesting) | — | — | $41,187(1) | $41,187(1) | $41,187 | $41,187(1) |
QUANTIFICATION OF TERMINATION BENEFITS
| EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION | WITHOUT CAUSE OR FOR GOOD REASON (WITHOUT CHANGE IN CONTROL) | WITHOUT CAUSE OR FOR GOOD REASON (WITH CHANGE IN CONTROL) | NON- RENEWAL TERMINATION (WITHOUT CHANGE IN CONTROL) | NON- RENEWAL TERMINATION (WITH CHANGE IN CONTROL) | EXECUTIVE- INITIATED NON- RENEWAL TERMINATION | DEATH OR DISABILITY | RETIREMENT | | Separation Payment | $563,925 | $751,900 | $375,950 | — | — | — | — | | Insurance | $21,449 | $21,449 | $21,449 | — | — | — | — | | Non-Equity Incentive Plan Compensation | $269,556 | $269,556 | $269,556 | — | — | $375,950 | — | | Relocation Expenses from Bermuda | $25,000 | $25,000 | $25,000 | — | $25,000 | $25,000(1) | — | | Service Based RSUs (amount includes accrued dividends payable upon vesting) | — | $207,790 | — | $69,375 | — | $69,375 | — | | PRSUs (amount includes accrued dividends payable upon vesting) | — | $23,119(2) | — | $23,119(2) | — | $23,119 | — |
QUANTIFICATION OF TERMINATION BENEFITS
| EXECUTIVE BENEFITS AND PAYMENTS UPON TERMINATION | WITHOUT CAUSE; FOR GOOD REASON OR NON-RENEWAL TERMINATION (WITHOUT CHANGE IN CONTROL) | WITHOUT CAUSE OR FOR GOOD REASON (WITH CHANGE IN CONTROL) | NON-RENEWAL TERMINATION (WITH CHANGE IN CONTROL) | DEATH OR DISABILITY | RETIREMENT | | Separation Payment | $442,000 | $663,000 | $442,000 | — | — | | Insurance | $32,118 | $32,118 | $32,118 | — | — | | Non-Equity Incentive Plan Compensation | $265,200 | $265,200 | $265,200 | $331,500 | — | | Service Based RSUs (amount includes accrued dividends payable upon vesting) | — | $193,643 | $80,788 | $80,788 | — | | PRSUs (amount includes accrued dividends payable upon vesting) | — | $26,923(1) | $26,923(1) | $26,923 | — |
Chief Executive Officer Pay Ratio
Chief Executive Officer Pay Ratio Pursuant to Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are required to disclose the ratio of the total 2023 compensation of our Chief Executive Officer, Frank N. D’Orazio, to the total compensation for 2023 of our median employee. We determined our median employee for purposes of the disclosure by generating a report from our payroll system reflecting regular and overtime salary (where applicable) paid to our employees for the calendar year 2023 for every full-time, part-time and short-term employee employed by us at December 31, 2023 (excluding Mr. D’Orazio). We annualized this pay for employees who had worked for us for less than a full year. Once we determined the median employee, we calculated that employee’s total compensation for 2023 in the same manner utilized to determine the amount reported for Mr. D’Orazio in the “Total” column in our Summary Compensation Table included in this proxy statement. Mr. D’Orazio’s total annual compensation was $2,720,691, and our median employee’s total annual compensation was $116,551. The ratio of the total annual compensation of Mr. D’Orazio to the total annual compensation for our median employee in 2023 is approximately 23 to 1.
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS At the Annual Meeting, shareholders will elect eight individuals to serve as directors and hold office until our 2025 annual general meeting of shareholders. The nominees were recommended and approved for nomination by the Nominating and Corporate Governance Committee of our Board of Directors. The directors shall serve until their successors have been duly elected and qualified or until any such director’s earlier resignation or removal. Proxies cannot be voted for a greater number of persons than the number of nominees named. If, for any reason, any nominee is unable or unwilling to serve, the persons named in the proxy will use their best judgment in selecting and voting for a substitute candidate or our Board of Directors may reduce the size of our Board and eliminate the vacancy. Our Board of Directors, however, has no reason to believe that the nominees will be unable or unwilling to be a candidate for election at the time of the Annual Meeting. Shareholders will be voting at the Annual Meeting to elect Matthew B. Botein, Thomas L. Brown, Frank N. D’Orazio, Kirstin M. Gould, Dennis J. Langwell, Christine LaSala, Peter B. Migliorato and Ollie L. Sherman, Jr. as directors to serve until the 2025 annual general meeting of shareholders and until their successors are duly elected and qualified.