DEF 14A of Palomar Holdings, Inc.
Filed Apr 11, 2025 · FY20240001171200-25-000184
Director Nominees
Director Nominees
Director Nominees
| Name | Age | Director Since | Independent | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | Sustainability Committee | Enterprise Risk Management Committee | Investment Committee | | Mac Armstrong | 50 | 2014 | | | | | ● | ● | ● | | Martha Notaras | 64 | 2020 | | | ● | ● | | ● | |
Director Nominees
l Chair l Member
Director Nominees
| Palomar 2025 Proxy Statement | PLMR.com 3 |
Table of Contents
| 2024 Option Exercises and Stock Vested Table | 55 | | Potential Payments Upon Termination or Change of Control | 56 | | Employment Agreements for Executive Officers | 57 | | CEO Pay Ratio Disclosure | 59 | | Pay vs. Performance Comparison | 60 | | Pay-for-Performance Alignment | 62 | | Security Ownership of Certain Beneficial Owners And Management | 65 | | Related Person Transactions | 67 | | Indemnification Agreements and Directors’ and Officers’ Liability Insurance | 67 | | Policies and Procedures for Related Party Transactions | 67 | | Other Matters | 67 | | Company Website | 67 | | Availability of Bylaws | 67 | | Available Information | 67 | | Proposals Of Stockholders For 2026 Annual Meeting | 68 | | Questions and Answers about the Annual Meeting | 69 | | Stockholder Proposals | 74 | | Nomination of Director Candidates | 75 | | Appendix A: Non-GAAP Financial Measures and Reconciliation Tables | 76 |
Nominees for Director
Nominees for Director
Class III Directors for a term expiring at our 2028 Annual Meeting of Stockholders
Class III Directors for a term expiring at our 2028 Annual Meeting of Stockholders
Class III Directors for a term expiring at our 2028 Annual Meeting of Stockholders
| Age: 50 Director since 2014 Committees: Sustainability Committee Enterprise Risk Management Committee Investment 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 deep industry knowledge. As the founder of the Company, Mr. Armstrong has been instrumental in shaping its vision and guiding its success from inception. His extensive background in both insurance and private equity equips him with a unique perspective and a strategic understanding that is invaluable for steering the Company forward. 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 President of the Board of Trustees of the Bishop’s School. |
Class III Directors for a term expiring at our 2028 Annual Meeting of Stockholders
| Age: 64 Director since 2020 Committees: Compensation Committee Nominating and Corporate Governance Committee Enterprise Risk Management Committee | Martha Notaras We believe Ms. Notaras is qualified to serve on our Board, given her extensive experience working with emerging private and publicly traded companies. Ms. Notaras brings a wealth of knowledge with over 30 years as a strategic investor and venture capitalist in insurance and insurance-related industries. 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. 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. Ms. Notaras serves on the board of ATTOM Data, a Lovell Minnick portfolio company. 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 M.B.A. from Harvard Business School, where she was a Baker Scholar, awarded for graduating in the top five percent of the class. |
Class III Directors for a term expiring at our 2028 Annual Meeting of Stockholders
| Palomar 2025 Proxy Statement | PLMR.com 9 |
Continuing Directors
Continuing Directors
Class II Directors with a term expiring at our 2027 Annual Meeting of Stockholders
Class II Directors with a term expiring at our 2027 Annual Meeting of Stockholders
Class II Directors with a term expiring at our 2027 Annual Meeting of Stockholders
| Age: 54 Director since 2019 Committees: Audit Committee Nominating and Corporate Governance Committee Investment Committee | Catriona M. Fallon We believe Ms. Fallon is qualified to serve on our Board because of her vast experience as a senior executive and her strategic financial insight. Her expertise, including her roles as Chief Financial Officer and as a board member across publicly traded companies of various sizes, are crucial to Palomar’s continued growth and success. 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 strategic, Chief Financial Officer advisory services to pre-IPO companies. She is currently serving as Chief Financial Officer of SambaNova Systems, Inc. an AI semiconductor and cloud-based AI software provider. Ms. Fallon has served as Chief Financial Officer 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 with a term expiring at our 2027 Annual Meeting of Stockholders
| Age: 59 Director since 2021 Committees: Audit Committee Compensation Committee Sustainability Committee | Daina Middleton We believe Ms. Middleton is qualified to serve on our Board because of her extensive expertise in digital marketing, data, analytics, artificial intelligence (“AI”), and channel marketing. Her tenure as a former Chief Executive Officer and her service on boards and committees across publicly traded and privately held companies, bring valuable contributions to Palomar. 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 Chief Executive Officer 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 Directors of Marin Software, a public company; and two private equity-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 B.A. degree in Technical Journalism from Oregon State University where she serves as a member of OSU’s School of Arts & Communication Advisory Council. Additionally, Ms. Middleton has earned a AI Strategy Certification from MIT and a Sustainability Strategy Certification from Stanford University. |
Class II Directors with a term expiring at our 2027 Annual Meeting of Stockholders
| Palomar 2025 Proxy Statement | PLMR.com 10 |
Class II Directors with a term expiring at our 2027 Annual Meeting of Stockholders
| Age: 53 Director since 2019 Committees: Compensation Committee Nominating and Corporate Governance Committee Investment Committee | Richard H. Taketa We believe Mr. Taketa is qualified to serve on our Board, bringing extensive executive experience in the insurance industry, along with a proven track record as a director of several publicly traded and privately held companies. His expertise in mergers and acquisitions, capital markets, and investment strategies are helpful to Palomar’s continued growth and success. 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), Farmers and Merchants Bank of Long Beach, and several privately held 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 served 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 with a term expiring at our 2027 Annual Meeting of Stockholders
| Palomar 2025 Proxy Statement | PLMR.com 11 |
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: 69 Director since 2020 Committees: Audit Committee Sustainability Committee Enterprise Risk Management Committee | Daryl Bradley We believe Mr. D. Bradley is qualified to serve on our Board because of his valuable industry knowledge and practical experience from leadership roles in insurance and reinsurance. His experience, expertise in human capital and compensation, and understanding of corporate governance and non-financial risks are important to Palomar’s success. Mr. D. 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 Directors of Coverys, a leading provider of medical professional liability insurance. From 1995 to 2018, Mr. D. 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. D. Bradley served several roles at Continental Insurance Corporation from 1992 to 1995 and Fireman’s Fund Insurance Company from 1982 to 1992. Mr. D. 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: 67 Director since 2024 Committees: Audit Committee Compensation Committee Enterprise Risk Management Committee Investment Committee | Thomas Bradley We believe Mr. T. Bradley is qualified to serve on our Board due to his extensive executive and board-level experience with publicly traded insurance and reinsurance companies. His background in these areas provides valuable insight and leadership expertise that contributes to our organization’s growth and strategic direction. Mr. T. 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. T. 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 of Horace Mann Educators Corporation, an insurance and financial services company (NYSE: HMN), where he acts as the Chair of their Audit Committee. Prior to joining Argo, Mr. T. 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. T. 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. T. Bradley received a B.S. degree in Accounting from the University of Maryland and an M.B.A. with a concentration in Finance from Loyola University. |
Class I Directors with a term expiring at our 2026 Annual Meeting of stockholders
| Palomar 2025 Proxy Statement | PLMR.com 12 |
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; |
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; and |
Identifying and Evaluating Nominees for Director
| • | The Nominating and Corporate Governance Committee may engage a third-party recruitment firm to support the identification and evaluation of director candidates. In 2024, the Nominating and Corporate Governance Committee engaged Russell Reynolds Associates, an executive search and leadership advisory firm, to identify and assess director candidates. |
Identifying and Evaluating Nominees for Director
| Palomar 2025 Proxy Statement | PLMR.com 19 |
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, backgrounds and perspectives 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 for nomination, may consider whether a director candidate, if elected, assists in achieving a mix of Board members that represents a diversity of background and experience.
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 by its independent compensation consultant, Pay Governance LLC (“Pay Governance”), a leading independent global executive and director compensation advisory firm. 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 2024 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 (discontinued effective 2025 to better align with market practices); |
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
| Palomar 2025 Proxy Statement | PLMR.com 21 |
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, 2024. 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.”
2024 Director Compensation Table
2024 Director Compensation Table
2024 Director Compensation Table
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($) | Total ($) | | Daryl Bradley | 119,250 | 99,964 | — | 219,214 | | Thomas Bradley(3) | 95,161 | 199,962 | — | 295,123 | | Catriona Fallon | 118,500 | 99,964 | — | 218,464 | | Daina Middleton | 123,250 | 99,964 | — | 223,214 | | Martha Notaras | 121,000 | 99,964 | — | 220,964 | | Richard Taketa | 138,500 | 99,964 | — | 238,464 |
2024 Director Compensation Table
| (1) Amounts in this column reflect compensation earned in 2024 for service as a member of our Board and as a member of the Board of Directors of our subsidiaries. |
2024 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, 2024. 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. |
2024 Director Compensation Table
| (3) Mr. T. Bradley joined our Board of Directors in February 2024 and received a new director grant of $100,000 in RSUs upon commencing service as a director. |
2024 Director Compensation Table
| Palomar 2025 Proxy Statement | PLMR.com 22 |
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, two Class III directors will be elected for three-year terms. Based upon the recommendation of our Nominating and Corporate Governance Committee, our Board has nominated Mac Armstrong and Martha Notaras to stand for re-election by our stockholders, in each case for a three-year term expiring at our 2028 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, Mac Armstrong and Martha Notaras as nominees for election as Class III directors at the Annual Meeting. If elected, Mac Armstrong and Martha Notaras will serve as Class III directors until the 2028 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 Mr. Armstrong and Ms. Notaras. We expect that Mr. Armstrong and Ms. Notaras 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.
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 Pay Governance (and prior to 2024, PricewaterhouseCoopers LLP), has established a peer group to benchmark executive compensation data and practices. For 2024 benchmarking purposes, our peer group consisted of the following 16 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. | 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
The Compensation Committee has benchmarked our executive compensation against these companies for purposes of establishing our 2024 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 2025 benchmarking purposes, after conducting a review of the prevailing competitive market with the assistance of our compensation consultant, the Compensation Committee revamped the peer group due to our continued industry-leading top-line growth and bottom-line performance. Our 2025 compensation peer group consists of the below 17 public companies, of which six were constituents of the 2024 peer group and 11 are new additions. As part of the process of determining the benchmarking peer group for 2025, we considered Palomar’s weighted positioning of market capitalization and market cap-to-gross written premiums (GWP), to ensure we maintain an appropriate comparator group from a size standpoint. We believe market cap-to-GWP ratio in particular is an optimal size metric for peer group construction purposes, as it best measures a company’s ability to generate strong top and bottom-line growth relative to their asset base. We further took into account additional considerations such as the degree to which our compensation comparator group included peer of peers and reverse peers.
Peer Group Benchmarking Analysis
| Assured Guaranty | Kinsale Capital Group | Steward Information Services | | Employers Holdings | Lemonade, Inc. | The Baldwin Insurance Group | | Enstar Group | RLI Corp. | Trupanion, Inc. | | First American Financial Corp. | Safety Insurance Group | White Mountains Insurance Group | | Hamilton Insurance Group | Selective Insurance Group | | | Kemper Corporation | Skyward Specialty Insurance | |
Peer Group Benchmarking Analysis
| Palomar 2025 Proxy Statement | PLMR.com 36 |
Peer Group Benchmarking Analysis
Specific changes made to the 2025 benchmarking peer group included the following:
Peer Group Benchmarking Analysis
| Company | | Reason | | Removals | Amerisafe, Inc. | No longer meet our size/scope criteria | | | Donegal Group | | | | Global Indemnity | | | | Goosehead Insurance | | | | Heritage Insurance | | | | Hippo Holdings | | | | James River Group | | | | NI Holdings | | | | ProAssurance Corp. | | | | Universal Insurance Holdings | | | Additions | Assured Guaranty | Represents companies that we compete with for business opportunities and executive talent, and fall within our defined size criteria. | | | Employer Holdings | | | | Enstar Group | | | | First American Financial Corp. | | | | Hamilton Insurance Group | | | | Kemper Corp. | | | | Selective Insurance Group | | | | Stewart Information Services | | | | The Baldwin Insurance Group | | | | Trupanion, Inc. | | | | White Mountain Insurance Group | |
Peer Group Benchmarking Analysis
| Palomar 2025 Proxy Statement | PLMR.com 37 |
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. | To 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 or higher when warranted by performance, 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 2024) payable in cash based on performance against annually established Company metrics and individual performance. | To 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”) | 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. | To align the interests of executives with long-term stockholder value creation under our five guiding principles and 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”) | RSUs represent the 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 Palomar’s stock price over the three-year vesting period, which fosters long-term alignment of management and shareholder interests. |
2024 Target Compensation and Pay Mix
| Executive | Base Salary ($) | Target Bonus % | Target Bonus ($) | Target LTI ($)(1)(2) | Total Target Comp ($) | | Mac Armstrong | $1,000,000 | 150% | $1,500,000 | $1,750,000 | $4,250,000 | | Chris Uchida | 515,000 | 80% | 412,000 | 515,000 | 1,442,000 | | Jon Christianson | 485,000 | 80% | 388,000 | 485,000 | 1,358,000 | | Jon Knutzen | 450,000 | 80% | 360,000 | 450,000 | 1,260,000 | | Rodolphe Hervé | 425,000 | 70% | 297,500 | 297,500 | 1,020,000 |
2024 Target Compensation and Pay Mix
Payouts under the 2024 AIP range from 50% at Threshold to 200% at Maximum, with no bonuses earned for performance below Threshold.
2024 Target Compensation and Pay Mix
| Metric | Threshold (50%) | Target (100%) | Max (200%) | Actual Result | Payout as a % of Target | | Pre-Tax ANI ($ in millions) | $120.6 | $141.9 | $163.2 | $168.8 | 200.0% | | Pre-Tax ANI Before Catastrophe Losses ($ in millions) | $127.0 | $149.4 | $171.8 | $196.7 | 200.0% |
2024 Target Compensation and Pay Mix
| Metric | Weighting | Payout as a % of Target | Weighted Average Payout | | Pre-Tax ANI | 40% | 200% | 80% | | Pre-Tax ANI before catastrophe losses | 40% | 200% | 80% | | MBOs | 20% | 100% | 20% | | Total Payout as a % of Target | | | 180% |
2024 Target Compensation and Pay Mix
| Executive | 2024 Target Bonus ($)(1) | Earned Payout % | 2024 Bonus Payout ($) | | Mac Armstrong | $1,495,673 | 180% | $2,692,212 | | Chris Uchida | 411,000 | 180% | 739,800 | | Jon Christianson | 387,077 | 180% | 696,739 | | Jon Knutzen | 358,923 | 180% | 646,062 | | Rodolphe Hervé | 297,500 | 180% | 535,500 |
2024 Target Compensation and Pay Mix
| (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 “2024 Target Compensation and Pay Mix” section of this proxy on page 39 is based on annualized salaries, and thus target bonus amounts differ from above. |
2024 Target Compensation and Pay Mix
| * Since 2023, our LTI mix has included a 50% allocation to PSUs to align with shareholder preferences. |
2024 Target Compensation and Pay Mix
| Executive | Target 2024 LTI | LTI $ Value in PSUs (50%) | LTI $ Value in RSUs (50%) | | Mac Armstrong | $1,750,000 | $875,000 | $875,000 | | Chris Uchida | 515,000 | 257,500 | 257,500 | | Jon Christianson | 485,000 | 242,500 | 242,500 | | Jon Knutzen | 450,000 | 225,000 | 225,000 | | Rodolphe Hervé | 297,500 | — | 297,500 |
2024 Target Compensation and Pay Mix
As Mr. Hervé joined Palomar in July 2024 after the end of the second quarter of the fiscal year, per our Company practice, Mr. Hervé’s 2024 annual LTI grants were issued 100% in the form of RSUs since a material portion of the performance measurement period for the 2024 PSUs had already occurred. Beginning with his 2025 annual grant, Mr. Hervé’s LTI mix will reflect our standard executive LTI mix of 50% PSUs and 50% RSUs. In July 2024, Mr. Hervé separately received a sign-on make-whole RSU grant of $550,000 upon joining Palomar to compensate him for equity awards he forfeited from his former employer as a result of joining Palomar.
2024 Target Compensation and Pay Mix
Performance Objectives Under Our 2024 PSU Grants Performance for the 2024 PSU grants was measured based on the following Company metrics:
2024 Target Compensation and Pay Mix
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. Payouts of our PSU grants range from 50% for attainment of performance objectives at Threshold to 200% for attainment of performance at Maximum, with no units vesting in the event of below Threshold performance. The majority portion of the PSU grants tied to Adjusted ROE (70%) have a three-year measurement period. The minority portion of the PSUs tied to GWP continues 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 2024 PSUs, along with our actual performance for 2024, were as follows:
2024 Target Compensation and Pay Mix
| 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% | 22.2% | TBD(1) | | GWP | 30% | $1.27B | $1.49B | $1.71B | $1.54B | 123% | | Total Payout | | | | | | TBD(1) |
2024 Target Compensation and Pay Mix
| (1) As the majority portion of our 2024 PSUs tied to Adjusted ROE (70%) incorporate a three-year measurement period, the blended payout multiple for our 2024 PSU grants will not be known until the conclusion of the 2024-2026 performance period. |
2024 Target Compensation and Pay Mix
For 2024, we achieved Adjusted ROE of 22.2% due to continued strong underwriting and investing results. Our GWP increased by approximately 35% due to strong growth across multiple lines of business including our core earthquake line, our inland marine line and newer lines such as fronting, casualty, and crop. Payouts Earned for Our 2022 PSUs Our 2022 PSU awards covering the 2022-2024 period concluded their three-year cliff vesting requirement in January 2025 and were released to participants upon vest. The specific threshold, target and maximum level Adjusted ROE and GWP objectives for our 2022 PSUs, along with our actual performance for 2022, were as follows:
2024 Target Compensation and Pay Mix
| 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% | 18.3% | 200% | | GWP | 30% | $676.0M | $751.0M | $826.0M | $881.9M | 200% | | Total Payout | | | | | | 200% |
2024 Target Compensation and Pay Mix
| Executive | 2022 Target PSUs Granted (#) | Earned Performance Multiple | 2022 Earned PSUs (#) | | Mac Armstrong | 5,397 | 200% | 10,794 | | Chris Uchida | 1,079 | 200% | 2,158 | | Jon Christianson | 1,016 | 200% | 2,032 | | Jon Knutzen | 889 | 200% | 1,778 | | Rodolphe Hervé(1) | — | — | — |
2024 Target Compensation and Pay Mix
| (1) Mr. Hervé joined the Company in July 2024 and did not participate in the 2022 PSU grants. |
2024 Target Compensation and Pay Mix
Note our 2022 PSUs were granted under our prior award structure where both Adjusted ROE and GWP were measured over a one-year period, with two subsequent years of cliff vesting requirements. As previously indicated, effective 2023, we modified our PSU structure to expand the measurement period for the majority portion of the PSUs tied to Adjusted ROE (70%) to three-years in response to shareholder feedback.
2024 Target Compensation and Pay Mix
In establishing 2025 salary levels for our NEOs, our Compensation Committee, with the assistance of the independent compensation consultant, evaluated the salaries and performance of our NEOs relative to the 2025 peer group benchmarking analysis prepared by Pay Governance. The analysis indicated that our NEO salary levels were below market in light of their performance relative to peers and contribution to our industry-leading performance, and accordingly, our NEOs received adjustments to their 2025 salaries to better position their base pay levels relative to market taking into consideration our size and performance. 2025 AIP For 2025, 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 2025, our AIP is subject to the following performance objectives:
2024 Target Compensation and Pay Mix
| (1) All our NEOs are tasked with the execution of our sustainability strategy, and accordingly, with respect to our 2025 AIP, 100% of our NEOs (including our CEO) have sustainability objectives directly included in their MBOs. |
2024 Target Compensation and Pay Mix
2025 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, and for 2025, we further increased the portion of each officer’s target total compensation mix awarded in the form of LTI. 2025 LTI Mix Based on shareholder feedback supporting our current LTI mix, we maintained the same LTI mix for 2025 of (i) 50% PSUs and (ii) 50% RSUs. All our 2025 grants continue to have a three-year vesting period to foster long-term alignment of management and shareholder interests. 2025 PSUs For 2025, our 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 2025 PSUs are as follows:
2024 Target Compensation and Pay Mix
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. Implementation of a Relative Total Shareholder Return (“RTSR”) Modifier Additionally, after considering feedback received from our shareholders during our annual shareholder outreach efforts, we elected to introduce a relative total shareholder (“RTSR”) modifier to our PSUs effective with the 2025 grants. Under our RTSR modifier, 2025 PSU payouts will be adjusted up or down based on RTSR performance measured against the Index over the three-year 2025-2027 measurement period as follows:
2024 Target Compensation and Pay Mix
In all cases, payouts of our 2025 PSUs will continue to be capped at 200% of target. We believe the inclusion of an RTSR modifier to our PSU awards further strengthens the alignment of management and shareholder interests and supports our pay-for-performance philosophy. No 2025 Supplemental Equity Grants We have not issued, nor do we intend to issue, any supplemental equity grants to our executive officers in 2025, consistent with our commitment to not issue supplemental stock grants to executives without engaging shareholders first.
2024 Target Compensation and Pay Mix
| 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 | | | Enhanced stock ownership guidelines effective 2025 for the CEO of 6x salary, 3x salary for other executive officers, and 5x cash retainer for independent directors | | | | | Effective 2025, a portion of each executive’s compensation is tied to our RTSR performance measured against the Index | | |
2024 Target Compensation and Pay Mix
Executives subject to these Stock Ownership Guidelines have five (5) years after first becoming subject to these guidelines to achieve the required ownership level. Executive officers are required to hold a specific number of shares, net of taxes, until stock ownership guidelines are met. Stock ownership includes vested shares held directly or indirectly, unvested time-based RSUs and shares purchased via the ESPP. Performance awards are not counted toward the ownership requirement until the performance criteria is met. Underwater stock options are also not counted toward the ownership requirement. Moreover, effective 2024, we modified the methodology under our stock ownership guidelines to exclude counting in-the-money stock options toward compliance with the guidelines to align with ISS and Glass Lewis policies. The Compensation Committee reviews the stock ownership levels of executives subject to these Stock Ownership Guidelines on an annual basis to ensure compliance.
2024 Target Compensation and Pay Mix
Equity Awards Granting Practices We grant annual equity awards under our LTI program during the first quarter of the fiscal year and subsequently grant 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 “2024 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. We do not currently grant stock options, stock appreciation rights, or similar option-like instruments to our NEOs or other employees or service providers and therefore do not need to respond to Item 402(x). 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. If in the future we anticipate granting stock options, stock appreciation rights, or similar option-like instruments, we will establish a policy regarding how our Board determines when to grant such awards and how our Board or the Compensation Committee will take material nonpublic information into account when determining the timing and terms of such awards. Impact of Accounting and Tax Requirements of Compensation Deductibility of Executive Compensation Section 162(m) of the Internal Revenue Code limits deductibility of compensation in excess of $1 million paid to certain executives. The Compensation Committee intends to maximize the tax deductibility of compensation paid to our executive officers where possible. However, the Compensation Committee retains the discretion to pay compensation to our executive officers that is not deductible due to Section 162(m) as may be necessary to attract and retain top talent. 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 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.
2024 Target Compensation and Pay Mix
| • | individual cash incentives are made within the boundaries of approved fixed maximum awards as applicable to each executive officer; |
2024 Target Compensation and Pay Mix
| • | 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; |
2024 Target Compensation and Pay Mix
| • | the members of our Compensation Committee who approve final bonus recommendations are independent; |
2024 Target Compensation and Pay Mix
| • | 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 multi-year vesting) to align the interests of our executive officers with long-term value creation for our stockholders; |
Retirement Plan and Other Benefits
| | | | | | 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) | | 2024 | 5,469,403 | 19,217,308 | 1,656,528 | 3,529,139 | 209.13 | 156.55 | 117,573 | 22.2% | | 2023 | 3,541,369 | 4,787,065 | 1,041,504 | 1,366,774 | 109.92 | 126.13 | 79,201 | 21.9% | | 2022 | 3,000,327 | (1,497,733) | 774,572 | 519,793 | 89.44 | 104.75 | 52,170 | 18.3% | | 2021 | 19,246,249 | 16,982,053 | 3,486,487 | 2,279,277 | 128.28 | 114.26 | 45,847 | 13.8% | | 2020 | 1,063,612 | 5,720,732 | 686,310 | 1,683,012 | 175.96 | 100.95 | 6,257 | 2.6% |
Retirement Plan and Other Benefits
| (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). |