.UNITED
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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| MGIC Investment Corporation |
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MGIC Investment Corporation
Notice of 2023 Annual Meeting of Shareholders
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MGIC Investment
Corporation
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March 20, 2020
Dear Shareholder:
It is my pleasure to invite you to attend our Annual Meeting of Shareholders to be heldThursday, April 27, 2023, at 9:00 a.m. on Thursday, April 23, 2020,Central time. Admittance to the webcast begins at our headquarters in Milwaukee, Wisconsin.
At our meeting, we will ask shareholders8:45 a.m.
| 1 | Election of twelve directors |
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| 2 | Advisory vote to approve named executive officer compensation |
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| Where: | 3 | Advisory vote on the following matters:
frequency of future advisory votes on executive compensation |
Notice of 2020
Annual Meeting
and
Proxy Statement
| | • election of thirteen directors,
• an advisory vote to approve our executive compensation,
• approval of the MGIC Investment Corporation 2020 Omnibus Incentive Plan,
• ratification of PricewaterhouseCoopers LLP's appointment as our independent registered public accounting firm for 2020, and
• any other matters that properly come before the meeting.
We may also report on our business, which in 2019, produced exceptional financial results. Our results are described in this Proxy Statement and in our Annual Report to Shareholders.
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2019 Annual Report
to Shareholders
| | Your vote is important. Even if you plan to attend the meeting, we encourage you to vote as soon as possible. You may vote by telephone, online or by mail. Please read our Proxy Statement for more information about our meeting and the voting process. |
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| Timothy J. Mattke
Chief Executive Officer
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IMPORTANT VOTING INFORMATION
If you hold your shares in “street name,” meaning your shares are held in a stock brokerage account or by a bank or other nominee, you will have received a voting instruction form from that nominee containing instructions that you must follow in order for your shares to be voted. If you do not transmit your voting instructions before the Annual Meeting, your nominee can vote on your behalf only on the matter considered to be routine, which is the ratification of the appointment of our independent registered public accounting firm.
The election of directors, advisory vote to approve our executive compensation, and vote to approve our 2020 Omnibus Incentive Plan are NOT considered routine. Your nominee is not permitted to vote on your behalf on such matters unless you provide specific instructions by following the instructions from your nominee about voting your shares. For your vote to be counted on such matters, you will need to communicate your voting decisions to your broker, bank or other nominee before the date of the Annual Meeting.
Your Participation in Voting the Shares You Own is Important
Voting your shares is important to ensure that you have a say in the governance of MGIC Investment Corporation. Please review the proxy materials and follow the relevant instructions to vote your shares. We hope you will exercise your rights and fully participate as a shareholder in MGIC Investment Corporation.
More Information is Available
If you have any questions about the proxy voting process, please contact the broker, bank or other nominee through which you hold your shares. The Securities and Exchange Commission (“SEC”) also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about voting at annual meetings. Additionally, you may contact our Investor Relations personnel at (414) 347-6480.
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Via webcast at www.virtualshareholdermeeting.com/MTG2023 | | |
| 4 | IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 2020
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| Our Proxy Statement and 2019 Annual Report to Shareholders are available at https://materials.proxyvote.com/552848. Your vote is very important. Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible. You may vote your shares via telephone, online, or by completing, signing, dating and returning your proxy card or voting instruction form in the pre-addressed envelope provided. No postage is required if your proxy card or voting instruction form is mailed in the United States. If you attend the meeting and are a holder of record entitled to vote, you may vote in person, even if you have previously voted by telephone, online or by mailing your proxy card. If you hold your shares through an account with a brokerage firm, bank or other nominee, please follow the instructions you receive from them to vote your shares. | |
MGIC INVESTMENT CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
The Annual Meeting of Shareholders of MGIC Investment Corporation will be held at 270 East Kilbourn Avenue in Milwaukee, Wisconsin, on April 23, 2020, at 9:00 a.m., to vote on the following matters:
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(1) | Election of the thirteen directors named in the Proxy Statement, each for a term ending at the Annual Meeting in 2021; |
(2) An advisory vote to approve our executive compensation;
(3) Approval of our 2020 Omnibus Incentive Plan;
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(4) | Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2020; and |
(5) Any other matters that properly come before the meeting.
Only shareholders of record at the close of business on March 6, 2020, will be entitled to vote at the Annual Meeting and any postponement or adjournment of the meeting.
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| 5 | Any other matters that properly come before the meeting |
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Your vote is very important. Whether or not you plan to attend our Annual Meeting, we encourage you to read our proxy materials and to vote as soon as possible using one of the methods described beginning on page 70. | | |
| By Order of the Board of Directors, |
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| Paula C. Maggio Secretary |
| Executive Vice President, General Counsel and Secretary |
March 20, 202024, 2023 |
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YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY VOTE VIA TELEPHONE, ONLINE
OR BY COMPLETING, SIGNING, DATING AND RETURNING
YOUR PROXY CARD OR VOTING INSTRUCTION FORM
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| OUR PROXY STATEMENT AND 2022 ANNUAL REPORT TO SHAREHOLDERS ARE AVAILABLE AT HTTPS://MATERIALS.PROXYVOTE.COM/552848. |
Table of Contents
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| Item 2 – Advisory Vote to Approve Our Executive Compensation (Continued) | |
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| 20192022 Grants of Plan-Based Awards | |
| Outstanding Equity Awards at 20192022 Fiscal Year-End | |
| 2022 Stock Vested | | |
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| 20192022 CEO Pay Ratio | |
| 2022 Pay for Performance | |
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| Delinquent Section 16(a) Reports | |
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Item 3 - Approval– Advisory Vote on the Frequency of the MGIC Investment Corporation 2020 Omnibus Incentive PlanFuture Advisory Votes on Executive Compensation | |
| Proposed Terms of the 2020 Omnibus Incentive Plan | |
| Shareholder Vote Required | | |
| Item 4 – Ratification of Appointment of Independent Registered Public Accounting Firm | |
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| Stock Ownership | |
| About the Meeting and Proxy Materials | |
| Appendix A – Glossary of Terms and Acronyms | A - 1 |
| Appendix B – Explanation and Reconciliation of Non-GAAP Financial Measures | |
Appendix C – MGIC Investment Corporation 2020 Omnibus Incentive Plan
| Appendix C - 1 |
PROXY SUMMARY
This summary highlights information contained elsewhere in our Proxy Statement and does not contain all of the information you should consider. Please review the Company’s complete Proxy Statement before voting. Please refer to our Glossary of Terms and Acronyms in Appendix A to this Proxy Statement for definitions of certain capitalized terms.
VOTING MATTERS AND BOARD RECOMMENDATIONS
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Proposal | Voting Matter | More Information | Board Vote Recommendation |
1 | Election of Thirteen Director Nominees | | FOR each Director Nominee |
2 | Advisory Vote on Executive Compensation | | FOR |
3 | Approval of 2020 Omnibus Incentive Plan | | FOR |
4 | Ratification of Independent Registered Public Accounting Firm | | FOR |
OUR 2019 BUSINESS STRATEGIES AND HIGHLIGHTS
Through our subsidiary, Mortgage Guaranty Insurance Corporation ("MGIC"), we are a leading provider of mortgage insurance to lenders throughout the United States and to Fannie Mae and Freddie Mac (the “GSEs”). Our 2019 business strategies were to 1) prudently grow insurance in force, 2) pursue new business opportunities that meet our return objectives, 3) preserve and expand our role and that of the private mortgage insurance industry in housing finance policy, 4) manage and deploy capital to optimize the creation of shareholder value and 5) expand and develop the talents of our co-workers. As we discuss in the Compensation Discussion & Analysis section of this Proxy Statement, the compensation of our NEOs is directly tied to our financial performance and performance against these business strategies.
In 2019, we continued to deliver outstanding results for our shareholders, with revenues of $1.2 billion, net income of $673.8 million and strong performance against the following metrics. These metrics, among others, were considered when determining the 2019 bonuses of our NEOs.
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(1) | This is a non-GAAP measure of performance. For a description of how we calculate this measure and for a reconciliation of this measure to its nearest comparable GAAP measure, see Appendix B to this Proxy Statement. |
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(2) | Direct new insurance written (before the effects of reinsurance). |
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(3) | Direct primary insurance in force (before the effects of reinsurance), which is an important driver of our future premiums. |
MGIC Investment Corporation – 2020 Proxy Statement │ 1
In addition to strong performance against financial metrics, we also performed well relative to our business strategies, including those listed below.
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Business Strategy | | Results |
Capital Position - Manage and deploy capital to optimize creation of shareholder value.
| » | Executed a $316 million insurance linked note transaction, our second such post-financial crisis transaction, which provides an alternative source of capital, and enables the Company to enhance its returns and better manage its risk profile.
Increased dividends from MGIC to our holding company from $220 million in 2018 to $280 million in 2019.
Re-started the payment of quarterly dividends by our holding company, after having suspended such payments during the financial crisis.
Repurchased 8.7 million shares of our common stock, returning $114 million to shareholders.
MGIC received an upgrade in its financial strength rating from Moody's Investors Service (from Baa2 to Baa1).
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Developing Co-Workers - Develop and diversify the talents of co-workers.
| » | Executed on the Company's succession plan for key roles in the organization, including Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer and Chief Risk Officer, promoting all such officers from within the organization.
Delivered training workshops designed to build strategic capabilities which enhance performance.
Continued to enhance career developments, talent analytics and financial health capabilities for employees.
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Role in Housing Finance Industry - Preserve and expand the role of the Company and private mortgage insurance in housing finance policy.
| » | Held leadership roles in key trade association working groups.
Continued to enhance the reputation of the Company and the industry relative to changing housing finance policy and a broader role for private mortgage insurance.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE HIGHLIGHTS
We have always been committed to helping people live better lives through attainable homeownership and we have been a generous, committed and responsible citizen of our own home, Milwaukee. We are proud that our commitment to these values has been recognized through the following awards:
2019 Top 100 Workplaces in Southeastern Wisconsin winner (Journal Sentinel, Inc.). MGIC has been the recipient of this award for ten consecutive years, one of only 13 companies to have achieved this.
2018 Well Workplace Platinum Award (Wellness Council of America). The Platinum Award is the highest honor presented and is awarded to an organization recognized for its leadership and innovative commitment to the health and well-being of its employees. MGIC was one of 10 companies nationwide to receive the Platinum Award.
Eddy Award (Pension & Investments). MGIC was recognized with a 2019 first place award for “Pre-Retirement Preparation for Employees.”
You can read more about our focus on and commitment to ESG initiatives in our 2020 Environmental, Social and Governance Report published on our website. We are not including the information contained in that report as a part of, or incorporating it by reference into, this Proxy Statement.
2 │ MGIC Investment Corporation – 2020 Proxy Statement
OUR BOARD NOMINEES
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| Name | Age(1) | Director Since | Primary Occupation | Independent | Committee Memberships |
| Daniel A. Arrigoni | 69 | 2013 | Former President and CEO of U.S. Bank Home Mortgage Corp. | ü | • Audit • Risk Management |
| C. Edward Chaplin | 63 | 2014 | Corporate Director; Former President and CFO of MBIA Inc. | ü | • Risk Management • Securities Investment |
| Curt S. Culver | 67 | 1999 | Chairman of the Board Former CEO of MGIC Investment Corp. | | • Executive |
Jay C. Hartzell ª | 50 | 2019 | Dean of the McCombs School of Business at the University of Texas at Austin | ü
| • Audit
• Risk Management |
Timothy A. Holt ª | 66 | 2012 | Corporate Director; Former SVP and Chief Investment Officer of Aetna, Inc. | ü | • Audit • Securities Investment (C) |
| Kenneth M. Jastrow, II | 72 | 1994 | Lead Independent Director Corporate Director and Private Investor; Former Chairman & CEO of Temple-Inland Inc. | ü | • Executive • MDNG * (C) |
| Jodeen A. Kozlak | 56 | 2018 | Founder and CEO of Kozlak Capital Partners, LLC. Former Global SVP of Human Resources of Alibaba Group | ü
| • MDNG * • Securities Investment |
Michael E. Lehman ª | 69 | 2001 | Special Advisor to the Chancellor of the University of Wisconsin and Interim Chief Operating Officer of the Wisconsin School of Business; Former EVP and CFO of Sun Microsystems, Inc. | ü | • Audit (C) • MDNG * |
Melissa B. Lora ª | 57 | 2018 | Corporate Director; Former President of Taco Bell International | ü
| • Audit
• MDNG* |
| Timothy J. Mattke | 44 | 2019 | CEO of MGIC Investment Corp. | | • Executive (C) |
| Gary A. Poliner | 66 | 2013 | Corporate Director; Former President of The Northwestern Mutual Life Insurance Company | ü | • Audit • Risk Management (C) • Securities Investment |
Sheryl L. Sculley ª | 67 | 2019 | Corporate Director, Former City Manager of the City of San Antonio, Texas | ü
| • Audit
• Securities Investment |
| Mark M. Zandi | 60 | 2010 | Chief Economist of Moody's Analytics, Inc. | ü | • Risk Management |
| ª | = | Audit Committee Financial Expert |
| * | = | Management Development, Nominating and Governance Committee |
| C | = | Committee Chair |
| (1) | | As of March 6, 2020 |
MGIC Investment Corporation – 2020 Proxy Statement │ 3
COMPENSATION HIGHLIGHTS
Pay Mix. At-risk performance-based compensation represented a large percentage of our CEOs' 2019 total direct compensation (TDC): it represented 86.4% of our former CEO's actual TDC and 61.7% of our current CEO's actual TDC. Excluding the time-vested long-term equity awards granted to our current CEO upon his election to that position (discussed below under "Leadership Transition" in our CD&A), which are not part of our standard long-term equity program, 80% of our current CEO's actual 2019 TDC was at-risk performance-based compensation.
Former CEO 2019 Pay Mix (% of TDC)
At-Risk Performance-Based Pay: 86.4%
Current CEO 2019 Pay Mix (% of TDC)
At-Risk Performance-Based Pay: 61.7%
Recent Changes. At our 2017, 2018 and 2019 Annual Meetings, more than 95% of the Say on Pay votes cast were in support of the compensation of our NEOs. We view these voting results as confirmation of shareholder support of our executive compensation program and made few changes for 2018 and 2019. However, in response to feedback from an advisor to certain of our shareholders, we reduced the number of metrics used to determine the 2018 and 2019 bonuses of our NEOs to five from ten that we had used in 2017. For more information about the metrics used to determine bonuses, see "Components of our Executive Compensation Program – Annual Bonus" in our CD&A.
4 │ MGIC Investment Corporation – 2020 Proxy Statement
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| MGIC Investment Corporation
P.O. Box 488
MGIC Plaza, 270 East Kilbourn Avenue
Milwaukee, WI 53201
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PROXY STATEMENT
Proxy Statement
Our Board of Directors is soliciting proxies for the Annual Meeting of Shareholders to be held Thursday, April 27, 2023 at 9:00 a.m., Thursday, April 23, 2020, Central time, via webcast at 270 East Kilbourn Avenue, Milwaukee, Wisconsin,www.virtualshareholdermeeting.com/MTG2023, and at any postponement or adjournment of the meeting. In this Proxy Statement we sometimes refer to MGIC Investment Corporation as “the Company,” “we” or “us.” This Proxy Statement and the enclosed form of proxy are being mailed to shareholders beginning on March 20, 2020.24, 2023. If you have any questions about attending our Annual Meeting, you can call our Investor Relations personnel at (414) 347-6480.347-2635.
Proxy Summary
ABOUT THE MEETING AND PROXY MATERIALS
What is the purposeThis summary highlights information contained elsewhere in our Proxy Statement and does not contain all of the Annual Meeting?
At our Annual Meeting, shareholders will act oninformation you should consider. Please review the
matters outlined in our notice of meeting preceding the Table of Contents, including election of the thirteen directors named in theCompany’s complete Proxy Statement
an advisory votebefore voting. Please refer to approve our executive compensation, approvalGlossary of Terms and Acronyms in Appendix A to this Proxy Statement for definitions of certain capitalized terms.Voting Matters and Board Recommendation
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| Proposal | Voting Matter | More Information | Board Vote Recommendation |
| 1 | Election of Twelve Directors | | FOR each Director Nominee |
| 2 | Advisory Vote on Executive Compensation | | FOR |
| 3 | Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation | | 1 YEAR |
| 4 | Ratification of Independent Registered Public Accounting Firm | | FOR |
Our Business Strategies and 2022 Highlights
Through our 2020 Omnibus Incentive Plan, ratificationsubsidiary, Mortgage Guaranty Insurance Corporation (MGIC), we are a leading provider of mortgage insurance to lenders throughout the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2020, and any other matters that properly come before the meeting. In addition, management will report on our performance during the last year and, after the meeting, respond to questions from shareholders.
Who is entitled to vote at the meeting?
Only shareholders of record at the close of business on March 6, 2020, the record date for the meeting, are entitled to receive notice ofUnited States and to participate inFannie Mae and Freddie Mac (the GSEs). Our business strategies are to 1) maximize the Annual Meeting. For each share of Common Stock for which you were shareholder of record on that date, you are entitled to one vote on each matter consideredvalue we create through our mortgage credit enhancement activities; 2) differentiate ourselves through our customer experience; 3) establish a competitive advantage through our digital and analytical capabilities; 4) excel at acquiring, managing and distributing mortgage credit risk and the meeting. On the record date, 340,860,286 shares of Common Stock were entitled to vote.
What is a proxy?
A proxy is another person you legally designate to vote your shares. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card.
How do I vote my shares?
“Street Name” Holders: If you hold your shares in “street name,” meaning your shares are held in a stock brokerage account or by a bank or other nominee, your broker, bank or nominee has enclosed or provided a voting instruction form for you to use to direct the broker, bank or nominee how to vote your shares. Certain of these institutions offer telephone and online voting.
related capital; 5) maintain financial strength through economic
MGIC Investment Corporation – 20202023 Proxy Statement │ 51
ABOUT THE MEETING AND PROXY MATERIALSSUMMARY
Shareholders of Record: If you are a shareholder of record, meaning your shares are registered directly in your name with American Stock Transfer & Trust Company, LLC,cycles; and 6) foster an environment that embraces diversity and best positions our stock transfer agent, you may vote your shares in one of three ways:
By Telephone — Call toll-free 1-800-PROXIES (1-800-776-9437)people to succeed. As we discuss in the United States, or 1-718-921-8500 from other countries,Compensation Discussion & Analysis (CD&A), the compensation of our Named Executive Officers (NEOs) is tied to our financial performance and followto performance against business objectives that directly support these business strategies.
We began 2022 with uncertainty about inflation and interest rates. Additionally, the instructions. Have your proxy card available when you call.
volume of mortgage originations was expected to be 30% lower in 2022 than in 2021. Home prices increased by 17.9% in 2021, but in 2022 the rate of appreciation slowed (seasonally-adjusted Purchase-Only U.S. Home Price Index of the FHFA) and interest rates increased steadily. Despite these headwinds, we demonstrated strong performance, including against performance measures that are considered in determining the annual bonus and long-term equity compensation of our NEOs.Online — Access “www.voteproxy.com” and followWe earned record net income of $865 million on revenues of $1.2 billion. As shown by the on-screen instructions. Have your proxy card available when you access the web page.
By Mail — You may submit a proxy by completing, signing and dating your proxy card and mailing itmetrics below, in the accompanying pre-addressed envelope.
If you attend the meeting, you may withdraw your proxy and vote your shares in person.
Participants in2022, our Profit Sharing and Savings Plan: If you hold shares as a participant innew insurance written was $76.8 billion, reflective of our Profit Sharing and Savings Plan, you may instruct the plan trustee how to vote those shares in any one of three ways:
By Telephone — Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States, or 1-718-921-8500 from other countries, and follow the instructions. Have your proxy card available when you call.
Online — Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page.
By Mail — You may submit a proxy by completing, signing and dating your proxy card and mailing it in the accompanying pre-addressed envelope.
The plan trustee will vote shares held in your account in accordance with your instructionsperformance and the plan terms. The plan trustee will only votemarket size; our insurance in force reached an all-time high of $295 billion; and our adjusted net operating income per diluted share grew by 51%. These metrics, among others, were considered when determining the shares for you if your instructions are received at least three2022 bonuses of our NEOs and our success in advancing our business days before the Annual Meeting date.
Please contact our Investor Relations personnel at (414) 347-6480 if you would like information about attending the Annual Meeting and voting in person. At our meeting, you may be asked to show some form of identification (such as your driver's license).
Can I change my vote after I return my proxy card?
Yes. If you are a shareholder of record, you can revoke your proxy by advising our corporate Secretary in a writing that is received by her at any time before your shares are voted, by granting a new proxy with a later date, or by voting in person at the meeting. If your shares are held in street name by a broker, bank or nominee, or in our Profit Sharing and Savings Plan, you must follow the instructions of the broker, bank, nominee or plan trustee on how to change your vote.
How are the votes counted?
A quorum is necessary to hold the meeting and will exist if a majority of the 340,860,286 shares of Common Stock entitled to vote as of the record date are represented, in person or by proxy, at the meeting. Votes cast by proxy or in person at the meeting will be counted by American Stock Transfer & Trust Company, LLC, which has been appointed by our Board to act as inspector of election for the meeting. All shares voted by proxy are counted as present for purposes of establishing a quorum, including those that abstain or as to which the proxies contain “broker non-votes” as to one or more items.
“Broker non-votes” occur when a broker or other nominee does not vote on a particular matter because the broker or other nominee does not have authority to vote without instructions from the beneficial owner of the shares and has not
strategies.
New Insurance Written (NIW)
6(billions)1
Insurance in Force (IIF)
(billions)2
Adjusted Net Operating Income per Diluted Share3
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| 1 | For purposes of the bonus plan, NIW includes (i) traditional loan level insurance, (ii) loan level insurance executed through a managing agent or directly with a GSE or other entity, and (iii) credit risk transfer (calculated as 1/3 of the unpaid principal balance of the loans committed to be insured by us during the year). NIW received credit for bonus purposes only if its expected risk-adjusted return on capital exceeded the Company's hurdle rate. Because the NIW for the bonus plan includes a more comprehensive definition of NIW when compared to the primary NIW disclosed for financial reporting purposes, NIW figures shown in our financial reporting differ slightly from what is shown in this Proxy Statement. |
| 2 | For purposes of the bonus plan, IIF is the unpaid principal balance, as reported to us, of the loans insured by us, as of the end of the year, adjusted for financial impacts of GSE-mandated mortgage insurance cancellations inconsistent with prior business practices. |
| 3 | This is a non-GAAP measure of performance. For a description of how we calculate this measure and for a reconciliation of this measure to its nearest comparable GAAP measure, see Appendix B to this Proxy Statement. |
2 │ MGIC Investment Corporation – 2020 2023 Proxy Statement
ABOUT THE MEETING AND PROXY MATERIALSSUMMARY
Following are several additional 2022 accomplishments that furthered our business strategies.
received such instructions. Broker non-votes will not be counted as votes for or against any matter. Brokers and other nominees have discretionary authority to vote shares without instructions from the beneficial owner of the shares only for matters considered routine. For the 2020 Annual Meeting, nominees will only have discretionary authority to vote shares on the ratification of the appointment of the independent registered public accounting firm without instructions from the beneficial owner.
What are the Board’s recommendations?
Our Board of Directors recommends a vote FOR all of the nominees for director (Item 1), FOR approval of our executive compensation (Item 2), FOR approval of our 2020 Omnibus Incentive Plan (Item 3) and FOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2020 (Item 4).
If you sign and return a proxy card or voting instruction form without specifying how you want your shares voted, the named proxies will vote your shares in accordance with the recommendations of the Board for all Items and in their best judgment on any other matters that properly come before the meeting.
Will any other items be acted upon at the Annual Meeting?
The Board does not know of any other business to be presented at the Annual Meeting. No shareholder proposals will be presented at this year’s Annual Meeting.
What are the deadlines for submission of shareholder proposals for the next Annual Meeting?
Shareholders may submit proposals on matters appropriate for shareholder action at future Annual Meetings by following the SEC’s rules. Proposals intended for inclusion in next year’s proxy materials must be received by our Secretary no later than November 20, 2020.
Under our Amended and Restated Bylaws (“Bylaws”), a shareholder who wants to bring business before the Annual Meeting that has not been included in the proxy materials for the meeting, or who wants to nominate directors at the meeting, must be eligible to vote at the meeting and give written notice of the proposal to our corporate Secretary in accordance with the procedures contained in our Bylaws. For the 2021 Annual Meeting, the notice must be received by the Secretary no later than February 3, 2021, and no earlier than January 9, 2021. For director nominations, the notice must comply with our Bylaws and provide the information required to be included in the Proxy Statement for individuals nominated by our Board. For any other proposals, the notice must describe the proposal and why it should be approved, identify any material interest of the shareholder in the matter, and include other information required by our Bylaws.
Who pays to prepare, mail and solicit the proxies?
We will pay the cost of soliciting proxies. In addition to soliciting proxies by mail, our employees may solicit proxies by telephone, email, facsimile or personal interview. We have also engaged D.F. King & Co., Inc. to provide proxy solicitation services for a fee of $14,000, plus expenses such as charges by brokers, banks and other nominees to forward proxy materials to the beneficial owners of our Common Stock.
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| Business Strategy | | Results |
| Maximize value created through mortgage credit enhancement activities | è | Earned $865 million of net income on $1.2 billion of revenues, compared to $635 million in 2021. Earned a 17.8% return on beginning shareholders' equity. Increased book value per common share by 4.2%. |
| Differentiate through customer experience | è | Transitioned our sales team to three regions from four. Our sales team continues to be a core and sustainable strength - it is a brand built over decades. Created a Customer Experience team to further modernize and differentiate the value we provide to our customers. |
| Establish competitive advantage through digital and analytical capabilities | è | Developed models to better forecast the mortgage insurance market and the Company's performance. Continued enhancement to our risk-based pricing tool, MiQ, to better compete in an increasingly dynamic market. Established new governance to oversee technological investment and lead an enterprise-wide business prioritization process. |
| Excel at acquiring, managing and distributing mortgage credit risk and related capital | è | Expanded our reinsurance program by: •Executing a 15% quota share reinsurance agreement covering the majority of our 2022 and 2023 NIW. •Entering into a $473.6 million excess of loss reinsurance agreement executed through an insurance linked note transaction. •Placing first forward-commitment excess of loss reinsurance agreement providing up to $175 million in limit covering 2022 NIW. These transactions allowed us to better manage our risk profile and provided a source of capital relief. |
MGIC Investment Corporation – 20202023 Proxy Statement │ 73
STOCK OWNERSHIP
The following table shows the amount of our Common Stock held by persons who were beneficial owners of more than 5% of our shares as of December 31, 2019, based on information filed with the SEC. The "Percent of Class" reflects the percentage of our Common Stock outstanding as of March 6, 2020 represented by such shares.
|
| | | | |
| Name | Shares Beneficially Owned | | Percent of Class |
|
The Vanguard Group, Inc.(1)
100 Vanguard Boulevard, Malvern, PA 19355 | 35,323,266 | | 10.4 | % |
BlackRock, Inc.(2)
55 East 52nd Street, New York, NY 10055 | 17,966,749 | | 5.3 | % |
| | | | | | | | |
(1)Business Strategy | The Vanguard Group, Inc. reported ownership as of December 31, 2019, on behalf of itself and certain subsidiaries. It reported that it had sole dispositive power for 35,134,288 shares and shared dispositive power for 188,978 shares. It further reported that it had sole voting power for 184,013 shares and shared voting power for 54,502 shares. |
| Results |
(2)Maintain financial strength through economic cycles | BlackRock, Inc. reported ownership asè | Moody's Investors Service upgraded MGIC's financial strength rating to A3 and the Issuer Credit Rating of December 31, 2019,MGIC Investment Corporation was upgraded to Baa3. Maintained financial strength and capital flexibility while paying shareholder dividends of $0.36 per share for the year, a 29% increase from 2021. Repurchased 8.7% of our shares outstanding at the beginning of the year. Repurchased $89.1 million principal balance of our outstanding 9% Junior Convertible Debentures, which eliminated approximately 6.8 million potentially dilutive shares. Our debt-to-capital ratio was 10.7 at year-end 2022, compared to 15.7 at year end 2021. Our capital is well in excess of the requirements of the GSEs and state regulators. |
| Foster an environment that embraces diversity and best positions people to succeed | è | Continued to provide a competitive package of benefits that recognize the unique needs of our workforce and their families. Introduced new Career Framework designed to increase competitiveness for new talent. Expanded annual bonus program to include non-exempt co-workers and adjusted bonus calculations to help co-workers better share in Company successes. Expanded our diversity, equity and inclusion work: •Established a Diversity, Equity and Inclusion (DEI) Council. •Launched a DEI site on behalf of itself and certain subsidiaries. It reported that it had sole dispositive powerour company intranet. •Hosted facilitated DEI training sessions for 17,966,749 shares and shared dispositive power for no shares. It further reported that it had sole voting power for 16,459,007 shares and shared voting power for no shares.all officers. •Introduced a company-wide DEI observance schedule. |
84 │ MGIC Investment Corporation – 2020 2023 Proxy Statement
STOCK OWNERSHIPPROXY SUMMARY
Board Nominees
The following table shows the amount of our Common Stock beneficially owned by each of our directors, director nominees and NEOs, and by all directors and executive officers as a group, as of March 6, 2020. Unless otherwise noted, the persons listed in the table have sole voting and investment power over their shares. | | | | | | | | | | | | | | | | | | | | | | | |
| Name | Age1 | Director Since | Primary Occupation | Independent | Committee Memberships2 |
| Analisa M. Allen | 64 | 2020 | Consultant with Gerson Lehrman Group; Former CIO of Data & Analytics and CIO for Home Lending Technology of JP Morgan Chase's consumer bank | Yes | • BT&T • Risk Management |
| Daniel A. Arrigoni | 72 | 2013 | Former President and CEO
of U.S. Bank Home Mortgage Corp. | Yes | • MDNG • Risk Management |
| C. Edward Chaplin ▲ | 66 | 2014 | Former President and CFO of MBIA Inc. | Yes | • Audit (C) • Securities Inv. |
| Curt S. Culver | 70 | 1999 | Chairman of the Board and former CEO of MGIC Investment Corp. | No | • Executive |
| Jay C. Hartzell ▲ | 53 | 2019 | President of the University of Texas at Austin | Yes | • Audit
• Risk Management |
| Timothy A. Holt | 70 | 2012 | Former SVP and Chief Investment Officer of Aetna, Inc. | Yes | • MDNG • Securities Inv. (C) |
| Jodeen A. Kozlak | 60 | 2018 | Founder and CEO of Kozlak Capital Partners, LLC; Former Global SVP of Human Resources of Alibaba Group | Yes | • BT&T (C) • MDNG |
| Michael E. Lehman | 72 | 2001 | Lead Independent Director of MGIC Investment Corp; Former EVP and CFO of Sun Microsystems, Inc. | Yes | • BT&T • Executive • MDNG (C) |
Teresita M. Lowman ▲ | 58 | 2022 | Strategic Advisor to Launch Factory; Former VP of DXC Technology Company | Yes | • Audit • BT&T |
| Timothy J. Mattke | 47 | 2019 | CEO of MGIC Investment Corp. | No | • Executive (C) |
| Sheryl L. Sculley ▲ | 70 | 2019 | Consultant with Strategic Partnerships, Inc.; Adjunct Professor at the University of Texas at Austin; Former City Manager of the City of San Antonio, Texas | Yes | • Audit • Securities Inv. |
| Mark M. Zandi | 63 | 2010 | Chief Economist of Moody's
Analytics, Inc. | Yes | • Risk Management (C) • Securities Inv. |
| 1 | | As of March 24, 2023 |
| 2 | | BT&T = Business Transformation and Technology; MDNG = Management Development, Nominating and Governance |
| ▲ | = | Audit Committee Financial Expert |
| C | = | Committee Chair |
|
| | | | | | | | | | | | |
| Name of Beneficial Owner | Common Stock Owned Directly(1) | Common Stock Owned Indirectly(2) | Restricted Stock and Common Stock Underlying RSUs(3) | Total Number of Shares Beneficially Owned | Director Deferred Stock Units / Additional Underlying Units | Total Shares Beneficially
Owned Plus Underlying Units |
| Daniel A. Arrigoni | — |
| 25,000 |
| — |
| 25,000 |
| 7,394(4) |
| 32,394 |
|
| Cassandra C. Carr | 5,000 |
| — |
| — |
| 5,000 |
| 30,711(4) |
| 35,711 |
|
| C. Edward Chaplin | 10,000 |
| — |
| — |
| 10,000 |
| 50,727(4) |
| 60,727 |
|
| Curt S. Culver | 11,504 |
| 1,238,818 |
| — |
| 1,250,322 |
| 7,394(4) |
| 1,257,716 |
|
| Jay C. Hartzell | — |
| — |
| — |
| — |
| 9,240(4) |
| 9,240 |
|
| Timothy A. Holt | 20,000 |
| — |
| — |
| 20,000 |
| 75,217(4) |
| 95,217 |
|
| Kenneth M. Jastrow, II | 1,146 |
| — |
| 31,552 |
| 32,698 |
| 37,947(4) |
| 70,645 |
|
| Jodeen A. Kozlak | — |
| — |
| — |
| — |
| 13,322(4) |
| 13,322 |
|
| Michael E. Lehman | 26,939 |
| — |
| 3,050 |
| 29,989 |
| 8,794(4) |
| 38,783 |
|
| Melissa B. Lora | — |
| — |
| — |
| — |
| 22,474(4) |
| 22,474 |
|
| Gary A. Poliner | — |
| — |
| — |
| — |
| 126,372(4) |
| 126,372 |
|
| Sheryl L. Sculley | — |
| — |
| — |
| — |
| 9,240(4) |
| 9,240 |
|
| Mark M. Zandi | — |
| — |
| — |
| — |
| 49,477(4) |
| 49,477 |
|
| Timothy M. Mattke | 327,321 |
| 873 |
| — |
| 328,194 |
| 615,600(5) |
| 943,794 |
|
| Salvatore A. Miosi | 169,602 |
| 2,416 |
| — |
| 172,018 |
| 483,600(5) |
| 655,618 |
|
| Nathaniel H. Colson | 4,875 |
| — |
| — |
| 4,875 |
| 135,782(5) |
| 140,657 |
|
| James J. Hughes | — |
| 178,759 |
| — |
| 178,759 |
| 371,100(5) |
| 549,859 |
|
| Paula C. Maggio | 3,712 |
| — |
| — |
| 3,712 |
| 241,334(5) |
| 245,046 |
|
Patrick Sinks(7) | 632,946 |
| 10,706 |
| — |
| 643,652 |
| 658,000(5) |
| 1,301,652 |
|
| Stephen Mackey | 56,007 |
| — |
| — |
| 56,007 |
| — |
| 56,007 |
|
| All Directors and Executive Officers as a Group (20 Persons) | 617,358 |
| 1,445,866 |
| 34,602 |
| 2,097,826(6) |
| 2,506,925 |
| 4,604,751 |
|
| |
(1) | Includes shares for which investment power is shared as follows: all directors and executive officers as a group — 29,389. |
Shares held in our Profit Sharing and Savings Plan as follows: Mr. Sinks — 10,706; Mr. Mattke — 873; Mr. Miosi — 2,416; and all executive officers as a group — 3,289 (Mr. Sinks was not an executive officer as of March 6, 2020).
Shares held by a family trust affiliated with: Mr. Arrigoni — 25,000; Mr. Culver — 981,755; Mr. Hughes — 178,759; and all directors and executive officers as a group — 1,185,514.
Shares held by a Foundation for which Mr. Culver has no pecuniary interest but shares voting and dispositive power — 257,063.
Shares underlying RSUs that were issued to our non-management directors pursuant to our former RSU award program (See “Compensation of Directors — Former RSU Award Program” in our 2015 Proxy Statement filed with the SEC on March 24, 2015 (“our 2015 Proxy Statement”)) and could be settled in shares of Common Stock within 60 days of the record date as follows: Mr. Jastrow — 3,050 and Mr. Lehman — 3,050. Directors have neither voting nor investment power over the shares underlying any of these units.
19,769 shares underlying RSUs that are held by Mr. Jastrow under the Deposit Share Program for Non-Employee Directors under our 2002 Stock Incentive Plan (See “Compensation of Directors — Former Deposit Share Program” in our 2015 Proxy Statement) and could be settled in shares of Common Stock within 60 days of the record date. Mr. Jastrow has neither voting nor investment power over the shares underlying any of these units.
6,733 shares of restricted stock that Mr. Jastrow held under the Deposit Share Program for Non-Employee Directors under our 1991 and 2002 Stock Incentive Plans. Mr. Jastrow has sole voting power and no investment power over these shares.
2,000 shares held by Mr. Jastrow under our 1993 Restricted Stock Plan for Non-Employee Directors. (See “Compensation of Directors — Former Restricted Stock Plan” in our 2015 Proxy Statement). Mr. Jastrow has sole voting power and no investment power over these shares.
MGIC Investment Corporation – 20202023 Proxy Statement │ 95
STOCK OWNERSHIPPROXY SUMMARY
| |
(4) | Represents share equivalents held under our Deferred Compensation Plan for Non-Employee Directors (See “Compensation of Directors — Deferred Compensation Plan and Annual Grant of Share Units” below) over which the directors have neither voting nor investment power. For all directors as a group — 448,309. |
| |
(5) | Represents shares underlying stock-settled RSUs that cannot be settled in Common Stock within 60 days of the record date. For all executive officers as a group — 2,058,616. |
| |
(6) | As of March 6, 2020, no individual director or executive officer beneficially owned more than 1% of the Common Stock outstanding, and all directors and executive officers as a group beneficially owned less than 1% of the shares of Common Stock outstanding. |
| |
(7) | Reflects ownership as of retirement date of January 31, 2020, adjusted to reflect known March 4, 2020 vesting of RSUs. |
Corporate Sustainability Highlights
As pioneers of the modern form of private mortgage insurance 65 years ago, MGIC has helped millions of families achieve homeownership sooner. This is a touchstone we come back to when we think about the work we do, how we do it, and why we do it. Homeownership can be a powerful vehicle for financial stability and generational wealth, which means that our impact – and our responsibility – extends well beyond the walls of our company, beyond our investors, beyond our customers, even beyond the consumers who use our product. Our work supports resilient communities and the social fabric at large.
Keeping this holistic picture in mind is critical to doing well by each of the audiences to whom we are accountable. Our initiatives benefit greatly from our highly-engaged Board of Directors, who provide essential vision and oversight, in partnership with the members of our Corporate Sustainability Executive Council, who advance these efforts at the management level, cascading our priorities down through functional areas of our business.
In our Corporate Sustainability Report, published on our website, you can see how our commitment bears out across the work we do, from our internal approach to human capital to our external considerations for environmental and social impact, including, most notably, our efforts in the affordable housing space. We are not including the information contained in that report as a part of, or incorporating it by reference into, this Proxy Statement.
Compensation Highlights
Pay Opportunity Mix. At-risk performance-based compensation represented a significant majority of the 2022 total direct compensation (TDC) opportunity of our NEOs.
Long-Term Equity Incentives. To align our long-term equity awards with the interests of shareholders, 100% of the long-term equity awards granted in February 2022 to our NEOs are performance-based and cliff vest after three years based on achievement of a three-year cumulative adjusted book value (ABV) per share growth goal.
Performance-Based Bonus. Our bonus program is designed to strongly align pay with our performance. Bonus payouts for 2022 were based on our achievement against three financial performance goals (return on equity (ROE), NIW and IIF), and performance against three specific business objectives.
Best Practices. Our compensation program is grounded in best practices, which include strong stock ownership guidelines for NEOs, no hedging or pledging of our stock, a long-standing “clawback” policy, limited change in control benefits (with no tax gross-ups) and modest perquisites.
6 │ MGIC Investment Corporation – 2020 2023 Proxy Statement
CORPORATE GOVERNANCE AND BOARD MATTERS
Corporate Governance and Board Matters
The Board of Directors oversees the management of the Company and our business. The Board selects our CEO, andwho in conjunction with our CEO selects the rest of our senior management team, which is responsible for operating our business.
Corporate Governance Guidelines and
Code of Business Conduct
and Ethics
The Board has adopted Corporate Governance Guidelines, which set forth a framework for our governance. The Guidelines cover the Board’s composition, leadership, meeting process, director independence, Board membership criteria, limitations on other directorships, committee structure, succession planning and director compensation. Among other things, the Board meets in executive session outside the presence of any member of our management afterduring at least two Board meetings annually at which directors are present in person and at any additional times determined by the Board or the Lead Director. Mr. JastrowLehman presides at these sessions and has served as the Board’s Lead Director since the position was created in October 2009.July 2020. See “ — Board“Board Leadership” for information about the Lead Director’s responsibilities and authority. The Corporate Governance Guidelines provide that a director shall not be nominated by the Board for re‑election if at the date of the Annual Meeting of Shareholders, the director is age 74 or more. The Corporate Governance Guidelines also provide that a director who retires from his or her principal employment or joins a new employer shall offer to resign from the Board. Unless the Board determines that a Chief Executive Officer who is Chairman of the Board should continue as Chairman of the Board after his or her tenure as Chief Executive Officer, a director who is an officer of the Company or a subsidiary and leaves the Company shall resign from the Board. In 2014, the Board determined that Mr. Culver should become non-executive Chairman of the Board upon retirement from his position as Chief Executive Officer in 2015. In connection with Mr. Sinks stepping down from his role as our President and Chief Executive Officer in 2019 and his 2020 retirement from the Company, in 2019, Mr. Sinks resigned from the Board.
We have a Code of Business Conduct and Ethics emphasizing our commitment to conducting our business in accordance with legal requirements and high ethical standards. The Code applies to all employees, including our executive officers, and specified portions areis also applicable to our directors. Certain portions of the Code that apply to transactions with our executive officers, directors, and their immediate family members are described under “Other Matters – Related Person Transactions” below. These descriptions are subject to the actual terms of the Code.
Our Corporate Governance Guidelines and our Code of Business Conduct and Ethics are available on our website (http:(http://mtg.mgic.com)mtg.mgic.com) under the “Leadership & Governance; Documents” links. Written copies of these documents are available to any shareholder who submits a written request to our Secretary. We intend to disclose on our website any waivers from, or amendments to, our Code of Business Conduct that are subject to disclosure under applicable rules and regulations.
Director Independence
Our Corporate Governance Guidelines regarding director independence provide that a director is not independent if the director has any specified disqualifying relationship with us. The disqualifying relationships are equivalent to those of the independence rules of the New York Stock Exchange (“NYSE”)(NYSE), except that our disqualification for board interlocks is more stringent than under the NYSE rules. Also, for a director to be independent under the Guidelines, the director may not have any material relationship with us. For purposes of determining whether a disqualifying or material relationship exists, we consider relationships with MGIC Investment Corporation and its consolidated subsidiaries.
The Board has determined that all of our directors except for Mr. Culver, our former CEO, and Mr. Mattke, our current CEO, are independent under the Guidelines and the NYSE rules. The Board made its
MGIC Investment Corporation – 2023 Proxy Statement │ 7
CORPORATE GOVERNANCE AND BOARD MATTERS
independence determinations by considering whether any disqualifying relationships existed during the periods specified under the Guidelines and the NYSE rules. To determine that there were no material relationships, the Board applied categorical standards that it had adopted and incorporated into our Corporate Governance Guidelines. All independent directors met these standards.
MGIC Investment Corporation – 2020 Proxy Statement │ 11
CORPORATE GOVERNANCE AND BOARD MATTERS
Under these standards, a director is not independent if payments under transactions between us and a company of which the director is an executive officer or 10% or greater owner exceeded the greater of $1 million or 1% of the other company’s gross revenues. Payments made to and payments made by us are considered separately, and this quantitative threshold is applied to transactions that occurred in each of the three most recent fiscal years of the other company. Also under these standards, a director is not independent if during our last three fiscal years the director:
was an executive officer of a charity to which we made contributions,
•was an executive officer or member of a law firm or investment banking firm providing services to us,us;
•was an executive officer of a charity to which we made contributions; or
•received any direct compensation from us other than as a director, or if during such period a member of the director’s immediate family received compensation from us.
In making its independence determinations, the Board considered payments we made to Moody’s Analytics (of which Dr. Zandi is an executive officer) for research and subscription services for Moody’s Economy.com and related publications, and payments to Moody’s Investors Service for credit rating services. These transactions were below the quantitative threshold contained in our Corporate Governance Guidelines and were entered into in the ordinary course of business by us, Moody’s Analytics and Moody’s Investors Service.
Related Person Transactions
Among other things, our Code of Conduct and Ethics prohibits us from entering into transactions in which our executive officers, chief accounting officer, or any their respective immediate family members have a material personal financial interest (either directly or through a company with which the officer has a material relationship) unless all of the following conditions are satisfied:
•the terms of the contract or transaction are fair and equitable, at arm’s length and are not detrimental to our interests;
•the existence and nature of the interests of the officer are fully disclosed to and approved by the Audit Committee; and
•the interested officer has not participated on our behalf in the consideration, negotiation or approval of the contract or transaction.
The Code defines a material interest as one in which our officer or officer's immediate family member is a director or officer of the counterparty to the transaction, or our officer or a member of our officer’s immediate family has a financial interest in such counterparty or any of its affiliates that in the aggregate at least 10% of the value of such counterparty or the consolidated value of the organization's affiliates. Our Audit Committee does not consider payments and benefits arising in the ordinary course of employment with us, or through services as a director, to be “transactions” subject to its approval.
In addition, the Code requires Audit Committee approval of all transactions with any director or a member of the director’s immediate family, other than transactions involving the provision of goods or services in the ordinary course of business of both parties. The Code contemplates that our non-management directors will disclose all transactions between us and parties related to the director, even if they are in the ordinary course of business.
Under its Charter, the Audit Committee is responsible to conduct a review and oversee all related party transactions for potential conflicts of interest and prohibit such transactions if the Committee determines them to be inconsistent with the interests of the Company. For purposes of the Charter,
8 │ MGIC Investment Corporation – 2023 Proxy Statement
CORPORATE GOVERNANCE AND BOARD MATTERS
“related party transaction” means a transaction in which the Company (or its affiliates) is a participant, the amount exceeds $120,000, and in which one of the following had or will have a direct or indirect material interest: an executive officer, director, or director nominee, or their immediate family members or persons sharing their households, or 5% shareholders.
Board Leadership
Mr. Culver serves as non-executive Chairman of the Board and Mr. JastrowLehman serves as Lead Director. Under this structure, the Chairman chairs Board meetings, where the Board discussion includes strategic and business issues. The Board believes that this approach makes sense at this timeis appropriate because Mr. Culver, as ourthe Company's former CEO, is very familiar with our business and strategic plans as reviewed by the Board. Mr. Culver has been with us sincejoined the Company in 1985, and served as Chief Executive Officer from 2000 until his retirement in 2015, when he became our non-executive Chairman of the Board.
Because the Board also believes that strong, independent Board leadership is a critical aspect of effective corporate governance, the Board maintains the position of Lead Director. The Lead Director is an independent director selected by the independent directors. Mr. Jastrow has served as the Lead Director since the position was established in 2009. The Lead Director’s responsibilities and authority include:
•presiding at all meetings of the Board at which the Chairman is not present;
•having the authority to call and lead executive sessions of directors without the presence of any director who is an officer (or if determined by the Board, a former officer) (the Board meets in executive session afterduring at least two Board meetings each year);
•serving as a conduit between the CEO and the independent directors to the extent requested by the independent directors;
•serving as a conduit for the Board’s informational needs, including proposing topics for Board meeting agendas; and
•being available, if requested by major shareholders, for consultation and communication.
The Board believes that a leader intimately familiar with our business and strategic plans serving as Chairman, together with an experienced and engaged Lead Director, is the most appropriate leadership structure for the Board at this time. The Board periodically reviews periodically the structure of the Board and the Board’s leadership.
Communicating with the Board
Shareholders and other interested persons can communicate with members of the Board, non-management members of the Board as a group or the Lead Director, by sending a written communication to our Secretary, addressed to: MGIC Investment Corporation, Secretary, P.O. Box 488, Milwaukee, WI 53201. The Secretary will pass along any such communication, other than a solicitation for a product or service, to the Lead Director.
12 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 9
CORPORATE GOVERNANCE AND BOARD MATTERS
Director Selection
The Board believes that the Board, as a whole, should possess a combination of skills, professional experience, and diversity of backgrounds necessary to oversee our business. In addition, the Board believes there are certain attributes every director should possess, as reflected in the Board’s membership criteria. Accordingly, the Board and the Management Development, Nominating and Governance Committee (the Committee) consider the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and our current and future needs.
The Management Development, Nominating and Governance Committee is responsible for developing Board membership criteria and recommending these criteria to the Board. The criteria, which are set forth in our Corporate Governance Guidelines, include an inquiring and independent mind, sound and considered judgment, high standards of ethical conduct and integrity, well-respected experience at senior levels of business, academia, government or other fields, ability to commit sufficient time and attention to Board activities, anticipated tenure on the Board, and whether an individual will enable the Board to continue to have a substantial majority of independent directors. In addition, the Management Development, Nominating and Governance Committee in conjunction with the Board, periodically evaluates the composition of the Board to assess the skills and experience that are currently represented on the Board, as well as the skills and experience that the Board will find valuable in the future. The Management Development, Nominating and Governance Committee seeks a variety of occupational and personal backgrounds on the Board in order to obtain a range of viewpoints and perspectives and enable the Board to have access to a diverse body of talent and expertise relevant to our activities. The Committee also seeks to enhance the diversity of the Board in other areas, such as geography, age, race, gender and ethnicity. The Committee’s and the Board’s evaluation of the Board’s composition enables the Board to consider the skills and experience it seeks in the Board as a whole, and in individual directors, as our needs evolve and change over time and to assess the effectiveness of the Board’s efforts at pursuing diversity. In identifying director candidates from time to time, the Management Development, Nominating and Governance Committee may establish specific skills and experience that it believes we should seek in order to constitute a balanced and effective board.
MGIC Investment Corporation – 2020 Proxy Statement │ 13
CORPORATE GOVERNANCE AND BOARD MATTERS
The table below summarizes certain skills and experiences considered important by the Board, and how those skills and experiences are relevant to the Company and its business strategies, and how they are represented in the board members standing for election at the Annual Meeting of Shareholders.
|
| | |
Skills and Experience | Relevance to MGIC | Board Composition |
Accounting | We operate in a complex financial and regulatory environment. | |
Chief Executive Officer | Experience at the highest level of an organization provides expertise that will foster participation in the development and implementation of the Company's business strategies. | |
Financial | Knowledge of finance or financial reporting and experience with debt and capital markets transactions is important to executing our business strategies. | |
Human Resources | As a financial services firm, human capital represents an important asset. Knowledge of human resources matters is important to executing our business strategies. | |
Insurance | Insurance industry experience provides understanding of our business and strategies. | |
Investments | We manage a large and long-term investment portfolio to support our obligations to pay future claims of our policyholders. | |
Public Company Executive Experience | As a complex, publicly-held company, practical insight into shareholder concerns and governance matters is important. | |
Regulatory / Public Affairs | Our business requires compliance with a variety of federal, state and GSE requirements, and involves relationships with various government and non-government organizations. | |
Housing Markets / Risk Management | A main component of our business involves taking and managing risk associated with the housing markets. | |
Technology / Cyber | We continue to undergo a business process transformation involving upgrades to our technology and to manage our cybersecurity risks. | |
We have continued to refresh and diversify our Board over the last five years as four new independent directors joined our Board, two directors did not stand for re-election, our new CEO joined the Board and our former CEO retired from the Board. Ms. Carr is not standing for re-election at our 2020 Annual Meeting due to the age-related retirement policy in our Corporate Governance Guidelines. The following charts reflect the tenure, ages and diversity of the board members standing for election at the Annual Meeting of Shareholders.
14 │ MGIC Investment Corporation – 2020 Proxy Statement
COMMITTEE MEMBERSHIP AND MEETINGS
The Board of Directors held six meetings during 2019. Each director serving in 2019 attended at least 75% of the meetings of the Board and committees of the Board on which he or she served. The Annual Meeting of Shareholders is scheduled in conjunction with a Board meeting and, as a result, directors are expected to attend the Annual Meeting. All of our directors serving on the Board at that time attended the 2019 Annual Meeting of Shareholders.
The Board has five standing committees: Audit; Management Development, Nominating and Governance; Risk Management; Securities Investment; and Executive. Information regarding these committees is provided below. Each of the Audit; Management Development, Nominating and Governance; Risk Management and Securities Investment Committees consists entirely of independent directors and the charters for those committees are available on our website (http://mtg.mgic.com) under the “Leadership & Governance; Documents” links. Written copies of these charters are available to any shareholder who submits a written request to our Secretary. The functions of the Executive Committee are established under our Bylaws and are described below.
Current committee membership and the number of 2019 committee meetings are set forth below.
|
| | | | | |
| | Audit | Executive | Management Development, Nominating and Governance | Risk Management | Securities Investment |
| Daniel A. Arrigoni | ● | | | ● | |
Cassandra C. Carr(1) | | | ● | ● | |
| C. Edward Chaplin | | | | ● | ● |
| Curt S. Culver | | ● | | | |
| Jay C. Hartzell | ● | | | ● | |
| Timothy A. Holt | ● | | | | C |
| Kenneth M. Jastrow, II | | ● | C | | |
| Jodeen A. Kozlak | | | ● | | ● |
| Michael E. Lehman | C | | ● | | |
| Melissa B. Lora | ● | | ● | | |
| Timothy J. Mattke | | C | | | |
| Gary A. Poliner | ● | | | C | ● |
| Sheryl L. Sculley | ● | | | | ● |
| Mark M. Zandi | | | | ● | |
| 2019 Meetings | 14 | 0 | 4 | 4 | 6 |
| C = Chairman | | | | | |
| (1) Ms. Carr is not standing for re-election at our 2020 Annual Meeting of Shareholders. |
Audit Committee
The Audit Committee assists the oversight by the Board of Directors of the integrity of MGIC Investment Corporation’s financial statements; the effectiveness of its system of internal controls; the qualifications, independence and performance of its independent accountants; the performance of its internal audit function; and its compliance with legal, regulatory and non-financial GSE requirements. The Committee supports the Board’s role in overseeing the risks facing the Company, as described in more detail below under “Board Oversight of Risk.”
All members of the Audit Committee meet the heightened independence criteria that apply to Audit Committee members under SEC and NYSE rules. The Board has determined that Messrs. Hartzell, Holt and Lehman and Mses. Lora and Sculley are “audit committee financial experts” as defined in SEC rules.
MGIC Investment Corporation – 2020 Proxy Statement │ 15
COMMITTEE MEMBERSHIP AND MEETINGS
Management Development, Nominating and Governance Committee
The Management Development, Nominating and Governance Committee is responsible for overseeing our executive compensation program, including approving corporate goals relating to compensation for our CEO, determining our CEO’s annual compensation and approving compensation for our other senior executives. The Committee also makes recommendations to the Board regarding the compensation of directors. The Committee may delegate its responsibilities to subcommittees of the Committee.
The Committee receives information that includes: detailed breakdowns of the compensation of the NEOs, the amount, if any, that our NEOs realized in at least the previous five years pursuant to sales of shares awarded under equity grants; the total amount of stock and RSUs held by each NEO (RSUs are sometimes referred to in this Proxy Statement as “restricted equity”); and the other compensation information disclosed in this Proxy Statement under the SEC’s rules. The Committee supports the Board’s role in overseeing the risks facing the Company, as described in more detail below under “Board Oversight of Risk.”
The Committee has retained Frederic W. Cook & Co. (the “Compensation Consultant”), a nationally recognized executive compensation consulting firm, to advise it. The Committee retains the Compensation Consultant to, among other things, help it evaluate and oversee our executive compensation program and review the compensation of our directors. The scope of the Compensation Consultant’s services during 2019 is described under “Role of the Compensation Consultant” in our Compensation Discussion and Analysis below. In providing its services to the Committee, the Compensation Consultant regularly interacts with our senior management. The Compensation Consultant does not provide any services to us, other than the consulting services noted above. The Committee has assessed the independence of the Compensation Consultant pursuant to SEC and NYSE rules and concluded that its work for the Committee does not raise any conflict of interest.
The Committee also evaluates the annual performance of the CEO, oversees the CEO succession planning process, and makes recommendations to the Board to fill open director and committee member positions. In addition, the Committee reviews our Corporate Governance Guidelines and oversees the Board’s self-evaluation process. Finally, the Committee identifies new director candidates through recommendations from Committee members, other Board members and our executive officers, and will consider candidates who are recommended by shareholders.
Shareholders may recommend a director candidate for consideration by the Committee by submitting background information about the candidate, a description of his or her qualifications and the candidate’s consent to being recommended as a candidate. If the candidate is to be considered for nomination at the next annual shareholders meeting, the submission must be received by our corporate Secretary in writing no later than November 20, 2020. Information on shareholder nominations is provided under “About the Meeting and Proxy Materials” in response to the question “What are the deadlines for submission of shareholder proposals for the next Annual Meeting?”
The Committee evaluates new director candidates underconsidering these skills and experiences, and the criteria described under “Director Selection”listed above, as well as other factors the Committee deems relevant, through background reviews, input from other members of the Board and our executive officers, and personal interviews with the candidates attended by at least the Committee Chair. The Committee will evaluate any director candidates recommended by shareholders using the same process and criteria that apply to candidates from other sources.
All members of the Management Development, Nominating and Governance Committee meet the heightened independence criteria that apply to compensation committee members under SEC and NYSE rules.
Risk Management Committee
The Risk Management Committee assists the Board in overseeing the Company's enterprise risk management framework, including the Company's risk appetite on an enterprise-wide basis, and in overseeing certain key risks, including mortgage
1610 │ MGIC Investment Corporation – 20202023 Proxy Statement
COMMITTEE MEMBERSHIPCORPORATE GOVERNANCE AND MEETINGSBOARD MATTERS
| | | | | | | | |
| Skills and Experience | Relevance to MGIC | Board Composition |
| Accounting | We operate in a complex financial and regulatory environment. | 5 of 12 directors
☑☑☑☑☑☐☐☐☐☐☐☐ |
| Chief Executive Officer | Experience at the highest level of an organization provides expertise that will foster participation in the development and implementation of the Company's business strategies. | 5 of 12 directors
☑☑☑☑☑☐☐☐☐☐☐☐ |
| Data & Analytics | Experience with the use of structured and unstructured data, as well as the tools and processes necessary to enable the development of actionable insights via advanced quantitative and statistical methods is important as we continue to pursue our strategic initiatives. | 4 of 12 Directors
☑☑☑☑☐☐☐☐☐☐☐☐ |
| Financial | Knowledge of finance or financial reporting and experience with debt and capital markets transactions is important to executing our business strategies. | 11 of 12 directors
☑☑☑☑☑☑☑☑☑☑☑☐ |
| Housing Markets / Risk Management | A main component of our business involves taking and managing risk associated with the housing markets. | 11 of 12 directors
☑☑☑☑☑☑☑☑☑☑☑☐ |
| Human Resources | As a financial services firm, human capital represents an important asset. Knowledge of human resources matters is important to executing our business strategies. | 10 of 12 directors
☑☑☑☑☑☑☑☑☑☑☐☐ |
| Insurance | Insurance industry experience provides understanding of our business and strategies. | 6 of 12 directors
☑☑☑☑☑☑☐☐☐☐☐☐ |
| Investments | We manage a large and long-term investment portfolio to support our obligations to pay future claims of our policyholders. | 10 of 12 directors
☑☑☑☑☑☑☑☑☑☑☐☐ |
| Public Co. Executive Experience | As a complex, publicly-held company, practical insight into shareholder concerns and governance matters is important. | 10 of 12 directors
☑☑☑☑☑☑☑☑☑☑☐☐ |
| Regulatory / Public Affairs | Our business requires compliance with a variety of federal, state and GSE requirements, and involves relationships with various government and non-government organizations. | 9 of 12 directors
☑☑☑☑☑☑☑☑☑☐☐☐ |
| Technology / Cyber | We continue to undergo a business process transformation involving upgrades to our technology and to manage our cybersecurity risks. | 4 of 12 Directors
☑☑☑☑☐☐☐☐☐☐☐☐ |
credit risk. In connection with its oversight of mortgage credit risk,We have continued to refresh and diversify our Board over the Committee monitorslast five years as six new independent directors joined our Board, two directors did not stand for re-election due to the performanceage-related retirement policy in our Corporate Governance Guidelines, two directors did not stand for re-election for personal reasons, our new CEO joined the Board and our former CEO retired from the Board. As a result of the Company's insured books of businesschanges in our Board composition over the five-year period, and the principal factors affecting their performance; it discusseschanges proposed to occur at the Company's products, including premium rates, returns, underwriting guidelines2023 Annual Meeting of Shareholders, our Board has increased its gender and quality controls,racial diversity from 27% to 42%. The following table and external reinsurance programs;charts reflect the tenure, ages and it reviews the insurance operating environment, including the state of local and regional housing markets, competitive forces affecting the Company, the Company’s relationships with residential mortgage lenders and mortgage investors, regulatory and GSE capital requirements, and lender, GSE and government programs. The Risk Management Committee supports the Board’s role in overseeing other risks facing the Company, as described in more detail below under “Board Oversight of Risk.”
Securities Investment Committee
The Securities Investment Committee oversees management of our investment portfolio and the investment portfoliosdiversity of the Company’s employee benefit plans by those persons (employeesboard members standing for election at the Annual Meeting of the Company or external asset managers) who are managing such assets on a day-to-day basis. The Committee also makes recommendations to the Board with respect to our retirement benefit plans that are available to employees generally, capital management (other than external reinsurance), including repurchase of common stock and debt, and external funding. Finally, the Committee supports the Board’s role in overseeing the risks facing the Company, as described in more detail below under “Board Oversight of Risk.”Shareholders.
| | | | | | | | |
| Board Diversity Matrix (as of March 24, 2023) | Female | Male |
| African American or Black | 0 | 1 |
| Hispanic or Latinx | 1 | 0 |
| White | 3 | 7 |
| Total | 4 | 8 |
MGIC Investment Corporation – 2023 Proxy Statement │ 11
CORPORATE GOVERNANCE AND BOARD MATTERS
The Executive Committee provides an alternative to convening a meeting of the entire Board should a matter arise between Board meetings that requires Board authorization. The Committee is established under our Bylaws and has all authority that the Board may exercise with the exception of certain matters that under the Wisconsin Business Corporation Law are reserved to the Board itself.
Board 
Oversight of Risk and Corporate Sustainability Matters
Management
Our senior management is charged with identifying and managing the risks facing our business and operations. The Company's Senior Management Oversight Committee (SMOC) serves as its primary risk management governance organization. The SMOC oversees the Company’s enterprise risk management framework; maintains an enterprise view of risk across a set of identified key risks that may exist from time to time; and provides support and reporting to the Board's Risk Management Committee.
The Company's Corporate Sustainability Executive Council supports the Company's on-going initiatives related to environmental, health and safety, corporate social responsibility, corporate governance, sustainability, and other public policy matters relevant to the Company. In performing this general responsibility, the Council has discretion to: adopt the Company’s general strategy with respect to corporate sustainability matters; identify current and emerging corporate sustainability issues that may affect the Company’s business, strategy, operations, performance, or public image; make recommendations regarding policies, practices, procedures, or disclosures to address corporate sustainability matters; oversee the Company’s internal and external reporting and disclosures surrounding corporate sustainability matters; and advise on material concerns of shareholders or stakeholders regarding corporate sustainability matters. The Corporate Sustainability Executive Council makes regular reports to the Company's senior leaders and to the relevant Committee(s) of the Board of Directors of the Company.
12 │ MGIC Investment Corporation – 2023 Proxy Statement
CORPORATE GOVERNANCE AND BOARD MATTERS
Board of Directors and Committees
The Board of Directors is responsible for oversight of how our senior management addresses these risks, including those associated with corporate sustainability matters, to the extent they are material. In this regard, the Board seeks to understand the material risks we face and to allocate, among the full Board and its committees, responsibilities for overseeing how management addresses the risks, including the risk management systems and processes that management uses for this purpose. Overseeing risk is an ongoing process. Accordingly, the Board periodically considers risk throughout the year and also with respect to specific proposed actions.
The Board implements its risk oversight function both as a whole and through delegation to various committees. These Each of the Board's committees (other than the Executive Committee) meet regularly, and report back to the full Board. The following four committees play significant roles in carrying out the risk and corporate sustainability oversight function.
The Management Development, Nominatingfunctions, and Governance Committee evaluates the incentives and risks associated with our compensation philosophy and programs, and oversees operational risks related to human resources.
The Risk Management Committee assists the Board in overseeing the Company's enterprise risk management framework, including the Company's risk appetite on an enterprise-wide basis, and in overseeing the following key Company risks: Mortgage Credit; Capital Risk relatedreport back to the required amountfull Board. Each of capital; non-investment portfolio counterparty risk; model risk; operational risk related to underwriting, servicing, claims, risk and sales; and macroeconomic business risk.
MGIC Investment Corporation – 2020 Proxy Statement │ 17
COMMITTEE MEMBERSHIP AND MEETINGS
The Securities Investment Committee oversees risks related to our investment portfolio and capital management, which includes market risk; investment portfolio counterparty risk; capital risk related to our capital structure, access to capital and credit rating; and liquidity risk.
The Audit Committee oversees our processes for assessing risks (other than risks overseen by other committees) andtheir roles in the effectiveness of our system of internal controls. In performing this function, the Audit Committee considers information from our independent registered public accounting firm and internal auditors and discusses relevant issues with management, the Internal Audit Director and the independent registered public accounting firm. The Audit Committee assists the Board in overseeing compliance risk; cybersecurity risk; and operational risk related to information systems, finance and legal matters. In addition, the Audit Committee meets with the Chief Risk Officer and the Chairman of the Risk Management Committee to discuss and review in a general manner the Risk Management Committee's oversight of the Company's enterprise risk management framework.
is described below under "Board Meetings and Committees."
We believe that our leadership structure, discussed in “Board Leadership” above, supports the risk oversight function of the Board. Our former CEO serves as Chairman of the Board and has a wealth of experience with the risks of our Company and industry. Our current CEO is a director who keeps the Board informed about the risks we face. In addition, independent directors chair the various committees involved with risk oversight and there is open communication between senior management and directors.
Board Meetings and Committees
The Board of Directors held five meetings during 2022. Each director elected at our 2022 Annual Meeting of Shareholders attended at least 75% of the meetings of the Board and committees of the Board on which he or she served. The Annual Meeting of Shareholders is scheduled in conjunction with a Board meeting and, as a result, directors are expected to attend the Annual Meeting. The 2022 Annual Meeting of Shareholders was attended by each of the directors who stood for election at the Meeting.
The Board has six standing committees: Audit; Business Transformation and Technology; Management Development, Nominating and Governance; Risk Management; Securities Investment; and Executive. Information regarding these committees is provided below. With the exception of the Executive Committee, each committee consists entirely of independent directors and the charters for those committees are available on our website (http://mtg.mgic.com) under the “Leadership & Governance; Documents” links. Written copies of these charters are available to any shareholder who submits a written request to our Secretary. The functions of the Executive Committee are established under our Bylaws and are described below.
MGIC Investment Corporation – 2023 Proxy Statement │ 13
CORPORATE GOVERNANCE AND BOARD MATTERS
18Current committee membership and the number of 2022 committee meetings are set forth below.
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| Audit | Business Transformation
& Technology | Executive | Management Development, Nominating and Governance | Risk Management | Securities Investment |
| Analisa M. Allen | | l | | | l | |
| Daniel A. Arrigoni | | | | l | l | |
| C. Edward Chaplin | C | | | | | l |
| Curt S. Culver | | | l | | | |
| Jay C. Hartzell | l | | | | l | |
| Timothy A. Holt | | | | l | | C |
| Jodeen A. Kozlak | | C | | l | | |
| Michael E. Lehman | | l | l | C | | |
| Teresita M. Lowman | l | l | | | | |
| Timothy J. Mattke | | | C | | | |
Gary A. Poliner1 | l | | | | l | l |
| Sheryl L. Sculley | l | | | | | l |
| Mark M. Zandi | | | | | C | l |
| 2022 Meetings | 10 | 3 | 0 | 5 | 5 | 4 |
| C = Chairman | | | | | | |
1 Mr. Poliner decided not to stand for re-election at the 2023 Annual Meeting of Shareholders. Mr. Poliner's decision was not due to any disagreement on any matter relating to the Company's operations, policies or practices. Mr. Poliner served as Audit Committee Chairperson during 2022.
Audit Committee
Key Responsibilities:
•Oversee the integrity of our financial statements
•Oversee the effectiveness of our system of internal controls over accounting and financial reporting, and disclosure controls and procedures
•Appoint, retain and oversee the independent registered public accountant, and evaluate its qualifications, independence and performance
•Oversee the performance of our internal audit function
•Oversee our compliance with legal and regulatory requirements
•Review related party transactions, as further described above under "Related Person Transactions."
Risk Oversight Role:
•Oversee our processes for assessing risks (other than risks overseen by other committees) and the effectiveness of our system of internal controls. Meet with the Chief Risk Officer and the Chairman of the Risk Management Committee to discuss and review in a general manner the Risk Management Committee's oversight of the Company's enterprise risk management framework
•Oversee process, fraud, compliance and reserving risks
14 │ MGIC Investment Corporation – 20202023 Proxy Statement
CORPORATE GOVERNANCE AND BOARD MATTERS
All members of the Audit Committee meet the heightened independence criteria that apply to Audit Committee members under SEC and NYSE rules. The Board has determined that Mr. Chaplin, Dr. Hartzell and Mses. Lowman and Sculley are “audit committee financial experts” as defined in SEC rules.
Business Transformation and Technology Committee
Key Responsibilities:
•Oversee the Company's information technology strategy, including reviewing its strategy and initiatives, the strategy for developing and maintaining market-competitive information technology capabilities, and major information technology trends that pose risks or opportunities for the Company
•Oversee how information technology supports the Company's business strategies
•Oversee major business transformation projects
Risk Oversight Role:
•Oversee risks associated with the Company's technology capabilities
•Oversee cybersecurity (including data security) and business continuity risks
Management Development, Nominating and Governance Committee
Key Responsibilities:
•Oversee our executive compensation program, including approving corporate goals relating to compensation for our CEO, determining our CEO’s annual compensation, approving compensation for our other senior executives and making recommendations to the Board regarding incentive compensation plans and equity-based plans for the CEO and senior management
•Evaluate the annual performance of the CEO and oversee the CEO succession planning process
•Make recommendations to the Board regarding the compensation of directors
•Review our Corporate Governance Guidelines and oversee the Board’s self-evaluation and director orientation processes
•Identify new director candidates through recommendations from Committee members, other Board members and our executive officers; consider candidates recommended by shareholders (see “What are the deadlines for submission of shareholder proposals, or for nominating or recommending a director candidate for nomination, for the next Annual Meeting?” below); and make recommendations to the Board to fill open director and committee member positions
Risk Oversight Role:
•Oversee corporate governance matters
•Oversee operational risks related to human capital, which include risks associated with human capital management policies such as executive compensation; succession planning; management recruitment, retention, training and development; workforce planning, recruitment, morale and talent; diversity and inclusion strategies and initiatives; and work environment, including health and safety
All members of the Management Development, Nominating and Governance Committee meet the heightened independence criteria that apply to compensation committee members under the rules of the SEC and NYSE.
MGIC Investment Corporation – 2023 Proxy Statement │ 15
CORPORATE GOVERNANCE AND BOARD MATTERS
Risk Management Committee
Key Responsibilities:
•Oversee the administration of our enterprise risk management framework, including:
◦The capabilities of, and the resources allocated to, enterprise risk management
◦The methodologies, policies, systems and processes established by management to identify, assess, measure, monitor, mitigate, limit, report on, and establish risk profiles for, the key risks that are inherent in our business activities and strategies
◦The enterprise-wide assessment of key current and potential future risks regularly conducted by management
◦Coordinate with the Board and other Board Committees to assign oversight responsibilities for all identified key risks to the Board and other Committees
◦Review significant regulatory reports or disclosures required by law relating to the risk management program of the Company
Risk Oversight Role:
•Oversee the Company's enterprise risk management framework, including the Company's view of risk on an enterprise-wide basis
•Oversee the following key Company risks: pricing, underwriting, mortgage credit, climate change, model, compliance with the Private Mortgage Insurer Eligibility Requirements of Fannie Mae and Freddie Mac, and reinsurer counterparty risks
Securities Investment Committee
Key Responsibilities:
•Oversee management of our investment portfolio and the investment portfolios of the Company’s employee benefit plans by those persons (employees of the Company or external asset managers) who are managing such assets on a day-to-day basis
•Make recommendations to the Board with respect to our retirement benefit plans that are available to employees generally
•Capital management (other than external reinsurance), including repurchase of common stock and debt, and external funding
Risk Oversight Role:
•Oversee risks related to our investment portfolio and capital management, which include market risk; investment portfolio counterparty risk; capital risk related to our capital structure, access to capital and credit rating; and liquidity risk
•Oversight of risks related to our investment portfolio may include consideration of ESG factors
Executive Committee
The Executive Committee provides an alternative to convening a meeting of the entire Board should a matter arise between Board meetings that requires Board authorization. The Committee is established under our Bylaws and has all authority that the Board may exercise with the exception of certain matters that under the Wisconsin Business Corporation Law are reserved to the Board itself.
16 │ MGIC Investment Corporation – 2023 Proxy Statement
NOMINEES FOR DIRECTORNominees for Director
For Term Ending at the Annual Meeting in 2021
2024
Each nominee listed below is a director of the Company who with the exception of Dr. Hartzell and Ms. Sculley, was previously elected by the shareholders. Dr. Hartzell and Ms. Sculley were introduced to the Board by an independent director, and were elected by the Board on October 23, 2019. In evaluating incumbent directors for renomination(re)nomination to the Board, the Management Development, Nominating and Governance Committee has considered a variety of factors. These includeincluded the Board membership criteria described under “Director Selection” above and past performance on the Board based on any feedback from other Board members.
Information about our directors, all of whom are standing for election,director nominees appears below. The biographical information is as of March 6, 2020,24, 2023, and for each director includes a discussion about the skills and qualifications that the Board views as supporting the director’s continued service on the Board.
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| Analisa M. Allen Director Since: 2020 Age: 64 | Committees: •Business Transformation & Technology •Risk Management | |
Analisa M. Allen is an information technology consultant with the Gerson Lehrman Group. She is the former Chief Information Officer of Data & Analytics (2017-2019) and the former Chief Information Officer for Home Lending Technology (2015-2017), in each case for the consumer bank at JP Morgan Chase & Co. Ms. Allen has also held several leadership positions with Goldman Sachs & Co., a firm she served for a total of 24 years, where she was responsible for business planning and technical strategy, including as Managing Director, Co-Head of Global Operations Technology (2008-2015) and Managing Director, Global Regulatory, Risk and Control Head (2006-2013).
Ms. Allen brings to the Board extensive information technology and leadership experience, including in highly regulated industries. |
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| Daniel A. Arrigoni Director Since: 2013 Age: 72 | Committees: •Management Development, Nominating and Governance •Risk Management | |
DANIEL A. ARRIGONI
Director Since: 2013
Age: 69
| Committees: Audit Committee; Risk Management Committee
|
Daniel A. Arrigoni was President and Chief Executive Officer of U.S. Bank Home Mortgage Corp., one of the largest originators and servicers of home loans in the U.S., until his retirement in 2013. Prior to his retirement, Mr. Arrigoni also served as an Executive Vice President of U.S. Bank, N.A. Mr. Arrigoni led the mortgage company for U.S. Bank and its predecessor companies since 1996. Mr. Arrigoni has over 40 years of experience in the residential mortgage and banking industries.
Mr. Arrigoni brings to the Board a broad understanding of the mortgage business and its regulatory environment, skill in assessing and managing credit risk, and significant finance experience, each gained from his many years of executive management in the residential mortgage and banking industries.
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MGIC Investment Corporation – 2023 Proxy Statement │ 17
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| C. Edward Chaplin
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C. EDWARD CHAPLIN
Director Since: 2014 Age: 6366 | Committees:Risk Management Committee; •Audit (Chair) •Securities Investment Committee | Public Directorships: •Brighthouse Financial, Inc. |
C. Edward Chaplin was President and Chief Financial Officer at MBIA Inc., a provider of financial guarantee insurance and the largest municipal bond-only insurer, from 2008 until 2016, and remained with MBIA as Executive Vice President until his January 1, 2017 retirement. He joined MBIA in 2006 as its Chief Financial Officer, after having served as a member of its Board of Directors from 2003 until 2006. Prior to joining MBIA, Mr. Chaplin was Senior Vice President and Treasurer of Prudential Financial Inc., a firm he joined in 1983 and for which he held various senior management positions, including Regional Vice President of Prudential Mortgage Capital Company. Mr. Chaplin also serves on the Board of Brighthouse Financial, Inc., a provider of life insurance and annuity products in the U.S.
Mr. Chaplin brings to the Board a deep understanding of the insurance and real estate industries, management and leadership skills, and financial expertise.
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MGIC Investment Corporation – 2020 Proxy Statement │ 19
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CURTCurt S. CULVERCulver
Chairman of the Board Director Since: 1999 Age: 67 70 | Committees: •Executive Committee | Public Directorships: •WEC Energy Group, Inc. and its subsidiary Wisconsin Electric Power Company |
Curt S. Culver was our Chairman of the Board from 2005 until his retirement as our Chief Executive Officer in 2015. He has served as our non-executive Chairman of the Board since 2015. He was our Chief Executive Officer from 2000 and was the Chief Executive Officer of Mortgage Guaranty Insurance Corporation (“MGIC”)(MGIC) from 1999, in both cases until his retirement, and he held senior executive positions with us and MGIC for more than five years before he became Chief Executive Officer. He is also a director of Wisconsin Energy Corporation and its subsidiary Wisconsin Electric Power Company.
Mr. Culver brings to the Board extensive knowledge of our business and operations and a long-term perspective on our strategy.
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| Jay C. Hartzell Director Since: 2019 Age: 53 | Committees: •Audit •Risk Management | |
JAY C. HARTZELL
Director Since: 2019
Age: 50
| Committees: Audit Committee; Risk Management Committee
|
Jay C. Hartzell is DeanPresident of the McCombs School of Business at the University of Texas at Austin,Austin. Prior to being named President of the University in 2020, he was Dean of its McCombs School of Business, a position he has held since 2016. He joined the University of Texas in 2001 and held several key administrative roles at the McCombs School before being named Dean, including Senior Associate Dean for Academic Affairs, Chair of the Finance Department, and Executive Director of the School’s Real Estate Finance and Investment Center. Prior to joining the University of Texas, Dr. Hartzell taught at the Stern School of Business at New York University.
As a senior university administrator and an experienced academic, Dr. Hartzell provides our Board with expertise on business organization, governance, real estate finance and corporate finance matters.
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2018 │ MGIC Investment Corporation – 20202023 Proxy Statement
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TIMOTHYTimothy A. HOLTHolt
Director Since: 2012 Age: 6670 | Committees:Audit Committee; •Management Development, Nominating & Governance •Securities InvestmentCommittee (Chair) | Public Directorships: •Virtus Investment Partners, Inc.
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Timothy A. Holt was an executive committee member and Senior Vice President and Chief Investment Officer of Aetna, Inc., a diversified health care benefits company, when he retired in 2008 after 30 years of service. From 2004 through 2007, he also served as Chief Enterprise Risk Officer of Aetna. Prior to being named Chief Investment Officer in 1997, Mr. Holt held various senior management positions with Aetna, including Chief Financial Officer of Aetna Retirement Services and Vice President, Finance and Treasurer of Aetna. Mr. Holt also serves as a director of Virtus Investment Partners, Inc. From January 2014 to February 2017, he served as a director of StanCorp Financial Group, Inc., which was a publicly-traded insurance products company until it was acquired in March 2016.
Mr. Holt brings to the Board investment expertise, skill in assessing and managing investment and credit risk, broad-based experience in a number of areas relevant to our business, including insurance, and senior executive experience gained at a major public insurance company.
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KENNETH M. JASTROW, II
Lead Director
Director Since: 1994
Age: 72
| Committees: Management Development, Nominating &Governance Committee (Chair); Executive Committee
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Kenneth M. Jastrow, II has served as our Lead Director since October 2009. He is a corporate director and private investor. During 2007-2015, he served as a non-executive Chairman of the Board of Forestar Group Inc., which engaged in various real estate and natural resource businesses. During 2000-2007, Mr. Jastrow served as Chairman and Chief Executive Officer of Temple-Inland Inc., a paper and forest products company, which during Mr. Jastrow’s tenure also had interests in real estate and financial services. Mr. Jastrow is also a director of KB Home and Genesis Energy, LLC, the general partner of Genesis Energy, LP, a publicly-traded master limited partnership.
Mr. Jastrow brings to the Board senior executive and leadership experience gained through his service as chairman and chief executive officer at a public company with diversified business operations in sectors relevant to our operations; experience in the real estate, mortgage banking and financial services industries; and knowledge of corporate governance matters gained through his service as a non-executive chairman and on public company boards.
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MGIC Investment Corporation – 2020 Proxy Statement │ 21
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JODEEN A. KOZLAK
Director Since: 2018
Age: 56
| Jodeen A. Kozlak Director Since: 2018 Age: 60 | Committees: •Business Transformation & Technology (Chair) •Management Development, Nominating &Governance Committee; Securities Investment Committee | Public Directorships: •C.H. Robinson Worldwide, Inc. •KB Home •Leslie's Inc. |
Jodeen A. Kozlak is the founder of Kozlak Capital Partners, LLC, a private consulting firm, and has served as its CEO since 2017. Ms. Kozlak previously served as the Global Senior Vice President of Human Resources of Alibaba Group, a multinational conglomerate (2016-2017). Ms. Kozlak also previously served as the Executive Vice President and Chief Human Resources Officer of Target Corporation, one of the largest retailers in the U.S. (2007-2016), and held other senior leadership roles in her 15-year career there. Prior to joining Target, Ms. Kozlak was a partner in a private law practice. Ms. Kozlak also serves on the Board of Directors of C.H. Robinson Worldwide, Inc.
Ms. Kozlak brings to the Board significant executive management experience. Through her service as Executive Vice President and Chief Human Resources Officer at a Fortune 100 company, Ms. Kozlak has developed significant knowledge and expertise in the area of human capital development and a deep understanding of executive compensation and business transformation within a public company.
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MICHAELMichael E. LEHMANLehman
Lead Independent Director Director Since: 2001 Age: 6972 | Committees:Audit Committee (Chair); •Business Transformation & Technology •Executive •Management Development, Nominating and Governance Committee(Chair) | Public Directorships: •Astra Space, Inc.
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Michael E. Lehman has served the University of Wisconsin in various capacities sincefrom March 2016 currentlyuntil October 2021, including as Special Advisor to the Chancellor and Interim Chief Operating Officer of the Wisconsin School of Business, and previously asSpecial Advisor to the Chancellor, Interim Vice Provost for Information Technology, Chief Information Officer and Interim Vice Chancellor for Finance and Administration. He had previously been a consultant (2014-2016); Interim Chief Financial Officer at Ciber Inc., a global information technology company (2013-2014); Chief Financial Officer of Arista Networks, a cloud networking firm (2012-2013); and Chief Financial Officer of Palo Alto Networks, a network security firm (2010-2012). Earlier in his career, he was the Executive Vice President and Chief Financial Officer of Sun Microsystems, Inc., a provider of computer systems and professional support services. During the past five years, Mr. Lehman also served as a director of Solera Holdings, Inc., until it was acquired by a private company.
Mr. Lehman brings to the Board financial and accounting knowledge gained through his service as chief financial officer of a large, multinational public company; skills in addressing the range of financial issues facing a large company with complex operations; senior executive and operational experience; as well as technology and cybersecurity experience.
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22 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 19
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MELISSA B. LORA | Teresita M. Lowman Director Since: 20182022 Age: 5758 | Proposed Committees: •Audit Committee; Management Development, Nominating and Governance Committee •Business Transformation & Technology
| Public Directorships: •One Stop Systems, Inc.
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Melissa B. Lora was President of Taco Bell International, a segment of Taco Bell Corp., whichTeresita (Sita) M. Lowman is a subsidiaryStrategic Advisor to Launch Factory, an incubator of Yum! Brands, Inc., one of the world’s largest restauranttechnology start-up companies, from 2013 until her retirementa role she assumed in 2018. Ms. LoraApril 2021. She previously served at DXC Technology Company, a multi-billion-dollar Fortune 500 information technology services company, from 2017 until October 2021, most recently as the Vice President and General Manager of its America’s Microsoft Dynamics Portfolio, and in variousother leadership roles before then. She earlier served in leadership roles at Taco Bell Corp., including Global Chief FinancialHewlett Packard Enterprise, Nortel Networks and Development Officer (2012-2013), Chief Financial and Development Officer (2006-2012) and Chief Financial Officer (2001-2006)Texas Instruments Defense Group (acquired by Raytheon). Ms. Lora also serves as Lead Independent Director for KB Home and as a director of ConAgra Brands, Inc.
Ms. LoraLowman brings to the Board substantial executivesignificant leadership experience in the information technology and cloud enterprise industries. Her expertise includes business transformation, cloud computing, data analytics, risk management experience, including in financial and marketing matters, gained while serving in several executive roles for a Fortune 500 company.business continuity. |
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| Timothy J. Mattke Director Since: 2019 Age: 47 | Committees: •Executive (Chair) | |
TIMOTHY J. MATTKE
Director Since: 2019
Age: 44
| Committees: Executive Committee (Chair) |
Timothy J. Mattke has been our Chief Executive Officer since 2019. He served as our Executive Vice President and Chief Financial Officer from 2014 to 2019, and our Controller from 2009 to 2014. Before then, he held other positions within the Accounting and Finance Departments. Before joining the Company in 2006, Mr. Mattke had been with PricewaterhouseCoopers LLP.
Mr. Mattke brings to the Board extensive knowledge of our industry, business and operations; financial acumen; a long-term perspective on our strategy; and the ability to lead our Company as the mortgage finance system and the mortgage insurance industry evolve.
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GARY A. POLINER
Director Since: 2013
Age: 66
| Committees: Risk Management Committee (Chair);Audit Committee; Securities Investment Committee
|
Gary A. Poliner was President of The Northwestern Mutual Life Insurance Company (“Northwestern Mutual”), the nation’s largest direct provider of individual life insurance, and a member of its Board of Trustees, until his retirement from that company in June 2013, after more than 35 years of service. He was named President of Northwestern Mutual in 2010. Mr. Poliner also held various other senior-level positions at Northwestern Mutual, including Chief Financial Officer (2001-2008) and Chief Risk Officer (2009-2012). During a portion of 2016, Mr. Poliner served as a consultant for the Janus Funds, and since June 2016 he has served as an Independent Trustee of the Janus Funds (60 funds).
Mr. Poliner brings to the Board a breadth of executive management experience in the insurance business, including risk management, and financial and insurance regulatory expertise.
|
MGIC Investment Corporation – 2020 Proxy Statement │ 23
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| Sheryl L. Sculley Director Since: 2019 Age: 70 | Committees: •Audit •Securities Investment | |
SHERYL L. SCULLEY
Director Since: 2019
Age: 67
| Committees: Audit Committee; Securities Investment Committee
|
Sheryl L. Sculley is the former City Manager of the City of San Antonio Texas, the Chief Executive Officer of the municipal corporation, a position she held from 2005 until her retirement in April 2019. Prior to serving in that role, Ms. Sculley had been the Assistant City Manager (Chief Operating Officer) of Phoenix, Arizona from 1989 until 2005, the City Manager (Chief Executive Officer) of Kalamazoo, Michigan from 1984 until 1989 and in other city management roles before then. Today she is a consultant with Strategic Partnerships, Inc. and an adjunct professor at the University of Texas LBJ School of Public Affairs.
Ms. Sculley’s experience as a Chief Executive Officer leading large municipalities provides our Board with expertise on management, investment, financial and human resources matters. |
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2420 │ MGIC Investment Corporation – 20202023 Proxy Statement
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| Mark M. Zandi Director Since: 2010 Age: 63 | Committees: •Risk Management (Chair) •Securities Investment | |
MARK M. ZANDI
Director Since: 2010
Age: 60
| Committees: Risk Management Committee
|
Mark M. Zandi, since 2007, has been Chief Economist of Moody’s Analytics, Inc., where he directs economic research. Moody’s Analytics is a leading provider of economic research, data and analytical tools. It is a subsidiary of Moody’s Corporation that is separately managed from Moody’s Investors Service, the rating agency subsidiary of Moody’s Corporation. Dr. Zandi is a trusted adviser to policymakers and an influential source of economic analysis for businesses, journalists and the public, and he frequently testifies before Congress on economic matters.
Dr. Zandi, with his economics and residential real estate industry expertise, brings to the Board a deep understanding of the economic factors that shape our industry. In addition, Dr. Zandi has expertise in the legislative and regulatory processes relevant to our business. |
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MGIC Investment Corporation – 2020 Proxy Statement │ 25
ITEMItem 1 – ELECTION OF DIRECTORS
Election of Directors
Item 1 consists of the election of directors. The Board, upon the recommendation of the Management Development, Nominating and Governance Committee, has nominated Analisa M. Allen, Daniel A. Arrigoni, C. Edward Chaplin, Curt S. Culver, Jay C. Hartzell, Timothy A. Holt, Kenneth M. Jastrow, II, Jodeen A. Kozlak, Michael E. Lehman, Melissa B. Lora,Teresita M. Lowman, Timothy J. Mattke, Gary A. Poliner, Sheryl L. Sculley and Mark M. Zandi for re-election to the Board to serve until our 20212024 Annual Meeting of Shareholders. If any nominee is not available for election, proxies will be voted for another person nominated by the Board or the size of the Board will be reduced.
Shareholder Vote Required
Our Articles of Incorporation contain a majority vote standard for the election of directors in uncontested elections. Under this standard, each of the thirteentwelve nominees must receive a “majority vote” at the meeting to be elected a director. A “majority vote” means that when there is a quorum present, more than 50% of the votes cast in the election of the director are cast “for” the director, with votes cast being equal to the total of the votes “for” the election of the director plus the votes “withheld” from the election of the director. Therefore, under our Articles of Incorporation, a “withheld” vote is effectively a vote “against” a nominee. Broker non-votes will be disregarded in the calculation of a “majority vote.” Any incumbent director who does not receive a majority vote (but whose term as a director nevertheless would continue under Wisconsin law until his or her successor is elected) is required to send our Board a resignation. The effectiveness of any such resignation is contingent upon Board acceptance. The Board will accept or reject a resignation in its discretion after receiving a recommendation made by our Management Development, Nominating and Governance Committee and will promptly publicly disclose its decision regarding the director’s resignation (including the reason(s) for rejecting the resignation, if applicable).
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE THIRTEENTWELVE NOMINEES. SIGNED PROXY CARDS AND VOTING INSTRUCTION FORMS WILL BE VOTED FOR THE NOMINEES UNLESS A SHAREHOLDER GIVES OTHER INSTRUCTIONS ON THE PROXY CARD OR VOTING INSTRUCTION FORM. |
26 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 21
Compensation of Directors
COMPENSATION OF DIRECTORS
Non-Employee Director Compensation Program
Under our Corporate Governance Guidelines, compensation of non-employee directors is reviewed periodically by the Management Development, Nominating and Governance Committee. Mr. Mattke is our CEO and receives no additional compensation for service as a director, and he is not eligible to participate in any of the following programs or plans.
The following table describes the components of the non-employee director compensation program in effect during 2019.
2022. Changes to the program for 2023 are discussed below. |
| | | | | | | |
| Compensation Component | | Compensation |
| Annual Retainer – Chairman of the Board | | $250,000, which may be elected to be deferred and either converted into cash-settled share units or credited to a bookkeeping account to which interest is credited. |
| Annual Retainer – Non-Chairman Directors | | $250,000,125,000, which may be elected to be deferred and either converted into cash-settled share units or credited to a bookkeeping account to which interest is credited. |
Annual Retainer – Non-Chairman Directors | | $150,000, which may be elected to be deferred and either converted into cash-settled share units or credited to a bookkeeping account to which interest is credited. |
| Annual Retainer – Equity | | $100,000125,000 in cash-settledstock-settled RSUs that vest immediately but are not settled for approximately one year. Such settlement may be deferred at the option of the director. |
| Annual Retainer – Lead Director | | $25,000 |
| Annual Retainer – Committee Chair | | $25,000 for the Audit Committee
$25,000 for the Management Development, Nominating and Governance Committee
$15,000 for other committees(1)1 |
| Annual Retainer – Committee Member | | $15,000 for Audit Committee
$5,000 for other committees(1)1 |
Meeting Fees (after 5th meeting)(2)
| | $5,000 for Board meetings
$3,000 for Committee meetings |
| Stock Ownership Guidelines2 | | Ownership of 25,000a number of shares of Common Stock with a value of $375,000, including deferred share units that have vested or are scheduled to vest within one year. Directors are expected to meet the guideline within five years of joining the Board.(3) |
| Expense Reimbursement | | Subject to certain limits, we reimburse directors, and for meetings not held on our premises, their spouses, for travel, lodging and related expenses incurred in connection with attending Board and Committee meetings. |
| Directors & Officers Insurance | | We pay premiums for D&O liability insurance under which the directors are insureds. |
| |
(1) | 1 Excludes the Executive Committee. Other than the Executive Committee, directors who are members of management do not serve on any committees but may attend committee meetings. |
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(2) | After a non-management director attends five Board meetings in a given year, he or she is paid $5,000 for each subsequent Board meeting attended in that year. After a non-management director attends five meetings of a particular committee in a given year, he or she is paid $3,000 for each subsequent meeting of that committee attended in that year. However, directors are paid for attendance at only one committee meeting on any given day, regardless of the number of meetings attended on that day. Meetings of the Board of MGIC (or Committees of its Board) that are not held in conjunction with meetings of the Board of the Company (or Committees of its Board) are counted to determine meeting fees. |
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(3) | Each of our non-employee directors satisfies this guideline. |
2 Each of our non-employee directors satisfies this guideline.
22 │ MGIC Investment Corporation – 2023 Proxy Statement
COMPENSATION OF DIRECTORS
Deferred Compensation Plan and Annual Grant of Share Units.
Under the Deferred Compensation Plan for Non-Employee Directors (the “DeferredDeferred Compensation Plan”)Plan), our non-employee directors can elect to defer payment of all or part of their retainers and meeting fees until the director’s death, disability, termination of service as a director or to another date specified by the director. A director who elects to defer payments may have his or her deferred compensation bookkeeping account credited quarterly with interest accrued at an annual rate equal to the six-month U.S. Treasury Bill rate determined
MGIC Investment Corporation – 2020 Proxy Statement │ 27
COMPENSATION OF DIRECTORS
at the closest preceding January 1 and July 1 of each year, or may elect to have the payments deferred during a quarter translated into share units. Each share unit is equal in value to one share of our Common Stock and is ultimately settled only in cash. Such payment will be based on the stock’s average closing price for the five consecutive trading days preceding the payment date(s).Stock. If a director defers payments into share units, dividend equivalents in the form of additional share units are credited to the director’s account as of the date of payment of cash dividends on our Common Stock.
Under the Deferred Compensation Plan, in 2022, we also provideprovided to each director the annual equity retainer described above, which is a grant of cash-settled share units.restricted stock units to be ultimately settled in shares of the Corporation's common stock. In January 2019, each of ourFebruary 2022, non-management directors wasother than Ms. Lowman were granted restricted share units valued at $100,000, which$125,000. Ms. Lowman was granted restricted share units valued at $96,300 at the time she joined the Board in April 2022. Each director's shares vested immediatelyat the time of grant and were settled on February 14, 2020,15, 2023, unless the director elected a later settlement date. The directors could elect to receive payment for vestedhave their restricted share units settled in up to ten annual installments beginning shortly after departure from the Board, or on another date specified by the director that was after February 14, 2020. In all cases, the payment was or will be based on the stock’s average closing price for the five consecutive trading days preceding the payment date(s). Dividend equivalents15, 2023. Dividends in the form of additional sharerestricted stock units are credited to the director’s accountdirector as of the date of payment of cash dividends on our Common Stock.
20192023 Director Compensation Program Changes
In January 2023, the Board approved the following changes to the director compensation program to better align it with market practices:
•The annual cash retainers for committee Chairpersons were increased to $40,000 for the Audit Committee, $35,000 for the Management Development, Nominating and Governance Committee, and $20,000 for other committees (excluding the Executive Committee).
MGIC Investment Corporation – 2023 Proxy Statement │ 23
COMPENSATION OF DIRECTORS
2022 Director Compensation
The following table shows the compensation paid to each of our non-management directors in 2019.2022. Mr. Mattke, our CEO, and Mr. Sinks, our former CEO, werewas also directorsa director in 20192022 but received no compensation for service as a director.
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| Name | | Fees Earned or
Paid in Cash
($) | | Total Stock Awards
($)1 | | Total
($) |
| Analisa M. Allen | | $ | 137,500 | | | $ | 125,000 | | | $ | 262,500 | |
| Daniel A. Arrigoni | | 145,000 | | | 125,000 | | | 270,000 | |
| C. Edward Chaplin | | 135,000 | | | 125,000 | | | 260,000 | |
| Curt S. Culver | | 250,000 | | | 125,000 | | | 375,000 | |
| Jay C. Hartzell | | 145,000 | | | 125,000 | | | 270,000 | |
| Timothy A. Holt | | 145,000 | | | 125,000 | | | 270,000 | |
| Jodeen A. Kozlak | | 145,000 | | | 125,000 | | | 270,000 | |
| Michael E. Lehman | | 182,500 | | | 125,000 | | | 307,500 | |
Melissa B. Lora2 | | 72,500 | | | 125,000 | | | 197,500 | |
| Teresita M. Lowman | | 97,500 | | | 96,300 | | | 193,800 | |
| Gary A. Poliner | | 160,000 | | | 125,000 | | | 285,000 | |
| Sheryl L. Sculley | | 145,000 | | | 125,000 | | | 270,000 | |
| Mark M. Zandi | | 140,000 | | | 125,000 | | | 265,000 | |
|
| | | | | | |
| Name | | Fees Earned or
Paid in Cash
($)(1) | | Total Stock Awards
($)(2) | | Total
($) |
| Daniel A. Arrigoni | | 202,000 | | 100,000 | | 302,000 |
| Cassandra C. Carr | | 165,000 | | 100,000 | | 265,000 |
| C. Edward Chaplin | | 168,000 | | 100,000 | | 268,000 |
| Curt S. Culver | | 255,000 | | 100,000 | | 355,000 |
| Jay C. Hartzell | | 42,500 | | 26,600 | | 69,100 |
| Timothy A. Holt | | 206,000 | | 100,000 | | 306,000 |
| Kenneth M. Jastrow, II | | 205,000 | | 100,000 | | 305,000 |
| Jodeen A. Kozlak | | 168,000 | | 100,000 | | 268,000 |
| Michael E. Lehman | | 206,000 | | 100,000 | | 306,000 |
| Melissa B. Lora | | 202,000 | | 100,000 | | 302,000 |
| Gary A. Poliner | | 211,000 | | 100,000 | | 311,000 |
| Sheryl L. Sculley | | 42,500 | | 26,600 | | 69,100 |
| Mark M. Zandi | | 160,000 | | 100,000 | | 260,000 |
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(1) | The following directors elected to defer certain fees shown in this column into share units as described under " — Non-Employee Director Compensation Program — Deferred Compensation Plan and Annual Grant of Share Units" above: Ms. Kozlak elected to defer $61,333 of the fees and received 4,591 share units; and Mr. Poliner elected to defer $26,000 of the fees and received 1,932 share units. |
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(2) | The amount shown in this column for each director represents the grant date fair value of the annual share unit granted to non-employee directors in 2019 under our Deferred Compensation Plan, computed in accordance with FASB Accounting Standard Codification (“ASC”) Topic 718. The value of each share unit is equal to the value of our Common Stock on the grant date. See “— Non-Employee Director Compensation Program — Deferred Compensation Plan and Annual Grant of Share Units” above for more information about these grants. |
Mr. Jastrow had 2,000 unvested1 The amount shown in this column for each director represents the grant date fair value of the restricted stock awards outstanding as of December 31, 2019, which represents shares heldunits granted to non-employee directors in 2022 under our 1993 RestrictedDeferred Compensation Plan, computed in accordance with FASB Accounting Standard Codification (ASC) Topic 718. The value of restricted stock unit is equal to the value of our Common Stock on the grant date. See “Non-Employee Director Compensation Program — Deferred Compensation Plan and Annual Grant of Share Units” above for Non-Employee Directors
more information about these grants. The aggregate number of vested and unvested stock awards outstanding as of March 6, 2020,10, 2022, for each director, is described under “Stock Ownership” above.Ownership Information.”
2 Ms. Lora did not stand for re-election at our 2022 Annual Meeting. In recognition of her service on our Board, we made a contribution of $25,000 to a charity that she designated. This contribution was not solicited by Ms. Lora, was not made under any agreement with her, and is not included in the table.
2824 │ MGIC Investment Corporation – 20202023 Proxy Statement
Executive Compensation
ITEMItem 2 – ADVISORY VOTE TO APPROVE OUR EXECUTIVE COMPENSATIONAdvisory Vote to Approve our Named Executive Officer Compensation
At our 2017 Annual Meeting, we heldAs a non-binding, advisory shareholder vote on the frequencymatter of future advisory shareholder votes on the compensation of our NEOs. Our shareholders expressed a preference that advisory shareholder votes on the compensation of our NEOs be held on an annual basisgood governance and as previously disclosed, the Company continued the policy to hold such votes annually. Accordingly, as required by Section 14A of the Securities Exchange Act, of 1934, we are asking shareholders to approve, on an advisory basis, the compensation of our NEOsnamed executive officers (NEOs) as disclosed under the compensation disclosure rules of the SEC, including the CD&A, the compensation tables and any related material contained in this Proxy Statement.
We strongly believe you should approve our compensation in light of the factors discussed in the Executive Summary to the CD&A.
While this vote is advisory and is not binding, the Board and the Committee will review and consider the voting results when making future decisions regarding compensation of our NEOs. See “Investor Outreach and Consideration of Last Year’s ‘Say on Pay’ Vote” in the Executive Summary to our CD&A.
Shareholder Vote Required
Approval of the compensation of our NEOs requires the affirmative vote of a majority of the votes cast on this matter. Abstentions and broker non-votes will not be counted as votes cast.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL APPROVAL OF THE COMPENSATION OF OUR NEOs. SIGNED
PROXY CARDS AND VOTING INSTRUCTION FORMS WILL BE VOTED FOR THE APPROVAL APPROVAL OF THE EXECUTIVENEO COMPENSATION UNLESS A SHAREHOLDER
GIVES OTHER INSTRUCTIONS ON THE PROXY CARD OR VOTING INSTRUCTION FORM. |
Compensation Discussion and Analysis
MGIC Investment Corporation – 2020 Proxy Statement │ 29
COMPENSATION DISCUSSION AND ANALYSIS
In this CD&A, we describe the objectives and components of our executive compensation program for our NEOs, and how we make compensation decisions. Please refer to our Glossary of Terms and Acronyms in Appendix A to this Proxy Statement for definitions of certain capitalized terms.
In July 2019, the Board of Directors elected Timothy J. Mattke as our Chief Executive Officer. Mr. Mattke has served the Company since 2006, most recently as Executive Vice Presidentterms and Chief Financial Officer. Mr. Mattke succeeded Patrick Sinks, who had served the Company for 41 years, most recently as President and Chief Executive Officer. In July 2019, the Board also elected Salvatore A. Miosi as President and Chief Operating Officer, and Nathaniel H. Colson as Executive Vice President and Chief Financial Officer. Mr. Miosi has served the Company since 1988, most recently as MGIC's Executive Vice President – Business Strategies & Operations. Mr. Colson has served the Company since 2014, most recently as MGIC's Vice President – Finance.
In connection with the leadership transition, the Committee of the Board adjusted these three executives’ compensation as discussed below under "Leadership Transition." When discussing the compensation of our CEO in this CD&A, unless otherwise indicated, we are referring to the compensation of our current CEO.
acronyms.
Our 20192022 NEOs are shown in the table below:
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| | | | |
| Name | Title (as of December 31, 2019) |
| Timothy J. Mattke | Chief Executive Officer |
| Salvatore A. Miosi | President and Chief Operating Officer |
| Nathaniel H. Colson | Executive Vice President and Chief Financial Officer |
James J. Hughes1 | Executive Vice President – Sales and Business Development*Development |
| Paula C. Maggio | Executive Vice President, General Counsel and Secretary |
Patrick Sinks | Vice Chairman (July 25, 2019 – January 31, 2020) and Former President and Chief Executive Officer (stepped down from position July 25, 2019)
|
Stephen C. Mackey | Former Executive Vice President and Chief Risk Officer (through May 6, 2019) |
* Position is held with Mortgage Guaranty Insurance Corporation,1 On January 17, 2023, Mr. Hughes provided notice of his intent to retire, effective August 1, 2023. On April 1, 2023, Mr. Hughes will step down from his role as Executive Vice-President - Sales and Business Development and serve as a wholly owned subsidiary ofSpecial Advisor to the Company, and not with the Company.
CEO until his retirement date.
30 │ MGIC Investment Corporation – 20202023 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — Executive Summary
EXECUTIVE SUMMARY
Key Takeaways
Our 2019 financial and business performance was outstanding
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• | Adjusted net operating income per diluted share for 2019 was $1.84, up 3.3% from 2018 ($1.78), with adjusted net operating income of $669.7 million, up slightly from 2018 ($668.7 million).(1) Adjusted net operating income was a component of ROE, one of the financial performance measures that determined payouts under our 2019 annual bonus program, as described below under "Components of our Executive Compensation Program – Annual Bonus."
|
• | ROE for 2019 continued to be strong at 18.1%.(1)
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• | New insurance written was $63.4 billion in 2019, up more than 25% from 2018 ($50.5 billion), and was one of the financial metrics that determined payouts under our 2019 bonus program. Aided in part by our new insurance written, our book of direct primary insurance in force, an important driver of our future revenue, grew by more than 6% in 2019. |
• | Our GAAP book value per share grew by more than 23% in 2019. Growth in adjusted book value per share is used to determine vesting of our long-term equity awards. For a reconciliation of GAAP book value per share to the adjusted book value per share used to determine vesting of our long-term equity awards, see Appendix B. |
Adjusted Net Operating Income
per Diluted Share(1)
Return on Equity(1)
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| (1) Adjusted net operating income and adjusted net operating income per diluted share are non-GAAP measures of performance. For a description of how we calculate these measures and for a reconciliation of these measures to their nearest comparable GAAP measures, see Appendix B. For purposes of our 2019 bonus program, ROE is calculated as adjusted net operating income, divided by beginning shareholders' equity, excluding accumulated other comprehensive income (loss). |
MGIC Investment Corporation – 2020 Proxy Statement │ 31
Executive Summary — COMPENSATION DISCUSSION & ANALYSIS
Executive Summary
Key Takeaways
Despite headwinds, we continued to demonstrate strong performance in 2022
We began 2022 with uncertainty about inflation and interest rates. Additionally, the volume of mortgage originations was expected to be 30% lower in 2022 than in 2021. Home prices increased by 17.9% in 2021, but in 2022 the rate of appreciation slowed (according to the seasonally-adjusted Purchase-Only U.S. Home Price Index of the FHFA) and interest rates increased steadily. Despite these headwinds, we demonstrated strong performance, including against the performance measures discussed below, which are considered in determining the annual bonus and long-term equity compensation of our NEOs.
Net income for 2022 was $865.3 million, a company record, and a 36% increase from 2021 ($635.0 million). Our adjusted net operating income per diluted share for 2022 was $2.91, up 51% from 2021. Adjusted net operating income is a component of ROE, one of the financial performance measures that determined payouts under our 2022 bonus plan.We grew GAAP book value per share by approximately 4.2% in 2022, while returning approximately $497 million to shareholders through share repurchases and dividends. Growth in adjusted book value per share is used to determine vesting of our long-term equity awards. For a reconciliation of non-GAAP measures to their nearest comparable GAAP measures, see Appendix B.
Like ROE, IIF and NIW are financial measures by which payouts under our 2022 bonus plan are determined. Our book of direct primary IIF, an important driver of our future revenue, grew by 7.6% in 2022. Our NIW was $76.8 billion in 2022. Although this was down from our record NIW in 2021, we finished 2022 as the full-year market leader.
GAAP Book Value Per Share(2)
26 │ MGIC Investment Corporation – 2023 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — Executive Summary
|
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| (1) Direct new insurance written (before the effects of reinsurance). |
| (2) For a reconciliation of the book value per share shown above to the book value per share used to determine vesting of our long-term equity awards, see Appendix B. |
The 2019 performance-based compensation we awarded to our NEOs was aligned with shareholder interests
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●1 | Annual Bonus. Our NEOs' 2019 bonuses depended on performance against five performance metrics; eachAdjusted net operating income, divided by beginning of those metrics was tiedthe year GAAP shareholders' equity, excluding accumulated other comprehensive income (loss) and adjusted for financial impacts of GSE-mandated mortgage insurance cancellations inconsistent with prior business practices. Adjusted net operating income is a non-GAAP measure of performance. For a description of how we calculate this measure and for a reconciliation of this measure to our business strategies and aligned with shareholder interests.its nearest comparable GAAP measures, see Appendix B.
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| 2 | ○ | The following twounpaid principal balance, as reported to us, of the loans insured by us, as of the end of the year, adjusted for financial performance metrics had a total weightimpacts of 75% in determining the bonuses:GSE-mandated mortgage insurance cancellations inconsistent with prior business practices. |
| 3 | | ■ | Return on Equity(1) had a weightFor purposes of 45%. Full credit under the bonus calculation requiredplan, NIW includes (i) traditional loan level insurance, (ii) loan level insurance executed through a 21% ROE.
|
| | ■ | New Insurance Written hadmanaging agent or directly with a weightGSE or other entity, and (iii) credit risk transfer (calculated as 1/3 of 30%the unpaid principal balance of the loans committed to be insured by us during the year). NIW received credit under thefor bonus calculationpurposes only if its expected risk-adjusted return on capital exceeded the Company's hurdle rate. Because the NIW for the bonus plan includes a more comprehensive definition of NIW when compared to the primary NIW disclosed for financial reporting purposes, NIW figures shown in our financial reporting differ slightly from what is shown in this Proxy Statement.
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MGIC Investment Corporation – 2023 Proxy Statement │ 27
Executive Summary — COMPENSATION DISCUSSION & ANALYSIS
Our compensation programs are working effectively and are aligned with shareholder interests.
| | | | | | | | | | | | | | |
| ● | Performance-based compensation represents the significant majority of our NEOs' total direct compensation (TDC) opportunity. It was 85% of our CEO's 2022 target TDC opportunity. |
| ● | ○Evidence of pay for performance. Earned compensation varies widely depending on our actual performance. For example, NIW performance is taken into account as part of the annual bonus determination. Bonus funding related to our NIW performance was 30% above target in 2021 and 18% below target in 2022. |
| ● | There is a strong link between the bonus performance measures and our business strategies. |
| ○ | Three businessfinancial performance objectives, discussed below under "Componentsmeasures had a total weight of our Executive Compensation Program – Bonus,"75% in determining the bonuses: |
| | ■ | Return on Equity (weighted 45%). Funding at the target level required a 13.5% ROE and funding at the maximum level required a 16% ROE. |
| | ■ | New Insurance Written (weighted 15%). NIW received credit for bonus purposes only if its expected risk-adjusted return on capital exceeded the Company's hurdle rate. |
| | ■ | Insurance In Force (weighted 15%). IIF balances the volatility of the NIW performance measure that can be strongly influenced by a strong or weak mortgage refinancing environment. |
| ○ | Strategic performance had a total weight of 25%. Each objective is directly relatedStrategic performance includes qualitative measures relating to transforming our business operations, managing our amount and form of capital, and demonstrating our ESG commitment to our business strategies and strong performance is expected to lead to an increase in shareholder value over the long-term.stakeholders. |
| ● | Long-Term Equity Awards. Our long-termLong-term equity awards:
|
| ○ | Promote a long-term focus for our NEOs and reward multi-year performance because all long-term equity awards granted to NEOs are subject to cliff vesting that occurs only after three years for the CEO, President and all EVPs.are dependent on achievement of rigorous book value per share growth goals. |
| ○ | Are aligned with shareholder interests because the number of shares that vest is based on growth in book value per share and the ultimate value of any shares that vest will depend on our total shareholder return performance over the vesting period. |
| ○ | Reward multi-year performance because those awarded in our standard granting cycle require the Company to achieve a 16.4% compound annual growth in adjusted book value per share for full vesting.(1)
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● | Performance-Based Compensation. As discussed below under "Components of our Executive Compensation Program," performance-based compensation represents the majority of our NEOs' TDC.
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(1) | For purposes of the bonus calculation, ROE is calculated as adjusted net operating income divided by beginning shareholders' equity, excluding accumulated other comprehensive income (loss). Adjusted net operating income and adjusted book value per share are non-GAAP financial measures. For a description of how we calculate these measures and for a reconciliation of these measures to their nearest comparable GAAP measures, see Appendix B to this Proxy Statement. |
32 │ MGIC Investment Corporation – 2020 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — Shareholder Outreach
Shareholder Outreach and Consideration of Last Year’s “Say on Pay” Vote
We value the views of our shareholders. In eachaddition to our ordinary course meetings with investors throughout the year, we also seek to engage with them to solicit their feedback and to provide information about our strategies, corporate sustainability matters and executive compensation. As part of the last two years,this effort, we have invitedgenerally invite shareholders owningwho collectively own approximately 70% of our stock to meet with us to discuss topics such as performance against our business strategies; environmental, social and governance ("ESG") matters; and our executive compensation program (and haveus. We met with shareholders owning 23%22% and 12%10% of our stock in 20192021 and 2020, respectively). We value the views of our2022, respectively. With input from shareholders and intend to continue to engage with them and solicit their feedback. Atadvisers, in the suggestion of our shareholders,past we have made improvements to our executive and director compensation program overprograms (such as the past several yearsgranting of only performance-based long-term equity awards to our NEOs, extending the vesting period for NEO long-term equity awards to three-year cliff vesting and increasing the stock ownership guidelines for both NEOs and directors) and have enhanced our environmental, social and governance ("ESG") reporting by publishingCorporate Sustainability Report, which is available on our website our first ESG report.website.
At each of the 2017, 20182020, 2021 and 20192022 Annual Meetings, more than 95% of the Say"Say on PayPay" votes cast were in support of the compensation of our NEOs. The Committee views these voting results as confirmation of shareholder support of our executive compensation program.
28 │ MGIC Investment Corporation – 2023 Proxy Statement
Compensation-Related CorporateCOMPENSATION DISCUSSION & ANALYSIS — Governance Policies and Best Practices
Compensation-Related Governance Policies and Best Practices
We have many compensation-related governance policies and best practices that we believe align our executive compensation with shareholder interests:
interests, including those highlighted below. For more information about certain of these practices, see "Other Aspects of our Executive Compensation Programs," below. |
| | | | | | | |
| Stock Ownership Guidelines | è | Our stock ownership guidelines require our CEO to own Company stock equal in value to at least six times his base salary, and require our other NEOs to own Company stock equal in value to at least three times their base salaries. See "Other Aspects of our Executive Compensation Program" below for more information about the guidelines. |
Post-Vesting
Stock Holding Requirements
| è | Our NEOs and other executive officers are required to hold, for one year after vesting, the lower of 25% of shares that vest under equity awards and 50% of the shares that were received by the officer after taking account of shares withheld to cover taxes. Apart from what is required, we have had a culture of stock retention by senior executives. Excluding shares withheld from equity awards for income tax withholding, none of our current NEOs has sold our stock while an NEO. Upon Mr. Sinks stepping down from his role as our CEO, he sold a portion of his holdings in our stock; however, at year-end, his holdings still amounted to more than twelve times his base salary. |
No Hedging, Pledging or
10b5-1 Plans
| è | Our policies prohibit directors, NEOs, other officers and certain employees from entering into hedging transactions referencing the Company’s equity securities, holding Company securities in a margin account, or pledging Company securities as collateral for a loan. They also prohibit the use by those individuals of plans created pursuant to Rule 10b5-1 of the Securities Exchange Act which may otherwise have allowed such persons to sell our stock while in possession of material non-public information about us. For more information, see "Other Aspects of our Executive Compensation Program – Hedging, Pledging and 10b5-1 Plan Prohibitions" below. |
| High Percentage of Performance-Based Compensation | è | 86%85% of our former CEO's actual 20192022 target TDC and 62% of our current CEO's actual 2019 TDCopportunity was tied to achievement of pre‑setpreset performance goals. Excluding the time-vested long-term equity awards granted to our current CEO upon his election to that position (discussed below under "Leadership Transition"), which are not partOn average, 77% of our standard long-term equity program, 80% of our current CEO's actual 2019other NEOs' 2022 target TDC wasopportunities were tied to achievement of pre-set performancesuch goals.
|
| Limited Perquisites | è | Our perquisites are very modest, ranging between approximately $800 and $7,600$7,100 in 20192022 for our current NEOs. |
MGIC Investment Corporation – 2020 Proxy Statement │ 33
Governance Policies and Best Practices — COMPENSATION DISCUSSION & ANALYSIS
|
| | |
Effective Use
of Equity Compensation with Low Burn Rate
and Dilution
| è | The total equity awards granted to all participants under our 20152020 Omnibus Incentive Plan in each of 2019 and January 20202022 represented between approximately 0.5% and 0.6%0.4% of our outstanding shares at the prioras of December 31.31, 2021. The Company's dilution from outstanding awards was in the 10th25th percentile among all companies in theour 2022 Benchmarking Peer Group (calculated as outstanding equity awards on December 31, 2019,2021, as a percentage of weighted averagefully diluted total shares outstanding). Based on a “burn rate” methodology that uses the average of the total awards granted (after applying a multiple of 2.5 for RSUs versus options) and the weighted average number of shares outstanding during each of the last three completed years, our three-year average annual “burn rate” for 2017-2019 was approximately 1.2%. |
| Limited Change in Control Benefits | è | “Double trigger” is generally required for any benefits to be paid. Equity awards may vest upon a change in control only if the Committee determines that the awards will not be assumed or replaced. Cash severance does not exceed 2 times base salary plus bonus plus retirement plan accrual. There is no excise tax gross-up provision. |
| Employment Agreements | è | None; we only provide the limited provisions referred to above that are effective after a change in control. |
| “Clawback” Policy | è | Our “clawback” policy applies to cash incentive compensationbonuses as well as long-term equity award compensation received by our NEOs and other executive officers. The Committee intends to amend the policy to comply with the final SEC rules regarding the recoupment policy required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. |
| Compensation Consultant | è | The Compensation Consultant is retained by the Committee and performs no services for the Company, other than the consulting services to the Committee regarding executive compensation and non-employee director compensation. |
MGIC Investment Corporation – 2023 Proxy Statement │ 29
Governance Policies and Best Practices — COMPENSATION DISCUSSION & ANALYSIS
| | | | | | | | |
| Compensation Risk Evaluation | è | Annually, the Committee reviews an executiveincentive compensation risk evaluation designed to ensure that our compensation programs do not motivate excessive risk-taking and are not reasonably likely to have a material adverse effect on the Company. |
Omnibus Incentive Plan | è | Our 2015 Omnibus Incentive Plan, approved by shareholders, and our 2020 Omnibus Incentive Plan, proposed for approvalwhich was approved by shareholders, at the 2020 meeting of shareholders, containcontains the following provisions: •No granting of stock options with an exercise price less than the fair market value of the Company’s common stock on the date of grant; •No re-pricing (reduction in exercise price) of stock options and no exchange of underwater stock options for another award or for cash, without shareholder approval; •No inclusion of reload provisions in any stock option grant; •No payment of dividends on performance-vested RSUs before they are vested; • No payment of dividends on time-vested RSUs before they are vested (2020 Plan only); • No single trigger vesting of awards upon a change in control in which the awards are assumed or replaced;
•No recycling of shares withheld for tax purposes upon vesting; and •No Committee discretion to accelerate vesting of awards, except under certain limited instances like death, disability and retirement. |
34 │ MGIC Investment Corporation – 2020 Proxy Statement
OBJECTIVES OF OUR EXECUTIVE COMPENSATION PROGRAM
Objectives of Our Executive Compensation Program
In setting compensation, the Committee focuses on Total Direct Compensation (TDC),target TDC, which consists of base salary, target bonus (or non-equity incentive compensation) and target equity awards (valued at their grant date fair value reported in the SCT)Summary Compensation Table).
The objectives of our executive compensation program are to:
•Attract and retain high-quality executives. We want to offer a competitive pay opportunity that provides for:
| |
◦ | base salaries that are near the median of our Benchmarking Peers, and |
| |
◦ | bonus and long-term equity awards that, when performance is strong, move TDC above the median of our Benchmarking Peers to motivate and reward strong performance. |
¢base salaries within a range near the median level of an executive's Benchmarking Peer Group counterparts, and
¢bonus and long-term equity award opportunities that are competitive with those of an executive's Benchmarking Peer Group counterparts, and that may be earned above or below the target opportunity, based on performance.
•Align executive compensation with long-term shareholder interests. We align compensation and long-term shareholder interests by:
¢linking executive compensation to Company performance; and
¢paying a substantial portion of TDC in:
§ bonuses that are at-risk and are based on specific performance measures that align payouts with Company performance, with quantitative financial performance measures accounting for 75% of the bonus calculation and qualitative business objectives, which directly support our business strategies, accounting for 25% of the bonus calculation; and
§ long-term equity awards, with vesting based on a three-year quantitative performance goal that aligns payouts with Company performance and whose value directly reflects our stock price. All of the long-term equity awards granted to our NEOs in each of 2020, 2021 and 2022 were 100% performance-based and only vest after a three-year performance period.
30 │ MGIC Investment Corporation – 2023 Proxy Statement
| |
◦ | linking executive compensation to Company and executive performance; and |
| |
◦ | paying a substantial portion of TDC in: |
| |
§ | bonuses that are at-risk and are based on specific goals that align payouts with Company performance, with quantitative financial metrics accounting for 75% of the bonus calculation and qualitative business goals, directly related to our business strategies, accounting for 25% of the bonus calculation; and |
| |
§ | long-term equity awards, with vesting based on a three-year quantitative performance goal that aligns payouts with Company performance and whose value directly reflects our stock price. All of the long-term equity awards granted to our then-NEOs in our standard granting cycle in each of January 2018, 2019 and 2020, were 100% performance-vested and only vest after a three-year performance period. As described below under "Leadership Transition," in July 2019, certain NEOs received a one-time grant of RSUs that time-vest only after a three-year employment period. |
COMPENSATION DISCUSSION & ANALYSIS — How We Make Compensation Decisions
HOW WE MAKE COMPENSATION DECISIONS
How We Make Compensation Decisions
Role of the Management Development, Nominating and Governance Committee
The Committee, which consists solely of independent directors who meet the heightened independence criteria that apply to compensation committee members under SEC and NYSE rules, is responsible for overseeing the development and administration of our executive compensation program. The Committee approves the compensation of our CEO and our other senior executives, and performs other tasks including:
•Reviewing and approving bonus and equity compensation goals and objectives;
•Evaluating performance in light of these goals and objectives; and
•Evaluating the competitiveness of the CEO’s and other senior executives' total compensation package.
The Committee also performs other duties and supports the Board’s role in overseeing the risks facing the Company, as described in more detail above under “Committee Membership“Board Meetings and Meetings — Board Oversight of Risk.Committees.”
The Committee is supported in its work by our CEO, our Chief Human Resources Officer, our General Counsel and the Committee’s Compensation Consultant, as described below. Our Chairman of the Board, who retired as our CEO in 2015 but now is not a member of our management, regularly participates in meetings of the Committee.
MGIC Investment Corporation – 2020 Proxy Statement │ 35
How We Make Compensation Decisions — COMPENSATION DISCUSSION & ANALYSIS
The Committee may delegate its responsibilities to subcommittees of the Committee.
Role of the Compensation Consultant
The Committee has retained Frederic W. Cook & Co., (the Compensation Consultant) a nationally recognized executive compensation consulting firm to, advise it. Whileamong other things, help it evaluate and oversee our executive compensation program and review the compensation of our directors. The Committee has assessed the independence of the Compensation Consultant pursuant to SEC and NYSE rules and concluded that its work for the Committee does not raise any conflict of interest.
Our Chief Human Resources Officer coordinates the Compensation Consultant's assignments and, in providing its assignments,services to the Committee, the Compensation Consultant regularly interacts with our senior management. However, the Compensation Consultant reports directly to the Committee; the Committee retains authority to approve the compensation of the Compensation Consultant, determine the nature and scope of its services and evaluate its performance. The Compensation Consultant provides no services to the Company other than the consulting services to the Committee regarding executive compensation and non-executive director compensation. The Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant attends meetings of the Committee, as requested.
The Committee retains the Compensation Consultant to help it evaluate and oversee our executive compensation program and to periodically review the compensation of our directors. In connection with our executive compensation program, the Compensation Consultant provides various services to the Committee, including advising the Committee on the principal aspects of our executive compensation program and evolving industry practices and providing market information and analysis regarding the competitiveness of our program, including its relationship to performance.
The Compensation Consultant's work for the Committee during 20192022 and early 20202023 included:
•An evaluation of NEO compensation compared to Benchmarking Peers;Peers and recommendations for changes to our NEO compensation programs, generally;
•Advice relatedabout our base salaries and their amounts relative to our other compensation adjustments made in connection with our leadership transition;components;
MGIC Investment Corporation – 2023 Proxy Statement │ 31
How We Make Compensation Decisions — COMPENSATION DISCUSSION & ANALYSIS
•Advice about the annual bonus plan, including the goalsperformance measures and target performancegoals incorporated into the formula that is used to determine payouts;
•Advice about the long-term equity incentive program, including the level of awards granted under the program and the vesting provisions;
Advice regarding “best practice” compensation practices;
•Review and analysis of our peer groupBenchmarking Peer Group used to evaluate our executive compensation and non-employee director compensation;
Simulations of quantitative pay-for-performance models and review of policy statements of a leading proxy governance firm;
•An evaluation of the costs and provisions of change in control benefits for executives;
•Review of drafts of the CD&A and related compensation tables for the Proxy Statement; and
•An evaluation of compensation for the non-employee directorsdirector compensation compared to our Benchmarking Peers.Peers;
•Review of our stock ownership guidelines and recommendations for changes;
The Committee has assessed•Review of, and comment on, management's compensation risk assessments;
•Review of retirement provisions and unvested equity awards;
•Review of changes to retirement plans and implications for NEOs; and
•Advice about the independence of the Compensation Consultant pursuant to SEC and NYSE rules and concluded that its work for the Committee does not raise any conflict of interest.
SEC's new pay-versus-performance disclosure rules.
Role of Officers
While the Committee is ultimately responsible for making all compensation decisions affecting our NEOs, our CEO participates in the process because the Committee views his input as necessary given his close day-to-day association with the other NEOs and his knowledge of our operations. Among other things, our CEO makes recommendations on the components of compensation for the NEOs, other than himself. Our CEO does not participate in the portions of Committee meetings regarding the review of his own performance or the determination of the amounts of his compensation or when the Committee members meet among themselves.
in executive session.
Our Chief Human Resources Officer and our General Counsel also participate in the Committee’s compensation process. Our Chief Human Resources Officer is responsible for coordinating the work of the Compensation Consultant for the Committee and the annual preparation of an executive compensation risk evaluation. HeShe maintains knowledge of executive
36 │ MGIC Investment Corporation – 2020 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — How We Make Compensation Decisions
compensation trends, practices, rules and regulations and works with our General Counsel on related legal and tax compliance matters as well as on other matters related to executive compensation. The Committee receives information from management that includes: detailed breakdowns of the compensation of the NEOs; the amount, if any, that our NEOs realized during the period they were NEOs from sales of stock received upon vesting of equity awards; the total amount of stock and RSUs held by each NEO; and the other compensation information disclosed in this Proxy Statement.
BENCHMARKING
Benchmarking
To provide the Committee with a framework for evaluating compensation levels for our NEOs against market practices, the Compensation Consultant periodically prepares reports analyzing compensation data for our Benchmarking Peers. In addition, each year we provide the Committee with information regarding market trends and expected executive base salary changes for the coming year.
The compensation surveys that we reviewed and, with the concurrence of the Compensation Consultant, summarized in the aggregate forcriteria considered by the Committee when selecting Benchmarking Peers include whether the candidate: 1) is a mortgage insurer; 2) has significant exposure to residential real estate; 3) is in connection with establishing base salariesan industry in which we compete for 2019 were published by AON Hewitt, Mercer Consulting, Willis Towers Watsontalent; 4) chose us as a benchmarking peer; and World at Work.
Changes5) is reasonably similar in size to our Peer Group
us, in terms of revenues and market capitalization. The U.S. mortgage insurance industry has only six public companies including us. Therefore, the Committee has found it necessary to include companies from outside the mortgage insurance industry when constructing our group of Benchmarking Peers. Historically, surety and title insurers have been included in the group because, like mortgage insurers, they have significant exposure to2022 Benchmarking Peer Group were the residential real estate market.
Two of our peers mergedsame as those included in 2018, decreasing the size of our peer group to thirteen companies. At the recommendation of the Compensation Consultant, the Committee chose to maintain our peer group for purposes of benchmarking 2019 and 2020 executive compensation.
2021 Benchmarking Peer Group.
32 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 37
Benchmarking — COMPENSATION DISCUSSION & ANALYSIS
Why the selected peers are appropriate for benchmarking purposes
Our — Benchmarking Peer Group is shown below. We believe these companies are appropriate for benchmarking our executive compensation for the reasons shown in the table below.
|
| | | | | | | | | | | | | | | | |
| 2022 Benchmarking Peer Group |
| MGIC Peer Group | | Mortgage Insurer - Direct Competitor(1)1 | Direct Exposure to Residential Real Estate Market | Industry in which we Compete for Talent | Chose us
as a Peer | Business |
Ambac Financial Group, Inc. | | | X | X | X | Financial Guaranty Insurer |
| Arch Capital Group Ltd. | X | X | X | X | | Includes Mortgage Insurer |
| Assured Guaranty Ltd. | | X | X | X | X | Financial Guaranty Insurer |
| Essent Group Ltd. | X | X | X | X | X | Mortgage Insurer |
| Fidelity National Financial Inc. | | X | X | X | | Title Ins & Other R.E. Services |
| First American Fin'l Corp. | | X | X | X | | Title Ins & Other R.E. Services |
| Flagstar Bancorp Inc. | | X | X | X | | Mortgage Orig & Svg; Banking |
| Genworth Financial Inc. | X | X | X | X | X | Includes Mortgage Insurer |
MBIA Inc. | | | X | X | X | Financial Guaranty Insurer |
| NMI Holdings Inc. | X | X | X | X | X | Mortgage Insurer |
| Ocwen Financial Corp. | | X | X | X | X | Mortgage Svg & Lending |
| PennyMac Fin'l Services Inc. | | X | X | X | X | Mortgage Svg & Lending |
| Radian Group Inc. | X | X | X | X | Mortgage Insurer |
| Stewart Info. Services Corp. | | X | X | X | Title Ins & Other R.E. Services |
| Walker and Dunlop, Inc. | | X | X | X | X | X | X | Mortgage InsurerReal Estate Services & Finance |
| |
(1) | 1 Parent companies of direct competitors whose overall results are principally or significantly impacted by these competitors. |
As shown in the table below, we are reasonably comparable in terms of market capitalization revenues and CEO TDCrevenues to the companies in our 2022 Benchmarking Peer Group.
|
| | | | |
| MGIC Percentile Rank Versus Benchmarking Peer Group | |
12/31/1922 Market Capitalization | 64th71st |
20192022 Revenue | 51st |
Current CEO TDC(1)
| 19th |
Former CEO TDC(1)
| 24th43rd |
| |
(1) | Represents the annualized 2019 TDC for our current CEO for the period of time he was CEO; 2019 TDC for our former CEO; and 2018 TDC for our Benchmarking Peer Group because that was the latest TDC information available when this report was prepared. |
Note: Excludes Flagstar Bancorp Inc., who was acquired by New York Community Bank in late 2022.
Why we do not include propertyInclude Property and casualty insurersCasualty Insurers in our Benchmarking Peer Group
A leading proxy advisory service compares our CEO's compensation to the compensation of CEOs in a peer group that it constructs for us. That peer group includes a number of property and casualty insurers. WeOther than one of our direct competitors who is part of a company that includes diversified lines of insurance, we do not include property and casualty insurers in our Benchmarking Peer Group because those companies: (1)1) are not subject to residential mortgage risk or the residential real estate market to the same extent as are we or our Benchmarking Peers, (2)2) are not the companies with which we compete for executive talent, and (3)3) do not select us as a benchmarking peer. In addition, we do not believe comparing us
MGIC Investment Corporation – 2023 Proxy Statement │ 33
Benchmarking — COMPENSATION DISCUSSION & ANALYSIS
Total Direct Compensation Compared to thatBenchmarking Peer Groups
The following chart shows the reasonableness of our CEO's TDC, as reported in the Summary Compensation Table, as it shows the pretax income earned by the Company for every dollar of TDC earned by the CEO, compared to the same metric for our Benchmarking Peer Group and the peer group is appropriate because we are generally larger in market capitalization and revenues: asconstructed for the Company by a leading proxy advisory service. The Company's 2022 pretax income per dollar of December 31, 2019, our market capitalizationCEO's 2022 TDC was in the 92nd100th percentile of the company's Benchmarking Peers and the proxy advisory service-constructed peer group (2.2 timesgroup.
Notes: (1) Reflects 2022 and 2021 pretax income for peer companies, 2022 and 2021 TDC data for our CEO, and 2021 TDC data available from Summary Compensation Tables for the median)peer groups because that is the latest TDC available; (2) Data excludes Flagstar Bancorp Inc., who was acquired by New York Community Bank in late 2022.
Changes to our Benchmarking Peer Group for 2023
The Committee's Compensation Consultant reviews the Benchmarking Peer Group annually and our revenues were inreports its findings and recommendations to the 56th percentile of that group.
38 │ MGIC Investment Corporation – 2020 Proxy Statement
LEADERSHIP TRANSITION
As discussed in the introduction to this CD&A, inCommittee. In July 2019, the Board of Directors elected Timothy J. Mattke as our Chief Executive Officer, Salvatore A. Miosi as our President and Chief Operating Officer, and Nathaniel H. Colson as our Executive Vice President and Chief Financial Officer.
In determining the compensation adjustments to be made in connection with the leadership transition, the Committee consulted with the Compensation Consultant. Based on its prior work with the Committee regarding the Company’s compensation program and design, including benchmarking, and internal pay equity considerations,2022, the Compensation Consultant recommendedproposed, and the Committee approved, the following compensation adjustments:
The Committee reaffirmedchanges to the Company's fundamental compensation program, consisting of a base salary administered within a base salary range with a midpoint near the median level of an executive's Benchmarking Peer Group counterparts, an annual incentive opportunity based on objective financial and operational performance criteria, and long-term equity awards consistingfor 2023 executive compensation:
| | | | | | | | | | | | | | |
| Removed | | Added |
| Fidelity National Financial | | | Mr. Cooper Group | |
•Revenue and market capitalization have outgrown size range | | •Mortgage originator and servicer with significant exposure to residential real estate, reasonably comparable revenue and market capitalization, and a common peer of the Company's direct peers |
| Genworth Financial | | | Enact Holdings | |
•Spun out its mortgage insurance segment and re-branded it as Enact Holdings | | •Mortgage insurer spun off from Genworth Financial |
34 │ MGIC Investment Corporation – 2023 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — Components
Components of performance-based RSUs.Our Executive Compensation Program
Effective upon their promotions, the Committee adjusted base salaries and maximum potential annual bonuses for Messrs. Mattke, Miosi and Colson, to be more competitive with their new roles: Salaries and maximum bonuses were increased to $775,000 and 3x, $620,000 and 2.75x, and $275,000 and 1.8x for Messrs. Mattke, Miosi and Colson, respectively.
In connection with the leadership transition, the Committee also granted, to the following executives, a one-time award of RSUs that cliff vest in July 2022, which are designed for retention and to provide additional alignment with shareholders: Mr. Mattke – 75,000 RSUs; Mr. Miosi – 60,000 RSUs; Mr. Colson – 20,000 RSUs and Mr. Hughes – 37,500 RSUs.
As part of our succession plan, Mr. Sinks played a critical role by acting as Vice Chairman during his tenure in that position. This helped to ensure a smooth transition of his prior responsibilities as CEO to Mr. Mattke. For the five months that Mr. Sinks served as our Vice Chairman during 2019, he continued to participate in our executive compensation program at the same base salary and potential annual bonus levels.
COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
Each of the components of our executive compensation is discussed below. To meet our objective of aligning compensation and shareholder interests, our executive compensation program includes an annual bonus programplan that is tied to performance against performance measures that directly support the Company's business strategies, and long-term equity awards with vesting tied to growth in the Company's adjusted book value per share and whose ultimate value reflects our stock price. As
With input from the Committee's Compensation Consultant, the Committee approved a 2022 target TDC opportunity for each NEO in January 2022. Performance-based, at-risk compensation continues to represent the significant majority of our NEOs' TDC opportunities, as shown in the charts below, performance-based, at-risk compensation represented a large percentage of our CEO's 2019 total direct compensation (TDC): it represented 86.4% of our former CEO's actual 2019 TDC and 61.7% of our current CEO's actual 2019 TDC. Excluding the time-vested long-term equity awards granted to our current CEO at the time of his election to that position, which are not part of our standard long-term equity program, 80% of our current CEO's actual 2019 TDC was performance-based and at-risk.below.
MGIC Investment Corporation – 2020 Proxy Statement │ 39
Components — COMPENSATION DISCUSSION & ANALYSIS
Former CEO 2019 Pay Mix (% of TDC)
At-Risk Performance-Based Pay: 86.4%
Current CEO 2019 Pay Mix (% of TDC)
At-Risk Performance-Based Pay: 61.7%*
* Excluding the time-vested long-term equity awards granted to our current CEO upon his election to that position, which are not part of our standard long-term equity program, 80% of our current CEO’s actual 2019 TDC was performance-based and “at-risk.”
Base Salary
Our general philosophy is to target base salary range midpoints for our executive officersNEOs near the median levels of their Benchmarking Peer Group counterparts. In considering any change to our CEO’s compensation, including base salary, the Committee takes into account market competitiveness, tenure in position and its evaluation of his performance. Such evaluation is based in part on a CEO evaluation survey completed by each non-management director. Subjects covered by the evaluation of his performance include financial results, leadership, strategic planning, succession planning, community and industry involvement, and communications and relations with the Board. Base salary changes for our other NEOs are recommended to the Committee by the CEO based on his evaluation of each NEO’s performance, and the base salary surveys referred to under “Benchmarking” above.levels of Benchmarking Peer Group counterparts and considerations of internal equity. The Committee approves changes in salaries for NEOs after taking into account the CEO’s recommendations and the Committee's independent judgment regarding the NEOs gained through the Committee’s benchmarking and general contact with them, including contact through Board meetings.
In early April 2019, eachA benchmarking analysis of the Committee's Compensation Consultant indicated that prior to 2021 the base salaries of most of our then-NEOs atNEOs were significantly below the median levels of their Benchmarking Peer Group counterparts, which may have reflected the comparatively short time that time receivedsome of our NEOs had been in their positions in 2020. As a meritresult, we increased our NEOs' base salaries in 2021 to more closely align with their Benchmarking Peer Group counterparts, to reflect increased experience and demonstrated performance in their roles, and for purposes of internal pay equity. Given the adjustments made in 2021, the Committee approved more moderate base salary increase of approximately 3%. In connectionincreases for 2022 to ensure that the base salary levels continued to remain competitive with the leadership transition in July 2019, Messrs. Mattke, Miosi, and Colson received promotional salary adjustments.NEOs' respective Benchmarking Peer Group counterparts.
MGIC Investment Corporation – 2023 Proxy Statement │ 35
Base Salary — Components — COMPENSATION DISCUSSION & ANALYSIS
See "Leadership Transition" above for a discussion of salary adjustments made upon the promotion of Messrs. Mattke, Miosi and Colson to their current roles. | | | | | | | | | | | |
| NEO Base Salaries |
| Executive | 2020 | 2021 | 2022 |
| Timothy J. Mattke, CEO | $800,000 | $900,000 | $950,000 |
| Salvatore A. Miosi, President and COO | $639,000 | $700,000 | $721,000 |
| Nathaniel H. Colson, EVP and CFO | $350,000 | $465,000 | $500,000 |
| James J. Hughes, EVP - Sales and Bus. Development | $438,000 | $581,000 | $598,000 |
| Paula C. Maggio, EVP and General Counsel | $425,000 | $565,000 | $599,000 |
Annual Bonus
Our bonus programplan is designed to strongly align pay delivery with our performance, as defined by achievement of our annual financial goalsperformance measures and business objectives.
Maximum Bonus Opportunity. In determining TDC Consistent with 2021, for 2022, each of our executives has a target bonus opportunity the Committee has weighted bonus opportunities more heavily than base salaries because bonuses are more directly linked to Company performance. Bonus opportunity generally representsexpressed as a multiple of the base salary amount approved by the Committee in January that becomes effective in March or Aprilsalary. Actual earned bonuses could range from 0% to 200% of the yeartarget opportunities, depending on performance. The threshold (and below threshold), target and maximum bonus opportunities for which the bonuseseach NEO are awarded. Such base salary amounts will not be the same as the base salary amounts disclosed in the SCT due to the effects of the March or April pay increases and variability in the number of pay periods in each calendar year. Messrs. Mattke, Miosi and Colson were each promoted during 2019; their bonus multiples were prorated for the time they were in each of their positions during 2019.
40 │ MGIC Investment Corporation – 2020 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — Components — Annual Bonus
|
| | | |
| Maximum Bonus Opportunity (Multiple of Base Salary) |
| Executive | Before July 2019 Leadership Transition | After July 2019 Leadership Transition | Prorated |
| Timothy J. Mattke | 2.25 | 3.00 | 2.56 |
| Salvatore A. Miosi | 2.25 | 2.75 | 2.46 |
| Nathaniel H. Colson | 0.60 | 1.80 | 1.10 |
| James J. Hughes | 2.25 | 2.25 | 2.25 |
| Paula C. Maggio | 1.80 | 1.80 | 1.80 |
| Patrick Sinks | 3.00 | 3.00 | 3.00 |
As shown in the table below, our CEO's maximum bonus opportunity isfollowing table.
| | | | | | | | | | | | | | |
| 2022 Bonus Opportunities (Multiple of Base Salary) |
| Executive | Below Threshold | Threshold | Target | Maximum |
| Timothy J. Mattke | 0 | 0.75 | 1.50 | 3.00 |
| Salvatore A. Miosi | 0 | 0.675 | 1.35 | 2.70 |
| Nathaniel H. Colson | 0 | 0.50 | 1.00 | 2.00 |
| James J. Hughes | 0 | 0.50 | 1.00 | 2.00 |
| Paula C. Maggio | 0 | 0.50 | 1.00 | 2.00 |
| Represents a multiple of the base salary amounts that become effective in March or April of the year for which the bonuses are awarded. Such base salary amounts will not be the same as the base salary amounts disclosed in the SCT due to the effects of the timing of the pay increases and the variability in the number of pay periods in each calendar year. |
As referenced above, in line with our Benchmarking Peers' practices.
|
| | | |
| CEO Maximum Bonus Opportunity (Multiple of Base Salary) |
| | Benchmarking Peer Group (source: 2019 Proxy Statements) |
| MGIC | 25th percentile | Median | 75th percentile |
| 3.00 | 2.63 | 3.00 | 3.64 |
Calculation of 2019 Bonus. As shown inJanuary 2022 the table below, the bonus formula for 2019 had twoCommittee identified three financial performance goalsmeasures (with a total weight of 75%) and the three business objectives (with a total weight of 25%) to be used when determining 2022 NEO bonuses:
•Financial Performance Measures. The Committee chose ROE, NIW and IIF as the financial performance measures in the 2022 bonus plan to provide an incentive for bottom line and top line growth and for reasonable consistency with the 2021 bonus plan. The IIF metric was added in 2021 to balance the volatility of the NIW metric that can be impacted by a strong or weak mortgage refinancing environment.
•Business Objectives Performance Measures. Each business objective isselected by the Committee directly related tosupports our business strategiesstrategies. These objectives include transforming our business operations, managing our amount and strong performance is expectedform of capital, and demonstrating our Environmental, Social and Governance commitment to lead to an increase in shareholder value overall our stakeholders, including our co-workers, customers, investors, and community, and creating a co-worker experience that attracts, develops, and retains the long-term.right talent by emphasizing engagement, diversity, inclusion and collaboration.
Calculation of 2022 Bonus. Threshold, target and maximum performance levels were established for each financial performance goal.measure. Actual performance at such levels would result in credit of 0%, for below threshold performance, 50% for threshold performance, 100% for target performance, and 100% achievement, respectively,200% for that goal,
36 │ MGIC Investment Corporation – 2023 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — Components — Annual Bonus
maximum performance, with actualcredit for performance achievement between thesethe threshold and target levels, and the target and maximum levels, calculated by linear interpolation. The percentagespayout percentage determined by the Company’s actual 20192022 performance for each financial performance goal weremeasure was multiplied by an assigned weightsweight to determine a weighted score for that goal.measure. For the business objectives, the Committee reviewed management’s written report of the Company’s activities with respect to each objective and(some of which is included in the related score, which was accepted bydiscussion below) in determining the Committee.score.
| | | | | | | | | | | | | | | | | | | | | | | |
| 2022 Bonus Percentage | | | | | |
| | | | | Percent Earned | | Weighted Score |
| 2022 Performance Levels | Actual 2022 | |
| Threshold
50% | Target
100% | Maximum
200% | |
| Weight |
| Financial Performance Measures: | | | | | | | |
| Return on Equity | 8.0% | 13.5% | 16.0% | 19.1% | 200.0 | % | 45.0 | % | 90.0 | % |
| New Insurance Written (billions) | $59.3 | $93.4 | $131.7 | $76.8 | 75.7 | % | 15.0 | % | 11.3 | % |
| Insurance in Force (billions) | $268.1 | $302.2 | $315.5 | $295.3 | 89.9 | % | 15.0 | % | 13.5 | % |
| Total Score for Financial Performance Measures | | | | | 75.0 | % | 114.8 | % |
| | | | | | | |
| Business Objectives: | | | | | | | |
| Transformation | For a discussion of performance against these business objectives, see "Performance Against Business Objectives" | | | |
| ESG | | | |
| Capital | | | |
| Total Score for Business Objectives | | | | 80.0 | % | 25.0 | % | 20.0 | % |
| 2022 Bonus Percentage | | | 134.8 | % |
MGIC Investment Corporation – 2020 Proxy Statement │ 41
Components — Annual Bonus — COMPENSATION DISCUSSION & ANALYSIS
|
| | | | | | | | | | |
| 2019 Bonus Percentage | | | | | |
| | | | | | Maximum Possible Score (Weight) | | Weighted Score |
| | 2019 Performance Levels | Actual 2019 | |
| | Threshold | Target | Maximum | Score |
| Financial Performance Goals: | | | | | | | |
| Return on Equity | 10.0% | 13.5% | 21.0% | 18.1% | 60 |
| 48.4 |
| |
| New Insurance Written (billions) | $42.0 | $52.0 | $55.0 | $64.9 | 40 |
| 40.0 |
| |
| Total | | | | | 100 | % | 88.4 |
| |
| Times: Total Weight of Financial Performance Goals | | | | | X 75% |
| 66.3 | % |
| | | | | | | | |
| Business Objectives: | | | | | | | |
| Capital Position | For a discussion of performance against these business objectives, see "Performance Against Business Objectives" | | | |
| Manage Role of MI in Housing Policy | | | |
| Develop Co-Workers | | | |
| Total | | | | | 100 | % | 80.0 |
| |
| Times: Total Weight of Business Objectives | | | | | X 25% |
| 20.0 | % |
| 2019 Bonus Percentage | | | 86.3 | % |
The aggregate weighted financial and business performance scores resulted in a preliminary bonus percentage of 86.3%134.8%. The Committee has discretion to adjust the preliminary bonus percentage up or down by as much as 10 percentage points, but did not do so. Each executive who was an NEO at year-end received 86.3% of his or her maximum bonus, as prorated based on the date of the leadership transition discussed above. The CEO recommends toso because the Committee aconsidered the bonus forpay-out to be consistent with the Company’s pay-for-performance objective.More information about the evaluation and scoring of each of the other NEOs, which takes into account the bonus formulathese financial and the CEO’s evaluation of each NEO’s performance. The Committee, which has regular contact with the NEOs through their interaction with the Board, accepted the CEO’s recommendation and approved bonuses for the other NEOs.
Included in the payments to be made to Mr. Mackey, upon his separation of service from the Company, was an amount equal to the then-forecasted 2019 bonus percentage, pro-rated for his employment period in 2019. That amountbusiness performance scores is included in "All Other Compensation" in the Summary Compensation Table.
below.
42 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 37
Annual Bonus — Components — COMPENSATION DISCUSSION & ANALYSIS — Components — Annual Bonus
Performance Against Business Objectives. As shown in the table below, in 2019, the Company achieved favorable results against the business objectives used to determine the 2019 bonuses of our NEOs.Financial Measures
Return on Equity (ROE) |
| | | | |
Business ObjectiveROE Performance Levels for Company's 2022 Bonus Plan | |
| Company's Threshold ROE (for 50% bonus payout. If performance is below threshold, no credit is given) | Results8.0 | % |
| Company's Target ROE (for 100% bonus payout) | 13.5 | % |
| Company's Maximum ROE (for 200% bonus payout) | 16.0 | % |
| Company's Actual 2021 ROE | 14.7 | % |
| Company's Actual 2022 ROE | 19.1 | % |
Capital Position - Manage and deploy capital to optimize creation of shareholder value.
| » | Executed a $316 million insurance linked note transaction, our second such post-financial crisis transaction, which provides an alternative source of capital, and enables the Company to enhance its returns and better manage its risk profile.
Increased dividends from MGIC to our holding company from $220 million in 2018 to $280 million in 2019.
Re-started the payment of quarterly dividends by our holding company, after having suspended such payments during the financial crisis.
Repurchased 8.7 million shares of our common stock, returning $114 million to shareholders.
MGIC received an upgrade in its financial strength rating from Moody's Investors Service (from Baa2 to Baa1).
|
Developing Co-Workers - Develop and diversify the talents of co-workers.
| » | Executed on the Company's succession plan for key roles in the organization, including Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer and Chief Risk Officer, promoting all such officers from within the organization.
Delivered training workshops designed to build strategic capabilities which enhance performance.
Continued to enhance career developments, talent analytics and financial health capabilities for employees.
|
Role in Housing Finance Industry - Preserve and expand the roleNote: For purposes of the Companybonus plan, we calculate ROE as adjusted net operating income, divided by beginning of the year GAAP shareholders' equity, excluding accumulated other comprehensive income (loss) and privateadjusted for financial impacts of GSE-mandated mortgage insurance in housing finance policy.
| » | Held leadership roles in key trade association working groups.
Continuedcancellations inconsistent with prior business practices. Adjusted net operating income is a non-GAAP measure of performance. For a description of how we calculate this measure and for a reconciliation of this measure to enhance the reputation of the Company and the industry relative to changing housing finance policy and a broader role for private mortgage insurance.its nearest comparable GAAP measures, see Appendix B.
|
Setting Our Financial Performance Goals. The Committee chose return on equity and new insurance written as the financial performance goals used in the 2019 bonus plan to provide an incentive for bottom line and top line growth and for consistency with the 2018 bonus plan. In 2017 and 2019, our Investor Relations department engaged a consulting firm to conduct an investor perception study for us. In 2017 most investors (60-65%) responding to the survey indicated that they consider return on equity and book value growth rate to be the most appropriate measures of performance for the Company. In 2019, investors indicated they consider those metrics to be among the top three most important metrics, but also indicated that risk-adjusted return on capital (RAROC) over the estimated life of a book of insured business was an appropriate measure. These results confirmed to us the appropriateness of our use, for our bonus plan, of the return on equity metric and the RAROC hurdle rate associated with our NIW metric. It also confirmed the appropriateness of our use, for vesting of long-term equity awards, of a book value growth metric. Following is a description of how the performance levels for our bonus plan's financial goals were established.
Return on Equity ("ROE")
As noted above, two of the objectives of our executive compensation program are to link compensation to Company performance and to design incentives so that the earned TDC of our NEOs moves above the median of our Benchmarking Peersvaries based on performance. The Committee considered those objectives when performance is strong. When the Committeeit established the ROE performance levels for the 20192022 bonus plan, it considered those objectives. The amount by which each of the Company's threshold, target and maximum ROE performance levels exceeded the average ROE earned by its Benchmarking Peers, as well as the Company's cost of capital, confirmed the Committee's January 2019 view thatplan. In considering the ROE performance levels for 2022, there was uncertainty regarding how inflation, rising interest rates, and the declining rate of home price appreciation would impact our 2022 results. Despite these uncertainties, the Committee increased the 2022 target ROE level from 13.0% in 2021 to 13.5%, consistent with our 2022 business plan and at a level the Committee considered challenging, yet achievable. Ultimately, our actual 2022 ROE results were appropriately rigorous.
MGIC Investment Corporation – exceptional, primarily due to the reduction of loss reserves related to COVID-19 related delinquencies that had been established in 2020 Proxy Statement │ 43
Components — Annual Bonus — COMPENSATION DISCUSSION & ANALYSIS
|
| | |
ROE Performance Levels for Company's Bonus Plan Compared to Benchmarks | |
Company's Threshold ROE (for no bonus payout)(1)
| 10.0 | % |
Company's Target ROE (for 50% bonus payout)(1)
| 13.5 | % |
Company's Maximum ROE (for 100% bonus payout)(1)
| 21.0 | % |
Average 2018 ROE of Company's Benchmarking Peers(2)
| 8.8 | % |
| |
(1) | For purposes of the bonus plan, we calculate ROE as adjusted net operating income, divided by beginning shareholders' equity, excluding accumulated other comprehensive income (loss). Adjusted net operating income is a non-GAAP measures of performance. For a description of how we calculate this measure and for a reconciliation of this measure to its nearest comparable GAAP measures, see Appendix B. |
| |
(2) | Represents 2018 Net income available to common shareholders, adjusted (from Bloomberg), divided by beginning shareholders' equity, excluding accumulated other comprehensive income (loss). |
and for which our bonuses in 2020 had been negatively impacted, when we earned only 11% of the possible funding for the ROE performance under the bonus plan.
The Company's 2019 target ROE of 13.5% (for 50% bonus payout) and maximum ROE of 21.0% (for 100% bonus payout) are reasonable comparedCompany continued to engage in stock repurchases in 2022. However, the Company's 2018 actual ROE, after adjusting to reflect the increase in beginning shareholders' equity before accumulated other comprehensive income (loss) ($3.7 billion in 2019 vs. $3.2 billion in 2018) and to reflect the 2018 favorable development experienced in our loss reserves associated with insured mortgages that became delinquent prior to January 1, 2018 (no amount of favorable loss reserve development was forecast to occur in 2019). For year-over-year comparison purposes, these adjustments reduce 2018 actual ROE from 20.9% to 14.5%.
In determining the bonus percentage, the Committee considers significant events that occurred during a performance period and may revise performance metrics if the Committee expects that such significant events will have a substantial effect on the performance metrics. The Company engaged in a stock repurchase program in 2019, however, that program2022 repurchases did not have an effect onaffect the Company's ROE metricperformance because ROE is calculated as adjusted net operating income, divided by beginning shareholders' equity (which is not affected by 2022 share repurchases).
New Insurance Written ("NIW") (billions)The following chart shows the reasonableness of our CEO's bonus in terms of its alignment with the Company's ROE: 
| | | | | | | | |
| Note: The bonuses of our former CEO are shown for 2017-2019 and the bonuses of our current CEO are shown for 2020-2022. | |
|
| | |
| MGIC 2019 NIW Performance Levels (billions) |
Threshold (for no bonus payout) | Target (for 50% bonus payout) | Maximum (for 100% bonus payout) |
| $42 | $52 | $55 |
Our 2019 NIW target performance level of $52 billion (for 50% bonus payout) was set slightly above our 2018 actual NIW of $50.5 billion, while the maximum performance level required an 8.9% increase over our 2018 actual NIW. In establishing this level of NIW, the Committee evaluated our prior year's results, including that our 2018 actual NIW was at the highest level since 2007 and increased by $1.4 billion over 2017 (a 2.9% increase). The increase in the target performance level, after such results in 2018, reflects the Committee's focus on ensuring that the goal are appropriately rigorous.
4438 │ MGIC Investment Corporation – 20202023 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — Components — Annual Bonus
CEO 2019 Bonus Alignment and Benchmarking Results. The following chart illustrates that our CEO's bonuses have been reasonable when viewed in relationship to the strong growth in the Company's adjusted net operating income and the five-year increase in our stock price. The high volatility of our stock price (its three year, monthly beta was in the top 35% of the Russell 3000 in December 2019 and our stock previously had the second highest beta in that index) makes it problematic to evaluate pay for performance alignment for us by measuring stock price performance over a single year.
New Insurance Written (NIW) |
| | | | |
| 2022 NIW Performance Levels (billions) | | |
| Company's Threshold NIW (for 50% bonus payout. If performance is below threshold, no credit is given) | Notes: (1) Adjusted net operating income (loss)$
| 59.3 | |
| Company's Target NIW (for 100% bonus payout) | $ | 93.4 | |
| Company's Maximum NIW (for 200% bonus payout) | $ | 131.7 | |
| Company's Actual 2021 NIW | $ | 121.1 | |
| Company's Actual 2022 NIW | $ | 76.8 | |
Note: For purposes of the bonus plan, NIW includes (i) traditional loan level insurance, (ii) loan level insurance executed through a managing agent or directly with a GSE or other entity, and (iii) credit risk transfer (calculated as 1/3 of the unpaid principal balance of the loans committed to be insured by us during the year). NIW received credit for bonus purposes only if its expected risk-adjusted return on capital exceeded the Company's hurdle rate. Because the NIW for the bonus plan includes a more comprehensive definition of NIW when compared to the primary NIW disclosed for financial reporting purposes, NIW figures shown in our financial reporting differ slightly from what is a non-GAAP financial measure. For a description of how we calculate this measure and for a reconciliation of this measure to its nearest comparable GAAP measure, see Appendix B toshown in this Proxy Statement.(2) For comparability between periods, the bonuses of our former and current CEOs are provided.
| |
The following chart demonstrates that the Company's ROE continued to exceedWhile our 2022 NIW target performance level of $93.4 billion was set below our 2021 actual NIW of $121 billion, it was substantially above the average ROE of its Benchmarking Peers and the peer group constructedlevel for the Company by a leading proxy advisory service. The Company's 2019 ROEpast five years, as shown below. In establishing the 2022 performance goals for NIW, the Committee reviewed our business plan, evaluated our prior years' results, and viewed the 2020 and 2021 results as extraordinary. Because mortgage originations were expected to be 30% lower in 2022 than in 2021, the Committee viewed the performance goals based on our business plan as sufficiently rigorous. Our actual 2022 NIW for bonus purposes was $76.8 billion, between threshold and target, reflecting lower mortgage originations that decreased the market for our product.
| | | | | | | | | | | | | | | | | |
| Historical NIW (billions) |
| 2017 | 2018 | 2019 | 2020 | 2021 | Average |
| $49 | $51 | $63 | $114 | $121 | $80 |
Insurance in the 57th percentile of its Benchmarking Peers and in the 69th percentile of the proxy advisory service-constructed peer group. The chart also demonstrates the reasonableness of our current CEO's compensation, in terms of dollars of pretax income earned by the Company per dollar of TDC earned by our current CEO, when compared to the average for those same peer groups. The Company's 2019 pretax income per dollar of our CEO's 2019 TDC was in the 89th percentile of the Benchmarking Peers and in the 95th percentile of the proxy advisory service-constructed peer group.
|
| | | | |
| 2022 IIF Performance Levels (billions) | |
| Company's Threshold IIF (for 50% bonus payout. If performance is below threshold, no credit is given) | $ | 268.1 | |
| Company's Target IIF (for 100% bonus payout) | $ | 302.2 | |
| Company's Maximum IIF (for 200% bonus payout) | $ | 315.5 | |
| Company's Actual 2022 IIF | $ | 295.3 | |
Note: Reflects 2019 ROE for all companies,For purposes of the bonus plan, IIF is the unpaid principal balance, as reported to us, of the loans insured by Bloomberg, which differs fromus, as of the calculationend of ROEthe year, adjusted for bonus purposes. Pretax Income per dollarfinancial impacts of TDC reflects 2019 pretax income for all companies, annualized 2019 TDC data for our current CEO for the time he was in that position, and 2018 TDC data for the peer groups because that was the latest TDC information available when this report was prepared. | GSE-mandated mortgage insurance cancellations inconsistent with prior business practices. |
Our 2022 IIF target performance level of $302.2 billion represented growth of 10.1% above IIF at the end of 2021, which is above the average annual growth rate over the past five years as shown in the table below. The Committee viewed the performance target level as sufficiently rigorous considering the expected size of the mortgage market for 2022 and our business plan assumptions. Our actual 2022 IIF was $295.3 billion, which represented strong growth over 2021, but fell slightly below the target goal.
| | | | | | | | | | | | | | | | | |
| Historical IIF (billions) |
| 2017 | 2018 | 2019 | 2020 | 2021 | Average Annual
Growth Rate |
| $194.9 | $209.7 | $222.3 | $246.6 | $274.4 | 9.0% |
MGIC Investment Corporation – 20202023 Proxy Statement │ 4539
ComponentsAnnual Bonus — Long-Term EquityComponents — COMPENSATION DISCUSSION & ANALYSIS
Performance Against Business Objectives
Each business objective directly supports our business strategies. As shown in the table below, despite the headwinds facing the Company at the beginning of the year, the Company achieved favorable results against the business objectives used to determine the 2022 bonuses of our NEOs.
| | | | | | | | |
| Business Objective | | Results |
Transformation - Transform our business to sustain our success. | è | We continued to transform our business through digital, data-driven processes, including: •Pricing - Advanced pricing capabilities to better compete in an increasingly dynamic market. •Data and analytics - Developed cloud-based models to provide additional insight into market activity and conditions. •Governance - Established a Transformation Management Office and Senior Leadership Team to oversee technological investment governance. |
Capital- Ensure that we have the appropriate amount and form of capital to support our strategies and meet the needs of our stakeholders. | è | Our capital was well in excess of the requirements of the GSEs and state regulators, and our debt-to-capital ratio was 10.7 at year-end 2022, compared to 15.7 at year-end 2021. Expanded our reinsurance program through additional quota share and excess-of-loss reinsurance transactions that provide a source of capital relief and allow us to better manage our risk profile. Maintained financial strength and capital flexibility while paying shareholder dividends of $0.36 per share for the year,, a 29% increase from 2021. Repurchased $89.1 million principal balance of our outstanding 9% Junior Convertible Debentures, which eliminated approximately 6.8 million potentially dilutive shares. |
40 │ MGIC Investment Corporation – 2023 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — Components — Annual Bonus
| | | | | | | | |
| Business Objective | | Results |
ESG - Demonstrate our commitment to all our stakeholders, including our co-workers, customers, investors, and community, and create a co-worker experience that attracts, develops and retains the right talent by emphasizing engagement, diversity, inclusion and collaboration. | è | Established a Corporate Sustainability Roadmap to document goals and initiatives for 2022. Successes in the areas of community and diversity, equity and inclusion included: •Created a Diversity, Equity and Inclusion ("DEI") Council •Introduced a company-wide DEI observance schedule •Provided co-workers with paid time off for volunteering and lent financial support to more than 50 organizations
Introduced new career frameworks, designed to add clarity and consistency across roles and titles, and increase competitiveness for new talent.
Furthered Affordable Housing Strategy and continued participation with various organizations to increase racial equity in homeownership. |
The Committee approved a payout of 80% of the target score for performance against the business objectives.
Long-Term Equity Awards
Background Considerations.Considerations. Consistent with our belief that there should be a strong link between earned compensation and long-term performance, long-term equity awards provide one of our most significant TDC opportunities. We emphasize this component of our executive compensation program because it aligns executives’ interests with those of shareholders by linking compensation to both company performance and total shareholder return, while fostering a long-term planning horizon and supporting the retention of our leadership team. Performance-based long-term equity awards at their grant date fair value represented 63% of the 2022 target TDC opportunity of our CEO, and averaged 51% of the 20192022 target TDC of our former CEO, 27% of the 2019 TDC of our current CEO, and averaged 37% of the 2019 TDCopportunities of our other currentNEOs.
In January 2022, the Committee established a target long-term equity award opportunity for each of our NEOs. Time-vestedTo set these targets, the Committee considered a competitive market analysis of each NEO's TDC opportunity, the portion of such opportunity provided as long-term equity awards atrelative to their grant date represented 23% of the 2019 TDC of our current CEO, and averaged 22% of the 2019 TDC of our other current NEOs who received them. Excluding the time-vested long-term equity awards granted in connection with our leadership transition discussed above, which are not part of our standard long-term equity program, 35% of the 2019 TDC of our current CEO and, on average, 45% of the 2019 TDC of our other current NEOs wasBenchmarking Peer Group counterparts, tenure in the form of performance-based long-term equity awards.
Our CEO's long-term equity awards have traditionally been in line with our Benchmarking Peers' practices. The following table shows how the Company's grant date value of long-term equity awards to our CEO compares to the awards to the CEOs of our Benchmarking Peer Group. As a result of our stock price volatility, the date on which equity awards are made significantly affects the calculation of total compensation in the SCTposition and as a result, the analysis of pay for performance alignment. As noted above, our stock’s volatility is the top 35% of stocks in the Russell 3000, and has been the second highest in that index. For example, based on the high and low closing prices of our stock during 2019, the SCT value of our former CEO’s 2019 equity grant would have ranged between the 5th and 28th percentile of 2018 long-term incentive compensation among our Benchmarking Peer Group.
|
| | | | |
| MGIC's CEO Long-Term Equity Awards - Percentile Rank Among our Benchmarking Peers |
| | Target # of RSUs Granted(1) | Grant Date Value | MGIC Grant Date Stock Price | MGIC Percentile Rank |
| 2017 Long-Term Equity Awards | 243,320 | $2,532,961 | $10.41 | 44th |
| 2018 Long-Term Equity Awards | 264,880 | $4,187,753 | $15.81 | 26th |
| 2019 Long-Term Equity Awards - Former CEO | 287,000 | $3,375,120 | $11.76 | 7th(2) |
| 2019 Long-Term Equity Awards - Current CEO | 173,400 | $2,144,934 | $12.37(3) | 1st(2) |
| |
(1) | Represents a portion of the RSUs granted, calculated based on the probable outcome of the applicable performance conditions as of the grant date. |
| |
(2) | 2018 awards as reported in 2019 proxy statements are used for Benchmarking Peers because that is the most recent information that is available. |
| |
(3) | Represents the weighted average stock price on the two dates on which awards were granted. |
internal equity.
Below is a discussion of our 20192022 long-term equity awards and a discussion of our 20182021 and 20172020 long-term equity awards, which is provided for comparison purposes and because a portion of the long-term equity awards granted in those years either vested based on 20192022 performance or remain outstanding.
20192022 Long-Term Equity Awards.
2019 Cliff BV Awards. To align our long-term equity awards with the interests of shareholders, 100% of the long-term equity awards granted in January 20192022 to our then-NEOs and executive officers (Messrs. Mattke, Miosi, Hughes, Sinks and Mackey and Ms. Maggio)NEOs are restricted stock units (RSUs) that are performance-based and will cliff vest after three years based on the percentage achievement of a three-year cumulative adjusted book value ("ABV")(ABV) per share growth goal. A 16.4% compound annual growth in ABV (or $6.02 per share growth)Each executive's target long-term equity award value is required for 100% vesting. No growth in ABV would result in 0% vesting. translated into a target number of RSUs based on the closing stock price on the date of grant. The actual number of earned shares ranges from 0% to 200% of the target number of RSUs, depending on performance versus the three-year cumulative goals outlined in the table below, with actual vesting percentage is determined by linear interpolation based on where the actual growth in ABV per shareperformance falls between $0.00 and $6.02.
levels.
46 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 41
Long-Term Equity — Components — COMPENSATION DISCUSSION & ANALYSIS — Components — Long-Term Equity
| | | | | | | | | | | | | | |
| 2022 Long-Term Equity Award Performance Goal – 3-year Cumulative ABV Growth |
| Below Threshold (no vesting) | Threshold (for 25% vesting) | Target (for 100% vesting) | Maximum (for 200% vesting) |
| Required Growth | Less than $1.51 | $1.51 | $6.04 | Greater than or
equal to $7.13 |
| Compound Annual Growth Rate | < 3.30% | 3.30% | 12.08% | ≥14.00% |
ABV per share is a non-GAAP financial measure. For a description of how we calculate this measure for each equity award and a reconciliation of this measure to its nearest comparable GAAP measure, see Appendix B. |
Book value growth was chosen as the performance goal, in part because of its simplicity and relevance to management and investors. Book value growth measures cumulative build-up of equity in the Company; we believe its use as a metricperformance goal aligns executive compensation with the financial strength of the Company. As noted above, most investors responding to an investor perception study performed for us indicated that they consider
The Committee viewed the $6.04 required growth in adjusted book value growth to be among the most appropriate measures of performanceper share for the Company. These results confirmed to us the appropriateness of our use of a book value growth metric fortarget vesting of long-term equity awards.
ABV per share is a non-GAAP financial measure. For a description of how we calculate this measure for each equity award and a reconciliation of this measure to its nearest comparable GAAP measure, see Appendix B to this Proxy Statement.
2019 Cliff Time-Vested Awards. In July 2019, we executed on our leadership transition and promoted internal candidates to the positions of CEO (Mr. Mattke); President and Chief Operating Officer (Mr. Miosi); and Chief Financial Officer (Mr. Colson). In connection with the management realignment, the Committee, after consulting with our Compensation Consultant, made the one-time grant of cliff vested restricted stock units described above under "Leadership Transition." Those RSUs vest in July 2022 subject to continued employment with the Company, and are reflected in the 2019 Grants of Plan Based Awards Table.
2019 Other Awards. In January 2019, prior to his becoming an NEO, Mr. Colson was awarded a combination of BV Awards and Time Vested Awards, consistent with the grant-type mix and design terms for awards provided to participants at the Vice president level. Vesting of the BV Awards, which represent 60% of the long-term equity awards as sufficiently rigorous when considering our business plan, the 2019-2021 growth of $5.12 and the economic uncertainty and anticipated reduction in the size of the mortgage origination market.
2021 and 2020 Long-Term Equity Awards
2021 Cliff BV Awards. These awards were granted to Mr. Colsonour NEOs in January 2019,March 2021 and will occur over a three-year period,cliff vest after three years based on percentage achievement of the samea three-year cumulative ABV per share growth goal thatgoal. Each executive's target long-term equity award value was used for 2019 Cliff BV Awardstranslated into a target number of RSUs based on the closing stock price on the grant date. Actual vesting may range from 0% to NEOs. However, partial vesting200% of the BV Awards to Mr. Colson may occur annually (up to a maximumtarget number of 1/3 for the first year and 2/3 for the first and second years combined)RSUs, based on progress against the three-year cumulative goal. ABV per share growth from 2021-2023. An 11.3% compound annual growth in ABV (or $5.03 per share growth) is required for 100% (target) vesting; 14.0% compound annual growth (or >$6.38 per share growth) is required for maximum vesting; 3.1% compound annual growth (or $1.26 per share growth) is required for threshold vesting; and anything less than the threshold growth will result in 0% vesting. The actual vesting percentage is determined by linear interpolation based on where the actual growth in ABV per share falls between $1.26 and $6.38.
2020 Cliff BV Awards. These awards were made to our NEOs in January 2020 and will cliff vest after three years based on percentage achievement of a three-year cumulative ABV per share growth goal. A "maximum" number of RSUs was granted, with actual vesting ranging from 0% to 100% of "maximum" RSUs, based on performance. A 16.4% compound annual growth in ABV (or $7.04 per share growth) is required for 100% (maximum) vesting; 10.8% compound annual growth is required for "target" vesting (which was 62% of maximum, based on the grant date fair value of the awards); and no growth will result in 0% vesting. The actual vesting percentage is determined by linear interpolation based on where the actual growth in ABV per share falls between $0.00 and $6.02. The Time-Vested Awards, which represent 40% of the long-term equity awards granted to Mr. Colson in January 2019, will vest ratably in each of the three years after grant, subject to continued employment with the Company.
2018 and 2017 Long-Term Equity Awards.
2018 and 2017 Cliff BV Awards. These were awarded in January 2018 and January 2017 to then-NEOs and executive officers (Messrs. Mattke, Miosi, Hughes, Sinks and Mackey) and each cliff vest after three years based on achievement of a three-year cumulative ABV per share growth goal. A 16.4% and 13.5% compound annual growth in ABV is required for 100% vesting of the 2018 and 2017 long-term equity awards, respectively. No growth in ABV would result in 0% vesting. The actual vesting percentage is determined by interpolation based on where the actual growth in ABV per share falls between $0.00 and $4.98 for the 2018 awards, and between $0.00 and $3.56 for the 2017 awards.
2018 and 2017 Time Vested Awards. In July 2018, upon her joining the Company, Ms. Maggio was awarded a one-time long-term equity award of 20,000 RSUs, which will vest ratably in each of the three years after grant, subject to continued employment with the Company. In each of January 2017 and 2018, prior to his becoming an NEO, Mr. Colson was awarded a long-term equity award of 2,000 RSUs, which will vest ratably in each of the three years after grant, subject to continued employment with the Company.
$7.04.
42 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 47
Components — Long-Term Equity — COMPENSATION DISCUSSION & ANALYSIS — Components — Long-Term Equity
The table below shows:
•the three-year cumulative goal for targeted vesting of the 2019, 20182022, 2021 and 2017 Cliff BV Awards, and2020 ABV awards to NEOs,
•the growth in ABV per share as of the end of 2019,2022, as calculated for the awards;awards, and
2020•the final vesting percentage for the 20172020 awards; no 20182021 or 2019 grants2022 awards will vest until the endends of their three-year performance periodperiods.
|
| | | | | |
| Growth in Adjusted Book Value per Share for 2019, 2018 and 2017 Cliff BV Awards | |
| | 3-year Cumulative Goal | 2017-2019 Actual Growth | 2018-2019 Actual Growth | 2019 Actual Growth | Vesting % |
| 2019 Equity Awards | $6.02 | | | $1.96 | |
| 2018 Equity Awards | $4.98 | | $3.58 | | |
| 2017 Equity Awards | $3.56 | $4.26 | | | 100% |
| | | | | | | | | | | | | | | | | |
| Growth in Adjusted Book Value per Share for Targeted Vesting of 2020-2022 Cliff ABV Awards |
| 3-year Cumulative Goal for Target | 2020-2022
Actual Growth | 2021-2022
Actual Growth | 2022
Actual Growth | Vesting % |
| 2022 Equity Awards | $6.04 | | | $2.80 | |
| 2021 Equity Awards | $5.03 | | $4.61 | | |
| 2020 Equity Awards | $4.39 | $4.97 | | | 71% of Maximum
113% of Target |
With respect to all of the long-term equity awards, dividends are not paid currently, but when awards vest, a payment is made equal to the dividends that would have been paid during the performance period for those vested awards.
Pension Plan
OurFor 2022, our executive compensation program includesincluded a qualified pension plan (which had previously been transitioned to a cash balance plan) and a supplemental executive retirement plan. We believe retirement plans are an important element of a competitive compensation program. These plans compute retirement benefits based only on current cash compensation (salary and annual bonus) and therefore do not include long-term incentives that can result in substantial increases in pension value. We also offer a broad-based 401(k) plan to which we make contributions in cash. A description of our pension plan can be found following the table titled “Pension Benefits at 20192022 Fiscal Year-End” in “Compensation and Related Tables” below.
We believe retirement benefits are an important element of a competitive compensation program. As a result, in 2022 we announced some changes to our retirement benefits effective for 2023. These changes were made to better match our retirement benefits to the diverse needs of our current and future co-workers, help us attract and retain talent, and align with our business objectives. Effective January 1, 2023, we ended contributions to the pension plan, increased MGIC matching contributions to the 401(k) Savings plan, and enhanced retiree medical benefits.
Perquisites
To avoid an entitlement mentality, the perquisites we provide are minimal, ranging from $800 to $7,600$7,100 in 20192022 for our current NEOs. The 20192022 perquisites includedwere primarily related to club dues and expenses, and a parking space at our headquarters and spousal travel in connection with conferences and Board meetings.headquarters.
MGIC Investment Corporation – 2023 Proxy Statement │ 43
OTHER ASPECTS OF OUR EXECUTIVE COMPENSATION PROGRAM
No Employment Agreements
Our CEO and other NEOs do not have employment agreements other than those discussed below that become effective upon a change in control. The Company entered into a Separation Agreement with Mr. Mackey effective May 14, 2019 and described in our Current Report on Form 8-K filed with the SEC on May 17, 2019.
Stock Ownership by Named Executive Officers
Stock Ownership Guidelines.Guidelines. We have stock ownership guidelines for our executive officers to encourage them to maintain an ownership interest inalign the Companyinterests of our executives with those of our shareholders and to mitigate potential risks from incentive arrangements. Stock considered owned consists of shares owned outright by the executive (including shares inand time-vested RSUs. Performance-vested RSUs are not considered for purposes of the executive's account in our 401(k) plan), and unvested RSUs projected to vest within one year.
48 │ MGIC Investment Corporation – 2020 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — Other Aspects
stock ownership guidelines.
The stock ownership guidelines require ownership of stock valued at six times base salary for our CEO and stock valued at three times base salary for the other NEOs. Until the guideline is met, an NEO must not dispose ofretain the portion of shares received upon vesting of equity awards equal to the lower of 25% of the shares that vested and 50% of the shares that were received by the NEO after taking account of shares withheld to cover taxes.
The table below shows the guidelines, shares considered owned asAs of December 31, 2019 for purposes2022, our CEO owned stock valued at 6.5 times his base salary. The stock ownership of our other NEOs ranged from less than 1.0 to 5.6 times their base salaries. The low stock ownership by two NEOs is explained by their tenure with the guidelines,company and/or in their roles, coupled with the three-year cliff vesting of their performance vested long-term equity awards, which are not included in determining compliance with our stock ownership guidelines. As those NEOs receive stock upon vesting of their 2020 and the multiple of base salary represented by that ownership for our current CEO and all other current NEOs.2021 long-term equity awards, their stock holding will increase.
|
| | | |
| | Guideline
(value of shares) | Actual Ownership
(value at 12/31/19) | Actual Ownership as a Multiple of Base Salary |
| CEO | $4,650,000 | $5,353,738 | 6.9 |
| Total Other Current NEOs | $5,197,200 | $6,627,677 | 3.8 |
Equity Holding Post-Vesting Requirement.Requirement. A portion of long-term equity awards granted to our NEOs and other executive officers must not be sold for one year after vesting. The number of shares that must not be sold is the lower of 25% of the shares that vested and 50% of the shares that were received by the officer after taking account of shares withheld to cover taxes. The holding period may end before one year if the officer is no longer required to report their equity transactions to the SEC. The holding period does not apply to involuntary transactions, such as would occur in a merger, and for certain other dispositions.
Excluding shares withheld from equity awards for income tax withholding, none of our current NEOs has sold our stock while an NEO. Upon Mr. Sinks stepping down from his role as our CEO, he sold a portion of his holdings in our stock; however, as of December 31, 2019, his holdings still amounted to more than twelve times his base salary.
Hedging, Pledging and 10b5-1 Plan Prohibitions
Our hedging policy applies to our directors, NEOs, all other officers and certain other employees (generally, those who have regular access to material nonpublic information about the Company that gets incorporated into the Company’s periodic releases and reports), as well as their family members and entities that they control or influence. Under our hedging policy, the covered individuals/entities may not enter into hedging transactions designed to hedge or offset a decrease in the value of "Company Securities" or of vested or unvested restricted stock units (whether cash- or stock-settled). The definition of "Company Securities" includes the Company's common stock, options to purchase common stock, units in the MGIC stock fund within the Company's Profit-Sharing and Savings Plan, and convertible debentures, as well as derivative securities that are not issued by the Company, such as exchange-traded put or call options or swaps relating to the Company's securities. The hedging policy includes the following non-exhaustive list of examples of prohibited hedging transactions: forward sale contracts, equity swaps and credit defaults swaps relating to Company Securities. Financial instruments that hedge general industry risk or whose underlying security is that of an unrelated company are specifically not prohibited.
Under our pledging policy, the same individuals/entities who are subject to our hedging policy may not hold Company Securities in a margin account or pledge Company Securities as collateral for a loan. Our insider trading policy prohibits the use by those individuals/entities of plans created pursuant to Rule
44 │ MGIC Investment Corporation – 2023 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — Other Aspects
10b5-1 of the Securities Exchange Act which, for example, may otherwise have allowed such persons to sell our stock while in possession of material undisclosed information about us.
“Clawback” Policy
Under our “clawback” policy, the Company will seek to recover from any NEO or other executive officer, to the extent the Committee deems appropriate, amounts associated with cash incentive compensation that was earned and equity awards that vested based on achievement of a performance goal if a subsequent financial restatement shows that such compensation should not have been paid.
MGIC Investment Corporation – 2020 Proxy Statement │ 49
Other Aspects — COMPENSATION DISCUSSION & ANALYSIS
The Committee intends to amend the policy to comply with the final SEC rules regarding the recoupment policy required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Change in Control Provisions
Each of our NEOs is a party to a Key Executive Employment and Severance Agreement with us (a “KEESA”)KEESA), as described in the section titled “Potential Payments Upon Termination or Change-in-Control – Change in Control Agreements” below. No executive officer has an employment or severance agreement, other than a KEESA. The period for which our KEESAs provide employment protection ends on the third anniversary of the date of a change in control. Our KEESAs provide for a cash payment in two lump sums (or one lump sum if neither the Company nor any affiliate’s stock is publicly traded) only after both a change in control and a specified employment termination (a “double trigger”). Our KEESAs also provide for "double trigger" vesting of equity awards: there must be a change in control and ana qualifying employment termination.
The agreements for our outstanding equity awards provide that the equity will not vest upon a change in control if the Committee reasonably determines in good faith prior to the occurrence of the change in control that the awards will be assumed or replaced by the employee’s employer immediately following the change in control with an alternative award meeting specified requirements.
Our KEESAs do not contain a gross-up by the Company for any excise tax payments resulting from payments upon a change in control. For participants with KEESAs effective on or after October 23, 2014, and/or who have reached age 62, paymentsPayments under the KEESAs or under any other agreement with or plan of the Company, are capped by reducing such payments to an amount that will not trigger payment of federal excise taxes on such payment. For participants with KEESAs effective before October 23, 2014, and who are younger than age 62, payments under the KEESAs, or under any other agreement with or plan of the Company, are similarly reducedpayment (the "Cut-Back Provision"), but only if the resulting after-tax value to the participant of the total payments upon a change in control iswould be greater than the after-tax value to the participant if the cash payments were not so reduced with the participant responsible for the excise taxes.
Tax Deductibility Limit
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation in excess of $1 million paid during a year to certain "covered employees," generally including our NEOs. We expect the portion of 20192022 compensation exceeding $1 million for income tax purposes that we provide to our "covered employees" will not be deductible. The Committee considered the impact of this Internal Revenue Code rule in developing, implementingintends to set compensation for our NEOs at levels it believes are necessary to attract, motivate, retain and administering our compensation program for 2019.
Prior to the enactment of the Tax Act, Section 162(m) generally exempted qualifying performance-based compensation from the $1 million annual deduction. The Tax Act included "grandfather" rules that apply to certain written binding contracts in effect as of November 2, 2017. Although the rules allowing this exemption are complex, we believe thatreward them, even if a portion of our equity awards granted in 2017 qualifysuch compensation is not deductible as tax-deductible. However, because of ambiguities and uncertainties as to the application and interpretationa result of Section 162(m) and related regulations, and the fact that such regulations and interpretations may change from time to time (with potentially retroactive effect), there is no certainty that compensation intended by the Committee to satisfy the requirements for deductibility under Section 162(m) will be deductible.
The Committee will continue to consider the deductibility of compensation in light of the revisions to Code Section 162(m) by the Tax Act; however, the primary goals of the executive compensation program are to attract and retain high-quality executives and to align compensation with long-term shareholder interests.
.
In making decisions about executive compensation, we also considerconsideration is given to the impact of other regulatory provisions, including the provisions of Section 409A of the Internal Revenue Code regarding non-qualified deferred compensation and the change in control provisions of Section 280G of the Internal Revenue Code.
50 │ MGIC Investment Corporation – 2020 Proxy Statement
COMPENSATION DISCUSSION & ANALYSIS — Other Aspects
Process for Approving Compensation Components
The Committee's typical practice for many years has beenis to make long-term equity awards and approve new salaries and bonuses at its meeting in late January, which normally follows our determination ofJanuary. The Committee adopted a policy that if at the time the
MGIC Investment Corporation – 2023 Proxy Statement │ 45
Other Aspects — COMPENSATION DISCUSSION & ANALYSIS
Committee is making its compensation decisions, the Company has not yet released its earnings for the prior year, then the grant date for long-term equity awards to employees (including the NEOs) and directors shall be the second business day following the year-end earnings release for the prior year. The Committee also may approve changesThis policy was adopted so that equity awards would be valued at a point in compensation at other times throughouttime when the year. In July 2019,most important information about the Committee approved compensation changes in connection with the management succession discussedCompany is likely to have been disseminated in the introduction to this CD&A.
market. If the approval of awards occurs on or after March 15 of any given year, the grant date will be the second business day following the first quarterly earnings release issued after such approval.
The Committee has not adjusted executive officers' future compensation based upon amounts realized or forfeited pursuant to previous equity awards.
The Board has delegated limited authority to the CEO to grant equity awards to non-executive officers.
COMPENSATION COMMITTEE REPORT
Among its other duties, the Committee assists in the oversight by the Board of Directors of MGIC Investment Corporation’s executive compensation program, including approving corporate goals relating to compensation for the CEO and senior officers, evaluating the performance of the CEO and determining the CEO’s annual compensation and approving compensation for MGIC Investment Corporation’s other senior executives.
The Committee reviewed and discussed with management the foregoing Compensation Discussion and Analysis. Based upon this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in MGIC Investment Corporation’s Proxy Statement for its 20202023 Annual Meeting of Shareholders.
Members of the Management Development, Nominating and Governance Committee:Committee:
Kenneth M. Jastrow, II,Michael E. Lehman, Chair
Cassandra C. CarrDaniel A. Arrigoni
Timothy A. Holt
Jodeen A. Kozlak
Michael E. Lehman
Melissa B. Lora
46 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 51
Compensation and Related Tables
COMPENSATION AND RELATED TABLES
Summary Compensation Table
The following provides certain information abouttable summarizes the compensation of our NEOs in 2017for 2020 through 2019. Other tables that follow provide more detail about the specific types of compensation.2022.
| | | | | | | | | | | | | | | | | | | | | | | |
Name and
Principal Position | Year | Salary
($) | Stock Awards ($)1 | Non-Equity Incentive Plan Compensation ($)2 | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)3 | All Other Compensation ($)4 | Total
($) |
| Timothy Mattke | 2022 | 938,462 | | 4,000,012 | | 1,920,900 | | — | | 26,700 | | 6,886,074 | |
| Chief Executive | 2021 | 876,923 | | 3,500,001 | | 1,888,650 | | 94,133 | | 25,850 | | 6,385,557 | |
| Officer | 2020 | 824,039 | | 2,686,975 | | 1,442,400 | | 538,355 | | 25,400 | | 5,517,169 | |
| Salvatore Miosi | 2022 | 716,154 | | 2,060,014 | | 1,312,076 | | — | | 26,700 | | 4,114,944 | |
| President and | 2021 | 685,969 | | 2,000,010 | | 1,322,055 | | 164,330 | | 25,850 | | 4,198,214 | |
| Chief Operating Officer | 2020 | 658,616 | | 1,688,956 | | 1,056,400 | | 529,650 | | 25,400 | | 3,959,022 | |
| Nathaniel Colson | 2022 | 491,923 | | 1,100,010 | | 674,000 | | 6,644 | | 26,700 | | 2,299,277 | |
| EVP and Chief | 2021 | 438,462 | | 1,000,011 | | 650,535 | | 34,816 | | 25,850 | | 2,149,674 | |
| Financial Officer | 2020 | 343,269 | | 921,249 | 473,300 | | 21,875 | 23,853 | 1,783,546 |
James Hughes5 | 2022 | 594,077 | | 1,030,007 | | 806,104 | | — | | 26,700 | | 2,456,888 | |
| EVP – Sales & | 2021 | 548,046 | | 1,000,011 | | 812,819 | | 113,933 | | 25,850 | | 2,500,659 | |
| Bus. Development | 2020 | 451,500 | | 921,249 | | 592,600 | | 516,999 | | 25,400 | | 2,507,748 | |
| Paula Maggio | 2022 | 591,154 | | 1,030,007 | | 807,452 | | 32,245 | | 26,700 | | 2,487,558 | |
| EVP and | 2021 | 532,739 | | 1,000,011 | | 790,435 | | 44,616 | | 25,850 | | 2,393,651 | |
| General Counsel | 2020 | 438,108 | | 921,249 | | 575,000 | | 43,129 | | 25,400 | | 2,002,886 | |
|
| | | | | | | | | | | | | |
Name and
Principal Position | Year | Salary
($) | Stock Awards(1)
($) | Non-Equity Incentive Plan Compensation(2)
($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(3)
($) | All Other Compensation(4)
($) | Total
($) |
Timothy Mattke(5) | 2019 | 645,873 |
| 2,144,934 |
| 1,474,000 |
| 504,486 |
| 24,950 |
| 4,794,243 |
|
| Chief Executive | 2018 | 542,119 |
| 1,435,801 |
| 1,106,000 |
| 54,457 |
| 15,100 |
| 3,153,477 |
|
| Officer | 2017 | 526,327 |
| 868,444 |
| 966,800 |
| 396,358 |
| 14,850 |
| 2,772,779 |
|
Salvatore Miosi(5), (6) | 2019 | 495,593 |
| 1,947,384 |
| 1,082,500 |
| 507,286 |
| 24,950 |
| 4,057,713 |
|
| President and | 2018 | 398,550 |
| 1,435,801 |
| 813,000 |
| 84,115 |
| 15,100 |
| 2,746,566 |
|
| Chief Operating Officer | | | |
| | | |
Nathaniel Colson(5), (6) | 2019 | 206,180 |
| 374,593 |
| 223,100 |
| 14,822 |
| 8,808 |
| 827,503 |
|
| Executive Vice | | | |
| | | |
| President and Chief | | | |
| | | |
| Financial Officer | | | |
| | | |
James Hughes(7) | 2019 | 421,500 |
| 1,651,059 |
| 825,200 |
| 558,689 |
| 24,950 |
| 3,481,398 |
|
| Executive Vice | 2018 | 408,769 |
| 1,435,801 |
| 834,000 |
| 126,953 |
| 15,100 |
| 2,820,623 |
|
| President - Sales & | 2017 | 365,081 |
| 868,444 |
| 729,000 |
| 469,507 |
| 14,850 |
| 2,446,882 |
|
| Bus. Development | | | |
| | | |
Paula Maggio(6) | 2019 | 409,062 |
| 1,157,184 |
| 640,600 |
| 39,438 |
| 24,950 |
| 2,271,234 |
|
| Executive Vice | | | |
|
| | | |
| President and | | | |
|
| | | |
| General Counsel | | | |
|
| | | |
Patrick Sinks(5) | 2019 | 895,304 |
| 3,375,120 |
| 2,336,800 |
| 909,738 |
| 24,950 |
| 7,541,912 |
|
| Vice Chairman | 2018 | 868,635 |
| 4,187,753 |
| 2,311,300 |
| 588,738 |
| 15,100 |
| 7,971,526 |
|
| | 2017 | 843,000 |
| 2,532,961 |
| 2,065,500 |
| 1,577,483 |
| 14,850 |
| 7,033,794 |
|
Stephen Mackey(8) | 2019 | 204,151 |
| 1,157,184 |
| — |
| 61,492 |
| 483,294 |
| 1,906,121 |
|
| Former Executive | 2018 | 460,765 |
| 1,435,801 |
| 940,000 |
| 49,299 |
| 24,500 |
| 2,910,365 |
|
| Vice President and | 2017 | 447,373 |
| 868,444 |
| 801,500 |
| 52,884 |
| 24,050 |
| 2,194,251 |
|
| Chief Risk Officer | | | | | | | |
| |
(1) | 1Our equity awards are granted under programs described in "Components of our Executive Compensation Program — Long-Term Equity Awards” in our CD&A. The amounts shown in this column represent the grant date fair value of the restricted equity awards granted to NEOs in the years shown, computed in accordance with FASB ASC Topic 718. The fair value of restricted equity is based on the closing price of our Common Stock on the NYSE on the date of grant. In 2019, this was $12.37 (on a weighted average basis) for our CEO; and ranged from $11.76 to $13.99 (on a weighted average basis) for our other NEOs; in 2018, it was $15.81; and in 2017, it was $10.41. In accordance with the rules of the SEC, all of the figures in this column represent the value at the grant date based upon the probable outcome of the applicable performance conditions as of the grant date. If the full value of the applicable awards for 2019, 2018 and 2017 were shown, assuming the highest levels of the applicable performance conditions were achieved, rather than an amount based upon the probable outcome of the applicable performance conditions, then the amounts shown would have been: |
52 │ MGIC Investment Corporation – 2020 Proxy Statement
COMPENSATION AND RELATED TABLES — Summary Compensation Table
|
| | | | | | | | | | |
| | Name | 2019 | 2018 | 2017 |
| | Timothy Mattke | $ | 2,398,950 |
| $ | 1,669,536 |
| $ | 1,099,296 |
|
| | Salvatore Miosi | 2,201,400 |
| 1,669,536 |
| See Note (6) |
|
| | Nathaniel Colson | 388,056 |
| See Note (6) |
| See Note (6) |
|
| | James Hughes | 1,905,075 |
| 1,669,536 |
| 1,099,296 |
|
| | Paula Maggio | 1,411,200 |
| See Note (6) |
| See Note (6) |
|
| | Patrick Sinks(7) | 4,116,000 |
| 4,869,480 |
| 3,206,280 |
|
| | Stephen Mackey(8) | 1,411,200 |
| 1,669,536 |
| 1,099,296 |
|
Our standard terms for stock awards provide that separation from service withare granted under programs described in "Components of our Executive Compensation Program – Long-Term Equity Awards” in our CD&A. The amounts shown in this column represent the Company results in forfeiture of the awards. In connection with Mr. Mackey's separation from service, the Company waived the forfeiture of Mr. Mackey's 2017 stock award; Mr. Mackey's 2018 and 2019 stock awards were forfeited. Thegrant date fair value of Mr. Mackey's 2017 award whenRSUs granted to NEOs in the forfeiture was waived,years shown, computed in accordance with FASB ASC Topic 718. The fair value of RSUs is based on the probable outcome of the applicable performance conditions and the closing price of our Common Stockcommon stock on the NYSE on that date, had increased from $868,444the grant date. In 2022, the applicable closing price was $15.46; in 2021, it was $12.82; and in 2020, it was $13.67. The value of the RSUs granted in 2022 if maximum performance were to $1,156,257. The award remains subject to the performance conditionbe achieved is as follows: Mr. Mattke – $8,000,024; Mr. Miosi – $4,120,028; Mr. Colson – $2,200,020; Mr. Hughes – $2,060,014; and Ms. Maggio – $2,060,014.2Our 2022 bonus program is described in "Components of our Executive Compensation Program - 2018 and 2017 Long-Term Equity Awards– Annual Bonus"” in our CD&A. The bonuses paid were calculated based on a formula that compares actual performance to threshold, target and maximum performance achievement levels for three different financial performance goals (each with specific weights and in total weighted 75%) and a subjective assessment of performance against three different business objectives (in total weighted 25%). All goals for the 2020-2022 bonus programs were considered and approved by the Management Development, Nominating and Governance Committee.
| |
(2) | Our 2019 bonus program is described in "Components of our Executive Compensation Program — Annual Bonus” in our CD&A. The percentage of the maximum bonuses paid was calculated based on a formula that compares actual performance to threshold, target and maximum performance achievement levels for two different financial performance goals (each with specific weights and in total weighted 75%) and a subjective assessment of performance against three different business objectives. Our 2018 and 2017 bonus programs were structurally similar to the 2019 bonus program; however the 2017 program considered a greater number of financial performance goals and business objectives. All goals for the 2017-2019 bonus programs were considered and approved by the Management Development, Nominating and Governance Committee. |
| |
(3) | The Company does not maintain a nonqualified deferred compensation plan for its employees. The amounts shown in this column reflect, if positive, the sum of (a) the aggregate change in present value of accumulated pension benefits during the year pursuant to our Pension Plan and our Supplemental Executive Retirement Plan (“SERP”) when retirement benefits are also provided under the SERP, and (b) distributions the named executive officer received from our Qualified Pension Plan or SERP during the year. |
3The Company does not maintain a non-qualified deferred compensation plan for its employees. The amounts shown in this column reflect, if positive, the sum of (a) the aggregate change in present value of accumulated pension benefits during the year pursuant to our Pension Plan and our SERP when retirement benefits are also provided under the SERP, and (b) distributions the named executive officer received from our SERP during the year.
The aggregate change in present value of accumulated pension benefits represents:
| |
(a) | For other than Mr. Colson, Ms. Maggio and Mr. Mackey, the difference between (a) the present value of the annual pension payments that the named executive officer would be entitled to receive beginning at age 62, or current age if older than 62, and continuing for his life expectancy determined at the end of the year shown and by assuming that the officer’s employment with us ended on the last day of the year shown, and (b) the same calculation done as if the officer’s employment had ended one year earlier. |
| |
(b) | For Mr. Colson and Ms. Maggio, the difference between (a) the present value as of December 31, 2019 of the accumulated benefit under the "Cash Component" (described following the table titled “Pension Benefits at 2019 Fiscal Year-End") of our Pension Plan, and (b) the same calculation as of the prior year-end. |
| |
(c) | For Mr. Mackey, the difference between (a) the sum of (I) the distribution Mr. Mackey is expected to receive from the Pension Plan on February 1, 2020, and (II) the distribution Mr. Mackey received from the SERP in 2019, and (b) the present value as of December 31, 2018 of the accumulated benefit under the "Cash Component." |
| |
(d) | For all years shown, the change in the present value of accumulated pension benefits between years represents the net result of (a) the officer being one year closer to the receipt of the pension payments, which generally means the present value is higher, and the annual pension payment (for Mr. Colson, Ms. Maggio and Mr. Mackey, their accumulated benefit) is higher due to the additional benefit earned because of one more year (in the case of Mr. Mackey, a partial year) of employment; (b) a change in actuarial assumptions used to calculate the benefit, primarily changes in the discount rate used to calculate the present value at the end of each of those years; (c) a decrease for the effect of distributions that the NEOs received from our Qualified Pension Plan or SERP; (d) an increase for (I) in the case of Mr. Sinks and Mr. Mattke, in-service distributions received from our SERP to pay their portion of social security taxes and related income tax from such distributions, and (II) in the case of Mr. Mackey, a lump-sum distribution from the SERP. For each NEO, the change for 2019, 2018 and 2017 consists of: |
aFor other than Mr. Colson and Ms. Maggio, the difference between (a) the present value of the annual pension payments that the named executive officer would be entitled to receive beginning at age 60 and continuing for his life expectancy determined at the end of the year shown and by assuming that the officer’s employment with us ended on the last day of the year shown, and (b) the same calculation done as if the officer’s employment had ended one year earlier.
MGIC Investment Corporation – 20202023 Proxy Statement │ 5347
Summary Compensation Table — COMPENSATION AND RELATED TABLES
bFor Mr. Colson and Ms. Maggio, the difference between (a) the present value as of December 31, 2022 of the accumulated benefit under the "Cash Component" (described following the table titled “Pension Benefits at 2022Fiscal Year-End") of our Pension Plan, and (b) the same calculation as of the prior year-end.
cFor all years shown, the change in the present value of accumulated pension benefits between years represents the net result of (a) the officer being one year closer to the receipt of the pension payments, which generally means the present value is higher, and the annual pension payment (for Mr. Colson and Ms. Maggio, their accumulated benefit) is higher due to the additional benefit earned because of one more year of employment; (b) a change in actuarial assumptions used to calculate the benefit, primarily changes in the discount rate used to calculate the present value at the end of each of those years; (c) a decrease for the effect of distributions that the NEOs received from our SERP; and (d) an increase for in-service distributions received from our SERP to pay the NEO's portion of social security taxes and related income tax from such distributions. For net results that represent negative amounts, in compliance with applicable Securities and Exchange Commission regulations, no amount is shown in the Summary Compensation Table. For each NEO, the changes consist of:
|
| | | | | | | | | | | | | | | | | | | |
| | | 2019 | 2018 | 2017 |
| | Name | Change in
Actuarial
Assumptions | Change Due to Other Factors | Change in
Actuarial
Assumptions | Change Due to Other Factors | Change in
Actuarial
Assumptions | Change Due to Other Factors |
| | Timothy Mattke | $ | 336,693 |
| $ | 167,793 |
| $ | (219,652 | ) | $ | 274,109 |
| $ | 173,042 |
| $ | 223,316 |
|
| | Salvatore Miosi | 297,162 |
| 210,124 |
| (208,703 | ) | 292,818 |
| See Note (6) |
| See Note (6) |
|
| | Nathaniel Colson | 6,503 |
| 8,319 |
| See Note (6) |
| See Note (6) |
| See Note (6) |
| See Note (6) |
|
| | James Hughes | 318,594 |
| 240,095 |
| (237,244 | ) | 364,197 |
| 222,500 |
| 247,007 |
|
| | Paula Maggio | 4,607 |
| 34,831 |
| See Note (6) |
| See Note (6) |
| See Note (6) |
| See Note (6) |
|
| | Patrick Sinks | 669,333 |
| 240,405 |
| (522,207 | ) | 1,110,945 |
| 570,271 |
| 1,007,212 |
|
| | Stephen Mackey | 5,960 |
| 55,532 |
| (2,083 | ) | 51,382 |
| 6,401 |
| 46,483 |
|
| | | | | | | | | | | | | | | | | | | | |
| 2022 | 2021 | 2020 |
| Name | Change in
Actuarial
Assumptions | Change Due to Other Factors | Change in
Actuarial
Assumptions | Change Due to Other Factors | Change in
Actuarial
Assumptions | Change Due to Other Factors |
| Timothy Mattke | $ | (925,632) | $ | 441,643 | $ | (133,590) | $ | 227,723 | $ | 307,386 | $ | 230,969 |
| Salvatore Miosi | (761,417) | 574,614 | (106,308) | 270,638 | 258,515 | 271,135 |
| Nathaniel Colson | (37,731) | 44,375 | (94) | 34,910 | (13) | 21,888 |
| James Hughes | (754,218) | 494,566 | (107,419) | 221,352 | 273,634 | 243,365 |
| Paula Maggio | (25,050) | 57,295 | (206) | 44,822 | 74 | 43,055 |
See Note 11 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ending December 31, 20192022 for additional information regarding the assumptions made in arriving at these amounts.
| |
(4) | Amounts in this column for 2019, for other than Mr. Mackey, consist of matching 401(K)4 Amounts in this column for 2022 consist of matching 401(k) contributions and discretionary retirement plan contributions. For Mr. Mackey, the amount reflects $458,344 of severance paid in 2019 in connection with his separation from service with the Company, and a matching 401(k) contribution and discretionary retirement plan contribution of $24,950. |
| |
(5) | In July 2019, Mr. Sinks stepped down as our President and CEO, but agreed to remain with the Company until January 31, 2020 in the position of Vice Chairman. |
In July 2019,5 Mr. Mattke, our former Executive Vice President and Chief Financial Officer, was promoted to Chief Executive Officer; Mr. Miosi, our former Executive Vice President–Business Strategies & Operations, was promoted to President and Chief Operating Officer; and Mr. Colson, our former Vice President–Finance, was promoted to Executive Vice President and Chief Financial Officer.
| |
(6) | No compensation data is provided for the years prior to Mr. Miosi, Mr. Colson or Ms. Maggio becoming an NEO. |
| |
(7) | NEOHughes holds this position with Mortgage Guaranty Insurance Corporation, a wholly owned subsidiary of the Company, and not with the Company. |
(8) Mr. Mackey departed the Company, in May 2019. His "salary" amount includesand not with the payment of $23,920 he received for his accrued but unused vacation time.
Company.
5448 │ MGIC Investment Corporation – 20202023 Proxy Statement
COMPENSATION AND RELATED TABLES — Grants of Plan-Based Awards
20192022 Grants of Plan-Based Awards
The following table shows the 2022 grants of plan-based awards to our NEOsNEOs.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards1 | Estimated Future Payouts Under Equity Incentive Plan Awards2 | Grant Date Fair Value of Stock and Option Awards3 ($) |
| Name | Grant Date | Type of Award | Threshold
($) | Target
($) | Maximum
($) | Threshold
(#) | Target
(#) | Maximum
(#) |
| Timothy Mattke | 2/4/2022 | Annual Cash Incentive1 | 712,500 | | 1,425,000 | | 2,850,000 | | | | | |
| 2/4/2022 | RSUs-Cliff Perf. Vest4 | | | | 64,683 | | 258,733 | | 517,466 | | 4,000,012 | |
| Salvatore Miosi | 2/4/2022 | Annual Cash Incentive1 | 486,675 | | 973,350 | | 1,946,700 | | | | | |
| 2/4/2022 | RSUs-Cliff Perf. Vest4 | | | | 33,312 | | 133,248 | | 266,496 | | 2,060,014 | |
| Nathaniel Colson | 2/4/2022 | Annual Cash Incentive1 | 250,000 | | 500,000 | | 1,000,000 | | | | | |
| 2/4/2022 | RSUs-Cliff Perf. Vest4 | | | | 17,788 | | 71,152 | | 142,304 | | 1,100,010 | |
| James Hughes | 2/4/2022 | Annual Cash Incentive1 | 299,000 | | 598,000 | | 1,196,000 | | | | | |
| 2/4/2022 | RSUs-Cliff Perf. Vest4 | | | | 16,656 | | 66,624 | | 133,248 | | 1,030,007 | |
| Paula Maggio | 2/4/2022 | Annual Cash Incentive1 | 299,500 | | 599,000 | | 1,198,000 | | | | | |
| 2/4/2022 | RSUs-Cliff Perf. Vest4 | | | | 16,656 | | 66,624 | | 133,248 | | 1,030,007 | |
3 All of the figures in this column represent the grant date fair value of stock unit awards based on the probable outcome of the applicable performance conditions as of the grant date. The grant date fair value is based on the NYSE closing price on the day the award was granted.
|
| | | | | | | | | | | | | | |
|
| | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1) | Estimated Future Payouts
Under Equity Incentive
Plan Awards(2) | All Other Stock Awards | Grant Date
Fair Value
of Stock
and Option Awards(3)
($) |
| Name | Grant Date | Type of Award | Target
($) | Maximum
($) | Target
(#) | Maximum
(#) | (#) |
| Timothy Mattke | 1/21/2019 | Annual Bonus Incentive(1) | 854,041 |
| 1,708,081 |
| | | | |
| | 1/21/2019 | RSUs-Cliff Perf. Vest(4) | | | 98,400 |
| 120,000 |
| | 1,157,184 |
|
| | 7/25/2019 | RSUs-Cliff Time Vest(5) | | | | | 75,000 |
| 987,750 |
|
| Salvatore Miosi | 1/21/2019 | Annual Bonus Incentive(1) | 627,158 |
| 1,254,317 |
| | | | |
| | 1/21/2019 | RSUs-Cliff Perf. Vest(4) | | | 98,400 |
| 120,000 |
| | 1,157,184 |
|
| | 7/25/2019 | RSUs-Cliff Time Vest(5) | | | | | 60,000 |
| 790,200 |
|
| Nathaniel Colson | 1/21/2019 | Annual Bonus Incentive(1) | 129,251 |
| 258,503 |
| | | | |
| | 1/21/2019 | RSUs-Perf. Vest(6) | | | 5,215 |
| 6,360 |
| | 61,331 |
|
| | 1/21/2019 | RSUs-Time Vest(7) | | | | | 4,240 |
| 49,862 |
|
| | 7/25/2019 | RSUs-Cliff Time Vest(5) | | | | | 20,000 |
| 263,400 |
|
| James Hughes | 1/21/2019 | Annual Bonus Incentive(1) | 478,125 |
| 956,250 |
| | | | |
| | 1/21/2019 | RSUs-Cliff Perf. Vest(4) | | | 98,400 |
| 120,000 |
| | 1,157,184 |
|
| | 7/25/2019 | RSUs-Cliff Time Vest(5) | | | | | 37,500 |
| 493,875 |
|
| Paula Maggio | 1/21/2019 | Annual Bonus Incentive(1) | 371,160 |
| 742,320 |
| | | | |
| | 1/21/2019 | RSUs-Cliff Perf. Vest(4) | | | 98,400 |
| 120,000 |
| | 1,157,184 |
|
| Patrick Sinks | 1/21/2019 | Annual Bonus Incentive(1) | 1,353,900 |
| 2,707,800 |
| | | | |
| | 1/21/2019 | RSUs-Cliff Perf. Vest(4) | | | 287,000 |
| 350,000 |
| | 3,375,120 |
|
Stephen Mackey(8) | 1/21/2019 | Annual Bonus Incentive(1) | 538,200 |
| 1,076,400 |
| | | | |
| | 1/21/2019 | RSUs-Cliff Perf. Vest(4) | | | 98,400 |
| 120,000 |
| | 1,157,184 |
|
| |
(1) | Our Non-Equity Incentive Plan Awards are described in "Components of our Executive Compensation Program — Annual Bonus” in our CD&A. This table does not include a "threshold" column because under our 2019 Non-Equity Incentive Awards, a zero payout was possible if threshold performance targets were not achieved. Messrs. Mattke, Miosi and Colson were each promoted during 2019; the amounts shown in this column have been calculated based on their prorated salaries and bonus multiples for the time they were in each of their positions during 2019. |
| |
(2) | Our Equity Incentive Plan Awards are described in “Components of our Executive Compensation Program - 2019 Long-Term Equity Awards” in our CD&A. This table does not include a "threshold" column because under our 2019 Long-Term Equity Awards, a zero payout is possible for performance vested awards if no adjusted book value per share growth is achieved, and a zero payout is possible for time vested awards if the NEO departs before vesting.
|
| |
(3) | All of the figures in this column represent the value of stock unit awards at the grant date based upon the probable outcome of the applicable performance conditions as of the grant date. The grant date fair value is based on the NYSE closing price on the day the award was granted or the prior day if the NYSE was closed on the day the award was granted. |
| |
(4) | These are the Cliff BV Awards described in “Components of our Executive Compensation Program - 2019 Long-Term Equity Awards” in our CD&A. |
| |
(5) | These are the one-time Cliff Time Vested Awards described in “Components of our Executive Compensation Program - 2019 Long-Term Equity Awards” in our CD&A that were awarded in connection with the execution of our leadership transition. |
MGIC Investment Corporation – 20202023 Proxy Statement │ 5549
Grants of Plan-BasedOutstanding Equity Awards — COMPENSATION AND RELATED TABLES
| |
(6) | These are the BV Awards described in "Components of our Executive Compensation Program - 2019 Long-Term Equity Awards” in our CD&A.
|
| |
(7) | These are the Time Vested Awards described in “Components of our Executive Compensation Program - 2019 Long-Term Equity Awards” in our CD&A. |
| |
(8) | Our standard terms for stock awards provide that separation from service with the Company results in forfeiture of the awards. In connection with Mr. Mackey’s separation from service, the Company waived the forfeiture of Mr. Mackey’s 2017 stock award; Mr. Mackey’s 2018 and 2019 stock awards were forfeited. The value of Mr. Mackey’s 2017 award when the forfeiture was waived, based upon the probable outcome of the applicable performance conditions and the closing price of our Common Stock on the NYSE on that date, had increased from $868,444 to $1,156,257. The award remains subject to the performance condition described in “Components of our Executive Compensation Program - 2018 and 2017 Long-Term Equity Awards” in our CD&A. |
56 │ MGIC Investment Corporation – 2020 Proxy Statement
COMPENSATION AND RELATED TABLES — Outstanding Equity Awards
Outstanding Equity Awards at 20192022 Fiscal Year-End
The following table shows our NEOs’ equity awards outstanding on December 31, 2019.2022.
| | | | | | | | | | | | | | |
| | Equity Incentive Plan Awards |
| Name | |
Number of Unearned Shares, Units or
Other Rights That Have Not Vested1
(#)
| | Market or Payout
Value of Unearned Shares, Units or Other Rights That Have Not Vested2
($) |
| Timothy Mattke | | 1,285,878 | | | 16,716,414 | |
| Salvatore Miosi | | 718,298 | | | 9,337,874 | |
| Nathaniel Colson | | 374,560 | | | 4,869,280 | |
| James Hughes | | 365,504 | | | 4,751,552 | |
| Paula Maggio | | 365,504 | | | 4,751,552 | |
|
| | | | | | | | | | | |
| | | | | | Equity Incentive Plan Awards |
| Name | Number of Shares or
Units That Have Not Vested(1)
(#) | | Market Value of Shares or Units That Have Not Vested(2)
($) | |
Number of Unearned Shares, Units or
Other Rights That Have Not Vested(3)
(#)
| | Market or Payout
Value of Unearned Shares, Units or Other Rights That Have Not Vested(2)
($) |
| Timothy Mattke | 75,000 |
| | 1,062,750 |
| | 328,440 |
| | 4,653,995 |
|
| Salvatore Miosi | 60,000 |
| | 850,200 |
| | 328,440 |
| | 4,653,995 |
|
| Nathaniel Colson | 26,242 |
| | 371,849 |
| | 6,214 |
| | 88,052 |
|
| James Hughes | 37,500 |
| | 531,375 |
| | 328,440 |
| | 4,653,995 |
|
| Paula Maggio | 13,334 |
| | 188,943 |
| | 117,240 |
| | 1,661,291 |
|
| Patrick Sinks | — |
| | — |
| | 957,950 |
| | 13,574,152 |
|
| Stephen Mackey | — |
| | — |
| | 105,600 |
| | 1,496,352 |
|
| |
(a) | Cliff Time Vested RSUs awarded in July 2019 to Messrs. Mattke (75,000), Miosi (60,000), Colson (20,000) and Hughes (37,500) in connection with our CEO succession and management realignment. Those RSUs vest in July 2022, subject to continued employment with the Company, and are not subject to performance targets. |
| |
(b) | Time Vested RSUs awarded in July 2018 to Ms. Maggio (13,334), upon her joining the Company and prior to her becoming an NEO. Those awards vest in July in each of the first three years following the year of grant subject to her continued employment with the Company and are not subject to performance targets.
|
| |
(c) | Time Vested RSUs awarded to Mr. Colson in each of January 2017 (668) and January 2018 (1,334), prior to his becoming an NEO. Those awards vest in January in each of the first three years following the year of grant subject to his continued employment with the Company, and are not subject to performance targets.
|
| |
(d) | Time Vested RSUs granted in January 2019 to Mr. Colson (4,240). Those awards vest in January in each of the first three years following the year of grant, are not subject to performance targets and are reflected in the 2019 Grants of Plan Based Awards Table.
|
| |
(2) | Based on the closing price of the Common Stock on the NYSE at 2019 year-end, which was $14.17. |
| |
(a) | Cliff Performance Vested RSUs awarded January 21, 2019 to Messrs. Mattke (117,240), Miosi (117,240), Hughes (117,240) and Sinks (341,950) and Ms. Maggio (117,240) that will cliff vest in February 2022 based on achievement of a three-year cumulative goal for growth in adjusted book value per share and are reflected in the 2019 Grants of Plan Based Awards Table. For more information, see “Components of our Executive Compensation Program - 2019 Long Term Equity Awards” in our CD&A. |
| |
(c) | Cliff Performance Vested RSUs awarded January 23, 2017 to Messrs. Mattke (105,600), Miosi (105,600), Hughes (105,600), Sinks (308,000) and Mackey (105,600) that cliff vested in March 2020 based on achievement of a three-year cumulative goal for growth in adjusted book value per share. For more information, see "Components of our Executive Compensation Program - 2018 and 2017 Long Term Equity Awards" in our CD&A. |
MGIC Investment Corporation – 2020 Proxy Statement │ 57
Outstanding Equity Awards — COMPENSATION AND RELATED TABLES
| |
(d) | Performance Vested RSUs awarded on January 21, 2019 to Mr. Colson (6,214) that will vest over a three-year period, based on achievement of a three-year cumulative goal for growth in adjusted book value per share and are reflected in the 2019 Grants of Plan Based Awards Table. For more information, see “Components of our Executive Compensation Program - 2019 Long-Term Equity Awards” in our CD&A. |
1 The number of units that are included in this column is a representative number of units that would vest based on performance for the last completed year (2019)(2022), or if the payout is based on performance to occur over more than one year, the last completed fiscal years over which performance is measured. Consists of the following representative numbers of units that would vest, in each case calculated based on linear interpolation between performance measures, as provided in the granting documents:
aCliff Performance Vested RSUs awarded February 4, 2022 to Messrs. Mattke (517,466), Miosi (266,496), Colson (142,304) and Hughes (133,248), and Ms. Maggio (133,248) that will cliff vest in February, 2025 based on achievement of a three-year cumulative goal for growth in adjusted book value per share and are reflected in the 2022 Grants of Plan Based Awards Table. For more information, see "Components of our Executive Compensation Program –2022 Long Term Equity Awards" in our CD&A. bCliff Performance Vested RSUs awarded March 1, 2021 to Messrs. Mattke (546,022), Miosi (312,014), Colson (156,008) and Hughes (156,008), and Ms. Maggio (156,008) that will cliff vest in March 2024 based on achievement of a three-year cumulative goal for growth in adjusted book value per share. For more information, see "Components of our Executive Compensation Program – 2021 Long Term Equity Awards" in our CD&A. cCliff Performance Vested RSUs awarded January 27, 2020 to Messrs. Mattke (222,390), Miosi (139,788), Colson (76,248) and Hughes (76,248), and Ms. Maggio (76,248) that will cliff vest in February 2023 based on achievement of a three-year cumulative goal for growth in adjusted book value per share. For more information, see "Components of our Executive Compensation Program – 2020 Long Term Equity Awards" in our CD&A.
2 Based on the closing price of the Common Stock on the NYSE at 2022 year-end, which was $13.00.
5850 │ MGIC Investment Corporation – 20202023 Proxy Statement
COMPENSATION AND RELATED TABLES — Stock Vested
20192022 Stock Vested
The following table shows the vesting of grants of plan based stock awards to our NEOs in 2019.2022. There were no options outstanding or exercised in 2019.2022.
| | | | | | | | |
| Name | Number of Shares Acquired on Vesting
(#) | Value Realized on Vesting1 ($) |
| Timothy Mattke | 177,000 | | 2,592,360 | |
| Salvatore Miosi | 162,000 | | 2,383,560 | |
| Nathaniel Colson | 23,386 | | 330,690 | |
| James Hughes | 139,500 | | 2,070,360 | |
| Paula Maggio | 102,000 | | 1,548,360 | |
1 Value realized is the market value at the close of business on the vesting date, or the prior business day if the vesting date falls on a weekend or holiday.
|
| | | | |
| Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(1)
($) |
| Timothy Mattke | 39,968 |
| 523,095 |
|
| Salvatore Miosi | 14,660 |
| 189,198 |
|
| Nathaniel Colson | 2,000 |
| 24,720 |
|
| James Hughes | 14,660 |
| 189,198 |
|
| Paula Maggio | 6,666 |
| 89,991 |
|
| Patrick Sinks | 116,574 |
| 1,525,703 |
|
| Stephen Mackey | 39,968 |
| 523,095 |
|
| |
(1) | Value realized is the market value at the close of business on the vesting date. |
MGIC Investment Corporation – 20202023 Proxy Statement │ 5951
Pension Benefits — COMPENSATION AND RELATED TABLES
Pension Benefits at 20192022 Fiscal Year-End
The following table shows the present value of accrued pension plan benefits for our NEOs as of December 31, 2019.2022.
| | | | | | | | | | | | | | |
| Name | Plan Name1 | Number of Years Credited Service
(#) | Present Value of Accumulated Benefit2
($) | Payments During Last Fiscal Year3
($) |
| Timothy Mattke | Qualified Pension Plan | 16.6 | 1,622,043 | — | |
| Supplemental Executive Retirement Plan | 16.6 | 63,704 | — |
| Salvatore Miosi | Qualified Pension Plan | 34.7 | 2,279,353 | — | |
| Supplemental Executive Retirement Plan | 34.7 | 230,041 | 3,061 | |
| Nathaniel Colson | Qualified Pension Plan | 8.4 | 98,027 | — | |
| Supplemental Executive Retirement Plan | 8.4 | — | | — | |
| James Hughes | Qualified Pension Plan | 35.3 | 2,970,107 | — | |
| Supplemental Executive Retirement Plan | 35.3 | 134,597 | 1,458 | |
| Paula Maggio | Qualified Pension Plan | 4.5 | 169,170 | — | |
| Supplemental Executive Retirement Plan | 4.5 | — | — | |
|
| | | | | | |
| Name | Plan Name(1) | Number of Years Credited Service
(#) | Present Value of Accumulated Benefit(2)
($) | Payments During Last Fiscal Year(3)
($) |
| Timothy Mattke | Qualified Pension Plan | 13.6 | 1,351,975 |
| — |
|
| | Supplemental Executive Retirement Plan | 13.6 | 198,851 |
| 5,101 |
|
| Salvatore Miosi | Qualified Pension Plan | 31.7 | 1,891,813 |
| — |
|
| | Supplemental Executive Retirement Plan | 31.7 | 120,918 |
| — |
|
| Nathaniel Colson | Qualified Pension Plan | 5.4 | 34,692 |
| — |
|
| | Supplemental Executive Retirement Plan | 5.4 | — |
| — |
|
| James Hughes | Qualified Pension Plan | 32.3 | 2,623,389 |
| — |
|
| | Supplemental Executive Retirement Plan | 32.3 | 115,862 |
| — |
|
| Paula Maggio | Qualified Pension Plan | 1.5 | 21,917 |
| — |
|
| | Supplemental Executive Retirement Plan | 1.5 | 27,263 |
| — |
|
| Patrick Sinks | Qualified Pension Plan | 41.4 | 3,420,062 |
| — |
|
| | Supplemental Executive Retirement Plan | 41.4 | 4,587,179 |
| 16,514 |
|
| Stephen Mackey | Qualified Pension Plan | 3.9 | 165,541 |
| — |
|
| | Supplemental Executive Retirement Plan | 3.9 | — |
| 35,431 |
|
2 The amount shown in this column, for other than Mr. Colson and Ms. Maggio, is the present value of the pension payments that the NEO would be entitled to receive beginning at age 60 (which is the earliest age that unreduced benefits under the Qualified Pension Plan and SERP may be received), or current age if older than 60, and continuing for his or her life expectancy determined at the end of 2022, and by assuming that the officer’s employment with us ended on the last day of that year. It represents the present value of annual payments under the Prior Plan Component and the present value of the accumulated benefit under the Cash Balance Component (both described below) of our Pension Plan. See Note 11 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ending December 31, 2022 for the discount rate used to calculate the present value of benefits under these plans. The amount shown in this column for Mr. Colson and Ms. Maggio is the present value as of December 31, 2022 of the accumulated benefit under the Cash Balance Component, assuming retirement at age 65.
| |
(1) | See below for a summary of these plans. |
| |
(2) | The amount shown in this column, for other than Mr. Colson, Ms. Maggio and Mr. Mackey, is the present value of the annual pension payments that the named executive officer would be entitled to receive beginning at age 62 (which is the earliest age that unreduced benefits under the Qualified Pension Plan and SERP may be received), or current age if older than 62, and continuing for his or her life expectancy determined at the end of 2019, and by assuming that the officer’s employment with us ended on the last day of that year. See Note 11 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ending December 31, 2019 for the discount rate used to calculate the present value of benefits under these plans. The amount shown in this column for Mr. Colson and Ms. Maggio is the present value as of December 31, 2019 of the accumulated benefit under the "Cash Component" (described below) of our Pension Plan, assuming retirement at age 65 (the earliest age at which unreduced benefits may be received under the Cash Component of the Pension Plan). The amount shown in this column for Mr. Mackey is the accumulated benefit under the "Cash Component" (described below) of our Pension Plan (Mr. Mackey received a qualified lump sum payment on February 1, 2020). |
3 The amounts shown in this column represent distribution amounts received from the SERP during the fiscal year ended December 31, 2022, to pay the employee portion of the Social Security tax attributable to benefits earned under the plan during fiscal year 2022, as well as amounts distributed to cover the income tax thereon.
| |
(3) | For Mr. Sinks and Mr. Mattke, the amount shown in this column represents distribution amounts received from the SERP during the fiscal year ended December 31, 2019, to pay the employee portion of the Social Security tax attributable to benefits earned under the plan during fiscal year 2019, as well as amounts distributed to cover the income tax thereon. For Mr. Mackey, the amount reflects a 2019 lump sum payout from the SERP. |
The Pension Plan has beenwas redesigned, effective January 1, 2014. As described below, under the redesigned Pension Plan and SERP, employees hired after December 31, 2013 accrue retirement benefits under a cash balance formula (the “CashCash Balance Component”)Component). Employees hired prior to January 1, 2014 continued to accrue benefits under the legacy Pension Plan design through December 31, 2018 (the “PriorPrior Plan Component”)Component). EffectiveBetween January 1, 2019 and December 31, 2022, all participants accrued benefits under the Cash Balance Component.
52 │ MGIC Investment Corporation – 2023 Proxy Statement
COMPENSATION AND RELATED TABLES — Pension Benefits
Named Executive Officers Hired Prior to January 1, 2014
Through 2018, the NEOs (other than Mr. Colson, who was hired in 2014, and Ms. Maggio, who was hired in 2018, and Mr. Mackey, who was hired in 2015)2018) accrued benefits under the Prior Plan Component. Under the Pension Plan and SERP taken together within the Prior Plan Component, those executive officers each earned an annual pension credit for each year of employment equal to 2% of the officer’s eligible compensation for that year. Eligible compensation iswas limited to salaries, wages, cash bonuses (which for this purpose also includes payments listed in the Non-Equity Incentive Compensation Plan column in the Summary Compensation Table), and the portion of cash bonuses deferred and converted to restricted equity bonuses
60 │ MGIC Investment Corporation – 2020 Proxy Statement
COMPENSATION AND RELATED TABLES — Pension Benefits
(applicable (applicable for bonuses for 1999 through 2006 performance). At retirement, the annual pension credits are added together to determine the employee’s accrued pension benefit. However, the annual pension credits for service prior to 1998 for each employee with at least five years of vested service on January 1, 1998 will generally be equal to 2% of the employee’s average eligible compensation for the five years ended December 31, 1997. Eligible employees with credited service for employment prior to October 31, 1985 also receive a past service benefit, which is generally equal to the difference between the amount of pension the employee would have been entitled to receive for service prior to October 31, 1985 under the terms of a prior plan had such plan continued, and the amount the employee is actually entitled to receive under an annuity contract purchased when the prior plan was terminated. Retirement benefits vest on the basis of a graduated schedule over a seven-year periodafter three years of service. Full pension benefits for the Prior Plan Component are payable in monthly installments or a lump-sum upon retirement at or after age 6560 with at least fivethree years of service (age 62 if the employee has completed at least seven years of service).service. Any supplemental executive retirement benefits are payable in a lump sum six months after service with the company ends. In addition, reduced benefits are payable beginning at any age following termination. Mr. Sinks is eligible for his full retirement benefits.
If the employment of our active NEOs as of December 31, 2019 (other than Mr. Colson and Ms. Maggio) terminated effective December 31, 2019,2022, the annual amounts payable to them at age 62 (or current age if older than 62)60 under the Pension Plan would be: Mr. Mattke – $251,339; Mr. Miosi – $210,229; and Mr. Hughes – $229,232; and the lump-sum payments under the SERP would have been:be: Mr. Mattke – $159,363;$9,763; Mr. Miosi – $161,563; Mr. Colson – $6,160; Mr. Hughes –$193,982;$21,252; and Mr. Sinks – $225,000; and the lump-sum payment for supplemental executive retirement benefits would have been: Mr. Mattke – $366,234; Mr. Miosi – $161,325; Mr. Hughes – $133,828; and Mr. Sinks – $4,703,662.$10,412. As of December 31, 2019, Mr. Sinks was eligible to receive this level of benefit because he was age 62 and had more than seven years' tenure. As of December 31, 2019,2022, Messrs. Mattke, Miosi Colson and Hughes were each eligible to receive reduced benefits under these plans upon termination of employment. If their employment had been terminated effective December 31, 2019, the annual amounts payable under these plans had2022, and each one elected to begin receiving annual payments immediately, the annual amounts payable under the Pension Plan would have been: Mr. Mattke – $25,660;$79,667; Mr. Miosi – $57,226; Mr. Colson – $1,613;$167,890; and Mr. Hughes – $144,642; $229,232; and the lump-sum payment for supplemental executive retirement benefitspayments under the SERP would have been: Mr. Mattke – $180,340;$2,031; Mr. Miosi – $123,431;$17,537; and Mr. Hughes – $117,060.$10,412. The discount rate and post-retirement mortality assumptions used to calculate the lump-sum payments differ from the factors used in our financial statements.
Named Executive Officers Hired on or after January 2, 2014
For Mr. Colson and Ms. Maggio, and Mr. Mackey, the accumulated benefit in the Cash Balance Component of the Pension Plan is based on an annual credit of 4% of his or her plan eligible compensation (described above) and an annual interest credit based on the yield of the 30-year Treasury securities. Similar to the Prior Plan Component of the Pension Plan, benefits in excess of the qualified plan are eligible for accrual in the SERP. Benefits in the Cash Balance Component fully vest upon the earlier of three years of service or attainment of normal retirement age, therefore, ifthe benefit of each NEO is fully vested. If the employment of Mr. Colson and Ms. Maggio terminated effective December 31, 2019, no benefit would be payable to her. Mr. Mackey received a reduced distribution of $35,431 from2022, the SERP in 2019 and is expected to receive a reduced distribution of $165,541 fromlump-sum payments at age 65 under the Pension Plan on February 1, 2020.would be: Mr. Colson – $393,713, and Ms. Maggio – $305,504. As of December 31, 2022, Mr. Colson and Ms. Maggio were each eligible to receive benefits under these plans upon termination of employment. If their employment had been terminated effective December 31, 2022, and each one elected to begin receiving payments immediately, the lump-sum payments would have been: Mr. Colson – $146,364; Ms. Maggio – $199,080. The discount rate and post-retirement mortality assumptions used to calculate the lump-sum payments differ from the factors used in our financial statements.
2023 Changes to the Pension Plan
The Pension Plan and SERP were amended effective December 31, 2022, to cease all future accrual of benefits under the Cash Balance Component of the Plans. However, benefits already accrued under the Cash Balance Component of the Plans will continue to earn future interest credits.
The Prior Plan Component for the Pension Plan and SERP has been amended to allow unreduced retirement benefits as early as age 60.
Employees are fully vested in the benefits from both plans if fully employed on December 31, 2022.
MGIC Investment Corporation – 20202023 Proxy Statement │ 6153
Payments Upon Termination or Change in Control — COMPENSATION AND RELATED TABLES
Potential Payments Upon Termination or Change in Control
The following table summarizes the estimated value of payments to each of the NEOs assuming the triggering event or events indicated occurred on December 31, 2019.2022.
| | | | | | | | | | | | | | | | | | | | |
| Name | Termination Scenario | Total
($) | Cash Payment1 ($) | Value of Restricted Equity and Stock Options that will Vest on an Accelerated Basis2 ($) | Value of Restricted Equity and Stock Options Eligible for Continued Vesting2 ($) | Value of Other Benefits3 ($) |
Timothy
Mattke | Change in control with qualifying termination | 23,858,041 | | 5,746,792 | | 17,920,344 | | | 190,905 | |
| Change in control without qualifying termination | — | | | | | |
| Disability | 16,716,414 | | | | 16,716,414 | | |
| Death | 11,007,672 | | | 11,007,672 | | | |
| Salvatore Miosi | Change in control with qualifying termination | 14,423,337 | | 4,160,702 | | 10,094,630 | | | 168,005 | |
| Change in control without qualifying termination | — | | | | | |
| Disability | 9,337,874 | | | | 9,337,874 | | |
| Death | 6,334,315 | | | 6,334,315 | | | |
| Nathaniel Colson | Change in control with qualifying termination | 7,770,290 | | 2,357,482 | | 5,282,056 | | | 130,752 | |
| Change in control without qualifying termination | — | | | | | |
| Disability | 4,869,280 | | | | 4,869,280 | | |
| Death | 3,343,028 | | | 3,343,028 | | | |
| James Hughes | Change in control with qualifying termination | 8,189,397 | | 2,890,394 | | 5,164,328 | | | 134,675 | |
| Change in control without qualifying termination | — | | | | | |
| Disability | 4,751,552 | | | | 4,751,552 | | |
| Death | 3,284,164 | | | 3,284,164 | | | |
| Paula Maggio | Change in control with qualifying termination | 8,141,716 | | 2,836,736 | | 5,164,328 | | | 140,652 | |
| Change in control without qualifying termination | — | | | | | |
| Disability | 4,751,552 | | | | 4,751,552 | | |
| Death | 3,284,164 | | | 3,284,164 | | | |
|
| | | | | | | | | | | |
| Name | Termination Scenario | Total
($) | Cash Payment(1)
($) | Value of Restricted Equity and Stock Options that will Vest on an Accelerated Basis(2)
($) | Value of Restricted Equity and Stock Options Eligible for Continued Vesting(2)
($) | Value of Other Benefits(3)
($) |
Timothy
Mattke | Change in control with qualifying termination | 11,059,678 |
| 5,128,557 |
| 5,755,854 |
| — |
| 175,267 |
|
| | Change in control without qualifying termination | — |
| — |
| — |
| — |
| — |
|
| | Death | 5,755,854 |
| — |
| 5,755,854 |
| — |
| — |
|
| Salvatore Miosi | Change in control with qualifying termination | 3,635,755 |
| — |
| 3,635,753 |
| — |
| 2 |
|
| | Change in control without qualifying termination | — |
| — |
| — |
| — |
| — |
|
| | Death | 5,543,304 |
| — |
| 5,543,304 |
| — |
| — |
|
| Nathaniel Colson | Change in control with qualifying termination | 642,099 |
| 75,675 |
| 461,970 |
| — |
| 104,454 |
|
| | Change in control without qualifying termination | — |
| — |
| — |
| — |
| — |
|
| | Death | 461,970 |
| — |
| 461,970 |
| — |
| — |
|
| James Hughes | Change in control with qualifying termination | 3,437,589 |
| — |
| 3,437,585 |
| — |
| 4 |
|
| | Change in control without qualifying termination | — |
| — |
| — |
| — |
| — |
|
| | Death | 5,224,479 |
| — |
| 5,224,479 |
| — |
| — |
|
| Paula Maggio | Change in control with qualifying termination | 2,000,477 |
| — |
| 1,889,343 |
| — |
| 111,134 |
|
| | Change in control without qualifying termination | — |
| — |
| — |
| — |
| — |
|
| | Death | 1,889,343 |
| — |
| 1,889,343 |
| — |
| — |
|
| Patrick Sinks | Change in control with qualifying termination | 14,612,891 |
| 762,276 |
| 13,688,220 |
| — |
| 162,395 |
|
| | Change in control without qualifying termination | — |
| — |
| — |
| — |
| — |
|
| | Retirement | 8,728,720 |
| — |
| — |
| 8,728,720 |
| — |
|
| | Death | 13,688,220 |
| — |
| 13,688,220 |
| — |
| — |
|
| Stephen Mackey | Separation from service | 1,782,817 |
| 286,465 |
| — |
| 1,496,352 |
| — |
|
| |
(1) | As described further in “1 As described further in "Change in Control Agreements and Severance Pay” below, each of our current NEOs is a party to a KEESA that may provide for payments after a change in control. A qualifying termination is a termination within three years after the change in control by the Company other than for cause, death or disability or by the executive for good reason. Amounts are payable in one or |
62 │ MGIC Investment Corporation – 2020 Proxy Statement
COMPENSATION AND RELATED TABLES — Payments Upon Termination or Change in Control
Agreements and Severance Pay” below, each of our current NEOs is a party to a KEESA that may provide for payments after a change in control. A qualifying termination is a termination within three years after the change in control by the Company other than for cause, death or disability or by the executive for good reason. Amounts are payable in one or two lump sums, depending on limits on amounts that may be paid within six months under applicable tax rules and regulations. The first lump sum is payable within 10 business days after the termination date and the second lump sum, if required by applicable tax rules and regulations, is payable six months thereafter.
For KEESA participants who have reached age 62 or whose KEESAs are dated after October 22, 2014, paymentsPayments under the KEESAs wereare capped by reducing such payments to an amount that will not trigger payment of federal excise taxes on such payment (the "Cut-Back Provision"). For KEESA participants who are younger than age 62 and whose KEESAs are dated on or before October 22, 2014, payments under the KEESAs are similarly reducedCut-Back Provision), but only if the resulting after-tax value to the participant of the total payments upon a change in control waswould be greater than the after-tax value to the participant if the cash payments were not so reduced with the participant responsible for the excise taxes. Cash payments were reduced under the Cut-Back Provision as follows: Mr. Miosi – $3,872,574; Mr. Colson – $1,249,304; Mr. Hughes – $2,594,211; Ms. Maggio – $1,967,117; and Mr. Sinks – $5,813,589.
| |
(2) | For other than Mr. Mackey, the2 The value attributed to restricted equity that accelerates or is eligible for continued vesting is calculated using the closing price on the NYSE on December 31, 2019 (which is a higher valuation than that specified by IRS regulations for tax purposes). The value of equity that would vest on an accelerated basis was reduced under the Cut-Back Provision as follows: Mr. Miosi – $1,907,551; and Mr. Hughes –$1,786,894. |
Our standard terms for stock awards provide that separation from service with the Company results in forfeiture of the awards. In connection with Mr. Mackey's separation from service, the Company waived forfeiture of Mr. Mackey's 2017 stock award. The value of Mr. Mackey's 2017 award when the forfeiture was waived, based upon the probable outcome of the applicable performance conditions and the closing price of our Common Stock on the NYSE on December 31, 2022 (which is a higher valuation than that date, was $1,156,257. The amount shown in this column representsspecified by IRS regulations for tax purposes). Under the valueagreements governing the terms of the equity awards, at 2019 year-end. The award remains subjectupon an NEO's death, restricted stock units will vest immediately; and upon an NEO's disability, restricted stock units will continue to the performance condition described in “Components of our Executive Compensation Program — 2018 and 2017 Long-Term Equity Awards” in our CD&A.vest.
| |
(3) | For other than Mr. Mackey, in3 In connection with a change in control, other benefits include three years of health and welfare benefits, outplacement costs, and an allowance for tax, legal and accounting fees. Other benefits were reduced under the Cut-Back Provision as follows: Mr. Miosi – $159,765; Mr. Hughes –$140,263; and Ms. Maggio – $12,464. |
For Mr. Mackey, the amount reflects severance payments expected to be paid in 2020, subject to compliance with non-solicitation and other conditions of his Separation Agreement. Mr. Mackey was paid $458,344 of severance payments in 2019.
For an estimate of the value of pension benefits for an NEO upon retirement, please see the Pension Benefits Table.
54 │ MGIC Investment Corporation – 2023 Proxy Statement
COMPENSATION AND RELATED TABLES — Payments Upon Termination or Change in Control
Change in Control Agreements and Severance Pay
Key Executive Employment and Severance Agreement:
Each of our currently-serving NEOs is a party to a KEESA. IfUnder the KEESAs, if a change in control occurs and the executive’s employment is terminated within three years after the change in control (this period is referred to as the employment period), other than for cause, death or disability, or if the executive terminates his or her employment for good reason, the executive is generally entitled to receive a termination payment of twice the sum of his or her annual base salary, his maximumor her targeted bonus award at the time of termination, and an amount for pension accruals and profit sharing and matching contributions to our tax‑qualified defined contribution plan, subject to reduction as described below. This termination payment is payable in one or two lump sums, depending on limits on amounts that may be paid within six months under applicable tax rules and regulations. The first lump sum is payable within 10 business days after the termination date and the second lump sum, if required by applicable tax rules and regulations, is payable six months thereafter.
If the employment termination occurs during the employment period but more than three months after the change in control, the termination payment is reduced by an amount corresponding to the portion of the employment period that has elapsed since the date of the change in control. The KEESAs requireprovide that, for a period of twelve months after a termination for which a payment is required, the executive not compete with us unless approved in advance in writing by our Board of Directors.is subject to non-competition and non-solicitation provisions. The KEESAs also impose confidentiality obligations on our executives.
Under the KEESAs, a change in control generally would occur upon the acquisition by certain unrelated persons of 50%25% or more of our Common Stock; an exogenous change in the majority of our Board of Directors; certain mergers, consolidations or share exchanges or related share issuances; or our sale or disposition of all or substantially all of our assets. We would have “cause” to terminate an executive under a KEESA if the executive were intentionally to engage in certain bad faith conduct causing demonstrable and serious financial injury to us; to be convicted of certain felonies;
MGIC Investment Corporation – 2020 Proxy Statement │ 63
Payments Upon Termination or Change in Control — COMPENSATION AND RELATED TABLES
or to willfully, unreasonably and continuously refuse to perform his or her existing duties or responsibilities. An executive would have “good reason” under his or her KEESA if we were to breach the terms of the KEESA or make certain changes to the executive’s position or working conditions.
While the executive is employed during the employment period, the executive is entitled to a base salary no less than the base salary in effect prior to the change in control and to atargeted and maximum bonus opportunityopportunities of no less than 75% of the targeted and maximum bonus opportunityopportunities in effect prior to the change in control. The executive is also entitled to annual equity awards that are as favorable (in terms of grant date fair value and length of vesting period) as the more favorable of those granted in the year of the change in control or the year prior. This benefit may be offset by value provided through an increase to another pay element (for example, if the new employer does not offer equity compensation). The executive is also entitled to participate in medical and other specified benefit plans. Such benefits include life insurance benefits made available to salaried employees generally and other benefits provided to executives of comparable rank, including stock awards, supplemental retirement benefits and periodic physicals. The value of these benefits cannot be less than 75% of
If outstanding equity awards are not assumed or the value of comparable benefits prior toexecutive does not receive a substitute award from the acquirer in the change in control except that iftransaction, performance-vesting RSUs will vest based on the new parent company does not provide stock‑based compensationgreater of target performance, performance as measured through the date of the change in control (as measured against a pro-rated portion of the performance goal) or the most recently forecasted performance through the end of the performance period. The same approach applies to executives of its U.S. companies of comparable rank, this type of benefit need not be provided and the 75% minimum for other benefits is raised to 100%. unvested performance-vesting RSUs upon a covered termination.
If the executive experiences a qualified termination, hethe calculation of the termination payment that will be payable to the executive is the same regardless of when during the employment period the covered termination occurs. An executive would receive a pro rata bonus; such pro rata bonus would be calculated and paid on the basis of the greater of performance as measured through the termination date or the most recently forecasted performance through the end of the performance period. He or she is also entitled to continued life and health insurance for the remainder of the employment periodtwenty-four months or, if earlier, the time he or she obtains similar coverage from a new employer, outplacement services and up to a total of $10,000 to cover tax preparation, legal and accounting services relating to the KEESA termination payment.
MGIC Investment Corporation – 2023 Proxy Statement │ 55
Payments Upon Termination or Change in Control — COMPENSATION AND RELATED TABLES
OurThe KEESAs were modified in 2014 to remove the gross-upprovide no gross-ups by the Company for excise tax payments resulting from payments upon a change in control. The form of KEESA is filed as an exhibit to our Form 10-K. The foregoing description is only a summary and is qualified by the actual terms of the KEESA.
Post-Termination Vesting of Certain Restricted Equity Awards: Stock Units
In general, under the terms of our Restricted Stock Unit Agreements ("Grant Agreements") our restricted equity awardsstock units ("RSUs") outstanding as of December 31, 20192022 are forfeited upon a termination of employment, other than as a result of the award recipient’s death (in which case the entire award vests)target number of RSUs vest) or disability (in which case the award continuesRSUs continue to vest). In general, the terms of our Grant Agreements provide that, if employment termination occursterminates by reason of retirement after age 62 for a recipient who has been employed by us for at least seven years, awardsRSUs granted at least one year prior to the date of the employment termination will continue to vest if the recipient enters into a non-competition agreement with us. NoneFor RSUs grated after January 1, 2023, the same general conditions apply, but continued vesting is available to employees who retire after reaching the age of our current NEOs is 62 or older.
60 who have been employed by us for at least seven years.
Our equity awardsGrant Agreements provide that the equityRSUs will not vest upon a change in control if the Committee reasonably determines in good faith prior to the occurrence of the change in control that the awards will be assumed or replaced by the employee’s employer immediately following the change in control with an alternative award meeting specified requirements. For purposes of the table above, we assume that the awards will be so assumed or replaced.
If there is a change in control with a qualified termination of employment, then the RSUs granted in 2020 would immediately vest, and the RSUs granted in 2021 and 2022 would vest by assuming that the performance goals had been achieved equal to the greater of: (a) target performance, (b) performance measured through the employment termination date, with the performance goal adjusted to reflect the portion of the performance period that has lapsed through the termination date, and (c) the most recently forecasted performance through the end of the performance period.
Severance Pay:
Although we do not have a written severance policy for terminations of employment unrelated to a change in control, we have historically negotiated severance arrangements with officers whose employment we terminate without cause. The amount that we have paid has varied based upon the officer’s tenure and position.
6456 │ MGIC Investment Corporation – 20202023 Proxy Statement
COMPENSATION AND RELATED TABLES — CEO Pay Ratio
20192022 CEO Pay Ratio
The following table providesshows the ratio of the median of the annual total compensation of all of our employees, except the CEO, to the annual total compensation of the CEO.
|
| | |
Median of the 2019 Annual Total Compensation of all of our Employees, except the CEO | 2019 Annual Total Compensation of the CEO | Ratio of the Median of the 2019 Annual Total Compensation of all of our Employees, except the CEO, to the Annual 2019 Total Compensation of the CEO |
| $ 149,146 | $ 6,873,472 | 1:46 |
| | | | | | | | |
Median of the 2022 Annual Total Compensation of all of our Employees, except the CEO | 2022 Annual Total Compensation of the CEO | Ratio of the Median of the 2022 Annual Total Compensation of all of our Employees, except the CEO, to the Annual 2022 Total Compensation of the CEO |
| $137,465 | $6,913,788 | 1:50 |
The 20192022 Annual Total Compensation of the median employee, and the 20192022 Annual Total Compensation of the CEO, were calculated in accordance with the rules applicable to the SCT,Summary Compensation Table, adjusted to include the value of tax-exempt, non-discriminatory health benefits provided by us.
Our median 20192022 employee was determined by considering, for each employee employed by us and our consolidated subsidiaries as of December 31, 2019,2022, the sum of “pension eligible compensation” and the positive "change in pension value" (if any) during 2019.2022. “Pension eligible compensation” includes base wages, commission, overtime pay and bonuses paid in 2019.2022. The "pension eligible compensation" is derived from our payroll records. The "change in pension value" is calculated in the same manner as it is for the SCTSummary Compensation Table and is provided by our pension consultant.
Mr. Mattke has been our CEO since July 25, 2019; prior to that time, he had been our Executive Vice President and Chief Financial Officer. To calculate his compensation for purposes of the CEO Pay Ratio, we annualized the portion of his salary, stock awards, long-term incentive plan compensation, change in pension value and all other compensation reported in the 2019 Summary Compensation Table that was attributable to his time as our CEO. To that, we added the tax-exempt, non-discriminatory health benefits provided by us.
OTHER MATTERS
Related Person Transactions
Among other things, our Code of Business Conduct prohibits us from entering into transactions in which our “Senior Financial Officers,” executive officers, or their respective immediate family members have a material personal financial interest (either directly or through a company with which the officer has a relationship) unless all of the following conditions are satisfied:
the terms of the contract or transaction are fair and equitable, at arm’s length and are not detrimental to our interests;
the existence and nature of the interests of the officer are fully disclosed to and approved by the Audit Committee; and
the interested officer has not participated on our behalf in the consideration, negotiation or approval of the contract or transaction.
The Code defines a material interest as one in which our officer is a director or officer of the counterparty to the transaction, or our officer or a member of our officer’s immediate family has a financial interest in such counterparty that has a value of at least 10% of the value of such counterparty. Our Audit Committee does not consider payments and benefits arising in the ordinary course of employment with us, or through services as a director, to be “transactions” subject to its approval.
MGIC Investment Corporation – 20202023 Proxy Statement │ 6557
OTHER MATTERSCOMPENSATION AND RELATED TABLES - Pay for Performance
2022 Pay for Performance
The following table shows the relationship between executive compensation actually paid to our named executive officers ("CAP") and the Company's financial performance for 2020 through 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CEO1 | Non-CEO NEOs2 | Value of Initial Fixed $100 Investment Based on: | | Adjusted Book Value per Share Growth4 |
| Year | Summary Compensation Table ("SCT") Total ($) | Compensation Actually Paid5 ($) | Average Summary Compensation Paid ($) | Average Compensation Actually Paid6 ($) | Total Shareholder Return ($) | Peer Group Total Shareholder Return3 ($) | Net Income ($) | ($) | (%)9 |
| 2022 | 6,886,074 | | 7,897,495 | | 2,839,667 | | 3,307,887 | | 98.39 | 108.46 | 865,349,000 | | 2.80 | 19 | |
| 2021 | 6,385,557 | | 10,175,941 | | 2,810,550 | | 4,282,221 | | 106.39 | 112.85 | 634,983,000 | | 1.97 | 15 | |
| 2020 | 5,517,169 | | 4,067,781 | | 2,563,301 | | 1,816,815 | | 90.78 | 87.56 | 446,093,000 | | 1.32 | 11 | |
1 Mr. Mattke is the CEO for all years shown.
2 The non-CEO NEOs for all years shown are Messrs. Miosi, Colson, and Hughes, and Ms. Maggio.
3 The peer group total shareholder return shown is weighted according to the respective peers' stock market capitalization at the beginning of each period for which a return is indicated. Our 2022 and 2021 peer group includes those companies identified in "Benchmarking Peers" in our CD&A. The 2020 peer group includes those companies identified in "Benchmarking Peers" in the CD&A in our 2021 Proxy Statement filed with the Securities and Exchange Commission: Ambac Financial Group, Inc., MBIA Inc., Arch Capital Group Ltd., Assured Guaranty Ltd., Essent Group Ltd., Fidelity National Financial Inc., First American Fin'l Corp., Flagstar Bancorp Inc., Genworth Financial inc., NMI Holdings Inc. Ocwen Financial Corp. PennyMac Fin'l Services Inc., and Radian Group Inc.
4 The figures shown in this column are annual growth in adjusted book value per share ("ABVS"). ABVS represents shareholder's equity divided by common stock shares outstanding, adjusted for the net-of-tax, per share effects of accumulated other comprehensive income/(loss), litigation accruals, debt and common stock repurchases, shareholder dividends, the financial impacts of certain changes made by the GSEs inconsistent with prior business practices, and adjustments set forth in the Omnibus Incentive Plan, including without limitation, for the effect of changes in accounting rules and tax law.
In addition,2022, we considered cumulative ABVS growth our most important measure of financial performance. For information about the Code requires Audit Committee approvalrelationship between cumulative ABVS and our executive compensation, please see "2022 Long-Term Equity Awards" in our CD&A.
ABVS is a non-GAAP financial measure. For a description of all transactions with any director orhow we calculate this measure and a memberreconciliation of the director’s immediate family, other than transactions involving the provision of goods or services in the ordinary course of business of both parties.this measure to its nearest comparable GAAP measure, see Appendix B.
5 The Code contemplates that our non-management directors will disclose all transactions between us and parties relatedfollowing table shows adjustments to the director, even if they are in the ordinary course of business.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors to file reports of their beneficial ownership of our stock and changes in stock ownership with the SEC. Based in part on statements by the directors and executive officers, we believe that all Section 16(a) forms were timely filed by our directors and executive officers in 2019, exceptSCT Total for the filing of the Form 4s requiredCEO in order to be filed February 19, 2019 to report the cash settlement upon vesting of the 2018 grant of share units madedetermine CAP:
| | | | | | | | | | | | | | |
| Year | SCT Total for CEO
($) | Equity Award Adjustments7 ($) | Pension Benefits Adjustments8 ($) | Compensation Actually Paid to CEO ($) |
| 2022 | 6,886,074 | | 788,452 | | 222,969 | | 7,897,495 | |
| 2021 | 6,385,557 | | 3,723,543 | | 66,841 | | 10,175,941 | |
| 2020 | 5,517,169 | | (1,055,218) | | (394,170) | | 4,067,781 | |
6 The following table shows adjustments to the following directors under our Deferred Compensation Planaverage SCT Total for Non-Employee Directors: Messrs. Arrigoni, Chaplin, Culver, Holt, Jastrow, and Lehman; Messes. Carr and Kozlak; and Dr. Zandi. The forms were filed on March 5, 2019 duenon-CEO NEOs in order to an administrative error. We timely made 91 other Section 16(a) filings on behalf of our executive officers and directors in 2019.determine CAP:
. | | | | | | | | | | | | | | |
| Year | Average SCT Total for Non-CEO NEOs ($) | Equity Award Adjustments7 ($) | Average Pension Benefits Adjustments8 ($) | Average Compensation Actually Paid to Non-CEO NEOs ($) |
| 2022 | 2,839,667 | | 343,065 | | 125,155 | | 3,307,887 | |
| 2021 | 2,810,550 | | 1,468,170 | | 3,501 | | 4,282,221 | |
| 2020 | 2,563,301 | | (551,503) | | (194,983) | | 1,816,815 | |
6658 │ MGIC Investment Corporation – 20202023 Proxy Statement
COMPENSATION AND RELATED TABLES - Pay for Performance
REPORT OF THE AUDIT COMMITTEE
7The Audit Committee assistsStock Awards reported in the oversight bySCT were adjusted as shown below for each applicable year and reflect the Boardyear-over-year change in the fair value of Directors ofequity awards:
| | | | | | | | | | | | | | | | | | | | |
| CEO Equity Award Adjustments | Non-CEO NEO Equity Award Adjustments |
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020 |
| Minus SCT Value of Equity Granted During the Year | $(4,000,012) | $(3,500,001) | $(2,686,975) | $(1,305,010) | $(1,250,011) | $(1,113,176) |
| Plus Fair Value at Year-end of Equity Granted During the Year | 3,802,340 | 6,220,556 | 2,256,156 | 1,240,519 | 2,212,577 | 934,693 |
| Increase (Decrease) from Prior Year-End in Fair Value of Awards that Vested During the Year | 64,230 | (38,603) | (137,280) | 67,773 | (16,423) | (78,559) |
| Year-over-Year Increase (Decrease) in Fair Value of Unvested Awards Granted in Prior Years | 921,894 | 1,041,591 | (487,119) | 339,783 | 522,027 | (294,461) |
| | | | | | |
| Total Equity Award Adjustments | $788,452 | $3,723,543 | $(1,055,218) | $343,065 | $1,468,170 | $(551,503) |
8 The total pension benefit adjustments for each applicable year replace the integrity of MGIC Investment Corporation’s financial statements,SCT values with the effectiveness of its system of internal controls,actuarially determined service cost for services rendered during the qualifications, independence and performance of its independent accountants, the performance of its internal audit function, and its compliance with legal and regulatory requirements.
The Audit Committee reviewed and discussed with management and PricewaterhouseCoopers LLP (“PwC”), MGIC Investment Corporation’s independent registered public accounting firm, its audited financial statements for theapplicable year ended December 31, 2019. The Audit Committee discussed with PwC the matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”(the “service cost”) and the SEC. The Audit Committee also received the written disclosures and the letter from PwC required by applicable requirements of the PCAOB regarding auditor-audit committee communications about independence and discussed with PwC their independence from MGIC Investment Corporation and its management.
In reliance on the reviews and discussions referredchange in liability due to above, the Audit Committee recommendedamendments to the Board of Directors that MGIC Investment Corporation’s audited financial statements be included in its Annual Report on Form 10-K for the year ended December 31, 2019, which has been filed with the SEC. These are the same financial statements that appear in MGIC Investment Corporation’s Annual Report to Shareholders.plan. See additional discussion below.
Members of the Audit Committee: | | | | | | | | | | | | | | | | | | | | |
| CEO Pension Benefit Adjustments | Non-CEO NEO Pension Benefit Adjustments |
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020 |
| Change in Pension Value | $— | $(94,133) | $(538,355) | $(9,722) | $(89,424) | $(277,913) |
| Total Service Cost | 167,999 | 150,713 | 134,761 | 100,543 | 90,381 | 83,271 |
| Change in Liability due to Amendments | 54,970 | 3,362 | 2,745 | 33,204 | (414) | (341) |
| Payments | — | 6,899 | 6,679 | 1,130 | 2,958 | — |
| Total Pension Benefit Adjustments | $222,969 | $66,841 | $(394,170) | $125,155 | $3,501 | $(194,983) |
Michael E. Lehman, Chair
Daniel A. Arrigoni
Jay C. Hartzell
Timothy A. Holt
Melissa B. Lora
Gary A. Poliner
Sheryl L. Sculley
MGIC Investment Corporation – 2020 Proxy Statement │ 67
ITEM 3 – APPROVAL OF THE MGIC INVESTMENT CORPORATION 2020 OMNIBUS INCENTIVE PLAN
The Board of Directors has approved and recommended for shareholder approval the MGIC Investment Corporation 2020 Omnibus Incentive Plan (the “Plan”). The material features of the Plan are summarized below. The summary does not change the actual terms of the Plan, which9 Cumulative ABVS Growth is included as Appendix C to this proxy statement.
The Board of Directors is recommending that shareholders approve the Plan because it views providing equity compensation opportunities to senior management and key employees to be one of the most significant means to align the interests of shareholders and management. See ‘‘Compensation Discussion and Analysis - Long-Term Equity Awards” in this proxy statement. The Plan also permits awards to be made to non-employee directors and sets forth the limits on the amount of equity compensation that may be awarded to such directors under this Plan and our Deferred Compensation Plan for Non-Employee Directors. The Corporate Governance Guidelines, adopted by the Board, provide that a meaningful portion of director compensation should consist of common equity or its equivalent (such as phantom stock). While we have not awarded common equity to non-employee directors for more than ten years (phantom stock has been awarded as discussed under “Compensation of Directors - Non-Management Director Compensation Program” in this proxy statement), the Plan will be available as another mechanism by which the interests of shareholders and directors can be aligned through equity ownership as contemplated by the Corporate Governance Guidelines.
Proposed Terms of the 2020 Omnibus Incentive Plan
The purpose of the Plan is to motivate and incent performance by, to obtain the services of, and/or to retain the services of, key employees and non-employee directors through receipt of equity-based and other incentive awards under the Plan. The persons who are eligible to receive awards under the Plan as described above are referred to as “eligible individuals” and the persons to whom awards are made under the Plan are referred to as “participants.” A “non-employee director” is a director of the Company who is not an employee of the Company or any affiliate and is not a representative of a particular holder of the Company’s securities.
The maximum number of shares of Common Stock that may be covered by awards under the Plan is 11,000,000 shares (the “Maximum Limit”). If shares covered by an award under the Plan are not delivered because the award is forfeited or canceled or expires, or if an award is settled in cash rather than in shares, then those shares will not count against the Maximum Limit. However, shares purchased by the Company using proceeds from option exercises, shares tendered or withheld in payment of the exercise of price of an option and shares tendered or withheld to satisfy tax withholding obligations will count against the Maximum Limit. Shares issued under the Plan will increase the number of outstanding shares and dilute the interest of existing shareholders. Awards under the Plan will also result in GAAP compensation expense to the Company.
The Company’s amended and restated articles of incorporation authorize the issuance of 1,000,000,000 shares of Common Stock. There were 340,860,286 outstanding shares of Common Stock as of March 6, 2020, with approximately 19,100,000 shares reserved for future issuance under convertible debt and approximately 4,200,000 shares reserved for issuance under outstanding awards under our existing 2015 Omnibus Incentive Plan (the “2015 Plan”); if the Plan is approved, the 2015 Plan will terminate such that no future awards will be made under the 2015 Plan. As of March 6, 2020, approximately 1,800,000 shares remained available for future awards under the 2015 Plan. Awards previously granted under the 2015 Plan and still outstanding will continue to be subject to the 2015 Plan. Thereafter, if any shares subject to such awards under the 2015 Plan would again become available for new grants under the terms of the 2015 Plan if the 2015 Plan were still in effect (taking into account the 2015 Plan’s provisions concerning termination or expiration, if any, and the Plan’s limits on share recycling described above), then those shares will be available for the purpose of granting awards under the Plan, thereby increasing the number of shares available for issuance under the Maximum Limit.
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ITEM 3 — 2020 OMNIBUS INCENTIVE PLAN
We determined the maximum number of shares for which awards may be granted under the Plan by considering that the number of shares we granted as equity awards in 2020 plus additional shares to cover newly hired employees and future changes in equity awards may result in an annual run rate of approximately 1,750,000 shares, which is approximately 99% of the average of our equity awards granted during 2017-2019 and approximately 87% of the equity awards granted in 2019. Using 1,750,000 shares as an estimated ‘‘run rate” for future awards, resulted in an annual ‘‘burn rate” of approximately 0.5% (the quotient of dividing 1,750,000 by our outstanding shares at March 6, 2020), which we considered low and therefore acceptable.
Using 1,750,000 as an estimated ‘‘run rate” for future awards resulted in the Maximum Limit being sufficient to make awards for the next six years (the quotient of dividing the Maximum Limit by 1,750,000), which we considered adequate but not excessive. The Plan does not count awards that are forfeited against the Maximum Limit. During the last three calendar years the average number of shares forfeited has been approximately 148,000 per year, although a forecast of future forfeitures would be difficult to make. Subtracting the average number of forfeitures from the assumed annual "run rate" for future awards of 1,750,000 would also result in the Maximum Limit being sufficient to make awards for six years.
Using the methodology of a leading proxy advisory firm, our average “burn rate” over the last three years would be approximately 1.2%. In analyzing equity compensation plans, this firm develops a benchmark “burn rate” for each 4-digit GICS code (for these purposes, our Company is considered to be in the Insurance GICS code); and the particular benchmark depends on the stock index in which the issuer is included (which for us is the Russell 3000). We expect that under this firm’s equity plan scoring model, a “burn rate” at the 1.2% level, which is about one-fourth of the benchmark, would receive the maximum points for this element of the firm’s analysis, which requires a specified point total to obtain a favorable voting recommendation from this firm. As a result, we also consider our “burn rate” computed under this firm’s methodology to be low.
The Plan provides for the award of stock options (“options”), stock appreciation rights (“SARs”), restricted stock and restricted stock units, as well as cash incentive awards. Each type of award is described briefly below and they are referred to together as “awards.” No award may be granted after April 23, 2030.
On March 6, 2020, the last reported sale price of the Common Stock on the NYSE on that date was $12.42. There are currently approximately 168 eligible individuals, of whom 13 are non-employee directors.
Administration
The Plan is administered by a Committee of the Board. Unless otherwise provided by the Board, the Committee will be the Management Development, Nominating and Governance Committee. The Plan provides that the Committee will meet the non-employee director requirement of Rule 16b-3 promulgated under the Securities Exchange Act of 1934. At any time that awards intended to be performance-based for state tax law purposes, as discussed below under the caption “Certain Income Tax Consequences of Restricted Stock and Restricted Stock Units,” are outstanding or are to be granted, the Committee will also meet the outside director requirement of Section 162(m) of the Code, the regulations thereunder and state laws that incorporate, refer to or based on such provisions. Among other functions, the Committee has power (a) to select the participants from among the eligible individuals, (b)used to determine the number of shares covered byrestricted stock units that vest under our long-term equity awards and (c) withingranted under our executive compensation program. The annual percentage growth in ABVS is shown to provide context to the limitsreader of the Plan, to set the terms of awards. The Plan authorizes the Committee to delegate its functions to any one or more of its members or to other persons.this Proxy Statement.
Options and SARs
An option is the right to purchase a specified number of shares of Common Stock at a specified exercise price. An SAR is the right to receive, in cash or shares with equivalent value, the difference between the fair market value of a specified number of shares of Common Stock and a specified exercise price. The exercise price per share of Common Stock subject to an option or an SAR will be determined by the Committee. However, the exercise price per share may not be less than the fair market value ("Fair Market Value") of a share of Common Stock on the date the award is made and
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ITEM 3 — 2020 OMNIBUS INCENTIVE PLANCOMPENSATION AND RELATED TABLES - Pay for Performance
the exercise price of an incentive stock option (“ISO”) granted to an employee who owns more than ten percent (10%) of the total combined voting power of all classes of stock then issued by the Company or a subsidiary (a “10% Shareholder”) must have an exercise price not less than 110% of the Fair Market Value of a share of stock on the date of grant. (Fair Market Value is defined in theSalary, Non-Equity Incentive Plan and if the Committee does not specify a different method, Fair Market Value as of a given date is the last reported sale price of the Common Stock on that date.) The exercise price of an option or SAR that has been granted may not be reduced nor may a new option or SAR be granted with an exercise price that is lower than an outstanding option or SAR for which such new option or SAR is exchanged without the approval of the Company’s shareholders. The Committee may not approve the grant of an option or an SAR with a grant date that is effective prior to the date the Committee takes action to approve such grant.
The term of an option or SAR will be determined by the Committee, but may not be more than ten years or, in the case of an ISO granted to a 10% Shareholder, five years. Subject to the minimum vesting period required by the Plan, options and SARs will vest on such conditions as are determined by the Committee. Conditions to vesting can include remaining as an employee or non-employee director for a specified period or the achievement of performance goals set by the Committee.
The method and form of payment of the exercise price for options will be determined by the Committee and may include cash, check, promissory note, surrender of previously owned shares, delivery of a properly executed form of attestation (as determined by the Committee) of ownership of shares that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the shares for which the option is exercised, a broker-assisted cashless exercise program approved by the Committee, other methods permitted by applicable law or a combination of any of such methods.
Options may be ISOs or options that are not ISOs.
Restricted Stock and Restricted Stock Units
Restricted stock is Common Stock that is not freely transferable by the participant until specified restrictions lapse or specified conditions are met. In this description, these restrictions and conditions are referred to together as restrictions. A restricted stock unit (“RSU”) is the right to receive stock in the future (or a cash payment based upon the fair market value of a share of stock), which right is subject to restrictions.
Restricted stock and RSUs will be subject to such restrictions as the Committee may impose.
Cash Incentive Awards
An “Incentive Award” is a grant of a right to receive a cash payment pursuant to a bonus plan, to the extent Performance Goals (as defined below) are achieved. Such a bonus plan may be intended to provide performance-based compensation under certain state tax laws, as discussed below under the caption “Section 162(m) of the Code." A bonus plan may provide for the grant of restricted stock or RSUs in conjunction with bonuses payable under such plan.
The Committee will determine the terms of Incentive Awards, including the Performance Goals that must be achieved, the performance period, the potential amount payable and the timing of payment.
The Committee may allow participants to elect to receive restricted stock or RSUs with a vesting period determined by the Committee for a portion of Incentive Awards (“Base Award”). If the Base Award is elected, the participant may also be awarded additional shares of restricted stock or RSUs with a vesting period determined by the Committee for each share associated with the Base Award (“Matching Award”).
Limits on Awards
The maximum number of shares that may be issued under options intended to be ISOs is the Maximum Limit.
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ITEM 3 — 2020 OMNIBUS INCENTIVE PLAN
The following limits shall apply to any Awards granted under the Plan that are intended to qualify as performance-based compensation under certain state tax laws, as discussed below under the caption "Section 162(m) of the Code":
The number of shares that may be covered by Awards granted to any one participant in any fiscal year (excluding any Matching Awards) will not exceed 1,000,000 shares.
The maximum amount paid to any participant in any fiscal year under all Incentive Awards (including any Matching Award) will not exceed $7,500,000.
For any fiscal year, and for any particular non-employee director, the Awards under this Plan plus the Annual Grants under, and defined in, ourCompensation, Nonqualified Deferred Compensation Plan for Non-Employee Directors (or any successor plan thereto), may not exceed an aggregate Fair Market Value on the date of grant greater than $600,000.
Performance Goals
The term “Performance Goal” means, with respect to any award that is or is not intended to constitute “performance based compensation” under certain state tax laws, as discussed below under the caption "Section 162(m) of the Code," any goal or performance measure the Committee establishes that relates to one or more of the following:
net income, pre-tax income or earnings before interest, taxesEarnings and depreciation and amortization,
earnings per share,
operating earnings, which is net income excluding realized gains and losses,
cash flow, including operating cash flow, which excludes the same items asAll Other Compensation are excluded in operating earnings,
return on assets, capital, investment, invested capital or equity;
total return to shareholders or another return measure in which the denominator is one objective financial metric derived from the Company’s financial statements and the denominator is another one,
expenses or a ratio related to expenses, such as the ratio of expenses from insurance operations to net premiums written or earned,
incurred or paid losses or ratios related to those losses, such as the ratio of incurred losses to net premiums written or earned,
market share,
book value,
book value per share growth,
common stock share price,
surplus,
statutory capital,
economic value added,
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ITEM 3 — 2020 OMNIBUS INCENTIVE PLAN
gross or net revenues, and
new insurance written.
In addition, in the case of Awards that are not intended to constitute “performance-based compensation” under certain state tax laws, as discussed below under the caption "Section 162(m) of the Code," the Committee may establish other subjective or objective performance goals not listed above.
Each of the listed goals may be combined with other listed goals, and may be:
determined on a Company-wide basis or, where applicable, with respect to one or more subsidiaries, operating units, divisions, books of business, new insurance written, types of insurance that we write, acquired businesses, minority investments, partnerships or joint ventures,
determined on a relative or an absolute basis, or
determined on a per share (either basic or fully diluted) or an aggregate basis.
If during the course of a performance period there shall occur significant events which the Committee expects to have a substantial effect on the applicable performance objectives during such period, the Committee may revise such performance objectives. Unless otherwise determined by the Committee, the measurement of the Performance Goal shall exclude, to the extent applicable under the particular Performance Goal, the effects of charges for reorganizations, restructurings, and discontinued operations; all items of gain, loss or expense determined to be unusual or non‑recurring in nature ; all items of gain, loss or expense or related to the acquisition or disposal of a business; all items of gain, loss or expense related to a change in accounting principle as well as the cumulative effect of accounting changes; the establishment or elimination of any valuation reserve; litigation judgments or settlements; the effect of changes in tax law or other laws or provisions affecting reported results; and any item that is included in a determination of other comprehensive income.
The Committee may, in its discretion, determine at any time to adjust the measurement of any Performance Goal, or exclude from the measurement of any Performance goal, any items it designates in its discretion; provided that, with respect to an award that is intended to constitute performance-based compensation under certain state tax laws as discussed below under the caption “Section 162(m) of the Code," any such adjustments or exclusions must be made or established as part of an objective formula or standard that precludes discretion in accordance with applicable state laws.
Adjustments
In the event of any corporate transaction involving the Company, including any stock dividend, stock split, extraordinary cash dividend, recapitalization or merger, the Committee will have the authority to adjust the number and type of shares that may be issued under the Plan, and under any awards that are outstanding.
Clawback
All Awards granted pursuant to the Plan to employees, and any stock issued or cash paid pursuant to an Award to an employee, shall be subject to any recoupment or clawback policy applicable to employees that is adopted by, or any recoupment or similar requirement otherwise made applicable by law, regulation or listing standards to, the Company from time to time.
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ITEM 3 — 2020 OMNIBUS INCENTIVE PLAN
Change in Control
Under the Plan, awards will not automatically vest upon a Change in Control if the Committee reasonably determines in good faith prior to the occurrence of the Change in Control that the awards will be assumed or replaced with an Alternative Award immediately following the Change in Control. Such an Alternative Award must:
relate to a security that is, or will shortly become, traded on a recognized securities market,
provide rights and entitlements that are substantially equivalent to or better than the rights and entitlements under the existing award,
be of substantially equivalent economic value, and
provide that awards become fully vested and exercisable if the participant’s employment is terminated within three years following the Change in Control without Cause or by the participant for Good Reason. For this purpose, “Good Reason” and “Cause” are as defined in the Company’s KEESA (see “Compensation and Related Tables - Change in Control Agreements”).
In the event that awards will not be assumed or replaced with such Alternative Awards, then, upon the Change in Control, the following would occur:
Each option and SAR outstanding would generally immediately vest and become exercisable to the full extent of the original grant for the remainder of its term.
The Committee could, in its discretion, provide, either absolutely or subject to the election of the optionee, that each option and SAR be surrendered or exercised for cash equal to the excess of the Fair Market Value of the Common Stock at the time of exercise over the exercise price.
All outstanding restricted stock and RSUs that vest without reference to the extent to which one or more Performance Goals are attained shall become vested to the maximum extent provided in the award.
All outstanding restricted stock and RSUs that vest with reference to the extent to which one or more Performance Goals are attained shall become vested in an amount calculated by assuming that the Performance Goal(s) have been satisfied at the target level specified in the Participant’s award agreement or, if greater, as otherwise specified by the Committee at or after grant.
A Change in Control is defined in Section 10.1(d) of the Plan and the Annex to the Plan, both of which appear as Appendix C to this proxy statement.
Dividends
A Participant is not entitled to dividends or dividend equivalents with respect to an option or an SAR.
An RSU award or restricted stock award may provide that the participant is entitled to receive payment of the same amount that the participant would have received as cash dividends if, on each record date during the performance or vesting period relating to such award, the participant had been the holder of record of a number of shares of stock equal to the number of RSUs actually earned by the participant or in which the participant has become vested based upon, to the extent the award is subject to Performance Goals, the achievement of the Performance Goals or to the extent the award is subject to time-vesting, the completion of the applicable time period. Payment of any such dividend equivalent shall be deferred until the date that such number of shares is determined, earned and vested and shall only be paid to the extent that the stock underlying the award has been earned by the participant based upon achievement of the
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ITEM 3 — 2020 OMNIBUS INCENTIVE PLAN
Performance Goals and/or the participant has become vested in the RSUs, and may be settled in cash or stock, as determined by the Committee.
Transferability
Options are not transferable except: (i) by will or by the laws of descent and distribution, or (ii) by gift, provided that all restrictions contained in this Plan continue to apply to such option as if such gift had not occurred and provided the Committee has approved such transfer by gift. Unless otherwise provided by the Committee, no other award may be transferred by any participant other than by will, or by the laws of descent and distribution.
Amendment and Suspension
The Board or the Committee may amend the Plan at any time. However, except as discussed under "Adjustments" above, the approval of the shareholders is required for amendments that increase the Maximum Limit; increase the maximum number of shares that may be issued under options intended to be ISOs; increase the limits onwards to any one participant; decrease the minimum option or SAR exercise price; increase the maximum term of an option or SAR to more than ten years; reprice options or SARs; cancel options or SARs in exchange for cash, other awards or options or SARs with an exercise price lower than the exercise price of the original options or SARs; or amend provisions concerning the payment of the exercise price of an option. The Board or the Committee may also suspend granting awards under the Plan at any time. No amendment of the Plan will adversely affect any award outstanding without the approval of the affected participant.
Withholding
Not later than the date on which an amount with respect to an award first becomes includable in the income of a participant who is an employee, the participant is required to pay to the Company or make arrangements satisfactory to the Company regarding the payment of any taxes required by law to be withheld with respect to such amount. The Committee may permit withholding obligations to be settled with shares of Common Stock, including shares of Common Stock that are part of an award that gives rise to the withholding requirement.
Certain Income Tax Consequences of Options and SARs
The grant of an option or SAR under the Plan will create no income tax consequences to the participant or the Company. A participant who is granted an option that is not an ISO will generally recognize ordinary income at the time of exercise in an amount by which the fair market value of the Common Stock at such time exceeds the exercise price. The value of the Common Stock or the amount of cash delivered on exercise of an SAR will also generally be ordinary income to the participant. Subject to any limitation on such deduction under Section 162(m) of the Code, including as discussed below, the Company will be entitled to a deduction in the same amountmanner for purposes of both CAP and at the same time as ordinary income is recognized by the participant. A subsequent taxable disposition of the Common Stock will give rise to capital gain or loss to the extent the amount realized from the sale differs from the fair market value of the Common Stock on the date of exercise.
In general, if an ISO is awarded to an employee, the participant holds the shares of Common Stock acquired on the exercise of the ISO for at leastSCT. There are two years from the date of grant and one year from the date of exercise, and the participant remained an employee until at least three months before exercise, the participant will recognize no income or gain as a result of the exercise, except that the alternative minimum tax may apply. Any gain or loss realized by the participant on the disposition of the Common Stock will be treated as a long-term capital gain or loss. No deduction will be allowed to the Company. If the holding period requirements described above are not satisfied, the participant will recognize ordinary income at the time of the disposition equal to the lesser of (a) the gain realized on the disposition, or (b) the differenceprimary differences between the exercise pricecalculation of CAP and the fair market value of the shares of Common Stock on the date of exercise. The Company will be entitled to a deduction in the same amount and at the same time as ordinary income is recognized by the participant. Any additional gain realized by the participant over the fair market value at the time of exercise will be treated as capital gain.SCT total compensation:
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ITEM 3 — 2020 OMNIBUS INCENTIVE PLAN
Certain Income Tax Consequences of Restricted Stock and Restricted Stock Units
A participant will not recognize income upon the award of restricted stock that is subject to a substantial risk of forfeiture unless the election described below is made. A participant who has not made such an election will recognize ordinary income at the end of the applicable restriction period in an amount equal to the fair market value of the restricted stock at such time. Subject to any limitation on such deduction under Section 162(m) of the Code, including as discussed below, the Company will be entitled to a corresponding deduction in the same amount and at the same time as the participant recognizes income. An otherwise taxable disposition of the restricted stock after the end of the applicable restriction period will result in capital gain or loss. Dividends paid in cash and received by a participant prior to the end of the applicable restriction period will constitute ordinary income to the participant in the year paid. The Company will be entitled to a corresponding deduction for such dividends. Any dividends paid in stock will be treated as an award of additional restricted stock subject to the tax treatment described herein.
A participant may, within thirty days after the date of the award of restricted stock, elect to recognize ordinary income as of the date of the award in an amount equal to the fair market value of such restricted stock on the date of the award, determined without regard to any of the restrictions. Subject to any limitation on such deduction under Section 162(m) of the Code, including as discussed below, the Company will be entitled to a corresponding deduction in the same amount and at the same time as the participant recognizes income. If the election is made, any cash dividends received with respect to the restricted stock will be treated as dividend income to the participant in the year of payment and will not be deductible by the Company. An otherwise taxable disposition of the restricted stock (other than by forfeiture) will result in capital gain or loss. If a participant who has made an election subsequently forfeits the restricted stock, the participant will not be entitled to deduct any loss. In addition, the Company would then be required to include as ordinary income the amount of the deduction it originally claimed with respect to such shares.
A participant will not recognize income upon the award of RSUs. A participant will recognize ordinary income upon settlement of RSUs, in an amount equal to the fair market value of the stock or other property received by the participant at such time. Similarly, a participant will not recognize income upon the credit of dividend equivalents with respect to RSUs, but will recognize ordinary income upon settlement of such dividend equivalents, in an amount equal to the fair market value of the stock or other property received by the participant at such time. Subject to any limitation on such deduction under Section 162(m) of the Code, including as discussed below, the Company will be entitled to a corresponding deduction in the same amount and at the same time as the participant recognizes income.
Section 162(m) of the Code
Section 162(m) of the Code places a $1 million limit on the amount of federally tax-deductible compensation that a company can pay to certain employees, including the CEO, CFO, and other three most highly paid executives. Prior to 2018, there was an exception to the deduction limit for performance-based compensation. However, the Tax Cuts and Jobs Act of 2017 repealed this exception, except for certain "grandfathered" arrangements. Certain state tax laws continue to allow the deductibility of performance-based compensation as provided for in Code Section 162(m) as in effect prior to the enactment of the Tax Cuts and Jobs Act.
Securities Authorized for Issuance Under Equity Compensation Plans
The table below sets forth certain information, as of December 31, 2019, about the number of securities remaining available for future issuance under our equity compensation plans. No options, warrants or rights were outstanding at that date under any compensation plan or individual compensation arrangement with us. We have no compensation plan under which our equity securities may be issued that has not been approved by shareholders. Share units or phantom shares issued to our non-employee directors, which have no voting power and can be settled only in cash, are not considered to be equity securities for this purpose.
MGIC Investment Corporation – 2020 Proxy Statement │ 75
ITEM 3 — 2020 OMNIBUS INCENTIVE PLAN
|
| | | | | | | |
| Equity Compensation Plan InformationSCT Total | CAP |
| Pension | (A) NumberYear over year change in the actuarial present value of Securitiespension benefits. | Current year service cost and the change to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (B) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | (C) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A))any prior year service cost (if a plan amendment occurred during the year). |
Equity compensation plans approved by security holdersStock and Option Awards | 4,141,661(1)
Grant date fair value of stock and option awards granted during the year. |
| — |
| 3,439,836(2)
|
|
Equity compensation plans not approved by security holders | — |
| — |
| — |
|
Total | 4,141,661(1)
|
| — |
| 3,439,836(2)
|
Year over year change in the fair value of stock and option awards that are expected to vest as of the end of the year, or vested or were forfeited during the year, including dividend equivalents as applicable. Vesting is tied to growth in the Company's adjusted book value per share, as described further in our CD&A. |
| |
(1) | Includes 4,115,792 RSUs granted under our 2015 Omnibus Incentive Plan for which shares will be issued if certain criteria are met. Of the RSUs granted under the 205 Plan, 3,143,457 RSUs are subject to performance conditions and the remaining RSUs are subject to service conditions. Also includes 25,869 vested RSUs granted under our 2002 Stock Incentive Plan for which shares will be issued in the future. |
| |
(2) | Reflects shares available for granting as of December 31, 2019; the number has been materially reduced by awards made in January 2020. All of these shares are available under our 2015 Plan. |
New Plan Benefits60 │ MGIC Investment Corporation – 2023 Proxy Statement
COMPENSATION AND RELATED TABLES - Pay for Performance
No awards have been made underRelationship between Company Total Shareholder Return (TSR) and Peer Group TSR and Company CAP and Company TSR. The graphs below illustrate the Plan,relationship between our TSR and the Peer Group TSR, as well as the relationship between CAP and our TSR for the CEO and other NEOs. For reference, SCT total compensation values for each year are also shown. As the graphs below illustrate, CAP amounts for our CEO and other NEOs are aligned with our TSR.
MGIC Investment Corporation – 2023 Proxy Statement │ 61
COMPENSATION AND RELATED TABLES - Pay for Performance
Relationship between CAP and GAAP Net Income. The graph below reflects the relationship between the CEO and average other NEO CAP and our GAAP Net Income. GAAP net income is not used as a metric in our annual or long-term incentive plans, but its value affects various metrics used to determine executive compensation.
Relationship between CAP and Adjusted Book Value per Share Growth (our Company-Selected Measures). The graph below reflects the relationship between CEO and average other NEO CAP and ABVS Growth. Cumulative ABVS Growth determines the number of restricted stock units that vest under our long-term equity awards granted under our executive compensation program, and it is an important driver of long-term shareholder value creation.
62 │ MGIC Investment Corporation – 2023 Proxy Statement
COMPENSATION AND RELATED TABLES - Pay for Performance
This disclosure has been prepared in accordance with Item 402(v) of Regulation S-K and does not necessarily reflect value actually realized by the executives or how our Committee evaluates compensation decisions in light of Company or individual performance. In particular, our Committee has not used CAP as a basis for making compensation decisions, nor has it used TSR or net income for purposes of determining incentive compensation. Additionally, as described above, Cumulative ABVS Growth is used to determine the number of restricted stock units that may be madevest under our long-term equity awards granted under our executive compensation program.
Please refer to our CD&A for a discussion of our executive compensation program objectives and the ways in the future are not currently determinable. which we align executive compensation pay with performance.
The following table shows the awards made in 2019 underperformance measures considered most important for determining our 2022 executive compensation. The first four measures are financial performance measures and the 2015 Plan to the persons listed in the table. The table also shows the cash bonuses awarded to our Named Executive Officers for 2019 under our performance-based bonus plan.fifth is non-financial.
|
| | | | | | |
| Name | Dollar Value of Restricted Stock Units ($)(1) | Number of Restricted Stock Units | Cash Bonuses ($) |
| Timothy Mattke | 2,144,934 |
| 173,400 |
| 1,474,000 |
|
| Salvatore Miosi | 1,947,384 |
| 158,400 |
| 1,082,500 |
|
| Nathaniel Colson | 374,593 |
| 29,455 |
| 223,100 |
|
| James Hughes | 1,651,059 |
| 135,900 |
| 825,200 |
|
| Paula Maggio | 1,157,184 |
| 98,400 |
| 640,600 |
|
| Patrick Sinks | 3,375,120 |
| 287,000 |
| 2,336,800 |
|
| Stephen Mackey | 1,157,184 |
| 98,400 |
| — |
|
| All Executive Officers as of 3/6/20, including the NEOs | 8,016,511 |
| 654,803 |
| 5,153,200 |
|
| Non-Executive Director Group | — |
| — |
| — |
|
| Non-Executive Officer Employee Group as of 3/6/20 | 8,400,083 |
| 714,293 |
| — |
|
| | |
(1)Performance Measure |
The dollar valueCumulative Adjusted Book Value per Share Growth |
| Return on Equity (ROE) |
| New Insurance Written (NIW) |
| Insurance In Force (IIF) |
Strategic Performance (Capital, ESG, and number of RSUs shown are based upon the probable outcome of the applicable performance conditions as of the grant date. The RSUs are valued at the NYSE closing prices on the dates of the awards, or the previous day if the NYSE was not open for trading on the date of the award.Transformation) |
Cumulative adjusted book value per share growth is the sole measure by which vesting percentages of long-term equity awards is determined. ROE, NIW, and IIF are financial metrics, which along with our strategic performance objectives, are used to determine annual bonus percentages. For more information about each of these measures, please see "Annual Bonus" and "Long-Term Equity Awards" in our CD&A.
76 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 63
ITEM 3 — 2020 OMNIBUS INCENTIVE PLAN- ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION
Item 3 - Advisory Vote on the Frequency of Holding Future Advisory Votes on Executive Compensation
We are asking shareholders to vote, on an advisory basis, whether they would like to cast an advisory vote on the compensation of our named executive officers annually, every two, or every three years. Shareholders may indicate one of four choices for this proposal on the proxy card or voting instruction form: one year, two years, three years, or abstain.
The Board believes that, as has been the Company's practice for the past twelve years, annual shareholder advisory votes on the compensation of our executive officers are appropriate. The Board's belief was informed by its experience the past twelve years, and its view that in matters of executive compensation it was preferable to have more frequent shareholder feedback even though that schedule could result in undue emphasis being placed on compensation for only a single year.
While this vote is advisory and not binding, the Board and the Management, Development, Nominating and Governance Committee will review and consider the voting results when making future determinations of the frequency of advisory votes on executive compensation. Notwithstanding the Board's current recommendation or the voting results, the Board may in the future decide to conduct advisory votes more or less frequently than the shareholders have recommended.
Shareholder Vote Required
The Planfrequency of the advisory vote on executive compensation receiving the greatest number of votes cast in favor of such frequency, whether annually, every two years or every three years, will be approved by the affirmative vote of a majorityfrequency of the votes cast, with votesadvisory vote on executive compensation that shareholders have deemed to have approved. Abstentions and broker non-votes do not constitute a vote for against or abstentions being considered as “votes cast.” Accordingly, abstentions will count as votes against with respect to the proposal. Broker non-votes will not be considered as “votes cast.”
any particular frequency. |
| |
YOURTHE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR HOLDING THE APPROVALADVISORY VOTE ON COMPENSATION OF THE 2020 OMNIBUS INCENTIVE PLAN.OUR NEOs ANNUALLY. SIGNED PROXY CARDS AND VOTING INSTRUCTION FORMS WILL
BE VOTED FOR APPROVAL OF THE 2020 OMNIBUS INCENTIVE PLANANNUAL ADVISORY VOTES UNLESS A SHAREHOLDER GIVES OTHER INSTRUCTIONS ON THE PROXY CARD OR VOTING INSTRUCTION FORM. |
64 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 77
ITEM 4 - RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ITEMItem 4 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ratification of Appointment of Independent Registered Public Accounting Firm
The Audit Committee has reappointed the accounting firm of PricewaterhouseCoopers LLP (“PwC”)(PwC) as our independent registered public accounting firm for the year ending December 31, 2020.2023. As a matter of good corporate governance, the Board is seeking shareholder ratification of the appointment even though ratification is not legally required. If shareholders do not ratify this appointment, the Audit Committee will take this into consideration in its future selection of an independent registered public accounting firm. A representative of PwC is expected to attend the Annual Meeting and will be given an opportunity to make a statement and respond to appropriate questions.
Audit and Other Fees
For the years ended December 31, 20192022 and 2018,2021, PwC's fees for services were as shown in the table below.
|
| | | | |
| | 2019 | 2018 |
| Audit Fees | 2,834,000 |
| 2,328,800 |
|
| Audit-Related Fees | 140,711 |
| 107,140 |
|
| Tax Fees | 35,552 |
| 35,778 |
|
| All Other Fees | 3,870 |
| 3,870 |
|
| Total Fees | 3,014,133 |
| 2,475,588 |
|
| | | | | | | | |
| 2022 | 2021 |
| Audit Fees | $ | 2,618,500 | | $ | 2,519,800 | |
| Audit-Related Fees | 165,500 | | 135,000 | |
| Tax Fees | 130,000 | | 124,000 | |
| All Other Fees | 4,150 | | 5,400 | |
| Total Fees | $ | 2,918,150 | | $ | 2,784,200 | |
Audit Fees includerelate to PwC’s review of our quarterly financial statements, audit of our year-end financial statements and internal controls over financial reporting, and agreed upon procedures performed in connection with our excess of loss reinsurance transactions. Audit-Related Fees includerelate to the preparation of a SOC2 report (SOC is an abbreviation for Service Organization Controls). Tax Fees includerelate to a review of our tax returns.returns and a tax study. All Other Fees include subscription feesrelate to subscriptions for an online library of financial reporting and assurance literature.
The rules of the SEC regarding auditor independence provide that independence may be impaired if the auditor performs services without the pre-approval of the Audit Committee. The Audit Committee’s policy regarding pre-approval of audit and allowable non-audit services to be provided by the independent auditor includes a list of services that are pre-approved as they become necessary and requires the Audit Committee’s approvingpre-approval of a schedule of other services expected to be performed during the ensuing year prior to the start of the annual audit engagement. If we desire the auditor to provide a service that is not in either category, the service may be presented for pre-approval by the Audit Committee at its next meeting or may be pre-approved by the Chairperson (or another Committee member designated by the Audit Committee). The Committee member approving the service will be given detail regarding the service equivalent to the detail that would be given to the Audit Committee, and the Audit Committee will be notified of the approved service at its next regularly scheduled meeting. We periodically provide the Audit Committee with information about fees paid for services that have been approved and pre-approved. The Audit Committee pre-approved all of the services that PwC provided in 2019.2021 and 2022.
78 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 65
ITEM 4 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholder Vote Required
The affirmative vote of a majority of the votes cast on this matter is required for the ratification of the appointment of PwC as our independent registered public accounting firm. Abstentions and broker non-votes, if any, will not be counted as votes cast.
| | |
|
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
RATIFICATION OF THE APPOINTMENT OF PWC AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM. PROXY CARDS AND VOTING INSTRUCTION FORMS WILL
BE VOTED FOR RATIFICATION UNLESS A SHAREHOLDER GIVES OTHER INSTRUCTIONS
ON THE PROXY CARD OR VOTING INSTRUCTION FORM.
|
Report of the Audit Committee HOUSEHOLDINGThe Audit Committee assists the Board of Directors in the oversight by the Board of Directors of the integrity of MGIC Investment Corporation’s financial statements, the effectiveness of its system of internal controls, the qualifications, independence and performance of its independent accountants, the performance of its internal audit function, and its compliance with legal and regulatory requirements.
The Audit Committee reviewed and discussed with management and PricewaterhouseCoopers LLP (PwC), MGIC Investment Corporation’s independent registered public accounting firm, its audited financial statements for the year ended December 31, 2022. The Audit Committee discussed with PwC the matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC. The Audit Committee also received the written disclosures and the letter from PwC required by applicable requirements of the PCAOB regarding auditor-audit committee communications about independence and discussed with PwC their independence from MGIC Investment Corporation and its management.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that MGIC Investment Corporation’s audited financial statements be included in its Annual Report on Form 10-K for the year ended December 31, 2022, which has been filed with the SEC. These are the same financial statements that appear in MGIC Investment Corporation’s Annual Report to Shareholders.
Members of the Audit Committee:
C. Edward Chaplin, Chair
Jay C. Hartzell
Teresita M. Lowman
Gary A. Poliner
Sheryl L. Sculley
66 │ MGIC Investment Corporation – 2023 Proxy Statement
Other Matters
Stock Ownership Information
Security Ownership of Directors and Executive Officers
The following table shows the amount of our Common Stock beneficially owned by each of our directors, director nominees and NEOs, and by all directors and executive officers as a group, as of March 10, 2023. Unless otherwise noted, the persons listed in the table have sole voting and investment power over their shares.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name of Beneficial Owner | Common Stock Owned Directly1 | Common Stock Owned Indirectly2 | Restricted Stock and Common Stock Underlying RSUs3 | Total Number of Shares Beneficially Owned | Director Phantom Share Units 4 | Restricted Stock Units 5 | Total Shares Beneficially
Owned Plus Underlying Units | Percent of Class6 |
| Analisa M. Allen | — | | — | | 17,241 | | 17,241 | | 4,221 | | — | | 21,462 | | * |
| Daniel A. Arrigoni | 8,296 | | 30,000 | | — | | 38,296 | | — | | 8,885 | | 47,181 | | * |
| C. Edward Chaplin | 18,296 | | — | | — | | 18,296 | | 46,509 | | 8,885 | | 73,690 | | * |
| Curt S. Culver | 11,504 | | 1,247,114 | | — | | 1,258,618 | | — | | 8,885 | | 1,267,503 | | * |
| Jay C. Hartzell | — | | — | | 3,448 | | 3,448 | | 18,333 | | 13,792 | | 35,573 | | * |
| Timothy A. Holt | 20,000 | | — | | 17,241 | | 37,241 | | 89,145 | | — | | 126,386 | | * |
| Jodeen A. Kozlak | 5,000 | | — | | 8,359 | | 13,359 | | 27,572 | | 8,885 | | 49,816 | | * |
| Michael E. Lehman | 34,939 | | — | | 20,291 | | 55,230 | | 1,503 | | — | | 56,733 | | * |
| Teresita M. Lowman | — | | — | | 3,245 | | 3,245 | | — | | 12,982 | | 16,227 | | * |
| Gary A. Poliner | — | | — | | — | | — | | 134,058 | | 8,885 | | 142,943 | | * |
| Sheryl L. Sculley | — | | — | | 17,241 | | 17,241 | | 18,333 | | — | | 35,574 | | * |
| Mark M. Zandi | 8,296 | | — | | — | | 8,296 | | 45,167 | | 8,885 | | 62,348 | | * |
| Timothy M. Mattke | 594,291 | | — | | — | | 594,291 | | 0 | 884,603 | | 1,478,894 | | * |
| Salvatore A. Miosi | 384,844 | | — | | — | | 384,844 | | 0 | 437,456 | | 822,300 | | * |
| Nathaniel H. Colson | 59,503 | | — | | — | | 59,503 | | 0 | 247,957 | | 307,460 | | * |
| James J. Hughes | 40,411 | | 227,938 | | — | | 268,349 | | 0 | 144,628 | | 412,977 | | * |
| Paula C. Maggio | 110,422 | | — | | — | | 110,422 | | 0 | 218,729 | | 329,151 | | * |
| All Directors and Executive Officers as a Group (19 Persons) | 1,449,550 | | 1,505,052 | | 87,066 | | 3,041,668 | | 384,841 | | 2,312,333 | | 5,738,842 | | 1.05 | % |
MGIC Investment Corporation – 2023 Proxy Statement │ 67
1 Includes shares for which investment power is shared as follows: all directors and executive officers as a group — 66,683.
2 Includes: (a) Shares held by a family trust affiliated with: Mr. Arrigoni — 30,000; Mr. Culver — 811,051; Mr. Hughes — 227,938; and all directors and executive officers as a group — 1,068,989; and (b) 436,063 shares held by a Foundation for which Mr. Culver has no pecuniary interest but shares voting and dispositive power.
3 Includes: (a) 3,050 shares underlying RSUs that were issued to Mr. Lehman pursuant to our former RSU award program (See “Compensation of Directors — Former RSU Award Program” in our 2015 Proxy Statement filed with the SEC on March 24, 2015 (our 2015 Proxy Statement) and (b) Annual equity grants issued to each director and dividends reinvested on such shares, if such RSUs could be settled in shares of Common Stock within 60 days of the record date. No director has voting or investment power over the shares underlying these units.
4 Includes share equivalents held under our Deferred Compensation Plan for Non-Employee Directors (See “Compensation of Directors — Deferred Compensation Plan and Annual Grant of Share Units”) over which the directors have neither voting nor investment power. For all directors as a group — 384,841.
5 Represents shares underlying stock-settled RSUs that cannot be settled in Common Stock within 60 days of the record date. For all executive officers as a group — 2,232,249, for all directors as a group — 80,084.
6 As of March 10, 2023, no individual director or executive officer beneficially owned more than 1% of the Common Stock outstanding, and all directors and executive officers as a group beneficially owned 1.05% of the shares of Common Stock outstanding.
Security Ownership of Certain Beneficial Owners
The following table shows the amount of our Common Stock held by persons who were beneficial owners of more than 5% of our shares as of March 10, 2023, based on information filed with the SEC.
| | | | | | | | |
| Name | Shares Beneficially Owned | Percent of Class |
The Vanguard Group, Inc.
100 Vanguard Boulevard, Malvern, PA 19355 | 40,192,185 1 | 13.9% |
BlackRock, Inc. 55 East 52nd Street, New York, NY 10055 | 28,494,884 2 | 9.8% |
Wellington Management Group LLP 280 Congress Street, Boston, MA 02210 | 15,208,741 3 | 5.2% |
1 The Vanguard Group, Inc. reported ownership as of December 20, 2022, on behalf of itself and certain subsidiaries. It reported that it had sole dispositive power for 39,667,983 shares and shared dispositive power for 524,202 shares. It further reported that it had sole voting power for no shares and shared voting power for 223,861 shares.
2 BlackRock, Inc. reported ownership as of December 31, 2022, on behalf of itself and certain subsidiaries. It reported that it had sole dispositive power for 28,494,884 shares and shared dispositive power for no shares. It further reported that it had sole voting power for 27,726,912 shares and shared voting power for no shares.
3 Wellington Management Group LLP reported ownership as of December 30, 2022, on behalf of itself and certain subsidiaries. It reported that it had shared dispositive power for 15,208,741 shares and sole dispositive power for no shares. It further reported that it had shared voting power for 13,099,708 shares and sole voting power for no shares.
About the Meeting and the Proxy Materials
What is the purpose of the Annual Meeting?
At our Annual Meeting, shareholders will act on the matters outlined in our Notice of Annual Meeting preceding the Table of Contents, including election of the twelve directors named in the Proxy Statement, an advisory vote to approve our executive compensation, an advisory vote on the frequency of holding future advisory votes on executive compensation, and ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2023, and any other matters that properly come before the meeting.
68 │ MGIC Investment Corporation – 2023 Proxy Statement
ABOUT THE MEETING AND PROXY MATERIALS
Where will the meeting be held?
The 2023 Annual Meeting will be held entirely online via webcast. While you will not be able to attend the meeting at a physical location, we are committed to ensuring that shareholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You will be able to attend the meeting online, vote your shares electronically and submit questions during the virtual annual meeting. We are excited to provide expanded access, allowing shareholders to participate from any location, at no cost to them.
How do I attend the meeting?
There will be no physical location for the 2023 Annual Meeting. To attend the virtual meeting, please visit www.virtualshareholdermeeting.com/MTG2023. Online access for the meeting will begin at 8:45 a.m. Central time on April 27, 2023. The virtual meeting will begin promptly at 9:00 a.m. Central time on April 27, 2023. To participate in the meeting, you will need to enter the 16-digit control number that appears on your voting instruction form or proxy card, or follow the other instructions provided on the voting instruction form for attending the meeting.
How do I submit questions for the meeting?
During the meeting, shareholders may ask questions by visiting www.virtualshareholdermeeting.com/MTG2023, entering their control number as described above, and clicking the “Q&A” button once in the meeting. We intend to answer all questions submitted that are pertinent to the business of the meeting, as time permits and in accordance with our meeting procedures. We will post all such questions and their answers on our Investor Relations website for a period of 30 days after our meeting.
What if I experience technical difficulties entering the meeting?
Online access to the virtual meeting will open at 8:45 a.m. Central time, 15 minutes prior to the start of the meeting, to allow time for you to log in and test your computer audio system. We encourage you to access the meeting prior to the start time. A technical support telephone number will be available on the registration page at www.virtualshareholdermeeting.com/MTG2023.
Who is entitled to vote at the meeting?
Only shareholders of record at the close of business on March 10, 2023, the record date for the meeting, are entitled to receive notice of and to participate in the Annual Meeting. For each share of Common Stock for which you were shareholder of record on that date, you are entitled to one vote on each matter considered at the meeting. On the record date, 290,084,746 shares of Common Stock were entitled to vote.
What is a proxy?
A proxy is another person you legally designate to vote your shares. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card.
MGIC Investment Corporation – 2023 Proxy Statement │ 69
ABOUT THE MEETING AND PROXY MATERIALS
How do I vote my shares?
“Street Name” Holders: If you hold your shares in “street name,” meaning your shares are held in a stock brokerage account or by a bank or other nominee, your broker, bank or nominee has enclosed or provided a voting instruction form for you to use to direct the broker, bank or nominee how to vote your shares. Some of these institutions offer telephone and online voting. If you attend the Annual Meeting, you may withdraw your proxy and vote your shares at the meeting.
Shareholders of Record: If you are a shareholder of record, meaning your shares are registered directly in your name with American Stock Transfer & Trust Company, LLC, our stock transfer agent, you may vote your shares in one of three ways:
•By Telephone — Call toll-free 1-800-690-6903 and follow the instructions. Have your proxy card available when you call.
•Online — Access www.proxyvote.com and follow the on-screen instructions. Have your proxy card available when you access the web page.
•By Mail — You may submit a proxy by completing, signing and dating your proxy card and mailing it in the accompanying pre-addressed envelope.
If you attend the Annual Meeting, you may withdraw your proxy and vote your shares at the meeting.
Please contact our Investor Relations personnel at (414) 347-6596 if you would like information about attending the Annual Meeting and voting at the meeting.
Can I change my vote after I return my proxy card?
Yes. If you are a shareholder of record, you can revoke your proxy by advising our corporate Secretary in a writing that is received by her at any time before your shares are voted, by providing a new proxy with a later date, or by voting in person at the Annual Meeting. If your shares are held in street name by a broker, bank or nominee, you must follow the instructions of the broker, bank, nominee or plan trustee on how to change your vote.
If you are a shareholder of record or your shares are held in street name by a broker, bank or nominee, and if you attend the Annual Meeting, you may withdraw your proxy and vote your shares at the meeting.
How are the votes counted?
A quorum is necessary to hold the meeting and will exist if a majority of the 290,084,746 shares of Common Stock entitled to vote as of the record date are represented, in person or by proxy, at the meeting. Votes cast by proxy or in person at the meeting will be counted by Broadridge Financial Solutions, Inc., which has been appointed by our Board to act as inspector of election for the meeting. All shares voted by proxy are counted as present for purposes of establishing a quorum, including those that abstain or as to which the proxies contain “broker non-votes” as to one or more items.
“Broker non-votes” occur when a broker or other nominee does not vote on a particular matter because the broker or other nominee does not have authority to vote without instructions from the beneficial owner of the shares and has not received such instructions. Broker non-votes will not be counted as votes for or against any matter. Brokers and other nominees have discretionary authority to vote shares without instructions from the beneficial owner of the shares only for matters considered routine. For the 2023 Annual Meeting, nominees will only have discretionary authority to vote shares on the ratification of the appointment of the independent registered public accounting firm without instructions from the beneficial owner.
70 │ MGIC Investment Corporation – 2023 Proxy Statement
ABOUT THE MEETING AND PROXY MATERIALS
What are the Board’s recommendations?
Our Board of Directors recommends a vote FOR all of the nominees for director (Item 1), FOR approval of our executive compensation (Item 2), 1 YEAR on the frequency of future advisory votes on executive compensation (Item 3), and FOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2023 (Item 4).
If you sign and return a proxy card or voting instruction form without specifying how you want your shares voted, the named proxies will vote your shares in accordance with the recommendations of the Board for all Items and in their best judgment on any other matters that properly come before the meeting.
Will any other items be acted upon at the Annual Meeting?
The Board does not know of any other business to be presented at the Annual Meeting. No shareholder proposals will be presented at this year’s Annual Meeting.
What are the deadlines for submission of shareholder proposals, or for nominating or recommending a director candidate for nomination, for the next Annual Meeting?
Shareholders may submit proposals on matters appropriate for shareholder action at future Annual Meetings by following the SEC’s rules. Proposals intended for inclusion in next year’s proxy materials must be received by our Secretary no later than November 25, 2023. Additionally, shareholders may recommend a director candidate for consideration by the Management Development, Nominating and Governance Committee by submitting background information about the candidate, a description of his or her qualifications and the candidate’s consent to being recommended as a candidate. If the candidate is to be considered for nomination at the next annual shareholder meeting, the submission must be received by our Corporate Secretary in writing no later than November 25, 2023.
Under our Amended and Restated Bylaws (Bylaws), a shareholder who wants to bring business before the Annual Meeting that has not been included in the proxy materials for the meeting, or who wants to nominate directors at the meeting, must be eligible to vote at the meeting and give written notice of the proposal to our corporate Secretary in accordance with the SEC rules and the procedures contained in our Bylaws. For the 2024 Annual Meeting, the notice must be received by the Secretary no later than February 7, 2024, and no earlier than January 13, 2024. The notice must describe the proposal and why it should be approved, identify any material interest of the shareholder in the matter, and include other information required by our Bylaws.
Who pays to prepare, mail and solicit the proxies?
We will pay the cost of soliciting proxies. In addition to soliciting proxies by mail, our employees may solicit proxies by telephone, email, facsimile or personal interview. We have also engaged D.F. King & Co., Inc. to provide proxy solicitation services for a fee of $14,500, plus expenses such as charges by brokers, banks and other nominees to forward proxy materials to the beneficial owners of our Common Stock.
MGIC Investment Corporation – 2023 Proxy Statement │ 71
ABOUT THE MEETING AND PROXY MATERIALS
Householding
The broker, bank or other nominee for any shareholder who holds shares in “street name” and is not a shareholder of record may deliver only one copy of this Proxy Statement and the Annual Report to Shareholders to multiple shareholders who share the same address, unless that broker, bank or other nominee has received contrary instructions from one or more of the shareholders. We will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and the Annual Report to Shareholders to a shareholder at a shared address to which a single copy of the document was delivered. A shareholder who wishes to receive a separate copy of the Proxy Statement and Annual Report to Shareholders, now or in the future, should submit a request to MGIC by telephone at (414) 347-6480347-2635 or by submitting a written request to Investor Relations, MGIC Investment Corporation, P.O. Box 488, MGIC Plaza, Milwaukee, WI 53201. Beneficial owners sharing an address who are receiving multiple copies of the Proxy Statement and Annual Report to Shareholders and wish to receive a single copy of such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy be mailed to all shareholders at the shared address in the future.
72 │ MGIC Investment Corporation – 20202023 Proxy Statement │ 79
APPENDIX A -— GLOSSARY OF TERMS AND ACRONYMS
Glossary of Terms and Acronyms |
| | | | |
| Term | Description |
Benchmarking Peer Group / ABVS | Adjusted Book Value per Share. |
| ASC | Accounting Standards Codification. |
| Benchmarking Peers | The peer group used by the Committee to benchmark 2018 executive compensation. |
| CAP | Compensation Actually Paid. |
| CD&A | Compensation Discussion & Analysis. |
| Committee | The Management Development, Nominating and Governance Committee of our Board. |
| Compensation Consultant | Frederic W. Cook & Co., the Committee’s independent compensation consultant. |
EVPESG | Environmental, Social & Governance. |
| EVP | Executive Vice President. |
GAAPFASB | Financial Accounting Standards Board. |
| GAAP | Generally Accepted Accounting Principles in the United States. |
MGICIIF | Insurance in Force. |
| MGIC | Our wholly-owned subsidiary, Mortgage Guaranty Insurance Corporation. |
| Named Executive Officers | Our chief executive officer, our chief financial officer and our three other most highly compensated executive officers. The NEOs are the officers listed in the SCT. For 2018, the NEOs also included our former General Counsel. |
| NEOs | Named Executive Officers. |
| NIW | Direct new insurance written (before the effects of reinsurance).New Insurance Written. |
| NYSE | New York Stock Exchange. |
| ROE | Return on Equity. Unless otherwise indicated, ROE is calculated as Adjusted Net Operating Income divided by beginning of the year shareholders' equity, excluding accumulated other comprehensive income (loss). |
| RSUs | Restricted Stock Units. |
| SCT | Summary Compensation Table that appears on page 5247. |
Tax ActSERP | The U.S. tax reform enacted on December 22, 2017 and commonly referred to as the "Tax Cuts and Jobs Act."Supplemental Executive Retirement Plan. |
TDCTSR | Total Shareholder Return. |
| TDC | Total direct compensation, which consists of base salary, bonus (or non-equity incentive compensation) and equity awards (valued at their grant date value reported in the SCT). |
Appendix A - 1 │ MGIC Investment Corporation – 20202023 Proxy Statement
APPENDIX B — RECONCILIATION OF NON-GAAP MEASURES
Explanation and Reconciliation of Our Use of Non-GAAP Financial Measures
EXPLANATION AND RECONCILIATION OF OUR USE OF NON-GAAP FINANCIAL MEASURES
NON-GAAP FINANCIAL MEASURESNon-GAAP Financial Measures
We believe that use of the Non-GAAP measures of adjusted pre-tax operating income (loss), adjusted net operating income (loss) and adjusted net operating income (loss) per diluted share facilitate the evaluation of the company's core financial performance thereby providing relevant information to investors. These measures are not recognized in accordance with GAAP and should not be viewed as alternatives to GAAP measures of performance.
Adjusted pre-tax operating income (loss)is defined as GAAP income (loss) before tax, excluding the effects of net realized investment gains (losses), gain (loss)and losses on debt extinguishment, net impairment losses recognized in income (loss) and infrequent or unusual non-operating items, where applicable.
Adjusted net operating income (loss)is defined as GAAP net income (loss) excluding the after-tax effects of net realized investment gains (losses), gain (loss)and losses on debt extinguishment, net impairment losses recognized in income (loss), and infrequent or unusual non-operating items, where applicable, which include the effects of changes in our deferred tax valuation allowance.applicable. The amounts of adjustments to components of pre-tax operating income (loss) are tax effected using a federal statutory income tax rate of 21% for 2019 and 2018 and 35% for 2017..
Adjusted net operating income (loss) per diluted shareis calculated in a manner consistent with the accounting standard regarding earnings per share, by dividing (i) adjusted net operating income (loss) after making adjustments for interest expense on convertible debt, whenever the impact is dilutive, by (ii) diluted weighted average common shares outstanding, which reflects share dilution from unvested restricted stock units and from convertible debt when dilutive under the "if-converted" method.
Although adjusted pre-tax operating income (loss) and adjusted net operating income (loss) exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items represent items that are: (1) not viewed as part of the operating performance of our primary activities; or (2) impacted by both discretionary and other economic or regulatory factors and are not necessarily indicative of operating trends, or both. These adjustments, along with the reasons for their treatment, are described below. Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these excluded items.adjustments. Other companies may calculate these measures differently. Therefore, their measures may not be comparable to those used by us.
(1)Net realized investment gains (losses). The recognition of net realized investment gains or losses can vary significantly across periods as the timing of individual securities sales is highly discretionary and is influenced by such factors as market opportunities, our tax and capital profile, and overall market cycles.
| |
(1) | Net realized investment gains (losses). The recognition of net realized investment gains or losses can vary significantly across periods as the timing of individual securities sales is highly discretionary and is influenced by such factors as market opportunities, our tax and capital profile, and overall market cycles.
|
| |
(2) | Gains and losses on debt extinguishment. Gains and losses on debt extinguishment result from discretionary activities that are undertaken to enhance our capital position, improve our debt profile, and/or reduce potential dilution from our outstanding convertible debt.
|
| |
(3) | Net impairment losses recognized in earnings. The recognition of net impairment losses on investments can vary significantly in both size and timing, depending on market credit cycles, individual issuer performance, and general economic conditions.
|
| |
(4) | Infrequent or unusual non-operating items. Our income tax expense for 2017 reflects the remeasurement of our net deferred tax assets to reflect the lower corporate income tax rate under the Tax Act. Our 2018 and 2017 income tax expense also includes amounts related to our IRS dispute and is related to past transactions which are non-recurring in nature and are not part of our primary operating activities.
|
(2)Gains and losses on debt extinguishment. Gains and losses on debt extinguishment result from discretionary activities that are undertaken to enhance our capital position, improve our debt profile, and/or reduce potential dilution from our outstanding convertible debt.
(3)Infrequent or unusual non-operating items. Items that are non-recurring in nature and are not part of our primary operating activities.
MGIC Investment Corporation – 20202023 Proxy Statement │ Appendix B - 1
RECONCILIATION OF NON-GAAP MEASURES — APPENDIX B
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-GAAP reconciliations |
|
| | | | | | | | | | | | | | | | | | |
| Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income: |
|
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| (in thousands) | | Pre-tax | | Tax Effect | | Net
(after-tax) | | Pre-tax | | Tax Effect | | Net
(after-tax) | | Pre-tax | | Tax Effect | | Net
(after-tax) |
| Income before tax / Net income | | $ | 1,090,034 | | | $ | 224,685 | | | $ | 865,349 | | | $ | 801,777 | | | $ | 166,794 | | | $ | 634,983 | | | $ | 559,263 | | | $ | 113,170 | | | $ | 446,093 | |
| Adjustments: | | | | | | | | | | | | | | | | | | |
| Net realized investment (gains) losses | | 9,745 | | | 2,046 | | | 7,699 | | | (7,009) | | | (1,472) | | | (5,537) | | | (13,245) | | | (2,781) | | | (10,464) | |
| Loss on debt extinguishment | | 40,199 | | | 8,442 | | | 31,757 | | | 36,914 | | | 7,752 | | | 29,162 | | | 26,736 | | | 5,615 | | | 21,121 | |
| Adjusted pre-tax operating income / Adjusted net operating income | | $ | 1,139,978 | | | $ | 235,173 | | | $ | 904,805 | | | $ | 831,682 | | | $ | 173,074 | | | $ | 658,608 | | | $ | 572,754 | | | $ | 116,004 | | | $ | 456,750 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share: |
| | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
Weighted average diluted shares outstanding (in thousands) | | | | 311,229 | | | | | | | 351,308 | | | | | | | 359,293 | |
| Net income per diluted share | | | | | | $ | 2.79 | | | | | | | $ | 1.85 | | | | | | | $ | 1.29 | |
| Net realized investment (gains) losses | | | | | | 0.02 | | | | | | | (0.02) | | | | | | | (0.03) | |
| Loss on debt extinguishment | | | | | | 0.10 | | | | | | | 0.08 | | | | | | | 0.06 | |
| Adjusted net operating income per diluted share | | | | | | $ | 2.91 | | | | | | | $ | 1.91 | | | | | | | $ | 1.32 | |
B - 2 │ MGIC Investment Corporation – 2023 Proxy Statement
APPENDIX B — RECONCILIATION OF NON-GAAP MEASURES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-GAAP reconciliations |
|
| | | | | | | | | | | | | | | | | | |
| Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income: |
|
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| (in thousands) | | Pre-tax | | Tax Effect | | Net
(after-tax) | | Pre-tax | | Tax Effect | | Net
(after-tax) | | Pre-tax | | Tax Effect | | Net
(after-tax) |
| Income before tax / Net income | | $ | 847,977 | | | $ | 174,214 | | | $ | 673,763 | | | $ | 844,150 | | | $ | 174,053 | | | $ | 670,097 | | | $ | 784,496 | | | $ | 428,735 | | | $ | 355,761 | |
| Adjustments: | | | | | | | | | | | | | | | | | | |
Additional income tax provision related to the rate decrease included in the Tax Act(1) | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (132,999) | | | 132,999 | |
| Additional income tax benefit (provision) related to IRS litigation | | — | | | — | | | — | | | — | | | 2,462 | | | (2,462) | | | — | | | (29,039) | | | 29,039 | |
| Net realized investment (gains) losses | | (5,108) | | | (1,073) | | | (4,035) | | | 1,353 | | | 284 | | | 1,069 | | | (231) | | | (81) | | | (150) | |
| Loss on debt extinguishment | | — | | | — | | | — | | | — | | | — | | | — | | | 65 | | | 23 | | | 42 | |
| Adjusted pre-tax operating income / Adjusted net operating income | | $ | 842,869 | | | $ | 173,141 | | | $ | 669,728 | | | $ | 845,503 | | | $ | 176,799 | | | $ | 668,704 | | | $ | 784,330 | | | $ | 266,639 | | | $ | 517,691 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share: |
| | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
Weighted average diluted shares outstanding (in thousands) | | | | 373,924 | | | | | | | 386,078 | | | | | | | 394,766 | |
| Net income per diluted share | | | | | | $ | 1.85 | | | | | | | $ | 1.78 | | | | | | | $ | 0.95 | |
Additional income tax provision related to the rate decrease included in the Tax Act(1) | | | | | | — | | | | | | | — | | | | | | | 0.34 | |
| Additional income tax benefit (provision) related to IRS regulation | | | | | | — | | | | | | | (0.01) | | | | | | | 0.07 | |
| Net realized investment (gains) losses | | | | | | (0.01) | | | | | | | — | | | | | | | — | |
| Loss on debt extinguishment | | | | | | — | | | | | | | — | | | | | | | — | |
Adjusted net operating income per diluted share (2) | | | | | | $ | 1.84 | | | | | | | $ | 1.78 | | | | | | | $ | 1.36 | |
(1)The "Tax Act" refers to the U.S. tax reform enacted on December 22, 2017 and commonly referred to as the "Tax Cuts and Jobs Act."
(2) For the year ended December 31, 2018, the reconciliation of net income per diluted share to adjusted net operating income per diluted share does not foot due to rounding of the adjustments.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-GAAP reconciliations |
| |
| Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income: |
| |
| | | Years Ended December 31, |
| | | 2019 | | 2018 | | 2017 |
| (in thousands) | | Pre-tax | | Tax Effect | | Net (after-tax) | | Pre-tax | | Tax Effect | | Net
(after-tax) | | Pre-tax | | Tax Effect | | Net
(after-tax) |
| Income before tax / Net income | | $ | 847,977 |
| | $ | 174,214 |
| | $ | 673,763 |
| | 844,150 |
| | 174,053 |
| | 670,097 |
| | 784,496 |
| | 428,735 |
| | 355,761 |
|
| Adjustments: | | | | | | | | | | | | | | | | | | |
| Additional income tax provision related to the rate decrease included in the Tax Act | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (132,999 | ) | | 132,999 |
|
| Additional income tax benefit (provision) related to IRS litigation | | — |
| | — |
| | — |
| | — |
| | 2,462 |
| | (2,462 | ) | | — |
| | (29,039 | ) | | 29,039 |
|
| Net realized investment (gains) losses | | (5,108 | ) | | (1,073 | ) | | (4,035 | ) | | 1,353 |
| | 284 |
| | 1,069 |
| | (231 | ) | | (81 | ) | | (150 | ) |
| Loss on debt extinguishment | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 65 |
| | 23 |
| | 42 |
|
| Adjusted pre-tax operating income / Adjusted net operating income | | $ | 842,869 |
| | $ | 173,141 |
| | $ | 669,728 |
| | $ | 845,503 |
| | $ | 176,799 |
| | $ | 668,704 |
| | $ | 784,330 |
| | $ | 266,639 |
| | $ | 517,691 |
|
| | | | | | | | | | | | | | | | | | | |
| Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share: |
| | | | | | | | | | | | | | | | | | | |
| Weighted average diluted shares outstanding | | | | | | 373,924 |
| | | | | | 386,078 |
| | | | | | 394,766 |
|
| Net income per diluted share | | | | | | $ | 1.85 |
| | | | | | $ | 1.78 |
| | | | | | $ | 0.95 |
|
| Additional income tax provision related to the rate decrease included in the Tax Act | | | | | | — |
| | | | | | — |
| | | | | | 0.34 |
|
| Additional income tax benefit (provision) related to IRS litigation | | | | | | — |
| | | | | | (0.01 | ) | | | | | | 0.07 |
|
| Net realized investment (gains) losses | | | | | | (0.01 | ) | | | | | | — |
| | | | | | — |
|
| Loss on debt extinguishment | | | | | | — |
| | | | | | — |
| | | | | | — |
|
| Adjusted net operating income per diluted share (1) | | | | | | $ | 1.84 |
| | | | | | $ | 1.78 |
| | | | | | $ | 1.36 |
|
| |
(1)
| For the Year Ended December 31, 2018, the Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share does not foot due to rounding of the adjustments. |
Appendix B - 2 │ MGIC Investment Corporation – 20202023 Proxy Statement │ B - 3
APPENDIX B — RECONCILIATION OF NON-GAAP MEASURES — APPENDIX B
Reconciliation of Book Value per Share to Adjusted Book Value ("ABV")(ABV) per Share
Following is the reconciliation of book value per share to ABV per share used in determining vesting of each of the 2019, 20182022, 2021 and 20172020 equity awards.
| | Reconciliation of Book Value per Share to Adjusted Book Value per Share for 2019 Equity Awards | |
| Reconciliation of Book Value per Share to Adjusted Book Value per Share for 2022 Equity Awards | | Reconciliation of Book Value per Share to Adjusted Book Value per Share for 2022 Equity Awards |
| | | | | | |
| (In thousands, except per share amounts) | | 2019 | | 2018 | (In thousands, except per share amounts) | | 2022 | | 2021 |
| Shareholders' Equity (Book Value) | | $ | 4,309,234 |
| | $ | 3,581,891 |
| Shareholders' Equity (Book Value) | | $ | 4,642,740 | | | $ | 4,861,381 | |
| Divided by Shares Outstanding | | 347,308 |
| | 355,371 |
| Divided by Shares Outstanding | | 293,433 | | | 320,336 | |
| Book Value per Share | | $ | 12.41 |
| | $ | 10.08 |
| Book Value per Share | | $ | 15.82 | | | $ | 15.18 | |
| | | | | | |
| Adjusted Book Value for 2019 Equity Awards (from below) | | $ | 4,411,605 |
| | $ | 3,706,105 |
| |
| Adjusted Book Value for 2021 Equity Awards (from below) | | Adjusted Book Value for 2021 Equity Awards (from below) | | $ | 5,653,611 | | | $ | 4,741,684 | |
| Divided by Shares Outstanding (from below) | | 355,992 |
| | 355,371 |
| Divided by Shares Outstanding (from below) | | 321,212 | | | 320,336 | |
| Adjusted Book Value per Share for 2019 Equity Awards | | $ | 12.39 |
| | $ | 10.43 |
| |
| Adjusted Book Value per Share for 2022 Equity Awards | | Adjusted Book Value per Share for 2022 Equity Awards | | $ | 17.60 | | | $ | 14.80 | |
| | | | | | |
| Shareholders' Equity (Book Value) | | $ | 4,309,234 |
| | $ | 3,581,891 |
| Shareholders' Equity (Book Value) | | $ | 4,642,740 | | | $ | 4,861,381 | |
| Litigation Accruals | | 18,565 |
| | — |
| |
| Litigation Accruals, Net of Tax | | Litigation Accruals, Net of Tax | | — | | | — | |
| Common Stock Repurchases | | 114,126 |
| | — |
| Common Stock Repurchases | | 385,714 | | | — | |
| Dividends | | Dividends | | 111,889 | | | — | |
| Accumulated Other Comprehensive (Income) Loss | | (72,707 | ) | | 124,214 |
| Accumulated Other Comprehensive (Income) Loss | | 481,511 | | | (119,697) | |
| Initiation of Dividends | | 42,387 |
| | — |
| |
| Adjusted Book Value for 2019 Equity Awards | | $ | 4,411,605 |
| | $ | 3,706,105 |
| |
| Loss on Debt Extinguishment, Net of Tax | | Loss on Debt Extinguishment, Net of Tax | | 31,757 | | | — | |
| Adjusted Book Value for 2022 Equity Awards | | Adjusted Book Value for 2022 Equity Awards | | $ | 5,653,611 | | | $ | 4,741,684 | |
| | | | | | |
| Shares Outstanding | | 347,308 |
| | 355,371 |
| Shares Outstanding | | 293,433 | | | 320,336 | |
| Common Stock Repurchases | | 8,684 |
| | — |
| Common Stock Repurchases | | 27,779 | | | — | |
| Adjusted Shares Outstanding | | 355,992 |
| | 355,371 |
| Adjusted Shares Outstanding | | 321,212 | | | 320,336 | |
The grant documents and the Omnibus Incentive Plan for the 20192022 equity awards provide for certain specific eliminations in arriving at adjusted book value per share, as follows:
•Accumulated Other Comprehensive Income (Loss)
•Certain Litigation Settlements / Judgments
•Repurchases of Common Stock
•Repurchases of Convertible Debt
•Adjustments for Changes in Tax Laws
•Adjustments for Changes in Accounting Principle
•Dividends
In addition, the Omnibus Incentive Plan allows the Committee to revise the performance metricsgoals if significant events occur during a performance period that the Committee expects will have a substantial effect on the performance metrics.goals.
In the second half of 2019, the Company began to pay quarterly dividends to shareholders, after ceasing such dividends for more than ten years. When the 2019 Cliff BV Awards were approved in January 2019, neither the Company’s forecast nor the adjusted book value per share growth metric assumed any dividends would be paid to shareholders. The Committee determined that resumption of dividends to shareholders would have substantial effect on the performance metric for the 2019 Cliff BV Awards and that they should be eliminated in arriving at adjusted book value per share for purposes of determining the vesting percentage.
B - 4 │ MGIC Investment Corporation – 20202023 Proxy Statement │ Appendix B - 3
APPENDIX B — RECONCILIATION OF NON-GAAP MEASURES
| | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Book Value per Share to Adjusted Book Value per Share for 2021 Equity Awards |
| | | | | | |
| (In thousands, except per share amounts) | | 2022 | | 2021 | | 2020 |
| Shareholders' Equity (Book Value) | | $ | 4,642,740 | | | $ | 4,861,382 | | | $ | 4,698,986 | |
| Divided by Shares Outstanding | | 293,433 | | | 320,336 | | | 338,573 | |
| Book Value per Share | | $ | 15.82 | | | $ | 15.18 | | | $ | 13.88 | |
| | | | | | |
| Adjusted Book Value for 2021 Equity Awards (from below) | | $ | 6,073,348 | | | $ | 5,161,421 | | | $ | 4,482,165 | |
| Divided by Shares Outstanding (from below) | | 340,202 | | | 339,326 | | | 338,573 | |
| Adjusted Book Value per Share for 2021 Equity Awards | | $ | 17.85 | | | $ | 15.21 | | | $ | 13.24 | |
| | | | | | |
| Shareholders' Equity (Book Value) | | $ | 4,642,740 | | | $ | 4,861,382 | | | $ | 4,698,986 | |
| Common Stock Repurchases | | 676,532 | | | 290,818 | | | — | |
| Dividends | | 206,669 | | | 94,780 | | | — | |
| Loss on Debt Extinguishment, Net of Tax | | 60,919 | | | 29,162 | | | — | |
| Litigation Accruals, Net of Tax | | 4,977 | | | 4,977 | | | — | |
| Accumulated Other Comprehensive (Income) Loss | | 481,511 | | | (119,697) | | | (216,821) | |
| Adjusted Book Value for 2021 Equity Awards | | $ | 6,073,348 | | | $ | 5,161,422 | | | $ | 4,482,165 | |
| | | | | | |
| Shares Outstanding | | 293,433 | | | 320,336 | | | 338,573 | |
| Common Stock Repurchases | | 46,769 | | | 18,990 | | | — | |
| Adjusted Shares Outstanding | | 340,202 | | | 339,326 | | | 338,573 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Book Value per Share to Adjusted Book Value per Share for 2020 Equity Awards |
| | | | | | | | |
| (In thousands, except per share amounts) | | 2022 | | 2021 | | 2020 | | 2019 |
| Shareholders' Equity (Book Value) | | $ | 4,642,740 | | | $ | 4,861,381 | | | $ | 4,698,986 | | | $ | 4,309,234 | |
| Divided by Shares Outstanding | | 293,433 | | | 320,336 | | | 338,573 | | | 347,308 | |
| Book Value per Share | | $ | 15.82 | | | $ | 15.18 | | | $ | 13.88 | | | $ | 12.41 | |
| | | | | | | | |
| Adjusted Book Value for 2020 Equity Awards (from below) | | $ | 6,007,798 | | | $ | 5,207,759 | | | $ | 4,623,283 | | | $ | 4,236,527 | |
| Divided by Adjusted Shares Outstanding (from below) | | 349,814 | | | 348,938 | | | 348,185 | | | 347,308 | |
| Adjusted Book Value per Share for 2020 Equity Awards | | $ | 17.17 | | | $ | 14.92 | | | $ | 13.28 | | | $ | 12.20 | |
| | | | | | | | |
| Shareholders' Equity (Book Value) | | $ | 4,642,740 | | | $ | 4,861,381 | | | $ | 4,698,986 | | | $ | 4,309,234 | |
| Litigation Accruals, Net of Tax | | 4,977 | | | 4,977 | | | — | | | — | |
| Common Stock Repurchases | | 796,529 | | | 410,815 | | | 119,997 | | | — | |
| Loss on Debt Extinguishment, Net of Tax | | 82,041 | | | 50,283 | | | 21,121 | | | — | |
| Accumulated Other Comprehensive (Income) Loss | | 481,511 | | | (119,697) | | | (216,821) | | | (72,707) | |
| Adjusted Book Value for 2020 Equity Awards | | $ | 6,007,798 | | | $ | 5,207,759 | | | $ | 4,623,283 | | | $ | 4,236,527 | |
| | | | | | | | |
| Shares Outstanding | | 293,433 | | | 320,336 | | | 338,573 | | | 347,308 | |
| Common Stock Repurchases | | 56,381 | | | 28,602 | | | 9,612 | | | — | |
| Adjusted Shares Outstanding | | 349,814 | | | 348,938 | | | 348,185 | | | 347,308 | |
|
| | | | | | | | | | | | |
Reconciliation of Book Value per Share to Adjusted Book Value per Share for 2018 Equity Awards |
| | | | | | | |
| (In thousands, except per share amounts) | | 2019 | | 2018 | | 2017 |
| Shareholders' Equity (Book Value) | | $ | 4,309,234 |
| | $ | 3,581,891 |
| | $ | 3,154,526 |
|
| Divided by Shares Outstanding | | 347,308 |
| | 355,371 |
| | 370,567 |
|
| Book Value per Share | | $ | 12.41 |
| | $ | 10.08 |
| | $ | 8.51 |
|
| | | | | | | |
| Adjusted Book Value for 2018 Equity Awards (from below) | | $ | 4,541,797 |
| | $ | 3,878,684 |
| | $ | 3,198,309 |
|
| Divided by Shares Outstanding (from below) | | 371,973 |
| | 371,353 |
| | 370,567 |
|
| Adjusted Book Value per Share for 2018 Equity Awards | | $ | 12.21 |
| | $ | 10.44 |
| | $ | 8.63 |
|
| | | | | | | |
| Shareholders' Equity (Book Value) | | $ | 4,309,234 |
| | $ | 3,581,891 |
| | $ | 3,154,526 |
|
| Common Stock Repurchases | | 289,185 |
| | 175,059 |
| | — |
|
| Litigation Accruals | | 16,103 |
| | (2,462 | ) | | — |
|
| Accumulated Other Comprehensive (Income) Loss | | (72,707 | ) | | 124,214 |
| | 43,783 |
|
| Tax Law and Change in Accounting Principle | | (18 | ) | | (18 | ) | | — |
|
| Adjusted Book Value for 2018 Equity Awards | | $ | 4,541,797 |
| | $ | 3,878,684 |
| | $ | 3,198,309 |
|
| | | | | | | |
| Shares Outstanding | | 347,308 |
| | 355,371 |
| | 370,567 |
|
| Common Stock Repurchases | | 24,665 |
| | 15,982 |
| | — |
|
| Adjusted Shares Outstanding | | 371,973 |
| | 371,353 |
| | 370,567 |
|
|
| | | | | | | | | | | | | | | | |
Reconciliation of Book Value per Share to Adjusted Book Value per Share for 2017 Equity Awards |
| | | | | | | | | |
| (In thousands, except per share amounts) | | 2019 | | 2018 | | 2017 | | 2016 |
| Shareholders' Equity (Book Value) | | $ | 4,309,234 |
| | $ | 3,581,891 |
| | $ | 3,154,526 |
| | $ | 2,548,842 |
|
| Divided by Shares Outstanding | | 347,308 |
| | 355,371 |
| | 370,567 |
| | 340,663 |
|
| Book Value per Share | | $ | 12.41 |
| | $ | 10.08 |
| | $ | 8.51 |
| | $ | 7.48 |
|
| | | | | | | | | |
| Adjusted Book Value for 2017 Equity Awards (from below) | | $ | 4,449,276 |
| | $ | 3,908,741 |
| | $ | 3,349,765 |
| | $ | 2,623,942 |
|
| Divided by Adjusted Shares Outstanding (from below) | | 371,973 |
| | 371,353 |
| | 370,567 |
| | 340,663 |
|
| Adjusted Book Value per Share for 2017 Equity Awards | | $ | 11.96 |
| | $ | 10.53 |
| | $ | 9.04 |
| | $ | 7.70 |
|
| | | | | | | | | |
| Shareholders' Equity (Book Value) | | $ | 4,309,234 |
| | $ | 3,581,891 |
| | $ | 3,154,526 |
| | $ | 2,548,842 |
|
| Change in Tax Rate | | (243,977 | ) | | (121,399 | ) | | — |
| | — |
|
| Litigation Accruals | | 45,142 |
| | 26,577 |
| | 29,039 |
| | — |
|
| Convertible Debt and Stock Repurchases | | 289,227 |
| | 175,101 |
| | 42 |
| | — |
|
| Accumulated Other Comprehensive (Income) Loss | | (83,129 | ) | | 113,792 |
| | 33,361 |
| | 75,100 |
|
| Tax Law and Change in Accounting Principle | | 132,779 |
| | 132,779 |
| | 132,797 |
| | — |
|
| Adjusted Book Value for 2017 Equity Awards | | $ | 4,449,276 |
| | $ | 3,908,741 |
| | $ | 3,349,765 |
| | $ | 2,623,942 |
|
| | | | | | | | | |
| Shares Outstanding | | 347,308 |
| | 355,371 |
| | 370,567 |
| | 340,663 |
|
| Conversion of Convertible Debt | | 24,665 |
| | 15,982 |
| | — |
| | — |
|
| Adjusted Shares Outstanding | | 371,973 |
| | 371,353 |
| | 370,567 |
| | 340,663 |
|
Appendix B - 4 │ MGIC Investment Corporation – 20202023 Proxy Statement │ B - 5
APPENDIX C — 2020 OMNIBUS INCENTIVE PLAN
MGIC INVESTMENT CORPORATION
2020 OMNIBUS INCENTIVE PLAN
SECTION 1. GENERAL
1.1 Purpose. The MGIC Investment Corporation 2020 Omnibus Incentive Plan (the “Plan”) has been established by MGIC Investment Corporation (the “Company”) to motivate and incent performance by, to obtain the services of, and/or to retain the services of, key employees of the Company and its Subsidiaries and Non-Employee Directors of the Company through the receipt of Awards under the Plan.
1.2 Participation. Subject to the terms and conditions of the Plan, the Committee shall determine and designate, from time to time, from among the Eligible Individuals, those persons who will be granted one or more Awards under the Plan, and thereby become “Participants” in the Plan.
1.3 Effective Date; Effect on Prior Plan. Subject to the approval of the shareholders of the Company at the Company’s 2020 annual meeting of shareholders, the Plan shall be effective as of the date of such meeting (the “Effective Date”). Prior to the Effective Date, the Company had in effect the MGIC Investment Corporation 2015 Omnibus Incentive Plan (the “Prior Plan”). On and after the Effective Date, the Prior Plan shall terminate such that no new awards may be granted under the Prior Plan, although awards previously granted under the Prior Plan and still outstanding shall continue to be subject to all terms and conditions of the Prior Plan.
1.4 Definitions. Capitalized terms in the Plan are defined as set forth in the Plan (including the definition provisions of subsection 10.1 of the Plan).
SECTION 2. OPTIONS AND SARS
2.1 Definitions.
(a) The grant of an “Option” entitles the Participant to purchase shares of Stock at an Exercise Price established by the Committee. Any Option granted under the Plan may be either (i) an incentive stock option that is granted not later than April 23, 2030 and that is intended to satisfy the requirements applicable to an “incentive stock option” described in Section 422(b) of the Code (an “ISO”); or (ii) an Option that is not intended to be an ISO (a non-qualified option, or “NQO”). If an Option that is intended to be an ISO fails to meet the requirements thereof, the Option shall automatically be treated as an NSO to the extent of such failure.
(b) A stock appreciation right (an “SAR”) entitles the Participant to receive, in cash or Stock (as determined in accordance with subsection 5.7), value equal to (or otherwise based on) the excess of: (a) the Fair Market Value of a specified number of shares of Stock at the time of exercise; over (b) an Exercise Price established by the Committee.
(c) The Committee may not approve the grant of an Option or an SAR with a grant date that is effective prior to the date the Committee takes action to approve such grant.
2.2 Exercise Price. The “Exercise Price” of each Option and SAR granted under the Plan shall be established by the Committee or shall be determined by a method established by the Committee at the time the Option or SAR is granted, except that the Exercise Price shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant, and the Exercise Price of an ISO granted to an employee Participant who, as of the date an ISO is granted to such individual, owns more than ten percent (10%) of the total combined voting power of all classes of Stock then issued by the Company or a Subsidiary (a “10% Shareholder”) must have an exercise price not less than 110% of the Fair Market Value of a share of Stock on the date of grant.
2.3 Exercise. An Option and an SAR shall be exercisable in accordance with such terms, conditions, restrictions
MGIC Investment Corporation – 2020 Proxy Statement │ Appendix C - 1
APPENDIX C — 2020 OMNIBUS INCENTIVE PLAN
and contingencies, including those governing the period(s) during which such Awards may be exercised, as the Committee shall determine, except that the term of an Option and an SAR may not exceed ten years or, in the case of an ISO granted to a 10% Shareholder, five years.
2.4 Payment of Exercise Price. Except as otherwise determined by the Committee, the entire Exercise Price for shares of Stock being purchased under an Option shall be paid at the time of exercise of such Option. The method and form of payment of the Exercise Price shall be determined by the Committee (and, in the case of an ISO and to the extent required by applicable law, shall be determined at the time of grant) and may include (a) cash; (b) check; (c) to the extent permitted under applicable law, delivery of a promissory note with such recourse, interest, security and redemption provisions as the Committee determines to be appropriate; (d) surrender of previously owned shares of Stock, or delivery of a properly executed form of attestation (as determined by the Committee) of ownership of shares of Stock, that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the shares of Stock to which the Option is exercised; (e) a program approved by the Committee in which payment of the Exercise Price may be satisfied, in whole or in part, with shares subject to the Option, including by delivery of an irrevocable direction to a securities broker (on a form prescribed by the Committee) to sell shares of Stock and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price; (f) such other consideration and method of payment permitted under applicable laws; or (g) any combination of the foregoing methods of payment. In making its determination as to the type of method and form of payment to accept, the Committee may, in its sole discretion, refuse to accept a particular form of consideration at the time of any Option exercise.
2.5 Repricing Prohibited Without Shareholder Approval. Without the approval of the Company’s shareholders, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), (a) the terms of outstanding Options or SARs may not be amended to reduce the exercise price of outstanding Options or SARs; (b) outstanding Options or SARs may not be canceled in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs; and (c) outstanding Options or SARs with an Exercise Price above the then-current Fair Market Value of a share of Stock may not be canceled in exchange for cash or other securities.
SECTION 3. RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS
3.1 Definitions. A “Restricted Stock” Award is a grant of shares of Stock, and a “Restricted Stock Unit” Award is the grant of a right to receive shares of Stock (or a cash payment based upon the Fair Market Value of a share of Stock) in the future.
3.2 Restrictions on Awards. Except as otherwise provided by the Committee in the Award Agreement, each Restricted Stock Award and Restricted Stock Unit Award shall be subject to such conditions, restrictions and contingencies as the Committee shall determine, including but not limited to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the Participant, or achievement of Performance Goals or other objectives, or the satisfaction of conditions that must be satisfied prior to the grant of the Award, including but not limited to a condition that an Incentive Award must have become payable and the Participant must have previously elected to receive a portion of such Award in the form of a Restricted Stock Award or a Restricted Stock Unit Award (such Award referred to as a “Base Award”).
SECTION 4. CASH INCENTIVE AWARDS
4.1 Incentive Award. An “Incentive Award” is a grant of a right to receive a cash payment, pursuant to one or more underlying bonus plans, to the extent Performance Goals are achieved, all as established by the Committee, except that such a bonus plan may provide for the grant of Restricted Stock or Restricted Stock Units in conjunction with bonuses payable under such plan. Such a bonus plan may be intended to provide performance-based compensation under
Appendix C - 2 │ MGIC Investment Corporation – 2020 Proxy Statement
APPENDIX C — 2020 OMNIBUS INCENTIVE PLAN
Section 162(m) of the Code as in effect prior to the enactment of the Tax Cuts and Jobs Act for purposes of any state laws that incorporate, refer to or are based on such provisions (together, “Code Section 162(m)”) and may cover one or more key employees who are not “covered employees” under Code Section 162(m).
4.2 Terms and Conditions of Incentive Awards. Subject to the terms of the Plan, the Committee will determine all terms and conditions of Incentive Awards, including but not limited to the Performance Goals that must be achieved or partially achieved, the performance period, the potential amount payable and the timing of payment.
SECTION 5. OPERATION AND ADMINISTRATION
5.1 Duration. The Plan shall remain in effect as long as any Awards are outstanding. Except for Awards granted pursuant to commitments entered into prior to the ten-year anniversary of the Effective Date, no Awards may be granted after such ten-year anniversary.
5.2 Shares Subject to Plan; Award Limitations; Adjustments. Awards granted under the Plan shall be subject to the following:
(a) The shares of Stock may be authorized but unissued shares or treasury shares. As used herein, the term “issued” and similar terms include treasury shares delivered under an Award. Subject to the following provisions of this subsection 5.2, the maximum number of shares of Stock that may be covered by Awards to Participants and their beneficiaries under the Plan, and the number of shares of Stock reserved under the Plan, shall be 11,000,000 (such number, as it may be adjusted as provided herein, is the "Maximum Limit"). An Award shall be considered to cover, and shall deplete the shares reserved under the Plan by, the maximum number of shares of Stock, if any, with respect to which such Award is granted, determined on the date of grant. The maximum number of shares that may be covered by Awards under Options intended to be ISOs shall be the Maximum Limit.
(b) The maximum number of shares of Stock subject to (i) Awards under this Plan, and (ii) Annual Grants under, and as defined in, the Company’s Deferred Compensation Plan for Non-Employee Directors (or any successor plan thereto), granted during a single fiscal year to any Non-Employee Director, shall not exceed $600,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes). For the avoidance of doubt, such limit shall not apply to share units credited to an account for a Non-Employee Director upon the election by such director to defer cash compensation and to have such cash compensation converted into share units.
(c) Subject to subsection 5.2(f), the following additional limits shall apply to any Awards granted under the Plan that are intended to qualify as performance-based compensation under Code Section 162(m).
(i) The maximum number of shares that may be covered by Awards granted to any one Participant in any fiscal year (excluding any additional Restricted Stock Award or Restricted Stock Unit Award granted in connection with a Base Award (collectively, a “Matching Award”) that is intended to constitute performance-based compensation for purposes of Code Section 162(m)) shall be 1,000,000 shares.
(ii) In no event, may the amounts paid with respect to any fiscal year of the Company under all Incentive Awards to any one Participant that are intended to constitute performance-based compensation for purposes of Code Section 162(m), including any additional Matching Award, exceed $7,500,000.
(iii) In all cases, determinations under this subsection 5.2(c) will be made, in the case of an Award that is intended to constitute performance-based compensation under Code Section 162(m), in a manner that is consistent with the exemption for performance-based compensation provided by Code Section 162(m).
(d) To the extent any shares of Stock covered by an Award are not delivered to a Participant or beneficiary
MGIC Investment Corporation – 2020 Proxy Statement │ Appendix C - 3
APPENDIX C — 2020 OMNIBUS INCENTIVE PLAN
because the Award is forfeited, canceled, or expires, or if the shares are delivered but subsequently forfeited, or if an Award is settled in cash rather than in shares of Stock, such shares shall not be deemed to have been covered by an Award for purposes of determining the maximum number of shares of Stock available or the ISO limit under subsection 5.2(a), but shall, to the extent the Award was intended to qualify as performance-based compensation under Code Section 162(m), be counted for purposes of applying the limit of subsection 5.2(c)(i). For the avoidance of doubt, in no event shall the following shares of Stock be recredited to the Plan’s reserve under this Section 5.2(d): (i) shares purchased by the Company using proceeds from Option exercises; (ii) shares tendered or withheld in payment of the exercise price of an Option or as a result of the net settlement of an outstanding SAR; or (iii) shares tendered or withheld to satisfy federal, state or local tax withholding obligations.
(e) After the Effective Date, if any shares of Stock subject to awards granted under the Prior Plan would again become available for new grants under the terms of the Prior Plan if the Prior Plan were still in effect (taking into account the Prior Plan’s provisions concerning termination or expiration, if any), then those shares will be available for the purpose of granting Awards under this Plan, thereby increasing the number of shares available for issuance under the Maximum Limit; provided that no shares subject to awards granted under the Prior Plan shall be available for purposes of granting Awards under this Plan to the extent they are (i) shares purchased by the Company using proceeds from Option exercises, (ii) shares tendered or withheld in payment of the exercise price of an Option or as a result of the net settlement of an outstanding SAR, or (iii) shares tendered or withheld to satisfy federal, state or local tax withholding obligations.
(f) The following adjustments shall or may be made under the Plan:
(i) If (A) the Company shall at any time be involved in a merger or other transaction in which the Stock is changed or exchanged; (B) the Company shall subdivide or combine the Stock or the Company shall declare a dividend payable in shares of Stock, other securities or other property; (C) the Company shall effect a cash dividend the amount of which, on a per share basis, exceeds 10% of the trading price of the Stock at the time the dividend is declared, or the Company shall effect any other dividend or other distribution on the Stock in the form of cash, or a repurchase of Stock, that the Board determines by resolution is special or extraordinary in nature or that is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization involving the Stock; or (D) any other event shall occur which, in the case of this clause (D), in the judgment of the Committee necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (1) the number of shares and type of Stock subject to the Plan and which may after the event be made the subject of Awards under the Plan and any limitation on the number of shares so available for Awards under the Plan or for a particular type of Award under the Plan, including ISOs, (2) the number of shares and type of Stock subject to outstanding Awards, (3) the grant, purchase, or exercise price with respect to any Award, and (4) to the extent such discretion does not cause an Award that is intended to qualify as performance-based compensation under Code Section 162(m) to lose its status as such, the Performance Goals of an Award. In the case of clause (D), the Committee may also (or in lieu of the foregoing) make provision for a cash payment to the holder of an outstanding Award in exchange for the cancellation of all or a portion of the Award (without the consent of the holder of an Award) in an amount determined by the Committee effective at such time as the Committee specifies (which may be the time such transaction or event is effective). However, in each case, with respect to Awards of ISOs, no such adjustment may be authorized to the extent that such authority would cause the Plan to violate Code Section 422(b). Further, the number of shares of Stock subject to any Award payable or denominated in shares of Stock must always be a whole number. In any event, previously granted Options or SARs are subject to only such adjustments as are necessary to maintain the relative proportionate interest the Options and SARs represented immediately prior to any such event and to preserve, without increasing, the value of such Options or SARs. Without limitation, in the event of any such merger or similar transaction, subdivision or combination of Shares, dividend or other event described above (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Stock is not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Committee shall substitute, on an equitable basis as the Committee determines, for each share of Stock then subject to an Award, the number and kind of shares of stock, other securities, cash or other property to which holders of Stock are or will be entitled in respect of each share of Stock pursuant to the transaction. Notwithstanding the foregoing, if the Company shall subdivide the Stock or the Company shall declare a dividend payable in shares of
Appendix C - 4 │ MGIC Investment Corporation – 2020 Proxy Statement
APPENDIX C — 2020 OMNIBUS INCENTIVE PLAN
Stock, and if no action is taken by the Board or the Committee, then the adjustments contemplated by this subsection 5.2(f) that are proportionate shall nevertheless automatically be made as of the date of such subdivision of the Stock or dividend in shares of Stock.
(ii) Notwithstanding any other provision of the Plan, and without affecting the number of shares of Stock otherwise reserved or available under the Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, the Committee may authorize the issuance of awards under the Plan, or the assumption under the Plan of awards of another person, in each case, upon such terms and conditions as it may deem appropriate.
5.3 General Restrictions. Delivery of shares of Stock or other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Stock or make any other distribution of benefits unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933, as amended), and the applicable requirements of the Applicable Exchange.
(b) To the extent that the Plan provides for issuance of stock certificates to reflect the issuance of shares of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable requirements of the Applicable Exchange.
(c) All Awards granted pursuant to the Plan to employees, and any Stock issued or cash paid pursuant to an Award to an employee, shall be subject to any recoupment or clawback policy applicable to employees that is adopted by, or any recoupment or similar requirement otherwise made applicable by law, regulation or listing standards to, the Company from time to time.
5.4 Tax Withholding; No Guarantee of Tax Treatment. Delivery of shares of Stock or other amounts under the Plan is subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares of Stock or other amounts under the Plan on satisfaction of the applicable withholding obligations by the Participant in a manner satisfactory to the Committee (which may include, without limitation, such rules and requirements as the Committee may determine to be necessary or appropriate to avoid adverse accounting treatment with respect to any Award) and, if such obligations are not satisfied in such manner, the Committee may cancel the Award to which the withholding obligations relate. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may satisfy such withholding obligations by deducting cash from any payments of any kind otherwise due to the Participant, including under the Award, or may permit such withholding obligations to be satisfied through cash payment by the Participant, through the surrender of shares of Stock which the Participant already owns, or through the surrender of shares of Stock to which the Participant is otherwise entitled under the Plan; provided that, in the event the obligations are satisfied by the surrender of shares of Stock to which the Participant is otherwise entitled under the Plan, the amount so withheld may not exceed the total maximum statutory tax withholding obligations to the extent such a limitation is needed for the Company to avoid an accounting charge. Notwithstanding any provision of the Plan to the contrary, the Company does not guarantee to any Participant or any other person(s) with an interest in an Award that (i) any Award intended to be exempt from Code Section 409A shall be so exempt, (ii) any Award intended to comply with Code Section 409A or Code Section 422 shall so comply, or (iii) any Award shall otherwise receive a specific tax treatment under any other applicable tax law, nor in any such case will the Company or any other person be required to indemnify, defend or hold harmless any individual with respect to the tax consequences of any Award.
5.5 Grant and Use of Awards. In the discretion of the Committee, a Participant may be granted any Award permitted under the provisions of the Plan, and more than one Award may be granted to a Participant; provided that no ISO nor any Incentive Award may be granted to any person who at the time of the grant is not an employee of the Company or a Subsidiary. Subject to the limits of Section 2.5, Awards may be granted as alternatives to or replacement of Awards granted or outstanding under the Plan, or any other plan or arrangement of the Company or a Subsidiary
MGIC Investment Corporation – 2020 Proxy Statement │ Appendix C - 5
APPENDIX C — 2020 OMNIBUS INCENTIVE PLAN
(including a plan or arrangement of a business or entity, all or a portion of which is acquired by the Company or a Subsidiary). Subject to the overall limitation on the number of shares of Stock that may be covered by Awards under the Plan, and subject to the limitations of Section 8.3, the Committee may use available shares of Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or a Subsidiary, including the plans and arrangements of the Company or a Subsidiary assumed in business combinations.
5.6 Dividends and Dividend Equivalents. The following rules shall apply with respect to dividends or dividend equivalents on outstanding Awards:
(a) A Participant shall not be entitled to dividends or dividend equivalents with respect to an Option or an SAR.
(b) A Restricted Stock Unit Award or a Restricted Stock Award may provide that the Participant is entitled to receive payment of the same amount that the Participant would have received as cash dividends if, on each record date during the performance or vesting period relating to such Award, the Participant had been the holder of record of a number of shares of Stock equal to the number of Restricted Stock Units or shares of Restricted Stock actually earned by the Participant or in which the Participant has become vested based upon, to the extent the Award is subject to Performance Goals, the achievement of such Performance Goals or, to the extent the Award is subject to time-vesting, the completion of the applicable vesting period; provided that payment of any such dividend equivalent shall be deferred until the date that the final award is determined, earned and vested, and shall only be paid to the extent that (i) the Restricted Stock Units or shares of Restricted Stock, as applicable, underlying the final award have been earned by the Participant based upon achievement of the Performance Goals, or (ii) the Participant has become vested in the Restricted Stock Units or Restricted Stock, as applicable. Such dividend equivalents may be settled in cash or Stock, as determined by the Committee. Any such settlements, and any such crediting of dividends or dividend equivalents, may be subject to such conditions, restrictions and contingencies as the Committee shall establish at the time of grant, including the reinvestment of such credited amounts in Stock equivalents or additional shares of Stock.
5.7 Settlement of Awards. The obligation to make payments and distributions with respect to Awards may be satisfied through cash payments, the delivery of shares of Stock, or combination thereof as the Committee shall determine. Satisfaction of any such obligations under an Award, which is sometimes referred to as “Settlement” of the Award, may be subject to such conditions, restrictions and contingencies as the Committee shall determine. The Committee may permit or require the deferral of any Award Settlement, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest or dividend equivalents, and may include converting such credits into deferred Stock equivalents. Each Subsidiary shall be liable for payment of cash due under the Plan with respect to any Participant to the extent that such benefits are attributable to the services rendered for that Subsidiary by the Participant. Any disputes relating to liability of a Subsidiary for cash payments shall be resolved by the Committee.
5.8 Transferability. Options are not transferable except: (i) as designated by the Participant by will or by the laws of descent and distribution, or (ii) by gift, provided that all restrictions contained in this Plan continue to apply to such Option as if such gift had not occurred and provided the Committee has approved such transfer by gift. Except as otherwise provided by the Committee, other Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution.
5.9 Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be filed with the Committee or its delegate at such times, in such form (which may include a requirement of a written election or a requirement to use an electronic or on-line system), and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require.
5.10 Agreement With Company. An Award under the Plan shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall, in its sole discretion, prescribe. The terms and conditions of any
Appendix C - 6 │ MGIC Investment Corporation – 2020 Proxy Statement
APPENDIX C — 2020 OMNIBUS INCENTIVE PLAN
Award to any Participant shall be reflected in such form of document as is determined by the Committee (and which may be written or otherwise be set forth or delivered electronically). A copy of such document shall be provided, or otherwise made available, to the Participant, and the Committee may, but need not, require that the Participant sign a copy of such document or otherwise acknowledge receipt and acceptance in the manner acceptable to the Committee. Such document is referred to in the Plan as an “Award Agreement” regardless of whether any Participant signature (or acknowledgement or acceptance) is required.
5.11 Action by Company or Subsidiary. Any action required or permitted to be taken by the Company or any Subsidiary shall be by resolution of its board of directors, or by action of one or more members of the board (including a committee of the board) who are duly authorized to act for the board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of such company.
5.12 Gender and Number. Where the context permits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.
5.13 Limitation of Implied Rights.
(a) No employee or other person shall have any claim or right to be granted an Award under the Plan. Having received an Award under the Plan shall not give a Participant or any other person any right to receive any other Award under the Plan. A Participant shall have no rights in any Award, except as set forth herein and in the applicable Award Agreement.
(b) Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Stock or amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(c) The Plan does not constitute a contract of employment, in the case of a Participant who is an employee, or an agreement to renominate a director as a director, in the case of a Participant who is a Non-Employee Director, and selection as a Participant will not give any participating employee or Non-Employee Director the right to be retained in the employ, or remain a director, of the Company or any Subsidiary, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder thereof any rights as a shareholder of the Company prior to the date on which the Participant fulfills all conditions for Settlement of such rights.
5.14 Evidence and Manner of Action. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties. Board and Committee actions and authorizations with respect to the Plan and Awards granted thereunder are not required to take any specific form. For example, and without limiting the generality of the foregoing, any action or authorization by the Board or the Committee that is not described as an amendment, but that would be inconsistent with the Plan or an Award agreement as then in effect, shall be given the same effect as a formal amendment thereto (provided that such amendment is otherwise permitted by the Plan).
SECTION 6. CHANGE IN CONTROL
6.1 Subject to Section 6.4, upon the occurrence of a Change in Control:
(a) All outstanding Options (regardless of whether in tandem with SARs) shall become fully vested and
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exercisable.
(b) All outstanding SARs (regardless of whether in tandem with Options) shall become fully vested and exercisable.
(c) All outstanding Awards of Restricted Stock and Restricted Stock Units:
(i) that vest without reference to the extent to which one or more Performance Goals are attained shall become fully vested (for the avoidance of doubt, if an Award provides that a Performance Goal must be attained for Stock to vest, and if the Goal is attained, the number of shares of Stock that vest does not depend on the extent to which the Goal was attained, such Award is an Award that vests without reference to the extent to which the Goal was attained);
(ii) that vest with reference to the extent to which one or more Performance Goals are attained shall become vested in an amount calculated by assuming that the Performance Goal(s) have been satisfied at the target level specified in the Participant’s Award Agreement or, if greater, otherwise specified by the Committee at or after grant.
(d) All Incentive Awards shall be treated as determined by the Committee.
6.2 Without limiting the foregoing provisions of Section 6.1, but subject to the provisions of Section 6.4, in the event of a Change in Control the Committee may, in its discretion, provide any of the following either absolutely or subject to the election of such Participants:
(a) Each Option and SAR shall be surrendered, canceled or exercised for an immediate lump sum cash amount, subject to withholding, equal to the excess of the aggregate Fair Market Value of the shares of Stock subject to such Option or SAR determined as of the date prior to the Change in Control over the aggregate Exercise Price of such shares; provided that, to the extent such Fair Market Value does not exceed such Exercise Price, the Option or SAR may be canceled for no consideration upon the Change in Control;
(b) Each Restricted Stock Award or Restricted Stock Unit shall be exchanged for an immediate lump sum cash amount, subject to withholding, equal to the number of shares of Stock subject to such Restricted Stock Award or Restricted Stock Unit multiplied by the Fair Market Value of a share of Stock on the date prior to the Change in Control, or if greater, the value of a share of Stock as indicated by the transaction underlying the Change in Control.
6.3 The provisions of Section 6.1 and Section 6.2 notwithstanding, no distribution or payment shall be made upon or in connection with the occurrence of a Change in Control with respect to any Award that the Committee shall determine does not qualify for any applicable exemption from the application of Section 409A of the Code (such as by reason of being a stock right or qualifying as a short-term deferral), unless the Change in Control qualifies as a permissible distribution event under Section 409A of the Code with respect to such Award and the Award provides for such distribution. To the extent that, pursuant to the immediately preceding sentence, an Award is not distributable or payable upon the occurrence of a Change in Control, distribution or payment of such Award shall be made at the time otherwise specified under the Plan or the Award Documents without regard to the occurrence of a Change in Control (including any six month delay in payment applicable to a “specified employee,” as determined in accordance with Section 409A of the Code). Without limiting the generality of the foregoing, nothing in this Section 6.3 shall be construed to prevent any Participant’s rights in respect of any Award from becoming non-forfeitable upon the occurrence of a Change in Control.
6.4 The provisions of Section 6.1 notwithstanding, no acceleration of exercisability, vesting, issuance of shares, cash Settlement or other payment shall occur under Section 6.1 with respect to any Equity Award granted to a Participant if the Committee reasonably determines in good faith prior to the occurrence of a Change in Control that such Equity Award shall be honored or assumed, or new rights substituted therefor (such honored, assumed or substituted award hereinafter called an “Alternative Award”) by the Participant’s employer (or the parent or a subsidiary of such employer) immediately following the Change in Control, provided that any such Alternative Award must:
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(a) relate to a class of equity that is (or will be within 5 business days following the Change in Control) listed to trade on a recognized securities market;
(b) provide the Participant with rights and entitlements substantially equivalent to or better than the rights and entitlements applicable under such Equity Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment, including all provisions applicable in respect of such Equity Award that provide for accelerated vesting (with respect to Equity Awards that vest upon the attainment of one or more Performance Goals, if the Change in Control occurs during the course of a performance period applicable to the Equity Award, then (A) the Performance Goals shall be deemed to have been satisfied at the target level specified in the Participant’s Award agreement or, if greater, otherwise specified by the Committee at or after grant, and (B) any Alternative Award shall not include a performance objective, unless otherwise determined by the Committee);
(c) have substantially equivalent economic value to the Equity Award (as determined by the Committee as constituted immediately prior to the Change in Control); and
(d) have terms and conditions which provide that if the Participant’s employment is terminated upon or within three years following such Change in Control by the Participant’s employer other than for Cause or by the Participant for Good Reason, a Participant’s rights under each such Alternative Award shall become fully vested and exercisable (for purposes of this clause (d), Good Reason and Cause shall be as defined in the Company’s Key Executive Employment and Severance Agreement (“KEESA”) applicable to the Participant prior to the occurrence of the Change in Control and if no KEESA is applicable to the Participant, then as such terms are defined in the form of KEESA most recently filed with the Securities and Exchange Commission; provided, however, that with respect to any Equity Award that does not qualify for any applicable exemption from the application of Section 409A of the Code, the payment or distribution of the Alternative Award shall only be made at the time otherwise specified under the Plan or the Award Agreement without regard to the occurrence of the Change in Control (including any six month delay in payment applicable to a “specified employee,” as determined in accordance with Section 409A of the Code).
6.5 Anything in this Plan to the contrary notwithstanding, if a Change in Control occurs and if the Participant’s employment is terminated (other than a termination due to the Participant’s death or as a result of the Participant’s disability) during the period of 90 days prior to the date on which the Change in Control of the Company occurs, and if it is reasonably demonstrated by the Participant that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control of the Company or (ii) was by the Participant for Good Reason or was by the employer for other than Cause and otherwise arose in connection with or in anticipation of a Change in Control of the Company, then the date of termination of such Participant’s employment or service shall be deemed for purposes of the Plan to be the day following the date of the Change in Control.
SECTION 7. COMMITTEE
7.1 Administration. The authority to control and manage the operation and administration of the Plan shall be vested in a committee (the “Committee”) in accordance with this Section 7. The Committee shall be selected by the Board, and shall consist of at least two members and shall be appointed from among the members of the Board. Any member of the Committee may resign or be removed by the Board and new members may be appointed by the Board. Additionally, the Committee shall be constituted so as to satisfy at all times the non-employee director requirement of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and, at any time during which Awards that are intended to constitute performance-based compensation for purposes of Code Section 162(m) are outstanding or to be granted, the outside director requirement of Code Section 162(m) and the regulations thereunder. Unless otherwise determined by the Board, the Committee shall be the Management Development, Nominating and Governance Committee. If the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.
7.2 Powers of Committee. The Committee’s administration of the Plan shall be subject to the following:
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(a) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Eligible Individuals those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and (subject to the restrictions imposed by Section 8) to cancel or suspend Awards.
(b) To the extent that the Committee determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the Awards in jurisdictions outside the United States, the Committee will have the authority and discretion to modify those restrictions as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States.
(c) The Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any Award Agreement made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision made by it under the Plan, including an adjustment under subsection 5.2(f), is final and binding on all persons. Except to the extent precluded by applicable law, decisions made by the Committee under the Plan need not be uniform with respect to Participants notwithstanding that Participants are similarly situated.
(e) No member of the Board or the Committee, and no member of a sub-committee or other person to whom a delegation under Section 7.3 has been made, will be liable for any act done, or determination made, by the individual in good faith with respect to this Plan or any Award. The Company will indemnify and hold harmless each member of the Board and the Committee, and each member of a sub-committee or other person to whom a delegation under Section 7.3 has been made, as to any acts or omissions with respect to this Plan or any Award to the maximum extent that the law, the Company’s by-laws, articles of incorporation and any indemnification agreement between such member and the Company or an affiliate permit.
7.3 Delegation by Committee. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any sub-committee or person or persons selected by it. If the Committee has made a permitted allocation or delegation, then all references to the Committee in the Plan include such sub-committee or person or persons with respect to whom the allocation or delegation is made to the extent of such allocation or delegation. Any such allocation or delegation may be revoked by the Committee at any time.
7.4 Information to be Furnished to Committee. The Company and Subsidiaries shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of the Company and Subsidiaries as to an employee’s or Participant’s employment, termination of employment, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
SECTION 8. AMENDMENT AND SUSPENSION OF GRANTING AWARDS
8.1 Amendment of Plan and Suspension of Granting Awards. The Board or the Committee may, at any time, amend the Plan, except that the Board may amend the Plan to prohibit or restrict the Committee’s power to amend the Plan after the time at which such amendment is adopted by the Board, and any such amendment by the Board shall not be subject to change by the Committee. Notwithstanding the foregoing sentence, (i) subject to subsection 8.2, no
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amendment may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary of the former Participant), adversely affect the rights of any Participant or beneficiary under any Award made prior to the date such amendment is adopted; (ii) no amendment may increase the limitations set forth in subsections 5.2(a), 5.2(b) and 5.2(c), decrease the minimum Option or SAR Exercise Price set forth in subsection 2.2, increase the maximum term of an Option or SAR from the maximum term set forth in subsection 2.3 or amend subsections 2.4 or 2.5 unless any such amendment is approved by the Company’s shareholders; and (iii) shareholders must approve any amendment of the Plan to the extent the Company determines such approval is required by: (A) Section 16 of the Exchange Act, (B) the Code, or (C) the listing requirements of the Applicable Exchange. Adjustments pursuant to subsection 5.2(f) shall not be subject to the foregoing limitations of this Section 8. The Committee or the Board may at any time suspend, temporarily or permanently, granting Awards under the Plan.
8.2 Amendment, Modification or Cancellation of Awards. Except as provided in subsection 2.5 and subject to the requirements of the Plan, the Committee may modify or amend any Award, or waive any restrictions or conditions applicable to any Award or the exercise of the Award, or amend, modify or cancel any terms and conditions applicable to any Award, in each case by mutual agreement between the Committee and the Participant or any other person(s) as may then have an interest in the Award, so long as any such action does not increase the number of shares of Stock issuable under the Plan (except as permitted by subsection 5.2(f)), but the Committee need not obtain Participant (or other interested party) consent for any such action that is permitted by the provisions of subsection 5.2(f) or for any such action: (i) to the extent the action is deemed necessary by the Committee to comply with any applicable law or the listing requirements of the Applicable Exchange; (ii) to the extent the action is deemed necessary by the Committee to preserve favorable accounting or tax treatment of any Award for the Company; or (iii) to the extent the Committee determines that such action does not materially and adversely affect the value of an Award or that such action is in the best interest of the affected Participant or any other person(s) as may then have an interest in the Award. The foregoing notwithstanding, the Committee may not waive or accelerate the vesting period of any Equity Award except in the case of death, disability, retirement, or, subject to Section 6, a Change in Control.
SECTION 9. INTERNAL REVENUE CODE SECTION 409A
Unless determined otherwise by the Committee, the Plan shall be administered in a manner that will enable an Award that is intended to be exempt from Code Section 409A to continue to be so exempt, or to enable an Award that is intended to comply with Code Section 409A to continue to so comply. For purposes of any Award that is subject to Code Section 409A and with respect to which the terms and conditions of the Award Agreement, as determined by the Committee (or if applicable, elected by the Participant) at the time of grant provide for distribution or Settlement of the Award upon the Participant’s termination of employment, the Participant will be deemed to have terminated employment on the date on which the Participant incurs a “separation from service”, within the meaning of Code Section 409A, and to the extent required in order to comply with Code Section 409A, no distribution or Settlement of the Award shall be made until the date that is six months and one day following the date of the Participant’s “separation from service”. A Participant’s “separation from service” shall occur when the Company reasonably anticipates that no further services will be performed by the Participant for the Company after a certain date or that the level of bona fide services the Participant will perform after such date will permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed by the Participant (whether as an employee or independent contractor) for the Company over the immediately preceding thirty-six (36) month period (or such lesser period of actual service). For purposes of this definition, the term “Company” includes each other corporation, trade or business that, with MGIC Investment Corporation, constitutes a controlled group of corporations or group of trades or businesses under common control within the meaning of Code Sections 414(b) or (c). For this purpose, Code Sections 414(b) and (c) shall be applied by substituting “at least 50 percent” for “at least 80 percent” each place it appears therein or in the regulations promulgated thereunder. A Participant is not considered to have incurred a “separation from service” if the Participant is absent from active employment due to military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed the greater of (i) six (6) months, or (ii) the period during which the Participant’s right to reemployment by the Company or controlled group member is provided either by statute or by contract; provided that if the leave of absence is due to a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not
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less than six (6) months, where such impairment causes the Participant to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, the leave may be extended for up to twenty-nine (29) months without causing a “separation from service”.
SECTION 10. DEFINED TERMS AND GOVERNING LAW
10.1 Defined Terms. In addition to the other definitions contained herein, the following definitions shall apply:
(a) “Award” means any award or benefit granted under the Plan, including, without limitation, the grant of Options, SARs, Restricted Stock Awards, Restricted Stock Unit Awards and Incentive Awards.
(b) “Board” means the Board of Directors of the Company.
(c) “CEO” means the Chief Executive Officer of the Company.
(d) “Change in Control” means a change in control of the Company, as defined in the Annex hereto, provided that with respect to an Award that is subject to Code Section 409A, such change in control is also a change in ownership or effective control of a corporation or a change in ownership of a substantial portion of the assets of a corporation pursuant to Treasury Regulations section 1.409A-3(i)(5).
(e) “Code” means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provision of the Code and the regulations promulgated under such provision.
(f) “Covered Employee” means any employee of the Company or any Subsidiary who is not the CEO.
(g) “Eligible Individual” means any executive officer or other key employee of the Company or a Subsidiary and any Non-Employee Director. An Award may be granted to an employee, in connection with hiring, retention or otherwise, prior to the date the employee first performs services for the Company or a Subsidiary, provided that such Award shall not become vested prior to the date the employee first performs such services.
(h) “Equity Award” means an Award of Options, SARs, Restricted Stock, Restricted Stock Units or other stock-based Award.
(i) “Fair Market Value” means, per share of Stock on a particular date, a price that is based on (i) the opening, closing, actual, high or low sale price, or the arithmetic mean of selling prices of, a share of Stock on the New York Stock Exchange or such other exchange or automated trading system on which the Stock is then principally traded (the “Applicable Exchange”) on the applicable date, the preceding trading day or the next succeeding trading day, or (ii) the arithmetic mean of selling prices on all trading days over a specified averaging period that is within 30 days before or 30 days after the applicable date, or such arithmetic mean weighted by volume of trading on each trading day in the period, in each case as determined by the Committee in its discretion; provided that, if an arithmetic mean of prices is used to set a grant price or an exercise price for an Option or SAR that is intended to be exempt from Code Section 409A, then the commitment to grant the applicable Award based on such arithmetic mean must be irrevocable before the beginning of the specified averaging period in accordance with United States Treasury Regulations section 1.409A-1(b)(5)(iv)(A). The method of determining Fair Market Value with respect to an Award shall be determined by the Committee and may differ depending on whether Fair Market Value is in reference to the grant, exercise, vesting, Settlement, or payout of an Award; provided that, if the Committee does not specify a different method, the Fair Market Value of a share of Stock as of a given date shall be the last reported per share sale price of the Stock on the day as of which Fair Market Value is to be determined or, if there shall be no such sale on such date, the next preceding day on which such a sale shall have occurred. If the Stock is not traded on an established stock exchange, the Committee shall determine in good faith the Fair Market Value of a share of Stock. Notwithstanding the foregoing, in the case of a sale of shares of Stock on the Applicable Exchange, the actual sale price shall be the Fair Market Value of such shares. The Committee also
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shall establish the Fair Market Value of any other property.
(j) “Non-Employee Director” means a member of the Board who is not an employee of the Company, any Subsidiary or of any person, directly or indirectly, controlling, controlled by or under common control with the Company and is not a member of the Board representing a particular holder of any class of securities of the Company.
(k) “Performance Goal” means, with respect to any Award that is or is not intended to constitute “performance based compensation” under Code Section 162(m), any goal or performance measure the Committee establishes that relates to one or more of the following:
net income, pre-tax income or earnings before interest, taxes and depreciation and amortization,
earnings per share,
operating earnings, which is net income excluding realized gains and losses,
cash flow, including operating cash flow, which excludes the same items as are excluded in operating earnings,
return on assets, capital, investment, invested capital or equity,
total return to shareholders or another return measure in which the denominator is one objective financial metric derived from the Company's financial statements and the denominator is another one,
expenses or a ratio related to expenses, such as the ratio of expenses from insurance operations to net premiums written or earned,
incurred or paid losses or ratios related to those losses, such as the ratio of incurred losses to the net premiums written or earned,
market share,
book value,
book value per share,
common stock share price,
increase in surplus,
statutory capital,
economic value added,
gross or net revenues, and
new insurance written.
In addition, in the case of Awards that are not intended to constitute “performance-based compensation” under Code Section 162(m), the Committee may establish other subjective or objective performance goals not listed above, but which shall be deemed Performance Goals for purposes of this Plan.
Each of the Performance Goals may be combined with other Performance Goals, and may be (i) determined on a Company-wide basis or, where applicable, with respect to one or more Subsidiaries, operating units, divisions, books of business, new insurance written, types of insurance written by the Company, acquired businesses, minority investments, partnerships or joint ventures; (ii) determined on a relative or an absolute basis, or (iii) determined on a per share (either basic or fully diluted) or an aggregate basis. If during the course of a performance period there shall occur significant events which the Committee expects to have a substantial effect on the applicable performance objectives during such period, the Committee may revise such performance objectives.
Unless otherwise determined by the Committee, the measurement of the Performance Goal shall exclude, to the extent applicable under the particular Performance Goal, the effects of (i) charges for reorganizations and restructurings and discontinued operations; (ii) all items of gain, loss or expense determined to be unusual or non-recurring in nature; (iii) all items of gain, loss or expense related to the acquisition or disposal of a business; (iv) all items of gain, loss or expense related to a change in accounting principle as well as the cumulative effect of accounting changes; (v) the establishment or elimination of any valuation reserve; (vi) litigation judgments or settlements, (vii) the effect of changes in tax law or other laws or provisions affecting reported results; and (viii) any item that is included in a determination of other comprehensive income.
The Committee may, in its discretion, determine at any time to adjust the measurement of any Performance Goal, or
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exclude from the measurement of any Performance Goal any items it designates in its discretion; provided that, with respect to Awards that are intended to constitute performance-based compensation for purposes of Code Section 162(m), such adjustments or exclusions must be made or established as part of an objective formula or standard that precludes discretion in accordance with Code Section 162(m).
Where applicable, the Performance Goals may be expressed, without limitation, in terms of attaining a specified level of the particular criterion or the attainment of an increase or decrease (expressed as absolute numbers or a percentage) in the particular criterion or achievement in relation to a peer group or other index. The Performance Goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be paid (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur).
(l) “Stock” means the common stock, $1.00 par value, of the Company.
(m) “Subsidiary” means any company during any period in which it is a “subsidiary corporation” (as that term is defined in Code Section 424(f)) with respect to the Company.
The following terms are defined where indicated below:
|
| |
10% Shareholder | -- Subsection 2.2 |
Alternative Award | -- Subsection 6.4 |
Applicable Exchange | -- Subsection 10.1(i) |
Award Agreement | -- Subsection 5.10 |
Base Award | -- Subsection 3.2 |
Cause | -- Subsection 6.4(d) |
Code Section 162(m) | -- Subsection 4.1 |
Committee | -- Subsection 7.1 |
Company | -- Subsection 1.1 |
Effective Date | -- Subsection 1.3 |
Exchange Act | -- Subsection 7.1 |
Exercise Price | -- Subsection 2.2 |
Good Reason | -- Subsection 6.4(d) |
Incentive Award | -- Subsection 4.1 |
ISO | -- Subsection 2.1(a) |
KEESA | -- Subsection 6.4(d) |
Matching Award | -- Subsection 5.2(c)(i) |
Maximum Limit | -- Subsection 5.2(a) |
NQO | -- Subsection 2.1(a) |
Option | -- Subsection 2.1(a) |
Participant | -- Subsection 1.2 |
Plan | -- Subsection 1.1 |
Prior Plan | -- Subsection 1.3 |
Restricted Stock | -- Subsection 3.1 |
Restricted Stock Unit | -- Subsection 3.1 |
SAR | -- Subsection 2.1(b) |
Settlement | -- Subsection 5.7 |
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10.2 Governing Law. The Plan, and all Award Agreements, shall be construed in accordance with and governed by the laws of the State of Wisconsin, without reference to any conflict of law principles. As a condition of receiving any Award, a Participant agrees, on behalf of the Participant and all persons or entities that may claim through the Participant, that except to the extent otherwise determined by the Company in writing in the case of one or more Participants and communicated to an affected Participant in the same manner by which notices may be given under the Participant’s Award Agreement (a) any legal action or proceeding with respect to the Plan, any Award or any Award Agreement, or for recognition and enforcement of any judgment in respect of the Plan, any Award or any Award Agreement, may be brought and determined only in a state court sitting in the County of Milwaukee, or the Federal District Court for the Eastern District of Wisconsin sitting in the County of Milwaukee, in the State of Wisconsin, and (b) any right to a jury trial is waived. No legal action or other proceeding may be brought by or on behalf of a Participant (or any beneficiary of the Participant) with respect to the Plan or any Plan Award more than one (1) year after the later of (i) the last date on which the act or omission giving rise to the legal action or proceeding occurred, or (ii) the date on which the individual or entity bringing the legal action or proceeding had knowledge (or reasonably should have had knowledge) of the act or omission.
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ANNEX
Definition of “Change in Control” and Related Terms
1. Change in Control of the Company. A “Change in Control” shall be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any of its subsidiaries, (B) a trustee or other fiduciary holding securities under any employee benefit plan of the Company or any of its subsidiaries, (C) an underwriter temporarily holding securities pursuant to an offering of such securities or (D) an entity owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock in the Company (“Excluded Persons”)) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after January 1, 2020, pursuant to express authorization by the Board of Directors of the Company (the “Board”) that refers to this exception) representing more than 25% of the total fair market value of the stock of the Company or representing more than 25% of the total voting power of the stock of the Company; or
(ii) during any 12 consecutive month period, the following individuals cease for any reason to constitute a majority of the number of directors of the Company then serving: (A) individuals who, on January 1, 2020, constituted the Board and (B) any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least a majority of the directors then still in office who either were directors on January 1, 2020, or whose initial appointment, election or nomination for election as a director which occurred after January 1, 2020 was approved by such vote of the directors then still in office at the time of such initial appointment, election or nomination who were themselves either directors on January 1, 2020 or initially appointed, elected or nominated by such majority vote as described above ad infinitum (collectively the “Continuing Directors”); provided, however, that individuals who are appointed to the Board pursuant to or in accordance with the terms of an agreement relating to a merger, consolidation, or share exchange involving the Company (or any direct or indirect subsidiary of the Company) shall not be Continuing Directors for purposes of this Agreement until after such individuals are first nominated for election by a vote of at least a majority of the then Continuing Directors and are thereafter elected as directors by the shareholders of the Company at a meeting of shareholders held following consummation of such merger, consolidation, or share exchange; and, provided further, that in the event the failure of any such persons appointed to the Board to be Continuing Directors results in a Change in Control of the Company, the subsequent qualification of such persons as Continuing Directors shall not alter the fact that a Change in Control of the Company occurred; or
(iii) a merger, consolidation or share exchange of the Company with any other entity is consummated or voting securities of the Company are issued in connection with a merger, consolidation or share exchange of the Company (or any direct or indirect subsidiary of the Company) pursuant to applicable stock exchange requirements, other than (A) a merger, consolidation or share exchange which would result in the voting securities of the Company entitled to vote generally in the election of directors outstanding immediately prior to such merger, consolidation or share exchange continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof entitled to vote generally in the election of directors of such entity or parent outstanding immediately after such merger, consolidation or share exchange, or (B) a merger, consolidation or share exchange effected to implement a recapitalization of the Company (or similar transaction) in which no Person (other than an Excluded Person) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after January 1, 2020, pursuant to express authorization by the Board that refers to this exception) representing at least 25% of the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors; or
Appendix C - 16 │ MGIC Investment Corporation – 2020 Proxy Statement
APPENDIX C — 2020 OMNIBUS INCENTIVE PLAN
(iv) the consummation of a sale or disposition by the Company of all or substantially all of the Company’s assets to a Person (in one transaction or a series of related transactions within any period of 24 consecutive months), other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an Excluded Person or to an entity at least 75% of the total value or voting power of which is owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale. It is understood that in no event shall a sale or disposition of assets be considered to be a sale of substantially all of the assets unless the assets sold or disposed of have a total gross fair market value of at least 40% of the total gross fair market value of all of the Company’s assets immediately prior to such sale or disposition.
2. Related Definitions. For purposes of this Annex, the following terms, when capitalized, shall have the following meanings:
(i) Act. The term “Act” means the Securities Exchange Act of 1934, as amended.
(ii) Affiliate and Associate. The terms “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule l2b-2 of the General Rules and Regulations under the Act.
(iii) Beneficial Owner. A Person shall be deemed to be the “Beneficial Owner” of any securities:
(a) which such Person or any of such Person’s Affiliates or Associates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase, or securities issuable upon exercise of rights issued pursuant to the terms of a shareholder rights agreement that may be entered into by the Company from time to time, at any time before the issuance of such securities;
(b) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Act), including pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this subsection 2(iii)(b) as a result of an agreement, arrangement or understanding to vote such security if the agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Act and (B) is not also then reportable on a Schedule 13D under the Act (or any comparable or successor report); or
(c) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in subsection 2(iii)(b) above) or disposing of any voting securities of the Company.
(iv) Person. The term “Person” shall mean any individual, firm, partnership, corporation or other entity, including any successor (by merger or otherwise) of such entity, or a group of any of the foregoing acting in concert.
(v) Stock. The term “stock” shall have the meaning contemplated by Treasury Regulation 1.409A-1 et seq.
MGIC Investment Corporation – 2020 Proxy Statement │ Appendix C - 17
