DEF 14A of Donegal Group Inc
Filed Mar 17, 2025 · FY20240001140361-25-008932
CONTENTS
| Other Aspects of Our Compensation Philosophy | 50 | | Summary Compensation Table | 50 | | Grants of Plan-Based Awards | 52 | | Stock Incentive Plans | 52 | | Outstanding Equity Awards at December 31, 2024 | 54 | | Option Exercises and Stock Vested | 55 | | Pension Benefits | 55 | | Non-Qualified Deferred Compensation | 55 | | Limitation of Liability and Indemnification | 55 | | Pay Ratio Disclosure | 56 | | Pay Versus Performance | 57 | | Joint Report of the Compensation Committees of Donegal Mutual and DGI | 61 | | Equity Compensation Plan Information | 62 | | PROPOSAL 1 – ELECTION OF DIRECTORS | 63 | | PROPOSAL 2 – RATIFICATION OF THE APPOINTMENT BY OUR AUDIT COMMITTEE OF KPMG LLP TO SERVE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2025 | 70 | | AUDIT AND NON-AUDIT FEES | 72 | | Report of our Audit Committee | 72 | | STOCKHOLDER PROPOSALS FOR OUR 2026 ANNUAL MEETING OF STOCKHOLDERS | 75 | | HOUSEHOLDING | 77 | | DIRECTOR - STOCKHOLDER COMMUNICATIONS | 78 | | OTHER MATTERS | 78 |
The Coordinating Committee
The Coordinating Committee Donegal Mutual and we maintain a coordinating committee that consists of two members of our board of directors, neither of whom is a member of Donegal Mutual’s board of directors, and two members of Donegal Mutual’s board of directors, neither of whom is a member of our board of directors. The purpose of the coordinating committee is to maintain a process for an ongoing evaluation of the fairness of the terms of all transactions between Donegal Mutual and its policyholders, on the one hand, and our insurance subsidiaries, us and our stockholders, on the other hand. Any change to an agreement between Donegal Mutual, on the one hand, and us or any of our insurance subsidiaries, on the other hand, or any new agreement between Donegal Mutual, on the one hand, and us or any of our insurance subsidiaries, on the other hand, is also subject to the applicable provisions of the Pennsylvania Insurance Company Law of 1921, as amended, and the PHCA, as well as the laws of the other states of domicile of our insurance subsidiaries. The coordinating committee will only approve a new agreement between Donegal Mutual and us or Donegal Mutual and one or more of our insurance subsidiaries or a change in an existing agreement between Donegal Mutual and us or Donegal Mutual and one or more of our insurance subsidiaries if:
The Coordinating Committee
| ● | both of our members on the coordinating committee determine that the new agreement or the change in an existing agreement is fair and equitable to us and in the best interests of our stockholders; and |
The Coordinating Committee
| ● | both of Donegal Mutual’s members on the coordinating committee determine that the new agreement or the change in an existing agreement is fair and equitable to Donegal Mutual and in the best interests of Donegal Mutual’s policyholders. |
The Coordinating Committee
After the coordinating committee approves the new agreement or the change in an existing agreement, our board of directors and Donegal Mutual’s board of directors must each approve the new agreement or the change in an existing agreement. The coordinating committee meets annually during the first two months of each year to review each continuing agreement and each on-going transaction between Donegal Mutual and us or one or more of our insurance subsidiaries, including the various reinsurance agreements between Donegal Mutual and our insurance subsidiaries. The purpose of this annual review is to examine the results of these reinsurance agreements over a period of several years and to determine if the results of the existing agreements between Donegal Mutual and us and our insurance subsidiaries over an extended time period remain fair and equitable to us and our stockholders and fair and equitable to Donegal Mutual and its policyholders or if Donegal Mutual or if we should mutually agree to certain adjustments. In the case of these agreements, the adjustments typically consist of adjustments to the reinsurance premiums, the level at which the reinsurance attaches and the reinsurance reinstatement premiums. The intent of any changes is to achieve relative parity between Donegal Mutual, on the one hand, and us or one or more of our insurance subsidiaries, on the other hand, over a period of several years. These agreements are on-going in nature and will continue in effect throughout 2025 in the ordinary course of our business and the business of our insurance subsidiaries and in the ordinary course of the business of Donegal Mutual. On January 30, 2025, the coordinating committee met and determined that the proposed terms of these agreements for 2025 were fair and equitable to our insurance subsidiaries and our stockholders and fair and equitable to Donegal Mutual and its policyholders. Accordingly, the coordinating committee unanimously approved the continuation of the terms of such agreements and transactions, with non-material adjustments, through the next scheduled annual review during the first two months of 2026. Barry C. Huber and David C. King were our members of the coordinating committee during 2024. Certain biographical information about Mr. Huber amd Mr. King appears later in this proxy statement under the caption “Election of Directors.” Michael W. Brubaker and Michael K. Callahan were Donegal Mutual’s members of the coordinating committee during 2024. Certain biographical information about Messrs. Brubaker and Callahan is as follows: Mr. Brubaker, age 67, has been a director of Donegal Mutual since 2016. Mr. Brubaker is a partner of Principled Strategies, a business consultancy in Lititz, Pennsylvania, since 2018. Mr. Brubaker served as chief executive officer of Blackford Ventures, LLC, a private equity and real estate investment firm in Lancaster, Pennsylvania, from 2015 to 2018. From 2006 through 2014, Mr. Brubaker served as a Pennsylvania State Senator. Mr. Brubaker beneficially owns 22,070 shares of our Class A common stock and does not own beneficially any shares of our Class B common stock. As director compensation in 2024, Donegal Mutual paid Mr. Brubaker cash fees of $92,000 and granted him a restricted stock award of 500 shares of our Class A common stock with a value at the time of issuance in January 2024 of $6,995. Mr. Brubaker received $1,000 in cash fees as compensation from Donegal Mutual for the two meetings of the coordinating committee he attended as one of Donegal Mutual’s members on the coordinating committee during 2024 and stock options to purchase 4,500 shares of our Class A common stock at an exercise price of $15.76 per share. Mr. Callahan, age 66, has been a director of Donegal Mutual since 2009. Mr. Callahan has served as Chairman of the Board of Benchmark Construction Company, Inc. since 2020 after serving as President of that firm from 2009 to 2020. Mr. Callahan beneficially owns 26,485 shares of our Class A common stock and does not own beneficially any shares of our Class B common stock. As director compensation in 2024, Donegal Mutual paid Mr. Callahan cash fees of $103,300 and granted him a restricted stock award of 500 shares of our Class A common stock with a value at the time of issuance in January 2024 of $6,995. Mr. Callahan received $1,000 in cash fees as compensation from Donegal Mutual for the two meetings of the coordinating committee he attended as one of Donegal Mutual’s members on the coordinating committee during 2024 and stock options to purchase 4,500 shares of our Class A common stock at an exercise price of $15.76 per share.
Summary of the 2024 Compensation of Our Named Executive Officers
| ● | an incentive bonus paid in cash following the determination of our achievement of certain performance objectives pursuant to our annual cash incentive bonus plan for our immediately preceding completed fiscal year; and |
Summary of the 2024 Compensation of Our Named Executive Officers
| ● | long-term incentive compensation in the form of stock options that we granted in December. |
2024 Total Direct Compensation of Our Named Executive Officers
| Long-Term Incentive Compensation | Stock options that are exercisable for five years and vest in three equal annual installments | Stock options support our growth, provide a link between the compensation of our named executive officers and our stock performance and also serve as a retention device Supports pay for performance because options have substantial value only if our Class A stock price increases by a substantial amount over the exercise price of the option to purchase Class A shares | Stock options granted in 2024 that are exercisable for five years at $15.76 per share and vest in three equal annual installments commencing on July 1, 2025 |
2024 Total Direct Compensation of Our Named Executive Officers
We believe our 2024 compensation for our officers, including our named executive officers, is fair and reasonable. We implemented our compensation programs to balance risk and reward in our overall business strategy. Our compensation programs tie a significant percentage of the total compensation of our officers, including our named executive officers, directly to our objectives of achieving sustained excellent financial performance and capitalizing on opportunities to grow profitably. Accordingly, we base our annual incentive compensation awards on targeted premium growth rates, underwriting results and our operating return on equity. Our long-term executive incentive plan is likewise focused on our underwriting profitability over an extended period of time. As a result, we believe our named executive officers are incentivized to develop and implement strategies and action plans to grow our business and achieve sustained underwriting profitability. Finally, our incentive compensation programs for our named executive officers do not guarantee compensation to our named executive officers. We believe that the elements of our compensation programs as we describe them in this proxy statement establish that we have the appropriate mix of risk versus benefit to align effectively the interests of our named executive officers with the interests of our stockholders, and that our incentive compensation programs contribute to the enhancement of the long-term value of an investment in our common stock and do not create incentives or disincentives that may materially affect risk taking or are reasonably likely to have a material adverse effect on us. For example, our named executive officers did not receive any incentive bonuses for 2023, and our named executive officers will only realize a gain from the stock options we granted to them as compensation in 2024 if the price of our Class A common stock increases above the exercise price of the options subsequently to the vesting date of the options.
Director Compensation
Director Compensation Our objectives for our director compensation are to attract qualified individuals to serve on our board of directors and to align the interests of our directors with the interests of our stockholders. Our board of directors determines the form and amount of director compensation after its review of recommendations by the compensation committee of our board of directors. Our compensation committee reviews our director compensation program annually to confirm that the compensation of the members of our board of directors remains competitive and comparable to the compensation practices of our peer group and to make recommendations to our board of directors that our compensation committee believes are appropriate.
Director Compensation
| Type of Compensation | | Amount | Form of Payment | | Annual Retainer | Base Retainer | $97,735 | $90,000 in cash and an annual restricted stock award of 500 shares of Class A common stock on the first business day of 2025 with an estimated value of $7,735 based on the closing price of our Class A common stock on December 31, 2024 | | | Additional retainer amount for each board meeting attended in excess of five meetings per year | $500 | Cash | | | Additional retainer amount for each compensation committee meeting and each executive committee meeting attended | $300 | Cash | | | Additional retainer amount for each coordinating committee meeting, each nominating committee meeting and each special committee meeting attended | $500 | Cash | | | Additional retainer amount for each audit committee meeting attended | $750 | Cash |
Director Compensation
| Type of Compensation | | Amount | Form of Payment | | Periodic Equity Grant | When we grant options to our executive officers, we also typically grant options to our directors that are exercisable for five years at the closing market price of our Class A common stock on the day before the date of grant and that vest in three equal annual cumulative installments | Option to purchase 4,500 shares of our Class A common stock at $15.76 per share valued at $6,345 on the December 19, 2024 date of grant | Non-qualified stock options to purchase shares of our Class A common stock |
Director Compensation
Under our equity incentive plan for directors, each of our directors and each director of Donegal Mutual who is not also one of our directors receives an annual restricted stock award of 500 shares of our Class A common stock. We grant the award to each director as of the first business day of each year, provided the director served as a member of our board of directors or as a member of the board of directors of Donegal Mutual during any portion of the preceding year. Donegal Mutual reimburses us for the cost of the restricted stock awards we grant to those directors of Donegal Mutual who do not also serve as members of our board of directors. Each of our directors and each of the directors of Donegal Mutual is also eligible to receive non-qualified options to purchase shares of our Class A common stock in an amount our board of directors determines on the date of grant. On December 19, 2024, we granted each of our directors, and each director of Donegal Mutual who was not also a member of our board of directors, a non-qualified stock option to purchase 4,500 shares of our Class A common stock at an exercise price of $15.76 per share. Each option is exercisable until December 19, 2029 and vests in three equal annual cumulative installments commencing on July 1, 2025. The following table sets forth a summary of the compensation we paid to our non-officer directors during 2024.
Director Compensation
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Total ($) | | Scott A. Berlucchi | 98,800 | 6,995 | — | 105,795 | | Dennis J. Bixenman | 101,700 | 6,995 | 6,345 | 115,040 | | Jack L. Hess | 110,000 | 6,995 | 6,345 | 123,340 | | Barry C. Huber | 98,400 | 6,995 | 6,345 | 111,740 | | David C. King | 91,000 | 6,995 | 6,345 | 104,340 | | Kevin M. Kraft, Sr. | 103,400 | 6,995 | 6,345 | 116,740 | | Jon M. Mahan | 93,300 | 6,995 | 6,345 | 106,640 | | S. Trezevant Moore, Jr. | 95,600 | 6,995 | 6,345 | 108,940 | | Britta H. Schatz | 95,500 | 6,995 | 6,345 | 108,840 | | Annette B. Szady | 96,250 | 6,995 | 6,345 | 109,590 |
Director Compensation
The following table summarizes the outstanding equity awards our directors held at December 31, 2024, excluding the awards our president and chief executive officer, Mr. Burke, held. We report those awards elsewhere in this proxy statement.
Director Compensation
| | Option Awards | | | | Stock Awards | | | | Number of Securities Underlying Unexercised Option | | Option Exercise Price ($) | 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 | | Name | (#) Exercisable | (#) Unexercisable | | | | | | Scott A. Berlucchi | 4,500 | — | 14.43 | 12/17/2025 | 500 | 7,735 | | | 4,500 | — | 14.39 | 12/16/2026 | | | | | 3,000 | 1,500 | 14.09 | 12/15/2027 | | | | | 1,500 | 3,000 | 13.87 | 12/21/2028 | | | | Dennis J. Bixenman | 4,500 | — | 14.43 | 12/17/2025 | 500 | 7,735 | | | 4,500 | — | 14.39 | 12/16/2026 | | | | | 3,000 | 1,500 | 14.09 | 12/15/2027 | | | | | 1,500 | 3,000 | 13.87 | 12/21/2028 | | | | | — | 4,500 | 15.76 | 12/19/2029 | | | | Jack L. Hess | 4,500 | — | 14.43 | 12/17/2025 | 500 | 7,735 | | | 4,500 | — | 14.39 | 12/16/2026 | | | | | 3,000 | 1,500 | 14.09 | 12/15/2027 | | | | | 1,500 | 3,000 | 13.87 | 12/21/2028 | | | | | — | 4,500 | 15.76 | 12/19/2029 | | | | Barry C. Huber | 4,500 | — | 14.43 | 12/17/2025 | 500 | 7,735 | | | 4,500 | — | 14.39 | 12/16/2026 | | | | | 3,000 | 1,500 | 14.09 | 12/15/2027 | | | | | 1,500 | 3,000 | 13.87 | 12/21/2028 | | | | | — | 4,500 | 15.76 | 12/19/2029 | | | | David C. King | 4,500 | — | 14.43 | 12/17/2025 | 500 | 7,735 | | | 4,500 | — | 14.39 | 12/16/2026 | | | | | 3,000 | 1,500 | 14.09 | 12/15/2027 | | | | | 1,500 | 3,000 | 13.87 | 12/21/2028 | | | | | — | 4,500 | 15.76 | 12/19/2029 | | | | Kevin M. Kraft, Sr. | 4,500 | — | 14.43 | 12/17/2025 | 500 | 7,735 | | | 4,500 | — | 14.39 | 12/16/2026 | | | | | 3,000 | 1,500 | 14.09 | 12/15/2027 | | | | | 1,500 | 3,000 | 13.87 | 12/21/2028 | | | | | — | 4,500 | 15.76 | 12/19/2029 | | | | Jon M. Mahan | 4,500 | — | 14.43 | 12/17/2025 | 500 | 7,735 | | | 4,500 | — | 14.39 | 12/16/2026 | | | | | 3,000 | 1,500 | 14.09 | 12/15/2027 | | | | | 1,500 | 3,000 | 13.87 | 12/21/2028 | | | | | — | 4,500 | 15.76 | 12/19/2029 | | |
Director Compensation
| | Option Awards | | | | Stock Awards | | | | Number of Securities Underlying Unexercised Option | | Option | Option | Number of Shares or Units of Stock That Have Not | Market Value of Shares or Units of Stock That | | Name | (#) Exercisable | (#) Unexercisable | Exercise Price ($) | Expiration Date | Vested (#) | Have Not Vested | | S. Trezevant Moore, Jr. | 4,500 | — | 14.43 | 12/17/2025 | 500 | 7,735 | | | 4,500 | — | 14.39 | 12/16/2026 | | | | | 3,000 | 1,500 | 14.09 | 12/15/2027 | | | | | 1,500 | 3,000 | 13.87 | 12/21/2028 | | | | | — | 4,500 | 15.76 | 12/19/2029 | | | | Britta H. Schatz | 1,500 | 3,000 | 13.87 | 12/21/2028 | 500 | 7,735 | | | — | 4,500 | 15.76 | 12/19/2029 | | | | Annette B. Szady | 4,500 | — | 14.43 | 12/17/2025 | 500 | 7,735 | | | 4,500 | — | 14.39 | 12/16/2026 | | | | | 3,000 | 1,500 | 14.09 | 12/15/2027 | | | | | 1,500 | 3,000 | 13.87 | 12/21/2028 | | | | | — | 4,500 | 15.76 | 12/19/2029 | | |
Director Compensation
In addition to the compensation we describe in the two preceding tables, we reimburse our directors for any out-of-pocket expenses they reasonably incur in connection with attendance at meetings of our board of directors, meetings of committees of our board of directors and meetings of our stockholders upon presentation of appropriate receipts for such expenses.
Our Compensation Philosophy and Risk Management Considerations
| ● | Provide long-term compensation to our executive officers that rewards them for sustained financial and operating performance and leadership excellence. |
Our Compensation Philosophy and Risk Management Considerations
| ● | We believe our long-term cash incentive plan and stock option grants appropriately reward our executive officers for sustained financial and operating leadership and performance. |
Our Compensation Philosophy and Risk Management Considerations
| ● | The financial measures we use to determine the bonuses of our executive officers are metrics our compensation committee believes promote long-term stockholder value. These measures include our targeted premium growth, underwriting results and operating return on equity. Our compensation committee sets limits on these bonus payments that encourage success without encouraging excessive risk-taking or short-term results. |
Our Compensation Philosophy and Risk Management Considerations
| ● | We grant stock options that are exercisable for five years from the date of grant at the closing price of our Class A common stock on the day before the date of grant. Our compensation committee believes such stock options encourage our executive officers to attain sustained long-term performance. |
Our Compensation Philosophy and Risk Management Considerations
| ● | We do not reduce the exercise price of stock options if the price of our Class A common stock subsequently declines below the exercise price of the stock options unless we first obtain stockholder approval. However, we do adjust the exercise price of previously granted stock options to reflect recapitalizations, stock or extraordinary dividends, stock splits, mergers, spin-offs and similar events as the applicable stock compensation plan permits. |
Employment Agreements with Our Named Executive Officers
Employment Agreements with Our Named Executive Officers Both Donegal Mutual and we have entered into employment agreements with our named executive officers that we describe below. Donegal Mutual and we have also entered into employment agreements containing generally similar provisions with our other executive officers.
Employment Agreements with Our Named Executive Officers
| ● | The initial terms of the employment agreements were 36 months for Messrs. DeLamater, Hay and Pandey and 42 months for Messrs. Burke and Miller. The term of each agreement automatically extends for one additional year following the initial term or then current term unless the named executive officer or the respective boards of directors of Donegal Mutual or us provide not less than 60 days advance notice that the employment agreement will expire at the end of the then-current term. The current terms expire on December 31, 2025 for Messrs. DeLamater and Hay, September 30, 2025 for Mr. Pandey and March 31, 2026 for Messrs. Burke and Miller. |
Employment Agreements with Our Named Executive Officers
| ● | The respective employment agreements among Donegal Mutual, us and our named executive officers include customary provisions relating to indemnification, confidentiality and non-solicitation. |
Employment Agreements with Our Named Executive Officers
| ● | The respective employment agreements among Donegal Mutual, us and Messrs. Burke and Miller include a non-compete provision that extends for two years following a termination of employment (regardless of the reason for termination) with regard to any insurance company, insurance holding company or other entities that offer services or products competitive with the services or products that Donegal Mutual, us or our respective subsidiaries or affiliates currently offer or offer in the future. |
Employment Agreements with Our Named Executive Officers
| ● | We and Donegal Mutual have agreed to pay our named executive officers an annual base salary in the amount the compensation committee of Donegal Mutual and we recommend and our board of directors and the board of directors of Donegal Mutual each respectively approve from time to time, but in no event less than the minimum amount stated in the employment agreements of our named executive officers. |
Employment Agreements with Our Named Executive Officers
| ● | The respective employment agreements among Donegal Mutual, us and our named executive officers grant our named executive officers the right to participate in our incentive programs, including those relating to the standards and objectives set forth in our executive incentive plans, and benefit plans. |
Employment Agreements with Our Named Executive Officers
| ● | The employment agreements contain customary provisions relating to vacations, disability and death. |
Employment Agreements with Our Named Executive Officers
| ● | The employment agreements include certain rights to terminate the employment agreements and, upon the occurrence of certain events, such as a change-of-control, the right to receive severance payments, as the respective employment agreements provide. |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control If we or Donegal Mutual terminate the employment of one of our named executive officers, or a Change-of-Control (as defined below) occurs and the employment of the named executive officer subsequently terminates on either a voluntary or involuntary basis, the named executive officer would be entitled to receive certain payments and benefits from us. The table below shows the estimated payments and benefits in connection with the following events based upon the assumptions we state below:
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | “Voluntary Termination” includes the voluntary resignation of a named executive officer. |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | “Involuntary-for-Cause Termination” includes a termination of the employment of a named executive officer for reasons such as violation of certain policies or for certain performance-related issues. |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | “Involuntary Termination” includes a termination of the employment of a named executive officer other than for cause, but not including a termination related to a Change-of-Control. Terminations due to death or disability result in substantially the same treatment as an Involuntary Termination. |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | “Change-of-Control,” as defined in the employment agreements we have entered into with each of our named executive officers, includes the occurrence of one of the types of transaction we describe below: |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | the acquisition of shares of our Class A common stock and our Class B common stock by any person or group in a transaction or series of transactions that result in such person or group directly or indirectly first owning more than 25% of the aggregate voting power of our Class A common stock and our Class B common stock taken as a single class; or |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | the consummation of a merger of Donegal Mutual or other business combination transaction involving Donegal Mutual in which Donegal Mutual is not the surviving entity; or |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | the consummation of a merger of DGI or other business combination transaction involving DGI after which the holders of our outstanding voting capital stock taken as a single class do not collectively own 60% or more of the aggregate voting power of the entity surviving such merger or other business combination transaction; or |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | the sale, lease, exchange or other transfer in a transaction or series of transactions of all or substantially all of our assets, but excluding therefrom the sale and re-investment of our consolidated investment portfolio; or |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | a change in the composition of the board of directors of Donegal Mutual or us, wherein the persons who constituted a majority of the members of the respective boards of directors of us or Donegal Mutual on October 1, 2020 and persons whose election as members of their respective boards received the approval of such members then still in office no longer constitute at least a majority of the respective boards of directors of us or Donegal Mutual. |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
A transaction constituting a Change-of-Control shall only be deemed to have occurred upon the closing of the transaction. The employment agreements provide generally that if the employment of a named executive officer terminates within twelve months after a Change-of-Control either by us without Cause, or by the named executive officer with or without Good Reason, in both cases, as defined in the employment agreements, then the named executive officer will be entitled to receive an amount equal to the sum of:
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | the executive’s base salary accrued through the date the termination of the executive’s employment becomes effective; |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | any incentive compensation we have the obligation to pay to the executive pursuant to our employment agreement with that named executive officer; |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | any amounts payable under any of the benefit plans Donegal Mutual or we maintain in accordance with the terms of such plans; |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | severance pay in an amount equal to 36 months of the named executive officer’s annual base salary as of the effective date of termination of the employment of the named executive officer, payable in 36 equal consecutive monthly installments, commencing on Donegal Mutual’s first regularly scheduled payroll date occurring after the date of the termination of the employment of that named executive officer; |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | in the case of Messrs. Burke and Miller, additional severance pay in an amount equal to six months of their respective annual base salary as of the effective date of termination of their employment, payable in six equal consecutive monthly installments, commencing after the conclusion of the initial 36-month severance payment; |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | an amount equal to the aggregate premiums that Donegal Mutual and the named executive officer would have paid to maintain in effect the same medical, health, disability and life insurance coverage Donegal Mutual provided to that named executive officer immediately prior to the date of such termination had the named executive officer remained employed for 36 months following the date of termination, assuming no increase in insurance premium rates; and |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | any amount in respect of excise taxes Donegal Mutual and we have the obligation to pay to that named executive officer under our employment agreement with such officer. |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
We will make these payments, provided the timing of such payments could be postponed to the extent required to comply with the requirements of Section 409A of the Code. General Assumptions We set forth in the table below a description of the payments and benefits that we would provide to our named executive officers related to each employment termination event or a Change-of-Control as of December 31, 2024. We also discuss below the basis upon which we calculated the payments and benefits. Except as we note below, these amounts are the incremental or enhanced amounts that a named executive officer would receive that are greater than those that we would have provided to employees generally under the same circumstances. The amounts we disclose below are estimates only and are based on various assumptions we discuss below. The actual amounts we would provide can be determined only at the time that an employment termination event occurs. The table below assumes that:
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | a Change-of-Control occurred on December 31, 2024 under the terms of various plans and agreements unrelated to the employment agreements, regardless of a termination of employment; |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | the employment of each named executive officer terminated on December 31, 2024 due to each termination event, including termination within twelve months after a Change-of-Control, as the employment agreements contemplate; and |
Potential Payments to Our Named Executive Officers upon Termination or a Change-of-Control
| ● | values related to outstanding stock options reflect the market value of our Class A common stock of $15.47 per share, the last reported price of our Class A common stock on the NASDAQ Global Market System on December 31, 2024. |
Amounts Potentially Payable Upon Termination
| Name | Event | Severance Benefits ($) | Stock Options ($) | Other Benefits ($)(1) | Total ($) | | Kevin G. Burke | Voluntary Termination | — | 88,880 | — | 88,880 | | | Involuntary-for-Cause Termination | — | 88,880 | — | 88,880 | | | Involuntary Termination | 2,625,000 | 88,880 | 56,217 | 2,770,097 | | | Change-in-Control | 2,625,000 | 88,880 | 56,217 | 2,770,097 | | W. Daniel DeLamater | Voluntary Termination | — | 58,080 | — | 58,080 | | | Involuntary-for-Cause Termination | — | 58,080 | — | 58,080 | | | Involuntary Termination | 1,641,000 | 58,080 | 65,019 | 1,764,099 | | | Change-in-Control | 1,641,000 | 58,080 | 65,019 | 1,764,099 | | Jeffery T. Hay | Voluntary Termination | — | 59,600 | — | 59,600 | | | Involuntary-for-Cause Termination | — | 59,600 | — | 59,600 | | | Involuntary Termination | 1,377,000 | 59,600 | 65,019 | 1,501,619 | | | Change-in-Control | 1,377,000 | 59,600 | 65,019 | 1,501,619 | | Jeffrey D. Miller | Voluntary Termination | — | 78,160 | — | 78,160 | | | Involuntary-for-Cause Termination | — | 78,160 | — | 78,160 | | | Involuntary Termination | 2,250,500 | 78,160 | 51,819 | 2,380,479 | | | Change-in-Control | 2,250,500 | 78,160 | 51,819 | 2,380,479 | | Sanjay Pandey | Voluntary Termination | — | 67,440 | — | 67,440 | | | Involuntary-for-Cause Termination | — | 67,440 | — | 67,440 | | | Involuntary Termination | 1,464,000 | 67,440 | 56,217 | 1,587,657 | | | Change-in-Control | 1,464,000 | 67,440 | 56,217 | 1,587,657 |
Our Annual Cash Incentive Bonus Plan
Our Annual Cash Incentive Bonus Plan For 2024, we had an annual cash incentive bonus plan for our executive officers, including our named executive officers. We determined the amount, if any, available for the award of these bonuses based on the achievement of financial performance objectives of the Donegal Insurance Group and us. We used the following financial performance measures, as we define later in this section, to determine the amount of performance-based cash bonuses for each named executive officer:
Our Annual Cash Incentive Bonus Plan
| ● | commercial lines direct premium growth rate for the Donegal Insurance Group; |
Our Annual Cash Incentive Bonus Plan
| ● | adjusted statutory combined ratio for the Donegal Insurance Group; and |
Our Annual Cash Incentive Bonus Plan
| ● | our operating return on equity. |
Our Annual Cash Incentive Bonus Plan
The Compensation Committee chose these performance measures to tie a portion of the compensation of our executive officers directly to our growth and profit objectives for 2024 and to provide a significant financial incentive for our executive officers to achieve those objectives. In a change from 2023, our annual cash incentive bonus plan for 2024 did not include performance objectives for personal lines premium growth. The Compensation Committee established weightings for each performance measure and established threshold, target and maximum performance objectives for each performance measure. The following table shows the performance measures, performance objectives, weighting percentages and actual results for 2024:
Our Annual Cash Incentive Bonus Plan
| | | Performance Objectives | | | | | | | Actual | | Performance Measure | Weighting | Threshold | Level 1 | Level 2 | Target | Level 3 | Level 4 | Maximum | Result | | Commercial Lines Premium Growth | 15% | 0.5% | 1.0% | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% | 4.3% | | Adjusted Statutory Combined Ratio | 65% | 100.0% | 99.0% | 98.0% | 97.0% | 96.0% | 95.0% | 94.0% | 96.9% | | Operating Return on Equity | 20% | 7.5% | 8.0% | 8.5% | 9.0% | 9.5% | 10.0% | 10.5% | 8.6% |
Our Annual Cash Incentive Bonus Plan
Each of our named executive officers had the ability to earn a performance-based cash bonus for each performance measure, and we paid no bonus for an individual performance measure if the threshold performance objective for that performance measure was not achieved. Potential cash bonuses for each of our named executive officers ranged from 40% to 100% of their base salary, as shown in the following table.
Our Annual Cash Incentive Bonus Plan
| Percentage of Base Salary | | | | | | | | Threshold | Level 1 | Level 2 | Target | Level 3 | Level 4 | Maximum | | 40.0% | 50.0% | 60.0% | 70.0% | 80.0% | 90.0% | 100.0% |
Our Annual Cash Incentive Bonus Plan
We calculated cash bonuses separately for each performance measure by multiplying base salary times the incentive level bonus percentage achieved times the weighting percentage for the performance measure. The total cash bonus each of our named executives received was equal to the sum of the calculations for the three performance measures. Our named executive officers earned cash bonuses with respect to the achievement of the performance objectives for the commercial lines direct premium growth, adjusted statutory combined ratio and operating return on equity for 2024. The amounts of the cash bonuses are set forth under the Annual Cash Bonus column under “Summary Compensation Table.” The Compensation Committee retained, but did not exercise, the discretion to reduce, but not increase, the cash bonuses payable pursuant to the annual cash incentive bonus plan. The Compensation Committee approved a similar annual cash incentive bonus plan for 2025 for our executive officers, including our named executive officers.
Definition of Performance Measures
Definition of Performance Measures Commercial Lines Direct Premium Growth Rate - We define the commercial lines direct premium growth rate as the percentage of annual growth in direct premiums written of the Donegal Insurance Group for its commercial lines of business. Adjusted Statutory Combined Ratio - We define the adjusted statutory combined ratio as the combination of the annual loss ratio, loss expense ratio, underwriting expense ratio and dividend ratio for the Donegal Insurance Group, calculated in accordance with statutory accounting principles and then adjusted to exclude any net effect that exceeds $15.0 million for the single largest catastrophe loss event, accruals for bonuses under executive cash incentive bonus plans and stock option compensation expense. Operating Return on Equity - We define operating return on equity as our return on equity, calculated in accordance with GAAP and then adjusted to exclude net investment gains or losses from net income and to exclude accumulated other comprehensive income or loss, which primarily consists of unrealized gains or losses on our available-for-sale fixed-maturity investments, from stockholders’ equity.
Our Long-Term Executive Incentive Plan
Our Long-Term Executive Incentive Plan For 2024, we had a long-term executive incentive plan for our executive officers, including our named executive officers, pursuant to which we will determine the amount, if any, available for the award of cash bonuses to our named executive officers based on the achievement of financial performance objectives tied to the average adjusted statutory combined ratio for the Donegal Insurance Group over a three-year period that includes the calendar years of 2023, 2024 and 2025. Our named executive officers must be employed on December 31, 2025 in order to receive a bonus under the long-term executive incentive plan. We will use the average adjusted statutory combined ratio for the Donegal Insurance Group, as we define in “Our Annual Cash Incentive Bonus Plan - Definition of Performance Measures,” for the three calendar years to determine the amount of performance-based cash bonuses under the long-term executive incentive plan for each named executive officer. Potential cash bonuses for each of our named executive officers ranged from 15% to 85% of their base salary, payable in a lump-sum payment in early 2026, as shown in the following table.
Our Long-Term Executive Incentive Plan
| Average Adjusted | Performance Objectives | | | | | | | | | Statutory Combined Ratio | Under 94% | 94-94.99% | 95-95.99% | 96-96.99% | 97-97.99% | 98-98.99% | 99-99.99% | Over 100% | | Percentage of Base Salary | 85% | 70% | 60% | 50% | 40% | 25% | 15% | None |
Our Long-Term Executive Incentive Plan
The Compensation Committee chose this performance measure to tie a portion of the long-term compensation of our executive officers directly to our profit objectives and to provide a significant financial incentive for our executive officers to achieve those objectives. The Compensation Committee retains the discretion to reduce, but not increase, the cash bonuses payable pursuant to the long-term executive incentive plan.
Summary Compensation Table
Summary Compensation Table The following table shows the compensation we paid during 2024, 2023 and 2022 for services rendered in all capacities to our chief executive officer, our chief financial officer and our three other most highly compensated executive officers. We refer to these officers, whom we name in the table below, as our named executive officers. We maintain employment agreements with all of our executive officers, including our named executive officers. We refer you to “Employment Agreements with Our Named Executive Officers” elsewhere in this proxy statement for a description of those employment agreements. We do not provide any of our named executive officers with restricted stock awards, non-equity incentive plan compensation, deferred compensation or pension benefits, with the exception of two of our named executive officers who receive an annual restricted stock award of 500 shares of our Class A common stock as part of their compensation for serving as members of our board of directors or Donegal Mutual’s board of directors. Based on the compensation our named executive officers earned in 2024, their salaries and performance-based compensation accounted for 53.1% and 38.5%, respectively, of their total compensation in 2024.
Summary Compensation Table
| Name and Principal Position | Year | Salary($) | Annual Cash Bonus ($)(1) | Long-Term Cash Bonus ($)(2) | Stock Awards ($) | Option Awards ($)(3) | All Other Compensation ($)(4) | Total ($) | | Kevin G. Burke, | 2024 | 750,000 | 543,750 | — | 6,995 | 33,840 | 122,225 | 1,456,810 | | President and Chief Executive Officer | 2023 | 750,000 | — | — | 7,100 | 36,240 | 121,100 | 914,440 | | | 2022 | 725,000 | 184,728 | 108,663 | 7,145 | 35,520 | 119,375 | 1,180,431 | | W. Daniel DeLamater, | 2024 | 547,000 | 396,659 | — | — | 28,200 | 20,425 | 992,284 | | Executive Vice President and Chief Operating Officer | | | | | | | | | | Jeffery T. Hay, | 2024 | 459,000 | 332,775 | — | — | 28,200 | 20,425 | 840,400 | | Executive Vice President | 2023 | 459,000 | — | — | — | 27,180 | 15,095 | 501,275 | | | 2022 | 442,000 | 112,627 | 44,167 | — | 26,640 | 13,815 | 639,249 | | Jeffrey D. Miller, | 2024 | 643,000 | 466,175 | — | 6,995 | 31,020 | 111,425 | 1,258,615 | | Executive Vice President and Chief Financial Officer | 2023 | 643,000 | — | — | 7,100 | 31,710 | 110,300 | 792,110 | | | 2022 | 618,000 | 157,443 | 92,614 | 7,145 | 31,080 | 108,575 | 1,014,857 | | Sanjay Pandey, | 2024 | 488,000 | 353,800 | — | — | 28,200 | 20,365 | 890,365 | | Executive Vice President and Chief Information Officer | 2023 | 488,000 | — | — | — | 27,180 | 19,800 | 534,980 | | | 2022 | 468,000 | 119,252 | 70,148 | — | 26,640 | 18,075 | 702,115 |
Summary Compensation Table
| (1) Our executive officers are eligible to participate in an annual cash incentive bonus plan. We refer you to “Executive Compensation – Our Annual Cash Incentive Bonus Plan” elsewhere in this proxy statement. |
Summary Compensation Table
| (2) Our executive officers are eligible to participate in a long-term cash incentive bonus plan. We refer you to “Executive Compensation – Our Long-Term Executive Incentive Plan” elsewhere in this proxy statement. |
Summary Compensation Table
| (3) We show the option awards at an estimated grant date fair value, which we calculated by using an option pricing model. Further, the options are subject to a vesting schedule, and the estimated value obtained from the option pricing model does not represent actual value based upon trading prices of our Class A common stock at the grant date. See Note 13 to our Consolidated Financial Statements included in our 2024 Annual Report for information on the accounting treatment and calculation of the grant date fair value of these stock options. |
Summary Compensation Table
| (4) In the case of Messrs. Burke and Miller, the totals shown include directors fees of $101,800 and $91,000, respectively, and a matching 401(k) plan contribution of $20,425 paid during 2024. Mr. Burke serves on our board of directors and the board of directors of Donegal Mutual. Mr. Miller serves on the board of directors of Donegal Mutual. In the case of Messrs. DeLamater, Hay and Pandey, the totals shown represent matching 401(k) plan contributions paid during 2024. |
Grants of Plan-Based Awards
Grants of Plan-Based Awards During 2024, we granted non-qualified options to purchase shares of our Class A common stock at an exercise price of $15.76 per share to our named executive officers as set forth in the following table. At the close of business on the day before the date on which we granted the options, the closing market price per share of our Class A common stock was $15.76.
Grants of Plan-Based Awards
| Name | Grant Date | Number of Securities Underlying Options(#) | Exercise or Base Price of Option Awards($) | Grant Date Fair Value of Option Awards($) | | Kevin G. Burke | 12/19/2024 | 24,000 | 15.76 | 33,840 | | W. Daniel DeLamater | 12/19/2024 | 20,000 | 15.76 | 28,200 | | Jeffery T. Hay | 12/19/2024 | 20,000 | 15.76 | 28,200 | | Jeffrey D. Miller | 12/19/2024 | 22,000 | 15.76 | 31,020 | | Sanjay Pandey | 12/19/2024 | 20,000 | 15.76 | 28,200 |
Outstanding Equity Awards at December 31, 2024
Outstanding Equity Awards at December 31, 2024 The following table summarizes the outstanding equity awards our named executive officers held at December 31, 2024. All of the options listed have a five-year term.
Outstanding Equity Awards at December 31, 2024
| | Option Awards | | | | Stock Awards | | | Name | Number of Securities Underlying Unexercised Options | | Option Exercise Price ($) | 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 ($) | | | (#) Exercisable | (#) Unexercisable | | | | | | Kevin G. Burke | 27,000 | — | 14.43 | 12/17/2025 | 500 | 7,735 | | | 24,000 | — | 14.39 | 12/16/2026 | | | | | 16,000 | 8,000 | 14.09 | 12/15/2027 | | | | | 8,000 | 16,000 | 13.87 | 12/21/2028 | | | | | — | 24,000 | 15.76 | 12/19/2029 | | | | W. Daniel DeLamater | 12,000 | — | 14.43 | 12/17/2025 | — | — | | | 18,000 | — | 14.39 | 12/16/2026 | | | | | 12,000 | 6,000 | 14.09 | 12/15/2027 | | | | | 6,000 | 12,000 | 13.87 | 12/21/2028 | | | | | — | 20,000 | 15.76 | 12/19/2029 | | | | Jeffery T. Hay | 10,000 | — | 14.07 | 1/4/2026 | — | — | | | 18,000 | — | 14.39 | 12/16/2026 | | | | | 12,000 | 6,000 | 14.09 | 12/15/2027 | | | | | 6,000 | 12,000 | 13.87 | 12/21/2028 | | | | | — | 20,000 | 15.76 | 12/19/2029 | | | | Jeffrey D. Miller | 24,000 | — | 14.43 | 12/17/2025 | 500 | 7,735 | | | 21,000 | — | 14.39 | 12/16/2026 | | | | | 14,000 | 7,000 | 14.09 | 12/15/2027 | | | | | 7,000 | 14,000 | 13.87 | 12/21/2028 | | | | | — | 22,000 | 15.76 | 12/19/2029 | | | | Sanjay Pandey | 21,000 | — | 14.43 | 12/17/2025 | — | — | | | 18,000 | — | 14.39 | 12/16/2026 | | | | | 12,000 | 6,000 | 14.09 | 12/15/2027 | | | | | 6,000 | 12,000 | 13.87 | 12/21/2028 | | | | | — | 20,000 | 15.76 | 12/19/2029 | | |
Option Exercises and Stock Vested
Option Exercises and Stock Vested The following table summarizes the stock options our named executive officers exercised and the restricted stock awards our named executive officers acquired on vesting during 2024 and the values realized upon exercise and vesting:
Option Exercises and Stock Vested
| | Option Exercises and Stock Vested | | | | | | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | | Kevin G. Burke | 90,000 | 115,380 | 500 | 6,995 | | W. Daniel DeLamater | 20,000 | 12,989 | — | — | | Jeffery T. Hay | — | — | — | — | | Jeffrey D. Miller | 85,000 | 106,920 | 500 | 6,995 | | Sanjay Pandey | 75,000 | 48,603 | — | — |
Option Exercises and Stock Vested
| (1) We calculate the value our named executive officers realized on vesting of restricted stock awards based upon the closing price of our Class A common stock on NASDAQ Global Select Market on the vesting date. |
Pension Benefits
Pension Benefits None of our named executive officers participated in or had an account balance in qualified or non-qualified defined benefit plans that we sponsored in 2022, 2023 or 2024, and we contemplate none for 2025.
Non-Qualified Deferred Compensation
Non-Qualified Deferred Compensation None of our named executive officers participated in or had an account balance in non-qualified deferred compensation plans or other deferred compensation plans that we maintained in 2022, 2023 or 2024, and we contemplate no such plans for 2025.
Pay Ratio Disclosure
Pay Ratio Disclosure We believe the compensation of our executive officers should be internally consistent and equitable in order to motivate our employees to seek to create stockholder value. We have a commitment to internal pay equity, and our compensation committee monitors the relationship between the compensation of our executive officers and the compensation of our other employees. Our compensation committee reviewed a comparison of the compensation of our chief executive officer (base salary, incentive pay and stock option awards) to the compensation (base salary, incentive pay and stock option awards) of all of our employees in 2024. For 2024, the median of the annual total compensation of all of our employees, excluding the compensation of our chief executive officer, was $93,177 and the annual total compensation of our chief executive officer in 2024 was $1,327,590. Thus, the ratio of the annual total compensation of our chief executive officer in 2024 to the median of the annual total compensation in 2024 of all of our other employees was 14.2 to 1. We calculated the ratio of the annual total compensation of our chief executive officer to the annual total compensation of our median employee in accordance with applicable SEC regulations. We identified our median employee compensation by examining the compensation (base salary, incentive pay and stock option awards) in 2024 of all of our employees whom we employed on December 31, 2024, the last day of our 2024 payroll year, excluding our chief executive officer. We included all employees, whether employed on a full-time basis or a part-time basis on that date. We did not make any assumptions, adjustments or estimates with respect to our annual total compensation in 2024. In computing our median annual employee compensation, we used the same methodology we use for determining the compensation of our named executive officers set forth in the 2024 Summary Compensation Table included elsewhere in this proxy statement. We did not annualize the compensation of any full-time employees whom we did not employ for all of 2024.
Pay Versus Performance
Pay Versus Performance SEC rules require certain adjustments to the summary compensation totals that appear in this proxy statement under the caption “Executive Compensation Discussion and Analysis - Summary Compensation Table” in order to determine “compensation actually paid” as those rules define that term. The following table summarizes the compensation actually paid to our president and chief executive officer, who is our principal executive officer (“PEO”), and the average compensation actually paid to our other named executive officers (“Non-PEO NEOs”) for fiscal years 2020 through 2024:
Pay Versus Performance
| | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year | Summary Compensation Total for PEO ($) (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 ($) (4) | Class A Common Stock Total Shareholder Return ($) | Peer Group Total Shareholder Return ($) | Net Income (Loss) ($) | Combined Ratio (%) | | 2024 | 1,456,810 | 1,464,535 | 995,416 | 1,003,072 | 130.65 | 136.71 | 50,862,252 | 98.6 | | 2023 | 914,440 | 897,995 | 579,336 | 566,573 | 112.65 | 104.50 | 4,425,504 | 104.4 | | 2022 | 1,180,431 | 1,256,456 | 751,940 | 805,762 | 109.16 | 102.08 | (1,959,405) | 103.3 | | 2021 | 1,017,560 | 1,044,160 | 677,148 | 695,284 | 104.91 | 105.60 | 25,254,174 | 101.0 | | 2020 | 1,290,278 | 1,281,678 | 847,290 | 840,466 | 98.98 | 90.33 | 52,815,252 | 96.0 |
Pay Versus Performance
| (1) Kevin Burke was our PEO for each of fiscal years 2020 through 2024. |
Pay Versus Performance
| (2) We calculated the compensation actually paid to our PEO for each fiscal year as shown in the following table: |
Pay Versus Performance
| Year | 2024 | 2023 | 2022 | 2021 | 2020 | | PEO | | | | | | | Summary compensation total | $1,456,810 | $914,440 | $1,180,431 | $1,017,560 | $1,290,278 | | Less: Equity award values reported in summary compensation total | (43,235) | (43,340) | (42,665) | (36,075) | (38,460) | | Add: Fair value of outstanding unvested equity awards granted in covered year | 40,855 | 40,355 | 51,500 | 34,985 | 23,235 | | Change in fair value of outstanding unvested equity awards from prior years | (18,195) | (61,000) | (28,435) | (18,975) | (78,210) | | Change in fair value of equity awards that vested in covered year | 28,300 | 47,540 | 95,625 | 46,665 | 84,835 | | Compensation actually paid | $1,464,535 | $897,995 | $1,256,456 | $1,044,160 | $1,281,678 |
Pay Versus Performance
| (3) The following non-PEO NEOs are included in the average figures shown: |
Pay Versus Performance
| (a) 2024: Daniel DeLamater, Jeffery Hay, Jeffrey Miller and Sanjay Pandey |
Pay Versus Performance
| (b) 2023: Jeffery Hay, Jeffrey Miller, Sanjay Pandey, Daniel Wagner |
Pay Versus Performance
| (c) 2022: Jeffery Hay, Jeffrey Miller, Sanjay Pandey, Daniel Wagner |
Pay Versus Performance
| (d) 2021: Jeffery Hay, Richard Kelley, Jeffrey Miller and Sanjay Pandey |
Pay Versus Performance
| (e) 2020: Richard Kelley, Jeffrey Miller, Sanjay Pandey and Daniel Wagner |
Pay Versus Performance
| (4) We calculated the average compensation actually paid to our non-PEO NEOs for each fiscal year as shown in the following table: |
Pay Versus Performance
| Year | 2024 | 2023 | 2022 | 2021 | 2020 | | Non-PEO NEOs | | | | | | | Summary compensation total | $995,416 | $579,336 | $751,940 | $677,148 | $847,290 | | Less: Equity award values reported in summary compensation total | (30,061) | (30,088) | (29,536) | (19,001) | (26,771) | | Add: Fair value of outstanding unvested equity awards granted in covered year | 29,879 | 27,811 | 36,463 | 18,316 | 14,809 | | Change in fair value of outstanding unvested equity awards from prior years | (10,499) | (43,250) | (16,273) | (7,156) | (58,819) | | Change in fair value of equity awards that vested in covered year | 18,337 | 32,764 | 63,168 | 25,977 | 63,957 | | Compensation actually paid | $1,003,072 | $566,573 | $805,762 | $695,284 | $840,466 |
Pay Versus Performance
We determined fair value of equity awards in the same manner we determine fair value for share-based payments we reflect in our financial statements. We calculated the value of an initial fixed $100 investment at December 31, 2019 based on total shareholder return for our Class A common stock and peer group total using the same methodology that we used in preparing the performance graph that appeared in our 2024 Annual Report on Form 10-K. Our peer group consists of Cincinnati Financial Corporation, The Hanover Insurance Group, Inc., Horace Mann Educators Corporation, Kemper Corporation, Selective Insurance Group Inc. and United Fire Group, Inc. We present below graphs showing the relationship of the compensation actually paid to our PEO and the average compensation actually paid to our Non-PEO NEOs to (1) our TSR, (2) our net income (loss) and (3) our combined ratio and our cumulative total shareholder return (“TSR”) compared to our peer group TSR for fiscal years 2020 through 2024: We consider the following financial performance measures, as we define them in this proxy statement under the caption “Our Annual Cash Incentive Bonus Plan - Definition of Performance Measures,” as our most important financial performance measures we used to link compensation actually paid to our named executive officers to our performance for 2024:
Pay Versus Performance
| ● | commercial lines direct premium growth rate for the Donegal Insurance Group; |
Pay Versus Performance
| ● | adjusted statutory combined ratio for the Donegal Insurance Group; and |
Pay Versus Performance
| ● | our operating return on equity. |
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS The DGCL, the PHCA and our by-laws govern the election of our directors by our stockholders. Because Donegal Mutual has owned more than a majority of the aggregate voting power of our outstanding shares of common stock since our formation in 1986, Donegal Mutual has had the ability to control the election of all of our directors and has voted every year since 1986 to elect as our directors the candidates nominated by our nominating committee and board of directors. Donegal Mutual has advised us in writing that it will also do so at our 2025 Annual Meeting. The following discussion summarizes the process the nominating committee of our board of directors follows in connection with the nomination of candidates for election as directors by our stockholders and their taking of office.
Our Nominees for Election as Class C Directors at Our 2025 Annual Meeting
Our Nominees for Election as Class C Directors at Our 2025 Annual Meeting Our board of directors currently has 11 members and consists of four Class A directors, four Class B directors and three Class C directors. We elect each director of each class for a three-year term and until the director’s successor takes office. The current three-year terms of our Class C directors expire at our 2025 Annual Meeting and upon the election and taking of office by their successors. The current three-year terms of our Class A directors next expire at our 2026 annual meeting of stockholders and upon the election and taking of office by their successors, and the current three-year terms of our Class B directors next expire at our 2027 annual meeting of stockholders and upon the election and taking of office by their successors. We believe our nominees for election as Class C directors possess the experience and qualifications to provide sound guidance and oversight to our senior executive management. We will elect two Class C directors at our 2025 Annual Meeting. Effective as of the conclusion of our 2025 Annual Meeting, the size of our board of directors will be reduced from 11 members to 10 members. Unless you have marked your proxy card to the contrary, we have instructed the proxies named on your proxy card to vote for the election of the two nominees for Class C directors we name in this proxy statement. If any of the named nominees for Class C director becomes unavailable for any reason, our board of directors will designate a substitute nominee. Our board of directors believes each nominee will be able to serve if elected. A majority of our board of directors may fill any vacancy that occurs in our board of directors for any reason until the expiration of the term of the class of directors in which the vacancy has occurred. The names of our two nominees for election as Class C directors, and our Class A directors and our Class B directors who will continue in office after our 2025 Annual Meeting until the expiration of their respective terms and the election and taking of office of their respective successors, together with certain information regarding them, are as follows:
Our Nominees for Election as Class C Directors at Our 2025 Annual Meeting
| Class C Directors | | | | | Name | Age | Director Since | Year Term Will Expire* | | Barry C. Huber | 73 | 2015 | 2028 | | S. Trezevant Moore, Jr. | 71 | 2006 | 2028 |
Our Nominees for Election as Class C Directors at Our 2025 Annual Meeting
| * If elected at our 2025 Annual Meeting |
Our Class A Directors and Our Class B Directors Who Will Continue as Directors After Our 2025 Annual Meeting
Our board of directors recommends you vote FOR the election of the two nominees for Class C directors we name above. Mr. Bixenman has been a director of Donegal Mutual since 2006. For a number of years prior to his retirement in 2012, Mr. Bixenman served as vice president and senior consultant of Williams & Company Consulting, Inc., an environmental and business consulting firm with its headquarters in Sioux City, Iowa. Mr. Bixenman is a certified public accountant with extensive experience in auditing and preparing financial statements. We believe Mr. Bixenman’s background and financial accounting expertise qualifies Mr. Bixenman to serve on our board of directors. Mr. Burke has served as our president and chief executive officer since 2015 and as one of our directors since October 2016. Mr. Burke has served as president and chief executive officer of Donegal Mutual since September 2018 and as a director of Donegal Mutual since 2014. He served as executive vice president and chief operating officer of Donegal Mutual from 2014 to August 2018, as senior vice president of human resources of Donegal Mutual and us from 2005 to 2014 and as vice president of human resources of Donegal Mutual and us from 2001 to 2005. We believe Mr. Burke’s leadership and experience in these positions with Donegal Mutual and us qualifies him to serve on our board of directors. Mr. Hess, a certified public accountant for more than 40 years, retired as a partner of Bertz, Hess & Co., LLP, a public accounting firm, on December 31, 2015. He was a partner of that firm and a predecessor firm since 1982. Mr. Hess is managing partner of Hempland Associates, a real estate investment partnership based in Lancaster County, Pennsylvania. Mr. Hess has been a director of Donegal Mutual since 2009, a director of us since 2011 and a director of Conestoga Title Insurance Company, a subsidiary of Donegal Mutual, since 2006. Mr. Hess’ background brings significant auditing and tax expertise to our board of directors as well as experienced business management skills, which we believe qualifies Mr. Hess to serve on our board of directors. Mr. Huber practiced for over 35 years as a certified public accountant with Trout, Ebersole & Groff, LLP, a public accounting firm, for which he served as managing partner from 1998 to 2010. He retired from that firm in 2012. We believe the experience of Mr. Huber as the managing partner of a major regional public accounting firm qualifies Mr. Huber to serve on our board of directors. Mr. King has served as the president and chief executive officer of Horst Insurance, a Lancaster, Pennsylvania-based independent insurance agency, since 2005 and served in various leadership positions within that agency from 1995 to 2005. Mr. King also serves as the corporate risk manager for Horst Group, Inc., the parent company of Horst Insurance, and has served on the board of directors of that entity since 2005. Mr. King has supported the insurance industry and the Lancaster, Pennsylvania community through his participation in various insurance industry associations, representation on agency advisory boards for several insurance companies and service on numerous boards of directors. Mr. King’s insurance industry and business leadership experience brings significant expertise and the perspective of an insurance agent to our board of directors, which we believe qualifies Mr. King to serve on our board of directors. Mr. Kraft has been the chief executive officer of Clyde W. Kraft Funeral Home, Columbia, Pennsylvania since 1995. Mr. Kraft is also registered as an insurance agent with the Pennsylvania Department of Insurance. Mr. Kraft has been a director of Donegal Mutual since 2003. Mr. Kraft also serves on the board of directors of a Lancaster County-based water utility, and Conestoga Title Insurance Company, a subsidiary of Donegal Mutual. We believe Mr. Kraft’s background and experience qualifies him to serve as a member of our board of directors. Mr. Mahan has been a managing director in the Investment Banking Division of Stifel Nicolaus & Company, Incorporated since 2005. Mr. Mahan specializes in corporate finance with a focus on mergers and acquisitions, and has experience with a variety of corporate transactions involving mergers and acquisitions. Mr. Mahan’s expertise benefits our analysis of acquisition opportunities and makes him a desirable member of our board of directors. Mr. Moore retired as a managing director of Georgia Banking Company, a commercial bank, a position he held from December 2021 to June 2024. Mr. Moore was head of capital markets for Lima One Capital, LLC from June 2017 until MFA Financial, Inc. acquired that entity in December 2021. From December 2016 to June 2017, Mr. Moore served as a managing director of Promontory MortgagePath. From October 2014 to December 2016, Mr. Moore was an executive vice president of FirstKey Mortgage, LLC, a subsidiary of Cerberus. Mr. Moore served as a managing director in the securities unit of the Royal Bank of Scotland from October 2012 to October 2014. From March 2010 until October 2012, Mr. Moore served as senior vice president, Strategic Investment Group, of The Federal Home Loan Mortgage Corporation. We believe the experience of Mr. Moore in mortgage securities and financial businesses amply qualifies him to serve as a member of our board of directors. Mrs. Schatz retired as chief information officer and vice president of information technology of Penn National Mutual Casualty Insurance Company, a Harrisburg, Pennsylvania-based mutual insurance company, where she served in various executive and information technology management roles for 20 years. Mrs. Schatz has been a director of Donegal Mutual since 2023. During her tenure at Penn National Insurance, Mrs. Schatz coordinated the replacement of the core underwriting, claims and billing systems and was responsible for development and execution of strategies for areas including technology architecture, enterprise data management, predictive analytics, cloud and digital technologies, business intelligence and innovation research and development. Mrs. Schatz was also responsible for the creation and oversight of the company’s cybersecurity program and certification of cybersecurity compliance to insurance regulatory authorities. We believe Mrs. Schatz’s extensive information technology experience in the insurance industry amply qualifies her to serve as a member of our board of directors. Mrs. Szady is a certified public accountant and served as the director of the bureau of financial examinations within the office of corporate and financial regulation of the Pennsylvania Insurance Department from 2011 to 2016. For 20 prior years, Mrs. Szady served in various financial leadership positions, including 15 years as the vice president and chief financial officer, for the largest writer of professional liability insurance for physicians in the Commonwealth of Pennsylvania. We believe Mrs. Szady’s insurance industry background, insurance regulatory experience and financial expertise qualifies Mrs. Szady to serve on our board of directors.