DEF 14A of Palomar Holdings, Inc.
Filed Apr 11, 2024 · FY20230001171200-24-000165
Director Nominees
Director Nominees
Director Nominees
| Name | Age | Director Since | Independent | Nominating and Corporate Governance Committee | Audit Committee | Compensation Committee | Sustainability Committee | Enterprise Risk Management Committee | | Catriona M. Fallon | 53 | 2019 | | ● | ● | | | | | Daina Middleton | 58 | 2021 | | | ● | ● | ● | | | Richard H. Taketa | 52 | 2019 | | ● | | ● | | |
Director Nominees
● Chair ● Member
Director Nominees
| Palomar 2024 Proxy Statement | PLMR.com 4 |
Table of Contents
| Compensation Committee Report | 58 | | Executive Compensation Tables | 59 | | Summary Compensation Table | 59 | | 2023 Grant of Plan-Based Awards Table | 60 | | 2023 Outstanding Equity Awards at Fiscal Year-End | 61 | | 2023 Option Exercises and Stock Vested Table | 62 | | Potential Payments Upon Termination or Change of Control | 63 | | Employment Agreements for Executive Officers | 64 | | CEO Pay Ratio Disclosure | 66 | | Pay vs. Performance Comparison | 67 | | Pay-for-Performance Alignment | 69 | | Security Ownership of Certain Beneficial Owners And Management | 72 | | Related Person Transactions | 74 | | Indemnification Agreements and Directors’ and Officers’ Liability Insurance | 74 | | Policies and Procedures for Related Party Transactions | 74 | | Other Matters | 74 | | Available Information | 74 | | Company Website | 74 | | Proposals Of Stockholders For 2025 Annual Meeting | 75 | | Appendix A: Non-GAAP Financial Measures and Reconciliation Tables | 76 |
Nominees for Director
Nominees for Director
Class II Directors for a term expiring at our 2027 Annual Meeting of stockholders
Class II Directors for a term expiring at our 2027 Annual Meeting of stockholders
Class II Directors for a term expiring at our 2027 Annual Meeting of stockholders
| Age: 53 Director since 2019 Committees: Nominating and Corporate Governance Committee Audit Committee | Catriona M. Fallon We believe that Ms. Fallon’s experiences as a senior finance executive, including as the Chief Financial Officer of other publicly traded technology companies, qualifies her to serve on our Board of Directors. Ms. Fallon has served as a member of our Board of Directors since May 2019, bringing more than twenty years of strategic finance expertise and leadership experience. She also serves on the Board of Directors for Arlo Technologies, Inc., a smart home technology company based in Carlsbad, CA (NASDAQ: ARLO), and General Fusion, a Canadian company which is pursuing the fastest and most practical path to commercial fusion energy. Ms. Fallon previously served on the Board of Directors of Cray Inc. (NASDAQ: CRAY), until its acquisition by Hewlett Packard Enterprise. Ms. Fallon is an Executive Advisor and Investor, offering CFO advisory services to a number of venture and private equity backed, pre-IPO companies in the software and services, artificial intelligence, business services and green-tech / ag-tech industries. Ms. Fallon has served as CFO for several technology companies, including Aktana, a software and services company; Hitachi Vantara – a multi-billion-dollar digital solutions subsidiary of Hitachi, Ltd.; Silver Spring Networks where she helped to execute the sale of the company to Itron; and Marin Software, a company providing software as a service to optimize online advertising. Ms. Fallon has held leadership positions across a variety of technology companies including Cognizant Technology Solutions and Hewlett-Packard. She has also served as an equity analyst at Citigroup Investment Research and has held roles with Piper Jaffray & Company, and McKinsey & Company. Ms. Fallon holds an M.B.A. from Harvard Business School, and a B.A. in Economics from UCLA. |
Class II Directors for a term expiring at our 2027 Annual Meeting of stockholders
| Age: 58 Director since 2021 Committees: Audit Committee Compensation Committee Sustainability Committee | Daina Middleton We believe Ms. Middleton is qualified to serve on our Board due to her deep expertise in digital marketing earned through executive roles at several leading companies. Ms. Middleton has served as a member of our Board of Directors since July 2021. Ms. Middleton is a co-founder of PrismWork, a leadership and culture consultancy. She is also the former Chief Executive Officer of Britelite Immersive, an experiential creative technology company that built immersive and interactive client experiences, which sold to a strategic in November 2021. Previously, she served as the CEO of Ansira, an independent marketing technology and services company focused on customer relationship development; and prior to that held top-level management positions with Twitter; Performics, which is a global performance marketing solutions firm; and Hewlett-Packard where she led global advertising. During her nearly 30-year career, Ms. Middleton has also consulted broadly across industries to assist companies to manage global teams, optimize digital marketing and nurture company culture. She currently serves on the board of Marin Software, a public company; and two PE-backed marketing services companies: Level Agency and Bond Brand Loyalty. She is also an advisor for several early-stage companies founded and run by women. Ms. Middleton received a BA degree in Technical Journalism from Oregon State University where she serves as a member of OSU’s School of Arts & Communication Advisory Council. |
Class II Directors for a term expiring at our 2027 Annual Meeting of stockholders
| Palomar 2024 Proxy Statement | PLMR.com 18 |
Class II Directors for a term expiring at our 2027 Annual Meeting of stockholders
| Age: 52 Director since 2019 Committees: Nominating and Corporate Governance Committee Compensation Committee | Richard H. Taketa We believe Mr. Taketa is qualified to serve on our Board due to his executive and insurance industry experience, as well as his experience as a director of numerous private companies. Mr. Taketa has served as a member of our Board of Directors since March 2019 and on the Board of Directors of our insurance subsidiaries since October 2018. Mr. Taketa serves as President of Taketa Capital Corporation, where he has worked since September 2018. Previously, Mr. Taketa served as Chief Executive Officer and President of York Risk Services Group, Inc., from January 2014 through September 2018, previously holding the positions of Chief Operating Officer, Chief Strategy Officer, and President at numerous York divisions and subsidiaries since 2006. Prior to joining York, Mr. Taketa served as the Chief Executive Officer of Southern California Risk Management Associates and an associate at DLA Piper LLP. In addition, Mr. Taketa serves on the Board of Directors of Veritone, Inc. (NASDAQ:VERI), and several private companies. Mr. Taketa is a member of the Strategic Advisory Board of Genstar Capital, a private equity investment firm. He is also a member of the Board of Trustees of the Hoag Hospital Foundation and previously serviced on the Hoag Memorial Hospital Board. Mr. Taketa earned his B.A. in Economics from Colgate University and his J.D. from Stanford Law School. |
Class II Directors for a term expiring at our 2027 Annual Meeting of stockholders
| Palomar 2024 Proxy Statement | PLMR.com 19 |
Continuing Directors
Continuing Directors
Class I Directors with a term expiring at our 2026 Annual Meeting of stockholders
Class I Directors with a term expiring at our 2026 Annual Meeting of stockholders
Class I Directors with a term expiring at our 2026 Annual Meeting of stockholders
| Age: 68 Director since 2020 Committees: Audit Committee Sustainability Committee Enterprise Risk Management Committee | Daryl Bradley We believe Mr. Bradley is qualified to serve on our Board because his management experience in the insurance and reinsurance industry brings valuable industry knowledge and practical experience to our Board. Mr. Bradley has served as a member of our Board of Directors since May 2020 and on the Board of Directors of our insurance subsidiaries since June 2020. He currently serves on the board of Coverys, the fifth largest provider of medical liability insurance in the country. From 1995 to 2018, Mr. Bradley held various roles at Everest Reinsurance Company, a reinsurance and insurance company, most recently serving as Executive Vice President and Head of International Insurance from February 2015 to January 2018 and, prior to that, as Executive Vice President and President of Insurance Operations, Chairman of Everest Insurance Company of Canada, and President and Board member of all of Everest’s statutory primary insurance companies from August 2007 to February 2015. Prior to joining Everest, Mr. Bradley served several roles at Continental Insurance Corporation from 1992 to 1995 and Fireman’s Fund Insurance Company from 1982 to 1992. Mr. Bradley earned his B.A. in Political Science from the University of Chicago. |
Class I Directors with a term expiring at our 2026 Annual Meeting of stockholders
| Age: 66 Director since 2024 Committees: Audit Committee Enterprise Risk Management Committee | Thomas Bradley We believe Mr. Bradley is qualified to serve on our Board because of his extensive executive and board level experience working for various insurance and reinsurance companies in the public space. Mr. Bradley is the former Executive Chairman and Chief Executive Officer of Argo Group International Holdings, Ltd. (“Argo”) (NYSE: ARGO), where he led Argo through a review of strategic alternatives which resulted in the sale to Brookfield in 2023. Mr. Bradley also served on Argo’s Board of Directors from August 2018, and as Chairman from April 2020, until November 2023. Since November 2021, he has served on the Board of Directors for Horace Mann Educators Corp., an insurance and financial services company (NYSE: HMN), where he acts as the Chair of their Audit Committee. Prior to joining Argo, Mr. Bradley served as the Chief Financial Officer and Executive Vice President of Allied World Assurance Company Holdings, a global provider of insurance and reinsurance solutions, from 2012 until 2018. During his more than 40-year career, Mr. Bradley also acted as the Executive Vice President and Chief Financial Officer for two other public companies, Fair Isaac Corporation and the St. Paul Companies. He also held senior financial and operational positions at Zurich Insurance Group, including Chief Financial Officer of North America and Chief Executive Officer of the Universal Underwriters Group. Mr. Bradley received a B.A. degree in Accounting from the University of Maryland and a Master of Business Administration with a concentration in Finance from Loyola University. |
Class I Directors with a term expiring at our 2026 Annual Meeting of stockholders
| Palomar 2024 Proxy Statement | PLMR.com 20 |
Class III Directors with a term expiring at our 2025 Annual Meeting of stockholders
Class III Directors with a term expiring at our 2025 Annual Meeting of stockholders
Class III Directors with a term expiring at our 2025 Annual Meeting of stockholders
| Age: 49 Director since 2014 Committees: Sustainability Committee Enterprise Risk Management Committee | Mac Armstrong We believe Mr. Armstrong is qualified to serve on our Board of Directors due to his extensive experience leading insurance companies and his industry knowledge. Mr. Armstrong has served as our Chief Executive Officer and a Director since February 2014 and Chairman of our Board of Directors since June 2020. Prior to joining our Company, Mr. Armstrong served as the President of Arrowhead General Insurance Agency, which he joined in June 2009, previously holding the positions of Chief Financial Officer and Chief Operating Officer. Mr. Armstrong led the sale of Arrowhead to Brown & Brown, Inc. in January 2012. Mr. Armstrong’s prior experience includes Spectrum Equity Investors, a private equity investment firm, where he led the insurance investing practice and Alex. Brown & Sons/ BT Alex. Brown Inc., an investment bank acquired by Deutsche Bank. Mr. Armstrong earned an A.B. from Princeton University. Mr. Armstrong is a member of the Board of Advisors of Cloverlay Investment Management LLC, a private equity investment firm and a member of the Board of Trustees of the Bishop’s School. |
Class III Directors with a term expiring at our 2025 Annual Meeting of stockholders
| Age: 63 Director since 2020 Committees: Nominating and Corporate Governance Committee Compensation Committee Sustainability Committee Enterprise Risk Management Committee | Martha Notaras We believe Ms. Notaras is qualified to serve on our Board due to her extensive experience working with emerging private and public companies. Ms. Notaras has served as a member of our Board of Directors since February 2020. Ms. Notaras is General Partner at Brewer Lane Ventures, investing in early stage insurtech and fintech companies. Ms. Notaras serves on the Boards of Cowbell Cyber, an artificial intelligence-driven cyber managing general agent; Lynk, which uses artificial intelligence to deliver its knowledge as a service platform; Cape Analytics, which delivers highly accurate property data derived from imagery via machine learning; and Jaguar Global Growth Corporation I, a Nasdaq-listed proptech special purpose acquisition company. Prior to joining Brewer Lane Ventures, Ms. Notaras was Partner at XL Innovate, investing in early stage insurtechs, including Lemonade, which went public in 2020. Previously, Ms. Notaras ran corporate development for the business analytics division of the Daily Mail, where she acquired 20 companies, including insurtech pioneer Risk Management Solutions. Ms. Notaras has served as Board Director for many early and growth stage companies focusing on fintech, insurtech, proptech, edtech and digital media. Ms. Notaras’s prior experience includes investment banking at Merrill Lynch and commercial banking at Credit Suisse. Ms. Notaras earned her A.B. Cum Laude from Princeton University and her MBA from Harvard Business School, where she was a Baker Scholar, awarded for graduating in the top five percent of the class. |
Class III Directors with a term expiring at our 2025 Annual Meeting of stockholders
| Palomar 2024 Proxy Statement | PLMR.com 21 |
Identifying and Evaluating Nominees for Director
Identifying and Evaluating Nominees for Director The Nominating and Corporate Governance Committee use the following procedures to identify and evaluate any individual recommended or offered for nomination to the Board:
Identifying and Evaluating Nominees for Director
| • | The Nominating and Corporate Governance Committee will consider candidates recommended by stockholders in the same manner as candidates recommended to the Nominating and Corporate Governance Committee from other sources. |
Identifying and Evaluating Nominees for Director
| • | In its evaluation of director candidates, including the members of the Board eligible for re-election, the Nominating and Corporate Governance Committee will consider the following: |
Identifying and Evaluating Nominees for Director
| — | any specific minimum qualifications that it believes must be met by a nominee for a position on the Board; |
Identifying and Evaluating Nominees for Director
| — | any specific qualities or skills that it believes are necessary for one or more of the Board members to possess; and |
Identifying and Evaluating Nominees for Director
| — | the desired qualifications, expertise, experience, and characteristics of Board members, with the goal of developing an experienced and highly qualified Board. |
Identifying and Evaluating Nominees for Director
For Board membership, the criteria considered includes independence, diversity of experience, demonstrated leadership, and the ability to exercise sound judgment. The backgrounds and qualifications of the directors considered as a group should provide a significant breadth of experience, knowledge and abilities that shall assist the Board in fulfilling its responsibilities. Although there is no specific policy regarding diversity in identifying director nominees, both the Nominating and Corporate Governance Committee and the Board seek the talents and backgrounds that would be most helpful to us in selecting director nominees. In particular, the Nominating and Corporate Governance Committee, when recommending director candidates to the full Board of Directors for nomination, may consider whether a director candidate, if elected, assists in achieving a mix of Board of Directors members that represents a diversity of background and experience.
Identifying and Evaluating Nominees for Director
| Palomar 2024 Proxy Statement | PLMR.com 28 |
Director Compensation
Director Compensation We adopted a formal non-employee director compensation program effective January 1, 2021. The purpose of this compensation program is to attract and retain independent, qualified candidates to serve on the Board by providing competitive compensation and aligning the interest of our non-employee directors with those of our stockholders through long-term equity incentives. The Board makes all director compensation determinations after considering the recommendations of the Nominating and Corporate Governance Committee and the Compensation Committee. The Compensation Committee reviews director compensation annually, assisted periodically by its independent compensation consultant (most recently by PricewaterhouseCoopers LLP (“PwC”) in 2023). In setting director compensation, we consider various factors including market comparison studies and trends, the responsibilities of directors generally, including committee chairs, and the significant amount of time that directors expend in fulfilling their duties. In establishing the non-employee director compensation recommendations, the Compensation Committee utilized a balance of cash and equity. Directors who also serve as employees of the Company do not receive additional compensation for service as directors. Elements of 2023 Director Compensation were as follows:
Director Compensation
| • | Annual board member service retainer payable in quarterly cash installments; |
Director Compensation
| • | Annual committee chair cash retainer (in lieu of annual committee member service retainer) payable in quarterly cash installments; |
Director Compensation
| • | Annual committee member service retainer payable in quarterly cash installments; |
Director Compensation
| • | Annual equity retainer payable in Restricted Stock Units (“RSUs”) in connection with our Annual Meeting with a 1-year cliff vesting schedule; |
Director Compensation
| • | Equity incentives payable to new directors in RSUs with a 1-year cliff vesting schedule; |
Director Compensation
| • | Annual professional development program reimbursement up to a specified amount; and |
Director Compensation
| • | Reimbursement of reasonable out of pocket expenses incurred by the director in connection with attending board and committee meetings. |
Director Compensation
The following table sets forth information regarding compensation earned by our Non-Employee Directors for service on our Board of Directors and the board of directors of our subsidiaries during the year ended December 31, 2023. Directors who are also our employees receive no additional compensation for their service as a director. Thus, Mr. Armstrong’s compensation as a Named Executive Officer is discussed in the section “Executive Compensation-Compensation Discussion & Analysis.”
2023 Director Compensation Table
2023 Director Compensation Table
2023 Director Compensation Table
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($) | Total ($) | | Daryl Bradley | 105,000 | 79,983 | — | 184,983 | | Robert Dowdell | 105,000 | 79,983 | — | 184,983 | | Catriona Fallon | 105,000 | 79,983 | — | 184,983 | | Daina Middleton | 105,000 | 79,983 | — | 184,983 | | Martha Notaras | 105,000 | 79,983 | — | 184,983 | | Richard Taketa | 125,000 | 79,983 | — | 204,983 |
2023 Director Compensation Table
| (1) Amounts in this column reflect compensation earned in 2023 for service as a member of our Board and as a member of the board of directors of our subsidiaries. |
2023 Director Compensation Table
| (2) In accordance with SEC rules, amounts in this column reflect the aggregate grant date fair value of restricted stock units (RSUs), as computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 12 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. These amounts do not reflect the actual economic value that will be realized by our non-employee directors upon the vesting of such equity awards or the sale of the common stock underlying such awards. |
2023 Director Compensation Table
| Palomar 2024 Proxy Statement | PLMR.com 31 |
Proposal No. 1 Election of Directors
Proposal No. 1 Election of Directors Under our governing documents, our Board has the power to set the number of directors from time to time by resolution. We currently have seven authorized directors serving on our Board, of which six directors are “Independent” as defined under Nasdaq listing standards. In accordance with our certificate of incorporation, our Board is divided into three classes with staggered three-year terms. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our directors. This classification of our Board may have the effect of delaying or preventing changes in control of our company. In 2022, we amended and restated our certificate of incorporation to provide that our directors will be elected for one-year terms beginning with our 2027 Annual Meeting of stockholders. At the Annual Meeting, three Class II directors will be elected for three-year terms. Based upon the recommendation of our Nominating and Corporate Governance Committee, our Board has nominated Catriona M. Fallon, Daina Middleton and Richard H. Taketa to stand for re-election by our stockholders, in each case for a three-year term expiring at our 2027 Annual Meeting of stockholders or until his or her successor is duly elected and qualified.
Nominees for Director
Nominees for Director Our Nominating and Corporate Governance Committee has recommended, and our Board has approved, Catriona M. Fallon, Daina Middleton, and Richard H. Taketa as nominees for election as Class II directors at the Annual Meeting. If elected, Catriona M. Fallon, Daina Middleton and Richard H. Taketa will serve as Class II directors until the 2027 Annual Meeting of stockholders or until their successors are duly elected and qualified. For information concerning the nominees, please see the section titled “Board of Directors and Corporate Governance.” If you are a stockholder of record and you sign your proxy card or vote over the Internet or by telephone but do not give instructions with respect to the voting of directors, your shares will be voted FOR the election of Ms. Fallon, Ms. Middleton, and Mr. Taketa. We expect that Ms. Fallon, Ms. Middleton and Mr. Taketa will accept such nomination; however, in the event that a nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by our Board to fill such vacancy. If you are a beneficial owner of shares of our common stock and you do not give voting instructions to your broker, bank, or other nominee, then your broker, bank or other nominee will leave your shares unvoted on this matter.
Key Shareholder Feedback
| Compensation Practice | Key Modifications Implemented in 2023 | | No supplemental equity awards to NEOs | • We committed prospectively to not issue any supplemental equity grants to executive officers without engaging with shareholders first | | Greater performance-based equity in LTI mix | • We eliminated stock options from the LTI mix and we increased the weighting of PSUs from 20% of the total mix to 50%, with RSUs comprising the remainder of the mix | | 3-Year performance period for PSUs | • For the Adjusted ROE component that comprises 70% of our target PSUs, we increased the performance period from 1 year to 3 years | | Enhanced disclosures around STI and LTI mechanics | • Beginning with our 2023 proxy, we included enhanced disclosures in the CD&A detailing the full mechanics and payout calculations underlying our bonus plan and PSUs, and we will continue to include these enhanced disclosures in subsequent proxy filings | | Use of sustainability metrics in our incentive compensation plans | • For 2023 and 2024, 80% of our NEOs have sustainability objectives in their individual MBOs under our annual bonus plan (including our CEO) |
Role of the Compensation Committee
| • | reviewing annually all director compensation and benefits for service on the Board and committees of the Board and recommending any changes to the Board as necessary; and |
Role of the Independent Compensation Committee Consultant
| • | the evaluation of long-term incentive compensation practices and annual and long-term incentive plan design; |
Role of the Independent Compensation Committee Consultant
| • | the evaluation and selection of a compensation benchmarking comparator peer group; |
Role of the Independent Compensation Committee Consultant
| • | market benchmarking data around executive and director pay levels and design; and |
Role of the Independent Compensation Committee Consultant
| • | the competitiveness of the executive officers’ elements of compensation and post-employment benefits contained in executive employment agreements. |
Peer Group Benchmarking Analysis
Peer Group Benchmarking Analysis To ensure that our executive compensation program is competitive and allows us to meet our objective of attracting, retaining, and motivating a high-performing executive team, the Compensation Committee, with the assistance from PwC’s compensation consulting practice, has established a peer group to benchmark executive compensation data and practices. For 2023 benchmarking purposes, our peer group consisted of the following 18 public companies, which are insurance companies deemed to be of similar size and scope when considering Palomar’s weighted positioning of market capitalization and gross written premiums:
Peer Group Benchmarking Analysis
| Amerisafe, Inc. | Hallmark Financial Services | Lemonade, Inc. | | Argo Group | HCI Group | NI Holdings | | Atlantic American | Heritage Insurance | ProAssurance Corp. | | Donegal Group | Hippo Holdings | RLI Corp. | | Global Indemnity | James River Group | Safety Insurance Group | | Goosehead Insurance | Kinsale Capital Group | Universal Insurance Holdings |
Peer Group Benchmarking Analysis
The Compensation Committee has benchmarked our executive compensation against these companies for purposes of establishing our 2023 compensation program and reviewed the overall peer compensation information to understand how our NEO’s total compensation compares to competitive norms. To ensure our peer group continues to remain representative of the competitive landscape in which we operate and is appropriate from a size standpoint, we annually review the peer group and adjust if appropriate. For 2024 benchmarking purposes, after conducting a review of the prevailing competitive market with the assistance of our compensation consultant, the Compensation Committee modified the peer group to consist of the below 16 public companies. As part of the process of determining the benchmarking peer group for 2024, we again considered Palomar’s weighted positioning of market capitalization and gross written premiums to ensure we maintain an appropriate comparator group from a size standpoint.
Peer Group Benchmarking Analysis
| Amerisafe, Inc. | Hippo Holdings | RLI Corp. | | Donegal Group | James River Group | Safety Insurance Group | | Global Indemnity | Kinsale Capital Group | Skyward Specialty Insurance | | Goosehead Insurance | Lemonade, Inc. | Universal Insurance Holdings | | HCI Group | NI Holdings | | | Heritage Insurance | ProAssurance Corp. | |
Peer Group Benchmarking Analysis
| Palomar 2024 Proxy Statement | PLMR.com 44 |
Peer Group Benchmarking Analysis
Changes made to the 2024 benchmarking peer group included the following:
Peer Group Benchmarking Analysis
| | Company | Reason | | Removals | Argo Group | Acquired by Brookfield and no longer publicly traded | | | Atlantic American Group | No longer meets our size criteria | | | Hallmark Financial Services | No longer meets our size criteria and have been delisted from a national stock exchange | | Additions | Skyward Specialty Insurance | Completed their IPO in January 2023 and are of comparable business scope and size to Palomar |
Compensation Elements Used to Achieve Compensation Philosophy and Objectives
| | Element | Key Characteristics | Why We Pay This Element | How We Determine Amount | Key Design Features | | Fixed (Not at Risk) | Base Salary | Representing the sole fixed compensation component of our pay mix, payable in cash and reviewed annually, and adjusted when appropriate. | Provide stable and competitive base pay to facilitate the attraction and retention of a high-performing executive team. | Individual performance, experience, job scope, and compensation benchmarking. | • We generally set base salaries near the median of market, though pay may vary depending on the value and supply/ demand dynamics of the position | | Variable (At Risk) | Annual Incentive Plan (“AIP”) | Variable compensation component capped at a maximum level (200% of target for 2023) payable in cash based on performance against annually established Company metrics and individual performance. | Motivate and reward the successful achievement of pre-determined Company financial objectives and individual performance. | Target opportunity is based on job scope and competitive benchmarking. Payouts are based on company and individual performance against rigorous objectives. | • Company metrics (80%): —40% pre-tax adjusted net income (“ANI”) —40% pre-tax ANI pre-catastrophe losses • Individual management by objectives (20%) | | | LTI (“Long- Term Incentives”)– Performance Stock Units (“PSUs”)(1) | PSUs represents a right to receive shares based on Company financial performance. Effective 2023, the performance period for our PSUs tied to Adjusted ROE (70% allocation) is three years. All PSUs are subject to three-year cliff vesting. | PSUs and RSUs align the interests of executives with long-term stockholder value creation under our five guiding principles and serve to attract and retain talent. | Awards based on the individual’s ability to impact future results, job scope, individual performance, and review of competitive pay practices. | • Based wholly on Company performance: —70% Adjusted ROE —30% gross written premiums (“GWP”) | | | LTI -Restricted Stock Units (“RSUs”)(1) | RSUs represents a right to receive shares that vest ratably on each of the first three anniversaries of the grant date, subject to the individual’s continued service. | | | • Value of RSUs tracks PLMR’s stock price over the three-year vesting period, which fosters long-term alignment of management and shareholder interests. |
2023 Target Compensation and Pay Mix
| Executive | Base Salary ($) | Target Bonus % | Target Bonus ($) | Target LTI ($)(1)(2) | Total Target Comp ($) | | Mac Armstrong | $850,000 | 125% | $1,062,500 | $1,275,000 | $3,187,500 | | Christopher Uchida | 450,000 | 70% | 315,000 | 315,000 | 1,080,000 | | Jon Christianson | 425,000 | 70% | 297,500 | 297,500 | 1,020,000 | | Jonathan Knutzen | 380,000 | 70% | 266,000 | 266,000 | 912,000 | | Angela Grant | 355,000 | 60% | 213,000 | 213,000 | 781,000 |
Base Salaries
Our Compensation Committee and CEO determined that no increase would be made to the CEO’s salary for 2023, representing the second consecutive year that our CEO’s salary remained unchanged. Our other NEOs received base salary increases ranging from 5.9% to 8.6% based on a review of their role, performance and our peer group benchmarking data as provided by PwC. Their increases were generally aimed at better aligning their base salaries with market levels as represented by our peer group.
Annual Incentive Plan
Annual Incentive Plan A second key component in our compensation framework is our AIP, which is our annual cash bonus program. Our AIP has the potential to reward our NEOs for the achievement of rigorous financial, strategic, and operational performance objectives over an annual period. Each NEO was eligible to participate in our AIP for 2023, which was capped at a maximum payout of 200% of target for the year. The Compensation Committee oversees the AIP, evaluates the individual performance component, and approves the bonus payments of each NEO. Bonus awards are payable in cash by no later than March 15th of the year following the performance year. Guided by our pay-for-performance philosophy, the table below summarizes the performance metrics used to determine the 2023 annual cash incentives, the weighting of each metric, and the threshold, target, and maximum payout hurdles:
Annual Incentive Plan
| 2023 Metrics | Weighting | Threshold ($ in millions) | Target ($ in millions) | Maximum ($ in millions) | | Pre-Tax Adjusted Net Income (“ANI”)(1) | 40% | $92.1 | $108.3 | $135.4 | | Pre-Tax ANI Before Catastrophe Losses(2) | 40% | $96.9 | $114.0 | $142.5 | | Management by Objectives (MBOs) | 20% | | Individual Goals | |
Annual Incentive Plan
| (1) Pre-tax ANI is a non-GAAP metric we use internally to evaluate our financial performance and is a key metric by which external stakeholders evaluate our performance. We transitioned to using the pre-tax version of ANI effective 2023 to better focus on corporate performance within management’s control. See Appendix A for reconciliation of this measure to pre-tax net income calculated in accordance with GAAP. |
Annual Incentive Plan
| (2) Pre-tax ANI before catastrophe losses is a non-GAAP metric we use internally that allows us to evaluate our financial performance without the volatility caused by catastrophe losses. See Appendix A for reconciliation of this measure to pre-tax net income calculated in accordance with GAAP. |
Annual Incentive Plan
| Palomar 2024 Proxy Statement | PLMR.com 47 |
Annual Incentive Plan
Our company financial performance objectives for 2023 were set at 85% of target for Threshold to 125% of target for Maximum, thereby requiring significant outperformance to attain the plan Maximum. Payouts under the 2023 AIP range from 50% at Threshold to 200% at Maximum, with no bonuses earned for performance below Threshold.
Pre-Tax Adjusted Net Income and Pre-Tax Adjusted Net Income Before Catastrophe Losses
| Metric | Threshold (50%) | Target (100%) | Max (200%) | Actual Result | Payout as a % of Target | | Pre-Tax ANI ($ in millions) | $92.1 | $108.3 | $135.4 | $119.4 | 141.6% | | Pre-Tax ANI Before Catastrophe Losses ($ in millions) | $96.9 | $114.0 | $142.5 | $122.9 | 131.6% |
Aggregate 2023 AIP Payouts
Aggregate 2023 AIP Payouts Based on Company performance under the pre-tax ANI and pre-tax ANI before catastrophe losses metrics and individual performance under the MBO metric, our NEOs achieved a weighted average aggregate payout under our 2023 AIP of 129.2% of target, calculated as follows:
Aggregate 2023 AIP Payouts
| Metric | Weighting | Payout as a % of Target | Weighted Average Payout | | Pre-Tax ANI | 40% | 141.6% | 56.6% | | Pre-Tax ANI before catastrophe losses | 40% | 131.6% | 52.6% | | MBOs | 20% | 100.0% | 20.0% | | Total Payout as a % of Target | | | 129.2% |
Aggregate 2023 AIP Payouts
Accordingly, 2023 bonus payouts for our NEOs were calculated as follows:
Aggregate 2023 AIP Payouts
| Executive | 2023 Target Bonus ($)(1) | Earned Payout % | 2023 Bonus Payout ($) | | Mac Armstrong | $1,062,500 | 129.2% | $1,373,258 | | Christopher Uchida | 312,981 | 129.2% | 404,521 | | Jon Christianson | 295,481 | 129.2% | 381,902 | | Jonathan Knutzen | 263,577 | 129.2% | 340,667 | | Angela Grant | 211,615 | 129.2% | 273,508 |
Aggregate 2023 AIP Payouts
| (1) Actual bonus targets and payouts are calculated based on actual salary earned during the year, which is impacted by the timing of salary increases. Target view of total compensation illustrated in the “2023 Target Compensation and Pay Mix” section of this proxy on page 46 is based on annualized salaries, and thus target bonus amounts differ from above. |
Long-Term Equity Compensation
Long-Term Equity Compensation The third component in our compensation program is the utilization of long-term equity incentives, or LTI compensation, which comprises a key part of our NEOs’ compensation packages. Moreover, to foster an ownership culture throughout our organization and promote internal equity across our company, we issue LTI to all our team members, including our hourly personnel. Our LTI compensation program focuses the efforts of our NEOs and other executive officers on the achievement of long-term objectives and aligns the long-term financial interests of our executive officers with those of our stockholders. The value of awards granted under the LTI program is dependent on our future stock performance and gives our NEOs incentives to take actions to drive sustained, long-term shareholder value creation.
Long-Term Equity Compensation
| Palomar 2024 Proxy Statement | PLMR.com 49 |
Long-Term Equity Compensation
LTI equity awards are typically issued to our NEOs and other team members on an annual basis and are based on a predetermined target percentage of the NEO’s annual salary. All our 2023 LTI grants vest over three years, ensuring long- term alignment of management and shareholder interests. For 2023, the LTI mix for our NEOs was as follows:
Long-Term Equity Compensation
| 1 | Effective 2023, we increased the PSU allocation in our LTI mix from 20% to 50%, eliminated stock options from the mix and reduced the RSU allocation from 60% to 50%, to better align our LTI mix with shareholder preferences. |
Long-Term Equity Compensation
Based on our 2023 LTI mix, we granted the following LTI awards to our NEOs for 2023:
Long-Term Equity Compensation
| Executive | Base Salary | Target 2023 LTI | LTI $ Value in PSUs (50%) | LTI $ Value in RSUs (50%) | | Mac Armstrong | $850,000 | $1,275,000 | $637,500 | $637,500 | | Christopher Uchida | 450,000 | 315,000 | 157,500 | 157,500 | | Jon Christianson | 425,000 | 297,500 | 148,750 | 148,750 | | Jonathan Knutzen | 380,000 | 266,000 | 133,000 | 133,000 | | Angela Grant | 355,000 | 213,000 | 106,500 | 106,500 |
Long-Term Equity Compensation
Note consistent with our commitment to not issue supplemental equity grants to executive officers without first engaging shareholders, all our 2023 LTI grants were issued under our annual LTI program.
Long-Term Equity Compensation
| Palomar 2024 Proxy Statement | PLMR.com 50 |
Performance Attainment Under 2023 PSU Grants
Performance Attainment Under 2023 PSU Grants Performance for the 2023 PSU grants was measured based on the following company metrics:
Performance Attainment Under 2023 PSU Grants
| • | 70% based on Adjusted ROE; and |
Performance Attainment Under 2023 PSU Grants
| • | 30% subject to GWP objectives. |
Performance Attainment Under 2023 PSU Grants
Adjusted ROE serves as a measure of our capital efficiency, while GWP represents an important top-line metric that shareholders use to evaluate our ability to grow the business. Beginning with the 2023 LTI grants, the majority portion of the PSU grants tied to Adjusted ROE (70%) now have a three-year measurement period. The minority portion of the PSUs tied to GWP continue to have a one-year measurement period (with two additional years of time-based vesting after conclusion of the measurement period), as the year-over-year volatility in key drivers of GWP, such as availability and cost of reinsurance, makes it difficult to establish GWP targets multiple years in advance. The specific threshold, target and maximum level Adjusted ROE and GWP objectives for our 2023 PSUs, along with our actual performance for 2023, were as follows:
Performance Attainment Under 2023 PSU Grants
| Metric | Weighting | Threshold (50%) | Target (100%) | Max (200%) | Actual PLMR Result | Payout as a % of Target | | Adjusted ROE | 70% | 9.0% | 12.0% | 15.0% | 21.9% | TBD(1) | | GWP ($ in millions) | 30% | $935M | $1.1B | $1.27B | $1.14B | 124% | | Total Payout | | | | | | TBD(1) |
Performance Attainment Under 2023 PSU Grants
| 1 | Due to the change in structure of our 2023 PSUs to incorporate a three-year measurement period for the majority portion tied to Adjusted ROE (70%), the blended payout multiple for our 2023 PSU grants will not be known until the conclusion of the 2023-2025 performance period. |
Performance Attainment Under 2023 PSU Grants
During 2023, our Adjusted ROE improved to 21.9% from 18.3% due to stronger underwriting and investing results. Our GWP also increased by approximately 29% due to strong growth across multiple lines of business including our core earthquake line, our inland marine line and newer lines such as fronting and casualty. Note consistent with our commitment to not issue any supplemental equity grants to executive officers without first engaging shareholders, all our 2023 LTI grants were issued under our annual LTI program.
Performance Attainment Under 2023 PSU Grants
| Palomar 2024 Proxy Statement | PLMR.com 51 |
Base Salaries
As a result of our CEO not having received an increase to his base salary in the prior two years, his salary was below the median of the peer group. His 2024 increase was intended to better align with market levels, resulting in an equivalent per annum increase of 8.5% annually over two years. Our Compensation Committee, with the assistance of the independent compensation consultant, likewise evaluated the salary levels and performance of our other NEOs relative to the peer group. The analysis indicated that our other NEO salary levels were below market in light of their performance relative to peers and contribution to our industry-leading performance, and accordingly, our other NEOs received adjustments to their 2024 salaries to better align with market.
2024 AIP
2024 AIP For 2024, we continued to use pre-tax ANI and pre-tax ANI before catastrophe losses as the corporate AIP metrics given they represent core Company measures that drive shareholder value and for which management should be held accountable. For 2024, our AIP is subject to the following performance objectives:
2024 AIP
| Metric | Weighting | Threshold | Target | Max | | Pre-Tax ANI ($ in millions) | 40% | $120.6 | $141.9 | $163.2 | | Pre-Tax ANI Before Catastrophe Losses ($ in millions) | 40% | $127.0 | $149.4 | $171.8 | | Individual MBOs(1) | 20% | Individual Goals | | |
2024 AIP
| (1) All of our NEOs are tasked with the execution of our sustainability strategy, and with respect to our 2024 AIP, 80% of our NEOs (including our CEO) have sustainability objectives directly included in their MBOs. |
2024 AIP
| Palomar 2024 Proxy Statement | PLMR.com 52 |
2024 Long-Term Equity Compensation
2024 Long-Term Equity Compensation A fundamental component of our compensation offerings has been and will continue to be long-term equity-incentive grants, not only for our NEOs but for all Palomar team members, as we grant stock awards across our organization as part of our effort to foster an ownership culture. For our NEOs, long-term equity compensation comprises the largest component of their annual target compensation package to promote alignment of management and shareholder interests.
2024 LTI Mix
2024 LTI Mix Our shareholders were supportive of the change in our LTI mix that we implemented in 2023 that increased the proportion of PSUs from 20% to 50% of the mix and eliminated use of stock options, and, accordingly, we maintained the same LTI mix for 2024 as follows: All our 2024 grants continue to have a three-year vesting period to foster long-term alignment of management and shareholder interests.
2024 LTI Mix
| Palomar 2024 Proxy Statement | PLMR.com 53 |
2024 PSUs
2024 PSUs Based on shareholders’ support of the modifications we made to the structure of our PSUs in 2023, we maintained the same structure for our 2024 PSUs. Accordingly, our 2024 PSUs are based (i) 70% on Adjusted ROE and (ii) 30% on GWP, as these metrics are key drivers of our long-term shareholder value creation strategy. The specific financial objectives for our 2024 PSUs are as follows:
2024 PSUs
| Metric | Weighting | Performance Period | Vesting Period | Threshold | Target | Max | | Adjusted ROE | 70% | 3 years | 3 years | 9.0% | 12.0% | 15.0% | | GWP ($ in millions) | 30% | 1 year | 3 years | $1,270 | $1,490 | $1,710 |
2024 PSUs
The majority portion of the PSUs tied to Adjusted ROE (70%) have a three-year measurement period. The minority portion of the PSUs tied to GWP have a one-year measurement period (with two additional years of service-based vesting requirements), as the year-over-year variability in key drivers of GWP, such as availability and cost of reinsurance, makes it difficult to establish GWP targets multiple years in advance.
No 2024 Supplemental Equity Grants
No 2024 Supplemental Equity Grants We have not issued, nor do we intend to issue, any supplemental equity grants to our executive officers in 2024. We have committed not to issue supplemental stock grants to executives without engaging shareholders first.
No 2024 Supplemental Equity Grants
| Palomar 2024 Proxy Statement | PLMR.com 54 |
Compensation Policies and Other Information
| WHAT WE DO | | WHAT WE DON’T DO | | | | Pay-for-performance philosophy where the majority of our executives' compensation is at-risk | | No overlapping performance metrics used in our short- and long-term incentive plans | | | Fully independent directors on the Compensation Committee | | No supplemental equity grants to executives without first engaging with shareholders | | | Independent compensation consultant engaged by the Compensation Committee | | No supplemental retirement or pension benefit plans for our executive officers | | | Performance-based cash and equity incentives based on company performance goals and individual performance that directly ties to shareholder value creation | | No excessive executive perquisites | | | Equity award vesting periods of three or more years | | No tax gross-ups for change in control related payments | | | Conduct an annual risk assessment of our compensation programs and risk mitigation practices | | No short sales, hedging, or pledging of Palomar stock nor transactions involving derivatives of our common stock | | | Review our equity compensation dilution, burn rate and cost on a quarterly basis | | No “single trigger” change in control payments and benefits | | | Clawback policy on cash and equity incentive compensation, which we enhanced in 2023 to comply with the new SEC clawback requirements | | No repricing of underwater stock options without shareholder approval | | | Stock ownership guidelines for CEO of 5x salary and 2x salary for other executive officers, which we have updated in 2024 to exclude counting of in-the-money options toward compliance with the guidelines | | |
Equity Awards Granting Practices
Equity Awards Granting Practices In 2023, we granted annual equity awards under our LTI program during the first quarter of the fiscal year, and subsequently granted equity awards monthly for eligible new hires, promotions, and discretionary purposes, subject to approval of the Compensation Committee. Equity grants to non-employee directors are discussed in further detail under the section “2023 Director Compensation”. The grant date for all awards to eligible recipients, including executive officers and other key team members, is determined by the Compensation Committee at its meeting to approve such awards. For stock options, which we no longer grant effective 2023 as part of our effort to increase the proportion of performance-based stock grants in the LTI mix, the exercise price has always been the closing price of our common stock on the grant date. This procedure, along with a pre-established grant cycle, provides assurance that the grant dates are not being manipulated to result in a price that is favorable to us or our executive officers and other key team members. The vesting schedule of the respective awards will be subject to our standard award agreements, which may be amended from time to time. Any vesting terms outside of our standard award agreements must be approved by the Compensation Committee.
Section 409A Tax Considerations
Section 409A Tax Considerations We consider the tax impact when designing or deciding to amend our compensation programs, including compliance with the requirements of Section 409A of the Internal Revenue Code, which can impose additional taxes on participants in certain arrangements involving deferred compensation and Sections 280G and 4999 of the Internal Revenue Code that affect the deductibility of, and impose certain additional excise taxes on, certain payments that are made upon or in connection with a change of control.
Accounting for Stock-Based Compensation
Accounting for Stock-Based Compensation We follow ASC Topic 718 for our stock-based awards. ASC Topic 718 requires companies to measure the compensation expense for all share-based payment awards made to team members and directors, including stock options, restricted stock unit awards and performance units, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income statements over the period that a NEO is required to render service in exchange for the option or other award. For performance awards, when granted, stock-based compensation expense recognized may be adjusted over the performance period based on interim estimates of performance against pre-determined performance goals.
Compensation Risk Assessment
| • | individual cash incentives are made within the boundaries of approved fixed maximum awards as applicable to each executive officer; |
Compensation Risk Assessment
| • | the performance metrics under our short-term incentive program are distinct and separate from the metrics under our long-term incentive program, thereby ensuring there is no duplicative compensation opportunity for attainment of the same performance metric; |
Compensation Risk Assessment
| • | the members of our Compensation Committee who approve final bonus recommendations are independent; |
Compensation Risk Assessment
| • | executive officers receive the majority of their total direct compensation in the form of at-risk incentives (both annual cash bonus opportunity and long-term stock compensation subject to mutli-year vesting) to align the interests of our executive officers with long-term value creation for our stockholders; |
Compensation Risk Assessment
| • | executive officers are subject to robust stock ownership guidelines, further ensuring their long-term wealth is tied to long-term Company performance. |
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
| Name | Year | Salary ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | | Mac Armstrong Chief Executive Officer and | 2023 | 850,000 | 1,308,212 | — | 1,373,258 | 9,900 | 3,541,369 | | | 2022 | 850,000 | 1,069,353 | 268,418 | 803,406 | 9,150 | 3,000,327 | | Chairman of the Board | 2021 | 846,094 | 17,116,007 | 480,201 | 795,248 | 8,700 | 19,246,249 | | Christopher Uchida Chief Financial Officer | 2023 | 447,116 | 323,220 | — | 404,521 | 9,900 | 1,184,756 | | | 2022 | 424,167 | 213,821 | 53,668 | 240,549 | 9,150 | 941,355 | | | 2021 | 413,594 | 5,184,481 | 50,227 | 233,243 | 8,700 | 5,890,245 | | Jon Christianson President Chief Underwriting Officer | 2023 | 422,116 | 305,229 | — | 381,902 | 13,887 | 1,123,134 | | | 2022 | 397,917 | 201,290 | 50,518 | 225,662 | 9,150 | 884,536 | | | 2021 | 375,000 | 3,504,035 | 45,378 | 211,302 | 8,700 | 4,144,102 | | Jonathan Knutzen Chief Risk Officer | 2023 | 376,539 | 272,927 | — | 340,667 | 9,900 | 1,000,033 | | | 2022 | 345,833 | 176,129 | 44,198 | 196,126 | 9,150 | 771,436 | | | 2021 | 300,000 | 2,138,697 | 36,292 | 169,183 | 8,700 | 2,652,872 | | Angela Grant(5) Chief Legal Officer | 2023 | 352,692 | 218,546 | — | 273,508 | 13,347 | 858,094 | | | 2022 | 317,986 | 389,950 | 97,866 | 150,278 | 9,150 | 965,230 |
SUMMARY COMPENSATION TABLE
| (1) Amounts in this column reflect the grant date value of RSUs and PSUs as calculated per accounting rules. These amounts do not reflect the actual economic value or gain that will be realized by our Named Executive Officers relating to these awards. The amount of value realized by our executives may be significantly different than this figure depending on our future stock price performance. Assumptions used in the calculation of these amounts are included in Note 12 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. With respect to our 2023 PSU grants, the value shown in the table above reflects the grant date fair value based on the probable outcome of the performance milestones associated with such awards. The grant date fair value of each such award if all applicable performance milestones associated with such awards were achieved at the maximum level is $1,308,212 for Mr. Armstrong, $323,220 for Mr. Uchida, $305,229 for Mr. Christianson, $272,927 for Mr. Knutzen, and $218,546 for Ms. Grant. 2022 amounts include supplemental stock grants for Ms. Grant, and 2021 amounts include supplemental stock grants for Messrs. Armstrong, Uchida, Christianson and Knutzen. As described in our CD&A, effective 2023, we have committed to no longer issue supplemental stock grants to our executive officers without engaging with shareholders first. |
SUMMARY COMPENSATION TABLE
| (2) Amounts in this column reflect the grant date value of stock options as calculated per accounting rules. These amounts do not reflect the actual economic value or gain that will be realized by our Named Executive Officers relating to these awards. The amount of value realized by our executives may be significantly different than this figure depending on our future stock price performance. Assumptions used in the calculation of these amounts are included in Note 12 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. |
SUMMARY COMPENSATION TABLE
| (3) The amounts in this column represent total performance-based bonuses earned for service rendered during the applicable year under our executive bonus plans for such year. All such amounts were paid subsequent to the respective year end. |
SUMMARY COMPENSATION TABLE
| (4) For 2023, the amounts shown represent $9,900 in 401(k) plan employer contributions for Messrs. Armstrong, Uchida, Christianson, and Knutzen, and Ms. Grant. For Mr. Christianson and Ms. Grant, 2023 amounts also include $3,987 and $3,447, respectively, for Executive Physicals. |
SUMMARY COMPENSATION TABLE
| (5) In accordance with SEC rules, as Ms. Grant was not a Named Executive Officer in 2021, compensation information for this period is not required to be disclosed. |
SUMMARY COMPENSATION TABLE
| Palomar 2024 Proxy Statement | PLMR.com 59 |
2023 GRANT OF PLAN-BASED AWARDS TABLE
2023 GRANT OF PLAN-BASED AWARDS TABLE The following table sets forth information regarding grants of plan-based awards to our Named Executive Officers during the fiscal year ended December 31, 2023.
2023 GRANT OF PLAN-BASED AWARDS TABLE
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock | Grant Date Fair Value of Stock | | Name | Grant Date | Award Type | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (#)(3) | Awards ($)(4) | | Mac Armstrong | | Cash | 531,250 | 1,062,500 | 2,125,000 | | | | | | | | 1/31/2023 | PSU | | | | 6,399 | 12,798 | 25,596 | | 654,106 | | | 1/31/2023 | RSU | | | | | | | 12,798 | 654,106 | | Christopher Uchida | | Cash | 157,500 | 315,000 | 630,000 | | | | | | | | 1/31/2023 | PSU | | | | 1,581 | 3,162 | 6,324 | | 161,610 | | | 1/31/2023 | RSU | | | | | | | 3,162 | 161,610 | | Jon Christianson | | Cash | 148,750 | 297,500 | 595,000 | | | | | | | | 1/31/2023 | PSU | | | | 1,493 | 2,986 | 5,972 | | 152,614 | | | 1/31/2023 | RSU | | | | | | | 2,986 | 152,614 | | Jonathan Knutzen | | Cash | 133,000 | 266,000 | 532,000 | | | | | | | | 1/31/2023 | PSU | | | | 1,335 | 2,670 | 5,340 | | 136,464 | | | 1/31/2023 | RSU | | | | | | | 2,670 | 136,464 | | Angela Grant | | Cash | 106,500 | 213,000 | 426,000 | | | | | | | | 1/31/2023 | PSU | | | | 1,069 | 2,138 | 4,276 | | 109,273 | | | 1/31/2023 | RSU | | | | | | | 2,138 | 109,273 |
2023 GRANT OF PLAN-BASED AWARDS TABLE
| (1) Reflects amount of annual cash incentive plan awards threshold, target, and maximum potential payouts. Amounts actually paid are reported above in the Summary Compensation table. |
2023 GRANT OF PLAN-BASED AWARDS TABLE
| (2) Reflects the threshold, target, and maximum potential payouts pursuant to the PSUs granted under the LTI plan in 2023. The actual payout depends on performance relative to predetermined targets of the Company’s Gross Written Premiums and Adjusted Return on Equity as set by the Compensation Committee. The PSU’s performance period is the fiscal year of the grant. At the end of the performance period, the actual results will be measured against the predetermined targets to determine the number of PSUs to be earned as compensation. The earned PSUs are then subject to a required service period of approximately three years from the grant date before vesting and being issued as common stock. The actual results resulted in a future payout of 200% of target. |
2023 GRANT OF PLAN-BASED AWARDS TABLE
| (3) Represents grants of RSUs granted under the LTI plan in 2023 that vest as follows: one-third (1/3) shall vest on the first-year anniversary of the date of the grant; an additional one-third (1/3) shall vest on the second-year anniversary of the date of the grant; and the final one-third (1/3) shall vest on the third-year anniversary of the date of grant, subject to continued service with us. |
2023 GRANT OF PLAN-BASED AWARDS TABLE
| (4) Amounts in this column reflect the grant date value of RSUs and PSUs, as calculated per accounting rules. These amounts do not reflect the actual economic value or gain that will be realized by our Named Executive Officers relating to these awards. The amount of value realized by our executives may be significantly different than this figure depending on our future stock price performance. Assumptions used in the calculation of these amounts are included in Note 12 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. |
2023 GRANT OF PLAN-BASED AWARDS TABLE
| Palomar 2024 Proxy Statement | PLMR.com 60 |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table presents certain information concerning equity awards held by our Named Executive Officers as of December 31, 2023.
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| 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 (#)(3) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | | Mac Armstrong | 4/16/2019 | 206,310 | — | 15.00 | 4/16/2029 | — | — | | | 9/8/2020 | 2,956 | 682(1) | 98.95 | 9/8/2030 | — | — | | | 1/27/2021 | 9,762 | 315(2) | 97.87 | 1/27/2031 | 7,241 | 401,876 | | | 2/1/2021 | 7,500 | 500(2) | 106.60 | 2/1/2031 | — | — | | | 7/15/2021(5) | | — | — | — | 300,000 | 7,299,000 | | | 1/26/2022 | 7,994 | 5,470(2) | 49.53 | 1/26/2032 | 21,589 | 1,198,190 | | | 1/31/2023 | | | | | 35,723 | 1,982,627 | | Christopher Uchida | 4/16/2019 | 9,156 | — | 15.00 | 4/16/2029 | — | — | | | 9/8/2020 | 961 | 221(1) | 98.95 | 9/8/2030 | — | — | | | 1/27/2021 | 1,907 | 61(2) | 97.87 | 1/27/2031 | 1,412 | 78,366 | | | 11/18/2021(5) | | — | — | — | 75,176 | 1,738,753 | | | 1/26/2022 | 1,598 | 1,094(2) | 49.53 | 1/26/2032 | 4,317 | 239,594 | | | 1/31/2023 | | | | | 8,826 | 489,843 | | Jon Christianson | 4/16/2019 | 40,937 | — | 15.00 | 4/16/2029 | — | — | | | 7/30/2020 | 10,997 | 1,878(1) | 87.51 | 7/30/2030 | — | — | | | 9/8/2020 | 1,049 | 242(1) | 98.95 | 9/8/2030 | — | — | | | 1/27/2021 | 1,722 | 56(2) | 97.87 | 1/27/2031 | 1,277 | 70,874 | | | 11/18/2021(5) | | — | — | | 50,117 | 1,159,136 | | | 1/26/2022 | 1,505 | 1,029(2) | 49.53 | 1/26/2032 | 4,064 | 225,552 | | | 1/31/2023 | | | | | 8,334 | 462,537 | | Jonathan Knutzen | 4/16/2019 | 70,822 | — | 15.00 | 4/16/2029 | — | — | | | 9/8/2020 | 887 | 204(1) | 98.95 | 9/8/2030 | — | — | | | 1/27/2021 | 1,378 | 44(2) | 97.87 | 1/27/2031 | 1,021 | 56,666 | | | 11/18/2021(5) | | — | — | | 30,070 | 695,488 | | | 1/26/2022 | 1,317 | 900(2) | 49.53 | 1/26/2032 | 3,556 | 197,358 | | | 1/31/2023 | | | | | 7,452 | 413,586 | | Angela Grant | 11/30/2020 | 5,150 | 1,717(1) | 66.10 | 11/30/2030 | — | — | | | 1/27/2021 | 918 | 30(2) | 97.87 | 1/27/2031 | 680 | 37,740 | | | 1/26/2022 | 971 | 665(2) | 49.53 | 1/26/2032 | 2,624 | 145,632 | | | 1/26/2022(5) | 1,944 | 1,329(2) | 49.53 | 1/26/2032 | 5,249 | 291,320 | | | 1/31/2023 | | | | | 5,967 | 331,169 |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| Palomar 2024 Proxy Statement | PLMR.com 61 |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (1) Twenty-five percent of the shares subject to the option vest and become exercisable on the first-year anniversary of the grant date and the remaining option shares will vest and become exercisable in thirty-six (36) equal monthly installments thereafter. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (2) Twenty-five percent of the shares subject to the option vest and become exercisable on the first-year anniversary of the grant date and the remaining option shares will vest and become exercisable in twenty-four (24) equal monthly installments thereafter. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (3) Represents RSUs and PSUs issued under our LTI plan. For RSUs, one-third (1/3) of the shares subject to the RSUs shall vest on the first-year anniversary of the grant date; an additional one-third (1/3) shall vest on the second-year anniversary of the grant date; and the final one-third (1/3) shall vest on the third-year anniversary of the grant date. The PSUs are subject to a service before vesting. The number of PSUs represents the number of PSUs that will be issued based on actual performance relative to the preestablished targets. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (4) Represents the market value of the RSUs and PSUs outstanding based on the closing price of our common stock as reported on the Nasdaq Global Select Market of $55.50 per share on December 31, 2023 (with the exception of the 2021 supplemental PSU grants as described in footnote 5). Since these awards have not yet vested, the ultimate value or gain our executives receive from these awards may be significantly different than this number depending on our future stock price performance. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (5) Represents RSUs and PSUs issued pursuant to the 2021 and 2022 Supplemental Executive Stock Grants. With respect to the 2021 supplemental PSU grants, as these require the achievement of rigorous stock price appreciation hurdles to vest, the grants were valued using a Monte Carlo valuation model as of December 31, 2023. The PSUs granted to Mr. Armstrong on July 15, 2021, were determined to have a fair market value of $13.94 per unit, and the PSUs granted to Messrs. Uchida, Christianson and Knutzen on November 18, 2021, were determined to have a fair market value of $12.67 per unit as of December 31, 2023. If the probability factor determined under the Monte Carlo model was excluded and the target number of units was valued purely at the December 31, 2023 stock price, the target market value of the supplemental PSUs outstanding held by Messrs. Armstrong, Uchida, Christianson and Knutzen would be $12,487,500, $3,153,399, $2,102,291, and $1,261,362, respectively. |
2023 OPTION EXERCISES AND STOCK VESTED TABLE
2023 OPTION EXERCISES AND STOCK VESTED TABLE
2023 OPTION EXERCISES AND STOCK VESTED TABLE
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting | Value Realized on Vesting ($)(2) | | Mac Armstrong | — | — | 34,240 | 1,867,923 | | Christopher Uchida | 10,000 | 417,740 | 8,105 | 463,090 | | Jon Christianson | — | — | 5,989 | 338,186 | | Jonathan Knutzen | — | — | 4,071 | 226,892 | | Angela Grant | — | — | 2,216 | 110,718 |
2023 OPTION EXERCISES AND STOCK VESTED TABLE
| (1) The value realized on exercise is determined by multiplying (a) the number of options exercised by (b) the excess of the market price of our common stock on the exercise date over the exercise price of the option. |
2023 OPTION EXERCISES AND STOCK VESTED TABLE
| (2) The value realized on vesting is determined by multiplying (a) the number of stock awards by (b) the market price of our common stock on the vesting date. |
2023 OPTION EXERCISES AND STOCK VESTED TABLE
| Palomar 2024 Proxy Statement | PLMR.com 62 |
Potential Payments Upon Termination or Change of Control
Potential Payments Upon Termination or Change of Control Post-termination benefits for our Named Executive Officers are established pursuant to the terms of their individual employment agreements and equity awards. In the event of a change in control (“CIC”) as described in the 2019 Plan, the acquiring or successor entity may assume or continue all or any awards outstanding under the 2019 Plan or substitute substantially equivalent awards. All of our employment agreements contain double trigger CIC provisions, requiring that an executive’s employment is terminated in connection with the CIC in order to be eligible for termination payments. The following table sets forth the amounts payable to each of our Named Executive Officers based on (a) the acceleration of unvested equity awards upon a double trigger in connection with a CIC of the Company, and (b) an assumed termination of employment outside of a CIC, in all instances assuming a December 31, 2023 termination date. For equity related amounts, the market price refers to the closing price of our common stock which was $55.50 per share as reported on the Nasdaq Global Select Market as of December 31, 2023. The amounts that would be paid upon a NEO’s actual termination of employment can only be determined at the time of such termination, based on the facts and circumstances then prevailing.
Potential Payments Upon Termination or Change of Control
| Name | Cash Severance ($)(1) | Non-Equity Incentive Pay ($)(2) | Stock Options ($)(3) | PSUs ($)(3) | RSUs ($)(3) | Continuation of Medical Benefits ($)(4) | Total ($) | | Mac Armstrong | | | | | | | | | Termination Reason: | | | | | | | | | Termination without Cause or for Good Reason | 1,700,000 | 2,125,000 | 32,656 | 255,911 | 2,069,817 | 28,496 | 6,211,880 | | Qualifying Termination in Connection with a CIC | 1,700,000 | 2,125,000 | 32,656 | 1,411,643 | 5,617,877 | 28,496 | 10,915,672 | | Death or Disability | 1,700,000 | 2,125,000 | — | — | | 28,496 | 3,853,496 | | Christopher Uchida | | | | | | | | | Termination Reason: | | | | | | | | | Termination without Cause or for Good Reason | 450,000 | 315,000 | — | 49,895 | 571,373 | 21,864 | 1,408,131 | | Qualifying Termination in Connection with a CIC | 450,000 | 315,000 | 6,531 | 313,742 | 1,342,656 | 21,864 | 2,449,793 | | Jon Christianson | | | | | | | | | Termination Reason: | | | | | | | | | Termination without Cause or for Good Reason | 425,000 | 297,500 | — | 45,122 | 387,668 | 21,864 | 1,177,153 | | Qualifying Termination in Connection with a CIC | 425,000 | 297,500 | 6,143 | 292,985 | 983,460 | 21,864 | 2,026,952 | | Jonathan Knutzen | | | | | | | | | Termination Reason: | | | | | | | | | Termination without Cause or for Good Reason | 380,000 | 266,000 | — | 36,075 | 255,134 | 1,097 | 938,305 | | Qualifying Termination in Connection with a CIC | 380,000 | 266,000 | 5,373 | 254,190 | 674,991 | 1,097 | 1,581,651 | | Angela Grant | | | | | | | | | Termination Reason: | | | | | | | | | Termination without Cause or for Good Reason | 355,000 | 213,000 | — | 24,032 | 162,615 | 7,646 | 762,293 | | Qualifying Termination in Connection with a CIC | 355,000 | 213,000 | 11,904 | 265,623 | 350,871 | 7,646 | 1,204,044 |
Potential Payments Upon Termination or Change of Control
| (1) Amounts reported represent the value of benefits payable to each Named Executive Officer as follows: Messrs. Uchida. Christianson, and Knutzen, and Ms. Grant: 12 months of their respective current base salaries. Amount reported represents the value of benefits payable to Mr. Armstrong: 200% of 12 months of his current base salary. |
Potential Payments Upon Termination or Change of Control
| (2) Amount reported represents the value of benefits payable to Mr. Armstrong: 200% of 12 months of his target bonus. For Messrs. Uchida. Christianson, and Knutzen, and Ms. Grant amount represents 100% of 12 months of their target bonus. |
Potential Payments Upon Termination or Change of Control
| Palomar 2024 Proxy Statement | PLMR.com 63 |
Potential Payments Upon Termination or Change of Control
| (3) Amounts reported reflect the value attributable to the immediate acceleration of unvested equity awards upon a CIC event coupled with a qualifying termination. Amount is determined by multiplying (a) the number of unvested options that would automatically become fully vested, by (b) the excess of the market price of our common stock on the CIC date over the exercise price of the option plus (c) the number of unvested RSUs and PSUs that would automatically become fully vested multiplied by (d) the closing price of our common stock on the CIC date. |
Potential Payments Upon Termination or Change of Control
| (4) For Messrs. Uchida, Christianson, and Knutzen, and Ms. Grant, amounts reported represent the value of 12 months of continued health and welfare benefits payable to each Named Executive Officer per the terms of their respective employment agreements. For Mr. Armstrong, amount reported represents the value of 24 months of continued health and welfare benefits payable per the terms of his employment agreement. |
CEO Pay Ratio Disclosure
CEO Pay Ratio Disclosure
Pay vs. Performance Comparison
Pay vs. Performance Comparison Our Compensation Committee has implemented an executive compensation program rooted in a pay-for-performance philosophy that is designed to link a substantial portion of our NEOs’ realizable compensation to the achievement of Palomar’s financial, operational, and strategic objectives, and further to align management’s interest with those of shareholders. The following represents our pay-for-performance table for the 2020-2023 period, calculated in accordance with SEC regulations.
Pay vs. Performance Comparison
| | | | | | Value of $100 Investment | | | | | Year | Summary Compensation Table Total for CEO ($)(1) | Compensation Actually Paid to CEO ($)(2) | Average Summary Compensation Table Total for Non-CEO NEOs ($)(1) | Average Compensation Actually Paid to Non-CEO NEOs ($)(2)(3) | PLMR Total Shareholder Return ($)(4) | Comparator Group Total Shareholder Return ($)(4) | Net Income (in $000s) ($) | Company Selected Metric: Adjusted Return on Equity(5) | | 2023 | 3,541,369 | 4,787,065 | 1,041,504 | 1,366,774 | 114.60 | 125.47 | 79,201 | 21.9% | | 2022 | 3,000,327 | (1,497,733) | 774,572 | 519,793 | 93.25 | 104.20 | 52,170 | 18.3% | | 2021 | 19,246,249 | 16,982,053 | 3,486,487 | 2,279,277 | 133.74 | 113.66 | 45,847 | 13.8% | | 2020 | 1,063,612 | 5,720,732 | 686,310 | 1,683,012 | 183.44 | 100.42 | 6,257 | 2.6% |
Pay vs. Performance Comparison
| (1) Represents the dollar amounts of total compensation reported for our CEO, Mr. Armstrong, and the average dollar amounts of total compensation reported for our non-CEO NEOs in the Summary Compensation Table for the fiscal years 2023, 2022, 2021 and 2020, respectively. For 2023, our non-CEO NEOs were Chris Uchida, Jon Christianson, Jon Knutzen and Angela Grant. For 2022, our non-CEO NEOs were Chris Uchida, Jon Christianson, Jon Knutzen, Angela Grant, Michelle Johnson and Heath Fisher. For 2021, our non-CEO NEOs were Chris Uchida, Jon Christianson, Jon Knutzen and Heath Fisher. For 2020, our non-CEO NEOs were Chris Uchida, Jon Christianson, Heath Fisher, and Bill Bold. |
Pay vs. Performance Comparison
| (2) Represents the dollar amounts of “compensation actually paid” computed in accordance with SEC requirements. The amounts do not reflect actual compensation paid to our CEO or other NEOs during the applicable year, but instead also include (i) the year-end value of stock awards granted during the reported year and (ii) change in value of stock awards that were unvested at the end of the prior year (measured through the earlier of the vest date or through the end of the reported fiscal year). |
Pay vs. Performance Comparison
| (3) Represents the dollar amounts of total compensation reported for our other NEOs in the Summary Compensation Table. The non-CEO NEOs for the fiscal years 2023, 2022, 2021 and 2020, respectively, represent the actual NEOs reported in the proxy for the applicable reporting year, inclusive of any year-over-year changes in the NEO population. |
Pay vs. Performance Comparison
| (4) Represents the cumulative total shareholder return of Palomar and the NASDAQ Insurance Index (the “Index”), assuming $100 was invested in PLMR and the Index on January 1, 2020. |
Pay vs. Performance Comparison
| (5) Adjusted ROE is a key metric that shareholders use to evaluate our performance and capital efficiency. Adjusted ROE is a Non-GAAP Financial Measure; see Reconciliation of Non-GAAP Financial Measures in Appendix A. |
Pay vs. Performance Comparison
| Palomar 2024 Proxy Statement | PLMR.com 67 |
Pay vs. Performance Comparison
To calculate the amounts in the “Compensation Actually Paid to CEO” column in the table above, the following represents the deductions and additions to our CEO’s total compensation as reported in the Summary Compensation Table:
Pay vs. Performance Comparison
| Year | Summary Compensation Table Total for CEO ($) | Reported Value of Equity Awards for CEO ($)(1) | Equity Award Adjustments for CEO ($)(2) | Compensation Actually Paid to CEO ($) | | 2023 | 3,541,369 | (1,308,212) | 2,553,908 | 4,787,065 | | 2022 | 3,000,327 | (1,337,771) | (3,160,289) | (1,497,733) | | 2021 | 19,246,249 | (17,596,208) | 15,332,012 | 16,982,053 | | 2020 | 1,063,612 | (450,654) | 5,107,774 | 5,720,732 |
Pay vs. Performance Comparison
| (1) Reflects grant date value of stock and option awards for our CEO, as reported in the SCT for each applicable year. |
Pay vs. Performance Comparison
| (2) Represents the year-over-year change in the fair value of stock and option awards to our CEO, as itemized below. |
Pay vs. Performance Comparison
| Fair Value of Equity Awards for CEO: | 2023 ($) | 2022 ($) | 2021 ($) | 2020 ($) | | As of year-end for awards granted during the year | 1,982,630 | 1,493,399 | 15,448,189 | 386,901 | | Y-o-Y increase/(decrease) of unvested awards from prior years | 209,958 | (4,442,989) | (63,849) | 1,521,374 | | Increase/(decrease) from prior fiscal year-end of awards vested during the year | 361,320 | (210,699) | (52,335) | 3,199,498 | | Total Equity Award Adjustments | 2,553,908 | (3,160,289) | 15,332,012 | 5,107,774 |
Pay vs. Performance Comparison
To calculate the amounts in the “Compensation Actually Paid to Non-CEO NEOs” column in the table above, the following represents the deductions and additions to our non-CEO NEO’s total compensation as reported in the Summary Compensation Table:
Pay vs. Performance Comparison
| Year | Average Summary Compensation Table Total for Non-CEO NEOs ($) | Average Reported Value of Equity Awards for Non-CEO NEOs ($)(1) | Average Equity Award Adjustments for Non-CEO NEOs ($)(2) | Average Compensation Actually Paid to Non-CEO NEOs ($) | | 2023 | 1,041,504 | (279,981) | 605,250 | 1,366,774 | | 2022 | 774,572 | (142,938) | (111,842) | 519,793 | | 2021 | 3,486,487 | (2,847,541) | 1,640,330 | 2,279,277 | | 2020 | 686,310 | (397,849) | 1,394,551 | 1,683,012 |
Pay vs. Performance Comparison
| (1) Reflects grant date value of stock and option awards for our non-CEO NEOs, as reported in the SCT for each applicable year. |
Pay vs. Performance Comparison
| (2) Represents the year-over-year change in the fair value of stock and option awards to our non-CEO NEOs, as itemized below. |
Pay vs. Performance Comparison
| Palomar 2024 Proxy Statement | PLMR.com 68 |
Pay vs. Performance Comparison
| Fair Value of Equity Awards for Non-CEO NEOs: | 2023 ($) | 2022 ($) | 2021 ($) | 2020 ($) | | As of year-end for awards granted during the year | 424,318 | 319,133 | 1,871,865 | 470,453 | | Y-o-Y increase/(decrease) of unvested awards from prior years | 107,823 | (424,595) | (185,648) | 297,807 | | Increase/(decrease) from prior fiscal year-end of awards vested during the year | 73,109 | (6,379) | (45,886) | 626,291 | | Total Equity Award Adjustments | 605,250 | (111,842) | 1,640,330 | 1,394,551 |