UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrantý
Filed by a Party other than the Registranto
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| Check the appropriate box: |
| o | | Preliminary Proxy Statement |
| o | | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ý | | Definitive Proxy Statement |
| o | | Definitive Additional Materials |
| o | | Soliciting Material under §240.14a-12 |
| ARCH CAPITAL GROUP LTD. |
| (Name of Registrant as Specified In Its Charter) |
| Not Applicable |
| (Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
| Payment of Filing Fee (Check all boxes that apply): |
| ý | | No fee required. |
| o | | Fee paid previously with preliminary materials. |
| o | | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
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| Arch Capital Group Ltd. |
| Waterloo House, Ground Floor |
| 100 Pitts Bay Road |
| Pembroke HM 08, Bermuda |
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| | T: (441) 278-9250 |
| | | T: (441) 278-9250
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| | archgroup.com |
DEAR FELLOW SHAREHOLDER:
You are cordially invited to join Arch Capital Group Ltd.’s Board of Directors and senior leadership at the 20222024 Annual General Meeting of Shareholders (the “Annual Meeting”), which will be held on Thursday, May 9, 2024 at 12:00 p.m. local Bermuda time (11:00 a.m. Eastern Daylight Time, on Wednesday, May 4, 2022. As part of our COVID-19 precautions, theTime). The Annual Meeting will be held virtually via a live webcast. The Annual Meeting can be accessed directly at virtualshareholdermeeting.com/ACGL2022ACGL2024. To log in to the Annual Meeting as a shareholder, a control number will be required. For registered shareholders, the control number can be found on your proxy card, voting instruction formVoting Instruction Form or noticeNotice to shareholders. Any questions for the Annual Meeting must be submitted in advance at shareholderinfo@archgroup.com by 11:59 p.m. Eastern Daylight Time on May 1, 2022.6, 2024.
The attached noticeNotice of the 2022 Annual Meeting of shareholders and Proxy Statement provide important information about the meeting and will serve as your guide to the business to be conducted at the meeting. Your vote is very important to us. We urge you to read the accompanying materials regarding the matters to be voted on at the meeting and to submit your voting instructions by proxy. The Board of Directors recommends that you vote “FOR” each of the proposals as listed on the attached notice.Notice.
You may submit your proxy either over the telephone or the internet. In addition, if you have requested or received a paper copy of the proxy materials, you can vote by marking, signing, dating and returning the proxy card or voter instruction form sent to you in the envelope accompanying the proxy materials.
Thank you for your continued support.
Sincerely,
Marc Grandisson
Chief Executive Officer
NOTICE OF 20222024 ANNUAL GENERAL MEETING OF SHAREHOLDERS
When: Wednesday, Thursday, May 4, 2022,9, 2024 at 12:00 p.m. local Bermuda time (11:00 a.m. Eastern Daylight TimeTime)
Where: virtualshareholdermeeting.com/ACGL2022ACGL2024
We are pleased to invite you to the Arch Capital Group Ltd. Annual Meeting which will be held virtually.
Items of Business:
1.Elect fourtwo Class IIIII Directors to serve for a term of three years and until their respective successors are duly elected and qualified or their earlier resignation or removal (Item 1); 2.Advisory vote to approve named executive officer (“NEO”) compensation (Item 2); 3.Approve the Arch Capital Group Ltd. 2022 Long-Term Incentive and Share Award Plan (Item 3); 4.Appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 20222024 (Item 43);5.4.Elect certain individuals as Designated Company Directors of certain of our non-U.S. subsidiaries, as required by our bye-laws (Item 54); and6.5.Conduct other business if properly raised before the meeting or any adjournment thereof.
You are eligible to vote if you were a shareholder of record at the close of business on March 8, 2022.13, 2024. | | |
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| Conyers Corporate Services (Bermuda) Limited Secretary |
Hamilton, Bermuda
March 25, 2022 |
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| March 28, 2024 |
Voting Information
Ensure that your shares are represented at the 20222024 Annual Meeting by voting in one of several ways:
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| Go to the website listed on your proxy card or Notice to vote VIA THE INTERNET. |
| Call the telephone number specified on your proxy card or on your Voting Instruction Form to vote BY TELEPHONE. |
| If you received paper copies of your proxy materials, mark, sign, date and return your proxy card in the postage-paid envelope provided to vote BY MAIL. |
| Scan the QR Code on your proxy card, Notice or Voting Instruction Form to vote with your MOBILE DEVICE. |
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| Important Notice Regarding Annual Meeting
To log in to the Annual Meeting as a shareholder, a control number will be required. For registered shareholders, the control number can be found on your proxy card, voting instruction formVoting Instruction Form or noticeNotice to shareholders. |
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Any questions for the Annual Meeting must be submitted in advance at shareholderinfo@archgroup.com by 11:59 p.m. Eastern Daylight Time on May 1, 2022.6, 2024. |
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| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: |
This Proxy Statement and 20212023 Annual Report are available at proxyvote.com. On or about March 25, 2022,28, 2024, we expect to mail to our shareholders a Notice of Internet Availability containing instructions on how to access our proxy materials, including our Proxy Statement and 20212023 Annual Report. The Notice of Internet Availability also will instruct you on how to access and submit your proxy through the internet, by phone or with your mobile device. |
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| 3 | | 20222024 PROXY STATEMENT | |
TABLE OF CONTENTS
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| SAFE HARBOR STATEMENT | |
| PROXY SUMMARY | |
| Roadmap of Voting Matters | |
| Director Nominees | |
| Shareholder Engagement | |
| Key Executive Compensation Policies and Practices | |
| Sustainability Practices | |
| General Information | |
| Learn More About Our Company | |
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| GOVERNANCE | |
| Item 1—Election of Directors | |
| Board | |
| Committees of the Board | |
| Nominees | |
| Appointed Directors, Continuing Directors and Senior Management | |
| Director Compensation | |
| Certain Relationships and Related Person Transactions | |
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| SHARE OWNERSHIP | |
| Security Ownership of Certain Beneficial Owners and Management | |
| Common Shares | |
| Preferred Shares | |
| Delinquent Section 16(a) Reports |
| COMPENSATION | |
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COMPENSATION | |
| Item 2—Advisory Vote to Approve Named Executive Officer Compensation | |
| Compensation Discussion and Analysis | |
| Strong Link Between Pay and Performance | |
20212023 Performance at a Glance | |
| Long-Term Performance | |
| Executive Compensation Philosophy | |
| How We Make Compensation Decisions | |
| Shareholder Engagement and Results of Say-on-Pay Votes | |
| Elements of Compensation Program | |
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COMPENSATION (continued) | |
20212023 Compensation Decisions for Named Executive Officers | |
20222024 Long-Term Incentive Awards | |
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| COMPENSATION (continued) | |
| Additional Compensation Policies and Practices | |
| Tax Considerations | |
| Report of the Compensation and Human Capital Committee on the Compensation Discussion and Analysis | |
Executive Compensation Committee Interlocks and Insider ParticipationTables | |
Executive Compensation TablesPay for Performance | |
Employment ArrangementsPay Ratio | |
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2022 LONG-TERM INCENTIVE AND SHARE AWARD PLANEmployment Arrangements | |
| Item 3—Approval of the 2022 Plan |
| AUDIT MATTERS | |
Introduction | |
Reasons for the Proposal | |
Key Data | |
Promotion of Sound Corporate Governance Practices | |
Description of 2022 Plan | |
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AUDIT MATTERS | |
| Report of the Audit Committee of the Board | |
| Principal Auditor Fees and Services | |
Item 4—3—Appointment of Independent Registered Public Accounting Firm | |
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| SUBSIDIARY DIRECTORS | |
Item 5—4—Election of Subsidiary Directors | |
| Nominees | |
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ANNEX A—GENERAL INFORMATION | |
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ANNEX B—ARCH CAPITAL GROUP LTD. 2022 LONG-TERM INCENTIVE AND SHARE AWARD PLAN | |
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ANNEX C—NON-GAAP FINANCIAL MEASURES
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| 20222024 PROXY STATEMENT | | 4 |
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. This document includes forward-looking statements, which reflect our current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this document are forward-looking statements. Forward-looking statements, for purposes of the PSLRA or otherwise, can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” and similar statements of a future or forward-looking nature or their negative or variations or similar terminology. Forward-looking statements involve our current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. Important factors that could cause actual events or results to differ materially from those indicated in such statements are discussed in our periodic reports filed with the Securities and Exchange Commission (“SEC”). All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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| 5 | | 20222024 PROXY STATEMENT | |
PROXY SUMMARY
This summary highlights information contained in the Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement before voting. As used in this report, “we,” “us,” “our,” “Arch” or the “Company” refer to the consolidated operations of Arch Capital Group Ltd. (“Arch Capital”) and its subsidiaries. For more complete information regarding the Company’s 20212023 performance, please review the Company’s Annual Report on Form 10-K for the year ended December 31, 20212023 (“20212023 Annual Report”).
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| ROADMAP OF VOTING MATTERS | |
Shareholders are being asked to vote on the following matters at the 20222024 Annual Meeting:
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| Our Board’s Recommendation |
ITEM 1 - Election of Directors (page 12) | |
The Arch Capital Board of Directors (the “Board”) and the Nominating and Governance Committee of the Board believe that the fourtwo Director nominees possess the necessary qualifications and experience to provide quality advice and counsel to the Company’s management and effectively oversee the business and the long-term interests of shareholders. | FOR Each Director Nominee |
ITEM 2 - Advisory Vote to Approve Named Executive Officer Compensation (page 3633) | |
The Company seeks a non-binding advisory vote to approve the compensation of its named executive officers as described in the Compensation Discussion and Analysis beginning on page 3633 and the Executive Compensation Tables beginning on page 6057. The Board values shareholders’ opinions, and the Compensation and Human Capital Committee of the Board will take into account the outcome of the advisory vote when considering future executive compensation decisions. | FOR |
ITEM 3 - Approval of the Arch Capital Group Ltd. 2022 Long-Term Incentive and Share Award Plan (page 73) | |
On February 25, 2022, with the recommendation of the Compensation Committee, the Board adopted the 2022 Long-Term Incentive and Share Award Plan (the “2022 Plan”), subject to shareholder approval. The Board and the Compensation Committee believe that the 2022 Plan provides for competitive compensation opportunities, encourages long-term service, recognizes individual contributions and rewards achievement of performance goals, and promotes the creation of long-term value for shareholders by aligning the interests of such persons with those of shareholders. | FOR |
ITEM 4 - Appointment of PricewaterhouseCoopers LLP as Our Independent Registered Public Accounting Firm (page8276) | |
The Audit Committee of the Board and the Board believe that the retention of PricewaterhouseCoopers LLP to serve as the Independent Auditors for the fiscal year ending December 31, 2022,2024, is in the best interests of the Company and its shareholders. As required by Bermuda law, shareholders are being asked to appoint the Audit Committee’s selection of the Independent Auditors. | FOR One Year |
ITEM 54 - Election of Designated Company Directors of Certain Non-U.S. Subsidiaries (page 8377) | |
| The Board and management believe that the named Designated Company Director nominees possess the necessary qualifications and experience to provide oversight for the Company’s non-U.S. subsidiaries. | FOR Each Director Nominee |
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| 20222024 PROXY STATEMENT | | 6 |
The Board is comprised of 1312 members, divided into three classes, serving staggered three-year terms. The Board intends to present for action at the Annual Meeting the election of the following Class IIIII directors for a term of three years and until their respective successors are duly elected and qualified or their earlier resignation or removal:
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| | | | | Committee Membership (1) |
| Name | Age | Age | Director Since | Primary Occupation | A | CCHC | E | FIR | NG | UW |
John L. Bunce, Jr.Laurie S. Goodman | 68 | 63May 2018 | November 2001 | Managing DirectorInstitute Fellow at the Urban Institute and Founder of Greyhawk Capital Management, LLCits Housing Finance Policy Center | n | n | n | n | n | n |
Marc GrandissonJohn M. Pasquesi | 64 | 54October 2001 | March
2018Managing Member of Otter Capital LLC | Chief Executive Officer, Arch Capital | | n | n | | | |
Moira Kilcoyne | | 60 | January
2020 | Owner of MAK Management Consulting | | | | n | n | n |
Eugene S. Sunshine | | 72 | July
2014 | Former Senior Vice President for Business and Finance at Northwestern University | n | n | | | n | |
(1)A = Audit Committee; CCHC = Compensation and Human Capital Committee; E = Executive Committee; FIR = Finance, Investment and Risk Committee; NG = Nominating and Governance Committee; UW = Underwriting Oversight Committee
We maintain an ongoing, proactive outreach effort with our shareholders as members of our Investor Relations team and leaders of our business regularly engage with our shareholders to seek their input, to remain well-informed regarding their perspectives and to help increase their understanding of our business. Over the past year, our Board Chair, along with members of our Nominating and Governance and Compensation Committees, as well as members of senior management had discussions with institutional shareholders representing a significant number of our issued and outstanding common shares to examine a broad spectrum of matters critical to our business, including
our corporate governance, sustainability practices, environmental, social and governance (“ESG”) strategy and executive compensation program. Since January 2022 to date, we have engaged with shareholders representing more than 50% of our issued and outstanding shares. During these meetings, our discussions focused on a variety of ESG matters, including recent Board appointments. Our shareholders indicated they generally were pleased with our progress on these matters. We remain committed to listening to our shareholders as we continually review and evaluate our compensation programs, governance, sustainability and other matters.
Through proactive outreach efforts led by our Investor Relations team and business leaders, we engage with our shareholders to seek their input, to remain well-informed about their perspectives and to help increase their understanding of our business. Over the past year, both members of our Board and members of senior management engaged in discussions with shareholders
representing a significant number of our issued and outstanding common shares. These discussions examined a broad spectrum of matters critical to our business, including our corporate governance, sustainability practices, environmental, social and governance (“ESG”) strategy and executive compensation program. Feedback from these interactions has generally been positive, with shareholders expressing satisfaction with our progress on these matters.
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| 7 | | 20222024 PROXY STATEMENT | |
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| KEY EXECUTIVE COMPENSATION POLICIES AND PRACTICES | |
Our compensation framework includes these key policies and practices:
▪Structure the majority of pay as performance-based, which is tied to rigorous financial, strategic and relative shareholder return performance goals.
▪Align executive compensation with shareholder returns.
▪Apply caps on both the annual and long-term incentive plans.
▪Apply stock ownership and holding guidelines.
▪Discourage inappropriate risk takingrisk-taking that is inconsistent with the long-term success of the Company.
▪Require minimum vesting periods for equity awards.
▪Include clawback provisions for all incentive-based compensation.compensation for executive officers.
▪Include double-trigger change in control provisions in equity awards that are assumed by an acquirer.
▪Prohibit hedging of our shares.
▪Limit shares that can be pledged.
▪Set the exercise price of our stock options and stock appreciation rights (“SARs”) at the closing share price on the grant date.
▪Engage an independent compensation consultant that reports directly to the Compensation and Human Capital Committee.
▪Utilize a peer group approved by our Board to aid in the determination of compensation and to assess our performance relative to similar companies.
▪Engage with our shareholders.
▪No repricing or reducing the exercise price of stock options or SARs.
▪No exchanging out of theout-of-the money stock options or SARs for cash or other property.
▪No tax gross-ups provided to named executive officers.
▪No excise tax gross-up payments in connection with change in control payments.
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| 20222024 PROXY STATEMENT | | 8 |
Doing the right thing every day is core to our character. In line with our Values, the Company believes ESG considerations are integral to our business operations and daily decision-making. We believe that future success is built on how we interact with customers and society and how we collaborate to protect and promote the sustainability of the world around us today. We are proud of our reputation as a company that places ethics and integrity above all else and our consistent efforts to support and give back to the communities where we live and work. We are committedOur commitment to sharingcollaborating for a sustainable future is demonstrated in our ESG disclosures andthat include heightened transparency around our strategy and risk mitigation efforts.
Our Approach
Our business revolves around providing thoughtful services and theinsurance coverages to support our clients through a major loss and improve their resiliency. Our solutions we provide, is built onare grounded in long-term thinking and an establishedare backed by a well-established history of delivering reliable
risk management expertise to our markets. By takingWe take a measured, long-term approach to
ESG weand strive to find solutions that suit our business and allow us to meet our purpose to “Enable Possibility.”
ESG thinkingprinciples and processes are embedded across Arch as we engage with stakeholders and continue to build a resilientmarket-leading business. This includes supporting a diverse, engaged workforce that lives our Values and managing our impact on the environment.environmental impact. We support our clients with insurance products and investment solutions to help address climate change, and we provide a range of customer-oriented solutions.
We have identifiedThere are five key impact areas that support and drive our ESG strategy. By organizing our strategy around these areas, we seek to encompass Arch’s collaborative ESG successes and sustainability progress across our operations.
Enabling Possibility and Integrating ESG Across:
ESG Integration Across Our Organization:
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| OUR BUSINESS | OUR OPERATIONS | OUR INVESTING | OUR PEOPLE | | | | | | | | | | | OUR COMMUNITIES |
As a global (re)insurer, we provideWe offer services and insurance coverages that allowsupport our clients to rebuild afterthrough major lossesloss and improve their resilience;resiliency; we integrate ESG considerationsfactors into our underwriting to reduce risk and take advantage ofcapture opportunities for the benefit of our stakeholders.stakeholder benefit.
| ByWe actively managingmanage ESG risks and embeddingembed compliance, transparency, data protectioncybersecurity and resiliencyresilience across all areas of our operations, we protectprotecting our people and customers who entrust us with their personal information and business.business interests. | We believe incorporating material,certain nonfinancial ESG factors into investment selection and risk management has the potential tocan potentially enhance long-term investment returns.
| We are committed to investing in the personal and professional success of our employees as individuals and professionals to createcreating long-term sustainable growth as anfor our organization.
| Striving to make a differencemeaningful impact by investing in our communities is one ofingrained in Arch’s core values,Values, woven into the fabric of our corporate culture. |
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| 9 | | 20222024 PROXY STATEMENT | |
Highlights from ourOur Five Impact Areas
In 2021,2023, we continued our ESG focus, empowering teams to collaboratively drive progress. We integrate sustainability-driven thinking and decision-making into the fabric of our Company and thereby reinforce the role of sustainability across our five core areas of our Company.impact areas. These
impact areas and accompanying disclosures align with our internal and external
stakeholders’ priorities for annual reporting on ESG topics most relevant to Arch and the insurance industry. Highlights of our sustainability strategy are below:
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| Our Business | Our Operations | Our Investing | Our People | | | | | | | | | | | | | | | | | | | | | | | | | | Our Communities |
1. Our Business | 2. Our Operations | 3. Our Investing | 4. Our People | 5. Our Communities |
| n | Strategic approach to enterprise risk management, including integration of climate risk. | n | EnsuringEnhancing our data privacy and protection.protection programs. | n | Adopting and implementing a Responsible Investment Policy. | n | Implementing our D&I strategyResponsible Investing Policy. | n | Advancing our diversity and continued focus on creating an inclusive culture.inclusion (“D&I”) efforts and cultivating a workplace environment with thoughtful collaboration and respect. | n | Corporate giving of $6.3$5.9 million to organizations that support our giving focus areas. |
| n | Underwriting initiatives to improve resiliency and transition to a lower carbonlower-carbon economy. | n | Conducting business ethically. | n | Continuing to focus on impact investments.ESG factors in decision-making and including responsible investments in our portfolio. | n | ActivatingSupporting anew career leveling framework.
culture of lifelong learning, emphasizing leadership development and maintaining operational excellence. | n | Forming anThe Arch Group Foundation.Foundation reflects our belief in the transformative power of giving; granting $1.1 million in 2023. |
| n | Underwriting socially sustainable insurance products. | n | Measuring and committing to mitigate our Scope 1 and 2 greenhouse gas emissions in line with our 2030 goal for net zero. | n | Aligning with asset managers who are UN PRI signatories, supporting our commitment to reduce our operational greenhouse gas emissions. | n | Integratingconsidering ESG risks and opportunities in investment decisions. | n | Protecting our employees’ health and well-being. | n | OrganizingPromoting a first worldwideculture of community engagement, we continue to support regional volunteerism through our volunteer event to celebrate Arch’s 20th anniversary.time-off program. |
Oversight of Corporate Strategy and Sustainability Practices
Our Board regularly reviews and is responsible for our long-term business strategy and works with our management team to define our strategic objectives. The Board is also responsible for monitoring our progress against these objectives. As a part of this strategic integration, we give consideration to the risks and opportunities that impact and/or enhance Arch’s long-term sustainability. Within our Board structure, the committees (i.e., Audit, Compensation and Human Capital, Finance, Investment and Risk, Nominating and Governance and Underwriting Oversight), focus on key sustainability risks based on the respective committee’s expertise. Each committee reports to the Board regarding its areas of responsibility. The Nominating and Governance Committee has oversight of our ESG program and receives quarterly reports on ESG topics and activities. The reports detail the Company’s progress
Our Sustainability Reporting
We usepublish three frameworks forannual sustainability reports which detail our sustainability disclosures.goals, practices and achievements. To learn more about our sustainability practices, please see our annual Sustainability Report(s), Sustainability Accounting Standards Board (SASB) Report(s) and Task Force for Climate-related Financial Disclosure document(s) (collectively, “Sustainability Materials”), which include our sustainability goals and provide detail on our sustainability practices and achievements at: archgroup.com/sustainability-governance/documents/. None of the information in our Sustainability Materials is incorporated herein by reference.
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| 20222024 PROXY STATEMENT | | 10 |
GENERAL INFORMATION See pageA-1 Please see “Annex A—General Information” for important information about the proxy materials, voting, the 20222024 Annual Meeting, Company documents, communications and the deadlines to submit shareholder proposals and director nominees for the 20232025 annual general meeting.
LEARN MORE ABOUT OUR COMPANY
You can learn more about the Company by visiting:
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| n | Our website—archgroup.com | | | n | Proxy website—proxyvote.com, which includes this Proxy Statement and our 20212023 Annual Report.
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| 11 | | 20222024 PROXY STATEMENT | |
GOVERNANCE
ITEM 1—ELECTION OF DIRECTORS
TheOur Board of Arch Capital is composed of 1312 members, divided into three classes, serving staggered three-year terms. The Board intends to present for action at the Annual Meeting the election of Laurie S. Goodman and John L. Bunce, Jr., Marc Grandisson, Moira Kilcoyne and Eugene S. SunshineM. Pasquesi to serve as Class IIIII Directors for a term of three years and until their respective successors are duly elected and qualified or their earlier resignation or removal. Such nominees were recommended by the Nominating and Governance Committee for approval by the Board. Unless authority to vote for these nominees is withheld, the enclosed proxy will be voted for these nominees, except that the persons designated as proxies reserve discretion to cast their votes for other persons in the unanticipated event that any of these nominees is unable or declines to serve.
After approximately 14 years of service on the Board, Eric W. Doppstadt, a current Class II Director will not stand for re-election following the completion of his current term. In addition, after 10 years of service on the Board, Louis J. Paglia, a current Class I Director, will resign from the Board effective as of the Annual Meeting.
Board
Leadership Structure
The Board reviews the Company’s leadership structure from time to time. The Board has determined that a split in the role of chairChair of boardthe Board and chief executive officer (“CEO”) is appropriate and in the best interests of the Company’s shareholders. The Board has also determined that the role of independent lead director is not currently necessary as our Chair of the Board, Mr. Pasquesi, is a non-management/independent director.
Several factors ensure that we have acontribute to our strong and independent Board. All directors, with the exception of Messrs. Grandisson and Vollaro, are independent as defined under the applicable listing standards of The NASDAQNasdaq Stock Market LLC (“NASDAQ”Nasdaq”), and the Audit, Compensation and Human Capital and Nominating and Governance Committees of our Board are composed
entirely of independent directors. The Company’s independent directors bring experience, oversight and expertise from many industries, including the insurance industry. In addition to feedback provided during the course of Board meetings, the independent directors regularly meet in executive session without management present and have regular access to our management team.
Board Structure
Our Board has reviewed its classified board structure and continues to believe that this structure provides stability and continuity in the Board’s membership and the direction it provides to the Company’s management. This approach promotes a long-term perspective to our strategy and has proved beneficial to our management in establishing the Company’s short- and long-term priorities. We believe that a classified election process remains in the best interests of our shareholders.
Board Independence and Composition
Our Board consists of 13 directors, including 11 non-employee directors. Our Board has concluded that the following 1110 non-employee directors, including our Chair, are independent in accordance with the director independence standards set forth in Rule 5600 of the rules of NASDAQ: JohnNasdaq: John L. Bunce, Jr., Eric W. Doppstadt, Francis Ebong, Laurie S. Goodman, Moira Kilcoyne, Eileen Mallesch, Louis J. Paglia, John M. Pasquesi, Brian S. Posner and Eugene S. Sunshine, and Thomas R. Watjen.Sunshine. In making these independence determinations, the Board reviewed the relationships with the directors set forth under the captions “Compensation Committee Interlocks and Insider Participation” and caption “Certain Relationships and Related Person Transactions,” including ordinary course transactions not meeting the disclosure threshold with insurers, reinsurers and producers in which a director or a fund affiliated with any of our directors maintained at least a 10% ownership interest.Board Refreshment. The Board is committed Specifically, the Board’s independence determinations included reviewing our contribution made to effective refreshment that is reflective of the Company’s evolving strategy and to having a diversity of perspectives, skills and experiences on our Board that align with our strategy. Since 2018, we have added five independent directors through a comprehensive recruitment process. With succession planning and bench strength in mind, the Board first identified desired skill sets to enhance the effectiveness of our Board and then engaged a search firm to help identify and evaluate possible candidates.
With the assistance of the search firm, our Nominating and Governance Committee evaluated a broad pool of director candidates based upon the desired skills, qualities and attributes. Following that work, in 2018, the Board added one director,non-profit organization where Ms. Goodman with extensive mortgage insurance experience. In 2020,serves as a fellow (but not as an executive officer). Payment to this non-profit organization constituted less than the Board added two directors: Ms. Kilcoyne, with more than 30 yearsgreater of experience in the technology industry and extensive$200,000 or 1% of that organization’s annual consolidated gross revenues during its last completed fiscal year.
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| 20222024 PROXY STATEMENT | | 12 |
financial services experience, and Mr. Watjen, with extensive senior management and operating experience in the insurance industry. In 2021, the Board again added two directors: Mr. Ebong, with an extensive background in technology and innovation, and Ms. Mallesch, with more than 30 years of finance and risk experience.
The Company does not set specific term limits on director service and believes that a mix of director tenures strengthens the Board’s effectiveness. Longer tenured directors possess experience and institutional knowledge, while newer directors bring fresh perspectives. Of our 1312 directors, sixfour have five or fewer years of service; twothree have between six and 10 years of service; and five have more than 10 years of service. The average director tenure is approximately 810.5 years.
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| Independence | | Tenure | | | | | | | | | | | | | Age |
| Independence | | Tenure | | Age
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The diversity of our directors in terms of gender identity and demographic background is demonstrated in the following chart:
| Board Diversity Matrix (as of March 25, 2022) | Total Number of Directors: 13 | | Female | Male | Non-Binary | Did Not Disclose Gender |
Board Diversity Matrix (as of March 28, 2024) | | Board Diversity Matrix (as of March 28, 2024) |
Total Number of Directors: 12 | | Total Number of Directors: 12 |
| Female | | | Female | Male | | Non-Binary | Did Not Disclose Gender |
Part I: Gender Identity | | Directors | Directors | 3 | 9 | 0 | 1 | Directors | 3 | 8 | | 0 | 1 |
Part II: Demographic Background | | African American or Black | African American or Black | 0 | 1 | 0 | African American or Black | 0 | 1 | | 0 | 0 |
| Alaskan Native or Native American | Alaskan Native or Native American | 0 | Alaskan Native or Native American | 0 | | 0 | 0 |
| Asian | Asian | 0 | Asian | 0 | 0 | | 0 | 0 |
| Hispanic or Latinx | Hispanic or Latinx | 0 | Hispanic or Latinx | 0 | | 0 | 0 |
| Native Hawaiian or Pacific Islander | Native Hawaiian or Pacific Islander | 0 | Native Hawaiian or Pacific Islander | 0 | | 0 | 0 |
| White | White | 3 | 8 | 0 | White | 3 | 6 | | 0 | 0 |
| Two or More Races or Ethnicities | Two or More Races or Ethnicities | 0 | 0 | Two or More Races or Ethnicities | 0 | | 0 | 0 |
| LGBTQ+ | LGBTQ+ | 0 |
| Did Not Disclose Demographic Background | Did Not Disclose Demographic Background | 1 |
| Did Not Disclose Demographic Background | |
| Did Not Disclose Demographic Background | | | 2 | |
Skills and Experience
The Nominating and Governance Committee is responsible for identifying individuals qualified to become directors and recommending to the Board the director nominees for consideration at each annual general meeting of shareholders. In general, the Committee will look for new members, possessing superior business judgment and integrity who have distinguished themselves in their chosen fields of endeavor and who have knowledge and experience in the areas of insurance, reinsurance or other aspects of our business, operations or activities, as well as knowledge of the business environments in the jurisdictions in which we currently operate or intend to operate in the future. The Company endeavors to maintain a board representing a diverse spectrum of expertise, background, perspective, race, gender and experience.
Our Corporate Governance Guidelines provide that the Nominating and Governance Committee’s assessment of new Board candidates will include consideration of the members’ qualifications as independent, as well as
consideration of other affiliations, diversity, skills and experience in the context of the needs of the Board.
Over-boarding. In addition,Board Refreshment. The Board is committed to effective refreshment that is reflective of the Company’s evolving strategy and to having a diversity of perspectives, skills and experiences on our Board that align with our strategy. With succession planning and bench strength in order to ensure that our Directors have the ability to commit the time required to fully discharge their responsibilities tomind, the Board first identifies desired skill sets to enhance the effectiveness of our Board and from time to time may retain a search firm to help identify and evaluate possible candidates through a comprehensive recruitment process.
In its ongoing efforts to refresh Board composition, our Nominating and Governance Committee evaluates a broad pool of director candidates based upon the desired skills, qualities and attributes. For example, following this work in 2020, the Board added one director, Ms. Kilcoyne, with more than 30 years of experience in the technology industry and extensive financial services experience, and in 2021, the Board added two directors: Mr. Ebong, with an extensive background in technology and innovation, and Ms. Mallesch, with more than 30 years of finance and risk experience.
Over-boarding. Our Corporate Governance Guidelines and Code of Business Conduct require directors to advise the Board through the Chair of the Board or the Chair of the Nominating and Governance Committee in advance of accepting an invitation to serve on another company board whether public or private.private, in order to ensure that our directors have the ability to commit the time required to fully discharge their responsibilities to our Board. A proposed director position is reviewed to ensure that the new role will not interfere with the director’s ability to discharge his or her duties to the Company. To help ensure this, the Board has implemented a practice prohibiting directors from serving on more than three other public company boards.
Role in Risk Oversight
Our Board, as a whole and also at the committee level, has an active role in overseeing management of the Company’s risks. The Board regularly reviews information regarding the Company’s business and operations, including underwriting, investments, capital management, liquidity, financial reporting and compliance, as well as the risks associated with these activities.
As outlined below, Committees of the Board help oversee the business and operations of the Company:
| | | | | |
| Audit Committee | Oversees management of financial reporting, compliance and complianceoperational risks. |
| Compensation and Human Capital Committee | Oversees the management of risks relating to the Company’s compensation plans and arrangements, retention of personnel and succession planning.planning with regard to members of our executive management team. |
| Executive Committee | Oversees and directs the business and affairs of the Company in intervals between meetings of the Board. |
| Finance, Investment and Risk Committee | Oversees risks relating to the financial, investment operational (including information technology and data security) and other risk affairs of the Company. |
| Nominating and Governance Committee | Oversees risks associated with the composition of the Board, corporate governance, ESG matters and ESG matters.succession planning relating to our CEO. |
| Underwriting Oversight Committee | Oversees risks relating to our underwriting activities, including with respect to accumulations and aggregations of exposures in our insurance, reinsurance and mortgage businesses. |
| | | | | | | | |
| 20222024 PROXY STATEMENT | | 14 |
Cybersecurity Risk Oversight
We prioritize the management of cybersecurity risk and the protection of information across our enterprise. The Audit Committee of the Board oversees the Board’s responsibilities relating to the operational (including information technology (“IT”) business continuity and data security) risk affairs of the Company. Our Chief Information Officer and Chief Operations Officer, with input from our Chief Information Security Officer, provide a quarterly report of such risks to the Audit Committee.
Code of Business Conduct, Committee Charters and Corporate Governance Guidelines
We have adopted a Code of Business Conduct, which describes our ethical principles, and the charters of responsibilities for all of our standing Board committees, including Audit, Compensation and Human Capital, Executive, Finance, Investment and Risk, Nominating and Governance, and Underwriting Oversight Committees. We have also adopted Corporate Governance Guidelines that cover issues such as executive sessions of our Board, director qualification and independence requirements, director responsibilities, access to management, evaluation and communications with the Board in order to help maintain effective corporate governance of the Company. The full text of our Code of Business Conduct, each Committee Charter and our Corporate Governance Guidelines are available on the Company’s website, located at archgroup.com. None of the material on our website is incorporated herein by reference.
Meetings
The Board held ninesix meetings during 2021, in addition to several informational meetings intended to keep the Board updated on Company matters.2023. Each director attended 75% or more of all meetings of the Board and any committees on which the director served during fiscal year 2021.2023. Directors are encouraged, but not required, to attend our annual general meeting of shareholders. All of our then-current directors attended the 20212023 annual general meeting.
Communications with the Board
Shareholders may communicate with the Board or any of the directors by sending written communications addressed to the Board or any of the directors, to:
Arch Capital Group Ltd.
Waterloo House, Ground Floor
100 Pitts Bay Road
Pembroke HM 08, Bermuda
Attention: Secretary
E-Mail: shareholderinfo@archgroup.com
All shareholder
Shareholder communications will be compiled as appropriate by the Secretary for review by the Board.Board.
| | | | | | | | |
| 15 | | 20222024 PROXY STATEMENT | |
Committees of the Board
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Director | Audit | Compensation and Human Capital | Executive | Finance, Investment and Risk | Nominating and Governance | Underwriting Oversight |
| John L. Bunce, Jr. | | | n | n | nChair | | nChair | |
| Eric W. Doppstadt | | n | | n | n | | Chair
| Francis Ebong | n | n | | | n | |
Francis Ebong | | | | n | | n |
| Laurie S. Goodman | n | | | | n | | | n | n |
| Marc Grandisson | | | n | | | |
| Moira Kilcoyne | n | Chair | | | n | |
Moira KilcoyneEileen Mallesch | Chair | | | | | n | n | n |
Eileen Mallesch | n | | | | | n |
| Louis J. Paglia | | n | | n | | | | n | Chair |
| John M. Pasquesi | | | Chair | n | Chair | n | n | n |
| Brian S. Posner | | Chairn | | Chair | | | n | n |
| Eugene S. Sunshine | n | Chairn | | | n | | n | |
| John D. Vollaro | | | | n | | | n | | n |
Thomas R. Watjen | n | n | | n | | |
Audit Committee
The Audit Committee of the Board assists the Board in monitoring (1) the integrity of our financial statements, (2) the qualifications and independence of the independent registered public accounting firm, (3) the performance of our internal audit function and independent registered public accounting firm and (4) the compliance by the Company with legal and regulatory requirements. The Audit Committee is involved in the selection of the audit engagement partner and also oversees the Board’s responsibilities relating to the operational (including IT, business continuity and data security) risk affairs of the Company.
All of our Audit Committee members are considered independent under the listing standards of NASDAQNasdaq governing the qualifications of the members of audit committees and the independence requirements under Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board has determined that allthree of the five members of the Audit Committee, Mss. Goodman and Mallesch and Mr. Sunshine, qualify as an “audit committee financial expert” under the rules of the Securities and Exchange Commission (“SEC”).SEC. The Audit Committee held five meetings during 2021.2023.
Compensation and Human Capital Committee
The Compensation and Human Capital Committee of the Board approves the compensation of our senior executives and has overall responsibility for approving, evaluating and making recommendations to the Board regarding our officer compensation plans, policies and programs. As part of its responsibilities, the Compensation and Human Capital Committee also oversees the succession planning process for our senior
executive team. In addition, the Compensation and Human Capital Committee reviews periodic updates from management on initiatives and progress in the area of human capital management. All of our Compensation and Human Capital Committee members are considered independent under the listing standards of NASDAQNasdaq governing the qualifications of the members of compensation committees. In addition, no executive officer of the Company served on any board of directors or compensation committee of any entity (other than Arch Capital) with which any member of our Board serves as an executive officer. The Compensation and Human Capital Committee held six(i) four meetings during 2021.in 2023 and (ii) three meetings in 2024 relating to 2023 compensation decisions, in addition to several informational meetings.
Executive Committee
The Executive Committee of the Board may generally exercise all the powers and authority of the Board when it is not in session, in the management of our business and affairs when the Board is not in session unless the Board otherwise determines. The Executive Committee held one meetingtwo meetings during 2021.2023.
Finance, Investment and Risk Committee
The Finance, Investment and Risk Committee of the Board oversees the Board’s responsibilities relating to the financial, operational (including information technology and data security)investment and other risk affairs of the Company and recommends to the Board financial policies, risk tolerances, strategic investments and overall investment policy, including review of manager selection, financial and risk benchmarks and investment performance. The Finance, Investment and Risk Committee held four meetings during 2021.
Nominating and Governance Committee
The Nominating and Governance Committee of the Board is responsible for identifying individuals qualified to become directors and recommending to the Board the director nominees for consideration at each annual general meeting of shareholders. The Nominating and Governance Committee also advises the Board on succession planning for our CEO as well as corporate governance matters, as well asand the Company’s ESG initiatives. All of our Nominating and Governance Committee members are considered independent under the listing standards of NASDAQ.Nasdaq. The Nominating and Governance Committee held sixfive meetings during 2021.2023, in addition to several informational meetings.
Nominations Process. When the Board determines to seek a new member, whether to fill a vacancy or otherwise, the Nominating and Governance Committee will consider recommendations from Board members, management and others. Please refer to “Skills and Experience” for a description of the skills, expertise and other attributes desired in new members. For a discussion of the specific experiences, qualifications, attributes or skills that led the Nominating and Governance Committee to conclude that each director should serve on our Board, see the biographical information section beginning on page 18. For a more detailed discussion of our Board composition, including our Board refreshment process, see “Board Independence and Composition.Composition.” Any shareholder who wishes to make a proposal to be included in our Proxy Statement and form of proxy relating to the 20232025 annual general meeting, or to make a proposal or nominate a director at the 20232025 annual general meeting, should follow the procedures as
Board Self-Evaluations. The Nominating and Governance Committee also develops athe process for the Board’s periodic self-evaluation and oversees, in combination with the Chair of the Board, the conduct of these evaluations. Our Corporate Governance Guidelines provide that theBoard will conduct annual self-evaluations from time to time to determine whether the Board and its committees are functioning effectivelyeffectively. Following the annual general meeting each year, the Nominating and alsoGovernance Committee oversees individual director evaluations, including self-evaluations and peer reviews, for each director who will be up for election at the next annual general meeting to help inform the annual director nomination process.The Nominating and Governance Committee has retained a third-party governance organization to facilitate the Board and committee evaluation process.process and intends to use, at least every three years, an independent third party to conduct these evaluations. The Board believes that self-evaluations of the Board are important elements of corporate governance and essential to ensure a well-functioning Board.
ESG. The Nominating and Governance Committee oversees the establishment, management and processes related to ESG activities. The Nominating and Governance Committee receives periodicquarterly reports on ESG topics and activities. The reports detail the Company’s progress on substantive sustainability initiatives as well as the increasing number of sustainability rating agencies that evaluate our ESG performance. Please refer to the “OurSustainability Practices” for a review of our ESG program.
Underwriting Oversight Committee
The Underwriting Oversight Committee of the Board assists the Board by reviewing the underwriting activities of our insurance, reinsurance and mortgage businesses. The Underwriting Oversight Committee held four meetings in 2021.2023. In addition, the members of the Underwriting Oversight Committee regularly participate in the underwriting and business review meetings held in our insurance, reinsurance and mortgage operations throughout the year.
| | | | | | | | |
| 17 | | 20222024 PROXY STATEMENT | |
Nominees
| | | | | | | | |
| Laurie S. Goodman |
| | |
| n | 68 years old | Ms. Goodman is an institute fellow at the Urban Institute and Founder of its Housing Finance Policy Center. Before joining the Urban Institute in 2013, Ms. Goodman spent 30 years at several Wall Street firms. From 2008 to 2013, she was Senior Managing Director at Amherst Securities Group, LP. From 1993 to 2008, Ms. Goodman was head of global fixed income research and Manager of U.S. securitized products research at UBS and predecessor firms. Before that, she was a senior fixed income analyst, a mortgage portfolio manager and a senior economist at the Federal Reserve Bank of New York. Ms. Goodman serves on the board of directors of a real estate investment trust, MFA Financial, and is an adviser to The Amherst Group, LLC. She previously served on the board of directors of Home Point Capital Inc. and was a member of the Federal Reserve Bank of New York’s Financial Advisory Roundtable, the Bipartisan Policy Center’s Housing Commission, Fannie Mae’s Affordable Housing Advisory Council as well as the Consumer Financial Protection Bureau’s Consumer Advisory Board. Ms. Goodman has a B.A. in Mathematics from the University of Pennsylvania and an A.M. and Ph.D. in Economics from Stanford University.
Ms. Goodman’s qualifications for service on our Board include her extensive analytics and strategy experience, her housing finance expertise and her service on boards of directors of other companies. |
| n | Director since May 2018 |
| n | Class II Director of Arch Capital |
| n | Audit Committee |
| n | Nominating and Governance Committee |
| n | Underwriting Oversight Committee |
| |
| |
| | | | | | | | |
John LM. Pasquesi |
| | |
| n | 64 years old | Mr. Pasquesi has been Chair of the Board of Arch Capital since September 2019 and a director of Arch Capital since October 2001. From November 2017 to September 2019, he was Lead Director. Mr. Pasquesi is the Managing Member of Otter Capital LLC, a private equity investment firm he founded in January 2001. He holds an A.B. from Dartmouth College and an M.B.A. from Stanford Graduate School of Business.
Mr. Pasquesi’s qualifications for service on our Board include his investment skills, extensive experience in evaluating and overseeing companies in a wide range of industries, including the insurance industry, and service on boards of directors of other companies. |
| n | Director since October 2001 |
| n | Class II Director of Arch Capital |
| n | Executive Committee |
| n | Finance, Investment and Risk Committee |
| n | Underwriting Oversight Committee |
| |
Required Vote
A majority of the votes cast will be required to elect the above nominees as Class II Directors of Arch Capital.
Recommendation of the Board
| | | | | |
| THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL. |
Appointed Directors, Continuing Directors and Senior Management
The following individuals are our appointed and continuing directors:
| | | | | | | | |
| John L. Bunce, Jr. |
| | |
| n | 6365 years old | Mr. Bunce is a Managing Director and Founder of Greyhawk Capital Management, LLC and Managing Director and Founder of Steel Box, LLC. Both Greyhawk and Steel Box are investment organizations. Mr. Bunce has served as a director of numerous public and private companies and he continues to serve on several private company boards and as an Overseer of the Hoover Institution. He holds an A.B. from Stanford University and an M.B.A. from Harvard Business School. Mr. Bunce’s qualifications for service on our Board include his corporate finance background, investment skills, extensive experience in evaluating and overseeing companies in a wide range of industries and service on boards of directors of other companies.
|
| n | Director since November 2001 |
| n | Class III Director of Arch Capital |
| n | Compensation CommitteeTerm expires 2025 |
n
| Executive Committee |
n
| Finance, Investment and Risk Committee |
n
| Nominating and Governance Committee |
| |
| | | | | | | | |
| Francis Ebong |
| | |
| n | 43 years old | Mr. Ebong is a Managing Director, Turtle Capital, LLC. He most recently served as Managing Director, Program Management at X, Alphabet’s in-house research and development division, where he was tasked with launching technologies to improve the lives of billions of people. He has an extensive background in technology and innovation, including serving as the Director of Global Operations and Partnerships at Facebook from 2015 to 2017, where he led a global team responsible for launches including FB Live, Marketplace and Messenger. Prior to Facebook, Mr. Ebong was the Head of Operations at Postmates and has experience working at Apple and Deloitte. Mr. Ebong is a veteran of the U.S. Navy and has a degree from the U.S. Naval Academy and an M.B.A. from the George Washington School of Business.
Mr. Ebong’s qualifications for service on our Board include his extensive operational experience and his technology management skills. |
| n | Director since August 2021 |
| n | Class I Director of Arch Capital |
| n | Term expires 2026 |
| n | Audit Committee |
| n | Compensation and Human Capital Committee |
| n | Nominating and Governance Committee |
| | | | | | | | |
| Marc Grandisson |
| Marc Grandisson | |
| n | | |
n | 5456 years old | Mr. Grandisson is the Chief Executive Officer of Arch Capital as well as a member of our Board, both positions he has served in since March 2018. From March 2018 to December 2020, he was also President of Arch Capital, and from January 2016 to March 2018, he was President and Chief Operating Officer of Arch Capital. Prior to that role, he was Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group from 2005 to 2015 and the Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group from February 2014 to December 2015. He joined Arch Reinsurance Ltd. (“Arch Re Bermuda”) in October 2001 as Chief Actuary. He subsequently held various leadership roles, including Chief Underwriting Officer and Actuary, President and Chief Operating Officer, eventually being named President and Chief Executive Officer at Arch Re Bermuda. Prior to joining Arch, he held various positions with the Berkshire Hathaway Group, F&G Re, Inc. and Tillinghast/Towers Perrin. He holds a B.Sc. in Actuarial Science from Université Laval in Canada and an M.B.A. from The Wharton School of the University of Pennsylvania. He is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Mr. Grandisson’s qualifications for service on our Board include his financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations. |
| n | With Arch since October 2001 |
| n | Chief Executive Officer of Arch Capital |
| n | Director since March 2018 |
| n | Class III Director of Arch Capital |
| n | Executive CommitteeTerm expires 2025 |
| n | Executive Committee |
| |
| |
| |
| | | | | | | | |
| Moira Kilcoyne |
| Moira Kilcoyne | |
| n | | |
n | 6062 years old | Ms. Kilcoyne is a technology industry veteran with extensive financial services experience. From 2013 to 2016, she served as Managing Director, Co-Chief Information Officer of Morgan Stanley where she co-headed the company’s global technology and data business and she also sat on the firm’s Management Committee. Prior to becoming Managing Director, Co-Chief Information Officer, Ms. Kilcoyne held a number of senior technology roles within Morgan Stanley. She currently serves on the boardsboard of directors of Quilter plc and is a member of the Board of Governors of FINRA. Prior board roles have included Citrix Systems, Inc. and she is also the Vice Chairas a Trustee of the Manhattan College board of trustees.College. Ms. Kilcoyne has a B.S. in Mathematics from Manhattan College. Ms. Kilcoyne’s qualifications for service on our Board include her more than 30 years of experience in the technology industry, her extensive financial services experience and service on boards of directors of other companies.
|
| n | Director since January 2020 |
| n | Class III Director of Arch Capital |
| n | Finance, Investment and Risk CommitteeTerm expires 2025 |
| n | Audit Committee |
| n | Compensation and Human Capital Committee |
| n | Nominating and Governance Committee |
| n | Underwriting Oversight Committee
| |
| |
| | | | | | | | |
Eugene S. Sunshine |
| | |
n | 72 years old | Mr. Sunshine retired at the end of August 2014 as the Senior Vice President for Business and Finance at Northwestern University, the university’s chief financial and administrative officer. Before joining Northwestern in 1997, he was Senior Vice President for Administration at The Johns Hopkins University. Prior to Johns Hopkins, Mr. Sunshine held positions as New York State Deputy Commissioner for Tax Policy and New York State Treasurer as well as Director of Energy Conservation for the New York State Energy Office. He currently is a member of the board of directors of Chicago Board Options Exchange, and was a member of the board of directors of Kaufman Hall and Associates, from 2014 through 2022. He holds a B.A. from Northwestern University and a Master of Public Administration degree from Syracuse University’s School of Citizenship and Public Affairs.
Mr. Sunshine’s qualifications for service on our Board include his strong financial background and extensive executive management and operating experience.
|
n | Director since July 2014 |
n | Class III Director of Arch Capital |
n | Audit Committee |
n | Compensation Committee |
n | Nominating and Governance Committee |
| |
Required Vote
A majority of the votes cast will be required to elect the above nominees as Class III Directors of Arch Capital.
Recommendation of the Board
| | | | | |
| THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL. |
Appointed Directors, Continuing Directors and Senior Management
The following individuals are our appointed and continuing directors:
| | | | | | | | |
Eric W. Doppstadt |
| | |
n | 62 years old | Mr. Doppstadt serves as Vice President and Chief Investment Officer of the Ford Foundation. Mr. Doppstadt has been with the Ford Foundation since 1989, most recently as director of private equity investments for the foundation’s endowment. He joined the Ford Foundation as resident counsel, later assuming senior positions managing the Ford’s alternative investment portfolio. He has also served on the investment advisory boards of numerous private equity and venture capital funds. Mr. Doppstadt holds the Chartered Financial Analyst designation from the CFA Institute and is a director of Harvard Management Company and Makena Capital Management, LLC. He holds an A.B. from The University of Chicago and a J.D. from New York University School of Law.
Mr. Doppstadt’s qualifications for service on our Board include his extensive investment experience and investment management skills.
|
n | Director since November 2010 |
n | Class II Director of Arch Capital |
n | Term expires 2024 |
n | Compensation Committee |
n | Finance, Investment and Risk Committee |
n | Nominating and Governance Committee |
| |
| | | | | | | | |
| Eileen Mallesch |
| Francis Ebong | |
| n | | |
n | 4168 years old | Mr. Ebong is currently Managing Director, Program Management at X, Alphabet’s in-house research and development division, where he is tasked with launching technologies to improve the lives of billions of people. He has an extensive background in technology and innovation, including serving as the Director of Global Operations and Partnerships at Facebook from 2015 to 2017, where he led a global team responsible for launches including FB Live, Marketplace and Messenger. Prior to Facebook, Mr. Ebong was the Head of Operations at Postmates and has experience working at Apple and Deloitte. Mr. Ebong is a veteran of the U.S. Navy and has a degree from the U.S. Naval Academy and an M.B.A. from the George Washington School of Business.
Mr. Ebong’s qualifications for service on our Board include his extensive experience in the technology industry and his operating management skills.
|
n | Director since August 2021 |
n | Class I Director of Arch Capital |
n | Term expires 2023 |
n | Finance, Investment and Risk Committee |
n | Underwriting Oversight Committee |
| |
| | | | | | | | |
Laurie S. Goodman |
| | |
n | 66 years old | Ms. Goodman is an Institute Fellow at the Urban Institute and Founder of its Housing Finance Policy Center. Before joining the Urban Institute in 2013, Ms. Goodman spent 30 years at several Wall Street firms. From 2008 to 2013, she was Senior Managing Director at Amherst Securities Group, LP. From 1993 to 2008, Ms. Goodman was head of global fixed income research and Manager of U.S. securitized products research at UBS and predecessor firms. Before that, she was a senior fixed income analyst, a mortgage portfolio manager and a senior economist at the Federal Reserve Bank of New York. Ms. Goodman serves on the board of directors of Home Point Capital Inc., and real estate investment trust MFA Financial and is an adviser to The Amherst Group, LLC. She is currently serving as a member of the Consumer Financial Protection Bureau’s Consumer Advocacy Board and she previously served as a member of the Federal Reserve Bank of New York’s Financial Advisory Roundtable as well as the Bipartisan Policy Center’s Housing Commission and Fannie Mae’s Affordable Housing Advisory Council. Ms. Goodman has a B.A. in Mathematics from the University of Pennsylvania and an A.M. and Ph.D. in Economics from Stanford University.
Ms. Goodman's qualifications for service on our Board include her extensive analytics and strategy experience, her housing finance expertise and her service on boards of directors of other companies.
|
n | Director since May 2018 |
n | Class II Director of Arch Capital |
n | Term expires 2024 |
n | Audit Committee |
n | Nominating and Governance Committee |
n | Underwriting Oversight Committee |
| |
| | | | | | | | |
Eileen Mallesch |
| | |
n | 66 years old | Ms. Mallesch has more than 30 years of finance and risk experience, including serving as Senior Vice President and Chief Financial Officer for Nationwide’s Property and Casualty segment from 2005 to 2009. Prior to that, she was Chief Financial Officer, Senior Vice President at Genworth (2003 to 2005) and General Electric’s (2000 to 2003) Group Insurance and Life Insurance businesses. Ms. Mallesch has broad finance and business strategy expertise in the insurance, telecommunications and consumer products industries. Her significant board experience includes current positions on the boards of Brighthouse Financial and Fifth Third Bancorp. She previously served on the boards of Bob Evans, from 2008 to 2018, Libbey Inc. from 2016 to 2020, and State Auto Financial from 2010 to 2021.Financial. Ms. Mallesch has a B.S. in Accounting from the City University of New York and is a CPA.
Ms. Mallesch’s qualifications for service on our Board include her extensive financial background and executivesenior management and operating experience in the insurance industry.
|
n | Director since August 2021 |
n | Class I Director of Arch Capital |
n | Term expires 2023 |
n | Audit Committee |
n | Underwriting Oversight Committee |
| |
| | | | | | | | |
Louis J. Paglia |
| | |
n | 64 years old | Mr. Paglia is the founding member of Oakstone Capital LLC, a private investment firm. He previously founded Customer Choice LLC in April 2010, a data analytics company serving the electric utility industry. He previously served as Executive Vice President of UIL Holdings Corporation, an electric utility, contractingindustry and energy infrastructure company. Mr. Paglia also served as UIL Holdings’ Chief Financial Officer and as President of its investment subsidiaries. Prior to joining UIL Holdings, Mr. Paglia was Executive Vice President and Chief Financial Officer of eCredit.com, a credit evaluation software company. Prior to that, Mr. Paglia served as the Chief Financial Officer for TIG Holdings Inc., a property and casualty insurance and reinsurance holding company, and Emisphere Technologies, Inc. Mr. Paglia currently serves on the board of directors of Sarissa Capital Acquisition Corp. He holds a B.S. in Engineering from Massachusetts Institute of Technology and an M.B.A. from The Wharton School of the University of Pennsylvania.
Mr. Paglia’s qualifications for service on our Board include his strong financial background and extensive executive management and operating experience in financial services companies.
|
n | Director since July 2014 |
n | Class I Director of Arch Capital |
n | Term expires 2023 |
n | Compensation Committee |
n | Nominating and Governance Committee |
n | Underwriting Oversight Committee |
| | | | | | | | |
John M. Pasquesi |
| | |
n | 62 years old | Mr. Pasquesi has been Chair of Board of Arch Capital since September 2019 and a director since October 2001. From November 3, 2017 to September 14, 2019, he served as Lead Director. Mr. Pasquesi is the Managing Member of Otter Capital LLC, a private equity investment firm he founded in January 2001. He holds an A.B. from Dartmouth College and an M.B.A. from Stanford Graduate School of Business.
Mr. Pasquesi’s qualifications for service on our Board include his investment skills, extensive experience in evaluating and overseeing companies in a wide range of industries, including the insurance industry, andher service on boards of directors of other companies.
|
| n | Director since October 2001August 2021 |
| n | Chair of Board |
| |
n | Class III Director of Arch Capital |
| n | Term expires 20242026 |
| n | ExecutiveAudit Committee |
| n | Finance, investment and Risk Committee |
n | Nominating and Governance Committee |
n | Underwriting Oversight Committee |
| | | | | | | | |
| Brian S. Posner |
| | |
| n | 6062 years old | Mr. Posner has been a private investor since March 2008 and is the President of Point Rider Group LLC aand Point Rider Group (UK) Ltd., both being consulting and advisory services firmfirms focused on financial, technology, bio-pharmaceutical and other services-related companies. From 2005 to March 2008, Mr. Posner served as the President, Chief Executive Officer and Co-Chief Investment Officer of ClearBridge Advisors, LLC, an asset management company and a wholly owned subsidiary of Legg Mason (since acquired by Franklin Resources). InPrior to that, in 2000, Mr. Posner co-founded Hygrove Partners LLC, a private investment fund and served as the Managing Member for five years. He served as a portfolio manager and an analyst at Fidelity Investments from 1987 to 1996 and, from 1997 to 1999, at Warburg Pincus Asset Management/Credit Suisse Asset Management where he also served as Co-Chief Investment Officer and director of research. Mr. Posner currentlyis a Charter Trustee of Northwestern University and serves on the Advisory Board at Northwestern’s Center for the Study of Diversity and Democracy. He previously served on the board of directors of Biogen Inc. and he is a trustee andas Chair of the AQR Funds.Funds, among others. He holds a B.A. from Northwestern University and an M.B.A. from the University of Chicago Booth School of Business.
Mr. Posner’s qualifications for service on our Board include his strong financial background, executive management and operating experience in financial services companies, investment skills and extensive experience as a leading institutional investment manager and advisor.advisor, as well as his general expertise in matters pertaining to the financial services industry. |
| n | Director since November 2010 |
| n | Class I Director of Arch Capital |
| n | Term expires 20232026 |
| n | AuditCompensation and Human Capital Committee |
| n | NominatingFinance, Investment and GovernanceRisk Committee |
n | Underwriting Oversight Committee |
| |
| | | | | | | | |
| 20222024 PROXY STATEMENT | | 2220 |
| | | | | | | | |
| Eugene S. Sunshine |
| | |
| n | 74 years old | Mr. Sunshine retired at the end of August 2014 as the Senior Vice President for Business and Finance at Northwestern University, the university’s chief financial and administrative officer. Before joining Northwestern in 1997, he was Senior Vice President for Administration at The Johns Hopkins University. Prior to Johns Hopkins, Mr. Sunshine held positions as New York State Deputy Commissioner for Tax Policy and New York State Treasurer as well as Director of Energy Conservation for the New York State Energy Office. Mr. Sunshine is a former member of the boards of Chicago Board Options Exchange, Kaufman Hall and Associates, Keypath Education, Bloomberg L.P., National Mentors Holdings, Nuveen Investments and Kaufman Hall & Associates. He holds a B.A. from Northwestern University and a Master of Public Administration degree from Syracuse University’s School of Citizenship and Public Affairs.
Mr. Sunshine’s qualifications for service on our Board include his strong financial background and extensive executive management and operating experience. |
| n | Director since July 2014 |
| n | Class III Director of Arch Capital |
| n | Term expires 2025 |
| n | Audit Committee |
| n | Compensation and Human Capital Committee |
| n | Nominating and Governance Committee |
| |
| | | | | | | | |
| John D. Vollaro |
| | |
| n | 7779 years old | Mr. Vollaro has been a Senior Advisor of Arch Capital since April 2009 and has served as a director of Arch Capital since November 2009. He was Executive Vice President and Chief Financial Officer of Arch Capital from January 2002 to March 2009 and Treasurer of Arch Capital from May 2002 to March 2009. Prior to joining us, Mr. Vollaro acted as an independent consultant in the insurance industry since March 2000. Prior to March 2000, Mr. Vollaro was President and Chief Operating Officer of W.R. Berkley Corporation from January 1996 and a director from September 1995 until March 2000. Mr. Vollaro was Chief Executive Officer of Signet Star Holdings, Inc., a joint venture between W.R. Berkley Corporation and General Re Corporation, from July 1993 to December 1995. Mr. Vollaro served as Executive Vice President of W.R. Berkley Corporation from 1991 until 1993, Chief Financial Officer and Treasurer of W.R. Berkley Corporation from 1983 to 1993 and Senior Vice President of W.R. Berkley Corporation from 1983 to 1991.
Mr. Vollaro’s qualifications for service on our Board include his strong financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations.
|
| n | With Arch since 2002 |
| n | Director since November 2009 |
| n | Class I Director of Arch Capital |
| n | Term expires 20232026 |
| n | Finance, Investment and Risk Committee |
| n | Underwriting Oversight Committee |
| |
| | | | | | | | |
Thomas R. Watjen |
| | |
n | 67 years old | Mr. Watjen has extensive experience in the insurance sector having spent over 20 years at Unum Group and its predecessor, The Provident Companies. From 2003 to 2015, he was President and Chief Executive Officer of Unum Group. Prior to this, Mr. Watjen served as Vice Chairman and Chief Operating Officer of Unum Group from 2002 to 2003 and Executive Vice President, Finance and Risk Management for the company from 1999 to 2002. In 1994, he joined The Provident Companies as Executive Vice President and Chief Financial Officer and was later named Vice Chairman and Chief Operating Officer, a position he held from 1997 to 1999. Prior to Unum Group, Mr. Watjen worked at Morgan Stanley & Co. as Managing Director, Investment Banking from 1987 to 1994. From 1984 to 1987 he worked at Conning & Company in the consulting and venture capital areas, and from 1981 to 1984 he worked with Aetna Life & Casualty in both the investment and finance areas. He currently serves on the board of directors of Prudential plc, and was a member of the board of directors of LocatorX from 2019 through 2022 as well as SunTrust Bank from 2010 through 2019. Mr. Watjen also serves on the board of visitors of Virginia Military Institute. He holds a B.A. in Economics from the Virginia Military Institute and an M.B.A. from the University of Virginia, Darden School of Business Administration.
Mr. Watjen’s qualifications for service on our Board include his extensive senior management and operating experience in the insurance industry and his service on boards of directors of other companies.
|
n | Director since January 2020 |
n | Class II Director of Arch Capital |
n | Term expires 2024 |
n | Audit Committee |
n | Compensation Committee |
n | Finance, Investment and Risk Committee |
| | | | | | | | |
2321 | | 20222024 PROXY STATEMENT | |
The following individuals are members of senior management, including our executive officers, who do not serve as directors of Arch Capital:
| | | | | | | | |
| François Morin |
| François Morin | |
| n | | |
n | 5456 years old | Mr. Morin is Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital, a position he has held since May 2018. Prior to such position, Mr. Morin served as Senior Vice President, Chief Risk Officer and Chief Actuary of Arch Capital, a position he held since May 2015. He joined Arch Capital in October 2011 as Chief Actuary and Deputy Chief Risk Officer. From January 1990 through September 2011, Mr. Morin served in various roles for Towers Watson & Co. and its predecessor firm, Towers Perrin Forster & Crosby, including its actuarial division, Tillinghast. He holds a B.Sc. in Actuarial Science from Université Laval in Canada. He is a Fellow of the Casualty Actuarial Society, a Chartered Financial Analyst, a Chartered Enterprise Risk Analyst and a Member of the American Academy of Actuaries. |
| n | With Arch since October 2011 |
| n | Executive Vice President, Chief Financial Officer and Treasurer,
of Arch Capital |
| | | | | | | | |
| Nicolas Papadopoulo |
| Nicolas Papadopoulo | |
| n | | |
n | 5961 years old | Mr. Papadopoulo is President and Chief Underwriting Officer of Arch Capital and CEO of Arch Worldwide Insurance Group. He was promoted to his currentGroup, a position he has held since January 1, 2021. From September 2017 to December 2020, Mr. Papadopoulo was Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for Property and Casualty Operations. From July 2014 to September 2017, Mr. Papadopoulo was Chairman and Chief Executive Officer of Arch Reinsurance Group at Arch Capital. He joined Arch Re Bermuda in December 2001 where he held a variety of underwriting roles. Prior to joining Arch, he held various positions at Sorema N.A. Reinsurance Group, a U.S. subsidiary of Groupama and he was also an insurance examiner with the Ministry of Finance, Insurance Department, in France. Mr. Papadopoulo graduated from École Polytechnique in France and École Nationale de la Statistique et de l’Administration Economique in France with a master’s degree in statistics. He is also a Member of the International Actuarial Association and a Fellow at the French Actuarial Society. |
| n | With Arch since December 2001 |
| n | President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group |
| | | | | | | | |
| Maamoun Rajeh |
| Maamoun Rajeh | |
| n | | |
n | 5153 years old | Mr. Rajeh has served as Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group since October 2017. From July 2014 to September 2017, he was Chairman and Chief Executive Officer of Arch Re Bermuda. He joined Arch Re Bermuda in 2001 as an underwriter, ultimately becoming Chief Underwriting Officer in November 2005. Most recently, he was President and Chief Executive Officer of Arch Reinsurance Europe Underwriting Designated Activity Company (“Arch Re Europe”) from October 2012 to July 2014. From 1999 to 2001, Mr. Rajeh served as Assistant Vice President at HartRe, a subsidiary of The Hartford Financial Services Group, Inc. Mr. Rajeh also served in several business analysis positions at the United States Fidelity and Guarantee Company between 1992 and 1996 and as an underwriter at F&G Re from 1996 to 1999. He has a B.S. from The Wharton School of Business of the University of Pennsylvania and he is a Chartered Property Casualty Underwriter. |
| n | With Arch since December 2001 |
| n | Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group |
| | | | | | | | |
| 20222024 PROXY STATEMENT | | 2422 |
| | | | | | | | |
| David E. Gansberg |
| | |
| n | 4951 years old | Mr. Gansberg was named Chief Executive Officer of Arch Capital’s Global Mortgage Group which provides mortgage insurance and reinsurance on a worldwide basis, on March 1, 2019. From February 2013 through February 2019, he was the President and Chief Executive Officer of Arch Mortgage Insurance Company. From July 2007 to February 2013, Mr. Gansberg was Executive Vice President and a director at Arch Reinsurance Company (“Arch Re (U.S.)”). Prior to that, he held various underwriting, operational and strategic roles at Arch Re Bermuda and Arch Capital Services LLC, whichwhere he joined in December 2001. Prior to joining Arch, Mr. Gansberg held various positions with ACE Bermuda and Cigna Property and Casualty. He holds a B.S. in Actuarial Mathematics from the University of Michigan.
|
| n | With Arch since December 2001 |
| n | Chief Executive Officer, Global Mortgage Group, Arch Capital |
| | | | | | | | |
| Jennifer Centrone |
| Jennifer Centrone | |
| n | | |
n | 4951 years old | Ms. Centrone is the Executive Vice President, Chief Human Resources Officer of Arch Capital Services LLC, where she is responsible for leading the organization’s talent and culture strategies. Prior to joining Arch, Ms. Centrone was Senior Vice President, Human Resources at Voya Financial from August 2015 to May 2019, where she was responsible for leading key talent, organizational and transformational strategies. Before Voya Financial, Ms. Centrone held senior human resources roles at both The Hartford Financial Services Group, Inc. and Accenture. She holds a B.A. in English Writing and Literature from Fairfield University. |
| n | With Arch since June 2019 |
| n | Executive Vice President, Chief Human Resources Officer of Arch Capital Services LLC |
| | | | | | | | |
| Chris Hovey |
| Chris Hovey | |
| n | | |
n | 5557 years old | Mr. Hovey is Chief Operations Officer of Arch Capital Services LLC. From July 2018 to January 2020, Mr. Hovey served as Executive Vice President and Chief Information Officer at Arch Capital Services LLC. Prior to that, he held the role of Chief Operating Officer of Arch Mortgage Insurance Company. Before joining Arch, Mr. Hovey acted as Chief Operating Officer for PMI Mortgage Insurance Co. (“PMI”) since 2011. He also served as Senior Vice President of servicing operations and loss management for PMI, which he originally joined in 2002. Mr. Hovey holds a B.A. from San Francisco State University and an M.B.A. from Saint Mary’s College in Moraga, California. |
| n | With Arch since January 2014 |
| n | Chief Operations Officer of Arch Capital Services LLC |
| | | | | | | | |
| Louis T. Petrillo |
| | |
| n | 5658 years old | Mr. Petrillo has been President and General Counsel of Arch Capital Services LLC since April 2002. From May 2000 to April 2002, he was Senior Vice President, General Counsel and Secretary of Arch Capital. From 1996 until May 2000, Mr. Petrillo was Vice President and Associate General Counsel of Arch Capital’s reinsurance subsidiary. Prior to that time, Mr. Petrillo practiced law at the New York firm of Willkie Farr & Gallagher LLP. He holds a B.A. from Tufts University and a law degree from Columbia University. |
| n | With Arch since January 1996 |
| n | President and General Counsel of Arch Capital Services LLC |
| | | | | | | | |
2523 | | 20222024 PROXY STATEMENT | |
| | | | | | | | |
| Jay Rajendra |
| Jay Rajendra | |
| n | | |
n | 4143 years old | Mr. Rajendra is the Chief Strategy and Innovation Officer at Arch Capital. He is responsible for pursuing new business models and technologies while leading Arch’s analytics capabilities to improve profitability and growth. Mr. Rajendra joined Arch in 2016 in the role of Chief Analytics Officer for Arch Capital, a position he held until January 2020. Prior to joining Arch, Mr. Rajendra was Head of Business Solutions for XL Catlin’s Strategic Analytics team. Before XL, Mr. Rajendra was a Senior Consultant at Towers Watson in both North America and Europe, where he advised large international (re)insurers and start-ups on pricing, strategy and mergers and acquisitions (“M&A.&A”). He is a Fellow of the Institute of Actuaries, Fellow of the Casualty Actuarial Society and Member of the American Academy of Actuaries. He holds a combined Bachelors and Masters in Mathematics from Oxford University and an M.B.A. from Massachusetts Institute of Technology. |
| n | With Arch since August 2016 |
| n | Chief Strategy and Innovation Officer ofat Arch Capital |
| | | | | | | | |
| Christine Todd |
| Christine Todd | |
| n | | |
n | 5557 years old | Ms. Todd is Senior Vice President, Chief Investment Officer ofat Arch Capital and President of Arch Investment Management Ltd. (“AIM”). She joined Arch in June 2021 and has responsibility for setting the firm’s investment strategy and managing the day-to-day operations of the investment portfolio. Prior to joining Arch, Ms. Todd was Head of Fixed Income, U.S., for Amundi US from February 2019 to May 2021. She has also held executive roles at Neighborly Investments,Investments; Standish Mellon Asset Management Company LLCLLC; and Gannett, Welsh & Kotler. She is a Chartered Financial Analyst and holds a B.A. from Georgetown University and an M.B.A. from Boston University. |
| n | With Arch since June 2021 |
| n | Senior Vice President, Chief Investment Officer of Arch Capital |
Succession Planning
We have a robust talent and succession planning process. On an annual basis, management prepares a talent and succession plan for our CEO and for each member of our executive management team, focusing on high performing and high potential talent, diverse talent and the succession plan for each position. On an annual basis, our Board receives a comprehensive succession plan for the CEO and for each member of our executive management team. Our Board has delegated primary oversight responsibility for succession planning for our CEO to our Nominating and Governance Committee, and for our other members of our executive management team to the Compensation and Human Capital Committee. Our Board continues to regularly evaluate its succession planning to ensure that we are well-positioned to execute our corporate strategy.
| | | | | | | | |
| 20222024 PROXY STATEMENT | | 2624 |
Director Compensation
The Compensation and Human Capital Committee is responsible for reviewing and making recommendations to the Board regarding all matters pertaining to compensation paid to directors for Board, committee and committee chair services.
In making non-employee director compensation recommendations, the Compensation and Human Capital Committee takes various factors into consideration, including, but not limited to, input received from the Compensation and Human Capital Committee’s independent consultant, the responsibilities of directors generally, as well as committee chairs, and the form and amount of compensation paid to directors by comparable companies. The Board reviews the recommendations of the Compensation and Human Capital Committee and determines the form and amount of director compensation.
The following table provides information concerning the compensation of our directors for the year ended December 31, 2021.2023. Directors who also serve as employees of the Company do not receive payment for service as directors. In addition to the arrangements described below, all non-employee directors are entitled to reimbursement for their reasonable out-of-pocket expenses in connection with their travel to and attendance at meetings of the Board or committees. For a complete understanding of the table, please readrefer to the footnotes and the narrative disclosures that follow the table. Please also refer to the “20212023 Summary Compensation Table” for Mr. Grandisson’s compensation. | | Name | Name | | Fees Earned
or Paid in Cash
($)(1) | Stock
Awards
($)(2) | | All Other
Compensation
($)(3) | Total
($) | Name | | Committee Chair | Fees Earned
or Paid in Cash
($)(1) | Stock
Awards
($)(2) | | All Other
Compensation
($)(3) | Total
($) |
| John L. Bunce, Jr. | John L. Bunce, Jr. | | NC | | 148,517 | | | 124,997 | | | 24,835 | | | 298,349 | | John L. Bunce, Jr. | | NC | 150,007 | | | 124,985 | | 124,985 | | — | | | 274,992 | | 274,992 |
| Eric W. Doppstadt | Eric W. Doppstadt | | FC | | 150,017 | | | 124,997 | | | — | | | 275,014 | | Eric W. Doppstadt | | | 125,007 | | | 124,985 | | 124,985 | | — | | | 249,992 | | 249,992 |
| Francis Ebong (4) | | 91,096 | | | 91,062 | | | 16,250 | | | 198,408 | |
| Francis Ebong | | Francis Ebong | | | 154,596 | | | 124,985 | | 24,618 | | | 304,199 |
| Laurie S. Goodman | Laurie S. Goodman | | 148,517 | | | 124,997 | | | 42,177 | | | 315,691 | | Laurie S. Goodman | | | 150,007 | | | 124,985 | | 124,985 | | 25,000 | | | 299,992 | | 299,992 |
| Moira Kilcoyne | Moira Kilcoyne | | 123,517 | | | 124,997 | | | — | | | 248,514 | | Moira Kilcoyne | | CC** | 154,596 | | | 124,985 | | 124,985 | | — | | | 279,581 | | 279,581 |
| Eileen Mallesch (4) | | 108,767 | | | 91,062 | | | — | | | 199,829 | |
| Eileen Mallesch | | Eileen Mallesch | | AC | 179,596 | | | 124,985 | | — | | | 304,581 |
| Louis J. Paglia | Louis J. Paglia | | UC | | 173,517 | | | 124,997 | | | 25,000 | | | 323,514 | | Louis J. Paglia | | UC | 175,007 | | | 124,985 | | 124,985 | | 25,000 | | | 324,992 | | 324,992 |
| John M. Pasquesi* | | EC | | 258,517 | | | 124,997 | | | 25,000 | | | 408,514 | |
| John M. Pasquesi * | | John M. Pasquesi * | | EC | 260,007 | | | 124,985 | | 25,000 | | | 409,992 |
| Brian S. Posner | Brian S. Posner | | AC | | 173,517 | | | 124,997 | | | 30,000 | | | 328,514 | | Brian S. Posner | | FC | 175,007 | | | 124,985 | | 124,985 | | 2,500 | | | 302,492 | | 302,492 |
| Eugene S. Sunshine | Eugene S. Sunshine | | CC | | 173,517 | | | 124,997 | | | 6,000 | | | 304,514 | | Eugene S. Sunshine | | | 150,007 | | | 124,985 | | 124,985 | | 25,000 | | | 299,992 | | 299,992 |
| John D. Vollaro | John D. Vollaro | | 500,000 | | (5) | — | | | 59,059 | | (6) | 559,059 | | John D. Vollaro | | | 500,000 | | (4) | (4) | — | | 64,313 | | (5) | (5) | 564,313 |
| Thomas R. Watjen | Thomas R. Watjen | | 148,517 | | | 124,997 | | | — | | | 273,514 | | Thomas R. Watjen | | ** | 150,007 | | | 124,985 | | 124,985 | | — | | | 274,992 | | 274,992 |
AC = Audit Committee Chair, CC=CC = Compensation and Human Capital Committee Chair, EC = Executive Committee Chair, FC = Finance, Investment and Risk Committee Chair, NC = Nominating and Governance Committee Chair, UC = Underwriting Oversight Committee Chair
*Chair of the Board
** Mr. Watjen served as the Compensation and Human Capital Committee Chair until he was succeeded by Ms. Kilcoyne on December 31, 2023.
| | | | | | | | |
2725 | | 20222024 PROXY STATEMENT | |
(1) Each non-employee member of our Board is entitled to receive an annual cash retainer fee in the amount of $125,000. Each such director may elect to receive the retainer fee in the form of common shares instead of cash. If so elected, the number of shares distributed to the non-employee director will be equal to 100% of the amount of the annual retainer fee otherwise payable divided by the fair market value of our common shares on the date of grant. This column includes the annual retainer (whether paid in cash or, at the election of the director, in common shares), and the fees for service as Chair of the Board, committee chair and Audit Committee member fees.member. For the 2021–20222022-2023 annual period, Ms. Mallesch received a pro-rated Audit Committee Chair retainer when she assumed the role on February 27, 2023, from Mr. Posner, who remained a member of the Audit Committee through December 31, 2023. On February 27, 2023, Mr. Posner assumed the Finance, Investment and Risk Committee Chair from Mr. Doppstadt. Also, Ms. Kilcoyne and Mr. Ebong joined the Audit Committee on February 27, 2023 and received a prorated 2022-2023 Audit Committee member fee. In addition, Mss. Goodman and Mallesch and Messrs. Doppstadt, Ebong, Paglia, Posner and SunshineWatjen received their annual retainer fees in the form of cash and Ms. Kilcoyne and Messrs. Bunce Posner and WatjenSunshine received their annual retainers in the form of 3,1431,714 common shares. Additionally, Mr. Pasquesi elected to receive his annual retainer and Chair of the Board fee in shares in the form of 3,1431,714 common shares for each fee.
The following table sets forth the fees payable to our chairs and Audit Committee members:
| | | | | |
| Committee Chair/Member | | | | | | | | Annual Fee ($) |
Committee Chair/Member | | Annual Fee |
| Audit Committee Chair | 50,000 | | $50,000 | |
| Audit Committee Member | 25,000 | | $25,000 | |
| Chair of the Board | 125,000 | | $125,000 | |
| Compensation and Human Capital Committee Chair | 25,000 | | $25,000 | |
| Executive Committee Chair | 10,000 | | $10,000 | |
| Finance, Investment and Risk Committee Chair | 25,000 | | $25,000 | |
| Nominating and Governance Committee Chair | 25,000 | | $25,000 | |
| Underwriting Oversight Committee Chair | 50,000 | | $50,000 | |
(2)Each year, the non-employee directors are granted a number of restricted shares equal to $125,000 divided by the closing price on the date of grant (i.e., the first day of the annual period of compensation for the non-employee directors), and such shares vest on May 1the one-year anniversary of the following year.grant date. The grant date fair value indicated in the table has been calculated in accordance with FASB ASC Topic 718 Compensation—Stock Compensation.Compensation, using assumptions set forth in the notes accompanying our financial statements. See note 22, “Share-Based Compensation,” on pages 164-167 of the notes accompanying our consolidated financial statements included in our 2023 Annual Report. On May 6, 2021,4, 2023, each non-employee director except for Mr. Ebong and Ms. Mallesch, as described in footnote 4, received 3,1431,714 common shares, which will vest on May 1, 2022.4, 2024.
The aggregate number of share awards outstanding (i.e., unvested) as of December 31, 20212023, for Mss. Goodman and Kilcoyne and Messrs. Bunce, Doppstadt, Paglia, Pasquesi, Posner, Sunshine and Watjeneach of the non-employee directors was 3,1431,714 common shares. The number outstandingshares, except for Mr. Ebong and Ms. Mallesch was 2,178 common shares.Watjen whose outstanding share awards were forfeited upon his resignation from the Board on December 31, 2023.
(3)The amounts in the “All Other Compensation” column for Ms. Goodman, and Messrs. Bunce, Ebong, Paglia, Pasquesi, Posner and Sunshine includeconsist of matching gifts made under the Company’s matching gift program.
Under the matching gift program in 2021,2023, the Company matched eligible contributions to qualified charitable organizations on a dollar-for-dollar basis, up to a maximum of $25,000 per calendar year. Ms. Goodman and Mr. Posner each had multi-year pledges made under the prior policy, which we have grandfathered under that policy not to exceed $50,000 (the prior cap). During 2021,2023, the Company made an aggregate of approximately $169,262$127,118 in matching contributions on behalf of the directors noted in the table above.
(4) On August 13, 2021, Mr. Ebong and Ms. Mallesch joined the Board and received pro-rated director fees and stock awards for the 2021-2022 term, as reflected in the table above. The value of the pro-rated retainer fees were $91,096. Ms. Mallesch made an election to receive this fee in common shares and received 2,178 common shares, valued at $91,062. The value of the stock awards for both was $91,062 or 2,178 common shares.
(5) Mr. Vollaro is a Senior Advisor and an employee of the Company. Mr. Vollaro’s employment agreement provides that he receives an annual base salary of $250,000 and a bonus determined by the Compensation and Human Capital Committee and the Board for his role as Senior Advisor of the Company. For 2021,2023, Mr. Vollaro received a cash bonus of $250,000. In addition, Mr. Vollaro is a member of the Finance, Investment and Risk Committee and Underwriting Oversight CommitteesCommittee of the Board. A description of Mr. Vollaro’s employment agreement is included below.
(6)(5) The amount for Mr. Vollaro includes $34,910$39,840 in contributions to our defined contribution plans.plan. In addition, the total amount includes the payment for club dues and tax preparation services, none of which exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Vollaro.
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| 20222024 PROXY STATEMENT | | 2826 |
Employment Agreement with John Vollaro
Our employment agreement with John Vollaro provides for his employment as Senior Advisor of Arch Capital to continue until terminated by either party by providing at least six months’ prior written notice. His base salary is $250,000 per annum, and the target rate for his annual cash bonus is 100% of his annual base salary. Mr. Vollaro is eligible to receive share-based awards at the discretion of the Board and is also entitled to participate in employee benefit programs and other fringe benefits customarily provided to similarly situated senior executives. The Company will reimburse him for his reasonable expenses incurred traveling between Bermuda and the United States.
If Mr. Vollaro’s employment is terminated by us without cause, prior to the end of the term, he will be entitled to receive the base salary and target annual bonus which would have been paid to him under his employment agreement for the period through six months after the date of termination of employment (the “Severance Amount”). The Severance Amount would be payable over 12 months. The agreement further provides that if Mr. Vollaro’s employment is terminated by reason of his death or permanent disability, he (or his estate) will be
entitled to receive an amount equal to the
Severance Amount, in each case, (i) offset by any proceeds received from any insurance coverages provided by the Company and (ii) such amount, will be paid to him (or his estate) promptly upon death or permanent disability, as applicable. Mr. Vollaro’s medical insurance coverage benefits will continue for up to 12 months after the date of termination in the event that his employment ends due to permanent disability, or he is terminated other than for cause. Mr. Vollaro has agreed that, during the employment period and for a period of two years after termination of employment for cause or as a result of his resignation, he will not compete with the businesses of Arch Capital or any of its subsidiaries as such businesses exist or are in process or being planned as of the date of termination. If we terminate Mr. Vollaro’s employment without cause, the term of his noncompetition period will extend for one year following termination. Mr. Vollaro also agreed that he will not, for a period of two years following his date of termination, induce or attempt to induce any of our employees to leave his or her position with us or induce any customer to cease doing business with us.
Matters Relating to Director Share Ownership
In an effort to further align the interests of the non-employee directors with the interests of shareholders, the Company has adopted:
Share Ownership Guidelines: Share ownership guidelines require the directors to retain common shares having a value of at least three times the annual cash retainer fee payable to the director. Starting in 2024, the share ownership guidelines are increasing from three to five times the annual cash retainer fee payable to the director. Each non-employee director has five years to comply with the guidelines, and stock options, SARs and unvested restricted shares/units do not count toward the requirement.
Share Holding Requirements:Until our non-employee directors meet their target ownership levels, they must retain an amount equal to 50% of the net profit shares received from Arch Capital’s equity awards. Net profit shares are the shares remaining after payment of taxes owed on vesting of restricted stock or on vesting and payout under restricted stock units. Under the director share holding requirements, net profit shares would also include shares remaining after payment of the exercise price of an option and taxes owed on exercise of options or SARs vesting of restricted stock, or on vesting and payout under restricted stock units and performance shares.shares, although our non-employee directors do not
currently hold or receive Arch Capital performance shares, options or SARs.
No Hedging Permitted:As part of our Code of Business Conduct, our officers, directors and other employees are not permitted to engage in hedging activities with respect to Arch Capital’s common shares or any other publicly- traded equity or debt securities issued by Arch Capital or any of its subsidiaries. Specifically, they may not engage in short sales, purchase or sale of financial instruments or derivatives, including puts and calls, that hedge or offset any change in the market value of such securities. In addition, our officers, directors and other employees may not otherwise engage in transactions that are designed to, or have, the same effect.
Certain Relationships and Related Person Transactions
Generally, transactions with related persons are subject to review by the disinterested members of our Board. TheOur Board has adopted written procedures regarding the review of transactions involving companies affiliated with a company in which a non-employee director or executive officer of Arch Capital has a material interest (each a “portfolio company”), on the one hand, and Arch Capital or one of its subsidiaries, on the other hand. Under the
| | | | | | | | |
2927 | | 20222024 PROXY STATEMENT | |
Under the procedures, these transactions must be reviewed and approved by the management of Arch Capital or the operating subsidiary entering into the transaction (as applicable), and the terms of such transaction should be arm’s-length or on terms that are otherwise fair to Arch Capital and its subsidiaries. In addition, except for a few defined de minimis exceptions, these transactions also require the approval of Arch Capital under its holding company oversight guidelines, except for the following: (1) ordinary course transactions pursuant to which any insurance subsidiary of Arch Capital writes a direct insurance policy for a portfolio company where the Company will receive less than $3.0 million in annual premiums and (2) a transaction in which a U.S.-based subsidiary of Arch Capital (a) assumes reinsurance from, or cedes reinsurance to, a portfolio company or (b) provides direct insurance to a portfolio company pursuant to which the Company will receive $3.0 million or more in annual premiums, in which case, the general counsel of Arch Capital Services LLC should be pre-notified and appropriate steps will be implemented based on the transaction.guidelines. In reviewing these proposed transactions, the effects, if any, on the independence of the relevant directors are considered under the governing NASDAQNasdaq and SEC standards. Any applicable regulatory, tax and ratings agency matters are also considered. Under these procedures, the Board is regularly provided with an update of related party transactions entered into by the Company in accordance with the procedures on a regular basis.
Chiara Nannini, a director of certain of our non-U.S. subsidiaries, is a director of the law firm of Conyers Dill & Pearman Limited (“Conyers”), which provides legal services to the Company and its subsidiaries.
In January 2017, the Company and Kelso & Co. (“Kelso”), sponsored Premia Reinsurance Ltd., a newly formed multi-line Bermuda reinsurance company (“Premia Re”). Premia Re’s strategy is to reinsure or acquire companies or reserve portfolios in the non-life property and casualty insurance and reinsurance run-off market. The initial capitalization of Premia Re’s parent, Premia Holdings Ltd. (“Premia”), consisted of $400.0$400 million in common equity and $110.0$110 million in unsecured senior debt. Arch Re Bermuda and certain Arch co-investors, including senior management of Premia, invested $100.0$100 million and acquired 25.0%25% of Premia’s common equity as well as warrants to purchase additional common equity. Two of the co-investors included Nicolas Papadopoulo, President and Chief Underwriting Officer of Arch Capital and CEO of Arch Worldwide Insurance Group, who invested $2.5 million for a 0.625% stake, and Maamoun Rajeh,
Chairman and CEO of Arch Worldwide Reinsurance Group, who invested $0.5 million for a 0.125% stake. Affiliates of Kelso, along with co-investors of Kelso, invested $300.0$300 million and acquired the balance of Premia’s common equity as well as warrants to purchase additional common equity. Subsidiaries of Arch Capital are providing certain administrative and support services to Premia pursuant to services agreements. Arch Re Bermuda has appointed two directors to serve on the seven-person board of directors of Premia Re. Arch Re Bermuda is providing a 25% quota share reinsurance treaty on certain business written by Premia Re. For the 2021 year, the quota share agreement between Premia Re andDuring 2023, Arch Re Bermuda entered into certain reinsurance transactions with Premia which generated net premiums written and earned of $40.4 million.
In November 2019, we completed the acquisition of Barbican Group Holdings Limited$80 million and its subsidiaries, collectively (“Barbican”). Barbican entered into certain reinsurance$81 million, respectively, compared to $121 million and related transactions with Premia pursuant to which Premia assumed a transfer of liability for the 2018 and prior years of account of Barbican as of July 1, 2019. In the 2021 first quarter, as part of the Company’s acquisition of Barbican, the Company entered into an agreement with Premia Managing Agency Limited for the reinsurance to close of Syndicate 1955’s 2018 underwriting year of account into Premia Syndicate 1884’s 2021 underwriting year of account. The reinsurance to close covers legacy business underwritten by Syndicate 1955 on the underwriting 2018 and prior years of account and under the agreement, approximately $380$120 million of net liabilities was transferred to Syndicate 1884, with an effective date of January 1, 2021. The Company had no reinsurance recoverable on unpaidpremiums written and paid losses orearned, respectively in 2022. At December 31, 2023, Arch Re Bermuda recorded funds held liabilityin assets from Premia of $158 million, compared to $119 million at December 31, 2021, compared to $199.8 million and $149.6 million, respectively, at December 31, 2020.
In July 2021, the Company completed its acquisition of all of the common shares of Somers Holdings Ltd. (formerly Watford Holdings Ltd.), the parent of Somers Re Ltd. (formerly Watford Re Ltd. and together with Somers Holdings Ltd., “Somers”), for $35.00 per common share. Following the closing, Somers is indirectly owned 40% by the Company, 30% by certain investment funds managed by Kelso and 30% by certain investment funds managed by Warburg Pincus LLC, and the results of Somers are no longer consolidated with the Company’s results of operation. At the closing of the acquisition, the following directors and executive officers, who acquired their common shares of Somers at the time of its launch in March 2014 at the same price per share paid by other investors, received $35.00 in cash in exchange for each of their Somers common shares: John M. Pasquesi – 125,000
In February 2022,December 2023, we made a $125,000 contribution to the Urban Institute, a non-profit research organization that employs one of our directors in a non-executive role, Laurie S. Goodman.
In January 2023, we entered into various transactions related to private investments supporting the retrocession requirements of certain companies in the Company’s reinsurance segment (collectively, the “2023 Reinsurance Transactions”). One of the investors in the 2023 Reinsurance Transactions is a fund managed by Artisan Partners Limited Partnership (“APLP”). Certain investment management clients of APLP, including the fund referenced in the previous sentence, held an approximately 6.7% stock ownership interest in Arch Capital as of December 31, 2023. See “Security Ownership of Certain Beneficial Owners and Management—Common Shares” for further detail. Pursuant to the transaction, the fund has committed to providing $100 million in retrocession protection for Arch’s benefit via an insurance-linked securities structure with respect to certain risks underwritten during the relevant policy period in exchange for net ceded premiums. Based on a Schedule 13G/A filed in February 2024, BlackRock Inc. (“BlackRock”) owned approximately 7.3% of the outstanding common shares of Arch Capital as of December 31, 2023. BlackRock, through its subsidiaries, provides various investment management, investment trade support and risk analysis services to Arch Capital and its subsidiaries. During 2023, the Company incurred $7.1 million of fees, in the aggregate, under these services arrangements with BlackRock.
Based on a Schedule 13G/A filed in February 2024, The Vanguard Group (“Vanguard”) owned approximately 10.9% of the outstanding common shares of Arch Capital as of December 31, 2023. In 2023, Vanguard provided investment management services to Company-sponsored pension plans. Fees payable in connection with investing in Vanguard funds are paid by the plans. No fees were paid by the Company.
Chiara Nannini, a director of certain of our non-U.S. subsidiaries, is a director of the law firm of Conyers Dill & Pearman Limited (“Conyers”), which provides legal services to the Company and its subsidiaries.
From time to time, in the ordinary course of our business, we may enter into transactions, including insurance and reinsurance transactions and brokerage or other arrangements for the production of business, with entities in which companies or funds affiliated with beneficial owners of more than 5% of our issued and outstanding voting shares or directors of Arch Capital may have an ownership or other interest.
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31 | | 20222024 PROXY STATEMENT | | 28 |
SHARE OWNERSHIP
Security Ownership of Certain Beneficial Owners and Management
Common SharesRecommendation of the Board
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| THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL. |
Appointed Directors, Continuing Directors and Senior Management
The following individuals are our appointed and continuing directors:
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| John L. Bunce, Jr. |
| | |
| n | 65 years old | Mr. Bunce is a Managing Director and Founder of Greyhawk Capital Management, LLC and Managing Director and Founder of Steel Box, LLC. Both Greyhawk and Steel Box are investment organizations. Mr. Bunce has served as a director of numerous public and private companies and he continues to serve on several private company boards and as an Overseer of the Hoover Institution. He holds an A.B. from Stanford University and an M.B.A. from Harvard Business School. Mr. Bunce’s qualifications for service on our Board include his corporate finance background, investment skills, extensive experience in evaluating and overseeing companies in a wide range of industries and service on boards of directors of other companies.
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| n | Director since November 2001 |
| n | Class III Director of Arch Capital |
| n | Term expires 2025 |
n
| Executive Committee |
n
| Finance, Investment and Risk Committee |
| n | Nominating and Governance Committee |
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| Francis Ebong |
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| n | 43 years old | Mr. Ebong is a Managing Director, Turtle Capital, LLC. He most recently served as Managing Director, Program Management at X, Alphabet’s in-house research and development division, where he was tasked with launching technologies to improve the lives of billions of people. He has an extensive background in technology and innovation, including serving as the Director of Global Operations and Partnerships at Facebook from 2015 to 2017, where he led a global team responsible for launches including FB Live, Marketplace and Messenger. Prior to Facebook, Mr. Ebong was the Head of Operations at Postmates and has experience working at Apple and Deloitte. Mr. Ebong is a veteran of the U.S. Navy and has a degree from the U.S. Naval Academy and an M.B.A. from the George Washington School of Business.
Mr. Ebong’s qualifications for service on our Board include his extensive operational experience and his technology management skills. |
| n | Director since August 2021 |
| n | Class I Director of Arch Capital |
| n | Term expires 2026 |
| n | Audit Committee |
| n | Compensation and Human Capital Committee |
| n | Nominating and Governance Committee |
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| Marc Grandisson |
| | |
| n | 56 years old | Mr. Grandisson is the Chief Executive Officer of Arch Capital as well as a member of our Board, both positions he has served in since March 2018. From March 2018 to December 2020, he was also President of Arch Capital, and from January 2016 to March 2018, he was President and Chief Operating Officer of Arch Capital. Prior to that role, he was Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group from 2005 to 2015 and the Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group from February 2014 to December 2015. He joined Arch Reinsurance Ltd. (“Arch Re Bermuda”) in October 2001 as Chief Actuary. He subsequently held various leadership roles, including Chief Underwriting Officer and Actuary, President and Chief Operating Officer, eventually being named President and Chief Executive Officer at Arch Re Bermuda. Prior to joining Arch, he held various positions with the Berkshire Hathaway Group, F&G Re, Inc. and Tillinghast/Towers Perrin. He holds a B.Sc. in Actuarial Science from Université Laval in Canada and an M.B.A. from The Wharton School of the University of Pennsylvania. He is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Mr. Grandisson’s qualifications for service on our Board include his financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations. |
| n | With Arch since October 2001 |
| n | Chief Executive Officer of Arch Capital |
| n | Director since March 2018 |
| n | Class III Director of Arch Capital |
| n | Term expires 2025 |
| n | Executive Committee |
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| Moira Kilcoyne |
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| n | 62 years old | Ms. Kilcoyne is a technology industry veteran with extensive financial services experience. From 2013 to 2016, she served as Managing Director, Co-Chief Information Officer of Morgan Stanley where she co-headed the company’s global technology and data business and she also sat on the firm’s Management Committee. Prior to becoming Managing Director, Co-Chief Information Officer, Ms. Kilcoyne held a number of senior technology roles within Morgan Stanley. She currently serves on the board of directors of Quilter plc and is a member of the Board of Governors of FINRA. Prior board roles have included Citrix Systems, Inc. and as a Trustee of Manhattan College. Ms. Kilcoyne has a B.S. in Mathematics from Manhattan College. Ms. Kilcoyne’s qualifications for service on our Board include her more than 30 years of experience in the technology industry, her extensive financial services experience and service on boards of directors of other companies.
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| n | Director since January 2020 |
| n | Class III Director of Arch Capital |
| n | Term expires 2025 |
| n | Audit Committee |
| n | Compensation and Human Capital Committee |
| n | Nominating and Governance Committee |
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| Eileen Mallesch |
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| n | 68 years old | Ms. Mallesch has more than 30 years of finance and risk experience, including serving as Senior Vice President and Chief Financial Officer for Nationwide’s Property and Casualty segment from 2005 to 2009. Prior to that, she was Chief Financial Officer, Senior Vice President at Genworth (2003 to 2005) and General Electric’s (2000 to 2003) Group Insurance and Life Insurance businesses. Ms. Mallesch has broad finance and business strategy expertise in the insurance, telecommunications and consumer products industries. Her significant board experience includes current positions on the boards of Brighthouse Financial and Fifth Third Bancorp. She previously served on the boards of Bob Evans, Libbey Inc., and State Auto Financial. Ms. Mallesch has a B.S. in Accounting from the City University of New York and is a CPA.
Ms. Mallesch’s qualifications for service on our Board include her extensive senior management and operating experience in the insurance industry and her service on boards of directors of other companies. |
| n | Director since August 2021 |
| n | Class I Director of Arch Capital |
| n | Term expires 2026 |
| n | Audit Committee |
| n | Underwriting Oversight Committee |
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| Brian S. Posner |
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| n | 62 years old | Mr. Posner has been a private investor since March 2008 and is the President of Point Rider Group LLC and Point Rider Group (UK) Ltd., both being consulting and advisory services firms focused on financial, technology, bio-pharmaceutical and other services-related companies. From 2005 to March 2008, Mr. Posner served as the President, Chief Executive Officer and Co-Chief Investment Officer of ClearBridge Advisors, LLC, an asset management company and a wholly owned subsidiary of Legg Mason (since acquired by Franklin Resources). Prior to that, in 2000, Mr. Posner co-founded Hygrove Partners LLC, a private investment fund and served as the Managing Member for five years. He served as a portfolio manager and an analyst at Fidelity Investments from 1987 to 1996 and, from 1997 to 1999, at Warburg Pincus Asset Management/Credit Suisse Asset Management where he also served as Co-Chief Investment Officer and director of research. Mr. Posner is a Charter Trustee of Northwestern University and serves on the Advisory Board at Northwestern’s Center for the Study of Diversity and Democracy. He previously served on the board of directors of Biogen Inc. and as Chair of the AQR Funds, among others. He holds a B.A. from Northwestern University and an M.B.A. from the University of Chicago Booth School of Business.
Mr. Posner’s qualifications for service on our Board include his strong financial background, investment skills and extensive experience as a leading institutional investment manager and advisor, as well as his general expertise in matters pertaining to the financial services industry. |
| n | Director since November 2010 |
| n | Class I Director of Arch Capital |
| n | Term expires 2026 |
| n | Compensation and Human Capital Committee |
| n | Finance, Investment and Risk Committee |
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| Eugene S. Sunshine |
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| n | 74 years old | Mr. Sunshine retired at the end of August 2014 as the Senior Vice President for Business and Finance at Northwestern University, the university’s chief financial and administrative officer. Before joining Northwestern in 1997, he was Senior Vice President for Administration at The Johns Hopkins University. Prior to Johns Hopkins, Mr. Sunshine held positions as New York State Deputy Commissioner for Tax Policy and New York State Treasurer as well as Director of Energy Conservation for the New York State Energy Office. Mr. Sunshine is a former member of the boards of Chicago Board Options Exchange, Kaufman Hall and Associates, Keypath Education, Bloomberg L.P., National Mentors Holdings, Nuveen Investments and Kaufman Hall & Associates. He holds a B.A. from Northwestern University and a Master of Public Administration degree from Syracuse University’s School of Citizenship and Public Affairs.
Mr. Sunshine’s qualifications for service on our Board include his strong financial background and extensive executive management and operating experience. |
| n | Director since July 2014 |
| n | Class III Director of Arch Capital |
| n | Term expires 2025 |
| n | Audit Committee |
| n | Compensation and Human Capital Committee |
| n | Nominating and Governance Committee |
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| John D. Vollaro |
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| n | 79 years old | Mr. Vollaro has been a Senior Advisor of Arch Capital since April 2009 and has served as a director of Arch Capital since November 2009. He was Executive Vice President and Chief Financial Officer of Arch Capital from January 2002 to March 2009 and Treasurer of Arch Capital from May 2002 to March 2009. Prior to joining us, Mr. Vollaro acted as an independent consultant in the insurance industry since March 2000. Prior to March 2000, Mr. Vollaro was President and Chief Operating Officer of W.R. Berkley Corporation from January 1996 and a director from September 1995 until March 2000. Mr. Vollaro was Chief Executive Officer of Signet Star Holdings, Inc., a joint venture between W.R. Berkley Corporation and General Re Corporation, from July 1993 to December 1995. Mr. Vollaro served as Executive Vice President of W.R. Berkley Corporation from 1991 until 1993, Chief Financial Officer and Treasurer of W.R. Berkley Corporation from 1983 to 1993 and Senior Vice President of W.R. Berkley Corporation from 1983 to 1991.
Mr. Vollaro’s qualifications for service on our Board include his strong financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations. |
| n | With Arch since 2002 |
| n | Director since November 2009 |
| n | Class I Director of Arch Capital |
| n | Term expires 2026 |
| n | Finance, Investment and Risk Committee |
| n | Underwriting Oversight Committee |
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The following individuals are members of senior management, including our executive officers, who do not serve as directors of Arch Capital:
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| François Morin |
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| n | 56 years old | Mr. Morin is Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital, a position he has held since May 2018. Prior to such position, Mr. Morin served as Senior Vice President, Chief Risk Officer and Chief Actuary of Arch Capital, a position he held since May 2015. He joined Arch Capital in October 2011 as Chief Actuary and Deputy Chief Risk Officer. From January 1990 through September 2011, Mr. Morin served in various roles for Towers Watson & Co. and its predecessor firm, Towers Perrin Forster & Crosby, including its actuarial division, Tillinghast. He holds a B.Sc. in Actuarial Science from Université Laval in Canada. He is a Fellow of the Casualty Actuarial Society, a Chartered Financial Analyst, a Chartered Enterprise Risk Analyst and a Member of the American Academy of Actuaries. |
| n | With Arch since October 2011 |
| n | Executive Vice President, Chief Financial Officer and Treasurer, Arch Capital |
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| Nicolas Papadopoulo |
| | |
| n | 61 years old | Mr. Papadopoulo is President and Chief Underwriting Officer of Arch Capital and CEO of Arch Worldwide Insurance Group, a position he has held since January 2021. From September 2017 to December 2020, Mr. Papadopoulo was Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for Property and Casualty Operations. From July 2014 to September 2017, Mr. Papadopoulo was Chairman and Chief Executive Officer of Arch Reinsurance Group at Arch Capital. He joined Arch Re Bermuda in December 2001 where he held a variety of underwriting roles. Prior to joining Arch, he held various positions at Sorema N.A. Reinsurance Group, a U.S. subsidiary of Groupama and he was also an insurance examiner with the Ministry of Finance, Insurance Department, in France. Mr. Papadopoulo graduated from École Polytechnique in France and École Nationale de la Statistique et de l’Administration Economique in France with a master’s degree in statistics. He is also a Member of the International Actuarial Association and a Fellow at the French Actuarial Society. |
| n | With Arch since December 2001 |
| n | President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group |
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| Maamoun Rajeh |
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| n | 53 years old | Mr. Rajeh has served as Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group since October 2017. From July 2014 to September 2017, he was Chairman and Chief Executive Officer of Arch Re Bermuda. He joined Arch Re Bermuda in 2001 as an underwriter, ultimately becoming Chief Underwriting Officer in November 2005. Most recently, he was President and Chief Executive Officer of Arch Reinsurance Europe Underwriting Designated Activity Company (“Arch Re Europe”) from October 2012 to July 2014. From 1999 to 2001, Mr. Rajeh served as Assistant Vice President at HartRe, a subsidiary of The Hartford Financial Services Group, Inc. Mr. Rajeh also served in several business analysis positions at the United States Fidelity and Guarantee Company between 1992 and 1996 and as an underwriter at F&G Re from 1996 to 1999. He has a B.S. from The Wharton School of Business of the University of Pennsylvania and he is a Chartered Property Casualty Underwriter. |
| n | With Arch since December 2001 |
| n | Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group |
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| David E. Gansberg |
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| n | 51 years old | Mr. Gansberg was named Chief Executive Officer of Arch Capital’s Global Mortgage Group on March 1, 2019. From February 2013 through February 2019, he was the President and Chief Executive Officer of Arch Mortgage Insurance Company. From July 2007 to February 2013, Mr. Gansberg was Executive Vice President and a director at Arch Re (U.S.). Prior to that, he held various underwriting, operational and strategic roles at Arch Re Bermuda and Arch Capital Services LLC, where he joined in December 2001. Prior to joining Arch, Mr. Gansberg held various positions with ACE Bermuda and Cigna Property and Casualty. He holds a B.S. in Actuarial Mathematics from the University of Michigan.
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| n | With Arch since December 2001 |
| n | Chief Executive Officer, Global Mortgage Group, Arch Capital |
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| Jennifer Centrone |
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| n | 51 years old | Ms. Centrone is the Executive Vice President, Chief Human Resources Officer of Arch Capital Services LLC, where she is responsible for leading the organization’s talent and culture strategies. Prior to joining Arch, Ms. Centrone was Senior Vice President, Human Resources at Voya Financial from August 2015 to May 2019, where she was responsible for leading key talent, organizational and transformational strategies. Before Voya Financial, Ms. Centrone held senior human resources roles at both The Hartford Financial Services Group, Inc. and Accenture. She holds a B.A. in English Writing and Literature from Fairfield University. |
| n | With Arch since June 2019 |
| n | Executive Vice President, Chief Human Resources Officer of Arch Capital Services LLC |
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| Chris Hovey |
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| n | 57 years old | Mr. Hovey is Chief Operations Officer of Arch Capital Services LLC. From July 2018 to January 2020, Mr. Hovey served as Executive Vice President and Chief Information Officer at Arch Capital Services LLC. Prior to that, he held the role of Chief Operating Officer of Arch Mortgage Insurance Company. Before joining Arch, Mr. Hovey acted as Chief Operating Officer for PMI Mortgage Insurance Co. (“PMI”) since 2011. He also served as Senior Vice President of servicing operations and loss management for PMI, which he originally joined in 2002. Mr. Hovey holds a B.A. from San Francisco State University and an M.B.A. from Saint Mary’s College in Moraga, California. |
| n | With Arch since January 2014 |
| n | Chief Operations Officer of Arch Capital Services LLC |
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| Louis T. Petrillo |
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| n | 58 years old | Mr. Petrillo has been President and General Counsel of Arch Capital Services LLC since April 2002. From May 2000 to April 2002, he was Senior Vice President, General Counsel and Secretary of Arch Capital. From 1996 until May 2000, Mr. Petrillo was Vice President and Associate General Counsel of Arch Capital’s reinsurance subsidiary. Prior to that time, Mr. Petrillo practiced law at the New York firm of Willkie Farr & Gallagher LLP. He holds a B.A. from Tufts University and a law degree from Columbia University. |
| n | With Arch since January 1996 |
| n | President and General Counsel of Arch Capital Services LLC |
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| Jay Rajendra |
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| n | 43 years old | Mr. Rajendra is the Chief Strategy and Innovation Officer at Arch Capital. He is responsible for pursuing new business models and technologies while leading Arch’s analytics capabilities to improve profitability and growth. Mr. Rajendra joined Arch in 2016 in the role of Chief Analytics Officer for Arch Capital, a position he held until January 2020. Prior to joining Arch, Mr. Rajendra was Head of Business Solutions for XL Catlin’s Strategic Analytics team. Before XL, Mr. Rajendra was a Senior Consultant at Towers Watson in both North America and Europe, where he advised large international (re)insurers and start-ups on pricing, strategy and mergers and acquisitions (“M&A”). He is a Fellow of the Institute of Actuaries, Fellow of the Casualty Actuarial Society and Member of the American Academy of Actuaries. He holds a combined Bachelors and Masters in Mathematics from Oxford University and an M.B.A. from Massachusetts Institute of Technology. |
| n | With Arch since August 2016 |
| n | Chief Strategy and Innovation Officer at Arch Capital |
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| Christine Todd |
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| n | 57 years old | Ms. Todd is Senior Vice President, Chief Investment Officer at Arch Capital and President of Arch Investment Management Ltd. (“AIM”) and has responsibility for setting the firm’s investment strategy and managing the day-to-day operations of the investment portfolio. Prior to joining Arch, Ms. Todd was Head of Fixed Income, U.S., for Amundi US from February 2019 to May 2021. She has also held executive roles at Neighborly Investments; Standish Mellon Asset Management Company LLC; and Gannett, Welsh & Kotler. She is a Chartered Financial Analyst and holds a B.A. from Georgetown University and an M.B.A. from Boston University. |
| n | With Arch since June 2021 |
| n | Senior Vice President, Chief Investment Officer of Arch Capital |
Succession Planning
We have a robust talent and succession planning process. On an annual basis, management prepares a talent and succession plan for our CEO and for each member of our executive management team, focusing on high performing and high potential talent, diverse talent and the succession plan for each position. On an annual basis, our Board receives a comprehensive succession plan for the CEO and for each member of our executive management team. Our Board has delegated primary oversight responsibility for succession planning for our CEO to our Nominating and Governance Committee, and for our other members of our executive management team to the Compensation and Human Capital Committee. Our Board continues to regularly evaluate its succession planning to ensure that we are well-positioned to execute our corporate strategy.
Director Compensation
The Compensation and Human Capital Committee is responsible for reviewing and making recommendations to the Board regarding all matters pertaining to compensation paid to directors for Board, committee and committee chair services.
In making non-employee director compensation recommendations, the Compensation and Human Capital Committee takes various factors into consideration, including, but not limited to, input received from the Compensation and Human Capital Committee’s independent consultant, the responsibilities of directors generally, as well as committee chairs, and the form and amount of compensation paid to directors by comparable companies. The Board reviews the recommendations of the Compensation and Human Capital Committee and determines the form and amount of director compensation.
The following table provides information concerning the compensation of our directors for the year ended December 31, 2023. Directors who also serve as employees of the Company do not receive payment for service as directors. In addition to the arrangements described below, all non-employee directors are entitled to reimbursement for their reasonable out-of-pocket expenses in connection with their travel to and attendance at meetings of the Board or committees. For a complete understanding of the table, refer to the footnotes and the narrative disclosures that follow the table. Please also refer to the “2023 Summary Compensation Table” for Mr. Grandisson’s compensation. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Committee Chair | Fees Earned
or Paid in Cash
($)(1) | Stock
Awards
($)(2) | | All Other
Compensation
($)(3) | Total
($) |
| John L. Bunce, Jr. | | NC | 150,007 | | | 124,985 | | — | | | 274,992 |
| Eric W. Doppstadt | | | 125,007 | | | 124,985 | | — | | | 249,992 |
| Francis Ebong | | | 154,596 | | | 124,985 | | 24,618 | | | 304,199 |
| Laurie S. Goodman | | | 150,007 | | | 124,985 | | 25,000 | | | 299,992 |
| Moira Kilcoyne | | CC** | 154,596 | | | 124,985 | | — | | | 279,581 |
| Eileen Mallesch | | AC | 179,596 | | | 124,985 | | — | | | 304,581 |
| Louis J. Paglia | | UC | 175,007 | | | 124,985 | | 25,000 | | | 324,992 |
| John M. Pasquesi * | | EC | 260,007 | | | 124,985 | | 25,000 | | | 409,992 |
| Brian S. Posner | | FC | 175,007 | | | 124,985 | | 2,500 | | | 302,492 |
| Eugene S. Sunshine | | | 150,007 | | | 124,985 | | 25,000 | | | 299,992 |
| John D. Vollaro | | | 500,000 | | (4) | — | | 64,313 | | (5) | 564,313 |
| Thomas R. Watjen | | ** | 150,007 | | | 124,985 | | — | | | 274,992 |
AC = Audit Committee Chair, CC = Compensation and Human Capital Committee Chair, EC = Executive Committee Chair, FC = Finance, Investment and Risk Committee Chair, NC = Nominating and Governance Committee Chair, UC = Underwriting Oversight Committee Chair
* Chair of the Board
** Mr. Watjen served as the Compensation and Human Capital Committee Chair until he was succeeded by Ms. Kilcoyne on December 31, 2023.
(1) Each non-employee member of our Board is entitled to receive an annual cash retainer fee in the amount of $125,000. Each such director may elect to receive the retainer fee in the form of common shares instead of cash. If so elected, the number of shares distributed to the non-employee director will be equal to 100% of the amount of the annual retainer fee otherwise payable divided by the fair market value of our common shares on the date of grant. This column includes the annual retainer (whether paid in cash or, at the election of the director, in common shares) and the fees for service as Chair of the Board, committee chair and Audit Committee member. For the 2022-2023 annual period, Ms. Mallesch received a pro-rated Audit Committee Chair retainer when she assumed the role on February 27, 2023, from Mr. Posner, who remained a member of the Audit Committee through December 31, 2023. On February 27, 2023, Mr. Posner assumed the Finance, Investment and Risk Committee Chair from Mr. Doppstadt. Also, Ms. Kilcoyne and Mr. Ebong joined the Audit Committee on February 27, 2023 and received a prorated 2022-2023 Audit Committee member fee. In addition, Mss. Goodman and Mallesch and Messrs. Doppstadt, Ebong, Paglia, Posner and Watjen received their annual retainer fees in the form of cash and Ms. Kilcoyne and Messrs. Bunce and Sunshine received their annual retainers in the form of 1,714 common shares. Additionally, Mr. Pasquesi elected to receive his annual retainer and Chair of the Board fee in shares in the form of 1,714 common shares for each fee.
The following table sets forth information availablethe fees payable to us asour chairs and Audit Committee members:
| | | | | |
| Committee Chair/Member | Annual Fee ($) |
| Audit Committee Chair | 50,000 | |
| Audit Committee Member | 25,000 | |
| Chair of the Board | 125,000 | |
| Compensation and Human Capital Committee Chair | 25,000 | |
| Executive Committee Chair | 10,000 | |
| Finance, Investment and Risk Committee Chair | 25,000 | |
| Nominating and Governance Committee Chair | 25,000 | |
| Underwriting Oversight Committee Chair | 50,000 | |
(2)Each year, the non-employee directors are granted a number of February 21, 2022 with respectrestricted shares equal to $125,000 divided by the ownershipclosing price on the date of our voting shares by (1) each person known to us to begrant (i.e., the beneficial owner of more than 5% of any class of our issued and outstanding voting shares, (2) each director and named executive officer of Arch Capital and (3) allfirst day of the directorsannual period of compensation for the non-employee directors), and executive officerssuch shares vest on the one-year anniversary of Arch Capital as a group. Except as otherwisegrant date. The grant date fair value indicated each person named below has sole investment and voting power with respect to the securities shown.
| | | | | | | | |
| Common Shares |
| Name and Address of Beneficial Owner | (A)
Number of Common Shares Beneficially Owned (1) | (B)
Rule 13d-3
Percentage Ownership (1) |
Artisan Partners Holdings LP (2)
875 East Wisconsin Avenue, Suite 800
Milwaukee, Wisconsin 53202 | 36,684,714 | | 9.7 | % |
The Vanguard Group (3)
100 Vanguard Blvd.
Malvern, Pennsylvania 19355
| 33,407,250 | | 8.8 | % |
Baron Capital Group, Inc. (4)
767 Fifth Avenue
New York, New York 10153 | 21,532,452 | | 5.7 | % |
Capital World Investors (5)
333 South Hope Street
Los Angeles, California 90071 | 20,738,867 | | 5.5 | % |
| Marc Grandisson (6) | 4,183,632 | | 1.1 | % |
| John L. Bunce, Jr. (7) | 2,095,336 | | * |
| Eric W. Doppstadt (8) | 70,781 | | * |
| Francis Ebong (9) | 2,178 | | * |
| Laurie S. Goodman (10) | 28,127 | | * |
| Moira Kilcoyne (11) | 18,111 | | * |
| Eileen Mallesch (12) | 4,356 | | * |
| Louis J. Paglia (13) | 49,700 | | * |
| John M. Pasquesi (14) | 5,342,888 | | 1.4 | % |
| Brian S. Posner (15) | 110,087 | | * |
| Eugene S. Sunshine (16) | 27,005 | | * |
| John D. Vollaro (17) | 462,882 | | * |
| Thomas R. Watjen (18) | 19,315 | | * |
| David E. Gansberg (19) | 461,108 | | * |
| François Morin (20) | 591,015 | | * |
| Nicolas Papadopoulo (21) | 1,307,513 | | * |
| Maamoun Rajeh (22) | 855,843 | | * |
| All directors and executive officers (19 persons) (23) | 16,057,604 | | 4.2 | % |
* Denotes beneficial ownership of less than 1%
(1)Pursuant to Rule 13d-3 promulgated under the Exchange Act, amounts shown include common shares that may be acquired by a person within 60 days of February 21, 2022. Therefore, column (B) has been computed based on (a) 379,042,099 common shares actually issued and outstanding as of February 21, 2022; and (b) solely with respect to the person whose Rule 13d-3 Percentage Ownership of common shares is being computed, common shares that may be acquired within 60 days of February 21, 2022, upon the exercise of options held only by such person. All references to “options” in the above table and the related footnotes include SARs, as applicable.
(2)Based on a Schedule 13G/A filed with the SEC on February 4, 2022, jointly by Artisan Partners Limited Partnership (“APLP”), Artisan Investments GP LLC (“Artisan Investments”), Artisan Partners Holdings LP (“Artisan Holdings”), Artisan Partners Asset Management Inc. (“APAM”) and Artisan Partners Funds, Inc. (“Artisan Funds”). APLP is an investment advisor and Artisan Funds is an investment company. Artisan Holdings is the sole limited partner of APLP and the sole member of Artisan Investments. Artisan Investments is the general partner of APLP and APAM is the general partner of Artisan Holdings. The Schedule 13G/A reported that the common shares have been acquired on behalf of discretionary clients of APLP, which holds 36,684,714 common shares, including 24,737,684 common shares on behalf of Artisan Funds. In addition, the Schedule 13G/A reported that (a) APLP, Artisan Investments, Artisan Holdings and APAM each has shared voting with respect to 34,725,996 common shares and shared dispositive power with respect to 36,684,714 common shares; and (b) Artisan Funds has shared voting and dispositive power with respect to 24,737,684 common shares.
(3)Based on a Schedule 13G/A filed with the SEC on February 9, 2022, by The Vanguard Group (“Vanguard”). In the Schedule 13G/A it is reported that Vanguard has shared dispositive power with respect to 807,245 common shares, shared voting power with respect to 346,073 common shares and sole dispositive power with respect to 32,600,005 common shares.
(4)Based upon a Schedule 13G/A filed with the SEC on February 14, 2022, jointly by Baron Capital Group, Inc. (“BCG”), BAMCO, Inc. (“BAMCO”), Baron Capital Management, Inc. (“BCM”) and Ronald Baron (collectively, the “Baron Group”). In the Schedule 13G/A, the Baron Group reported that BAMCO and BCM are subsidiaries of BCG, and Ronald Baron owns a controlling interest in BCG. In addition, the Schedule 13G/A reported that (a) BCG has shared voting power with respect to 21,138,452 common shares and shared dispositive power with respect to 21,532,452 common shares; (b) BAMCO has shared voting power with respect to 19,935,292 common shares and shared dispositive power with respect to 20,329,292 common shares; (c) BCM has shared voting power with respect to 1,203,160 common shares and shared dispositive power with respect to 1,203,160 common shares; and (d) Ronald Baron has shared voting power with respect to 21,138,452 common shares and shared
dispositive power with respect to 21,532,452 common shares.
(5)Based on a Schedule 13G filed with the SEC on February 11, 2022, by Capital World Investors (“Capital”). In the Schedule 13G it is reported that Capital has sole voting power with respect to 20,671,297 common shares and sole dispositive power with respect to 20,738,867 common shares.
(6)Amounts in columns (A) and (B) reflect, on February 21, 2022, (a) 59,572 common shares owned directly by Mr. Grandisson (including 48,439 restricted shares, which were subject to vesting based solely on continued employment); (b) 1,916,608 common shares owned by a company for which Mr. Grandisson is the sole owner; (c) stock options and SARs with respect to 1,531,449 common shares that were exercisable on that date or within 60 days thereof; (d) 676,003 performance restricted shares which were subject to forfeiture and reacquisition in the event that performance criteria were not met. Amounts do not include stock options and SARs with respect to 232,348 common shares that were not exercisable within 60 days of February 21, 2022.
(7)Amounts in columns (A) and (B) reflect 2,095,336 common shares owned directly by Mr. Bunce.
(8)Amounts in columns (A) and (B) reflect 70,781 common shares owned directly by Mr. Doppstadt.
(9)Amounts in columns (A) and (B) reflect 2,178 common shares owned directly by Mr. Ebong.
(10)Amounts in columns (A) and (B) reflect 28,127 common shares owned directly by Ms. Goodman.
(11)Amounts in columns (A) and (B) reflect 18,111 common shares owned directly by Ms. Kilcoyne.
(12)Amounts in columns (A) and (B) reflect 4,356 common shares owned directly by Ms. Mallesch.
(13)Amounts in columns (A) and (B) reflect 49,700 common shares owned directly by Mr. Paglia.
(14)Amounts in columns (A) and (B) reflect (a) 1,221,693 common shares owned by Otter Capital LLC, for which Mr. Pasquesi serves as the Managing Member; (b) 3,938,105 common shares owned indirectly by revocable trusts for which Mr. Pasquesi and his spouse are the trustees; (c) 179,947 common shares owned indirectly by a family limited partnership; and (d) 3,143 common shares owned directly by Mr. Pasquesi. In addition, certain common shares held by the trusts and by the family limited partnership are subject to a security agreement. As of the record date, none of Mr. Pasquesi’s common shares are being used to secure any outstanding loans pursuant to such security agreement.
(15)Amounts in columns (A) and (B) reflect 110,087 common shares owned directly by Mr. Posner.
(16)Amounts in columns (A) and (B) reflect 27,005 common shares owned directly by Mr. Sunshine.
(17)Amounts in columns (A) and (B) reflect 462,882 common shares owned by trusts for which Mr. Vollaro or his spouse serve as trustees.
(18)Amounts in columns (A) and (B) reflect 19,315 common shares owned directly by Mr. Watjen.
(19)Amounts in columns (A) and (B) reflect, on February 21, 2022, (a) 137,937 common shares owned directly by Mr. Gansberg (including 14,749 restricted shares, which were subject to vesting based solely on continued employment); (b) stock options and SARs with respect to 167,314 common shares that were exercisable on that date or within 60 days thereof; and (c) 155,857 performance restricted shares which were subject to forfeiture and reacquisition in the event that performance criteria were not met. Amounts do not include stock options and SARs with respect to 67,124 common shares that were not exercisable within 60 days of February 21, 2022.
(20)Amounts in columns (A) and (B) reflect, on February 21, 2022, (a) 102,311 common shares owned directly by Mr. Morin (including 14,014 restricted shares, which were subject to vesting based solely on continued employment);(b) stock options and SARs with respect to 276,976 common shares that were exercisable on that date or within 60 days thereof; and (c) 211,728 performance restricted shares which were subject to forfeiture and reacquisition in the event that performance criteria were not met. Amounts do not include stock options and SARs with respect to 62,900 common shares that were not exercisable within 60 days of February 21, 2022.
(21)Amounts in columns (A) and (B) reflect, on February 21, 2022, (a) 693,848 common shares owned directly by Mr. Papadopoulo (including 21,171 restricted shares, which were subject to vesting based solely on continued employment); (b) stock options and SARs with respect to 347,677 common shares that were exercisable on that date or within 60 days thereof; and (c) 265,988 performance restricted shares which were subject to forfeiture and reacquisition in the event that performance criteria were not met. Amounts do not include stock options and SARs with respect to 104,443 common shares that were not exercisable within 60 days of February 21, 2022.
(22) Amounts in columns (A) and (B) reflect, on February 21, 2022, (a) 321,474 common shares owned directly by Mr. Rajeh (including 14,831 restricted shares, which were subject to vesting based solely on continued employment); (b) stock options and SARs with respect to 337,768 common shares that were exercisable on that date or within 60 days thereof; and (c) 196,601 performance restricted shares which were subject to forfeiture and reacquisition in the event that performance criteria were not met. Amounts do not include stock options and SARs with respect to 67,124 common shares that were not exercisable within 60 days of February 21, 2022.
(23)In addition to securities beneficially owned by the directors and the named executive officers reflected in the table includes an aggregate of 427,727 common shares which are beneficially owned on February 21, 2022 by executive officers who are not directors of Arch Capital, including restricted shares which were subject to vesting based solely on continued employment, common shares issuable upon exercise of stock options and SARs that were exercisable on that date or within 60 days thereof and performance restricted shares which were subject to forfeiture and reacquisitionhas been calculated in accordance with FASB ASC Topic 718 Compensation—Stock Compensation, using assumptions set forth in the event that performance criteria were not met.
Preferred Shares
The following table sets forth information available to us as of February 21, 2022, with respect to the ownership ofnotes accompanying our non-cumulative preferred shares by (1) each director and named executive officer of Arch Capital who owns such shares and (2) all of the directors and executive officers of Arch Capital as a group. Except as otherwise indicated, each person named below has sole investment and voting power with respect to the securities shown. Our preferred shares are not convertible into common shares, and the holders of the preferred shares do not have any voting rights (except under certain limited circumstances). For a description of the terms of our preferred shares, please see financial statements. See note 21, “Shareholders’ Equity,22, “Share-Based Compensation,” on pages 158-159164-167 of the notes accompanying our consolidated financial statements included in our 20212023 Annual Report. On May 4, 2023, each non-employee director received 1,714 common shares, which will vest on May 4, 2024.
| | | | | | | | |
| Preferred Shares |
Name of Beneficial Owner | Number of Series F Preferred Shares Beneficially Owned |
Percentage of Class Owned |
Brian S. Posner | 3,000 | | * |
All directors and executive officers (19 persons) | 3,000 | | * |
* Denotes beneficial ownershipThe aggregate number of less than 1%share awards outstanding (i.e., unvested) as of December 31, 2023, for each of the non-employee directors was 1,714 common shares, except for Mr. Watjen whose outstanding share awards were forfeited upon his resignation from the Board on December 31, 2023.
Delinquent Section 16(a) Reports
Section 16(a)(3)The amounts in the “All Other Compensation” column for Ms. Goodman, and Messrs. Ebong, Paglia, Pasquesi, Posner and Sunshine consist of matching gifts made under the Company’s matching gift program. Under the matching gift program in 2023, the Company matched eligible contributions to qualified charitable organizations on a dollar-for-dollar basis, up to a maximum of $25,000 per calendar year. During 2023, the Company made an aggregate of approximately $127,118 in matching contributions on behalf of the Exchange Act requiresdirectors noted in the table above.
(4) Mr. Vollaro is a Senior Advisor and an employee of the Company. Mr. Vollaro’s employment agreement provides that he receives an annual base salary of $250,000 and a bonus determined by the Compensation and Human Capital Committee and the Board for his role as Senior Advisor of the Company. For 2023, Mr. Vollaro received a cash bonus of $250,000. In addition, Mr. Vollaro is a member of the Finance, Investment and Risk Committee and Underwriting Oversight Committee of the Board. A description of Mr. Vollaro’s employment agreement is included below.
(5) The amount for Mr. Vollaro includes $39,840 in contributions to our directorsdefined contribution plan. In addition, the total amount includes payment for club dues and executive officers, and persons who own more thantax preparation services, none of which exceeded the greater of $25,000 or 10% of our common shares, to file with the SEC initial reportstotal amount of beneficial ownership and reports of changes in beneficial ownership of our equity securities. Such persons are also required by SEC regulation to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and representations that no other reports were required, we believe that all persons subject to the reporting requirements of Section 16(a) filed the required reports on a timely basis during the year ended December 31, 2021, with the exception of one report on Form 4 relating to a sale transaction bythese benefits for Mr. Rajeh, which was submitted one day late due to an administrative error.Vollaro.
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35 | | 20222024 PROXY STATEMENT | | 26 |
Employment Agreement with John Vollaro
Our employment agreement with John Vollaro provides for his employment as Senior Advisor of Arch Capital to continue until terminated by either party by providing at least six months’ prior written notice. His base salary is $250,000 per annum, and the target rate for his annual cash bonus is 100% of his annual base salary. Mr. Vollaro is eligible to receive share-based awards at the discretion of the Board and is also entitled to participate in employee benefit programs and other fringe benefits customarily provided to similarly situated senior executives. The Company will reimburse him for his reasonable expenses incurred traveling between Bermuda and the United States.
If Mr. Vollaro’s employment is terminated by us without cause, he will be entitled to receive the base salary and target annual bonus which would have been paid to him under his employment agreement for the period through six months after the date of termination of employment (the “Severance Amount”). The Severance Amount would be payable over 12 months. The agreement further provides that if Mr. Vollaro’s employment is terminated by reason of his death or permanent disability, he (or his estate) will be entitled to receive an amount equal to the
Severance Amount, in each case, (i) offset by any proceeds received from any insurance coverages provided by the Company and (ii) such amount, will be paid to him (or his estate) promptly upon death or permanent disability, as applicable. Mr. Vollaro’s medical insurance coverage benefits will continue for up to 12 months after the date of termination in the event that his employment ends due to permanent disability, or he is terminated other than for cause. Mr. Vollaro has agreed that, during the employment period and for a period of two years after termination of employment for cause or as a result of his resignation, he will not compete with the businesses of Arch Capital or any of its subsidiaries as such businesses exist or are in process or being planned as of the date of termination. If we terminate Mr. Vollaro’s employment without cause, the term of his noncompetition period will extend for one year following termination. Mr. Vollaro also agreed that he will not, for a period of two years following his date of termination, induce or attempt to induce any of our employees to leave his or her position with us or induce any customer to cease doing business with us.
Matters Relating to Director Share Ownership
In an effort to further align the interests of the non-employee directors with the interests of shareholders, the Company has adopted:
Share Ownership Guidelines: Share ownership guidelines require the directors to retain common shares having a value of at least three times the annual cash retainer fee payable to the director. Starting in 2024, the share ownership guidelines are increasing from three to five times the annual cash retainer fee payable to the director. Each non-employee director has five years to comply with the guidelines, and stock options, SARs and unvested restricted shares/units do not count toward the requirement.
Share Holding Requirements:Until our non-employee directors meet their target ownership levels, they must retain an amount equal to 50% of the net profit shares received from Arch Capital’s equity awards. Net profit shares are the shares remaining after payment of taxes owed on vesting of restricted stock or on vesting and payout under restricted stock units. Under the director share holding requirements, net profit shares would also include shares remaining after payment of the exercise price of an option and taxes owed on exercise of options or SARs or on vesting and payout under performance shares, although our non-employee directors do not
currently hold or receive Arch Capital performance shares, options or SARs.
No Hedging Permitted:As part of our Code of Business Conduct, our officers, directors and other employees are not permitted to engage in hedging activities with respect to Arch Capital’s common shares or any other publicly- traded equity or debt securities issued by Arch Capital or any of its subsidiaries. Specifically, they may not engage in short sales, purchase or sale of financial instruments or derivatives, including puts and calls, that hedge or offset any change in the market value of such securities. In addition, our officers, directors and other employees may not otherwise engage in transactions that are designed to, or have, the same effect.
Certain Relationships and Related Person Transactions
Generally, transactions with related persons are subject to review by the disinterested members of our Board. Our Board has adopted written procedures regarding the review of transactions involving companies affiliated with a company in which a non-employee director or executive officer of Arch Capital has a material interest (each a “portfolio company”), on the one hand, and Arch Capital or one of its subsidiaries, on the other hand. Under the
COMPENSATION
ITEM 2—ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
As requiredprocedures, these transactions must be reviewed and approved by Regulation 14Athe management of Arch Capital or the operating subsidiary entering into the transaction (as applicable), and the terms of such transaction should be arm’s-length or on terms that are otherwise fair to Arch Capital and its subsidiaries. In addition, except for a few defined de minimis exceptions, these transactions also require the approval of Arch Capital under its holding company oversight guidelines. In reviewing these proposed transactions, the effects, if any, on the independence of the relevant directors are considered under the Exchange Act, wegoverning Nasdaq and SEC standards. Any applicable regulatory, tax and ratings agency matters are pleasedalso considered. Under these procedures, the Board is regularly provided with an update of related party transactions.
In January 2017, the Company and Kelso & Co. (“Kelso”), sponsored Premia Reinsurance Ltd., a newly formed multi-line Bermuda reinsurance company (“Premia Re”). Premia Re’s strategy is to
ask our shareholders to approve, on an advisory basis, the compensation of the named executive officers as describedreinsure or acquire companies or reserve portfolios in the
“Compensation Discussionnon-life property and Analysis”casualty insurance and the “Executive Compensation Tables.” In deciding how to vote on this proposal, the Board encourages you to read the Compensation Discussionreinsurance run-off market. The initial capitalization of Premia Re’s parent, Premia Holdings Ltd. (“Premia”), consisted of $400 million in common equity and Analysis$110 million in unsecured senior debt. Arch Re Bermuda and Compensation Tables sections. We have designed our compensation programs with the intentioncertain Arch co-investors, including senior management of linking compensationPremia, invested $100 million and the Company’s business performance and talent retention strategiesacquired 25% of Premia’s common equity as well as the long-term interests of our shareholders. We have a “pay-for-performance” philosophy that forms the foundation of all decisions regarding compensation of our named executive officers.
We are requesting shareholder approvalwarrants to purchase additional common equity. Two of the compensationco-investors included Nicolas Papadopoulo, President and Chief Underwriting Officer of our named executive officersArch Capital and CEO of Arch Worldwide Insurance Group, who invested $2.5 million for a 0.625% stake, and Maamoun Rajeh, Chairman and CEO of Arch Worldwide Reinsurance Group, who invested $0.5 million for a 0.125% stake. Affiliates of Kelso, along with co-investors of Kelso, invested $300 million and acquired the balance of Premia’s common equity as well as warrants to purchase additional common equity. Subsidiaries of Arch Capital are providing certain administrative and support services to Premia pursuant to services agreements. Arch Re Bermuda has appointed two directors to serve on the compensation disclosure rulesseven-person board of the SEC, including the “Compensation Discussiondirectors of Premia Re. Arch Re Bermuda is providing a 25% quota share reinsurance treaty on certain business written by Premia Re. During 2023, Arch Re Bermuda entered into certain reinsurance transactions with Premia which generated net premiums written and Analysis,” the “Executive Compensation Tables”earned of $80 million and any related material disclosed$81 million, respectively, compared to $121 million and $120 million of net premiums written and earned, respectively in this Proxy Statement. This vote is not intended2022. At December 31, 2023, Arch Re Bermuda recorded funds held in assets from Premia of $158 million, compared to address any one specific item of compensation, but instead, the overall compensation of$119 million at December 31, 2022.In December 2023, we made a $125,000 contribution to the Urban Institute, a non-profit research organization that employs one of our named executive officersdirectors in a non-executive role, Laurie S. Goodman.
In January 2023, we entered into various transactions related to private investments supporting the retrocession requirements of certain companies in the Company’s reinsurance segment (collectively, the “2023 Reinsurance Transactions”). One of the investors in the 2023 Reinsurance Transactions is a fund managed by Artisan Partners Limited Partnership (“APLP”). Certain investment management clients of APLP, including the fund referenced in the previous sentence, held an approximately 6.7% stock ownership interest in Arch Capital as of December 31, 2023. See “Security Ownership of Certain Beneficial Owners and Management—Common Shares” for further detail. Pursuant to the policiestransaction, the fund has committed to providing $100 million in retrocession protection for Arch’s benefit via an insurance-linked securities structure with respect to certain risks underwritten during the relevant policy period in exchange for net ceded premiums. Based on a Schedule 13G/A filed in February 2024, BlackRock Inc. (“BlackRock”) owned approximately 7.3% of the outstanding common shares of Arch Capital as of December 31, 2023. BlackRock, through its subsidiaries, provides various investment management, investment trade support and practices described in this Proxy Statement.
Your vote is advisoryrisk analysis services to Arch Capital and therefore it will not be binding onits subsidiaries. During 2023, the Company incurred $7.1 million of fees, in the Compensation Committeeaggregate, under these services arrangements with BlackRock.
Based on a Schedule 13G/A filed in February 2024, The Vanguard Group (“Vanguard”) owned approximately 10.9% of the Board oroutstanding common shares of Arch Capital as of December 31, 2023. In 2023, Vanguard provided investment management services to Company-sponsored pension plans. Fees payable in connection with investing in Vanguard funds are paid by the Board. However,plans. No fees were paid by the Board and the Compensation Committee value the viewsCompany.
Chiara Nannini, a director of certain of our shareholders and the Compensation Committee will take into account the outcomenon-U.S. subsidiaries, is a director of the advisory vote when considering executive compensation. Welaw firm of Conyers Dill & Pearman Limited (“Conyers”), which provides legal services to the Company and its subsidiaries.
From time to time, in the ordinary course of our business, we may enter into transactions, including insurance and reinsurance transactions and brokerage or other arrangements for the production of business, with entities in which companies or funds affiliated with beneficial owners of more than 5% of our issued and outstanding voting shares or directors of Arch Capital may have determined to include a shareholder vote on the compensationan ownership or other interest.
SHARE OWNERSHIP
Security Ownership of named executive officers (commonly known as a “say on pay” vote) in our Proxy Statement annually until the next required vote on the frequency of say on pay votes. The next say on pay vote accordingly will be held at the 2023 annual general meeting.Certain Beneficial Owners and Management
Recommendation of the Board
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| THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL. |
Appointed Directors, Continuing Directors and Senior Management
The following individuals are our appointed and continuing directors:
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| John L. Bunce, Jr. |
| | |
| n | 65 years old | Mr. Bunce is a Managing Director and Founder of Greyhawk Capital Management, LLC and Managing Director and Founder of Steel Box, LLC. Both Greyhawk and Steel Box are investment organizations. Mr. Bunce has served as a director of numerous public and private companies and he continues to serve on several private company boards and as an Overseer of the Hoover Institution. He holds an A.B. from Stanford University and an M.B.A. from Harvard Business School. Mr. Bunce’s qualifications for service on our Board include his corporate finance background, investment skills, extensive experience in evaluating and overseeing companies in a wide range of industries and service on boards of directors of other companies.
|
| n | Director since November 2001 |
| n | Class III Director of Arch Capital |
| n | Term expires 2025 |
n
| Executive Committee |
n
| Finance, Investment and Risk Committee |
| n | Nominating and Governance Committee |
| |
| | | | | | | | |
| Francis Ebong |
| | |
| n | 43 years old | Mr. Ebong is a Managing Director, Turtle Capital, LLC. He most recently served as Managing Director, Program Management at X, Alphabet’s in-house research and development division, where he was tasked with launching technologies to improve the lives of billions of people. He has an extensive background in technology and innovation, including serving as the Director of Global Operations and Partnerships at Facebook from 2015 to 2017, where he led a global team responsible for launches including FB Live, Marketplace and Messenger. Prior to Facebook, Mr. Ebong was the Head of Operations at Postmates and has experience working at Apple and Deloitte. Mr. Ebong is a veteran of the U.S. Navy and has a degree from the U.S. Naval Academy and an M.B.A. from the George Washington School of Business.
Mr. Ebong’s qualifications for service on our Board include his extensive operational experience and his technology management skills. |
| n | Director since August 2021 |
| n | Class I Director of Arch Capital |
| n | Term expires 2026 |
| n | Audit Committee |
| n | Compensation and Human Capital Committee |
| n | Nominating and Governance Committee |
| | | | | | | | |
| Marc Grandisson |
| | |
| n | 56 years old | Mr. Grandisson is the Chief Executive Officer of Arch Capital as well as a member of our Board, both positions he has served in since March 2018. From March 2018 to December 2020, he was also President of Arch Capital, and from January 2016 to March 2018, he was President and Chief Operating Officer of Arch Capital. Prior to that role, he was Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group from 2005 to 2015 and the Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group from February 2014 to December 2015. He joined Arch Reinsurance Ltd. (“Arch Re Bermuda”) in October 2001 as Chief Actuary. He subsequently held various leadership roles, including Chief Underwriting Officer and Actuary, President and Chief Operating Officer, eventually being named President and Chief Executive Officer at Arch Re Bermuda. Prior to joining Arch, he held various positions with the Berkshire Hathaway Group, F&G Re, Inc. and Tillinghast/Towers Perrin. He holds a B.Sc. in Actuarial Science from Université Laval in Canada and an M.B.A. from The Wharton School of the University of Pennsylvania. He is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Mr. Grandisson’s qualifications for service on our Board include his financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations. |
| n | With Arch since October 2001 |
| n | Chief Executive Officer of Arch Capital |
| n | Director since March 2018 |
| n | Class III Director of Arch Capital |
| n | Term expires 2025 |
| n | Executive Committee |
| |
| |
| |
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| Moira Kilcoyne |
| | |
| n | 62 years old | Ms. Kilcoyne is a technology industry veteran with extensive financial services experience. From 2013 to 2016, she served as Managing Director, Co-Chief Information Officer of Morgan Stanley where she co-headed the company’s global technology and data business and she also sat on the firm’s Management Committee. Prior to becoming Managing Director, Co-Chief Information Officer, Ms. Kilcoyne held a number of senior technology roles within Morgan Stanley. She currently serves on the board of directors of Quilter plc and is a member of the Board of Governors of FINRA. Prior board roles have included Citrix Systems, Inc. and as a Trustee of Manhattan College. Ms. Kilcoyne has a B.S. in Mathematics from Manhattan College. Ms. Kilcoyne’s qualifications for service on our Board include her more than 30 years of experience in the technology industry, her extensive financial services experience and service on boards of directors of other companies.
|
| n | Director since January 2020 |
| n | Class III Director of Arch Capital |
| n | Term expires 2025 |
| n | Audit Committee |
| n | Compensation and Human Capital Committee |
| n | Nominating and Governance Committee |
| |
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| Eileen Mallesch |
| | |
| n | 68 years old | Ms. Mallesch has more than 30 years of finance and risk experience, including serving as Senior Vice President and Chief Financial Officer for Nationwide’s Property and Casualty segment from 2005 to 2009. Prior to that, she was Chief Financial Officer, Senior Vice President at Genworth (2003 to 2005) and General Electric’s (2000 to 2003) Group Insurance and Life Insurance businesses. Ms. Mallesch has broad finance and business strategy expertise in the insurance, telecommunications and consumer products industries. Her significant board experience includes current positions on the boards of Brighthouse Financial and Fifth Third Bancorp. She previously served on the boards of Bob Evans, Libbey Inc., and State Auto Financial. Ms. Mallesch has a B.S. in Accounting from the City University of New York and is a CPA.
Ms. Mallesch’s qualifications for service on our Board include her extensive senior management and operating experience in the insurance industry and her service on boards of directors of other companies. |
| n | Director since August 2021 |
| n | Class I Director of Arch Capital |
| n | Term expires 2026 |
| n | Audit Committee |
| n | Underwriting Oversight Committee |
| |
| |
| | | | | | | | |
| Brian S. Posner |
| | |
| n | 62 years old | Mr. Posner has been a private investor since March 2008 and is the President of Point Rider Group LLC and Point Rider Group (UK) Ltd., both being consulting and advisory services firms focused on financial, technology, bio-pharmaceutical and other services-related companies. From 2005 to March 2008, Mr. Posner served as the President, Chief Executive Officer and Co-Chief Investment Officer of ClearBridge Advisors, LLC, an asset management company and a wholly owned subsidiary of Legg Mason (since acquired by Franklin Resources). Prior to that, in 2000, Mr. Posner co-founded Hygrove Partners LLC, a private investment fund and served as the Managing Member for five years. He served as a portfolio manager and an analyst at Fidelity Investments from 1987 to 1996 and, from 1997 to 1999, at Warburg Pincus Asset Management/Credit Suisse Asset Management where he also served as Co-Chief Investment Officer and director of research. Mr. Posner is a Charter Trustee of Northwestern University and serves on the Advisory Board at Northwestern’s Center for the Study of Diversity and Democracy. He previously served on the board of directors of Biogen Inc. and as Chair of the AQR Funds, among others. He holds a B.A. from Northwestern University and an M.B.A. from the University of Chicago Booth School of Business.
Mr. Posner’s qualifications for service on our Board include his strong financial background, investment skills and extensive experience as a leading institutional investment manager and advisor, as well as his general expertise in matters pertaining to the financial services industry. |
| n | Director since November 2010 |
| n | Class I Director of Arch Capital |
| n | Term expires 2026 |
| n | Compensation and Human Capital Committee |
| n | Finance, Investment and Risk Committee |
| | | | | | | | |
| Eugene S. Sunshine |
| | |
| n | 74 years old | Mr. Sunshine retired at the end of August 2014 as the Senior Vice President for Business and Finance at Northwestern University, the university’s chief financial and administrative officer. Before joining Northwestern in 1997, he was Senior Vice President for Administration at The Johns Hopkins University. Prior to Johns Hopkins, Mr. Sunshine held positions as New York State Deputy Commissioner for Tax Policy and New York State Treasurer as well as Director of Energy Conservation for the New York State Energy Office. Mr. Sunshine is a former member of the boards of Chicago Board Options Exchange, Kaufman Hall and Associates, Keypath Education, Bloomberg L.P., National Mentors Holdings, Nuveen Investments and Kaufman Hall & Associates. He holds a B.A. from Northwestern University and a Master of Public Administration degree from Syracuse University’s School of Citizenship and Public Affairs.
Mr. Sunshine’s qualifications for service on our Board include his strong financial background and extensive executive management and operating experience. |
| n | Director since July 2014 |
| n | Class III Director of Arch Capital |
| n | Term expires 2025 |
| n | Audit Committee |
| n | Compensation and Human Capital Committee |
| n | Nominating and Governance Committee |
| |
| | | | | | | | |
| John D. Vollaro |
| | |
| n | 79 years old | Mr. Vollaro has been a Senior Advisor of Arch Capital since April 2009 and has served as a director of Arch Capital since November 2009. He was Executive Vice President and Chief Financial Officer of Arch Capital from January 2002 to March 2009 and Treasurer of Arch Capital from May 2002 to March 2009. Prior to joining us, Mr. Vollaro acted as an independent consultant in the insurance industry since March 2000. Prior to March 2000, Mr. Vollaro was President and Chief Operating Officer of W.R. Berkley Corporation from January 1996 and a director from September 1995 until March 2000. Mr. Vollaro was Chief Executive Officer of Signet Star Holdings, Inc., a joint venture between W.R. Berkley Corporation and General Re Corporation, from July 1993 to December 1995. Mr. Vollaro served as Executive Vice President of W.R. Berkley Corporation from 1991 until 1993, Chief Financial Officer and Treasurer of W.R. Berkley Corporation from 1983 to 1993 and Senior Vice President of W.R. Berkley Corporation from 1983 to 1991.
Mr. Vollaro’s qualifications for service on our Board include his strong financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations. |
| n | With Arch since 2002 |
| n | Director since November 2009 |
| n | Class I Director of Arch Capital |
| n | Term expires 2026 |
| n | Finance, Investment and Risk Committee |
| n | Underwriting Oversight Committee |
| |
The following individuals are members of senior management, including our executive officers, who do not serve as directors of Arch Capital:
| | | | | | | | |
| François Morin |
| | |
| n | 56 years old | Mr. Morin is Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital, a position he has held since May 2018. Prior to such position, Mr. Morin served as Senior Vice President, Chief Risk Officer and Chief Actuary of Arch Capital, a position he held since May 2015. He joined Arch Capital in October 2011 as Chief Actuary and Deputy Chief Risk Officer. From January 1990 through September 2011, Mr. Morin served in various roles for Towers Watson & Co. and its predecessor firm, Towers Perrin Forster & Crosby, including its actuarial division, Tillinghast. He holds a B.Sc. in Actuarial Science from Université Laval in Canada. He is a Fellow of the Casualty Actuarial Society, a Chartered Financial Analyst, a Chartered Enterprise Risk Analyst and a Member of the American Academy of Actuaries. |
| n | With Arch since October 2011 |
| n | Executive Vice President, Chief Financial Officer and Treasurer, Arch Capital |
| | | | | | | | |
| Nicolas Papadopoulo |
| | |
| n | 61 years old | Mr. Papadopoulo is President and Chief Underwriting Officer of Arch Capital and CEO of Arch Worldwide Insurance Group, a position he has held since January 2021. From September 2017 to December 2020, Mr. Papadopoulo was Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for Property and Casualty Operations. From July 2014 to September 2017, Mr. Papadopoulo was Chairman and Chief Executive Officer of Arch Reinsurance Group at Arch Capital. He joined Arch Re Bermuda in December 2001 where he held a variety of underwriting roles. Prior to joining Arch, he held various positions at Sorema N.A. Reinsurance Group, a U.S. subsidiary of Groupama and he was also an insurance examiner with the Ministry of Finance, Insurance Department, in France. Mr. Papadopoulo graduated from École Polytechnique in France and École Nationale de la Statistique et de l’Administration Economique in France with a master’s degree in statistics. He is also a Member of the International Actuarial Association and a Fellow at the French Actuarial Society. |
| n | With Arch since December 2001 |
| n | President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group |
| | | | | | | | |
| Maamoun Rajeh |
| | |
| n | 53 years old | Mr. Rajeh has served as Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group since October 2017. From July 2014 to September 2017, he was Chairman and Chief Executive Officer of Arch Re Bermuda. He joined Arch Re Bermuda in 2001 as an underwriter, ultimately becoming Chief Underwriting Officer in November 2005. Most recently, he was President and Chief Executive Officer of Arch Reinsurance Europe Underwriting Designated Activity Company (“Arch Re Europe”) from October 2012 to July 2014. From 1999 to 2001, Mr. Rajeh served as Assistant Vice President at HartRe, a subsidiary of The Hartford Financial Services Group, Inc. Mr. Rajeh also served in several business analysis positions at the United States Fidelity and Guarantee Company between 1992 and 1996 and as an underwriter at F&G Re from 1996 to 1999. He has a B.S. from The Wharton School of Business of the University of Pennsylvania and he is a Chartered Property Casualty Underwriter. |
| n | With Arch since December 2001 |
| n | Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group |
| | | | | | | | |
| David E. Gansberg |
| | |
| n | 51 years old | Mr. Gansberg was named Chief Executive Officer of Arch Capital’s Global Mortgage Group on March 1, 2019. From February 2013 through February 2019, he was the President and Chief Executive Officer of Arch Mortgage Insurance Company. From July 2007 to February 2013, Mr. Gansberg was Executive Vice President and a director at Arch Re (U.S.). Prior to that, he held various underwriting, operational and strategic roles at Arch Re Bermuda and Arch Capital Services LLC, where he joined in December 2001. Prior to joining Arch, Mr. Gansberg held various positions with ACE Bermuda and Cigna Property and Casualty. He holds a B.S. in Actuarial Mathematics from the University of Michigan.
|
| n | With Arch since December 2001 |
| n | Chief Executive Officer, Global Mortgage Group, Arch Capital |
| | | | | | | | |
| Jennifer Centrone |
| | |
| n | 51 years old | Ms. Centrone is the Executive Vice President, Chief Human Resources Officer of Arch Capital Services LLC, where she is responsible for leading the organization’s talent and culture strategies. Prior to joining Arch, Ms. Centrone was Senior Vice President, Human Resources at Voya Financial from August 2015 to May 2019, where she was responsible for leading key talent, organizational and transformational strategies. Before Voya Financial, Ms. Centrone held senior human resources roles at both The Hartford Financial Services Group, Inc. and Accenture. She holds a B.A. in English Writing and Literature from Fairfield University. |
| n | With Arch since June 2019 |
| n | Executive Vice President, Chief Human Resources Officer of Arch Capital Services LLC |
| | | | | | | | |
| Chris Hovey |
| | |
| n | 57 years old | Mr. Hovey is Chief Operations Officer of Arch Capital Services LLC. From July 2018 to January 2020, Mr. Hovey served as Executive Vice President and Chief Information Officer at Arch Capital Services LLC. Prior to that, he held the role of Chief Operating Officer of Arch Mortgage Insurance Company. Before joining Arch, Mr. Hovey acted as Chief Operating Officer for PMI Mortgage Insurance Co. (“PMI”) since 2011. He also served as Senior Vice President of servicing operations and loss management for PMI, which he originally joined in 2002. Mr. Hovey holds a B.A. from San Francisco State University and an M.B.A. from Saint Mary’s College in Moraga, California. |
| n | With Arch since January 2014 |
| n | Chief Operations Officer of Arch Capital Services LLC |
| | | | | | | | |
| Louis T. Petrillo |
| | |
| n | 58 years old | Mr. Petrillo has been President and General Counsel of Arch Capital Services LLC since April 2002. From May 2000 to April 2002, he was Senior Vice President, General Counsel and Secretary of Arch Capital. From 1996 until May 2000, Mr. Petrillo was Vice President and Associate General Counsel of Arch Capital’s reinsurance subsidiary. Prior to that time, Mr. Petrillo practiced law at the New York firm of Willkie Farr & Gallagher LLP. He holds a B.A. from Tufts University and a law degree from Columbia University. |
| n | With Arch since January 1996 |
| n | President and General Counsel of Arch Capital Services LLC |
| | | | | | | | |
| Jay Rajendra |
| | |
| n | 43 years old | Mr. Rajendra is the Chief Strategy and Innovation Officer at Arch Capital. He is responsible for pursuing new business models and technologies while leading Arch’s analytics capabilities to improve profitability and growth. Mr. Rajendra joined Arch in 2016 in the role of Chief Analytics Officer for Arch Capital, a position he held until January 2020. Prior to joining Arch, Mr. Rajendra was Head of Business Solutions for XL Catlin’s Strategic Analytics team. Before XL, Mr. Rajendra was a Senior Consultant at Towers Watson in both North America and Europe, where he advised large international (re)insurers and start-ups on pricing, strategy and mergers and acquisitions (“M&A”). He is a Fellow of the Institute of Actuaries, Fellow of the Casualty Actuarial Society and Member of the American Academy of Actuaries. He holds a combined Bachelors and Masters in Mathematics from Oxford University and an M.B.A. from Massachusetts Institute of Technology. |
| n | With Arch since August 2016 |
| n | Chief Strategy and Innovation Officer at Arch Capital |
| | | | | | | | |
| Christine Todd |
| | |
| n | 57 years old | Ms. Todd is Senior Vice President, Chief Investment Officer at Arch Capital and President of Arch Investment Management Ltd. (“AIM”) and has responsibility for setting the firm’s investment strategy and managing the day-to-day operations of the investment portfolio. Prior to joining Arch, Ms. Todd was Head of Fixed Income, U.S., for Amundi US from February 2019 to May 2021. She has also held executive roles at Neighborly Investments; Standish Mellon Asset Management Company LLC; and Gannett, Welsh & Kotler. She is a Chartered Financial Analyst and holds a B.A. from Georgetown University and an M.B.A. from Boston University. |
| n | With Arch since June 2021 |
| n | Senior Vice President, Chief Investment Officer of Arch Capital |
Succession Planning
We have a robust talent and succession planning process. On an annual basis, management prepares a talent and succession plan for our CEO and for each member of our executive management team, focusing on high performing and high potential talent, diverse talent and the succession plan for each position. On an annual basis, our Board receives a comprehensive succession plan for the CEO and for each member of our executive management team. Our Board has delegated primary oversight responsibility for succession planning for our CEO to our Nominating and Governance Committee, and for our other members of our executive management team to the Compensation and Human Capital Committee. Our Board continues to regularly evaluate its succession planning to ensure that we are well-positioned to execute our corporate strategy.
Director Compensation
The Compensation and Human Capital Committee is responsible for reviewing and making recommendations to the Board regarding all matters pertaining to compensation paid to directors for Board, committee and committee chair services.
In making non-employee director compensation recommendations, the Compensation and Human Capital Committee takes various factors into consideration, including, but not limited to, input received from the Compensation and Human Capital Committee’s independent consultant, the responsibilities of directors generally, as well as committee chairs, and the form and amount of compensation paid to directors by comparable companies. The Board reviews the recommendations of the Compensation and Human Capital Committee and determines the form and amount of director compensation.
The following table provides information concerning the compensation of our directors for the year ended December 31, 2023. Directors who also serve as employees of the Company do not receive payment for service as directors. In addition to the arrangements described below, all non-employee directors are entitled to reimbursement for their reasonable out-of-pocket expenses in connection with their travel to and attendance at meetings of the Board or committees. For a complete understanding of the table, refer to the footnotes and the narrative disclosures that follow the table. Please also refer to the “2023 Summary Compensation Table” for Mr. Grandisson’s compensation. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Committee Chair | Fees Earned
or Paid in Cash
($)(1) | Stock
Awards
($)(2) | | All Other
Compensation
($)(3) | Total
($) |
| John L. Bunce, Jr. | | NC | 150,007 | | | 124,985 | | — | | | 274,992 |
| Eric W. Doppstadt | | | 125,007 | | | 124,985 | | — | | | 249,992 |
| Francis Ebong | | | 154,596 | | | 124,985 | | 24,618 | | | 304,199 |
| Laurie S. Goodman | | | 150,007 | | | 124,985 | | 25,000 | | | 299,992 |
| Moira Kilcoyne | | CC** | 154,596 | | | 124,985 | | — | | | 279,581 |
| Eileen Mallesch | | AC | 179,596 | | | 124,985 | | — | | | 304,581 |
| Louis J. Paglia | | UC | 175,007 | | | 124,985 | | 25,000 | | | 324,992 |
| John M. Pasquesi * | | EC | 260,007 | | | 124,985 | | 25,000 | | | 409,992 |
| Brian S. Posner | | FC | 175,007 | | | 124,985 | | 2,500 | | | 302,492 |
| Eugene S. Sunshine | | | 150,007 | | | 124,985 | | 25,000 | | | 299,992 |
| John D. Vollaro | | | 500,000 | | (4) | — | | 64,313 | | (5) | 564,313 |
| Thomas R. Watjen | | ** | 150,007 | | | 124,985 | | — | | | 274,992 |
AC = Audit Committee Chair, CC = Compensation and Human Capital Committee Chair, EC = Executive Committee Chair, FC = Finance, Investment and Risk Committee Chair, NC = Nominating and Governance Committee Chair, UC = Underwriting Oversight Committee Chair
* Chair of the Board
** Mr. Watjen served as the Compensation and Human Capital Committee Chair until he was succeeded by Ms. Kilcoyne on December 31, 2023.
(1) Each non-employee member of our Board is entitled to receive an annual cash retainer fee in the amount of $125,000. Each such director may elect to receive the retainer fee in the form of common shares instead of cash. If so elected, the number of shares distributed to the non-employee director will be equal to 100% of the amount of the annual retainer fee otherwise payable divided by the fair market value of our common shares on the date of grant. This column includes the annual retainer (whether paid in cash or, at the election of the director, in common shares) and the fees for service as Chair of the Board, committee chair and Audit Committee member. For the 2022-2023 annual period, Ms. Mallesch received a pro-rated Audit Committee Chair retainer when she assumed the role on February 27, 2023, from Mr. Posner, who remained a member of the Audit Committee through December 31, 2023. On February 27, 2023, Mr. Posner assumed the Finance, Investment and Risk Committee Chair from Mr. Doppstadt. Also, Ms. Kilcoyne and Mr. Ebong joined the Audit Committee on February 27, 2023 and received a prorated 2022-2023 Audit Committee member fee. In addition, Mss. Goodman and Mallesch and Messrs. Doppstadt, Ebong, Paglia, Posner and Watjen received their annual retainer fees in the form of cash and Ms. Kilcoyne and Messrs. Bunce and Sunshine received their annual retainers in the form of 1,714 common shares. Additionally, Mr. Pasquesi elected to receive his annual retainer and Chair of the Board fee in shares in the form of 1,714 common shares for each fee.
The following table sets forth the fees payable to our chairs and Audit Committee members:
| | | | | |
| Committee Chair/Member | Annual Fee ($) |
| Audit Committee Chair | 50,000 | |
| Audit Committee Member | 25,000 | |
| Chair of the Board | 125,000 | |
| Compensation and Human Capital Committee Chair | 25,000 | |
| Executive Committee Chair | 10,000 | |
| Finance, Investment and Risk Committee Chair | 25,000 | |
| Nominating and Governance Committee Chair | 25,000 | |
| Underwriting Oversight Committee Chair | 50,000 | |
(2)Each year, the non-employee directors are granted a number of restricted shares equal to $125,000 divided by the closing price on the date of grant (i.e., the first day of the annual period of compensation for the non-employee directors), and such shares vest on the one-year anniversary of grant date. The grant date fair value indicated in the table has been calculated in accordance with FASB ASC Topic 718 Compensation—Stock Compensation, using assumptions set forth in the notes accompanying our financial statements. See note 22, “Share-Based Compensation,” on pages 164-167 of the notes accompanying our consolidated financial statements included in our 2023 Annual Report. On May 4, 2023, each non-employee director received 1,714 common shares, which will vest on May 4, 2024.
The aggregate number of share awards outstanding (i.e., unvested) as of December 31, 2023, for each of the non-employee directors was 1,714 common shares, except for Mr. Watjen whose outstanding share awards were forfeited upon his resignation from the Board on December 31, 2023.
(3)The amounts in the “All Other Compensation” column for Ms. Goodman, and Messrs. Ebong, Paglia, Pasquesi, Posner and Sunshine consist of matching gifts made under the Company’s matching gift program. Under the matching gift program in 2023, the Company matched eligible contributions to qualified charitable organizations on a dollar-for-dollar basis, up to a maximum of $25,000 per calendar year. During 2023, the Company made an aggregate of approximately $127,118 in matching contributions on behalf of the directors noted in the table above.
(4) Mr. Vollaro is a Senior Advisor and an employee of the Company. Mr. Vollaro’s employment agreement provides that he receives an annual base salary of $250,000 and a bonus determined by the Compensation and Human Capital Committee and the Board for his role as Senior Advisor of the Company. For 2023, Mr. Vollaro received a cash bonus of $250,000. In addition, Mr. Vollaro is a member of the Finance, Investment and Risk Committee and Underwriting Oversight Committee of the Board. A description of Mr. Vollaro’s employment agreement is included below.
(5) The amount for Mr. Vollaro includes $39,840 in contributions to our defined contribution plan. In addition, the total amount includes payment for club dues and tax preparation services, none of which exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Vollaro.
Employment Agreement with John Vollaro
Our employment agreement with John Vollaro provides for his employment as Senior Advisor of Arch Capital to continue until terminated by either party by providing at least six months’ prior written notice. His base salary is $250,000 per annum, and the target rate for his annual cash bonus is 100% of his annual base salary. Mr. Vollaro is eligible to receive share-based awards at the discretion of the Board and is also entitled to participate in employee benefit programs and other fringe benefits customarily provided to similarly situated senior executives. The Company will reimburse him for his reasonable expenses incurred traveling between Bermuda and the United States.
If Mr. Vollaro’s employment is terminated by us without cause, he will be entitled to receive the base salary and target annual bonus which would have been paid to him under his employment agreement for the period through six months after the date of termination of employment (the “Severance Amount”). The Severance Amount would be payable over 12 months. The agreement further provides that if Mr. Vollaro’s employment is terminated by reason of his death or permanent disability, he (or his estate) will be entitled to receive an amount equal to the
Severance Amount, in each case, (i) offset by any proceeds received from any insurance coverages provided by the Company and (ii) such amount, will be paid to him (or his estate) promptly upon death or permanent disability, as applicable. Mr. Vollaro’s medical insurance coverage benefits will continue for up to 12 months after the date of termination in the event that his employment ends due to permanent disability, or he is terminated other than for cause. Mr. Vollaro has agreed that, during the employment period and for a period of two years after termination of employment for cause or as a result of his resignation, he will not compete with the businesses of Arch Capital or any of its subsidiaries as such businesses exist or are in process or being planned as of the date of termination. If we terminate Mr. Vollaro’s employment without cause, the term of his noncompetition period will extend for one year following termination. Mr. Vollaro also agreed that he will not, for a period of two years following his date of termination, induce or attempt to induce any of our employees to leave his or her position with us or induce any customer to cease doing business with us.
Matters Relating to Director Share Ownership
In an effort to further align the interests of the non-employee directors with the interests of shareholders, the Company has adopted:
Share Ownership Guidelines: Share ownership guidelines require the directors to retain common shares having a value of at least three times the annual cash retainer fee payable to the director. Starting in 2024, the share ownership guidelines are increasing from three to five times the annual cash retainer fee payable to the director. Each non-employee director has five years to comply with the guidelines, and stock options, SARs and unvested restricted shares/units do not count toward the requirement.
Share Holding Requirements:Until our non-employee directors meet their target ownership levels, they must retain an amount equal to 50% of the net profit shares received from Arch Capital’s equity awards. Net profit shares are the shares remaining after payment of taxes owed on vesting of restricted stock or on vesting and payout under restricted stock units. Under the director share holding requirements, net profit shares would also include shares remaining after payment of the exercise price of an option and taxes owed on exercise of options or SARs or on vesting and payout under performance shares, although our non-employee directors do not
currently hold or receive Arch Capital performance shares, options or SARs.
No Hedging Permitted:As part of our Code of Business Conduct, our officers, directors and other employees are not permitted to engage in hedging activities with respect to Arch Capital’s common shares or any other publicly- traded equity or debt securities issued by Arch Capital or any of its subsidiaries. Specifically, they may not engage in short sales, purchase or sale of financial instruments or derivatives, including puts and calls, that hedge or offset any change in the market value of such securities. In addition, our officers, directors and other employees may not otherwise engage in transactions that are designed to, or have, the same effect.
Certain Relationships and Related Person Transactions
Generally, transactions with related persons are subject to review by the disinterested members of our Board. Our Board has adopted written procedures regarding the review of transactions involving companies affiliated with a company in which a non-employee director or executive officer of Arch Capital has a material interest (each a “portfolio company”), on the one hand, and Arch Capital or one of its subsidiaries, on the other hand. Under the
procedures, these transactions must be reviewed and approved by the management of Arch Capital or the operating subsidiary entering into the transaction (as applicable), and the terms of such transaction should be arm’s-length or on terms that are otherwise fair to Arch Capital and its subsidiaries. In addition, except for a few defined de minimis exceptions, these transactions also require the approval of Arch Capital under its holding company oversight guidelines. In reviewing these proposed transactions, the effects, if any, on the independence of the relevant directors are considered under the governing Nasdaq and SEC standards. Any applicable regulatory, tax and ratings agency matters are also considered. Under these procedures, the Board is regularly provided with an update of related party transactions.
In January 2017, the Company and Kelso & Co. (“Kelso”), sponsored Premia Reinsurance Ltd., a newly formed multi-line Bermuda reinsurance company (“Premia Re”). Premia Re’s strategy is to reinsure or acquire companies or reserve portfolios in the non-life property and casualty insurance and reinsurance run-off market. The initial capitalization of Premia Re’s parent, Premia Holdings Ltd. (“Premia”), consisted of $400 million in common equity and $110 million in unsecured senior debt. Arch Re Bermuda and certain Arch co-investors, including senior management of Premia, invested $100 million and acquired 25% of Premia’s common equity as well as warrants to purchase additional common equity. Two of the co-investors included Nicolas Papadopoulo, President and Chief Underwriting Officer of Arch Capital and CEO of Arch Worldwide Insurance Group, who invested $2.5 million for a 0.625% stake, and Maamoun Rajeh, Chairman and CEO of Arch Worldwide Reinsurance Group, who invested $0.5 million for a 0.125% stake. Affiliates of Kelso, along with co-investors of Kelso, invested $300 million and acquired the balance of Premia’s common equity as well as warrants to purchase additional common equity. Subsidiaries of Arch Capital are providing certain administrative and support services to Premia pursuant to services agreements. Arch Re Bermuda has appointed two directors to serve on the seven-person board of directors of Premia Re. Arch Re Bermuda is providing a 25% quota share reinsurance treaty on certain business written by Premia Re. During 2023, Arch Re Bermuda entered into certain reinsurance transactions with Premia which generated net premiums written and earned of $80 million and $81 million, respectively, compared to $121 million and $120 million of net premiums written and earned, respectively in 2022. At December 31, 2023, Arch Re Bermuda recorded funds held in assets from Premia of $158 million, compared to $119 million at December 31, 2022.
In December 2023, we made a $125,000 contribution to the Urban Institute, a non-profit research organization that employs one of our directors in a non-executive role, Laurie S. Goodman.
In January 2023, we entered into various transactions related to private investments supporting the retrocession requirements of certain companies in the Company’s reinsurance segment (collectively, the “2023 Reinsurance Transactions”). One of the investors in the 2023 Reinsurance Transactions is a fund managed by Artisan Partners Limited Partnership (“APLP”). Certain investment management clients of APLP, including the fund referenced in the previous sentence, held an approximately 6.7% stock ownership interest in Arch Capital as of December 31, 2023. See “Security Ownership of Certain Beneficial Owners and Management—Common Shares” for further detail. Pursuant to the transaction, the fund has committed to providing $100 million in retrocession protection for Arch’s benefit via an insurance-linked securities structure with respect to certain risks underwritten during the relevant policy period in exchange for net ceded premiums. Based on a Schedule 13G/A filed in February 2024, BlackRock Inc. (“BlackRock”) owned approximately 7.3% of the outstanding common shares of Arch Capital as of December 31, 2023. BlackRock, through its subsidiaries, provides various investment management, investment trade support and risk analysis services to Arch Capital and its subsidiaries. During 2023, the Company incurred $7.1 million of fees, in the aggregate, under these services arrangements with BlackRock.
Based on a Schedule 13G/A filed in February 2024, The Vanguard Group (“Vanguard”) owned approximately 10.9% of the outstanding common shares of Arch Capital as of December 31, 2023. In 2023, Vanguard provided investment management services to Company-sponsored pension plans. Fees payable in connection with investing in Vanguard funds are paid by the plans. No fees were paid by the Company.
Chiara Nannini, a director of certain of our non-U.S. subsidiaries, is a director of the law firm of Conyers Dill & Pearman Limited (“Conyers”), which provides legal services to the Company and its subsidiaries.
From time to time, in the ordinary course of our business, we may enter into transactions, including insurance and reinsurance transactions and brokerage or other arrangements for the production of business, with entities in which companies or funds affiliated with beneficial owners of more than 5% of our issued and outstanding voting shares or directors of Arch Capital may have an ownership or other interest.
SHARE OWNERSHIP
Security Ownership of Certain Beneficial Owners and Management
Common Shares
The following table sets forth information available to us as of March 13, 2024 with respect to the ownership of our voting shares by (1) each person known to us to be the beneficial owner of more than 5% of any class of our issued and outstanding voting shares, (2) each director and NEO of Arch Capital and (3) all of the directors and executive officers of Arch Capital as a group. Except as otherwise indicated, each person named below has sole investment and voting power with respect to the securities shown.
| | | | | | | | | |
| Common Shares | |
| Name and Address of Beneficial Owner | (A)
Number of Common Shares Beneficially Owned (1) | (B)
Rule 13d-3
Percentage Ownership (1) | |
The Vanguard Group (2)
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
| 40,754,642 | | 10.9 | % | |
BlackRock, Inc. (3)
50 Hudson Yards
New York, New York 10001 | 27,327,595 | | 7.3 | % | |
Artisan Partners Holdings LP (4)
875 East Wisconsin Avenue, Suite 800
Milwaukee, Wisconsin 53202 | 24,894,249 | | 6.6 | % | |
Baron Capital Group, Inc. (5)
767 Fifth Avenue
New York, New York 10153 | 21,292,042 | | 5.7 | % | |
| Marc Grandisson (6) | 3,926,104 | | 1.0 | % | |
| John L. Bunce, Jr. (7) | 1,554,048 | | * | |
| Eric W. Doppstadt (8) | 77,779 | | * | |
| Francis Ebong (9) | 6,534 | | * | |
| Laurie S. Goodman (10) | 32,483 | | * | |
| Moira Kilcoyne (11) | 26,823 | | * | |
| Eileen Mallesch (12) | 8,712 | | * | |
| Louis J. Paglia (13) | 54,056 | | * | |
| John M. Pasquesi (14) | 5,212,827 | | 1.4 | % | |
| Brian S. Posner (15) | 117,085 | | * | |
| Eugene S. Sunshine (16) | 33,075 | | * | |
| John D. Vollaro (17) | 427,429 | | * | |
| David E. Gansberg (18) | 502,946 | | * | |
| François Morin (19) | 629,764 | | * | |
| Nicolas Papadopoulo (20) | 1,244,614 | | * | |
| Maamoun Rajeh (21) | 738,549 | | * | |
| All directors and executive officers (18 persons) (22) | 15,079,006 | | 4.0 | % | |
* Denotes beneficial ownership of less than 1%
(1)Pursuant to Rule 13d-3 promulgated under the Exchange Act, amounts shown include common shares that may be acquired by a person within 60 days of March 13, 2024. Therefore, column (B) has been computed based on (a) 375,145,392 common shares actually issued and outstanding as of March 13, 2024; and (b) solely with respect to the person whose Rule 13d-3 Percentage Ownership of common shares is being computed, common shares that may be acquired within 60 days of March 13, 2024, upon the exercise of options held only by such person. All references to “options” in the above table and the related footnotes include SARs, as applicable.
(2)Based on a Schedule 13G/A filed with the SEC on February 13, 2024, by Vanguard. In the Schedule 13G/A it is reported that Vanguard has shared dispositive power with respect to 1,557,574 common shares, shared voting power with respect to 465,402 common shares and sole dispositive power with respect to 39,197,068 common shares.
(3)Based on a Schedule 13G/A filed with the SEC on February 1, 2024, by BlackRock. In the Schedule 13G/A it is reported that BlackRock has sole voting power with respect to 24,554,161 common shares and sole dispositive power with respect to 27,327,595 common shares.
(4)Based on a Schedule 13G/A filed with the SEC on February 12, 2024, jointly by APLP, Artisan Investments GP LLC (“Artisan Investments”), Artisan Partners Holdings LP (“Artisan Holdings”), Artisan Partners Asset Management Inc. (“APAM”) and Artisan Partners Funds, Inc. (“Artisan Funds”). APLP is an investment advisor and Artisan Funds is an investment company. Artisan Holdings is the sole limited partner of APLP and the sole member of Artisan Investments. Artisan Investments is the general partner of APLP and APAM is the general partner of Artisan Holdings. The Schedule 13G/A reported that the common shares have been acquired on behalf of discretionary clients of APLP, which holds 24,894,249 common shares, including 17,459,639 common shares on behalf of Artisan Funds. In addition, the Schedule 13G/A reported that (a) APLP, Artisan Investments, Artisan Holdings and APAM each has shared voting with respect to 24,097,765 common shares and shared dispositive power with respect to 24,894,249 common shares; and (b) Artisan Funds has shared voting and dispositive power with respect to 17,459,639 common shares.
(5)Based upon a Schedule 13G/A filed with the SEC on February 14, 2024, jointly by Baron Capital Group, Inc. (“BCG”), BAMCO, Inc. (“BAMCO”), Baron Capital Management, Inc. (“BCM”) and Ronald Baron (collectively, the “Baron Group”). In the Schedule 13G/A, the Baron Group reported that BAMCO and BCM are subsidiaries of BCG, and Ronald Baron owns a controlling interest in BCG. In addition, the Schedule 13G/A reported that (a) BCG has shared voting power with respect to 20,905,042 common shares and shared dispositive power with respect to 21,292,042 common shares; (b) BAMCO has shared voting power with respect to 19,701,673 common shares and shared dispositive power with respect to 20,088,673 common shares; (c) BCM has shared voting and shared dispositive power with respect to 1,203,369 common
shares; and (d) Ronald Baron has shared voting power with respect to 20,905,042 common shares and shared dispositive power with respect to 21,292,042 common shares.
(6)Amounts in columns (A) and (B) reflect, on March 13, 2024, (a) 275,784 common shares owned directly by Mr. Grandisson (including 36,572 restricted shares, which were subject to vesting based solely on continued employment); (b) 1,937,157 common shares owned by a company for which Mr. Grandisson is the sole owner; (c) stock options and SARs with respect to 1,393,413 common shares that were exercisable on that date or within 60 days thereof; and (d) 319,750 performance restricted shares which were subject to forfeiture and reacquisition in the event that performance criteria were not met. Amounts do not include stock options and SARs with respect to 138,982 common shares that were not exercisable within 60 days of March 13, 2024.
(7)Amounts in columns (A) and (B) reflect 1,554,048 common shares owned directly by Mr. Bunce.
(8)Amounts in columns (A) and (B) reflect 77,779 common shares owned directly by Mr. Doppstadt.
(9)Amounts in columns (A) and (B) reflect 6,534 common shares owned directly by Mr. Ebong.
(10)Amounts in columns (A) and (B) reflect 32,483 common shares owned directly by Ms. Goodman.
(11)Amounts in columns (A) and (B) reflect 26,823 common shares owned directly by Ms. Kilcoyne.
(12)Amounts in columns (A) and (B) reflect 8,712 common shares owned directly by Ms. Mallesch.
(13)Amounts in columns (A) and (B) reflect 54,056 common shares owned directly by Mr. Paglia.
(14)Amounts in columns (A) and (B) reflect (a) 1,221,693 common shares owned by Otter Capital LLC, for which Mr. Pasquesi serves as the Managing Member; (b) 3,809,473 common shares owned indirectly by revocable trusts for which Mr. Pasquesi and his spouse are the trustees; (c) 179,947 common shares owned indirectly by a family limited partnership; and (d) 1,714 common shares owned directly by Mr. Pasquesi. In addition, certain common shares held by the trusts and by the family limited partnership are subject to a security agreement. As of the record date, none of Mr. Pasquesi’s common shares are being used to secure any outstanding loans pursuant to such security agreement.
(15)Amounts in columns (A) and (B) reflect 117,085 common shares owned directly by Mr. Posner.
(16)Amounts in columns (A) and (B) reflect 33,075 common shares owned directly by Mr. Sunshine.
(17)Amounts in columns (A) and (B) reflect 427,429 common shares owned by trusts for which Mr. Vollaro or his spouse serve as trustees.
(18)Amounts in columns (A) and (B) reflect, on March 13, 2024, (a) 238,035 common shares owned directly by Mr. Gansberg (including 11,336 restricted shares, which were subject to vesting based solely on continued
employment); (b) stock options and SARs with respect to 170,655 common shares that were exercisable on that date or within 60 days thereof; and (c) 94,256 performance restricted shares which were subject to forfeiture and reacquisition in the event that performance criteria were not met. Amounts do not include stock options and SARs with respect to 42,682 common shares that were not exercisable within 60 days of March 13, 2024.
(19)Amounts in columns (A) and (B) reflect, on March 13, 2024, (a) 221,779 common shares owned directly by Mr. Morin (including 9,434 restricted shares, which were subject to vesting based solely on continued employment); (b) stock options and SARs with respect to 326,111 common shares that were exercisable on that date or within 60 days thereof; and (c) 81,874 performance restricted shares which were subject to forfeiture and reacquisition in the event that performance criteria were not met. Amounts do not include stock options and SARs with respect to 35,773 common shares that were not exercisable within 60 days of March 13, 2024.
(20)Amounts in columns (A) and (B) reflect, on March 13, 2024, (a) 651,931 common shares owned directly by Mr. Papadopoulo (including 16,857 restricted shares, which were subject to vesting based solely on continued employment); (b) stock options and SARs with respect to 447,345 common shares that were exercisable on that date or within 60 days thereof; and (c) 145,338 performance restricted shares which were subject to forfeiture and reacquisition in the event that performance criteria were not met. Amounts do not include stock options and SARs with respect to 63,872 common shares that were not exercisable within 60 days of March 13, 2024.
(21)Amounts in columns (A) and (B) reflect, on March 13, 2024, (a) 336,170 common shares owned directly by Mr. Rajeh (including 11,336 restricted shares, which were subject to vesting based solely on continued employment); (b) stock options and SARs with respect to 308,123 common shares that were exercisable on that date or within 60 days thereof; and (c) 94,256 performance restricted shares which were subject to forfeiture and reacquisition in the event that performance criteria were not met. Amounts do not include stock options and SARs with respect to 42,682 common shares that were not exercisable within 60 days of March 13, 2024.
(22)In addition to securities beneficially owned by the directors and the NEOs reflected in the table, includes an aggregate of 486,178 common shares which are beneficially owned on March 13, 2024 by executive officers who are not directors of Arch Capital, including restricted shares which were subject to vesting based solely on continued employment, common shares issuable upon exercise of stock options and SARs that were exercisable on that date or within 60 days thereof and performance restricted shares which were subject to forfeiture and reacquisition in the event that performance criteria were not met.
Preferred Shares
The following table sets forth information available to us as of March 13, 2024, with respect to the ownership of our non-cumulative preferred shares by (1) each director and NEO of Arch Capital who owns such shares and (2) all of the directors and executive officers of Arch Capital as a group. Except as otherwise indicated, each person named below has sole investment and voting power with respect to the securities shown. Our preferred shares are not convertible into common shares, and the holders of the preferred shares do not have any voting rights (except under certain limited circumstances). For a description of the terms of our preferred shares, please see note 21, “Shareholders’ Equity,” on pages 163-164 of the notes accompanying our consolidated financial statements included in our 2023 Annual Report.
| | | | | | | | |
| Preferred Shares |
| Name of Beneficial Owner | Number of Series F Preferred Shares Beneficially Owned |
Percentage of Class Owned |
| Brian S. Posner | 3,000 | | * |
| All directors and executive officers (18 persons) | 3,000 | | * |
| | |
| Number of Series G Preferred Shares Beneficially Owned | Percentage of Class Owned |
| Brian S. Posner | 4,000 | | * |
| All directors and executive officers (18 persons) | 4,000 | | * |
* Denotes beneficial ownership of less than 1%
COMPENSATION
ITEM 2—ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
In deciding how to vote on this proposal, the Board encourages you to read the Compensation Discussion and Analysis and Compensation Tables sections. We have designed our compensation programs with the intention of linking compensation and the Company’s business performance and talent retention strategies as well as the long-term interests of our shareholders. We have a “pay-for-performance” philosophy that forms the foundation of all decisions regarding compensation of our NEOs.
We are requesting shareholder approval of the compensation of our NEOs as disclosed pursuant to the compensation disclosure rules of the SEC, including the “Compensation Discussion and Analysis,” the “Executive Compensation Tables” and any related material disclosed in this Proxy Statement. This vote is not intended to address any one specific item of compensation, but instead, the overall compensation of our NEOs and the policies and practices described in this Proxy Statement. Your vote is advisory and therefore it will not be binding on the Company, the Compensation and Human Capital Committee of the Board or the Board. However, the Board and the Compensation and Human Capital Committee value the views of our shareholders and the Compensation and Human Capital Committee will take into account the outcome of the advisory vote when considering executive compensation. We have determined to include a shareholder vote on the compensation of NEOs (commonly known as a “say on pay” vote) in our Proxy Statement annually until the next required vote on the frequency of say on pay votes, which will be in 2029. The next say on pay vote accordingly will be held at the 2025 annual general meeting.
Recommendation of the Board
| | | | | |
| THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL. |
Compensation Discussion and Analysis
The Compensation Discussion and Analysis section explains our compensation philosophy, summarizes our compensation programs and reviews compensation decisions for the named executive officersNEOs whose compensation information is presented in the tables following this discussion in accordance with SEC rules. Named executive officersNEOs for 20212023 were:
| | | | | |
| Name | | | | | Title |
Name | Title |
| Marc Grandisson | Chief Executive Officer and Class III Director, Arch Capital |
| François Morin | Executive Vice President, Chief Financial Officer and Treasurer, Arch Capital |
| Nicolas Papadopoulo | President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group |
| Maamoun Rajeh | Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group |
| David E. Gansberg | Chief Executive Officer, Global Mortgage Group, Arch Capital |
| | | | | | | | |
| 33 | 2022| 2024 PROXY STATEMENT | | 36 |
Strong Link Between Pay and Performance
Our executive compensation programs are designed to link pay and performance and to align the interests of our executives with those of our shareholders by tying significant portions of their compensation to the Company’s financial performance and stock price performance. We utilize a formulaic approach in our annual incentive plan design for our senior executive team, including our named executive officers,NEOs, and the majority of our long-term incentive awards for senior executives (including named executive officers)NEOs) are granted in the form of performance shares.
| | | | | | | | |
| CEO Target Mix of Pay | | Other Named Executive Officers
NEOs
Target Mix of Pay |
| | |
As illustrated above for our CEO, 75% of target compensation was performance-based and 60%65% consists of long-term incentives. | | As illustrated above for our other named executive officers, 68%NEOs, 71% of target compensation was performance-based and 48%53% consists of long-term incentives. |
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37 | | 20222024 PROXY STATEMENT | | 34 |
20212023 Performance at a Glance1
1 Excludes amounts related to the “other” segment (i.e., Somers).effects of stock options, restricted and performance stock units outstanding.
In 2021,2023 was a year of exceptional performance across our diversified platform that resulted in new records in both underwriting income and premium growth. The Company generated $4.4 billion of net income available to Arch celebrated its 20th year as a company by delivering excellent performance – despite an active catastrophe yearcommon shareholders (“Net Income”) and continued uncertainty around COVID-19. Arch generated over $1.4$3.2 billion of after-tax operating income – more than double 2020’s results ($557 million). Additionally, book value per shareincome—a 207% and 74% increase, respectively, from our 2022 results. See “Annex B—Non-GAAP Financial Measures” for additional information on our non-GAAP measures.We continued our topline growth trajectory of the past several years with a 20.1% increase in gross premiums written (“BVPS”GPW”) rose by 10.7% over theand 21.6% increase in net premiums written (“NPW”) from 2022.
Building on momentum of prior year alongside a returnyears and capitalizing on net income of 16.7%. Further, we repurchased $1.2 billion of common shares in 2021, which will enable Arch to deliver even more long-term value for its shareholders.
Ourhard market conditions, our insurance and reinsurance property and casualty (“P&C”) businesses continued their growth trajectory with $7.4delivered significant growth. In 2023, the P&C units wrote
$12.4 billion of net premiums, written (“NPW”) amidst an excellent pricing environment.besting the prior record set in 2022. Our Mortgage segment completed its rebound from pandemic-related uncertaintiescontinued to deliver a record $953 million of underwriting income. On the year, all three of Arch’s operating segments each delivered over $100 million inprovide meaningful underwriting income, – highlightingdelivering over $1.0 billion for the valuesecond consecutive year amid challenging mortgage market conditions.
Fueled by the growth of our diversified business model.
Additionally, our investment portfolio returned $501 millionP&C units, investable assets increased to our bottom line, through$34.6 billion at the end of 2023, a 23% increase from the $28.1 billion at the end of 2022. The “float” generated from the increased premiums helped us produce over $1.0 billion of net investment income gainsfor the first time in our history, a 106% increase from equity method investments, realized gains and losses and changes in unrealized gains and losses. A solid performance – in spite of an ongoing low interest rate environment and volatility in the capital markets.
2022 on a per-share basis.This year, we reported separately the performance of our investments in operating affiliates, as they reached a meaningful size. Our share of the returns for these affiliates was $265 million, on approximately $1.1 billion of capital deployed at year-end 2021.
Underwriting quality remained excellent with our combined ratio of 84.3%79.3% for 2021,2023, an improvement of 230 basis points from 2022 and ranking in the 88th78th percentile of our Performance Peer Group (as defined below)(refer to “How We Make Compensation Decisions”). Our performance on the four key measures we track for compensation purposes was solid, with: (1) operating income return on average common equity at the 44th percentile. It is worth noting that our definition of operating income, contrary to most of our peer group, does not include equity in net income of investments accounted for using the equity method. If we were to include such returns in our definition, our performance would have been approximately at the 72nd percentile.88th percentile, (2) total shareholder return (“TSR”) tracking at the 56th67th percentile, (3) net income return on average common equity at the 61st94th percentile and (4) growth in tangible book value per share at the 50th89th percentile. Refer to “Long-Term Performance”discussion for additional information on our performance results.results and see “Annex B—Non-GAAP Financial Measures” for additional information on our non-GAAP measures. Achievements in 20212023
The following are among the highlightsIn 2023 we drove meaningful growth and profit by executing successfully in advancingeach of our corporate strategic initiatives:three business segments.
Despite the elevated catastrophe year, the Insurance segment was ableNPW increased to grow both the top and bottom lines
compared to 2020, producingapproximately $5.9 billion, of gross premiums written (“GPW”) – up from $4.7$5.0 billion in 2022 with growth coming from 2020 — and $117 milliona diverse mix of underwriting income compared to a loss of $129 million in 2020. Growth occurred across geographic regions, with Professional Lines,coverages including Property, Energy, Marine and Aviation, Construction and Programs experiencingNational Accounts, and Programs. Underwriting income of $450 million doubled the largest increases.segment’s result from 2022 while the combined ratio of 91.7% represented a 330 basis point improvement from the prior year.
Our Reinsurance segment also grew substantiallyNPW of $6.6 billion was a 33% increase from 2020. GPW increased from $3.5 billion to $5.1 billion and NPW increased from $2.5 billion to $3.3 billion as the team leaned into2022 with broad-based growth reflecting improved market conditions acrossconditions. $1.1 billion in underwriting income was a variety of specialty areas. We expanded our platform by acquiring Watford alongside two private equity partners before rebrandingsegment record. The combined ratio for Reinsurance was 81.4% for the entity as Somers and then also
purchasing Somerset Bridge Group – deepening our motor and distribution capabilitiesyear, a substantial improvement from the 92.2% combined ratio in the United Kingdom.2022.
Our Mortgage segment continued to rebound from uncertainty related to COVID-19navigated a significant industry-wide reduction in mortgage originations to generate four consecutive quarters$1.1 billion in underwriting income, demonstrating the
power of strong underwriting results. Credit qualitythe platform even in a soft market. Insurance in Force, a key driver of mortgage earnings, was $509.3 billion for the segmentyear—essentially flat with 2022. Credit quality remained excellent and the percentage of insured mortgage loans in default (U.S.) stood at 2.36%1.74% at the end of 2021,2023, down slightly from 4.19%December 2022.
Our shareholders were rewarded for their trust in December 2020. In August, we completedArch with an 18.3% share price increase for the acquisition of Westpac Lenders Mortgage Insurance Limited in Australia – further augmenting Arch MI’s position as a leading globally diversified insurer of mortgage credit risk.year.
Long-Term Performance
We believe the Company’s performance is best measured over the long term. The following charts highlight certain of our key metrics for evaluating financial performance, which are considered in our compensation decisions. In evaluating the performance of the Company in connection with our compensation programs, we focus primarily on two main benchmarks: growth in book and tangible book value per share, which creates long-term shareholder value, and Annualized Net Income Return on Equity (“ROE”) and Annualized Operating Return on Average Common Equity (“Operating ROE”), which drive book value growth and are key indicators of the efficient use of capital.
Book Value and Tangible Book Value per Common Share
Book Value per Common Share: Share (“BVPS”): Since our recapitalization in 2001, we have delivered strong results to our shareholders as our BVPS has grown by 1,553%2,212% from $2.03 at December 31, 2001, to $33.56$46.94 at December 31,
2021. 2023. Shareholders who invested in our recapitalization and continue to hold their common shares have seen the book value of their stock increase by 15.0%15.3% per year on a compounded basis and the price of their shares increased 1,902%3,245% to $44.45$74.27 from $2.22.$2.22, an increase by 17.1% per year on a compounded basis.
Tangible Book Value per Common Share (“TBVPS”): Growth in this measure, which excludes goodwill and intangible assets, is indicative of our underlying results and is a strong indicator of growth in shareholder value for a P&C insurer and reinsurer and a common financial performance measure for companies in our industry. As such, Arch Capital focuses the long-term component of its executive compensation program on building TBVPS over time.
Our growth in BVPS and TBVPS is aligned with the trading performance of our common shares (refer to “Common Share Performance” below)).
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39 | | 20222024 PROXY STATEMENT | | 36 |
| | | | | | | | | | | | | | |
Growth in Book Value and Tangible Book Value1 per Common Share |
2 Annualized growth rate from December 31, 2001 to December 31, 2023.
Excludes the effects of stock options, restricted and performance stock units outstanding.
| | | | | | | | |
| 37 | 2022| 2024 PROXY STATEMENT | | 40 |
Return on Equity
Our ROE for 20212023 reflected strong underwriting returnsperformance and growth in investment income, from operating affiliates, while the 2020 period reflected the impact of COVID-19reflecting higher yields available on underwriting results.fixed income securities. Historically low interest rates, competitive market conditions in the property casualty industry and
significant U.S. and global catastrophe losses, in particular in 2012, 2017, 2018, 2020, 2021 and 2021,2022, have put pressure on ROEs over the last decade when compared to our return objectives.
| | | | | | | | | | | | | | |
Net Income ROE and Operating Income ROE1 |
| | | | | | | | |
41 | | 20222024 PROXY STATEMENT | | 38 |
Common Share Performance
The chart below summarizes Arch Capital’s cumulative total shareholder return assuming reinvestment of dividends, from December 31, 2001 to December 31, 2021,2023, compared with the S&P 500 Composite Stock Index (“S&P 500 Index”) and the S&P 500 Property and Casualty Insurance Index (“S&P 500 P&C Index”). , assuming reinvestment of dividends.
During this 20-year period, the price of Arch Capital’s common shares
appreciated at a compound annual rate of 14.7%16.0%, compared with a compound annual rate of return of 9.5%8.8% for the S&P 500 Index and 8.9%9.4% for the S&P 500 P&C Index. The share price performance presented below is not necessarily indicative of future results.
At December 31, 2021,2023, the closing price of our common shares was $44.45,$74.27, up 23.2%18.3% in 20212023 and up 13.6%14.1% on a compounded annualized basis over the past 10 years. While stock valuations tend to fluctuate based on market conditions, our primary metric of value creation is book value growth over time.
In addition, at December 31, 2021,2023, our common share price represented
approximately 132%158% of our year-end 20212023 BVPS, which remained healthy relative to our peers, when taking into account our business mix. For the industry, price to bookprice-to-book value is viewed as an important indicator of company performance by analysts and the investment community.
Executive Compensation Philosophy
We are a leading, Bermuda-based specialty insurer and reinsurer with a global presence. Our job as an insurer is to understand and price risk and in doing so, to generate superior risk-adjusted returns from the insurance and reinsurance coverages we write. Accordingly, it is critical that we recruit, retain and motivate the best talent in the global marketplace. Over time, and in light of our business strategy, we have sought to develop a
compensation philosophy that both supports and is consistent with our risk-management practices and that helps to ensure that our compensation programs align
our executives and employees with the long-term interests of our shareholders. Our compensation philosophy seeks to reinforce and reward long-term value creation by motivating our named executive officersNEOs through pay practices based substantially on the overall
success of the Company. To achieve these goals, our executive compensation programs have been designed to incentivize our leaders to create long-term value for our shareholders. We use the combination of fixed and variable compensation in the executive compensation program. The variable compensation is performance-based,performance-
based, and consists of short-term annual cash incentive bonuses and long-term incentive share-based awards, while the fixed component of the compensation is designed to reflect the significant levels of theirour NEOs’ experience, duties and scope of responsibility in leading the Company’s underwriting and operating activities.
While we consider a numberThe design of factors in our compensation programs, we areprogram is guided by four core principles:
▪Link Pay with Performance: The majority of our pay for executives is at-risk and performance-based with metrics aligned to the Company’s short-term and long-term financial results and business strategy. Pay should have a clear connection to each executive’s individual contribution to increasing value for our shareholders.
▪Attract, Retain and Align: We maintain programs that will attract and retain critical talent, drive future growth and create strong shareholder alignment within our executive population.
▪Support Culture:We support the Arch Capital culture of teamwork, underwriting discipline and commitment to the highest ethical standards through pay and governance policies and practices that align with shareholder interests.
▪Provide Market Competitive Pay: For each executive position, we consider external benchmark market data at median values for base salary, annual target bonus levels and annualized long-term incentive target grants. Based upon the considerable range of unique facts and circumstances pertaining to our executive talent, we may adjust pay opportunities as appropriate to take into consideration various factors such as consistent high performance and value delivery to the Company, retention, succession, successful tenure and other factors.
How We Make Compensation Decisions
Compensation and Human Capital Committee Process
The Compensation and Human Capital Committee reviews the performance of, and approves the compensation paid to, the chief executive officerCEO and the other named executive officers.NEOs.
▪The chief executive officerCEO of Arch Capital assists in the performance reviews of the named executive officersNEOs other than himself and makes individual recommendations to the Compensation and Human Capital Committee on their base salary, annual incentive and long-term share-based compensation. The Compensation and Human Capital Committee reviews, discusses and modifies these compensation recommendations in connection with its approval of the compensation for the named executive officers.NEOs.
▪The Compensation and Human Capital Committee meets in executive sessions (without management present) as necessary, particularly when making determinations about base salary, annual incentive and long-term equity compensation, or administering any aspect of the compensation program for the chief executive officerCEO of Arch Capital. Determinations about compensation matters in respect of the chief executive officerCEO of Arch Capital, the chief financial officer (“CFO”) of Arch Capital, the general counsel of Arch Capital Services LLC, and other senior executives
designated by the Compensation and Human Capital Committee are subject to ratification by the Board.
▪To establish levels of base salary, annual incentives, long-term incentives and benefits, the Compensation and Human Capital Committee reviews extensive historical competitive data, including detailed tally sheets outlining compensation paid to the named executive officers, information compiled from annual reports on Form 10-K, proxy statements and other publicly available information for a representative sample of publicly-traded insurers and reinsurers that we believe compete directly with us for executive talent (the “Peer“Compensation Peer Group”). Many of these selected peersGenerally, peer companies are of generally similar size and have generally similar numbers of employees, product offerings and geographic scope.scope as Arch Capital.
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43 | | 20222024 PROXY STATEMENT | | 40 |
Risk Management and Compensation Policies
In line with the Company’s requirements for managing risks associated with the Company’s compensation programs, the Compensation and Human Capital Committee seeks to ensure our executive compensation program does not encourage executives to take excessive risks that are inconsistent with the long-term success of the Company.
We emphasize long-term results both in our short-term and long-term incentive programs. OurUnder our short-term incentive program, each underwriting year is tied to Company underwritingmeasured individually and the results are calculated over a 10-year development period. Our long-term incentive program includes a substantial component of performance-based compensation, which is earned based on achieved performance against preselected performance goals over a three-year performance period.
Our compensation philosophy and governance features are also complemented by the following policies: (i) a clawback policy, (ii) a no hedging policy and (iii) share ownership guidelines and share holding requirements that are designed to align our compensation with long-term shareholder interests. See “Additional Compensation Policies and Practices” for further detail. We believe our approach to the evaluation of performance and the design of our compensation programs assist in mitigating excessive risk-taking that could harm our Company and have concluded thatbelieve there is no excessive risk inherent in our programs.
Role of Compensation Consultant
Our Compensation and Human Capital Committee has sole authority to select, retain and terminate any consultants or advisors used to provide independent advice to the Compensation and Human Capital Committee and evaluate executive compensation, including sole authority to approve the fees and any other retention terms for any such consultant or advisor. The Compensation and Human Capital Committee engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent executive compensation consultant to assist in establishing compensation policies and programs. During 2021,2023, Meridian:
▪reviewed and advised the Compensation and Human Capital Committee on matters concerning compensation of the CEO and our other named executive officers;NEOs;
▪reported on all aspects of short-term and long-term compensation program design, including incentive mix;
▪assessed the companies in the Compensation Peer Group for continued appropriateness;
▪reported on emerging trends and developments in executive compensation and corporate governance;
▪prepared formal presentations for the Compensation and Human Capital Committee regarding executive compensation;
▪reviewed compensation benchmarking analysis for each of the Company’s senior executives; and
▪reviewed and advised on director compensation.
Meridian did not provide any other services to the Company and no other fees were paid to Meridian except fees related to their services to the Compensation and Human Capital Committee. The Compensation and Human Capital Committee believes that Meridian is independent and no conflict of interest exists.
Selected
Competitors for Setting Pay and Comparing Performance
For purposes of making compensation decisions and for evaluating our financial performance relative to peers, we used compensation and financial data derived from the Compensation Peer Group listed below. We annually review the companies in our Compensation Peer Group with Meridian. Prior to the Compensation and Human Capital Committee making 20212023 compensation decisions, the Compensation and Human Capital Committee conducted a formal review byof the Compensation Committee,Peer Group, with assistance from Meridian, resultedresulting in a recommendation which was approved by the Compensation Committee, to keep the same Compensation Peer Group as in effect for the prior year.year, which was approved by the Compensation and Human Capital Committee.
The table below describes the multi-step filtering exercise used in the Compensation Peer Group selection process:
| | | | | |
| Compensation Peer Group Selection Process |
Step 1:
Industry Filters | Select industries relative to Arch Capital’s business operations. |
Step 2:
Size Filters | Filter companies based on revenue and asset size. |
Step 3:
Additional Subjective Filters | Review business descriptions and additional financial measures. |
| | | | | | | | |
| 41 | 2022| 2024 PROXY STATEMENT | | 44 |
The table below describes the four primary functions for the Compensation Peer Group:
| | | | | |
| Purpose of the Compensation Peer Group |
| Pay Comparisons | Determine competitive pay levels and identify differences from general industry market data. |
| Assess ability to attract, retain, engage and motivate top talent. |
| Compensation Structure | Provide benchmarks for compensation structure (pay mix, performance metrics, leverage, vehicles, etc.). |
| Use as a foundation or reference when making design changes to the compensation program. |
| Performance Comparisons | Assess performance relative to companies facing similar business challenges. |
| Use as an input to setting incentive plan goals. |
| Financial Performance | Company performance is measured in absolute terms, as well as versus prior year results, and in relative terms in comparison with the performance of peer companies in our Compensation Peer Group on the same financial metrics. |
The Compensation Peer Group used for 20212023 compensation decisions was comprised of 18 competitors, as follows:the following 17 companies:
| | |
| 2023 Compensation Peer Group |
2021 Peer Group |
Alleghany Corporation |
| American Financial Group, Inc. |
Argo Group International Holdings, Ltd.Arthur J. Gallagher & Co. |
| Assurant, Inc. |
| AXIS Capital Holdings Limited |
| Cincinnati Financial Corporation |
| CNA Financial Corporation |
Cincinnati Financial CorporationEverest Group, Ltd. |
Essent Group Ltd. |
Everest Re Group, Ltd. |
| First American Financial Corporation |
| The Hanover Insurance Group, Inc. |
| The Hartford Financial Services Group |
| Markel Corporation |
| Old Republic International Corporation |
Radian Group Inc. |
| RenaissanceRe Holdings Ltd. |
| Selective Insurance Group, Inc. |
W. R.The Travelers Companies, Inc. |
| W.R. Berkley Corporation |
| Willis Towers Watson Public Limited Company |
During 2021The Compensation and followingHuman Capital Committee utilizes a separate peer group to measure relative TSR performance in our performance share awards (the “Performance Peer Group”). There is significant overlap between the 2021two peer groups, with 14 companies included in both groups, but there are differences that reflect the different purposes of the compensation decisions, a formal review byand performance peer groups. The Compensation Peer Group is used primarily to benchmark our compensation against companies that we compete with for talent, while the Performance Peer Group is more focused on companies that participate in similar lines of business in order to more closely measure our relative TSR performance. In establishing the Performance Peer Group for 2023, the Compensation and Human Capital Committee started with assistance from Meridian, resulted in changes to the Compensation Peer Group, to be used for compensation decisions for 2022. The Compensation Committee removed three peers (Argo Group International Holdings, Ltd.,added Essent Group Ltd., Fairfax Financial Holdings Limited, MGIC Investment Corporation and Radian Group, Inc.) and added three companies to the Peer Group (Arthurremoved Arthur J. Gallagher & Co., The Travelers Companies, Inc.First American Financial Corporation and Willis Towers Watson Public Limited Company).Company, resulting in the 18 companies listed below under “Elements of Compensation—Long Term Incentive Plan.”
Shareholder Engagement and Results of Say-on-Pay Votes
At our 20212023 annual general meeting of shareholders, approximately 91.5%93.9% of the votes cast approved the Company’s executive compensation programs and the resulting compensation described in the 20212023 Proxy Statement. Based on this high level of support, the Compensation and Human Capital Committee determined that shareholders support our compensation practices and will continue to work to ensure that our named executive officers’NEOs’ interests are aligned with our shareholders’ interests to support long-term value creation.
In addition, we continue to engage our largest institutional shareholders in discussions regarding our executive compensation program and other governance matters, including our ESG program, as outlined above (see “Proxy Summary”). We remain committed to listening to feedback from shareholders when designing, reviewing and evaluating our compensation programs and policies.
Elements of Compensation Program
We have three primary elements of total direct compensation for our executive compensation program: base salary, short-term cash incentive and long-term incentive share-based awards, all of which are described below. We also provide standard retirement and benefit plans and limited perquisites customarily provided to expatriates residing in Bermuda.
Base Salary
Base salary is fixed cash compensation and integral to any employment arrangement. SalaryBase salary is reviewed annually and adjusted when appropriate. Increases are not automatic or guaranteed. Placement of our named executive officers within aThe Compensation and Human Capital Committee sets each NEO’s base salary range is based on market data for the individual’s position and geographic location as well as experience, duties and scope of responsibility. From time to time, base salaries may be adjusted to reflect promotions, increases in responsibilities and competitive considerations.
Short-Term Annual Cash Incentive
For each executive participant, target annual cash incentive award levels are established, stated as a percentage of base salary. These levels are based oninfluenced by external market data at median valuesand adjusted as appropriate to take into consideration various factors such as consistent high performance and value delivery to the Company, internal equity, retention and succession.
AwardShort-term annual cash incentive award levels are designed to provide formulaic payouts to our senior executives and serve as a critical tool for rewarding the achievement of annual corporate and individual goals. Amounts are earned based on the attainment of quantitative and qualitative strategic accomplishments for the relevant year.
The table below sets forth the established target bonus award levels for our named executive officersNEOs as of December 31, 2021:2023:
| 2021 Named Executive Officer Target Short-Term Incentive Opportunity | 2023 NEO Target Short-Term Incentive Opportunity | | 2023 NEO Target Short-Term Incentive Opportunity |
| Name | Name | Base
Salary | Target
(%) | Target Bonus | Name | Base
Salary | Target
(%) | Target Bonus |
| Marc Grandisson | Marc Grandisson | $1,000,000 | 165% | $1,650,000 | Marc Grandisson | $1,225,000 | 200% | $2,450,000 |
| François Morin | François Morin | $675,000 | 135% | $911,250 | François Morin | $750,000 | 140% | $1,050,000 |
| Nicolas Papadopoulo | Nicolas Papadopoulo | $800,000 | 150% | $1,200,000 | Nicolas Papadopoulo | $850,000 | 165% | $1,402,500 |
| Maamoun Rajeh | Maamoun Rajeh | $725,000 | 135% | $978,750 | Maamoun Rajeh | $780,000 | 140% | $1,092,000 |
| David E. Gansberg | David E. Gansberg | $725,000 | 135% | $978,750 | David E. Gansberg | $780,000 | 140% | $1,092,000 |
Overview
At the beginning of each annual performance period, the Compensation and Human Capital Committee approves the financial performance metrics and reviews the strategic goals that will be considered when determining the ultimate amount of the performance-based annual cash incentive awarded upon completion of the calendar year, including establishing specific targets, thresholds and maximums for each specificfinancial performance criteria.metric. Performance below the threshold would result in no payout related to the financial metrics. For 2021,2023, financial performance metrics were given a weighting of 70% and strategic metricsgoals were given a weighting of 30%.
The financial metrics are measured based on the financial performance achieved by each of the Reporting Segmentssegments (i.e., Insurance, Reinsurance and Mortgage (collectively the “underwriting units”) and the investment unit) under our existing incentive compensation formula plans. Such plans typically base payouts on the achievement of ROE targets, reflecting the rate of return we earn on our capital, which supports our goal of growth in TBVPS and aligns our executives’ compensation with shareholder returns. At the beginning of each underwriting year, the
segment-level ROE scale, which establishes the threshold, target and maximum performance levels payable under the formula plans, is approved by the Compensation and Human Capital Committee. The threshold, target and maximum payout percentages as well as the 2023 underwriting year ROE scale are set forth in the following table:
| | | | | | | | |
Level of Performance1 | ROE Scale | Payout Factor |
| Threshold | 7.50% | 27.0% |
| Target | 13.74% | 100.0% |
| Maximum | 20.61% | 200.0% |
1 The threshold and maximum levels have been a consistent percentage of the target level over time. However, starting in 2020, the Compensation and Human Capital Committee determined that no amounts will be payable for a plan year unless the ROE for the plan year equals at least 7.5%. These percentages as well as the 2021 underwriting year ROE scale are set forth in the following table:
| | | | | | | | |
| Level of Performance | ROE Scale | Payout Factor |
| Threshold | 7.50% | 59.3% |
| Target | 10.06% | 100.0% |
| Maximum | 15.09% | 200.0% |
Despite the challenges due to the COVID-19 pandemic, no changes were made to the Short-Term Incentive Plan metrics or goals after the Compensation Committee approved the Plan at the beginning of the year.
Under the formula plans, for underwriting units, payouts are determined based on the unit’s performance during the current calendar year across all open underwriting years (typically the last 10 years), evaluated against the applicable ROE scale and target developed for each such underwriting year and applied over its respective development period (again, typically 10 years). For the investment unit, awards are derived from the unit’s performance as measured by our investment returns compared to the applicable benchmark index over the past one, three and five years.
Strategic goals are designed to incentivize participants to achieve corporate objectives that cannot be measured by financial metrics and are approved by the Compensation and Human Capital Committee at the beginning of each year. Performance against strategic goals is evaluated by the Compensation and Human Capital Committee at the conclusion of the calendar year. The strategic goals for each of our named executive officersNEOs for 20212023 are discussed below under “20220213 Compensation Decisions for Named Executive OfficersNEOs.”. Performance Criteria
The following performance criteria and weights apply for corporate and unit executives.
▪Corporate executives include our CEO and CFO who have a broad set of responsibilities across the entire
group and no specific underwriting unit profit and loss responsibilities.
▪Unit executives have profit and loss responsibilities for a specific underwriting unit and in 2021,2023, included Messrs. Papadopoulo, Rajeh and Gansberg.
Corporate executives’ 70% financial performance metric weighting is based on overall group performance, while the Reinsurance and Mortgage executives’ 70% financial metric weighting is based 50% on the results of the formula plan for their respective unit and 20% on overall group performance, in order to further incentivize them
to support overall group objectives. For the President’s role, the 70% financial performance metric weighting is based 30%50% on overall group performance 30%and 20% on Insurance segment performance and 5% for each of Reinsurance and Mortgage segment performance.
The chart below summarizes the performance criteria structure:
| | Performance Criteria | Performance Criteria | Measurement | Weights for Corporate Executives | Weights for
Unit
Executives | Range of Payout Percentages | Performance Criteria | Measurement | Weights for Corporate Executives | Weights for
Unit
Executives | Range of Payout Percentages |
Financial Metrics— Group Level
| Financial Metrics— Group Level
| The incentive compensation payout multiple at the group level is based on each of the underwriting units’ incentive compensation formula plan multiples and is determined as follows:
1 - Convert the payout levels for each unit to an ROE-equivalent, which is inferred1 using the current underwriting year’s ROE scale.
2 - Derive a group-wide ROE supporting the incentive compensation formula plans using the unit-specific inferred ROEs, weighted by the capital allocated (or deployed) to each underwriting unit.
3 - Compare the group-wide ROE to the target level ROE for the current year in order to assess the relative performance of the group.
4 - Compute the group-level payout multiple using the applicable scale. | 70% | 20% for Reinsurance and Mortgage Executives
30% for President role | 0–200% | Financial Metrics— Group Level
| The incentive compensation payout multiple at the group level is based on each of the underwriting units’ incentive compensation formula plan multiples and is determined as follows:
| 70% | 20% for Reinsurance and Mortgage Executives
50% for President role | 0–200% |
| 1 | |
| 2 | |
| 2 | |
| 2 | |
| 3 | |
| 3 | |
| 3 | |
| 4 | |
| 4 | |
| 4 | |
Financial Metrics— Segment Level
| Financial Metrics— Segment Level
| The incentive compensation payout level for each unit executive measured under this category is equal to his respective unit’s incentive compensation formula plan multiple (total bonus payout dollars for the unit for the current year expressed as a percentage of the aggregate target bonus pool for the unit for the current year), as described in “Overview” above.
| 0% | 50% for Reinsurance and Mortgage Executives
40% for President role | 0–200% |
Strategic Metrics2 | Based on each executive’s year-end performance evaluation measuring the achievement of strategic objectives. | 30% | 0–250% |
Financial Metrics— Segment Level
| |
Financial Metrics— Segment Level
| | The incentive compensation payout level for each unit executive measured under this category is equal to his respective unit’s incentive compensation formula plan multiple (total bonus payout dollars for the unit for the current year expressed as a percentage of the aggregate target bonus pool for the unit for the current year), as described in “Overview” above.
| 0% | 50% for Reinsurance and Mortgage Executives
20% for President role | 0–200% |
Strategic Goals2 | | Strategic Goals2 | Based on each executive’s year-end performance evaluation measuring the achievement of strategic objectives. | 30% | 0–250% |
| Total | Total | | 100% | 0–200% | Total | | | 100% | 100% | 0–200% |
1 An ROE equivalent for a given unit is inferred by determining the ROE that would be required under the current underwriting year’s ROE scale to produce a payout multiple equal to the unit’s actual incentive compensation formula plan payout.
2 For the strategic criteria, payout percentages over 200% may only be used if the overall financial criteria payout percentage is 100% (i.e., target level of performance) or higher. The overall maximum bonus payment cannot exceed 200% of the target amount.
| | | | | | | | |
47 | | 20222024 PROXY STATEMENT | | 44 |
20212023 Year ROE Scale/Financial Goals/Payout Scale
The two tables below show the (i) 20212023 year ROE scale and (ii) payout scale at the threshold, target and maximum levels for each level of financial goal achievement. Each year, in connection with setting the current year’s threshold, target and maximum ROE measures, the Compensation and Human Capital Committee reviews prevailing financial and economic conditions and uncertainties, the current interest rate environment and peer analysis. The Compensation and Human Capital Committee endeavors to set target ROE measures that are rigorous and responsive to the continued challenging environment in the insurance, reinsurance and mortgage industry and that deliver a pay-for-performance culture. For 2021,2023, the Compensation and Human Capital Committee set the ROE target at 10.06%13.74%.
| | | | | | | | | | | |
| Range of Payouts as % of Target - Financial Goals - Group Level | Threshold | Target | Maximum |
Payout as a % of Target1 | 20% | 100% | 200% |
| Level of Goal Achievement Required | 85% | 100% | 115% |
| | | | | | | | | | | |
| Range of Payouts as % of Target - Financial Goals - Segment Level | Threshold | Target | Maximum |
Payout as a % of Target1 | 20% | 100% | 200% |
| Level of Goal Achievement Required | 50% | 100% | 150% |
1 Payout for performance achievement between stated levels is interpolated on a straight-line basis.
The table below shows the payout percentages at each performance rating for strategic performance criteria:
| | | | | |
| Strategic Performance Rating | Payout1 |
| Exceptional Achievements | 250% |
| Exceeds Expectations | 150% |
| Meets Expectations | 100% |
| Needs Development | 50% |
| Unsatisfactory | 0% |
1 For the strategic criteria (30% weighting), payout modifiers over 200% may only be used if the overall financialgoals (70% weighting) achieve the target level of performance or higher. Also, maximum payout as a percentage of target is capped at 200%.
| | | | | | | | |
| 45 | 2022| 2024 PROXY STATEMENT | | 48 |
Long-Term Incentive Plan
Overview
The Company grants long-term equity-based incentive awards to link the compensation of our named executive officersNEOs directly to corporate performance over the long term and align the interests of executives to our shareholders. A majority of the economic value is granted in performance-based vehicles. The mix of such long-term awards is approximately (i) 80% performance-based, consisting of 55% performance shares and 25% stock options and (ii) 20% time-based restricted shares. The performance shares are subject to both service-based conditions and performance-based vesting conditions and directly link pay with performance and create shareholder alignment. The stock options also align executives’ interests with those of shareholders and focus on driving stock price. Time-based restricted shares promote direct retention and shareholder alignment.
These awards make up a significant component of total direct compensation, and we believe that the combination of awards supports our pay-for-performance philosophy by encouraging long-term performance and shareholder value creation.
Long-term incentive award grants are generally made annually at the beginning of each year, and the performance shares have three-year overlapping performance periods. In addition, during the year, additional equity awards may be granted for critical retention situations, newly hired employees and special recognition and promotional reasons.recognition. The summary below describes the vesting conditions and other relevant data relating to the annual long-term equity program.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| Performance Shares 55% of Economic Value | | | | Stock Options 25% of Economic Value | | | | Restricted Shares 20% of Economic Value | |
| | | | | | | | | | |
| Performance Period: 3 years. Underlying Value: Denoted in shares of Arch Capital. Opportunities: Pre-established threshold, target and maximum opportunities (e.g., 50%, 100%, 200%). Below threshold performance results in 0% shares earned. Payout: Earned shares vest in March following the end of the performance period, with the number of vested shares dependent upon the level of goal achievement. | | + | | + | Vesting: 3-year ratable commencing on the first anniversary of the grant date. Underlying Value: Denoted in non-qualified stock options evaluated using the Black-Scholes methodology. Exercise Price: Equal to the closing share price on the grant date. Life: 10-year maximum term. Black-Scholes Methodology: The grant date fair value is calculated in accordance with the Black-Scholes model. The expected life assumption for options is based on the Company’s historical exercise experience of six years (of a 10-year maximum term). Expected volatility is based on the Company’s daily historical trading data of its common shares. | | + | | + | Vesting: 3-year ratable commencing on the first anniversary of the grant date. UnderlyingValue: Denoted in shares of Arch Capital. Payout: In shares. Dividends: Accrue and are paid out upon vesting. | |
The financial metric against which we measure Company performance under our performance shares is based on growth in TBVPS. We selected this metric because higher and more consistent TBVPS growth over time is an indication of effective and prudent use of capital and is shown to deliver value over time. We also believe that performance in relation to our Performance Peer Group is important in
evaluating our long-term performance. Accordingly, we have incorporated a relative TSR modifier into the design for several reasons, most significantly its likely correlation to long-term growth in TBVPS and direct correlation with our shareholders’ returns over the performance period.
| | |
| | | | | 2023 Performance Peer Group |
49American Financial Group, Inc. |
| 2022 PROXY STATEMENTAssurant, Inc. |
| AXIS Capital Holdings Limited |
| Cincinnati Financial Corporation |
| CNA Financial Corporation |
| Essent Group Ltd. |
| Everest Group, Ltd. |
| Fairfax Financial Holdings Limited |
| The Hanover Insurance Group, Inc. |
| The Hartford Financial Services Group |
| Markel Corporation |
| MGIC Investment Corporation |
| Old Republic International Corporation |
| Radian Group Inc. |
| RenaissanceRe Holdings Ltd. |
| Selective Insurance Group, Inc. |
| The Travelers Companies, Inc. |
| W.R. Berkley Corporation |
Despite the challenges due to the COVID-19 pandemic, no changes were made to the Long-Term Incentive Plan metrics or goals after the Compensation Committee approved the Plan at the beginning of the year.
20212023 Long-Term Incentive Awards
The Compensation and Human Capital Committee endeavors to set rigorous goals for the performance share awards. The awards granted in 20212023 will pay out at target if our TBVPS grows at an 11% annual rate over the three-year period. As noted above, the resulting vesting level is secondarily modified by the relative TSR modifier. Earned awards can increase by upfrom 1% to 25% if TSR is greater than the 65th percentile of the Performance Peer Group, or decrease by upfrom 1% to 25% if TSR is less than the 35th percentile of the Performance Peer Group. Awards are not modified if TSR performance is between the 35th and 65th percentiles. The maximum number of shares that can be earned is 200% of target.
The table below sets forth the threshold, target and maximum performance levels:levels for TBVPS:
| | | | | | | | |
| Level of Performance | Growth in TBVPS | Shares Earned as a % of Target |
| Threshold | 6% | 50% |
| Target | 11% | 100% |
| Maximum | 16% | 200% |
The Compensation and Human Capital Committee sets award targets for long-term incentive compensation for our named executive officersNEOs based, in part, on Compensation Peer Group analysis and extensive review of competitive benchmarking data. For 2021,2023, the targeted valuesCompensation and Human Capital Committee increased the long-term incentive grant for the NEOs by approximately 15% above the target award value in recognition of the awards,Company’s outstanding performance in 2022. The target value of the award and the actual grant value stated as a percentage of base salary, are summarized in the table below:
| | | | | | | | |
| Name | 2023 Target Grant Value (% of Base Salary) | 2023 Actual Grant Value (% of Base Salary) |
| Marc Grandisson | 450% | 515% |
| François Morin | 200% | 230% |
| Nicolas Papadopoulo | 300% | 345% |
| Maamoun Rajeh | 200% | 230% |
| David E. Gansberg | 200% | 230% |
| | | | | | | | |
Name47 | | 2024 PROXY STATEMENT | 2021 Target (% of Base Salary)
|
Marc Grandisson | 450% |
François Morin | 200% |
Nicolas Papadopoulo | 300% |
Maamoun Rajeh | 200% |
David E. Gansberg | 200% |
20212023 Compensation Decisions for Named Executive Officers
20212023 Short-Term Cash Incentive Plan Payout
The group financial performance metrics represent the weighted average results under the plan formula for the insurance, reinsurance, mortgage and investment units determined for 2021.2023. The level of goal achievement for the group during 20212023 for open underwriting years was 123.8%127.3%, exceeding the maximum Level of Goal Achievement Required of 115% as indicated in “Elements of Compensation Program—2023 Year ROE Scale/Financial Goals/Payout Scale,” which resulted in a payout factor of 200.0% of target for the group financial goal portion of bonuses. The level of goal achievement for the individual units under the financial goal portion of the Short-Term Cash Incentive Plan for the open underwriting years was 110.0%128.7%, 118.0%140.9% and 136.0%144.1% for the Insurance, Reinsurance and Mortgage segments, respectively, resulting in payout factors of 120.0%157.3%, 135.9%181.7% and 172.0%188.3% of target, respectively.
The strategic performance results, which make up 30% of the calculation, are highlighted in the following pages covering each individual named executive officers’NEOs’ compensation.
2019-2021
2021 Performance Shares Plan Payout
As stated above, the Company uses performance shares as part of its Long‐Term Incentive (“LTI”) Compensation Plan. Under the terms of the LTI Plan, the final number of shares ultimately earned by the eligible executives is a function of the absolute growth in the TBVPS of the Company’s common shares over a three-year performance period, supplemented by a TSR modifier.
The starting TBVPS for the 20192021 grants was $19.96.$28.63. At the end of 2021,2023, the TBVPS grew to $31.07,$44.99, a 15.89%16.26% annualized increase over the performance period, resulting in a payout percentage of 177.8%200%, based on TBVPS growth.
Based on Arch Capital’s TSR over the three‐year performance period of 56.6%122.9%, which placed it in the 66.7th100th percentile of our Performance Peer Group, the resulting TSR multiplier was 102.8%125.0%.
| | | | | | | | | | | | | | |
| Annual Change in TBVPS | Payout Percentage | | TSR Percentile | Shares Modifier |
| <6% | 0% | | ≤20% | 75% |
| 6% | 50% | | 35% | 100% |
| 11% | 100% | | 65% | 100% |
| ≥16% | 200% | | ≥80% | 125% |
Based on the two calculations above, the indicated final payout was 182.8%200.0% for the performance shares granted in 20192021 that vested on March 10, 2022.4, 2024, which was the maximum payout.
| | | | | | | | |
| 20222024 PROXY STATEMENT | | 5048 |
| | Chief Executive Officer | Chief Executive Officer | |
| Chief Executive Officer | |
| Chief Executive Officer | |
Marc Grandisson Chief Executive Officer | |
Marc Grandisson Chief Executive Officer | |
Marc Grandisson Chief Executive Officer | Marc Grandisson Chief Executive Officer | |
| Strategic Goals | Strategic Goals | |
Mr. Grandisson’s strategic goals were based on Company performance, including in relation to the Peer Group, progress on key strategic initiatives and succession planning, as discussed below. Under Mr. Grandisson’s leadership, the Company celebrated 20 years and delivered excellent financial results, as highlighted in the “2021 Performance at a Glance” section, notwithstanding active catastrophes and continued uncertainty related to COVID-19. The Compensation Committee evaluated the Company’s growth in after-tax operating income achieved under his leadership, the Company’s continued strong performance in relation to its Peer Group and the Company’s overall focus on underwriting discipline and its conservative approach to investments and capital management. The Committee also reviewed Mr. Grandisson’s oversight of key strategic initiatives in the areas of analytics, M&A, diversity and inclusion, and succession planning as well as continued progress on global IT transformation and Arch Management System, both of which are multi-year initiatives to upgrade and refresh core processes and systems that will generate productivity, efficiency and consumer centric solutions. | | Strategic Goals | |
| Strategic Goals | |
In early 2023, the Compensation and Human Capital Committee reviewed and approved Mr. Grandisson’s 2023 strategic objectives. During the year, the Compensation and Human Capital Committee reviewed updates on the progress toward achievement of the objectives and final determinations were made in February 2024. The resulting determination by the Compensation and Human Capital Committee was that he had performed with respect to his pre-established strategic objectives at a level translating to a 200% payout factor. Highlights are summarized below: Mr. Grandisson’s strategic goals were based on Company performance, including in relation to the Performance Peer Group, progress on key strategic initiatives and succession planning. Under Mr. Grandisson’s leadership, the Company’s financial results were outstanding as highlighted in “2023 Performance at a Glance” section. Book value per common share was up 43.9%, annualized net income return on average common equity and annualized after-tax operating return on average common equity were 29.7% and 21.6%, respectively, compared to 11.6% and 14.8%, respectively, in 2022. The Company’s stock price was up 18.3% in 2023. In addition, the Company was once again named a “Most Honorable Company” placing in the top-three overall in every category by Institutional Investor. The Company was also named Best Places to Work by U.S. News and World Report. The Compensation and Human Capital Committee evaluated Mr. Grandisson’s oversight in developing the Company’s global strategy focusing on revenue growth, operating efficiencies, innovation and increased profitability. The Committee also evaluated Mr. Grandisson’s oversight of succession planning and maximizing Executive Leadership Team effectiveness, while also continuing to inspire the Senior Leadership Team (“SLT”) of the Company’s top ~150 leaders. The Committee also reviewed Mr. Grandisson’s oversight of key strategic initiatives in the areas of analytics, M&A, employee engagement, D&I, and ESG programs and policies, as well as continued progress on global IT transformation and Arch Management System, both of which are multi-year initiatives to upgrade and refresh core processes and systems that will generate productivity, efficiency and consumer centric solutions. | |
In early 2023, the Compensation and Human Capital Committee reviewed and approved Mr. Grandisson’s 2023 strategic objectives. During the year, the Compensation and Human Capital Committee reviewed updates on the progress toward achievement of the objectives and final determinations were made in February 2024. The resulting determination by the Compensation and Human Capital Committee was that he had performed with respect to his pre-established strategic objectives at a level translating to a 200% payout factor. Highlights are summarized below: Mr. Grandisson’s strategic goals were based on Company performance, including in relation to the Performance Peer Group, progress on key strategic initiatives and succession planning. Under Mr. Grandisson’s leadership, the Company’s financial results were outstanding as highlighted in “2023 Performance at a Glance” section. Book value per common share was up 43.9%, annualized net income return on average common equity and annualized after-tax operating return on average common equity were 29.7% and 21.6%, respectively, compared to 11.6% and 14.8%, respectively, in 2022. The Company’s stock price was up 18.3% in 2023. In addition, the Company was once again named a “Most Honorable Company” placing in the top-three overall in every category by Institutional Investor. The Company was also named Best Places to Work by U.S. News and World Report. The Compensation and Human Capital Committee evaluated Mr. Grandisson’s oversight in developing the Company’s global strategy focusing on revenue growth, operating efficiencies, innovation and increased profitability. The Committee also evaluated Mr. Grandisson’s oversight of succession planning and maximizing Executive Leadership Team effectiveness, while also continuing to inspire the Senior Leadership Team (“SLT”) of the Company’s top ~150 leaders. The Committee also reviewed Mr. Grandisson’s oversight of key strategic initiatives in the areas of analytics, M&A, employee engagement, D&I, and ESG programs and policies, as well as continued progress on global IT transformation and Arch Management System, both of which are multi-year initiatives to upgrade and refresh core processes and systems that will generate productivity, efficiency and consumer centric solutions. | |
In early 2023, the Compensation and Human Capital Committee reviewed and approved Mr. Grandisson’s 2023 strategic objectives. During the year, the Compensation and Human Capital Committee reviewed updates on the progress toward achievement of the objectives and final determinations were made in February 2024. The resulting determination by the Compensation and Human Capital Committee was that he had performed with respect to his pre-established strategic objectives at a level translating to a 200% payout factor. Highlights are summarized below: Mr. Grandisson’s strategic goals were based on Company performance, including in relation to the Performance Peer Group, progress on key strategic initiatives and succession planning. Under Mr. Grandisson’s leadership, the Company’s financial results were outstanding as highlighted in “2023 Performance at a Glance” section. Book value per common share was up 43.9%, annualized net income return on average common equity and annualized after-tax operating return on average common equity were 29.7% and 21.6%, respectively, compared to 11.6% and 14.8%, respectively, in 2022. The Company’s stock price was up 18.3% in 2023. In addition, the Company was once again named a “Most Honorable Company” placing in the top-three overall in every category by Institutional Investor. The Company was also named Best Places to Work by U.S. News and World Report. The Compensation and Human Capital Committee evaluated Mr. Grandisson’s oversight in developing the Company’s global strategy focusing on revenue growth, operating efficiencies, innovation and increased profitability. The Committee also evaluated Mr. Grandisson’s oversight of succession planning and maximizing Executive Leadership Team effectiveness, while also continuing to inspire the Senior Leadership Team (“SLT”) of the Company’s top ~150 leaders. The Committee also reviewed Mr. Grandisson’s oversight of key strategic initiatives in the areas of analytics, M&A, employee engagement, D&I, and ESG programs and policies, as well as continued progress on global IT transformation and Arch Management System, both of which are multi-year initiatives to upgrade and refresh core processes and systems that will generate productivity, efficiency and consumer centric solutions. | |
| Compensation Decisions | Compensation Decisions | |
■ Base Salary | No change was made to Mr. Grandisson’s base salary in 2021. Effective January 1, 2022, Mr. Grandisson’s base salary was increased to $1,225,000 from $1,000,000 following our annual benchmarking review. |
| Compensation Decisions | |
| Compensation Decisions | |
■ Base Salary, Short- and Long-Term Incentive Target | |
■ Base Salary, Short- and Long-Term Incentive Target | |
■ Base Salary, Short- and Long-Term Incentive Target | |
■ Short-Term Cash Incentive | ■ Short-Term Cash Incentive | The Compensation Committee reviewed Mr. Grandisson’s performance against his strategic goals, which resulted in a payout factor of 195% on the portion of his bonus that was based on strategic performance. |
| 2021 STI Metric | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout |
| Financial Performance—Group | 200% | 70% | 140.00% | td,650,000 | td,310,000 |
| Strategic Performance | 195% | 30% | 58.5% | 965,250 | |
| TOTAL | | 100% | 198.5% | | $3,275,250 |
■ Short-Term Cash Incentive | |
| ■ Short-Term Cash Incentive | |
| | 2023 STI Metric | |
| Financial Performance—Group | |
| Financial Performance—Group | |
| Financial Performance—Group | |
| Strategic Performance | |
| Strategic Performance | |
| Strategic Performance | |
| TOTAL | |
| TOTAL | |
| TOTAL | |
| | No change was made to Mr. Grandisson’s Short-Term Cash Incentive target in 2021. Effective January 1, 2022, Mr. Grandisson’s Short-Term Cash Incentive target was increased to 200% from 165%, following our annual benchmarking review.
|
■ Long-Term Incentive | ■ Long-Term Incentive | On February 26, 2021, the Compensation Committee approved the annual award summarized in the table below. The performance shares are reflected at target, since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. |
| | | Performance Shares | Stock Options | Time-Based
Restricted Shares | |
■ Long-Term Incentive | |
| | Grant
Date | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total |
■ Long-Term Incentive | |
| | Performance
Shares | |
| | Performance
Shares | |
| | Performance
Shares | |
| Grant
Date | |
| Grant
Date | |
| Grant
Date | |
| Feb. 24, 2023 | |
| Feb. 24, 2023 | |
| Feb. 24, 2023 | |
| | Feb 26, 2021 | 69,095 | $2,474,983 | 122,254 | $1,125,018 | 25,126 | $900,013 | $4,500,014 |
■ 2021 Perfor-mance Share Cycle Vesting | |
| ■ 2019-2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2019 grants was $19.96. At the end of 2021, the TBVPS grew to $31.07, a 15.89% annualized increase over the performance period, resulting in a payout percentage of 177.8%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 56.6%, which placed it in the 66.7th percentile of our Peer Group, the resulting TSR multiplier was 102.8%, and the overall payout factor was set at 182.8%. |
■ 2021 Perfor-mance Share Cycle Vesting | |
| 2019 Grant | Approved Payout Factor | Total Vested | Additional Shares Awarded | Value of Additional Shares at 12/31/2021 |
■ 2021 Perfor-mance Share Cycle Vesting | |
| | 2021 Grant (Target) | |
| 2021 Grant (Target) | |
| 69,095 | |
| 69,095 | |
| 69,095 | |
| | 75,758 | 182.8% | 138,486 | 62,728 | $2,788,260 |
2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
| 1 The total long-term incentive value provided in the summary above for performance share awards differs from the grant date fair value reported in the “2021 Summary Compensation” and “2021 Grants of Plan-Based Awards” Tables. The values in the summary above were based on the closing price of our shares on the grant date and the target number of shares. The values in the “2021 Summary Compensation” and “2021 Grants of Plan-Based Awards” Tables were computed at the grant date in accordance with ASC Topic 718. Stock options are valued on the grant date based on the Black-Scholes option pricing methodology and restricted shares are valued based on the closing price of our common shares on the grant date. | 2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
| 2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
| | | | | | | | |
5149 | | 20222024 PROXY STATEMENT | |
| | Chief Financial Officer | Chief Financial Officer | |
François Morin Executive Vice President, Chief Financial Officer and Treasurer | François Morin Executive Vice President, Chief Financial Officer and Treasurer | |
François Morin Executive Vice President, Chief Financial Officer and Treasurer | |
François Morin Executive Vice President, Chief Financial Officer and Treasurer | |
| Strategic Goals | Strategic Goals | |
Mr. Morin’s strategic goals were based on our financial strength ratings, strategic initiatives, updating of financials systems, treasury operations and processes and succession planning, as discussed below. Mr. Morin worked effectively at managing investor, rating agency and auditor relations to keep our financial strength ratings strong. Under Mr. Morin’s leadership, the Company raised $500 million in Series G Preference Shares (at 4.55% coupon, fixed for life), in order to refinance its Series E Preferred Shares. The Compensation Committee evaluated Mr. Morin’s role in strategic initiatives, including the successful restructuring of our ownership rights in Somers resulting in the de-consolidation of Somers from the Company’s financial statements, the deployment of $450 million in Insurance Corporate-Owned Life Insurance and formation of an Irish Collective Asset-Management Vehicle to house certain investments. Mr. Morin also continued focus on the multi-year transformation of group-wide financial systems and reporting, treasury operations, risk management and investment processes and identified the next level of leaders for the function. | | Mr. Morin’s strategic goals were based on our financial strength ratings, strategic initiatives, updating of financials systems, finance operations and processes and succession planning. Mr. Morin worked successfully at managing investor, rating agency and auditor relations to keep our financial strength ratings strong. He also led capital management decisions across the group resulting in 21.6% growth in net written premium and after-tax operating income growth of 74.2% from 2022. The Compensation and Human Capital Committee evaluated Mr. Morin’s role in strategic initiatives, including corporate structuring designed to enhance Company capital and provide financial flexibility for the future. In addition, Mr. Morin led the successful implementation of Phase 1 of the multi-year finance transformation to implement a single Enterprise Resource Planning (“ERP”) solution across the group. Mr. Morin also continued to identify the next generation of leaders through the SLT and succession planning process and encouraged team building for the various corporate functions by helping to lead a first-ever Corporate Collaboration Conference for 160-plus employees across the corporate functions. Mr. Morin also joined the Company’s mentorship program and mentors a number of individuals across different teams. | |
| Mr. Morin’s strategic goals were based on our financial strength ratings, strategic initiatives, updating of financials systems, finance operations and processes and succession planning. Mr. Morin worked successfully at managing investor, rating agency and auditor relations to keep our financial strength ratings strong. He also led capital management decisions across the group resulting in 21.6% growth in net written premium and after-tax operating income growth of 74.2% from 2022. The Compensation and Human Capital Committee evaluated Mr. Morin’s role in strategic initiatives, including corporate structuring designed to enhance Company capital and provide financial flexibility for the future. In addition, Mr. Morin led the successful implementation of Phase 1 of the multi-year finance transformation to implement a single Enterprise Resource Planning (“ERP”) solution across the group. Mr. Morin also continued to identify the next generation of leaders through the SLT and succession planning process and encouraged team building for the various corporate functions by helping to lead a first-ever Corporate Collaboration Conference for 160-plus employees across the corporate functions. Mr. Morin also joined the Company’s mentorship program and mentors a number of individuals across different teams. | |
| Mr. Morin’s strategic goals were based on our financial strength ratings, strategic initiatives, updating of financials systems, finance operations and processes and succession planning. Mr. Morin worked successfully at managing investor, rating agency and auditor relations to keep our financial strength ratings strong. He also led capital management decisions across the group resulting in 21.6% growth in net written premium and after-tax operating income growth of 74.2% from 2022. The Compensation and Human Capital Committee evaluated Mr. Morin’s role in strategic initiatives, including corporate structuring designed to enhance Company capital and provide financial flexibility for the future. In addition, Mr. Morin led the successful implementation of Phase 1 of the multi-year finance transformation to implement a single Enterprise Resource Planning (“ERP”) solution across the group. Mr. Morin also continued to identify the next generation of leaders through the SLT and succession planning process and encouraged team building for the various corporate functions by helping to lead a first-ever Corporate Collaboration Conference for 160-plus employees across the corporate functions. Mr. Morin also joined the Company’s mentorship program and mentors a number of individuals across different teams. | |
| Compensation Decisions | Compensation Decisions | |
■ Base Salary | ■ Base Salary | Mr. Morin’s salary was increased from $625,000 to $675,000 in January 2021 following our annual benchmarking review, and no adjustments were made for 2022. |
■ Base Salary | |
■ Base Salary | | Mr. Morin’s base salary was increased to $750,000 from $675,000 in January 2023 following our annual benchmarking review, company growth and continued high performance. For 2024 compensation decisions, Mr. Morin’s base salary was increased to $800,000 from $750,000 following our annual benchmarking review, effective January 1, 2024. |
■ Short-Term Cash Incentive | ■ Short-Term Cash Incentive | The Compensation Committee reviewed Mr. Morin’s performance against his strategic goals, which resulted in a payout factor of 200% on the portion of his bonus that was based on strategic performance. | ■ Short-Term Cash Incentive | The Compensation and Human Capital Committee reviewed Mr. Morin’s performance against his strategic goals, which resulted in a payout factor of 210% on the portion of his bonus that was based on strategic performance. |
■ Short-Term Cash Incentive | | 2023 STI Metric | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout (Max 2x) |
| | Financial Performance—Group | 200% | 70% | 140% | td,050,000 | td,470,000 |
| Strategic Performance | | | Strategic Performance | 210% | 30% | 63% | 630,000 |
| TOTAL | |
| Effective January 1, 2023, Mr. Morin’s Short-Term Cash Incentive target was increased to 140% of base salary from 135% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Morin’s Short-Term Cash Incentive target was increased to 150% of base salary from 140% of base salary following our annual benchmarking review, effective January 1, 2024. | | | Effective January 1, 2023, Mr. Morin’s Short-Term Cash Incentive target was increased to 140% of base salary from 135% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Morin’s Short-Term Cash Incentive target was increased to 150% of base salary from 140% of base salary following our annual benchmarking review, effective January 1, 2024. |
■ Long-Term Incentive | | ■ Long-Term Incentive | On February 24, 2023, the Compensation and Human Capital Committee approved the annual award summarized in the table below. The amount includes a 15% increase to the grant target in recognition of the Company’s outstanding performance in 2022. The performance shares are reflected at target since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. |
| | Performance Shares | |
| Grant
Date | |
| Grant
Date | |
| Grant
Date | | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total |
| Feb. 24, 2023 | | | Feb. 24, 2023 | 13,716 | $948,736 | 18,375 | $431,298 | 4,988 | $345,020 | $1,725,054 |
| | 2021 STI Metric | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout |
■ 2021 Perfor-mance Share Cycle Vesting | |
| ■ 2021 Perfor-mance Share Cycle Vesting | | ■ 2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2021 grants was td8.63. At the end of 2023, TBVPS grew to $44.99, a 16.26% annualized increase over the performance period, resulting in a payout percentage of 200%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 122.9%, which placed it in the 100th percentile of our Performance Peer Group, the resulting TSR multiplier was 125.0%, and the overall payout factor was calculated at 200.0%, which was the maximum payout. |
| 2021 Grant (Target) | Approved Payout Factor | Total Vested | Adjustment to Target Shares Awarded | Value of Adjustment to Target Shares at 12/31/20232 |
| 20,729 | | | 20,729 | 200.0% | 41,458 | 20,729 | $1,539,543 |
| | Financial Performance—Group | 200% | 70% | 140.00% | $911,250 | td,275,700 |
| Strategic Performance | 200% | 30% | 60% | 546,800 | |
| TOTAL | | 100% | 200% | | $1,822,500 | |
| ■ Long-Term Incentive | On February 26, 2021, the Compensation Committee approved the annual award summarized in the table below. The performance shares are reflected at target, since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. |
| | Performance Shares | Stock Options | Time-Based
Restricted Shares | |
| Grant
Date | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total |
| Feb 26, 2021 | 20,729 | $742,513 | 36,676 | $337,504 | 7,538 | $270,011 | $1,350,028 |
| ■ 2019-2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2019 grants was $19.96. At the end of 2021, the TBVPS grew to $31.07, a 15.89% annualized increase over the performance period, resulting in a payout percentage of 177.8%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 56.6%, which placed it in the 66.7th percentile of our Peer Group, the resulting TSR multiplier was 102.8%, and the overall payout factor was set at 182.8%. |
| 2019 Grant | Approved Payout Factor | Total Vested | Additional Shares Awarded | Value of Additional Shares at 12/31/2021 |
| 21,044 | 182.8% | 38,468 | 17,424 | $774,497 |
| 1 The total long-term incentive value provided in the summary above for performance share awards differs from the grant date fair value reported in the “2021 Summary Compensation” and “2021 Grants of Plan-Based Awards” Tables. The values in the summary above were based on the closing price of our shares on the grant date and the target number of shares. The values in the “2021 Summary Compensation” and “2021 Grants of Plan-Based Awards” Tables were computed at the grant date in accordance with ASC Topic 718. Stock options are valued on the grant date based on the Black-Scholes option pricing methodology and restricted shares are valued based on the closing price of our common shares on the grant date. | 2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
| | | | | | | | |
| 20222024 PROXY STATEMENT | | 5250 |
| | Insurance Unit Executive | |
| President and Chief Underwriting Officer | |
Nicolas Papadopoulo President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group | |
Nicolas Papadopoulo President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group | |
Nicolas Papadopoulo President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group | Strategic Goals | Mr. Papadopoulo’s strategic goals were based on growth strategies, strategic initiatives, leadership development, and diversity and inclusion initiatives, as described below. Mr. Papadopoulo continues to create alignment and common strategies around future growth for all Arch’s segments, namely, Insurance, Reinsurance and Mortgage. Under Mr. Papadopoulo’s leadership, Insurance group net written premiums grew over 30%, the most of any of our insurance peers and expanded Arch’s footprint in Middle Market and increased gross written premiums by 25% in Insurance North America. The Compensation Committee also evaluated Mr. Papadopoulo’s role in strategic initiatives, including the use of strategic analytics and digital partnership successes to drive innovation and increase profitability. Mr. Papadopoulo focused on continuing to support the development of leaders across Arch and those identified as high potential talent. Mr. Papadopoulo also concentrated on the Company’s diversity and inclusion initiatives, including serving as Executive Sponsor of the newly formed Women and Allies Employee Network. | Mr. Papadopoulo’s strategic goals included growth strategies, strategic initiatives, leadership development, and D&I initiatives. Mr. Papadopoulo continues to build alignment and common strategies around future growth for all of Arch’s segments, i.e., Insurance, Reinsurance and Mortgage. Under Mr. Papadopoulo’s leadership, Insurance group net written premiums grew 16.7% from 2022. The Compensation and Human Capital Committee also evaluated Mr. Papadopoulo’s role in strategic initiatives, including sponsoring the expansion of the Shared Service Operating Model and prioritization of next steps for the companywide transformation agenda after the successful implementation of the HR Talent Acquisition and IT End User Support pilots. Mr. Papadopoulo also focused on further expanding the use of strategic analytics and digital partnership successes to continue to drive innovation and increase profitability, and he continued to support the development of leaders and the framework specific to the next generation of successors. Mr. Papadopoulo also promoted the Company’s D&I initiatives across business units, including segment specific D&I goals and continues to serve as Executive Sponsor of the Women and Allies Employee Network. | |
Mr. Papadopoulo’s strategic goals included growth strategies, strategic initiatives, leadership development, and D&I initiatives. Mr. Papadopoulo continues to build alignment and common strategies around future growth for all of Arch’s segments, i.e., Insurance, Reinsurance and Mortgage. Under Mr. Papadopoulo’s leadership, Insurance group net written premiums grew 16.7% from 2022. The Compensation and Human Capital Committee also evaluated Mr. Papadopoulo’s role in strategic initiatives, including sponsoring the expansion of the Shared Service Operating Model and prioritization of next steps for the companywide transformation agenda after the successful implementation of the HR Talent Acquisition and IT End User Support pilots. Mr. Papadopoulo also focused on further expanding the use of strategic analytics and digital partnership successes to continue to drive innovation and increase profitability, and he continued to support the development of leaders and the framework specific to the next generation of successors. Mr. Papadopoulo also promoted the Company’s D&I initiatives across business units, including segment specific D&I goals and continues to serve as Executive Sponsor of the Women and Allies Employee Network. | |
Mr. Papadopoulo’s strategic goals included growth strategies, strategic initiatives, leadership development, and D&I initiatives. Mr. Papadopoulo continues to build alignment and common strategies around future growth for all of Arch’s segments, i.e., Insurance, Reinsurance and Mortgage. Under Mr. Papadopoulo’s leadership, Insurance group net written premiums grew 16.7% from 2022. The Compensation and Human Capital Committee also evaluated Mr. Papadopoulo’s role in strategic initiatives, including sponsoring the expansion of the Shared Service Operating Model and prioritization of next steps for the companywide transformation agenda after the successful implementation of the HR Talent Acquisition and IT End User Support pilots. Mr. Papadopoulo also focused on further expanding the use of strategic analytics and digital partnership successes to continue to drive innovation and increase profitability, and he continued to support the development of leaders and the framework specific to the next generation of successors. Mr. Papadopoulo also promoted the Company’s D&I initiatives across business units, including segment specific D&I goals and continues to serve as Executive Sponsor of the Women and Allies Employee Network. | |
Compensation Decisions | ■ Base Salary | ■ Base Salary | Mr. Papadopoulo’s salary was increased from $750,000 to $800,000 in January 2021 following our annual benchmarking review, and no adjustments were made for 2022. | ■ Base Salary | Mr. Papadopoulo’s base salary was increased to $850,000 from $800,000 in January 2023 following our annual benchmarking review, company growth and continued high performance. For 2024 compensation decisions, Mr. Papadopoulo’s base salary was increased to $900,000 from $850,000 following our annual benchmarking review, effective January 1, 2024. |
■ Short-Term Cash Incentive | ■ Short-Term Cash Incentive | The Compensation Committee reviewed Mr. Papadopoulo’s performance against his strategic goals, which resulted in a payout factor of 225% on the portion of his bonus that was based on strategic performance. | ■ Short-Term Cash Incentive | The Compensation and Human Capital Committee reviewed Mr. Papadopoulo’s performance against his strategic goals, which resulted in a payout factor of 225% on the portion of his bonus that was based on strategic performance. |
■ Short-Term Cash Incentive | | 2023 STI Metric | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout (Max 2x) |
| | Financial Performance—Group | 200% | 50% | 100% | td,402,500 | td,402,500 |
| Financial Performance—Segment | | | Financial Performance—Segment | 164% | 20% | 32.8% | 460,020 |
| Strategic Performance | | | Strategic Performance | 225% | 30% | 67.5% | 942,480 |
| TOTAL | | | TOTAL | | 100% | 200.3% | | $2,805,000 |
| | 2021 STI Metric | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout |
| Effective January 1, 2023, Mr. Papadopoulo’s Short-Term Cash Incentive target was increased to 165% of base salary from 150% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Papadopoulo’s Short-Term Cash Incentive target was increased to 185% of base salary from 165% of base salary following our annual benchmarking review, effective January 1, 2024. | |
| Effective January 1, 2023, Mr. Papadopoulo’s Short-Term Cash Incentive target was increased to 165% of base salary from 150% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Papadopoulo’s Short-Term Cash Incentive target was increased to 185% of base salary from 165% of base salary following our annual benchmarking review, effective January 1, 2024. | |
| Effective January 1, 2023, Mr. Papadopoulo’s Short-Term Cash Incentive target was increased to 165% of base salary from 150% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Papadopoulo’s Short-Term Cash Incentive target was increased to 185% of base salary from 165% of base salary following our annual benchmarking review, effective January 1, 2024. | |
■ Long-Term Incentive | | ■ Long-Term Incentive | On February 24, 2023, the Compensation and Human Capital Committee approved the annual award summarized in the table below. The amount includes a 15% increase to the grant target in recognition of the Company’s outstanding performance in 2022. The performance shares are reflected at target since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. |
| | Performance Shares | |
| Grant
Date | |
| Grant
Date | |
| Grant
Date | | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total |
| Feb. 24, 2023 | | | Feb. 24, 2023 | 23,337 | $1,614,220 | 31,264 | $733,829 | 8,486 | $586,977 | $2,935,026 |
| | Financial Performance—Group | 200% | 30% | 60% | td,200,000 | $720,000 |
■ 2021 Perfor-mance Share Cycle Vesting | |
| ■ 2021 Perfor-mance Share Cycle Vesting | | ■ 2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2021 grants was td8.63. At the end of 2023, TBVPS grew to $44.99, a 16.26% annualized increase over the performance period, resulting in a payout percentage of 200%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 122.9%, which placed it in the 100th percentile of our Performance Peer Group, the resulting TSR multiplier was 125.0%, and the overall payout factor was calculated at 200.0%, which was the maximum payout. |
| 2021 Grant (Target) | Approved Payout Factor | Total Vested | Adjustment to Target Shares Awarded | Value of Adjustment to Target Shares at 12/31/20232 |
| 36,851 | | | 36,851 | 200.0% | 73,702 | 36,851 | $2,736,924 |
| | Financial Performance—Segment1 | 128.5% | 40% | 51.4% | td,200,000 | 616,800 |
| Strategic Performance | 225% | 30% | 67.5% | 810,000 |
| TOTAL | | 100% | 178.9% | td,146,800 |
| 1 Payout factor was derived from a 30%, 5%, 5% weighted contribution respectively from Insurance, Reinsurance and Mortgage segments. |
| ■ Long-Term Incentive | On February 26, 2021, the Compensation Committee approved the annual award summarized in the table below. The performance shares are reflected at target, since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. |
| | Performance Shares | Stock Options | Time-Based
Restricted Shares | |
| Grant
Date | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total |
| Feb 26, 2021 | 36,851 | $1,320,003 | 65,202 | $600,008 | 13,400 | $479,988 | $2,399,999 |
| ■ 2019-2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2019 grants was $19.96. At the end of 2021, the TBVPS grew to $31.07, a 15.89% annualized increase over the performance period, resulting in a payout percentage of 177.8%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 56.6%, which placed it in the 66.7th percentile of our Peer Group, the resulting TSR multiplier was 102.8%, and the overall payout factor was set at 182.8%. |
| 2019 Grant | Approved Payout Factor | Total Vested | Additional Shares Awarded | Value of Additional Shares at 12/31/2021 |
| 25,253 | 182.8% | 46,162 | 20,909 | $929,405 |
| 1 The total long-term incentive value provided in the summary above for performance share awards differs from the grant date fair value reported in the “2021 Summary Compensation” and “2021 Grants of Plan-Based Awards” Tables. The values in the summary above were based on the closing price of our shares on the grant date and the target number of shares. The values in the “2021 Summary Compensation” and “2021 Grants of Plan-Based Awards” Tables were computed at the grant date in accordance with ASC Topic 718. Stock options are valued on the grant date based on the Black-Scholes option pricing methodology and restricted shares are valued based on the closing price of our common shares on the grant date. | 2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
| | | | | | | | |
5351 | | 20222024 PROXY STATEMENT | |
| | Reinsurance Unit Executive | Reinsurance Unit Executive | |
Maamoun Rajeh Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group | Maamoun Rajeh Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group | |
Maamoun Rajeh Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group | |
Maamoun Rajeh Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group | |
| Strategic Goals | Strategic Goals | |
Mr. Rajeh’s strategic goals were based on reinsurance growth and margin improvement, strategic initiatives, improvement of operational efficiencies, leadership development and diversity and inclusion initiatives, as described below. Under Mr. Rajeh’s direction of the reinsurance group, the group generated $1.3 billion in business growth and improved margins. The Compensation Committee also evaluated Mr. Rajeh’s role in strategic initiatives, including the acquisition of Precision Marketing Asia Pacific (PMAP), which will increase distribution in Japan and the completion of the Somers acquisition. Mr. Rajeh continued to increase operational efficiency, with the launch of Large Loss Reporting and in partnership with IT and Strategic Analytics, continues to find ways to increase capacity and efficiency. Mr. Rajeh continues to focus on the development of leaders in the group and initiated the Arch RE-thinking program for the next generation of leaders. Mr. Rajeh continues to focus the group on the Company’s diversity and inclusion goals, including training programs and the expansion of the successful Internship Program. | | Mr. Rajeh’s strategic goals were based on reinsurance growth and profitability, strategic initiatives, leadership development, D&I and inclusion initiatives and enhancing the reinsurance group’s brand and reputation in the market. Under Mr. Rajeh’s direction of the Reinsurance group, they generated $9.1 billion in gross premium written, 31% more than in 2022, including a bottom line profit of $1.1 billion, a record for the group. The Compensation and Human Capital Committee also evaluated Mr. Rajeh’s role in strategic initiatives, including leading the development of a distribution strategy in the face of increased broker bargaining power and underwriting commoditization. Mr. Rajeh focused on leadership development, which continues to yield strong internal candidates for key roles, including two newly promoted Chief Underwriting Officers (“CUOs”) and for the first time, the reinsurance group has two women in CUO roles. Mr. Rajeh increased his media engagement activities to promote the group’s message, which continues to establish the Company as a thought leader and trendsetter in the industry. | |
| Mr. Rajeh’s strategic goals were based on reinsurance growth and profitability, strategic initiatives, leadership development, D&I and inclusion initiatives and enhancing the reinsurance group’s brand and reputation in the market. Under Mr. Rajeh’s direction of the Reinsurance group, they generated $9.1 billion in gross premium written, 31% more than in 2022, including a bottom line profit of $1.1 billion, a record for the group. The Compensation and Human Capital Committee also evaluated Mr. Rajeh’s role in strategic initiatives, including leading the development of a distribution strategy in the face of increased broker bargaining power and underwriting commoditization. Mr. Rajeh focused on leadership development, which continues to yield strong internal candidates for key roles, including two newly promoted Chief Underwriting Officers (“CUOs”) and for the first time, the reinsurance group has two women in CUO roles. Mr. Rajeh increased his media engagement activities to promote the group’s message, which continues to establish the Company as a thought leader and trendsetter in the industry. | |
| Mr. Rajeh’s strategic goals were based on reinsurance growth and profitability, strategic initiatives, leadership development, D&I and inclusion initiatives and enhancing the reinsurance group’s brand and reputation in the market. Under Mr. Rajeh’s direction of the Reinsurance group, they generated $9.1 billion in gross premium written, 31% more than in 2022, including a bottom line profit of $1.1 billion, a record for the group. The Compensation and Human Capital Committee also evaluated Mr. Rajeh’s role in strategic initiatives, including leading the development of a distribution strategy in the face of increased broker bargaining power and underwriting commoditization. Mr. Rajeh focused on leadership development, which continues to yield strong internal candidates for key roles, including two newly promoted Chief Underwriting Officers (“CUOs”) and for the first time, the reinsurance group has two women in CUO roles. Mr. Rajeh increased his media engagement activities to promote the group’s message, which continues to establish the Company as a thought leader and trendsetter in the industry. | |
| Compensation Decisions | Compensation Decisions | Compensation Decisions |
■ Base Salary | ■ Base Salary | Mr. Rajeh’s salary was increased from $650,000 to $725,000 in January 2021 following our annual benchmarking review, and no adjustments were made for 2022. | ■ Base Salary | Mr. Rajeh’s base salary was increased to $780,000 from $725,000 in January 2023 following our annual benchmarking review, company growth and continued high performance. For 2024 compensation decisions, Mr. Rajeh’s base salary was increased to $850,000 from $780,000 following our annual benchmarking review, effective January 1, 2024. |
■ Short-Term Cash Incentive | ■ Short-Term Cash Incentive | The Compensation Committee reviewed Mr. Rajeh’s performance against his strategic goals, which resulted in a payout factor of 175% on the portion of his bonus that was based on strategic performance. | ■ Short-Term Cash Incentive | The Compensation and Human Capital Committee reviewed Mr. Rajeh’s performance against his strategic goals, which resulted in a payout factor of 200% on the portion of his bonus that was based on strategic performance. |
■ Short-Term Cash Incentive | | 2023 STI Metric | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout (Max 2x) |
| | Financial Performance—Group | 200% | 20% | 40% | td,092,000 | $436,800 |
| Financial Performance—Segment1 | | | Financial Performance—Segment1 | 181.6% | 50% | 90.8% | 991,500 |
| Strategic Performance | | | Strategic Performance | 200% | 30% | 60% | 655,200 |
| TOTAL | | | TOTAL | | 100% | 190.8% | | $2,083,500 |
| 1 The payout factor was reduced for amounts calculated under the reinsurance segment’s formula approach under the short-term cash incentive plan attributable to performance for prior underwriting years, for which Mr. Rajeh has previously received payment. | | | 1 The payout factor was reduced for amounts calculated under the reinsurance segment’s formula approach under the short-term cash incentive plan attributable to performance for prior underwriting years, for which Mr. Rajeh has previously received payment. |
| Effective January 1, 2023, Mr. Rajeh’s Short-Term Cash Incentive target was increased to 140% of base salary from 135% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Rajeh’s Short-Term Cash Incentive target was increased to 165% of base salary from 140% of base salary following our annual benchmarking review, effective January 1, 2024. | | | Effective January 1, 2023, Mr. Rajeh’s Short-Term Cash Incentive target was increased to 140% of base salary from 135% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Rajeh’s Short-Term Cash Incentive target was increased to 165% of base salary from 140% of base salary following our annual benchmarking review, effective January 1, 2024. |
■ Long-Term Incentive | | ■ Long-Term Incentive | On February 24, 2023, the Compensation and Human Capital Committee approved the annual award summarized in the table below. The amount includes a 15% increase to the grant target in recognition of the Company’s outstanding performance in 2022. The performance shares are reflected at target since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. |
| | Performance Shares | |
| Grant
Date | |
| Grant
Date | |
| Grant
Date | | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total |
| Feb. 24, 2023 | | | Feb. 24, 2023 | 14,273 | $987,263 | 19,121 | $448,808 | 5,190 | $358,992 | $1,795,063 |
| | 2021 STI Metric | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout |
■ 2021 Perfor-mance Share Cycle Vesting | |
| ■ 2021 Perfor-mance Share Cycle Vesting | | ■ 2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2021 grants was td8.63. At the end of 2023, TBVPS grew to $44.99, a 16.26% annualized increase over the performance period, resulting in a payout percentage of 200%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 122.9%, which placed it in the 100th percentile of our Performance Peer Group, the resulting TSR multiplier was 125.0%, and the overall payout factor was calculated at 200.0%, which was the maximum payout. |
| 2021 Grant (Target) | Approved Payout Factor | Total Vested | Adjustment to Target Shares Awarded | Value of Adjustment to Target Shares at 12/31/20232 |
| 22,264 | | | 22,264 | 200.0% | 44,528 | 22,264 | $1,653,547 |
| | Financial Performance—Group | 200% | 20% | 40% | $978,750 | $391,500 |
| Financial Performance—Segment1 | 123.3% | 50% | 61.65% | 603,400 |
| Strategic Performance | 175% | 30% | 52.5% | 513,800 |
| TOTAL | | 100% | 154.15% | | $1,508,700 |
| 1 The payout factor was reduced for amounts calculated under the reinsurance segment’s formula under the short-term cash incentive plan attributable to performance for prior underwriting years in recognition of the fact that an additional bonus amount of $409,000 was also paid to Mr. Rajeh in March 2022 for those prior underwriting years due to his continued participation in the Reinsurance segment’s separate Formula Approach bonus plan for those prior years. In order to more clearly focus Mr. Rajeh’s incentives on the factors established under our current short-term cash incentive plan, all of Mr. Rajeh’s legacy entitlements under the Formula Approach were satisfied by a payment of $3,191,451 in March 2022, which was in addition to the $409,000 payment described above. |
| ■ Long-Term Incentive | On February 26, 2021, the Compensation Committee approved the annual award summarized in the table below. The performance shares are reflected at target, since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. |
| | Performance Shares | Stock Options | Time-Based
Restricted Shares | |
| Grant
Date | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total |
| Feb 26, 2021 | 22,264 | $797,496 | 39,393 | $362,506 | 8,096 | $289,999 | $1,450,001 |
| ■ 2019-2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2019 grants was $19.96. At the end of 2021, the TBVPS grew to $31.07, a 15.89% annualized increase over the performance period, resulting in a payout percentage of 177.8%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 56.6%, which placed it in the 66.7th percentile of our Peer Group, the resulting TSR multiplier was 102.8%, and the overall payout factor was set at 182.8%. |
| 2019 Grant | Approved Payout Factor | Total Vested | Additional Shares Awarded | Value of Additional Shares at 12/31/2021 |
| 21,886 | 182.8% | 40,008 | 18,122 | $805,523 |
| 1 The total long-term incentive value provided in the summary above for performance share awards differs from the grant date fair value reported in the “2021 Summary Compensation” and “2021 Grants of Plan-Based Awards” Tables. The values in the summary above were based on the closing price of our shares on the grant date and the target number of shares. The values in the “2021 Summary Compensation” and “2021 Grants of Plan-Based Awards” Tables were computed at the grant date in accordance with ASC Topic 718. Stock options are valued on the grant date based on the Black-Scholes option pricing methodology and restricted shares are valued based on the closing price of our common shares on the grant date. | 2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
| | | | | | | | |
| 20222024 PROXY STATEMENT | | 5452 |
| | Mortgage Unit Executive | Mortgage Unit Executive | |
David E. Gansberg Chief Executive Officer, Global Mortgage Group | David E. Gansberg Chief Executive Officer, Global Mortgage Group | |
David E. Gansberg Chief Executive Officer, Global Mortgage Group | |
| Strategic Goals | Strategic Goals | |
Mr. Gansberg’s strategic goals were based on underwriting profits, strategic initiatives, leadership development, and diversity and inclusion initiatives, as described below. Under Mr. Gansberg’s leadership, the Mortgage group earned $953 million of underwriting profit at a 27% combined ratio, a 60% increase in profit and 32-point drop in combined ratio over 2020. The group’s year-end delinquency rate declined to 2.36% vs. 4.19% at year-end 2020, the lowest of all legacy competitors. The Compensation Committee also evaluated his oversight of strategic initiatives including the completion of the Westpac Lenders Mortgage Insurance Limited (WLMI) acquisition and execution of a reinsurance strategy to maximize capital efficiency. Mr. Gansberg continues to support the development and coaching of his leadership team, in addition to the development of the next generation of leaders. Under Mr. Gansberg’s direction, the Mortgage group was named a top 3 Best Places To Work for the third year in a row by Triad Business Journal. As part of the Company’s group-wide efforts, Mr. Gansberg’s commitment to diversity and inclusion activities remain strong, with the selection of the group’s first Arch MI Scholar at North Carolina A&T University - the nation’s largest historically Black college, located in Greensboro, NC. The group was also named an honoree in the Triad Business Journal’s inaugural Leaders in Diversity awards. | | Mr. Gansberg’s strategic goals were based on growth and diversification, strategic initiatives, leadership development, and D&I initiatives. Under Mr. Gansberg’s leadership, the Mortgage group earned $1.1 billion of underwriting income in a challenging year due to industry-wide reductions in mortgage originations. Also, the group generated significant financial benefit from calling several outstanding notes that no longer provided capital benefit. The Compensation and Human Capital Committee also evaluated Mr. Gansberg’s oversight of strategic initiatives including international growth in Australia and growth in gross written premium of 80% over 2022 from European Significant Risk Transfer transactions. Under Mr. Gansberg’s guidance, the group continues to enhance analytics by building better real-time analytics on housing industry and economic trends and competitor pricing. The group is diversifying business beyond primary mortgage insurance by operationalizing second lien insurance business and restarting the whole loan acquisition business. Mr. Gansberg continues to support the development and coaching of his leadership team and under his direction, the Mortgage group was named one of the Best Places To Work for the fifth consecutive year by Triad Business Journal. | |
| Mr. Gansberg’s strategic goals were based on growth and diversification, strategic initiatives, leadership development, and D&I initiatives. Under Mr. Gansberg’s leadership, the Mortgage group earned $1.1 billion of underwriting income in a challenging year due to industry-wide reductions in mortgage originations. Also, the group generated significant financial benefit from calling several outstanding notes that no longer provided capital benefit. The Compensation and Human Capital Committee also evaluated Mr. Gansberg’s oversight of strategic initiatives including international growth in Australia and growth in gross written premium of 80% over 2022 from European Significant Risk Transfer transactions. Under Mr. Gansberg’s guidance, the group continues to enhance analytics by building better real-time analytics on housing industry and economic trends and competitor pricing. The group is diversifying business beyond primary mortgage insurance by operationalizing second lien insurance business and restarting the whole loan acquisition business. Mr. Gansberg continues to support the development and coaching of his leadership team and under his direction, the Mortgage group was named one of the Best Places To Work for the fifth consecutive year by Triad Business Journal. | |
| Mr. Gansberg’s strategic goals were based on growth and diversification, strategic initiatives, leadership development, and D&I initiatives. Under Mr. Gansberg’s leadership, the Mortgage group earned $1.1 billion of underwriting income in a challenging year due to industry-wide reductions in mortgage originations. Also, the group generated significant financial benefit from calling several outstanding notes that no longer provided capital benefit. The Compensation and Human Capital Committee also evaluated Mr. Gansberg’s oversight of strategic initiatives including international growth in Australia and growth in gross written premium of 80% over 2022 from European Significant Risk Transfer transactions. Under Mr. Gansberg’s guidance, the group continues to enhance analytics by building better real-time analytics on housing industry and economic trends and competitor pricing. The group is diversifying business beyond primary mortgage insurance by operationalizing second lien insurance business and restarting the whole loan acquisition business. Mr. Gansberg continues to support the development and coaching of his leadership team and under his direction, the Mortgage group was named one of the Best Places To Work for the fifth consecutive year by Triad Business Journal. | |
| Compensation Decisions | Compensation Decisions | |
■ Base Salary | ■ Base Salary | Mr. Gansberg’s salary was increased from $650,000 to $725,000 in January 2021 following our annual benchmarking review, and no adjustments were made for 2022. |
■ Base Salary | |
■ Base Salary | | Mr. Gansberg’s base salary was increased to $780,000 from $725,000 in January 2023 following our annual benchmarking review, company growth and continued high performance. For 2024 compensation decisions, Mr. Gansberg’s base salary was increased to $850,000 from $780,000 following our annual benchmarking review, effective January 1, 2024. |
■ Short-Term Cash Incentive | ■ Short-Term Cash Incentive | The Compensation Committee reviewed Mr. Gansberg’s performance against his strategic goals, which resulted in a payout factor of 175% on the portion of his bonus that was based on strategic performance. | ■ Short-Term Cash Incentive | The Compensation and Human Capital Committee reviewed Mr. Gansberg’s performance against his strategic goals, which resulted in a payout factor of 200% on the portion of his bonus that was based on strategic performance. |
■ Short-Term Cash Incentive | | 2023 STI Metric | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout (Max 2x) |
| | Financial Performance—Group | 200% | 20% | 40% | td,092,000 | $436,800 |
| Financial Performance—Segment1 | | | Financial Performance—Segment1 | 179.2% | 50% | 90% | 978,481 |
| Strategic Performance | | | Strategic Performance | 200% | 30% | 60% | 655,200 |
| TOTAL | | | TOTAL | | 100% | 190% | | $2,070,481 |
| 1 The payout factor was reduced for amounts calculated under the mortgage segment’s formula approach under the short-term cash incentive plan attributable to performance for prior underwriting years in recognition of the fact that an additional bonus amount of $97,219 was paid to Mr. Gansberg in March 2024 for those prior underwriting years due to his continued participation in the Mortgage segment’s separate formulaic bonus plan for those prior years. | | | 1 The payout factor was reduced for amounts calculated under the mortgage segment’s formula approach under the short-term cash incentive plan attributable to performance for prior underwriting years in recognition of the fact that an additional bonus amount of $97,219 was paid to Mr. Gansberg in March 2024 for those prior underwriting years due to his continued participation in the Mortgage segment’s separate formulaic bonus plan for those prior years. |
| Effective January 1, 2023, Mr. Gansberg’s Short-Term Cash Incentive target was increased to 140% of base salary from 135% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Gansberg’s Short-Term Cash Incentive target was increased to 165% of base salary from 140% of base salary following our annual benchmarking review, effective January 1, 2024. | | | Effective January 1, 2023, Mr. Gansberg’s Short-Term Cash Incentive target was increased to 140% of base salary from 135% of base salary following our annual benchmarking review. For 2024 compensation decisions, Mr. Gansberg’s Short-Term Cash Incentive target was increased to 165% of base salary from 140% of base salary following our annual benchmarking review, effective January 1, 2024. |
■ Long-Term Incentive | | ■ Long-Term Incentive | On February 24, 2023, the Compensation and Human Capital Committee approved the annual award summarized in the table below. The amount includes a 15% increase to the grant target in recognition of the Company’s outstanding performance in 2022. The performance shares are reflected at target since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. |
| | Performance Shares | |
| Grant
Date | |
| Grant
Date | |
| Grant
Date | | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total |
| Feb. 24, 2023 | | | Feb. 24, 2023 | 14,273 | $987,263 | 19,121 | $448,808 | 5,190 | $358,992 | $1,795,063 |
| | 2021 STI Metric | Payout Factor | x Weighting | = Adjusted Weighting | x Target Bonus | = Bonus Payout |
■ 2021 Perfor-mance Share Cycle Vesting | |
| ■ 2021 Perfor-mance Share Cycle Vesting | | ■ 2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2021 grants was td8.63. At the end of 2023, TBVPS grew to $44.99, a 16.26% annualized increase over the performance period, resulting in a payout percentage of 200%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 122.9%, which placed it in the 100th percentile of our Performance Peer Group, the resulting TSR multiplier was 125.0%, and the overall payout factor was calculated at 200.0%, which was the maximum payout. |
| 2021 Grant (Target) | Approved Payout Factor | Total Vested | Adjustment to Target Shares Awarded | Value of Adjustment to Target Shares at 12/31/20232 |
| 22,264 | | | 22,264 | 200.0% | 44,528 | 22,264 | $1,653,547 |
| | Financial Performance—Group | 200% | 20% | 40% | $978,750 | $391,500 |
| Financial Performance—Segment1 | 116.1% | 50% | 58.05% | 568,200 |
| Strategic Performance | 175% | 30% | 52.5% | 513,800 |
| TOTAL | | 100% | 150.55% | | $1,473,500 |
| 1 The payout factor was reduced for amounts calculated under the mortgage segment’s formula under the short-term cash incentive plan attributable to performance for prior underwriting years in recognition of the fact that an additional bonus amount of $398,000 was also paid to Mr. Gansberg in March 2022 for those prior underwriting years due to his continued participation in the Mortgage segment’s separate formulaic bonus plan for those prior years. |
| ■ Long-Term Incentive | On February 26, 2021, the Compensation Committee approved the annual award summarized in the table below. The performance shares are reflected at target, since performance will be measured over the forward-looking three-year period, which will ultimately determine the number of shares earned. |
| | Performance Shares | Stock Options | Time-Based
Restricted Shares | |
| Grant
Date | Number of Shares | Value1 | Number of Options | Value1 | Number of Shares | Value1 | Total |
| Feb 26, 2021 | 22,264 | $797,496 | 39,393 | $362,506 | 8,096 | $289,999 | $1,450,001 |
| ■ 2019-2021 Perfor-mance Share Cycle Vesting | The starting TBVPS for the 2019 grants was $19.96. At the end of 2021, the TBVPS grew to $31.07, a 15.89% annualized increase over the performance period, resulting in a payout percentage of 177.8%, based on TBVPS growth. Based on Arch Capital’s TSR over the three-year performance period of 56.6%, which placed it in the 66.7th percentile of our Peer Group, the resulting TSR multiplier was 102.8%, and the overall payout factor was set at 182.8%. |
| 2019 Grant | Approved Payout Factor | Total Vested | Additional Shares Awarded | Value of Additional Shares at 12/31/2021 |
| 14,989 | 182.8% | 27,400 | 12,411 | $551,669 |
| 1 The total long-term incentive value provided in the summary above for performance share awards differs from the grant date fair value reported in the “2021 Summary Compensation” and “2021 Grants of Plan-Based Awards” Tables. The values in the summary above were based on the closing price of our shares on the grant date and the target number of shares. The values in the “2021 Summary Compensation” and “2021 Grants of Plan-Based Awards” Tables were computed at the grant date in accordance with ASC Topic 718. Stock options are valued on the grant date based on the Black-Scholes option pricing methodology and restricted shares are valued based on the closing price of our common shares on the grant date. | 2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
2 The Value of Adjustment to Target Shares is calculated utilizing the December 31, 2023 closing stock price of Arch Capital, which was $74.27. | |
| | | | | | | | |
5553 | | 20222024 PROXY STATEMENT | |
20222024 Long-Term Incentive Awards
In February of 2022,2024, and as will be described in more detail in next year’sthe 2025 Proxy Statement, for 2022, the Company made regularannual cycle long-term incentive grants in the form of performance shares, stock options and time-based restricted stock to the named executive officers.NEOs. The Compensation and Human Capital Committee sets award targets for long-term incentive compensation for our NEOs based, in part, on Compensation Peer Group analysis, extensive review of competitive benchmarking data and an evaluation of performance. As discussed in “2023 Compensation Decisions for NEOs,” the Compensation and Human Capital Committee increased the long-term incentive target for the NEOs. For the 2022 regular2024 annual cycle grants, each of the named executive officersNEOs received the following: | | | | | | | | | |
| Name | 2024 Target (% of Base Salary) | February 2024 Annual Cycle Grants1 | |
Marc Grandisson2 | 560% | $7,280,000 | |
François Morin2 | 230% | $1,840,000 | |
Nicolas Papadopoulo2 | 380% | $3,420,000 | |
Maamoun Rajeh2 | 300% | $2,550,000 | |
David E. Gansberg2 | 300% | $2,550,000 | |
| | | | | | | | |
| Name | 2022 Target (% of Base Salary) | February 2022 Regular Grants1 |
Marc Grandisson2 | 450% | $5,512,500 |
| François Morin | 200% | $1,350,000 |
| Nicolas Papadopoulo | 300% | $2,400,000 |
| Maamoun Rajeh | 200% | $1,450,000 |
| David E. Gansberg | 200% | $1,450,000 |
1 Similar to the regularannual cycle long-term incentive awards granted in 20212023 and, presentedas described in the 2021“2023 Compensation Decisions section, in February 2022,for NEOs,” the Company granted 55% in performance shares (measured by economic value), 25% in stock options and 20% in time-based restricted shares.shares in February 2024. Additional Compensation Policies and Practices
Arch Capital’s compensation philosophy and related governance features are also complemented by several specific elements that are designed to align our compensation with long-term shareholder interests. These elements include the following:
Clawback Policy
The Company has a clawback policy covering all executive officers, including the chief executive officer.CEO. This policy provides that, in the event the Company is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws, the Compensation and Human Capital Committee will review all cash and equity incentive-based
compensation that was paid to current or former executive officers during the three-year period preceding the required restatement. If any such incentive-based compensation would have been lower as a result of the restated financial results, the Compensation and Human Capital Committee will requirewould seek the reimbursement of the incremental portion of the incentive-based compensation in excess of the compensation that would have been paid based on the restated financial results (to the extent permitted by applicable law).results. This policy willis to be interpreted in accordance with the applicable rules of NASDAQNasdaq (or other securities exchange on which our common shares are listed from time to time).
No Excise Tax Gross-Ups
The Company does not provide excise tax gross-up payments to any of its executives in connection with change in control payments.
No Tax Gross-Ups
The Company does not include tax gross-up provisions in employment agreements and does not provide tax gross-ups to our named executive officers.
Share Ownership Guidelines
In an effort to further align the interests of the senior management team with the interests of shareholders, the Company has share ownership guidelines that require these executives to maintain designated levels of ownership of the common shares of Arch Capital. Specifically, these guidelines require common share ownership levels as follows: (1) chief executive officerCEO of Arch Capital—six times base salary; and (2) named executive officersNEOs and other executives who file reports under Section 16 of the Exchange Act—four times base salary. Each executive has five years to comply with the guidelines. Unvested restricted shares and shares subject to unvested restricted share units which, in either case, vest solely based on time and continued employment will be counted toward the target ownership level. Unvested performance restricted shares and shares subject to unvested performance restricted share units will be counted toward the target ownership level to the extent, if any, that the performance targets would have been achieved based on performance through the last completed calendar year of the applicable performance period (as determined by the Company). Shares subject to stock options, SARs and unvested performance awards (except as set forth above in the case of unvested performance restricted shares and shares subject to unvested performance restricted share units) do not count toward the requirement.
As of December 31, 2023, all our NEOs had satisfied their ownership requirements.
| | | | | | | | |
| 20222024 PROXY STATEMENT | | 5654 |
Share Holding Requirements for Executives
To ensure each of our senior executives meets our share ownership guidelines, the Company requires that each senior executive retain 50% of the net profit shares received from Company equity awards until the executive meets target ownership levels. Net profit shares are the shares remaining after payment of the exercise price of an option and taxes owed on exercise of options or SARs, vesting of restricted stock or vesting and payout under restricted stock units and performance shares. See also “Director Compensation—Matters Relating to Director Share Ownership” for a description of share retention guidelines that require our non-employee directors to maintain designated levels of ownership of common shares of Arch Capital. No Hedging Permitted
As part of our Code of Business Conduct, our officers, directors and other employees are not permitted to engage in hedging activities with respect to Arch Capital’s common shares or any other publicly-traded equity or debt securities issued by Arch Capital or any of its subsidiaries. Specifically, they may not engage in short sales, purchase or sale of financial instruments or derivatives, including puts and calls, that hedge or offset any change in the market value of such securities. In addition, our officers, directors and other employees may not otherwise engage in transactions that are designed to, or have, the same effect.
Limits on Pledging
Our Code of Business Conduct discourages the pledging of our common shares as collateral for loans and includes limitations.
▪In no event may any executive officer or director of the Company pledge an amount of common shares in respect of a loan that exceeds the lesser of 30% of the common shares beneficially owned by the individual (as reported or would be reported in our Proxy Statement) or 0.5% of the then outstanding common shares of Arch Capital; and
▪any securities pledged would not count toward satisfying any required ownership level of securities under relevant share retention guidelines.
Double-Trigger Change in Control Provision
The equity-based compensation award agreements for the named executive officersNEOs provide that, in the event the officer’s employment is terminated by the Company other than for cause, or by the officer for good reason, within two years following the consummation of a change in control in which the awards are assumed by the acquirer, unvested awards would immediately vest, and the options and SARs would have a remaining term of 90 days from termination.
Options and SARs
Our plans do not permit granting of stock options or SARs at an exercise price below the closing price on the grant date and also do not allow for repricing or reducing the exercise price of a stock option or SAR. We also do not allow out-of-the-money options or SARs to be exchanged for cash or other property.
Procedures Regarding Share-Based Compensation
The Compensation and Human Capital Committee, or a subcommittee comprised of at least two of its members, approves all grants of share-based compensation to the named executive officersNEOs and other executives who file reports under Section 16 of the Exchange Act, and these awards have generally also been ratified by the full Board.
The grant date for annual grants of share-based compensation is determined on the dates of regularly scheduled meetings of the full Board to provide assurance that grant timing is not being manipulated for employee gain. Generally, awards are granted to the named executive officersNEOs as part of the annual process, which encompassed 905939 employees worldwide for awards granted in 2021.2023. We may grant a small percentage of awards at other times throughout the year on the date of regularly scheduled meetings of the Compensation and Human Capital Committee or the full Board in connection with hiring or the promotion of an executive or special retention circumstances. In the case of new hires, the awards have grant dates corresponding to the date the employment commencesstart date for the new hire.
Retirement and Benefit Plans
Our named executive officersNEOs participate in retirement and benefit plans provided to other employees. The benefit plans include medical coverage and life and disability insurance. Our health and welfare plans help ensure that the Company has a productive and focused workforce through reliable and competitive healthcare and other benefits. Defined contribution retirement plans are provided for all employees according to local market practice. Retirement plans help employees save and prepare for retirement. In addition, the Company
maintains an Executive Supplemental Non-Qualified Savings and Retirement Plan
covering our U.S.-based senior executives which is described under “20212023 Non-Qualified Deferred Compensation.” Our named executive officersNEOs who are Bermuda-based are not permitted to participate in the non-qualified defined contribution retirement plan due to applicable United States income tax rules. In lieu of pension and matching contributions through the non-qualified plan, we have provided comparable benefits in the form of current cash payments, which are included in the “20212023 Summary Compensation Table” in the “All Other Compensation” column. column.
Other Personal Benefits
The Company provides our named executive officersNEOs who are based in Bermuda with perquisites and other benefits that the Company and Compensation and Human Capital Committee believe are reasonable and consistent with market practice in Bermuda to better enable the Company to attract and retain key employees. Such amounts have been included in the “20212023 Summary Compensation Table” in the “All Other Compensation” column.column and discussed in Footnote 5 of the “2023 Summary Compensation Table.” Tax Considerations
Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) generally limits the deductible amount of annual compensation paid to a “covered employee” (i.e.,the chief executive officer, chief financial officer and certain other current or former executive officers) to no more than $1,000,000 each. Since Arch Capital will not generally be subject to United States income tax, theany limitation on deductibility will not directly apply to it. However, theany applicable limitation would apply to a United States subsidiary of Arch Capital if it employs a covered employee. The Compensation and Human Capital Committee believes that its primary responsibility is to provide a compensation program that will attract, retain and reward the executive talent necessary to our success. Consequently, the Compensation and Human Capital Committee recognizes that the loss of a tax deduction could be necessary or advisable in some circumstances due to the restrictions of Section 162(m).
Report of the Compensation and Human Capital Committee on the Compensation Discussion and Analysis
The Compensation and Human Capital Committee reviewed and discussed the “Compensation Discussion and Analysis” section included in this Proxy Statement with management. Based on such review and discussion, the Compensation and Human Capital Committee recommended to the Board that the “Compensation Discussion and Analysis” section be included in the 20212023 Annual Report and this Proxy Statement for filing with the SEC. | | | | | | | | |
| | |
| | COMPENSATION AND HUMAN CAPITAL COMMITTEE
Moira Kilcoyne (Chair) (as of December 31, 2023)
Eric W. Doppstadt
Francis Ebong
Louis J. Paglia
Brian S. Posner (as of December 31, 2023)
Eugene S. Sunshine (Chair)
John L. Bunce, Jr.
Eric W. Doppstadt
Louis J. Paglia
Thomas R. Watjen (as of September 17, 2021) |
Compensation Committee Interlocks and Insider Participation
During 2021, the Compensation Committee consisted of Eugene S. Sunshine (chair), John L. Bunce, Jr., Eric W. Doppstadt, Louis J. Paglia and Thomas R. Watjen (as of September 17, 2021).
From time to time, in the ordinary course of our business, we may enter into transactions, including insurance and reinsurance transactions and brokerage or other arrangements for the production of business, with entities in which companies or funds affiliated with directors of Arch Capital may have an ownership or other interest.
In 2021, no such transactions took place by Compensation Committee members throughout the year.
| | | | | | | | |
59 | | 20222024 PROXY STATEMENT | | 56 |
Executive Compensation Tables
The following tables, narrative and footnotes discuss the compensation of the (i) chief executive officer,CEO, (ii) chief financial officerCFO and (iii) the three other most highly compensated executive officers during 2021.2023. These individuals are referred to as the named executive officers.NEOs.
| | | | | | | | | | | | | | |
20212023 Summary Compensation Table |
| | Name and Principal Position | Name and Principal Position | | Year | | Salary
($)(1) | | | Annual Bonus
($) | | Stock
Awards
($)(2) | | Option
Awards
($)(3) | | Non-Equity
Incentive Plan
Compensation
($)(4) | | | All Other
Compensation
($)(5) | | Total
($) | |
| Name and Principal Position | |
| Name and Principal Position | |
| Marc Grandisson | |
| Marc Grandisson | |
| Marc Grandisson | Marc Grandisson | | 2021 | | 1,000,000 | | | | — | | | 3,482,784 | | | 1,125,018 | | | 3,300,000 | | | | 428,211 | | | 9,336,013 | | |
| Chief Executive Officer and Class III Director, Arch Capital | Chief Executive Officer and Class III Director, Arch Capital | | 2020 | | 1,000,000 | | | | — | | | 3,477,082 | | | 1,125,006 | | | 2,737,000 | | | | 440,744 | | | 8,779,832 | | |
| 2019 | | 1,000,000 | | | | — | | | 3,614,402 | | | 1,125,114 | | | 3,176,000 | | | | 444,513 | | | 9,360,029 | | |
| Chief Executive Officer and Class III Director, Arch Capital | |
| | 2021 | |
| 2021 | |
| François Morin | |
| François Morin | |
| François Morin | François Morin | | 2021 | | 675,000 | | | | — | | | 1,044,861 | | | 337,504 | | | 1,822,500 | | (7) | | | 298,034 | | | 4,177,899 | | |
| Executive Vice President, Chief Financial Officer and Treasurer, Arch Capital | Executive Vice President, Chief Financial Officer and Treasurer, Arch Capital | | 2020 | | 625,000 | | | | — | | | 965,844 | | | 312,501 | | (6) | | 1,425,000 | | | | 285,260 | | | 3,613,605 | | |
| 2019 | | 625,000 | | | | — | | | 1,003,998 | | | 312,532 | | | 1,561,000 | | (7) | | | 282,755 | | | 3,785,285 | | |
| Executive Vice President, Chief Financial Officer and Treasurer, Arch Capital | |
| | 2021 | |
| 2021 | |
| Nicolas Papadopoulo | |
| Nicolas Papadopoulo | |
| Nicolas Papadopoulo | Nicolas Papadopoulo | | 2021 | | 800,000 | | | | — | | | 1,857,478 | | | 600,008 | | | 2,192,600 | | | | 409,873 | | | 5,859,959 | | |
| President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group | President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group | | 2020 | | 750,000 | | | | — | | | 1,159,012 | | | 374,999 | | | 1,419,000 | | | | 399,517 | | | 4,102,528 | | |
| 2019 | | 750,000 | | | | — | | | 1,204,824 | | | 375,035 | | | 1,544,000 | | | | 382,650 | | | 4,256,509 | | |
| President and Chief Underwriting Officer, Arch Capital and CEO, Arch Worldwide Insurance Group | |
| | 2021 | |
| 2021 | |
| Maamoun Rajeh | |
| Maamoun Rajeh | |
| Maamoun Rajeh | Maamoun Rajeh | | 2021 | | 725,000 | | | | 3,600,451 | | (8) | | 1,122,227 | | | 362,506 | | | 1,548,400 | | | | 560,148 | | | 7,918,732 | | |
| Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group | Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group | | 2020 | | 650,000 | | | | 589,856 | | (8) | | 1,004,477 | | | 325,002 | | | 1,165,144 | | (9) | | 588,785 | | | 4,323,264 | | |
| 2019 | | 650,000 | | | | 916,827 | | (8) | | 1,044,163 | | | 325,031 | | | 1,247,182 | | | | 531,746 | | | 4,714,949 | | |
| Chairman and Chief Executive Officer, Arch Worldwide Reinsurance Group | |
| | 2021 | |
| 2021 | |
| David E. Gansberg | David E. Gansberg | | 2021 | | 725,000 | | | | 398,000 | | (10) | 1,122,227 | | | 362,506 | | | 1,513,200 | | | | 79,493 | | | 4,200,426 | | |
| Chief Executive Officer, Global Mortgage Group | | 2020 | | 650,000 | | | | 213,200 | | (10) | 1,004,477 | | | 325,002 | | | 1,223,800 | | | | 72,016 | | | 3,488,495 | | |
| 2019 | | 631,792 | | | | 368,402 | | (10) | 859,035 | | | 200,812 | | | 1,255,176 | | | | 67,644 | | | 3,382,861 | | |
| | David E. Gansberg | |
| David E. Gansberg | |
| Chief Executive Officer, Global Mortgage Group, Arch Capital | |
| | 2021 | |
| 2021 | |
| 2021 | |
|
(1)The amount in the “Salary” column represents the base salary earned by each of the named executive officersNEOs in the applicable year.
(2)The amounts reported in the “Stock Awards” column represent the aggregate grant date fair value of stock awards determined pursuant to ASC Topic 718, using the assumptions set forth in the notes accompanying our financial statements. See note 22, “Share-Based Compensation,” on pages 159-162164-167 of the notes accompanying our consolidated financial statements included in our 20212023 Annual Report. The amounts for 20212023 include the grant date fair value of the annual performance shares based upon the probable outcome of the performance conditions as of the grant date. Performance shares, which pay in shares of Arch Capital will vest based upon growth in TBVPS over a three-year period. In addition, the performance shares are subject to a TSR modifier. The relative TSR modifier will reduce or increase the amount of shares earned by 25% if TSR over the three-year performance period relative to our Performance Peer Group falls outside of a defined range. See “Elements of Compensation Program—20212023 Long-Term Incentive Plan” for more information about the relative TSR modifier. Assuming the highest level of performance is achieved for the 20212023 award, the grant date fair value of the performance shares would be Mr. Grandisson—$5,165,542;7,420,533; Mr. Morin—$1,549,700;2,027,773; Mr. Papadopoulo—$2,754,981; 3,450,142; Mr. Rajeh—$1,664,457;2,110,120; and Mr. Gansberg—$1,664,457.2,110,120.
(3)The amounts reported in the “Option Awards” column represent the aggregate grant date fair value of awards computed in accordance with ASC Topic 718. We have computed the estimated grant date fair values of share-based compensation related to stock options using the Black-Scholes option valuation model (refer to “Elements of Compensation Program—Long-Term Incentive Plan”) having applied the assumptions set forth in the notes accompanying our financial statements. See note 22, “Share-Based Compensation,” on pages 159-162164-167 of the notes accompanying our consolidated financial statements included in our 20212023 Annual Report. (4)The amounts reported in the “Non-Equity Incentive Plan Compensation” column for 20212023 reflect the amounts earned by each named executive officerNEO under the annual performance incentive plan for 2023.
| | | | | | | | |
| 57 | 2022| 2024 PROXY STATEMENT | | 60 |
incentive plan for 2021. In addition, the amounts for Messrs. Grandisson, Papadopoulo, Rajeh and Gansberg, include amounts awarded and paid in February 2022 attributable to 2020 financial performance and continued employment through the payment date in the amounts of $24,750, $45,800, $39,700 and $39,700, respectively.
(5)The table below describes the incremental cost to the Company of other benefits provided to our named executive officers,NEOs, which are included in the “All Other Compensation” column. The table below provides the details of all other compensation required by SEC rules to be separately quantified for 2021.2023.
| | Name | Name | Housing Allowance (Bermuda)($) | Retirement Plans ($)(a) | Social Insurance ($)(b) | Other ($)(c) | Name | Housing Allowance (Bermuda)($) | Retirement Plans ($)(a) | Social Insurance ($)(b) | Other ($)(c) |
| Marc Grandisson | Marc Grandisson | 218,251 | 122,950 | 1,868 | — | Marc Grandisson | 224,778 | 149,775 | 1,868 | — |
| François Morin | François Morin | 82,644 | 90,735 | 1,868 | 75,000 | François Morin | 85,745 | 100,740 | 1,868 | 75,000 |
| Nicolas Papadopoulo | Nicolas Papadopoulo | 217,508 | 93,950 | 1,868 | — | Nicolas Papadopoulo | 222,548 | 95,400 | 1,868 | — |
| Maamoun Rajeh | Maamoun Rajeh | 218,954 | 97,985 | 1,868 | 139,000 | Maamoun Rajeh | 209,396 | 105,090 | 1,868 | 140,000 |
| David E. Gansberg | David E. Gansberg | — | 78,410 | — | David E. Gansberg | — | 84,840 | — | 67,778 |
(a)Represents contributions to our defined contribution plans and also includes a payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan which, due to applicable tax laws, was made outside the plan.
(b)Represents employer payment of employee portion of Bermuda social insurance.
(c)The amounts for Messrs. Morin and Rajeh represent an expatriate expense allowance for employees situated in Bermuda. The amount for Mr. Gansberg represents tuition reimbursement.
In addition, the “All Other Compensation” column also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits.
| | | | | | | | | | | | | | | | | |
| Marc Grandisson | François Morin | Nicolas Papadopoulo | Maamoun Rajeh | David E. Gansberg |
| Automobile Allowance | Y | | Y | Y | |
| Cell Allowance | | | | | Y |
| Club Dues | Y | Y | Y | Y | |
| | | | | |
| Family Travel | Y | Y | Y | Y | |
| | | | | |
| Life Insurance and LTD | Y | Y | Y | Y | |
| Fees for Children Schooling | Y | | Y | Y | |
| Tax Preparation Services | Y | Y | Y | Y | |
(6)The amount set forth for option awards for calendar year 2020 is $312,199 less than the amount shown for Mr. Morin’s option awards in the Company’s Proxy Statement for its 2021 annual meeting because his option awards for 2020 were previously inadvertently overstated by that amount. The overstatement was dueMorin elected to the inclusion in the option column of the value of options received by him in lieu of a portionreceive 20% of his 2023 approved short-term incentive payment for 2020, which amount should have only been shown in the Non-Equity Incentive Plan Compensation column.
(7)form of stock options under elections provided by the Company for Bermuda-based employees. Pursuant to that election, on February 27, 2024 Mr. Morin was awarded 13,672 stock options with a Black-Scholes value equal to $420,000. Such stock options awarded are fully vested and will expire 10 years from the date of grant. Mr. Morin also elected to receive 10% of his 2022 approved short-term incentive payment in the form of stock options under elections provided by the Company for Bermuda-based employees. Pursuant to that election, on February 24, 2023, Mr. Morin was awarded 7,765 stock options with a Black-Scholes value equal to $180,250. Such stock options awarded are fully vested and will expire 10 years from the date of grant. Mr. Morin also elected to receive 25% of his 2021 approved short-term incentive payment in the form of stock options under elections provided by the Company for Bermuda-based employees. OnPursuant to that election, on February 25, 2022, Mr. Morin was awarded 34,698 stock options with a Black-Scholes value equal to $455,622. Such stock options awarded are fully vested and will expire 10 years from the date of grant.
(7)For 2023, includes $43,081 for Mr. Morin also electedPapadopoulo and $45,291 for Mr. Gansberg received from a company in which Arch has invested for serving on the board of directors of that company at the request of Arch. Such amounts were paid in Euros and converted to receive 20%U.S. dollars using the 2023 year-end exchange rate of his 2019 approved short-term incentive payment1.10465. For the 2022 year, amounts include $41,263 Mr. Papadopoulo and $43,757 Mr. Gansberg received for aforementioned 2022 director fees. Such amounts were paid in Euros and converted to U.S. dollars using the form2022 year-end exchange rate of stock options under elections provided by1.06725. For the Company2021 year, amounts include $40,939 Mr. Papadopoulo and $31,179 Mr. Gansberg received for Bermuda-based employees. On February 27, 2020, Mr. Morin was awarded 38,309 stock options with a Black-Scholes value equalaforementioned 2021 director fees. Such amounts were paid in Euros and converted to $312,199. Such stock options awarded are fully vested and will expire 10 years fromU.S. dollars using the date2021 year-end exchange rate of grant.1.13720.
(8)Mr. Rajeh participated under the Formula Approachformula approach of our Bermuda Incentive Compensation Plan (“Formula Approach”) for underwriting years through 2017, which provides for payments over a development period of up to 10 years. The 2021 bonus payment for Mr. Rajeh represents payment in full under the Formula Approach for all prior underwriting years, as determined by the Compensation Committee. The 2020 bonus payment for Mr. Rajeh represented payments under the Formula Approach for prior underwriting years. The 2019 payment of $916,827 was comprised of a bonus amount of $506,827 calculated under the Formula Approach for prior underwriting years, and an additional bonus payment of $410,000 reflecting Mr. Rajeh’s service as Chairman and Chief Executive Officer of our Worldwide Reinsurance Group since October 2017.Human Capital Committee. No additional payments will be payable to Mr. Rajeh under the Formula Approach.
(9)Mr. Rajeh elected to receive 50%20% of his 20202023 approved short-term incentive payment in the form of stock options under elections provided by the Company for Bermuda-based employees. OnPursuant to that election, on February 26, 2021,27, 2024, Mr. Rajeh was awarded 63,30813,565 stock options with a Black-Scholes value equal to $582,572.$416,700. Such stock options awarded are fully vested and will expire 10 years from the date of grant.
(10)The 2019, 20202021, 2022 and 20212023 bonus payments for Mr. Gansberg represent payments under the Formula Approach for prior underwriting years.
| | | | | | | | |
61 | | 20222024 PROXY STATEMENT | | 58 |
| | | | | | | | | | | | | | | | | |
20212023 | Grants of Plan-Based Awards |
The following table provides information concerning grants of share-based awards made to our named executive officersNEOs in fiscal year 2021:2023:
| | Est. Future Payouts Under Non-Equity Incentive Plan Awards (2) | Est. Future Payouts Under Equity Incentive Plan Awards (3) | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | All Other Option Awards: Number of Securities Underlying Options (#)(5) | | Exercise or Base Price of Option Awards ($/Sh) (5) | Grant Date
Fair Value of
Stock and
Option Awards
($)(6) |
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)(2) | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)(2) | Estimated Future Payouts Under Equity Incentive Plan Awards ($)(3) | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | All Other Option Awards: Number of Securities Underlying Options (#)(5) | | Exercise or Base Price of Option Awards ($/Sh)(5) | Grant Date
Fair Value of
Stock and
Option Awards
($)(6) |
| Name | Name | Grant Date
(1) | Threshold | | Target | Maximum | Threshold | Target | Maximum | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | All Other Option Awards: Number of Securities Underlying Options (#)(5) | | Exercise or Base Price of Option Awards ($/Sh) (5) | Grant Date
Fair Value of
Stock and
Option Awards
($)(6) | Name | Grant Date
(1) | Threshold | | Target | Maximum | Threshold | Target | Maximum |
| Marc Grandisson | Marc Grandisson | 2/26/2021 | | 34,548 | 69,095 | 138,190 | Marc Grandisson | 2/24/2023 | | | | | 25,097 | 50,193 | 100,386 | | | | 73.92 | 3,710,267 |
| 2/24/2023 | | | 2/24/2023 | | | | | | | | 18,252 | | | 69.17 | 1,262,491 |
| 2/24/2023 | | | 2/24/2023 | | | | | | | | | 67,242 | | 69.17 | 1,578,304 |
| | 2/26/2021 | | | | 25,126 | | 35.82 | 900,013 |
| NA | |
| NA | |
| NA | |
| François Morin (7) | |
| François Morin (7) | |
| François Morin (7) | | 2/24/2023 | | | | | 6,858 | 13,716 | 27,432 | | | | 73.92 | 1,013,887 |
| 2/24/2023 | | | 2/24/2023 | | | | | | | | 4,988 | | | 69.17 | 345,020 |
| 2/24/2023 | | | 2/24/2023 | | | | | | | | | 18,375 | | 69.17 | 431,298 |
| | 2/26/2021 | | | | 122,254 | | 35.82 | 1,125,018 |
| NA | |
| NA | |
| NA | |
| Nicolas Papadopoulo | |
| Nicolas Papadopoulo | |
| Nicolas Papadopoulo | | 2/24/2023 | | | | | 11,669 | 23,337 | 46,674 | | | | 73.92 | 1,725,071 |
| 2/24/2023 | | | 2/24/2023 | | | | | | | | 8,486 | | | 69.17 | 586,977 |
| 2/24/2023 | | | 2/24/2023 | | | | | | | | | 31,264 | | 69.17 | 733,829 |
| | NA | |
| NA | |
| NA | |
| Maamoun Rajeh (7) | |
| Maamoun Rajeh (7) | |
| Maamoun Rajeh (7) | | 2/24/2023 | | | | | 7,137 | 14,273 | 28,546 | | | | 73.92 | 1,055,060 |
| 2/24/2023 | | | 2/24/2023 | | | | | | | | 5,190 | | | 69.17 | 358,992 |
| 2/24/2023 | | | 2/24/2023 | | | | | | | | | 19,121 | | 69.17 | 448,808 |
| | NA | 330,000 | | 1,650,000 | 3,300,000 | | |
| François Morin (7) | 2/26/2021 | | 10,365 | 20,729 | 41,458 | | 37.38 | 774,850 |
| NA | |
| NA | |
| NA | |
| David E. Gansberg | |
| David E. Gansberg | |
| David E. Gansberg | | 2/24/2023 | | | | | 7,137 | 14,273 | 28,546 | | | | 73.92 | | 1,055,060 |
| 2/24/2023 | | | 2/24/2023 | | | | | | | | 5,190 | | | 69.17 | | 358,992 |
| 2/24/2023 | | | 2/24/2023 | | | | | | | | | 19,121 | | 69.17 | | 448,808 |
| | 2/26/2021 | | | | 7,538 | | 35.82 | 270,011 |
| 2/26/2021 | | | | 36,676 | | 35.82 | 337,504 |
| | NA | 182,250 | | 911,250 | 1,822,500 | | |
| Nicolas Papadopoulo | 2/26/2021 | | 18,426 | 36,851 | 73,702 | | 37.38 | 1,377,490 |
| 2/26/2021 | | | | 13,400 | | 35.82 | 479,988 |
| 2/26/2021 | | | | 65,202 | | 35.82 | 600,008 |
| | NA | 240,000 | | 1,200,000 | 2,400,000 | | |
| Maamoun Rajeh | 2/26/2021 | | 11,132 | 22,264 | 44,528 | | 37.38 | 832,228 |
| 2/26/2021 | | | | 8,096 | | 35.82 | 289,999 |
| 2/26/2021 | | | | 39,393 | | 35.82 | 362,506 |
| NA | 195,750 | | 978,750 | 1,957,500 | | |
| David E. Gansberg | 2/26/2021 | | 11,132 | 22,264 | 44,528 | | 37.38 | | 832,228 |
| 2/26/2021 | | | | 8,096 | | 35.82 | | 289,999 |
| 2/26/2021 | | | | 39,393 | | 35.82 | | 362,506 |
| | NA | 195,750 | | 978,750 | 1,957,500 | | |
| NA | |
| NA | |
| NA | |
(1)All of the share-based grants indicated above were awarded either under the 20182022 Long-Term Incentive and Share Award Plan or the 2015 Long-Term Incentive and Share Award Plan.
(2)The amounts represent the possible payouts under our annual incentive compensation plan. The amount reported in the “Target” column represents the annual target incentive bonus opportunity for each executive. The amounts reported in the “Threshold” and “Maximum” columns in the table represent the amounts determined pursuant to the annual incentive compensation plan. Actual payments under these awards were determined in February 2022,2024, were paid in March 2022,2024, and are included in the “Non-Equity Incentive Plan Compensation” column of the “20212023 Summary Compensation Table.” (3)The awards represent performance shares granted in February 2021.2023. The amounts reported in the “Threshold,” “Target” and “Maximum” columns represent the number of performance shares awarded subject to performance vesting conditions. The performance period for the awards
(4)The awards represent restricted shares granted in February 2021.2023. The restricted shares will vest ratably over a three-year period.
(5)The awards represent stock options granted in February 2021.2023. All of the stock options reported in the table have a maximum term of 10 years from the grant date and vest ratably over a three-year period. The exercise price of stock options is the closing price of our common shares on the respective grant date.
(6)The amounts shown in this column represent the grant date fair value of the underlying award computed in accordance with accounting guidance governing share-
basedshare-based compensation arrangements as discussed in note 22, “Share-Based Compensation,” on pages 159-162164-167 of the notes accompanying our consolidated financial statements included in our 20212023 Annual Report. The grant date fair value of the performance share awards was based upon the probable outcome of the performance conditions as of the grant date.
(7)Mr.Messrs. Morin and Rajeh both elected to receive 25%20% of histheir approved cash bonus for 20212023 in the form of stock options under an election provided by the Company for Bermuda-based employees. On February 25, 2022,27, 2024, Mr. Morin was awarded 34,69813,672 stock options with a Black-Scholes value equal to $455,622.$420,000 and Mr. Rajeh was awarded 13,565 stock options with a Black-Scholes value equal to $416,700. The stock options are all fully vested and will expire 10 years from the date of grant. The Black-Scholes value of these stock options is reflected in the “20220213 Summary Compensation TableTable”” in the “Non-Equity Incentive Plan Compensation” column for 2021,2023, but the options had an intrinsic value of zero on the grant date.
| | | | | | | | | | | | | | |
Outstanding Equity Awards at 20212023Fiscal Year-End |
The following table provides information concerning unexercised options and stock that has not vested for each named executive officerNEO outstanding as of December 31, 2021:2023:
| | | Option Awards | | Stock Awards | |
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable
(1) | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(2) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | |
| Marc Grandisson | 75,000 | | — | | 12.86 | | 5/9/2022 | | 48,439 | | 2,153,114 | | 203,198 | | 9,032,151 | |
| | 100,800 | | — | | 14.22 | | 11/12/2022 | | | | | | | | |
| | 53,100 | | — | | 17.84 | | 5/9/2023 | | | | | | | | |
| | 48,000 | | — | | 19.09 | | 5/13/2024 | | | | | | | | |
| | 80,991 | | — | | 19.03 | | 11/6/2024 | | | | | | | | |
| Name | |
| Name | |
| Name | |
| Marc Grandisson | |
| Marc Grandisson | |
| Marc Grandisson | |
| 34,830 | |
| 34,830 | |
| 34,830 | |
| 69,600 | |
| 69,600 | |
| 69,600 | |
| 616,284 | |
| 616,284 | |
| 616,284 | |
| 133,821 | |
| 133,821 | |
| 133,821 | |
| 142,225 | |
| 142,225 | |
| 142,225 | |
| 138,046 | |
| 138,046 | |
| 138,046 | |
| 81,543 | |
| 81,543 | |
| 81,543 | |
| 35,055 | |
| 35,055 | |
| 35,055 | |
| — | |
| — | |
| — | |
| François Morin | |
| François Morin | |
| François Morin | |
| 4,599 | |
| 4,599 | |
| 4,599 | |
| 11,460 | |
| 11,460 | |
| 11,460 | |
| 12,630 | |
| 12,630 | |
| 12,630 | |
| 11,010 | |
| 11,010 | |
| 11,010 | |
| 31,224 | |
| 31,224 | |
| 31,224 | |
| 27,534 | |
| 27,534 | |
| 27,534 | |
| 39,507 | |
| 39,507 | |
| 39,507 | |
| 38,346 | |
| 38,346 | |
| 38,346 | |
| 38,309 | |
| 38,309 | |
| 38,309 | |
| 24,462 | |
| 24,462 | |
| 24,462 | |
| 8,584 | |
| 8,584 | |
| 8,584 | |
| 34,698 | |
| 34,698 | |
| 34,698 | |
| 7,765 | |
| 7,765 | |
| 7,765 | |
| — | |
| — | |
| — | |
| | 43,890 | | — | | 20.84 | | 5/13/2025 | | | | | | | | |
| | 34,830 | | — | | 23.90 | | 5/13/2026 | | | | | | | | |
| 69,600 | | — | | 32.09 | | 5/8/2027 | | | | | | | | |
| 616,284 | | — | | 26.79 | | 4/9/2028 | | | | | | | | |
| 133,821 | | — | | 26.55 | | 5/11/2028 | | | | | | | | |
| 94,864 | | 47,361 | | 32.67 | | 2/28/2029 | | | | | | | | |
| 46,107 | | 91,939 | | 42.42 | | 2/27/2030 | | | | | | | | |
| — | | 122,254 | | 35.82 | | 2/26/2031 | | | | | | | | |
| François Morin | 3,300 | | — | | 12.86 | | 5/9/2022 | | 14,014 | | 622,922 | | 57,980 | | 2,577,211 | |
| 16,500 | | — | | 14.22 | | 11/12/2022 | | | | | | | | |
| 5,655 | | — | | 17.84 | | 5/9/2023 | | | | | | | | |
| 5,025 | | — | | 18.09 | | 7/25/2023 | | | | | | | | |
| 6,000 | | — | | 19.09 | | 5/13/2024 | | | | | | | | |
| 4,599 | | — | | 19.43 | | 12/4/2024 | | | | | | | | |
| 11,460 | | — | | 20.84 | | 5/13/2025 | | | | | | | | |
| 12,630 | | — | | 23.90 | | 5/13/2026 | | | | | | | | |
| 11,010 | | — | | 32.09 | | 5/8/2027 | | | | | | | | |
| 31,224 | | — | | 26.55 | | 5/11/2028 | | | | | | | | |
| 27,534 | | — | | 29.13 | | 7/24/2028 | | | | | | | | |
| 26,351 | | 13,156 | | 32.67 | | 2/28/2029 | | | | | | | | |
| 12,807 | | 25,539 | | 42.42 | | 2/27/2030 | | | | | | | | |
| 38,309 | | — | | 42.42 | | 2/27/2030 | | | | | | | | |
| — | | 36,676 | | 35.82 | | 2/26/2031 | | | | | | | | |
| | | | | | | | |
63 | | 20222024 PROXY STATEMENT | | 60 |
| | | Option Awards | | Stock Awards | |
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable
(1) | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(2) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | |
| Nicolas Papadopoulo | 9,213 | | — | | 20.84 | | 5/13/2025 | | 21,171 | | 941,051 | | 81,552 | | 3,624,986 | |
| | 21,930 | | — | | 23.90 | | 5/13/2026 | | | | | | | | |
| | 22,050 | | — | | 32.09 | | 5/8/2027 | | | | | | | | |
| | 150,000 | | — | | 32.13 | | 9/19/2027 | | | | | | | | |
| | 44,607 | | — | | 26.55 | | 5/11/2028 | | | | | | | | |
| 31,621 | | 15,787 | | 32.67 | | 2/28/2029 | | | | | | | | |
| 15,369 | | 30,646 | | 42.42 | | 2/27/2030 | | | | | | | | |
| — | | 65,202 | | 35.82 | | 2/26/2031 | | | | | | | | |
| Name | |
| Name | |
| Name | |
| Nicolas Papadopoulo | |
| Nicolas Papadopoulo | |
| Nicolas Papadopoulo | |
| 21,930 | |
| 21,930 | |
| 21,930 | |
| 22,050 | |
| 22,050 | |
| 22,050 | |
| 150,000 | |
| 150,000 | |
| 150,000 | |
| 44,607 | |
| 44,607 | |
| 44,607 | |
| 47,408 | |
| 47,408 | |
| 47,408 | |
| 46,015 | |
| 46,015 | |
| 46,015 | |
| 43,489 | |
| 43,489 | |
| 43,489 | |
| 15,262 | |
| 15,262 | |
| 15,262 | |
| — | |
| — | |
| — | |
| Maamoun Rajeh | Maamoun Rajeh | 19,800 | | — | | 17.84 | | 5/9/2023 | | 14,831 | | 659,238 | | 61,005 | | 2,711,672 | |
| 19,500 | | — | | 19.09 | | 5/13/2024 | | | | | | | | |
| 32,286 | | — | | 19.33 | | 7/1/2024 | | | | | | | | |
| 20,040 | | — | | 20.84 | | 5/13/2025 | | | | | | | | |
| 15,900 | | — | | 23.90 | | 5/13/2026 | | | | | | | | |
| 15,930 | | — | | 32.09 | | 5/8/2027 | | | | | | | | |
| 31,500 | | — | | 32.13 | | 9/19/2027 | | | | | | | | |
| 38,661 | | — | | 26.55 | | 5/11/2028 | | | | | | | | |
| 27,405 | | 13,682 | | 32.67 | | 2/28/2029 | | | | | | | | |
| 13,319 | | 26,561 | | 42.42 | | 2/27/2030 | | | | | | | | |
| — | | 39,393 | | 35.82 | | 2/26/2031 | | | | | | | | |
| 63,308 | | — | | 35.82 | | 2/26/2031 | | | | | | | | |
| Maamoun Rajeh | |
| Maamoun Rajeh | |
| 31,500 | |
| 31,500 | |
| 31,500 | |
| 38,661 | |
| 38,661 | |
| 38,661 | |
| 41,087 | |
| 41,087 | |
| 41,087 | |
| 39,880 | |
| 39,880 | |
| 39,880 | |
| 63,308 | |
| 63,308 | |
| 63,308 | |
| 26,275 | |
| 26,275 | |
| 26,275 | |
| 9,220 | |
| 9,220 | |
| 9,220 | |
| — | |
| — | |
| — | |
| David E. Gansberg | David E. Gansberg | 9,900 | | — | | 12.86 | | 5/9/2022 | | 14,749 | | 655,593 | | 54,108 | | 2,405,101 | |
| 18,810 | | — | | 14.22 | | 11/12/2022 | | | | | | | | |
| 7,395 | | — | | 17.84 | | 5/9/2023 | | | | | | | | |
| 29,070 | | — | | 17.68 | | 2/4/2024 | | | | | | | | |
| 10,950 | | — | | 19.09 | | 5/13/2024 | | | | | | | | |
| 13,560 | | — | | 20.84 | | 5/13/2025 | | | | | | | | |
| 10,770 | | — | | 23.90 | | 5/13/2026 | | | | | | | | |
| 15,090 | | — | | 32.09 | | 5/8/2027 | | | | | | | | |
| 15,822 | | — | | 26.55 | | 5/11/2028 | | | | | | | | |
| 10,624 | | 5,305 | | 32.67 | | 2/28/2029 | | | | | | | | |
| 5,982 | | 2,990 | | 41.43 | | 10/1/2029 | | | | | | | | |
| 13,319 | | 26,561 | | 42.42 | | 2/27/2030 | | | | | | | | |
| — | | 39,393 | | 35.82 | | 2/26/2031 | | | | | | | | |
| David E. Gansberg | |
| David E. Gansberg | |
| 15,090 | |
| 15,090 | |
| 15,090 | |
| 15,822 | |
| 15,822 | |
| 15,822 | |
| 15,929 | |
| 15,929 | |
| 15,929 | |
| 8,972 | |
| 8,972 | |
| 8,972 | |
| 39,880 | |
| 39,880 | |
| 39,880 | |
| 26,275 | |
| 26,275 | |
| 26,275 | |
| 9,220 | |
| 9,220 | |
| 9,220 | |
| — | |
| — | |
| — | |
(1)Each of the above stock options and SARs, as applicable, vest in three equal annual installments commencing on the first anniversary of the grant date, except for the awards granted on October 1, 2019, to Mr. Gansberg, under which one-third of such award vested on each of the first anniversary of the grant date, and February 28, 2021, and the remaining one-third will vest on February 28, 2022, the 38,309 award to Mr. Morin on February 27, 2020, as part of his 2019 bonus that he elected to receive in options, which wasvested on the grant date, the 34,698 award to Mr. Morin on February 25, 2022, as part of his 2021 bonus that he elected to receive in options, which vested on grant date, the 7,765 award to Mr. Morin on February 24, 2023, as part of his 2022 bonus that he elected to receive in options, which vested on the grant date and the 63,308 award to Mr. Rajeh on February 26, 2021, as part of his 2020 bonus that he elected to receive in options, which vested on the grant date. All of the options and SARs will expire 10 years from the grant date, subject to the terms of the award agreements.
(2)The above includes restricted share or unit awards which vest in three equal annual installments commencing on the first anniversary of the grant date. The above also includes 2021 performance shares earned for the performance period ended on December 31, 2023, that vested on March 4, 2024, as discussed in “2023 Compensation Decisions for NEOs—2021 Performance Shares Plan Payout.” (3)Market value of the restricted share or unit awards and the 2021 performance shares earned is based on the closing price of our common shares on December 31, 2021,2023, which was $44.45.$74.27.
(4)Reflects performance shares at the targetmaximum performance that were granted in 2019, 20202022 and 2021,2023, which have a performance period of January 1, 20192022 through December 31, 2021;2024 and January 1, 20202023 through December 31, 2022; and January 1, 2021 through December 31, 2023,2025, respectively.
| | | | | | | | |
| 61 | 2022| 2024 PROXY STATEMENT | | 64 |
20212023 Option Exercises and Stock Vested
The following table provides information concerning each exercise of stock options and each vesting of stock during fiscal year 20212023 for the named executive officers:NEOs:
| | | |
| | | | | Option Awards | | Stock Awards | | Option Awards | | Stock Awards |
| Name | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) (1) | | Value Realized on Vesting ($) | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) (1) | | Value Realized on Vesting ($) |
| Marc Grandisson | Marc Grandisson | | 72,000 | | | 2,064,650 | | | 181,343 | | | 6,731,769 | |
| François Morin | François Morin | | 6,200 | | | 185,287 | | | 77,060 | | | 2,861,866 | |
| Nicolas Papadopoulo | Nicolas Papadopoulo | | — | | | — | | | 60,449 | | | 2,243,975 | |
| Maamoun Rajeh | Maamoun Rajeh | | 105,603 | | | 2,887,864 | | | 52,391 | | | 1,944,847 | |
| David E. Gansberg | David E. Gansberg | | 9,900 | | | 260,525 | | | 24,239 | | | 900,677 | |
(1)Includes the 20182020 Performance Shares that cliff-vested in 20212023 with a performance factor of 188.1%75.6%.
2021
2023 Non-Qualified Deferred Compensation
The Company maintains tax-qualified and non-qualified defined contribution plans but does not maintain any defined benefit retirement or pension plans. The following table provides information with respect to our defined contribution plans that provide for the deferral of compensation on a basis that is not tax-qualified:
| | Name | Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/Distributions ($) | | Aggregate Balance at Last FYE ($)(3) | | Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/Distributions ($) | | Aggregate Balance at Last FYE ($)(3) | |
| Marc Grandisson | Marc Grandisson | — | | — | | — | | — | | | — | | |
| François Morin | François Morin | — | | — | | — | | — | | | — | | |
| François Morin | |
| François Morin | |
| Nicolas Papadopoulo | |
| Nicolas Papadopoulo | |
| Nicolas Papadopoulo | Nicolas Papadopoulo | — | | — | | — | | — | | | — | | |
| Maamoun Rajeh | Maamoun Rajeh | — | | — | | — | | — | | | — | | |
| Maamoun Rajeh | |
| Maamoun Rajeh | |
| David E. Gansberg | David E. Gansberg | 8,485 | | 43,500 | | 237,534 | | — | | | 1,360,658 | | |
| David E. Gansberg | |
| David E. Gansberg | |
| | | | | | | | |
65 | | 20222024 PROXY STATEMENT | | 62 |
The Company maintains an Executive Supplemental Non-Qualified Savings and Retirement Plan. Under this Plan,plan, participants may defer eligible base salary in excess of the compensation limit imposed by the Internal Revenue Code (“Excess Compensation”) (for 2021,2023, base salary in excess of $290,000)$330,000) and, with respect to the eligible named executive officers,NEOs, the Company provides matching contributions on these deferrals in amounts equal to 100% of the first 3% of salary contributed to the plan and 50% of the next 3% of salary contributed to the plan. The Company also makes pension-like contributions on behalf of the eligible named executive officersNEOs in an amount equal to 10% of Excess Compensation. In addition, the eligible named executive officersNEOs may defer up to 100% of annual bonus paid each year and these bonus deferral contributions are not eligible for matching contributions by the Company. Until distribution, the contributions and any earnings are held in an irrevocable trust known as a “rabbi trust” by an independent trustee, and the trust assets remain subject to the Company’s creditors in the event of insolvency or bankruptcy. The participants may elect to have their contributions under the plan deemed to be invested among certain permissible mutual fund options. The plan provides that, as soon as practicable following retirement, death or other termination of employment, but subject to any delay required by the Internal Revenue Code, all benefits under the plan will be distributed either in a single lump sum in cash or, if elected, in installments over a period not to exceed 10 years.
Section 457A of the Internal Revenue Code generally prohibits U.S. taxpayers from deferring U.S. income tax on compensation attributable to services performed for certain Bermuda-based employers. As a result, certain employees of Arch Capital and Arch Re Bermuda, including Messrs. Grandisson, Morin, Papadopoulo and Rajeh are not permitted to participate in the non-qualified defined contribution retirement plan.Executive Supplemental Non-Qualified Savings and Retirement Plan. In lieu of pension and matching contributions whichthat would otherwise be provided to these executives through the non-qualified plan, we have provided comparable benefits to them in the form of current cash payments, subject to tax. Such cash payments have been included in the “20212023 Summary Compensation Table” in the “All Other Compensation” column for fiscal years 2021, 20202023, 2022 and 2019.2021. | | | | | | | | |
| 63 | 2022| 2024 PROXY STATEMENT | | 66 |
Termination Scenarios—Potential Payments
The following table provides information onquantitative disclosures of the variousestimated payments and benefits that each named executive officerNEO would have been entitled to receive if his last day of employmentin the event an NEO separated from service with the Company had been December 31, 2021, under the various circumstances presented.presented and such termination was effective as of December 31, 2023. Please refer to the descriptions of our employment agreements and share-based award agreements, which outline these potential payments and benefits (see “Employment Arrangements”). | | Name | Name | Without Good Reason ($)(1)(2) | For Cause ($) | Death ($)(3) | | Disability ($)(4) | Without Cause or For Good Reason (as applicable) ($)(3) | Without Cause or For Good Reason (as applicable) following a Change in Control ($)(3) | Name | Without Good Reason ($)(1)(2) | For Cause ($) | Death ($)(3) | | Disability ($)(4) | Without Cause or For Good Reason (as applicable) ($) | Without Cause or For Good Reason (as applicable) following a Change in Control ($) |
| Marc Grandisson | Marc Grandisson | |
| Cash Severance (5) | |
| Cash Severance (5) | |
| Cash Severance (5) | Cash Severance (5) | — | | — | | 4,300,000 | | | — | | 6,125,000 | | 6,125,000 | |
| Accelerated Vesting of Share-Based Awards (6) | Accelerated Vesting of Share-Based Awards (6) | — | | — | | 12,984,865 | | | 12,984,865 | | — | | 12,984,865 | |
| Health & Welfare (7) | Health & Welfare (7) | — | | — | | 35,151 | | | 35,151 | | 35,151 | | 35,151 | |
| Total | Total | — | | — | | 17,320,016 | | | 13,020,016 | | 6,160,151 | | 19,145,016 | |
| François Morin | François Morin | |
| Cash Severance (8) | Cash Severance (8) | — | | — | | — | | | — | | 2,041,875 | | 2,041,875 | |
| Cash Severance (8) | |
| Cash Severance (8) | |
| Accelerated Vesting of Share-Based Awards (6) | Accelerated Vesting of Share-Based Awards (6) | — | | — | | 3,723,469 | | | 3,723,469 | | — | | 3,723,469 | |
| Health & Welfare (7) | Health & Welfare (7) | — | | — | | 34,253 | | | 34,253 | | 34,253 | | 34,253 | |
| Total | Total | — | | — | | 3,757,722 | | | 3,757,722 | | 2,076,128 | | 5,799,597 | |
| Nicolas Papadopoulo | Nicolas Papadopoulo | |
| Cash Severance (8) | |
| Cash Severance (8) | |
| Cash Severance (8) | Cash Severance (8) | — | | — | | — | | | — | | 2,600,000 | | 2,600,000 | |
| Accelerated Vesting of Share-Based Awards (6) | Accelerated Vesting of Share-Based Awards (6) | — | | — | | 5,376,913 | | | 5,376,913 | | — | | 5,376,913 | |
| Health & Welfare (7) | Health & Welfare (7) | — | | — | | 34,253 | | | 34,253 | | 34,253 | | 34,253 | |
| Total | Total | — | | — | | 5,411,166 | | | 5,411,166 | | 2,634,253 | | 8,011,166 | |
| Maamoun Rajeh | Maamoun Rajeh | |
| Cash Severance (8) | Cash Severance (8) | — | | — | | — | | | — | | 2,193,125 | | 2,193,125 | |
| Cash Severance (8) | |
| Cash Severance (8) | |
| Accelerated Vesting of Share-Based Awards (6) | Accelerated Vesting of Share-Based Awards (6) | — | | — | | 3,925,965 | | | 3,925,965 | | — | | 3,925,965 | |
| Health & Welfare (7) | Health & Welfare (7) | — | | — | | 33,973 | | | 33,973 | | 33,973 | | 33,973 | |
| Total | Total | — | | — | | 3,959,938 | | | 3,959,938 | | 2,227,098 | | 6,153,063 | |
| David E. Gansberg | David E. Gansberg | |
| Cash Severance (9) | Cash Severance (9) | — | | — | | — | | | — | | 3,007,500 | | 2,682,500 | |
| Cash Severance (9) | |
| Cash Severance (9) | |
| Accelerated Vesting of Share-Based Awards (6) | Accelerated Vesting of Share-Based Awards (6) | — | | — | | 3,526,097 | | | 3,526,097 | | — | | 3,526,097 | |
| Health & Welfare (7) | Health & Welfare (7) | — | | — | | 31,785 | | | 31,785 | | 31,785 | | 31,785 | |
| Total | Total | — | | — | | 3,557,882 | | | 3,557,882 | | 3,039,285 | | 6,240,382 | |
(1)In the case of resignation by giving six months’ advance notice without good reason by Messrs. Grandisson, Morin, Papadopoulo or Rajeh, the Company may elect to place them on “garden leave” during all or part of the notice period. In this event, each of these individuals will (a) continue to receive base salary and benefits through the garden leave period of up to six months and (b) receive, following the end of the garden leave period, a cash lump sum payment equal to one half of the sum of (i) the “bonus amount” (which is the greater of the annual target bonus or the average of the annual bonuses received for the preceding three years) and (ii) a pro-rated portion of the “bonus amount” through the date of notice (in the case of Mr. Grandisson, through the date of termination, less any period of garden leave). If the Company does not elect to place them on garden leave and these individuals continue to work during the six-month notice period, they will be entitled to receive the amounts set forth in the preceding sentence
pursuant to their respective employment agreement. See
“Employment Arrangements.” For a termination date of December 31, 2021,2023, the total of these cash amounts accruing from the notice date would have been $2.8$3.3 million for Mr. Grandisson, $1.4$1.6 million for Mr. Morin, $1.6$1.9 million for Mr. Papadopoulo and $1.6$2.5 million for Mr. Rajeh. In addition, if the Company elects to extend their noncompetition period for six months after the end of the notice or garden leave period, Messrs. Grandisson, Morin, Papadopoulo and Rajeh will (a) continue to receive base salary and medical benefits through the extended noncompetition period and (b) receive, during the extended noncompetition period, payments in the aggregate equal to one half of the sum of (i) the “bonus amount” and (ii) a pro-rated portion of the “bonus amount” through the date of notice of termination. For a termination date of December 31, 2021,2023, and a six month extension of the noncompetition period, the total of these cash amounts would have been $2.8 million for Mr. Grandisson, $1.4 million for Mr. | | | | | | | | |
67 | | 20222024 PROXY STATEMENT | | 64 |
have been $3.3 million for Mr. Grandisson, $1.6 million for Mr. Morin, $1.6$1.9 million for Mr. Papadopoulo and $1.6$2.5 million for Mr. Rajeh.
(2)Since Mr.Messrs. Grandisson, Morin and Papadopoulo isare of retirement age (as defined in our plans), any unvested restricted shares/units and unvested stock options/SARs will continue to vest according to the vesting schedule and, in the case of stock options/SARs, the options/SARs will continue to have the full exercise period of 10 years from the date of grant, so long as he doesthey do not engage in a competitive activity (as defined in the applicable award agreements). In the event Mr.Messrs. Grandisson, Morin and Papadopoulo engagesengage in a competitive activity following retirement, unvested awards will be forfeited and the exercise periods for vested options/SARs would be reduced.
(3)Mr. Rajeh participated under the Formula Approach of our Bermuda Incentive Compensation Plan for underwriting years through 2017, which provides for payments over a development period of up to 10 years. In the event of termination on December 31, 2021, due to death, termination without cause or termination for good reason, Mr. Rajeh would have been entitled to payments in full settlement under the Formula Approach in the amounts determined by the Compensation Committee, taking into account such factors it deems relevant including that such amounts are generally subject to recalculation over the applicable 10-year development periods for open underwriting years. As of December 31, 2021, such amounts for Mr. Rajeh would have been approximately $3.6 million, which would have been payable by the end of the year following termination. As described in footnote 8 in the “2021 Summary Compensation Table” above, all of Mr. Rajeh’s entitlements under the Formula Approach were satisfied by a payment of $3,600,451 in March 2022, which amount is set forth in the “2021 Summary Compensation Table.” Accordingly, no further amount would be payable to Mr. Rajeh under the Formula Approach upon any termination of his employment. Mr. Gansberg participated under the Formula Approach of our Incentive Compensation Plan for underwriting years through 2018. In the event of termination on December 31, 2021, due to death, termination without cause or termination for good reason, Mr. Gansberg would have been entitled to payments under the Formula Approach attributable to underwriting years in which he participated prior to the year of termination on the same basis as if he remained employed, based on the ongoing recalculated results for such underwriting years over their applicable 10-year development periods. As of December 31, 2021, such amounts for Mr. Gansberg are estimated to be up to approximately $1.4 million in the aggregate. Any such payments would be made at the same times they are regularly made to active employees for such underwriting years.
Under Mr. Grandisson’s employment agreement, in the event of his death, his estate would receive an amount equal to two times the sum of his annual base salary and his target annual bonus. Such amount would be paid in a lump sum and offset by the amount of any proceeds received by his estate from life insurance provided by the Company. The amount set forth above reflects an offset of $1.0 million for life insurance coverage currently provided by the Company.
(4)Upon termination on December 31, 2021, due to disability, Mr. Rajeh would have been entitled to payments in full settlement under the Formula Approach as described in footnote 3 above for Mr. Rajeh, provided he did not engage in competition with the Company.
Upon termination on December 31, 20212023 due to disability, Mr. Gansberg would have been entitled to payments under the Formula Approach attributable to underwriting years in which he participated prior to the year of termination on the same basis as if he remained employed based on the ongoing recalculated results for such underwriting years over their applicable 10-year development periods, provided he did not engage in competition
with the Company. As of December 31, 2021,2023, such amounts for Mr. Gansberg are estimated to be up to approximately $1.4 million$171,252 in the aggregate. Any such payments would be made at the same times they are regularly made to active employees for such underwriting years.
Under Mr. Grandisson’s employment agreement, in the event his employment terminates due to his permanent disability, he would be entitled to payment of an amount equal to 40% of his base salary through the date he reaches age 65, offset by proceeds scheduled to be received from any disability insurance coverages provided by the Company. The disability insurance coverage currently provided by the Company exceeds the amount otherwise payable by the Company.
(5)Under Mr. Grandisson’s employment agreement, in the event his employment is terminated by the Company without cause or by him for good reason, he would be entitled to (a) base salary for the number of months equal to the excess of 24 months over the number of months, if any, he is on garden leave (during which he would continue to receive base salary), (b) two times his target annual bonus and (c) a pro-rated portion of his target annual bonus based on the period through the date of termination, less any period he is on garden leave.
The amounts above assume a termination date of December 31, 2021,2023, a notice of termination date of June 30, 2021,2023, and a six- month garden leave period between the notice and termination dates. The amounts include base salary payable during the garden leave period.
(6)Represents the intrinsic value (i.e., the value based upon the Company’s closing share price on December 31, 2021,2023, or in the case of stock options/SARs, the excess of the closing price over the exercise price) of accelerated vesting of certain unvested share-based awards as of December 31, 2021,2023, under the various circumstances presented.
In the case of termination by the Company without cause or by Mr. Gansberg for good reason, so long as such termination does not occur within two years after a change in control, unvested equity awards that were granted after the date of his employment agreement and held by him for at least one year would vest upon termination, in the case of unvested time-vesting awards, in full, and in the case of unvested performance awards, based upon the lesser of (x) target performance, or (y) the actual level of achievement of all relevant performance goals (measured as of the latest date immediately preceding termination for which performance can be determined).
(7)Represents the employer cost relating to the continuation of health insurance coverage under the terms described in each executive’s employment agreement for the various circumstances presented.
(8)In the case of termination by the Company without cause or by Messrs. Morin, Papadopoulo or Rajeh for good reason, each will be entitled to receive 12 months of base salary from the date of notice of termination and an amount equal to the sum of the (a) the annual target bonus plus (b) a pro-rated portion of the annual target bonus through the date of notice, one half of which amount shall be paid in a single lump sum on the date that is 60 days following the date of termination and the remaining half will be payable in equal monthly installments over six months following the date of termination.
(9)In the case of termination by the Company without cause or by Mr. Gansberg for good reason, he will be entitled to (a) an amount equal to the sum of his annual base salary, his target annual bonus and a pro-rated portion of his target annual bonus for the year of termination and (b) so long as such termination does not occur within two years after a change in control, unvested equity awards that have been granted after the date of his employment agreement and held by him for at least one year will vest upon termination, in the case of unvested performance awards, based upon the lesser of (x) target performance, or (y) the actual level of achievement of all relevant performance goals (measured as of the latest date immediately preceding termination for which performance can be determined).termination. The payments referred to in clause (a) above will be made in 12 equal monthly installments following the date of termination. The amount otherwise payable
Mr. Gansberg participated under clause (a) above will be increased by $325,000 inthe Formula Approach of our Incentive Compensation Plan for underwriting years through 2018. In the event of such a termination without cause, termination for good reason or the death of the executive, with an effective termination date of December 31, 2023, Mr. Gansberg’s employmentGansberg would have been entitled to payments under the Formula Approach attributable to underwriting years in which he participated prior to June 1, 2022 (and not within twothe year of termination on the same basis as if he remained employed, based on the ongoing recalculated results for such underwriting years after a changeover their applicable 10-year development periods. As of December 31, 2023, such amounts for Mr. Gansberg are estimated to be up to approximately $171,252 in control).the aggregate. Any such payments would be made at the same times they are regularly made to active employees for such underwriting years.
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| 65 | 2022| 2024 PROXY STATEMENT | | 68 |
Pay For Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between “compensation actually paid” to the Company’s principal executive officer (“PEO”) (also referred to as CEO) and non-principal executive officer NEOs (“Non-PEO NEOs”) and certain financial performance of the Company. Compensation actually paid, as determined under SEC
requirements, does not reflect the actual amount of compensation earned by or paid to our executive officers during a covered year. For further information on the Company’s variable pay-for-performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to “Compensation—Compensation Discussion and Analysis.” Pay Versus Performance | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(2) | Average Summary Compensation Table Total for Non-PEO NEOs(3) | Average Compensation Actually Paid to Non-PEO NEOs(4) | Value of Initial Fixed $100 Investment Based On: | | |
| Total Shareholder Return(5) | Peer Group Total Shareholder Return(6) | Net Income (thousands)(7) | Operating ROE(8) |
| 2023 | 13,102,252 | | 21,589,156 | | 5,595,327 | | 8,510,086 | | 173.16 | | 168.05 | | 4,403,000 | | 21.6 | % |
| 2022 | 12,101,639 | | 20,596,816 | | 4,658,436 | | 7,460,450 | | 146.37 | | 151.65 | | 1,436,197 | | 14.8 | % |
| 2021 | 9,336,013 | | 16,348,981 | | 5,557,283 | | 7,443,067 | | 103.64 | | 127.58 | | 2,093,405 | | 11.5 | % |
| 2020 | 8,779,832 | | 2,801,587 | | 3,881,973 | | 2,994,739 | | 84.10 | | 106.96 | | 1,363,909 | | 4.8 | % |
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(2)The dollar amounts reported represent the amount of compensation actually paid to Mr. Grandisson, computed as required by Item 402(v) of Regulation S-K. That computation does not reflect the actual amount of compensation earned by or paid to Mr. Grandisson during the applicable year. Refer to the “PEO Summary Compensation Total to Compensation Actually Paid Reconciliation” table below.
(3)The dollar amounts reported represent the average of the amounts reported for the Company’s NEOs as a group, excluding Mr. Grandisson, for each corresponding year in the “Total” column of the Summary Compensation Table. Refer to “Compensation—Executive Compensation Tables—Summary Compensation Table.” The names of each of the NEOs included for purposes of calculating the average amounts in each applicable year are as follows: François Morin, Nicolas Papadopoulo, Maamoun Rajeh and David E. Gansberg.
(4)The dollar amounts reported represent the average amount of compensation actually paid to the Company’s NEOs as a group, excluding Mr. Grandisson, computed as required by Item 402(v) of Regulation S-K. That computation does not reflect the actual average amount of compensation earned by or paid to the Non-PEO NEOs as a group during the applicable year. Refer to the “Average of Non-PEO NEO Summary Compensation Total to Compensation Actually Paid Reconciliation” table below.
(5)Represents the Company’s cumulative TSR assuming reinvestment of dividends for the measurement period beginning at market close on December 31, 2019, through the end of the applicable year.
(6)Represents the cumulative TSR assuming reinvestment of dividends of the S&P 500 P&C Index for the measurement period beginning at the market close on December 31, 2019, through the end of the applicable year.
(7)The dollar amounts reported represent the amount of Net Income reflected in the Company’s audited financial statements for the applicable year.
PEO Summary Compensation Total to Compensation Actually Paid Reconciliation:
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| Year | Reported Summary Compensation Table Total for PEO | Reported Value of Equity Awards(a) | Equity Award Adjustments(b) | Reported Change in the Actuarial Present Value of Pension Benefits(c) | Pension Benefit Adjustments(c) | Compensation Actually Paid to PEO |
| 2023 | 13,102,252 | | (6,551,061) | | 15,037,965 | | — | | — | | 21,589,156 | |
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(a)The reported value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year.
(b)Refer to the “PEO Equity Award Adjustments” table below.
(c)Arch does not provide Pension Benefits to its CEO.
PEO Equity Award Adjustments:
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| Year | Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year(a) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years(a) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years and Vested in the Year(a) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | Total Equity Award Adjustments |
| 2023 | 7,052,239 | | 7,006,817 | | — | | 978,909 | | — | | — | | 15,037,965 | |
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(a)The valuation assumptions differ from those disclosed as of the grant date of equity awards due to the fluctuation in the stock price and the corresponding Black-Scholes and Monte Carlo value simulations valued as of the corresponding dates in accordance with Item 402(v) of Regulation S-K. In calculating the Black-Scholes value of the option awards, the expected life input, based on the original expected life established at grant date, as used for financial
reporting purposes, was adjusted downward in proportion to the degree to which the options were in-the-money relative to their exercise price and upward in proportion to the degree to which the options were out-of-the-money relative to their exercise price, as applicable.
Average of Non-PEO NEO Summary Compensation Total to Compensation Actually Paid Reconciliation:
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| Year | Average Reported Summary Compensation Table Total for Non-PEO NEOs | Average Reported Value of Equity Awards(a) | Average Equity Award Adjustments(b) | Average Reported Change in the Actuarial Present Value of Pension Benefits(c) | Average Pension Benefit Adjustments(c) | Average Compensation Actually Paid to Non-PEO NEOs |
| 2023 | 5,595,327 | | (2,140,451) | | 5,055,210 | | — | | — | | 8,510,086 | |
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(a)The average reported value of equity awards represents the average of total of the amounts reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year.
(b)Refer to the “Average of Non-PEO NEO Equity Award Adjustments” table below.
(c)Arch does not provide Pension Benefits to its Non-PEO NEOs.
Average of Non-PEO NEO Equity Award Adjustments:
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| Year | Average Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year(a) | Year over Year Average Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years(a) | Average Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year | Year over Year Average Change in Fair Value of Equity Awards Granted in Prior Years and Vested in the Year(a) | Average Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year | Average Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | Total Average Equity Award Adjustments |
| 2023 | 2,304,202 | | 2,477,790 | | — | | 273,218 | | — | | — | | 5,055,210 | |
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(a)The average valuation assumptions differ from those disclosed as of the grant date of equity awards due to the fluctuation in the stock price and the corresponding Black-Scholes and Monte Carlo value simulations valued as of the corresponding dates in accordance with Item 402(v) of Regulation S-K. In calculating the Black-Scholes value of the option awards, the expected life input, based on the
original expected life established at grant date, as used for financial reporting purposes, was adjusted downward in proportion to the degree to which the options were in-the-money relative to their exercise price and upward in proportion to the degree to which the options were out-of-the-money relative to their exercise price, as applicable.
Most Important Measures to Determine Fiscal Year 2023 Compensation Actually Paid
▪Operating ROE
▪Growth in TBVPS
▪Relative TSR (the Company’s TSR as compared to a performance peer group established by the Compensation and Human Capital Committee)
Analysis of the Information Presented in the Pay versus Performance Table
As described in more detail in the section “Compensation—Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. While the Company utilizes several performance measures to align executive compensation with Company performance, all of those Company measures are not presented in the Pay Versus Performance table. In accordance with Item 402(v) of Regulation S-K, the Company is providing the following descriptions of the relationships between information presented in the Pay Versus Performance table. Compensation Actually Paid and Company Cumulative TSR
As demonstrated by the following graph, the amount of compensation actually paid to Mr. Grandisson and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Mr. Grandisson) strongly aligns with the Company’s cumulative TSR over the four years presented in the table. The alignment is because a significant portion of the compensation actually paid to Mr. Grandisson and to the other NEOs is comprised of equity awards. As described in more detail in the section “Compensation—Compensation Discussion and Analysis,” the Company targets that approximately 65% of the value of total compensation awarded for Mr. Grandisson and 53% of the value awarded for the other NEOs be comprised of equity awards, including restricted shares, performance-based restricted shares and stock options.
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| Compensation Actually Paid vs. Cumulative TSR |
Compensation Actually Paid and Net Income
As demonstrated by the following graph, the amount of compensation actually paid to Mr. Grandisson and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Mr. Grandisson) is generally aligned with the Company’s Net Income for 2020, 2021 and 2023. Although Net Income decreased in 2022, compensation actually paid increased largely due to the fact that a significant portion of compensation paid to Mr. Grandisson and the Company’s NEOs as a group (excluding Mr. Grandisson) is comprised of equity awards, with TSR increasing by 18.3% for the year, as described above. For 2022, the decrease in Net Income was driven by significant volatility in the capital markets and elevated catastrophic activity. The Company does not utilize Net Income as a performance measure in the overall executive compensation program.
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| Compensation Actually Paid vs. Net Income |
Compensation Actually Paid and Operating ROE
As demonstrated by the following graph, the amount of compensation actually paid to Mr. Grandisson and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Mr. Grandisson) strongly aligns with the Company’s growth in Operating ROE for the four years presented in the table. Compensation actually paid increased largely due to the fact that a significant portion of compensation paid to Mr. Grandisson and the Company’s NEOs as a group (excluding Mr. Grandisson) is comprised of equity awards, with TSR increasing by 18.3% for the year.
While the Company uses numerous financial and non-financial performance measures for the purpose of evaluating performance for the Company’s compensation programs, the Company has determined that Operating ROE is the financial performance measure that, in the Company’s assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table) used by the Company to link compensation actually paid to the Company’s NEOs, for the most recently completed fiscal year, to Company performance. The Company utilizes Operating ROE when setting goals in the Company’s short-term incentive compensation programs. Additionally, growth in Operating ROE is reflected in TBVPS, which is utilized in setting goals for the performance-based restricted shares that are awarded to the Company’s NEOs.
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| Compensation Actually Paid vs. Operating ROE |
Cumulative TSR of the Company and the Peer Group
As demonstrated by the following graph, the Company’s cumulative TSR over the four-year period presented in the table was approximately 73%, while the cumulative TSR of the peer group presented for this purpose, the S&P 500 P&C Index, was approximately 68% over the four years presented in the table. For more information regarding the Company’s performance and the companies that the Compensation and Human Capital Committee considers when determining compensation, refer to “Compensation—Compensation Discussion and Analysis.”
Pay Ratio
In accordance with Item 402(u) of Regulation S-K, we determined the ratio of the annual total compensation of our CEO relative to the median of the annual total compensation of our employees. We identified the median employee from among our global employee population (excluding the CEO) as of December 31, 2021.2023. Our global employee population included all of our full-time and part-time employees who were employed on December 31, 2021.2023.
CEO Pay Ratio —69 86 to 1
We determined each employee’s consistently applied compensation measure, which was equal to the sum of the following pay components:
▪20212023 base salary;
▪bonuses paid during 2021;2023;
▪variable incentive compensation paid during 2021;2023; and
▪the fair value of all equity grants made during 2021.2023.
We annualized the 20212023 base salary for full-time employees thatwho were not employed by us for all of 2021.2023. Amounts paid in currencies other than U.S. dollars were converted into U.S. dollars based on the applicable exchange rate at December 31, 2021.2023.
Based on each employee’s consistently applied compensation measure, we were able to identify the median employee who was a full-time, permanent employee based in the United States.
After identifying the median employee, we calculated the median employee’s annual total compensation for 20212023 using the same requirements applied to calculate our CEO annual total compensation as set forth in the “20212023 Summary Compensation Table,” and then added the estimated value of the median employee’s health plan benefits. Based on the foregoing, the annual total compensation calculated for the median employee for 20212023 was $129,028.$147,294. For purposes of the pay ratio rule, the annual total compensation calculated for our CEO for 2021,2023, was $8,907,802,$12,676,061, as set forth in the “20212023 Summary Compensation Table,” plus $35,151,$34,843, the estimated value of our CEO’s health plan benefits, or $8,942,953.$12,710,904. Accordingly, for 2021,2023, our CEO to median employee pay ratio was 6986 to 1.1 .
Employment Arrangements
Set forth below is a summary of the material terms of the employment arrangements with each of the named executive officers.NEOs.
Marc Grandisson
Mr. Grandisson’s employment agreement provides for annual base salary and eligibility to participate in an annual bonus plan with a target annual bonus and other terms set by the Board. Mr. Grandisson’s current annual base salary is $1,225,000,$1,300,000, and his target annual bonus is 200% of his annual base salary. Mr. Grandisson is entitled to participate in employee benefit programs and other fringe benefits customarily provided to similarly situated senior executives residing in Bermuda, which include housing expenses and automobile allowance.
Mr. Grandisson’s employment period under the employment agreement will end on the first to occur of: (a) the six-month anniversary of our providing notice of termination without cause to him; (b) immediately upon our providing notice of termination for cause to him; (c) the six-month anniversary of Mr. Grandisson providing notice of termination specifying his resignation with or without good reason (as defined in the employment agreement); (d) the fifth day following our providing notice of termination to him as a result of his permanent disability; and (e) the date of his death. The first of such dates is referred to as the “date of termination.”
The agreement provides that if the employment of Mr. Grandisson is terminated by us without cause or by him for good reason, he will be entitled to receive his annual base salary through the date of termination. He will also receive (i) an amount equal to his base salary for the excess of 24 months over the period, if any, of his “garden leave” (as described below), payable over six months following termination, (ii) an amount equal to the sum of (x) two times his target annual bonus plus (y) a pro-rated portion of his target annual bonus based on the number of days elapsed in the calendar year through the date of termination (less any period he is on “garden leave”), one half of which sum will be paid on the date that is 60 days following the date of termination and the remaining half of which will be paid over six months following the date of termination. Mr. Grandisson will also receive employee benefits through the date of termination, and his health insurance coverage benefits will continue for up to 18 months after the date of termination. Mr. Grandisson will be entitled to the amounts described above (other than base salary and employee benefits through the date of termination) only if he has delivered a general release of
claims and he does not breach the restrictive covenants set forth in the agreement.
If Mr. Grandisson’s employment is terminated as a result of his resignation other than for good reason, he will continue to receive base salary and employee benefits through the date of termination, and we will make a cash lump sum payment to him equal to one half of the sum of (I) his “bonus amount” (which is the greater of (i) his target annual bonus for the year during which notice of termination is given, or (ii) the average of his actual annual bonus for the three years immediately preceding the year during which notice of termination is given) and (II) a pro-rated portion of the bonus amount based on the number of days elapsed in the calendar year through the date of termination (less any period he is on “garden leave”), which payment will be made 60 days following termination.
If Mr. Grandisson’s employment is terminated by us for cause, he will receive base salary and employee benefits through the date of termination. In the case of termination due to his death, his beneficiaries or estate will receive a lump sum payment equal to two times the sum of his base salary and target annual bonus, offset by proceeds of life insurance coverages provided by us. In the case of termination due to his permanent disability, he will receive an amount per annum equal to 40 percent40% of his annual base salary until he reaches age 65, offset by proceeds scheduled to be received by him from any disability insurance provided by us, and any payments scheduled to be made after the first anniversary of termination will be made on such first anniversary. In the case of termination due to his permanent disability or death, he and/or his dependents will also receive health insurance coverage benefits for a period of up to 12 months after the date of termination.
Following any notice of termination, whether by us or Mr. Grandisson, and until the date of termination, we may direct, in our sole and exclusive discretion, that Mr. Grandisson perform no duties and exercise no powers or authorities in connection with his employment. However, following any such direction, Mr. Grandisson will continue to have a duty of loyalty to us as an employee through the date of termination. This is referred to as a “garden leave” period.
Mr. Grandisson has agreed that, during the employment period and for the period of one year after the date of termination, he will not compete with us. However, if Mr. Grandisson’s termination of employment occurs as a result of his resignation other than for good reason, the noncompetition period will continue beyond the date of termination only if (i) we pay Mr. Grandisson, for each day during which the noncompetition period so
continues, an amount equal to 1/365 of the sum of (A) his annual base salary, plus (B) the bonus amount (as defined above) and (C) a pro-rated portion of his bonus amount
based on the number of days elapsed in the calendar year through the date notice of termination is given; and (ii) he continues to receive his health insurance coverage for a period up to the end of the noncompetition period. Our obligation to make such payments and provide such benefits is contingent on Mr. Grandisson’s delivery of a general release of claims and his compliance with the restrictive covenants. Mr. Grandisson has also agreed not to solicit our employees or customers for a period of one year following termination. The lengths of the noncompetition and nonsolicitation periods will be reduced by any period that Mr. Grandisson is on garden leave, as described above.
François Morin, Nicolas Papadopoulo and Maamoun Rajeh
The following summarizes our employment agreements with Messrs. Morin, Papadopoulo and Rajeh (collectively referred to as the “Executives”).
Each of the employment agreements provides for annual base salary and eligibility to participate in an annual bonus plan with a target annual bonus and other terms set by the Board. Mr. Morin’s current annual base salary is $675,000, and his target annual bonus is 135% of his annual base salary. Mr. Papadopoulo’s current annual base salary is $800,000, and his target annual bonus is 150% of his annual base salary. Mr. Papadopoulo’s current annual base salary is $900,000, and his target annual bonus is 185% of his annual base salary. Mr. Rajeh’s current annual base salary is $725,000,$850,000, and his target annual bonus is 135%165% of his annual base salary. The Executives are also entitled to participate in employee benefits programs and other fringe benefits customarily provided to similarly situated senior executives residing in Bermuda, which includes housing expenses and automobile allowance.
The employment period under each of the employment agreements will end on the first to occur of: (a) the six- month anniversary of our providing notice of termination without cause; (b) immediately upon our providing notice of termination for cause; (c) the six-month anniversary of the Executive providing notice of termination specifying his resignation with or without good reason (as defined in the employment agreement); (d) the fifth day following our providing notice of termination as a result of the Executive’s permanent disability;disability and (e) the date of the Executive’s death. The first of such dates is referred to as the “date of termination.”
The agreements provide that if the employment of the Executive is terminated by us without cause or by him for
good reason, he will be entitled to receive an amount equal to his annual base salary through the six month anniversary of the date of termination. In that event, the
Executive will also receive an amount equal to the sum of (i) his target annual bonus plus (ii) a pro-rated portion of his target annual bonus based on the number of days elapsed in the calendar year through the date notice of termination is given, one half of which will be paid on the date that is 60 days following the date of termination and the remaining half of which will be paid over six months following the date of termination. The Executive will also receive employee benefits through the date of termination, and his health insurance coverage benefits will continue for up to six months after the date of termination. The Executive will be entitled to the amounts described above (other than base salary and employee benefits through the date of termination) only if he has delivered a general release of claims and he does not breach the restrictive covenants set forth in the agreement.
If the Executive’s employment is terminated as a result of his resignation other than for good reason, he will continue to receive base salary and employee benefits through the date of termination, and we will make a cash lump sum payment to him equal to one half of the sum of (I) his “bonus amount” (which is the greater of (i) his target annual bonus for the year during which notice of termination is given or (ii) the average of his actual annual bonus for the three years immediately preceding the year during which notice of termination is given), and (II) a pro-rated portion of the bonus amount based on the number of days elapsed in the calendar year through the date notice of termination is given, which payment will be made 60 days following termination.
If the Executive’s employment is terminated by us for cause, as a result of his permanent disability or upon his death, the Executive (or his beneficiaries or estate, in the case of death) will continue to receive base salary and employee benefits through the date of termination. In the case of termination due to his permanent disability or death, he and/or his dependents will also receive health insurance coverage benefits for a period of up to 12 months after the date of termination.
Following any notice of termination, whether by us or the Executive, and until the date of termination, we may direct, in our sole and exclusive discretion, that the Executive perform no duties and exercise no powers or authorities in connection with his employment. However, following any such direction, the Executive will continue to have a duty of loyalty to us as an employee through the date of termination. This is referred to as a “garden leave” period.
Each Executive has agreed that, during the employment period and for the period of one year after the date of termination, he will not compete with us. However, if the
Executive‘s termination of employment occurs as a result of his resignation other than for good reason, the noncompetition period will continue beyond the date of termination only if (i) we pay the Executive, for each day during which the noncompetition period so continues, an amount equal to 1/365 of the sum of (A) his annual base salary, plus (B) the bonus amount (as defined above) and (C) a pro-rated portion of his bonus amount based on the number of days elapsed in the calendar year through the date notice of termination is given and (ii) he continues to receive his health insurance coverage for a period up to the end of the noncompetition period. Our obligation to make such payments and provide such benefits is contingent on the Executive’s delivery of a general release of claims and his compliance with the restrictive covenants. Each Executive has also agreed not to solicit our employees or customers for a period of one year following termination. The lengths of the noncompetition and nonsolicitation periods will be reduced by any period that the Executive is on garden leave, as described above.
David E. Gansberg
Mr. Gansberg’s employment agreement, dated as of March 1, 2019, provides for an annual base salary and eligibility to participate in an annual bonus plan with a target annual bonus and other terms set by the Board. Mr. Gansberg’s current annual base salary is $725,000,$850,000, and his target annual bonus is 135%165% of his annual base salary. He is also entitled to participate in employee benefits programs and other fringe benefits customarily provided to similarly situated senior executives.
Mr. Gansberg will also be entitled to participate in the Company’s share-based award plans, as determined by our Board.
The employment period, as automatically extended, will end on March 1, 2023,2025, and is subject to further automatic extension for successive one-year periods following the end of the term until either we or Mr. Gansberg provide at least 90 days prior notice of non-extension. The employment period may also be terminated prior to the end of the term (as it may be extended) by Mr. Gansberg for “good reason” (as defined in the agreement), by us for any reason or due to Mr. Gansberg’s death or permanent disability.
The agreement provides that if the employment of Mr. Gansberg is terminated by us without cause (including due to our providing notice of non-extension) or by him for good reason, he will be entitled to the following: (A) an amount equal to the sum of his annual base salary, his target annual bonus and a pro-rated portion of his target
annual bonus for the year of termination, (B) payments under the Company’s Incentive Compensation Plan in
accordance with the terms of the plan and (C) unvested equity awards that have been granted after the date of the agreement and held by Mr. Gansberg for at least one year will vest upon termination, (in the case of unvested performance awards, based upon the lesser of (x) target performance, or (y) the actual level of achievement of all relevant performance goals (measured as of the latest date immediately preceding termination for which performance can be determined) (except that the vesting of any such awards shall be governed by the applicable award agreements in the event such termination of employment occurs within two years after a change in control or after attainment of retirement age)). Mr. Gansberg will be entitled to such benefits only if he has fully complied with his restrictive covenants and he has entered into a general release of claims in favor of the Company. The payments referred to in clause (A) above will be made in 12 equal monthly installments following the date of termination. Mr. Gansberg’s health insurance coverage benefits will also continue for up to 12 months after the date of such termination.
The amount otherwise payable under clause (A) above will be increased by 50% of the base salary as in effect on the date of the agreement in the event of such a termination of Mr. Gansberg’s employment prior to June 1, 2022 (and not within two years after a change in control).
Mr. Gansberg has agreed that, during the employment period and for the period of one year after the date of termination, he will not compete with us. However, if Mr. Gansberg‘s termination of employment occurs as a result of his resignation other than for good reason or pursuant to his provision of notice of non-extension, the noncompetition period will continue beyond the date of termination only if (i) we pay him, for each day during which the noncompetition period so continues, an amount equal to 1/365 of the sum of (A) his annual base salary, (B) the bonus amount (which is the greater of (I) his target annual bonus for the year of termination, or (II) the average of his actual annual bonus for the immediately preceding three years) and (C) a pro-rated portion of his bonus amount for the year of termination; and (ii) he continues to receive his health insurance coverage for a period up to the end of the noncompetition period. Our obligation to make such payments and provide such benefits is contingent on his delivery of a general release of claims and his compliance with the restrictive covenants. Mr. Gansberg has also agreed not to solicit our employees or customers for a period of one year following termination.
2022 LONG-TERM INCENTIVE AND SHARE AWARD PLAN
ITEM 3—APPROVAL OF 2022 LONG-TERM INCENTIVE AND SHARE AWARD PLAN
What am I Voting on?
Shareholders are being asked to vote upon a proposal to approve the Arch Capital Group Ltd. 2022 Long-Term Incentive and Share Award Plan (the “2022 Plan”).
Required Vote
The affirmative vote of a majority of the voting power of all of our issued and outstanding common shares represented at the Annual Meeting will be required for the approval of the 2022 Plan.
Recommendation of the Board
| | | | | |
| THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL. |
Introduction
On February 25, 2022, with the recommendation of the Compensation Committee, the Board adopted the 2022 Plan, subject to shareholder approval. The purpose of the 2022 Plan is to advance the interests of the Company and its shareholders by providing a means to attract, retain and motivate our employees and directors. The 2022 Plan is intended to provide for competitive compensation opportunities, to encourage long-term service, to recognize individual contributions and reward achievement of performance goals and to promote the creation of long-term value for shareholders by aligning the interests of participants with those of shareholders.
On March 10, 2022, 4,342,596 of our common shares remain available for grant to participants under the Arch Capital Group Ltd. 2018 Long-Term Incentive and Share Award Plan (the “2018 Plan”) and 606,942 of our common shares remain available for grant to participants under Arch Capital Group Ltd. 2015 Long-Term Incentive and Share Award Plan (the “2015 Plan”), both of which will continue in effect in accordance with their terms. The 2015 Plan provides that no more than 50% of the authorized shares may be issued in connection with full value awards, (i.e., awards other than stock options and SARs), and the 2018 Plan provides that any common shares issued under awards other than stock options or SARs will be counted against the share limit as 3.6
common shares for every one share subject to such award.
Reasons for the Proposal
The Board unanimously recommends that the shareholders approve the 2022 Plan. Our ability to grant an appropriate number of equity-based awards continues to be crucial in allowing us to effectively compete for key employee talent. It is in the long-term interest of Arch Capital and its shareholders to strengthen the ability to attract, motivate and retain employees, officers, and directors, and to provide additional incentives for those persons through share ownership and other incentives to improve operations, increase profits and strengthen the mutuality of interest between those persons and Arch Capital’s shareholders.
If the 2022 Plan is not approved, the number of shares currently available under the existing plans may not be sufficient to cover projected awards for next year. Thus, if the 2022 Plan is not approved, we may not be able to provide persons eligible for awards with compensation packages that are necessary to attract, retain and motivate these individuals.
The Board currently intends that the additional 9,000,000 shares under the 2022 Plan combined with our existing plans will be sufficient to fund Arch Capital’s equity compensation needs for approximately four to five years, based on historical grant practices.
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| 73 | | 20222024 PROXY STATEMENT | |
Key Data
The following table sets forth information regarding outstanding equity awards and shares available for future equity awards under the existing long-term incentive and share award plans as of March 10, 2022 (without giving effect to approval of the 2022 Plan):
| | | | | | | | |
Total shares underlying outstanding stock options | | 16,792,580 | |
Weighted average exercise price of outstanding stock options | | $ | 26.67 | |
Weighted average remaining contractual life of outstanding stock options | | 4.63 | |
Total shares underlying outstanding unvested restricted and performance stock and restricted and performance unit awards | | 4,681,568 | |
Total shares currently available for grant under the 2015 Plan | | 606,942 | |
Total shares currently available for grant under the 2018 Plan (full value shares are counted as 3.6 common shares for every one share subject to such award) | | 4,342,596 | |
Remaining full value shares available for grant under existing plans | | 1,513,519 | |
Total common shares issued and outstanding as of March 10, 2022 | | 377,471,271 | |
When approving the 2022 Plan, the Board considered our overhang and the burn rate with respect to the equity awards granted. Overhang is equal to the total number of equity awards outstanding (which includes total shares underlying outstanding stock options and restricted stock unit awards) plus the total number of shares available for grant under Arch Capital’s equity plans, divided by the sum of the total common shares issued and outstanding, the number of equity awards outstanding and the total number of shares available for grant under Arch Capital’s equity plans. Arch Capital’s overhang as of March 10, 2022 was 6.54%, and it would be 8.58% after taking into account the additional shares authorized for issuance under the 2022 Plan.
The burn rate is equal to the total number of equity awards Arch Capital granted in a calendar year divided by the weighted average common shares outstanding during the year. The following table provides data on Arch Capital’s burn rate under its existing equity compensation plans for the last three calendar years:
| | | | | | | | | | | | | | |
| Year | Total Shares Subject to Options | Total Shares Subject to Full Value Awards | Weighted Average Common Shares Outstanding | Annual Burn Rate |
| 2021 | 1,243,984 | | 1,946,877 | | 391,748,715 | | 0.81 | % |
| 2020 | 1,121,833 | | 1,535,330 | | 403,062,179 | | 0.66 | % |
| 2019 | 1,228,280 | | 1,195,741 | | 401,802,815 | | 0.60 | % |
| | | | |
| Average Three-Year Burn Rate | 0.69 | % |
Promotion of Sound Corporate Governance Practices
The 2022 Plan is designed to include a number of features that reinforce and promote alignment of equity compensation arrangements for employees, officers and directors with the interests of shareholders and the Company. The following are some of the features included in the 2022 Plan:
▪Minimum Vesting Requirements. Subject to certain limited exceptions described below, Awards (as defined below) will be granted under the 2022 Plan with vesting periods of at least one year.
▪No Single-Trigger Change in Control Vesting Provided Awards are Assumed. If awards granted under the 2022 Plan are assumed by the successor entity in connection with a change in control of the Company, the awards will not automatically vest and pay out upon the change in control.
▪No Discounted Stock Options or SARs.Stock options and SARs may not be granted with exercise prices lower than the fair market value of the underlying shares on the grant date.
▪No Repricing or Buyouts of Stock Options or SARs. The exercise price of a stock option or SAR may not be reduced, directly or indirectly, without the prior approval of shareholders, including by repurchase of “underwater” stock options or SARs in exchange for cash or other property.
▪No Dividends on Unvested Awards. In no event will dividends or dividend equivalents be paid on unvested Awards (as defined below).
▪No Liberal Share Recycling on Stock Options or SARs. Shares retained by or delivered to Arch Capital to pay the exercise price of a stock option or SAR or to satisfy tax withholding in connection with the exercise of such awards will count against the number of shares remaining available under the 2022 Plan.
▪No Tax Gross-Ups.The 2022 Plan does not provide tax gross-ups.
▪Awards Subject to Clawback Policy.Awards under the 2022 Plan will be subject to Arch Capital’s clawback policy as in effect from time to time.
Description of 2022 Plan
General
The 2022 Plan will provide for the grant to eligible employees and directors of stock options, SARs, restricted shares, restricted share units payable in common shares or cash, dividend equivalents, performance shares and performance units and other share-based awards (the “Awards”). The number of common shares reserved for grants of Awards under the 2022 Plan, subject to anti-dilution adjustments in the event of certain changes in Arch Capital’s capital structure, will be 9,000,000; provided, that no more than 6,000,000 common shares may be issued as incentive stock options under Section 422 of the Code.
If any Awards are forfeited, reacquired, canceled, terminated, exchanged or surrendered or any such Award is settled in cash or otherwise terminates without a distribution of common shares to the participant, any common shares counted against the number of common shares reserved and available under the 2022 Plan with respect to such Award will, to the extent of any such forfeiture, reacquisition, settlement, termination, cancellation, exchange or surrender, again be available for Awards under the 2022 Plan.
Notwithstanding the foregoing, common shares subject to an Award under the 2022 Plan may not again be made available for issuance under the 2022 Plan if such common shares (x) were subject to a stock option or stock-settled SAR and were not issued upon the net settlement or net exercise of such stock option or SAR, or (y) were delivered to or withheld by Arch Capital to pay the exercise price or withholding taxes under stock options or SARs.
Eligibility and Administration
Officers, other employees and directors of Arch Capital and its subsidiaries and affiliates will be eligible for grants of Awards under the 2022 Plan. The 2022 Plan will be administered by the Compensation Committee or such other committee of the Board (or the entire Board) as may be designated by the Board (the “Committee”). The Committee will determine which eligible employees and directors receive Awards, the types of Awards to be received and the terms and conditions thereof, including performance or vesting conditions thereof. Approximately 825 employees and 11 non-employee directors are currently eligible to participate in the 2022 Plan.
The Committee will be permitted to delegate to officers of the Company the authority to perform administrative functions for the 2022 Plan and, with respect to Awards granted to persons not subject to Section 16 of the Exchange Act, to perform such other functions as the Committee may determine to the extent permitted under Rule 16b-3 of the Exchange Act and applicable law.
Award Vesting Limitations
Under the 2022 Plan, Awards will be granted with vesting periods of not less than one year following the grant date (other than in the case of death or disability). However, Awards that result in the issuance of an aggregate of up to 5% of the shares reserved for issuance under the 2022 Plan may be granted without regard to the minimum vesting provisions.
Awards
Stock Options
Incentive stock options, intended to qualify for special tax treatment in accordance with the Code, and non-qualified stock options, not intended to qualify for special tax treatment under the Code, may be granted for such number of common shares as the Committee determines. The Committee will be authorized to set the terms relating to a stock option, including exercise price and the time and method of exercise. The terms of incentive stock options will comply with the provisions of Section 422 of the Code. Awards may be granted alone, in tandem with or in exchange for any other Award.
SARs
A SAR will entitle the holder thereof to receive with respect to each share subject thereto, an amount equal to the excess of the fair market value of one common share on the date of exercise over the exercise price of the SAR
set by the Committee. Payment with respect to SARs may be made in cash or common shares as determined by the Committee.
No Repricing/Maximum Term/Exercise Price
The 2022 Plan specifically provides that the exercise price per share of stock options and SARs will not be less than the fair market value per share on the date of grant of the Award. The 2022 Plan also specifically provides that, unless the approval of shareholders is obtained, (i) outstanding stock options and SARs cannot be amended to lower their exercise price or exchanged for other stock options or SARs with lower exercise prices; (ii) outstanding stock options and SARs issued under the Plan with an exercise price in excess of the fair market value of the underlying common shares will not be exchanged for cash or other property and (iii) no other action will be taken with respect to stock options or SARs that would be treated as a repricing under applicable stock exchange rules. In addition, the term of stock options and SARs may not exceed 10 years.
Restricted Shares
Awards of restricted shares will be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose. Such restrictions will lapse under circumstances as the Committee may determine, including upon the achievement of performance criteria. Except as otherwise determined by the Committee, eligible employees granted restricted shares will have rights of a shareholder, including the right to vote restricted shares, and unvested restricted shares will be forfeited and reacquired upon termination of employment during any applicable restriction period.
Restricted Share Units
A restricted share unit will entitle the holder thereof to receive common shares or cash at the end of a specified deferral period. Restricted share units also will be subject to such restrictions as the Committee may impose. Such restrictions will lapse under circumstances as the Committee may determine, including upon the achievement of performance criteria. Except as otherwise determined by the Committee, restricted share units subject to restriction will be forfeited upon termination of employment during any applicable restriction period.
Performance Shares/Performance Units
Performance shares and performance units will provide for future issuance of shares or payment of cash, respectively, to the recipient upon the attainment of corporate performance goals established by the Committee over specified performance periods. Except as
otherwise determined by the Committee, performance shares and performance units will be forfeited and reacquired upon termination of employment during any applicable performance period.
Dividend Equivalents/Other Share-Based Awards
Dividend equivalents granted under the 2022 Plan will entitle the holder thereof to receive cash, common shares or other property equal in value to dividends paid with respect to a specified number of common shares. Dividend equivalents may be awarded on a free-standing basis or in connection with another Award, and may be paid currently or on a deferred basis. The Committee is also authorized, subject to limitations under applicable law, to grant such other Awards that may be denominated in, valued in, or otherwise based on, common shares, as deemed by the Committee to be consistent with the purposes of the 2022 Plan.
Dividend Equivalents Not Paid on Unvested Awards
Dividend equivalents and dividends will not be paid with respect to any unvested Awards prior to the time of vesting of the underlying Award with respect to which the dividend equivalent or dividend is accrued.
Nontransferability
Awards (except for vested shares) will generally not be transferable by the participant other than by will or the laws of descent and distribution and will be exercisable during the lifetime of the participant only by such participant or his or her guardian or legal representative, provided that, if the Committee expressly so provides, an Award (other than incentive stock options) may be transferred by a participant to members of his or her immediate family or to a trust established for the exclusive benefit of solely one or more members of the participant’s immediate family or to a partnership, limited liability company or other entity under which the only partners or equity holders are one or more members of the participant’s immediate family.
Change in Control
Unless otherwise provided in an applicable Award agreement, the following will apply to Awards in the event of a change in control of Arch Capital (as defined in the 2022 Plan).
Awards Assumed
Upon the occurrence of a change in control of Arch Capital in which Awards under the 2022 Plan are assumed
by the surviving entity or otherwise equitably converted or substituted in connection with the change in control, if within two years after the effective date of the change in control, a participant’s employment is terminated without Cause or the participant resigns for Good Reason (as such terms are defined in the 2022 Plan), then: (i) all of that participant’s outstanding stock options and SARs will become fully vested and exercisable, and all time-based vesting restrictions on that participant’s outstanding Awards will lapse; and (ii) the payout level under performance-based awards outstanding at the time of the change in control will be determined and vest based on the greater of: (A) an assumed achievement of all relevant performance goals at the target level prorated based upon the number of days within the performance period that have elapsed prior to the termination of employment, or (B) the actual level of achievement of all relevant performance goals (measured as of the latest date immediately preceding the termination date for which performance can, as a practical matter, be determined). In either such case, there will be a payout to the participant within sixty (60) days following the termination date.
Awards Not Assumed
Upon the occurrence of a change in control of Arch Capital in which Awards under the 2022 Plan are not assumed by the surviving entity or otherwise equitably converted or substituted in connection with the change in control in a manner approved by the Committee or the Board: (i) all outstanding stock options and SARs will become fully vested and exercisable, and all time-based vesting restrictions on outstanding Awards will lapse; and (ii) the payout opportunities attainable under outstanding performance-based awards will vest based on the greater of: (A) an assumed achievement of all relevant performance goals at the target level prorated based upon the number of days within the performance period that have elapsed prior to the change in control or (B) the actual level of achievement of all relevant performance goals (measured as of the latest date immediately preceding the change in control for which performance can, as a practical matter, be determined). In either such case, there will be a payout to the participant within sixty (60) days following the change in control.
Capital Structure Changes
In the event that the Committee determines that any dividend in shares, recapitalization, share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, extraordinary distribution or share exchange, or other similar change affects our common shares such that an adjustment is appropriate in
order to prevent dilution or enlargement of the rights of participants under the 2022 Plan, then the Committee will make such equitable changes or adjustments as it deems appropriate to (i) the number and kind of shares which may thereafter be issued under the 2022 Plan, (ii) the number and kind of shares, other securities or other consideration issued or issuable in respect of outstanding Awards and (iii) the exercise price, grant price or purchase price relating to any Award. In such event, the Committee may also provide for a distribution of cash or property in respect of outstanding Awards.
Amendment and Termination
The 2022 Plan may be amended, altered, suspended, discontinued or terminated by the Board at any time, in whole or in part without the approval of shareholders, except that an amendment will be subject to shareholder approval (i) to the extent such shareholder approval is required under the rules of any stock exchange or automated quotation system on which the common shares may then be listed or quoted or (ii) as it applies to incentive stock options, to the extent such shareholder approval is required under Section 422 of the Code. In addition, no amendment, alteration, suspension, discontinuation or termination of the 2022 Plan may materially and adversely affect the rights of a participant under any Award theretofore granted to him or her without the consent of the affected participant. Unless earlier terminated, the 2022 Plan will expire on February 25, 2032, and no further Awards may be granted thereunder after such date.
Market Value
The per share closing price of our common shares on March 24, 2022 was $47.13.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax consequences of the 2022 Plan, based upon current provisions of the Code, the treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, and does not address the consequences under any other applicable tax laws. The provisions of the Code, regulations thereunder and related interpretations are complicated and their impact in any one case may depend upon the particular circumstances relating thereto.
Stock Options
In general, the grant of a stock option will not be a taxable event to the recipient and it will not result in a deduction to Arch Capital or any of its subsidiaries. The
tax consequences associated with the exercise of a stock option and the subsequent disposition of common shares acquired on the exercise of such stock option depend on whether the stock option is a non-qualified stock option or an incentive stock option.
Upon the exercise of a non-qualified stock option, the participant will recognize ordinary taxable income equal to the excess of the fair market value of the common shares received upon exercise over the exercise price. If the participant is employed by a United States subsidiary, the subsidiary will generally be able to claim a deduction in an equivalent amount. Any gain or loss upon a subsequent sale or exchange of the common shares will be capital gain or loss. If the holding period for the shares is not more than one year, the gain or loss will be short-term capital gain or loss. Short-term capital gain is taxable at the same rates as ordinary income. If the holding period is more than one year, the gain or loss will be long-term capital gain or loss. In general, long-term capital gain is subject to lower maximum federal income tax rates than ordinary income.
Generally, upon the exercise of an incentive stock option, a participant will not recognize ordinary taxable income and no deduction will be available to Arch Capital or any of its subsidiaries, provided the stock option is exercised while the participant is an employee or within three months following termination of employment (longer, in the case of termination of employment by reason of disability or death). If an incentive stock option granted under the 2022 Plan is exercised after these periods, the exercise will be treated for United States federal income tax purposes as the exercise of a non-qualified stock option. Also, an incentive stock option granted under the 2022 Plan will be treated as a non-qualified stock option to the extent it (together with any other incentive stock options granted under other plans of Arch Capital and its subsidiaries) first becomes exercisable in any calendar year for common shares having a fair market value, determined as of the date of grant, in excess of $100,000.
If common shares acquired upon exercise of an incentive stock option are sold or exchanged more than one year after the date of exercise and more than two years from the date of grant of the stock option, any gain or loss will be long-term capital gain or loss. If common shares acquired upon exercise of an incentive stock option are disposed of prior to the expiration of these one-year or two-year holding periods (a “Disqualifying Disposition”), the participant will recognize ordinary income at the time of disposition, and, if the participant is employed by a United States subsidiary, the subsidiary will generally be able to claim a deduction, in an amount equal to the excess of the fair market value of the common shares at the date of exercise over the exercise price (or, in certain
circumstances, the gain on sale, if less). Any additional gain will be treated as capital gain, long-term or short-term, depending on how long the common shares have been held. Where common shares are sold or exchanged in a Disqualifying Disposition (other than certain related party transactions) for an amount less than their fair market value at the date of exercise, any ordinary income recognized in connection with the Disqualifying Disposition will be limited to the amount of gain, if any, recognized in the sale or exchange, and any loss will be a long-term or short-term capital loss, depending on how long the common shares have been held.
Although the exercise of an incentive stock option as described above would not produce ordinary taxable income to the participant, it would result in an increase in the participant’s alternative minimum taxable income and may result in an alternative minimum tax liability for the year of exercise.
Restricted Shares
A participant who receives restricted shares will generally recognize ordinary income at the time they vest. The amount of ordinary income so recognized will be the fair market value of the common shares at the time the income is recognized, determined without regard to any restrictions other than restrictions which by their terms will never lapse. If the participant is employed by a United States subsidiary, this amount will generally be deductible for United States federal income tax purposes by the subsidiary. Any gain or loss upon a subsequent sale or exchange of the common shares, measured by the difference between the sale price and the fair market value on the date the shares vest, will be capital gain or loss, long-term or short-term, depending on the holding period for the common shares. The holding period for this purpose will begin on the date following the date the shares vest.
In lieu of the treatment described above, a participant may elect immediate recognition of income under Section 83(b) of the Code. In such event, the participant will recognize as income the fair market value of the restricted shares at the time of grant (determined without regard to any restrictions other than restrictions which by their terms will never lapse), and if the participant is employed by a United States subsidiary, the subsidiary will generally be entitled to a corresponding deduction. If a Section 83(b) election is made and the restricted shares are subsequently forfeited and reacquired by the Company, the participant will not be entitled to any offsetting tax deduction.
Performance Shares and Other Awards
With respect to SARs, restricted share units, performance shares, performance units, dividend equivalents and other Awards under the 2022 Plan not described above, generally, when a participant receives payment with respect to any such Award granted to him or her under the 2022 Plan, the amount of cash and the fair market value of any other property received will be ordinary income to such participant and will be allowed as a deduction for United States federal income tax purposes to an employer that is a United States subsidiary.
Payment of Withholding Taxes
Arch Capital may withhold, or require a participant to remit to Arch Capital or a subsidiary, an amount sufficient to satisfy any federal, state or local withholding tax requirements associated with Awards under the 2022 Plan.
Limitation on Deductibility
Section 162(m) of the Code generally limits the deductible amount of annual compensation paid (including compensation otherwise deductible in connection with Awards granted under the 2022 Plan) by a public company to a “covered employee” (i.e., the chief executive officer, chief financial officer and certain other current or former executive officers of Arch Capital) to no more than $1,000,000 each. Since Arch Capital will not
generally be subject to United States income tax, the limitation on deductibility will not directly apply to it. However, the limitation would apply to a United States subsidiary of Arch Capital if it employs a covered employee. The Committee believes that its primary responsibility is to provide a compensation program that will attract, retain and reward the executive talent necessary to Arch Capital’s success. Consequently, the Committee recognizes that the loss of a tax deduction could be necessary in some circumstances due to the restrictions of Section 162(m).
Compliance with Sections 409A and 457A
It is intended that the 2022 Plan and the Awards granted thereunder will either be exempt from or comply with Section 409A and 457A of the Code and any regulations and guidelines issued thereunder, and that the 2022 Plan and the Awards granted thereunder be interpreted on a basis consistent with such intent.
New Plan Benefits
No benefits have been received or allocated to any employee or non-employee director under the 2022 Plan and the Awards to be granted in the future are not currently determinable and, therefore, a “New Plan Benefits” table has not been included.
Securities Authorized for Issuance under Equity Compensation Plans
The following information is as of December 31, 2021: | | | | | | | | | | | | | | | | | | | | |
| Column A | | Column B | | Column C | |
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Stock Options (1), Warrants and Rights | | Weighted-Average Exercise Price of Outstanding
Stock Options (1), Warrants and Rights ($) | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column A) | |
| Equity compensation plans approved by security holders | 17,812,796 | | | 25.06 | | | 12,445,518 | | |
| Equity compensation plans not approved by security holders | — | | | — | | | — | | |
| Total | 17,812,796 | | | 25.06 | | | 12,445,518 | | (2) |
(1) Includes all vested and unvested stock options outstanding of 17,083,160 and restricted stock units outstanding of 729,636. The weighted average exercise price does not take into account restricted stock units. In addition, the weighted average remaining contractual life of Arch Capital’s outstanding exercisable stock options and SARs at December 31, 2021, was 4.4 years.
(2) Includes 1,608,354 common shares remaining available for future issuance under our Employee Share Purchase Plan and 10,837,164 common shares remaining available for future issuance under our equity compensation plans. Shares available for future issuance under our equity compensation plans may be issued in the form of stock options, SARs, restricted shares, restricted share units payable in common shares or cash, share awards in lieu of cash awards, dividend equivalents, performance shares and performance units and other share based awards. In addition, 3,310,797 common shares, or 26.6% of the 12,445,518 common shares remaining available for future issuance may be issued in connection with full value awards (i.e., awards other than stock options or SARs).
AUDIT MATTERS
Report of the Audit Committee of the Board
The Audit Committee assists the Board in monitoring (1) the integrity of our financial statements, (2) the qualifications and independence of the independent registered public accounting firm, (3) the performance of our internal audit function and independent registered public accounting firm and (4) the compliance by the Company with legal and regulatory requirements. The Audit Committee is involved in the selection of the audit engagement partner, and also oversees the Board’s responsibilities relating to the operational (including IT, business continuity and data security) risk affairs of the Company.
It is not the responsibility of the Audit Committee to plan or conduct audits or to determine that Arch Capital’s financial statements are in all material respects complete and accurate and in accordance with U.S. generally accepted accounting principles (“GAAP”). The financial statements are the responsibility of the Company’s management. The Company’s independent public registered accounting firm is responsible for expressing an opinion on these financial statements based on their audit. It is also not the responsibility of the Audit Committee to assure compliance with laws and regulations or with any codes or standards of conduct or related policies adopted by Arch Capital from time to time which seek to ensure that the business of Arch Capital is conducted in an ethical and legal manner.
The Audit Committee has reviewed and discussed the consolidated financial statements of Arch Capital and its subsidiaries set forth in Item 8 of our 20212023 Annual Report, management’s annual assessment of the effectiveness of Arch Capital’s internal control over financial reporting and PricewaterhouseCoopers LLP’s opinion on the effectiveness of internal control over financial reporting, with management of Arch Capital and PricewaterhouseCoopers LLP, independent registered public accounting firm for Arch Capital.
The Audit Committee has discussed with PricewaterhouseCoopers LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board regarding communications with the Audit Committee. The Audit Committee has also received the written disclosures and the letter from PricewaterhouseCoopers LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with PricewaterhouseCoopers LLP their independence.
Based on the review and discussions with management of Arch Capital and PricewaterhouseCoopers LLP referred to above, and other matters the Audit Committee deemed relevant and appropriate, the Audit Committee has recommended to the Board that Arch Capital publish the consolidated financial statements of Arch Capital and its subsidiaries for the year ended December 31, 2021,2023, in our 20212023 Annual Report.
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| | |
| | AUDIT COMMITTEE
Brian S. Posner
Eileen Mallesch (Chair)
Francis Ebong
Laurie S. Goodman
Eileen Mallesch
Moira Kilcoyne
Eugene S. Sunshine
Thomas R. Watjen
|
| | | | | | | | |
| 20222024 PROXY STATEMENT | | 8074 |
Principal Auditor Fees and Services
The following table summarizes professional services rendered to the Company and its majority-owned subsidiaries by PricewaterhouseCoopers LLP for the fiscal years ended December 31, 2021,2023, and 2020.2022.
| | Year Ended December 31, | |
| 2021 | 2020 | Description |
| Year Ended December 31, | |
| 2023 | |
| 2023 | |
| 2023 | | 2022 | Description |
| Audit Fees | Audit Fees | $ | 9,884,417 | | $ | 9,012,788 | | Includes fees for the integrated audit of our annual financial statements and internal control over financial reporting, review of our financial statements included in our quarterly reports on Form 10-Q and statutory audits for our insurance subsidiaries. Audit fees for the year ended December 31, 2021 increased when compared to prior year primarily due to acquisitions resulting in increased reporting requirements in 2021. | Audit Fees | $ | 11,306,885 | | $ | 10,353,246 | | Includes fees for the integrated audit of our annual financial statements and internal control over financial reporting, review of our financial statements included in our quarterly reports on Form 10-Q and statutory audits for our insurance subsidiaries. Audit fees for the year ended December 31, 2023 increased when compared to prior year primarily due to changes in local regulations resulting in increased reporting requirements in 2023. | Includes fees for the integrated audit of our annual financial statements and internal control over financial reporting, review of our financial statements included in our quarterly reports on Form 10-Q and statutory audits for our insurance subsidiaries. Audit fees for the year ended December 31, 2023 increased when compared to prior year primarily due to changes in local regulations resulting in increased reporting requirements in 2023. |
| Audit Related Fees | Audit Related Fees | 454,685 | | 370,542 | | Includes fees for assurance and related services that are traditionally performed by independent accountants, including employee benefit plan audits, due diligence related to mergers and acquisitions, regulatory and compliance attestations and agreed-upon procedures not required by regulation. Audit related fees for the year ended December 31, 2021 increased when compared to prior year primarily due to assistance with state regulatory examinations. | Audit Related Fees | 612,259 | | 168,988 | 168,988 | | Includes fees for assurance and related services that are traditionally performed by independent accountants, including employee benefit plan audits, due diligence related to M&A, regulatory and compliance attestations and agreed-upon procedures not required by regulation. Audit related fees for the year ended December 31, 2023 increased when compared to prior year primarily due to proactive assurance services related to a new system implementation and AUP procedures performed for BMIR. | Includes fees for assurance and related services that are traditionally performed by independent accountants, including employee benefit plan audits, due diligence related to M&A, regulatory and compliance attestations and agreed-upon procedures not required by regulation. Audit related fees for the year ended December 31, 2023 increased when compared to prior year primarily due to proactive assurance services related to a new system implementation and AUP procedures performed for BMIR. |
| Tax Fees | Tax Fees | 804,919 | | 801,160 | | Fees for tax services consists primarily of fees for tax compliance, tax advice and tax planning. | Tax Fees | 1,224,008 | | 302,977 | 302,977 | | Fees for tax services consists primarily of fees for tax compliance, tax advice and tax planning. Tax fees for the year ended December 31, 2023 increased when compared to prior year primarily due to services provided for various tax consulting projects. | Fees for tax services consists primarily of fees for tax compliance, tax advice and tax planning. Tax fees for the year ended December 31, 2023 increased when compared to prior year primarily due to services provided for various tax consulting projects. |
| All Other Fees | All Other Fees | 78,273 | | 153,195 | | Fees for services that are not included in the above categories consisted primarily of software licenses and professional services rendered in connection with various consulting. | All Other Fees | 47,037 | | 31,151 | 31,151 | | Fees for services that are not included in the above categories consisted primarily of software licenses and professional services rendered in connection with various consulting. | Fees for services that are not included in the above categories consisted primarily of software licenses and professional services rendered in connection with various consulting. |
Total1 | $ | 11,222,294 | | $ | 10,337,685 | | |
| Total | |
1 Both periods exclude fees related to audit work for Somers, which are subject to approval by Somers’ board of directors and its Audit Committee. See “Annex C - Non-GAAP Financial Measures” for additional information related to our interest in Somers.
The Audit Committee has considered whether the provision of these services is compatible with maintaining PricewaterhouseCoopers LLP’s independence. The Audit Committee approves all audit and permissible non-audit services performed for us by PricewaterhouseCoopers LLP, our independent registered public accounting firm. Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit Committee requires the independent registered public accounting firm and management to report actual fees compared to the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm. The Audit Committee delegates pre-approval authority to the Chair of the Audit Committee or, in the event of the Chair’s unavailability, to one or more of its independent members. To the extent applicable, the member to whom such authority is delegated reports, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
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8175 | | 20222024 PROXY STATEMENT | |
ITEM 4—3—APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has the sole authority to appoint the independent registered public accounting firm. As required by Bermuda law, the shareholders are required to appoint the Audit Committee’s selection of the independent auditors. PricewaterhouseCoopers LLP has served as our independent registered public accounting firm since 1995. The Audit Committee of the Board and the Board believe that the retention of PricewaterhouseCoopers LLP to serve as independent registered public accounting firm for the fiscal year ending December 31, 2022,2024, is in the best interests of the Company and its shareholders. The Audit Committee of the Board proposes and recommends that the shareholders appoint the firm of PricewaterhouseCoopers LLP to serve as independent registered public accounting firm of Arch Capital for the year ending December 31, 2022.2024. Unless otherwise directed by the shareholders, proxies will be voted for the appointment of PricewaterhouseCoopers LLP to audit our consolidated financial statements for the year ending December 31, 2022.2024. A representative of PricewaterhouseCoopers LLP will attend the Annual Meeting and will have an opportunity to make a statement and respond to appropriate questions.
Required Vote
The affirmative vote of a majority of the voting power of all of our issued and outstanding common shares represented by shareholders present in person or by proxy at the Annual Meeting will be required for the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2022.2024.
Recommendation of the Board
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| THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL. |
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| 20222024 PROXY STATEMENT | | 8276 |
SUBSIDIARY DIRECTORS
Under our bye-law 75, the boards of directors of any of our subsidiaries that are incorporated in Bermuda, the Cayman Islands and any other subsidiary designated by our Board, must consist of persons who have been elected by our shareholders as designated company directors (“Designated Company Directors”).
ITEM 5—4—ELECTION OF SUBSIDIARY DIRECTORS
Nominees
The persons named below have been nominated to serve as Designated Company Directors of our non-U.S. subsidiaries indicated below. Unless authority to vote for a nominee is withheld, the enclosed proxy will be voted for the nominee, except that the persons designated as proxies reserve discretion to cast their votes for other persons in the unanticipated event that the nominee is unable or declines to serve.
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| Arch Capital Holdings Ltd. | | Arch Investment Management Ltd. |
| François Morin; Chiara Nannini | | François Morin; Christine Todd |
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| Arch Credit Risk Services (Bermuda) Ltd. | | Arch Global Services Holdings Ltd. |
Brian Chen; Seamus Fearon; H. Beau Franklin; James Haney
Alan Tiernan
| | Chris Hovey; François Morin |
| | |
| Arch Investment Property Holdings Ltd. | | Alternative Re Holdings Limited, Alternative Re Limited |
Robert Appleby; W. Preston Hutchings;François Morin; David J. Mulholland | | François Morin; Chiara Nannini |
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| Arch Reinsurance Ltd. | | Arch Underwriters Ltd. |
Crystal Doughty; Matthew Dragonetti; Jerome Halgan; Pierre Jal; Maamoun RajehRajeh; William Soares | | Crystal Doughty; Matthew Dragonetti; Jerome Halgan; Pierre Jal; Maamoun Rajeh |
| | |
| Arch Investment Holdings I Ltd., Arch Investment Holdings II Ltd., Arch Investment Holdings III Ltd., Arch Investment Holdings IV Ltd. | | Other Non-U.S. Subsidiaries, as Required or Designated Under Bye-Law 75 (except as otherwise indicated herein) |
| François Morin; David J. Mulholland; Christine Todd | | François Morin; Maamoun Rajeh |
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Robert Appleby, 60, has servedBrian Chen, 35, is Senior Vice President of Credit Risk Transfer and Services at Arch Re Bermuda. Mr. Chen joined Arch in 2020 and leads Arch’s participation in GSE CRT reinsurance deals as well as its underwriting services platform to other reinsurers. Prior to joining Arch, Mr. Chen worked in various capital markets roles at Fannie Mae from 2011 to 2014 and from 2018 to 2020. Between 2014 and 2018, Mr. Chen worked in sell-side equity research at Autonomous Research covering mortgage and insurers, servicers and mortgage tech. Mr. Chen holds a directorB.S. in Financial Mathematics from the University of Virginia and is a CFA® Charterholder.
Crystal Doughty, 39, is Chief Underwriting Officer, Property of Arch InvestmentRe Bermuda, a position she has held since August 2023. Prior to such position, Ms. Doughty was Senior Underwriter and Third-Party Capital Portfolio Manager with Arch Re Bermuda. Prior to joining Arch Re Bermuda in January 2021, she held various roles at Markel, starting in 2006, including Senior Vice President Underwriting Retro, Property Holdings Ltd. since November 2016. He is a co-founder of ADM Capital,International and its Joint Chief Investment Officer, and the founder of Cibus Fund, a London-based private equity platform, which focuses on investment opportunities in the food and agricultural arena. Mr. Appleby is a directorNorth American Reinsurance, Senior Vice President of the ADM Capital Foundation, a charitable organization establishedsidecar, New Point and Assistant Vice President Reserving
Actuary for all lines of business including but not limited to promote environmental conservation. Prior to this, he served 13 years with Lehman Brothers. Mr. ApplebyCasualty and Specialty, Marine and Property. She holds a B.A.an Honours B.Sc. in ZoologyActuarial Science and AnthropologyStatistics from Oxford University of Toronto and is an M.A. in Zoology.Associate of the Casualty Actuarial Society.
Matthew Dragonetti, 52,54, is President and Head of Property for Arch Re Bermuda, a position he has held since November 2017. From 2012 to 2017, Mr. Dragonetti was the Head of Worldwide Property. He joined Arch Re Bermuda in November 2001 as a Senior Underwriter for U.S. Treaty Property, ultimately becoming Head of U.S. Property in 2005. Before joining Arch Re Bermuda, he served as Vice President at Odyssey Re and prior to that,
he was a Vice President of Property Treaty for Terra Nova (Bermuda) Holdings Ltd. from 1998 to 2000. He started his reinsurance career at F&G Re as an Assistant Vice President international property from 1995 to 1998. Mr. Dragonetti has a B.SB.S. in Economics from Pennsylvania State University and an M.B.A. from Northeastern University.
Seamus Fearon,41, 43, serves as Executive Vice President, Credit Risk Transfer and European Markets for the GlobalCEO, International Mortgage Group of Arch Capital. Mr. Fearon joined Arch Capital in September 2012 and previously served as the Chief Actuary of the Global Mortgage Group. Prior to joining Arch, Mr. Fearon was Associate Director and Actuary for KPMG Dublin from 2008 to 2012. From 2003 to 2008, he was Pricing Actuary for Aviva General Insurance Ltd. Mr. Fearon is a Fellow of the Institute and Faculty of Actuaries and holds a B.Sc. in Actuarial Mathematics from Dublin City University. He also completed the Program for Leadership Development from Harvard Business School.
H. Beau Franklin, 52, is President and Chief Executive Officer, an Arch Capital position, for the International Mortgage Group. He joined Arch Capital in 2008 to assist in the development of the mortgage insurance segment and left in early 2010 to pursue personal interests. In 2012, Mr. Franklin consulted with Arch Capital to determine the feasibility of developing an Australian domiciled mortgage insurer. From May 2015 to September 2017, Mr. Franklin was appointed Chief Executive Officer of Arch LMI Pty Ltd. Prior to joining Arch, and for the period from 1998 to September 2008, Mr. Franklin was President and Chief Executive Officer of Financial Security Assurance International Ltd., and a director of XL Financial Assurance Ltd., which later became Syncora Capital Assurance Ltd. Mr. Franklin holds a B.A. from Bond University in Australia.
Jerome Halgan, 48, 50, was appointed Chief Executive Officer of Arch Re Bermuda in January 2018. Mr. Halgan joined Arch in 2009 as Senior Underwriter with Arch Re Bermuda in Bermuda before being promoted to Chief Underwriting Officer in June 2012. He then took on the role of President of Arch Re (U.S.) in August 2014, a position he held until January 2016, when he was named Chairman, President and Chief Executive Officer of Arch Re (U.S.) before assuming his current role. Prior to Arch, Mr. Halgan worked with the Berkshire Hathaway Reinsurance Group as a Vice President from 2001 to 2009 and with Sorema N.A. Reinsurance Group from 1996 to 2001 with responsibilities within property underwriting and business analysis. Mr. Halgan holds an M.B.A. from the Stern School of Business and an engineering degree from the École Supérieure d’Électricité in France.
James Haney, 56, is Vice President and mortgage underwriter for Arch Re Bermuda. Mr. Haney joined Arch in January 2014 upon Arch Capital’s purchase of assets from PMI, where he spent eight years as PMI’s Director - Risk Transfer and Structured Transactions. Prior to PMI, Mr. Haney was the Director - Corporate Development, Acquisitions, and Finance for Irwin Home Equity Corporation from 1995 to 2006. From 1989 to 1994, he was an analyst in the mortgage trading group at Credit Suisse First Boston. Mr. Haney holds a B.S. in Operations Research from Columbia University School of Engineering and Applied Science and an M.B.A. from St. Mary’s College of California.
Chris Hovey, 55,57, is Chief Operations Officer of Arch Capital Services LLC. From July 2018 to January 2020, Mr. Hovey served as Executive Vice President and Chief Information Officer at Arch Capital Services LLC. Prior to that, he held the role of Chief Operating Officer of Arch Mortgage Insurance Company. Before joining Arch, Mr. Hovey acted as Chief Operating Officer for PMI since 2011. He also served as Senior Vice President of servicing
operations and loss management for PMI, which he originally joined in 2002. Mr. Hovey holds a B.A. from San Francisco State University and an M.B.A. from Saint Mary’s College in Moraga, California.
W. Preston Hutchings, 65, is Senior Advisor of Arch Capital. He served as President of AIM from April 2006 to June 2021, Chief Investment Officer from July 2005 to June 2021 and Senior Vice President of Arch Capital from July 2005 to December 2021. Prior to joining Arch Capital, Mr. Hutchings was at RenaissanceRe Holdings Ltd. from 1998 to 2005, serving as Senior Vice President and Chief Investment Officer. Previously, he was Senior Vice President and Chief Investment Officer of Mid Ocean Reinsurance Company Ltd. from January 1995 until its acquisition by XL Group plc in 1998. Mr. Hutchings began his career as a fixed income trader at J.P. Morgan & Co., working for the firm in New York, London and Tokyo. He graduated in 1978 with a B.A. from Hamilton College and received an M.A. in Jurisprudence from Oxford University in 1981, where he studied as a Rhodes Scholar.
Pierre Jal, 44, was appointed Global Chief Underwriting Officer for Arch Re Bermuda in November 2017. Mr. Jal joined Arch Re Europe as an underwriter/actuary in July 2007. He was appointed to senior international casualty/specialty underwriter in 2011. In 2012, Mr. Jal was appointed Chief Underwriting Officer P&C for Arch Re Europe. He was promoted to Chief Underwriting Officer in 2014. Prior to joining Arch, Mr. Jal held various underwriting and actuarial positions. From 2005 to 2007, he served as Underwriter/Head of Actuarial Department, of Scor Global P&C in Switzerland. From 2004 to 2005, he was first pricing actuary in charge of Nordics and the Netherlands before being promoted to reinsurance underwriter in charge of the French Market at Alea in Switzerland. Prior to this, Mr. Jal was an actuarial consultant at GECALUX in Luxemburg from 2002 to 2004. He started his reinsurance career in 2001 as a reinsurance pricing actuary at Gerling Globale Re in France. Mr. Jal holds an M.Sc. in Actuarial Science and is a fully qualified Member of the French Institute of Actuaries.
François Morin, 54,56, is Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital, a position he has held since May 2018. Prior to such position, Mr. Morin served as Senior Vice President, Chief Risk Officer and Chief Actuary of Arch Capital, a position he held since May 2015. He joined Arch Capital in October 2011 as Chief Actuary and Deputy Chief Risk Officer. From January 1990 through September 2011, Mr. Morin served in various roles for Towers Watson & Co. and its predecessor firm, Towers Perrin Forster & Crosby, including its actuarial division, Tillinghast. He holds a B.Sc. in Actuarial Science from Université Laval in Canada. He is a Fellow of the Casualty Actuarial Society, a Chartered
Financial Analyst, a Chartered Enterprise Risk Analyst and a Member of the American Academy of Actuaries.
David J. Mulholland, 55, 57, has served as Senior Vice President and Chief PM, Onshore Portfolios at AIM since March 2022. Prior to March 2022, he served as Senior Vice President & Chief Administrative Officer ofat AIM sincefrom November 2011. Prior to November 2011,that, he served as Vice President at AIM, which he joined in January 2006. Prior to that time, he spent 11 years at STW Fixed Income Management where he held the title of Principal and Portfolio Manager. From 1990 to 1994, he worked as a money market and foreign exchange trader in the treasury department of the Bank of Butterfield in Bermuda. Mr. Mulholland holds a B.S. with a concentration in finance from Boston University.
Chiara Nannini, 42,44, has practiced law at Conyers since 2008, where she has been a director since 2017. Ms. Nannini obtained a B.A. in Politics and Italian from the University of Virginia in 2003 and received her law degree from the London School of Economics and Political Science in 2006. Since joining Conyers, Ms. Nannini was based in Conyers’ São Paulo, Brazil office from 2010 to 2013.
Maamoun Rajeh, 51, 53, has served as Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group since October 2017. From July 2014 to September 2017, he was Chairman and Chief Executive Officer of Arch Re Bermuda. He joined Arch Re Bermuda in 2001 as an underwriter, ultimately becoming Chief Underwriting Officer in November 2005. Most recently, he was President and Chief Executive Officer of Arch Re Europe from October 2012 to July 2014. From 1999 to 2001, Mr. Rajeh served as Assistant Vice President at HartRe, a subsidiary of The Hartford Financial Services Group, Inc. Mr. Rajeh also served in several business analysis positions at the United States Fidelity and Guarantee Company between 1992 and 1996 and as an underwriter at F&G Re from 1996 to 1999. He has a B.S. from The Wharton School of Business of the University of Pennsylvania and he is a Chartered Property Casualty Underwriter.
William Soares, 44, is Chief Underwriting Officer, Casualty and Specialty of Arch Re Bermuda, a position he has held since August 2023. Prior to such position, Mr. Soares served as Head of Specialty and Head of Customized Products. He joined Arch Re Bermuda in 2006 as a Casualty Underwriter. Prior to joining Arch Re Bermuda, he was an Assurance Manager in the reinsurance department for Ernst & Young in Bermuda. He graduated in 2002 with a B.A. in Economics from Harvard University. Mr. Soares is a CFA® Charterholder who holds the Chartered Property Casualty Underwriter and Associate in Reinsurance designations.
Alan Tiernan, 38, serves as Global Chief Actuary and International Chief Operating Officer for the Mortgage Group of Arch Capital. Mr. Tiernan joined Arch Capital in October 2014 as an Actuary in the Group Actuarial and Risk team before becoming Chief Actuary of the Global Mortgage Group of Arch Capital in April 2020. Prior to joining Arch, Mr. Tiernan held various actuarial pricing roles with Zurich Insurance plc in Dublin from 2013-2014 and with Aviva General Insurance Ltd. in Dublin from 2008-2012. Mr. Tiernan holds a Bachelor’s Degree in Actuarial and Financial Studies from University College Dublin and is a Fellow of the Institute and Faculty of Actuaries in the U.K., the Casualty Actuarial Society in the U.S. and the Society of Actuaries in Ireland.
Christine Todd, 55,57, is Senior Vice President, Chief Investment Officer of Arch Capital and President of AIM. She joined Arch in June 2021 and has responsibility for setting the firm’s investment strategy and managing the day-to-day operations of the investment portfolio. Prior to joining Arch, Ms. Todd was Head of Fixed Income, U.S., for Amundi US from February 2019 to May 2021. She has also held executive roles at Neighborly Investments, Standish Mellon Asset Management Company LLC and Gannett, Welsh & Kotler. She is a Chartered Financial Analyst and holds a B.A. from Georgetown University and an M.B.A. from Boston University.
Required Vote
The affirmative vote of a majority of the voting power of all of our issued and outstanding common shares represented by shareholders present in person or by proxy at the Annual Meeting will be required for the election of Designated Company Directors.
Recommendation of the Board
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| THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL. |
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8579 | | 20222024 PROXY STATEMENT | |
ANNEX A—GENERAL INFORMATION
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| | Internet Availability of Proxy Materials |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on May 4, 2022:9, 2024: For the convenience of our shareholders, this Proxy Statement and the 20212023 Annual Report for the Annual Meeting to be held on May 4, 20229, 2024 are available at:at proxyvote.com.
Notice and Access
We are furnishing proxy materials to our shareholders primarily via the internet under the SEC’s “Notice and Access” rules. On or about March 25, 2022,28, 2024, we expect to mail to our shareholders a Notice of Internet Availability containing instructions on how to access our proxy materials, including our Proxy Statement and 20212023 Annual Report. The Notice of Internet Availability also will instruct you on how to access and submit your proxy through the internet, by phone or with your mobile device.
We are providing internet distribution of our proxy materials to expedite receipt by shareholders, reduce costs and conserve paper. However, if you would like to receive printed proxy materials, please follow the instructions on the Notice of Internet Availability.
Electronic Access to Proxy Materials
This Proxy Statement and our 20212023 Annual Report are available at proxyvote.com or at the Company’s website,
archgroup.com. If you received paper copies of this year’s Proxy Statement and Annual Report or our Notice of Internet Availability by mail, you can elect to receive an e-mail message in the future that will provide a link to those documents on the internet. By opting to access your proxy materials via the internet, you will:
▪gain faster access to your proxy materials;
▪help reduce production and mailing costs;
▪ reduce the amount of mail you receive; and
▪ save paper.
If you have already enrolled in the electronic access service, you will continue to receive your proxy materials by e-mail, unless and until you change your delivery preference.
Registered and Beneficial Shareholdersmay enroll in the electronic proxy and annual report access service for future annual general meetings by registering at proxyvote.com. If you vote via the internet, simply follow the prompts that link you to that website.
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| | Shareholders Entitled to Vote and Voting Standard |
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Our Board set March 8, 202213, 2024 as the record date for the Annual Meeting. This means that shareholders as of the close of business on that date are entitled to receive this noticeNotice of the Annual Meeting and vote at the Annual Meeting and any and all postponements or adjournments of the Annual Meeting.
On the record date, there were 378,556,205375,145,392 common shares issued and outstanding and entitled to vote, subject to our bye-laws (described below). At that date, there were an estimated 1,0052,605 holders of record and approximately 161,235 beneficial377,591 beneficial holders of theour common shares. Each holder of record of shares on the record date
is entitled to cast one vote per share, subject to the
limitations described below. Only holders of the Company’s common shares may vote at the Annual Meeting. The Company’s issued and outstanding preferred shares have no voting rights (except in very limited circumstances, which do not currently apply).
How to Vote
You are encouraged to vote in advance of the Annual Meeting, even if you are planning to attend.
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| 2022 PROXY STATEMENT | | A-1 |
You can use any of the following methods listed to vote. Make sure you have your Notice, proxy card, Notice or Voting Instruction Form in hand and follow the instructions.
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| 2024 PROXY STATEMENT | | A-1 |
Registered Shareholders
Shareholders who hold their shares directly with our stock registrar, American Stock Transfer & Trust Company, can vote any one of several ways.ways:
Via the Internet:Visit proxyvote.com and follow the instructions on the website.If you vote via the internet or by phone, your voting instructions may be transmitted until 11:59 p.m. Eastern Daylight Time on May 3, 2022.8, 2024.
By Phone:Call 1-800-690-6903 and follow the voice prompts.
By Mail: Sign, date and return the proxy card.
By QR Code: Scan the QR Code on your proxy card, Notice or Voting Instruction Form to vote with your mobile device.
Attending the Meeting: Attend the Annual Meeting, or send a personal representative with an appropriate proxy, to vote by ballot at the meeting (see below “Annual Meeting Attendance”).Beneficial Shareholders
Shareholders who hold their shares beneficially through an institutional holder of record such as a bank or broker (sometimes referred to as holding shares “in street name”), will receive voting instructions from that holder of record. If you wish to vote at the Annual Meeting, you must obtain a legal proxy from the holder of record of your shares and present it at the meeting.
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| | Quorum; Votes Required for Approval |
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The presence of two or more persons representing, in person or by proxy, including proxies properly submitted by mail, telephone or internet, at least a majority of the voting power of our shares issued and outstanding and entitled to vote at the Annual Meeting is necessary to constitute a quorum. If a quorum is not present, the Annual Meeting may be adjourned until a quorum is obtained. The affirmative vote of a majority of the voting power of the shares represented by shareholders present in person or by proxy at the Annual Meeting will be required for approval of each of the proposals, except for Item 1 as described below and Item 2 which is advisory and does not have a required vote.
With respect to Item 1, in any uncontested election of directors, the affirmative vote of a majority of the votes cast will be required to elect each director. In the event of a director election in which the number of director nominees exceeds the number of directors to be elected, the directors will be elected by a plurality of the votes cast for such directors. Our Corporate Governance Guidelines provide that in an uncontested election, any nominee for director who fails to receive a majority of the votes cast in such election will be obligated to tender his or her resignation to the Board. The Nominating and Governance Committee or other Committee designated by our Board will consider any such resignation and make a recommendation to the Board whether to accept or
reject the resignation. The Board would then be required to accept or reject the resignation within 90 days
following certification of the election results, taking into account all relevant facts and circumstances, and would publicly disclose its reasons if the resignation is not accepted.
An automated system administered by our distribution and tabulation agent will tabulate votes cast by proxy at the Annual Meeting, and our inspector will tabulate votes cast during the Annual Meeting. Abstentions and broker non-votes (i.e., shares held by a broker which are represented at the meeting but with respect to which such broker does not have discretionary authority to vote on a particular proposal) will be counted for purposes of determining whether or not a quorum exists. Abstentions will not be considered in determining the number of votes necessary for approval of Item 1 and will be considered in determining the number of votes necessary for approval of Items 3 4 and 5.4.
Several of our officers and directors will be present at the Annual Meeting and available to respond to questions. Our independent auditors are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
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| A-2 | | 20222024 PROXY STATEMENT | |
Your proxy authorizes another person to vote your shares on your behalf at the Annual Meeting.
If your valid proxy is received by internet, telephone or mail before the deadline, the persons designated as proxies will vote your shares per your directions. We have designated two of our officers as proxies for the 20222024 Annual Meeting—Marc Grandisson and François Morin.
Should any other matter not referred to in this Proxy Statement properly come before the meeting, the
designated proxies will vote in their discretion. If any Directordirector nominee should refuse or be unable to serve, an event that is not anticipated, your shares will be voted for the person designated by the Board to replace such nominee or, alternatively, the Board may reduce the number of Directorsdirectors on the Board.
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| | Effect of Not Casting Your Vote |
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Registered Shareholders
When a valid proxy is received, but specific choices are not indicated, the designated proxies will vote as recommended by the Board.
Beneficial Shareholders
It is critical that you cast your vote if you want it to count in the election of directors and most other items on the agenda. Under applicable regulations, if you hold your shares beneficially and do not instruct your bank, broker or other holder of record on how to vote your shares, the
holder of record will only have discretion to vote your
uninstructed shares on the appointment of our independent registered public accounting firm (Item 4)3). The holder of record will not have discretion to vote your uninstructed shares on the election of fourtwo Class III directorsII Directors (Item 1), the advisory vote to approve named executive officerNEO compensation (Item 2), the approval of the 2022 Arch Capital Group Ltd. Long-Term Incentive and Share Award Plan (Item 3) or the election of certain individuals as Designated Company Directors of certain of our non-U.S. subsidiaries, as required by our bye-laws (Item 5)4), resulting in “broker non-votes” on those items.
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| | Revoking Your Proxy or Changing Your Vote |
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You may change your vote at any time before the proxy is exercised.
Registered Shareholders
If you voted by mail, you may revoke your proxy at any time before it is exercised by executing and delivering a timely and valid later-dated proxy, by voting by ballot at the meeting or by giving written notice to the Secretary. If you voted via the internet or by phone, you may change your vote with a timely and valid later internet or telephone vote, or by voting by ballot at the meeting.
Attendance at the meeting will not have the effect of revoking a proxy unless (1) you give proper written notice of revocation to the Secretary before the proxy is exercised, or (2) you vote by ballot at the meeting.
Beneficial Shareholders
Follow the specific directions provided by your bank, broker or other holder of record to change or revoke any voting instructions you have already provided. Alternatively, you may vote your shares by ballot at the meeting if you obtain a legal proxy from your holder of record and present it at the meeting.
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| 20222024 PROXY STATEMENT | | A-3 |
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| | Annual Meeting Attendance |
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If you were a shareholder as of the record date, March 8, 2022,13, 2024, you are invited to attend our Annual Meeting.
Where: virtualshareholdermeeting.com/ACGL2022ACGL2024
To log in to the Annual Meeting as a shareholder, a control number will be required. For registered shareholders, the control number can be found on your proxy card, voting instruction formVoting Instruction Form or noticeNotice to shareholders.
Submitting Questions in Advance:
Any questions for the Annual Meeting must be submitted in advance at shareholderinfo@archgroup.com by 11:59 p.m. Eastern Daylight Time on May 1, 2022.6, 2024.
Date:
Wednesday,Thursday, May 4, 20229, 2024
Time:
12:00 p.m. local Bermuda time (11:00 a.m. Eastern Daylight TimeTime)
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| | Limitation on Voting Under Our Bye-laws |
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Under our bye-laws, if the votes conferred by shares of the Company, directly or indirectly or constructively owned (within the meaning of Section 958 of the Internal Revenue Code of 1986, as amended (the “Code”)), by any U.S. person (as defined in Section 7701(a)(30) of the Code) would otherwise represent more than 9.9% of the voting power of all shares entitled to vote generally at an election of directors, the votes conferred by such shares or such U.S. person will be reduced, subject to certain exceptions, by whatever amount is necessary so that after any such reduction the votes conferred by the shares of such person will constitute 9.9% of the total voting power of all shares entitled to vote generally at an election of directors. There may be circumstances in which the votes conferred on a U.S. person are reduced to less than 9.9% as a result of the operation of our bye-laws because of shares that may be attributed to that person under the Code.
Code. Notwithstanding the provisions of our bye-laws described above, after having applied such provisions as best as they consider reasonably practicable, the Board may make such final adjustments to the aggregate number of votes conferred by the shares of any U.S. person that they consider fair and reasonable in all the circumstances to ensure that such votes represent 9.9% of the aggregate voting power of the votes conferred by all shares of Arch Capital entitled to vote generally at an election of directors.
In order to implement our bye-laws, we will assume that all shareholders are U.S. persons unless we receive assurances satisfactory to us that they are not U.S. persons.
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A-4 | | 2022 PROXY STATEMENT | |
Proxies are being solicited by and on behalf of the Board. In addition to the use of the mail, proxies may be solicited by personal interview, phone, telegram and facsimile, in each case by our directors, officers and employees.
The Company is paying the entire costs of the solicitation. We have retained MacKenzie Partners, Inc. to aid in the solicitation of proxies and verify records related to the
solicitation for a fee of approximately $12,500$13,500 plus expenses. We will reimburse brokerage houses,
nominees, fiduciaries and other custodians for their costs in forwarding proxy materials. We may request by phone, facsimile, mail, electronic mail or other means the return of the proxy cards. Please contact MacKenzie Partners at 1-800-322-2885 with any questions you may have regarding our proposals.
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| A-4 | | 2024 PROXY STATEMENT | |
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| | Corporate Governance Materials |
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Shareholders can see our Board Committee Charters;Charters, Code of Business Conduct;Conduct, Corporate Governance Guidelines and other corporate governance materials at archgroup.com. Copies of these documents, as well as additional copies of this Proxy Statement, are available to shareholders, without charge, upon request to:
Arch Capital Group Ltd.
Waterloo House, Ground Floor
100 Pitts Bay Road
Pembroke HM 08, Bermuda
Attention: Secretary
E-Mail:shareholderinfo@archgroup.com
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| | Reduce Duplicate Mailings |
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We have adopted a procedure approved by the SEC called “householding.” Under this procedure, registered shareholders, who have the same address and last name and who receive either Notices or paper copies of the proxy materials in the mail, will receive only one copy of our proxy materials, or a single envelope containing the Notices for all shareholders at that address. This consolidated method of delivery will continue unless one or more of these shareholders notifies us that they would like to receive individual copies of proxy materials. This procedure reduces our printing costs and postage fees. Shareholders who participate in householding will continue to receive separate proxy cards or Notices that include each shareholder’s unique control number for voting the shares held in each account.
Registered Shareholderswho wish to discontinue householding and receive separate copies of proxy materials may notify Broadridge by calling 1-866-540-7095, or send a written request to the Company’s Secretary at the address of our principal office.
Beneficial Shareholdersmay request information about householding from your bank, broker or other holder of record.
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| 2022 PROXY STATEMENT | | A-5 |
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| | Shareholder Proposals for the 20232025 Annual General Meeting |
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To be included in our Proxy Statement and form of proxy relating to the 20232025 annual general meeting of shareholders, all proposals of security holders intended to be presented at the 20232025 annual general meeting must be received by the Company not later than November 25, 202228, 2024, and must comply with Rule 14a-8 of the Exchange Act.
For any proposal that is not submitted for inclusion in next year’s Proxy Statement (as described in the preceding paragraph) but is instead sought to be presented directly at next year’s annual general meeting, the rules of the SEC permit management to vote proxies in its discretion if we do not receive notice of the proposal on or before the deadline for advance notice set forth in our bye-laws as described below.
Our bye-laws provide that any shareholder desiring to make a proposal or nominate a director at an annual general meeting must provide written notice of such proposal or nomination to the Secretary of the Company
at least 50 days prior to the date of the annual general meeting at which such proposal or nomination is proposed to be voted upon (or, if less than 55 days’ notice of an annual general meeting is given, shareholder proposals and nominations must be delivered no later than the close of business of the seventh day following the day notice was mailed). The date of our 20232025 annual
general meeting is expected to be held no earlier than May 2, 20236, 2025, and no later than May 4, 2023.8, 2025. As a result, any shareholder desiring to make a proposal or nominate a director at anthe 2025 annual general meeting must provide written notice of such proposal or nomination no later than March 1317 through March 15, 2023,19, 2025, as applicable.applicable in order to comply with our bye-laws (except see below regarding nominations pursuant to the universal proxy rules). Any such proposal or nomination
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| 2024 PROXY STATEMENT | | A-5 |
must include the information required under our bye-laws with respect to each proposal or nomination and the shareholder making such proposal or nomination.
In addition, to comply with the universal proxy rules under the Exchange Act, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees at the 2025 annual general meeting generally must provide written notice no later than 60 calendar days prior to the anniversary of the previous year’s annual meeting date. As a result, any shareholder desiring to nominate a director at the 2025 annual general meeting must provide written notice of such nomination no later than March 10, 2025. Such notice also must set forth the information required by Rule 14a-19 under the Exchange Act in addition to the information required under our bye-laws.
A shareholder proponent must be a shareholder of the Company who was a shareholder of record both at the time of giving of notice and at the time of the annual general meeting and who is entitled to vote at the annual general meeting.
Proposals and other items of business should be directed to the attention of:
Arch Capital Group Ltd.
Waterloo House, Ground Floor
100 Pitts Bay Road
Pembroke HM 08, Bermuda
Attention: Secretary
E-Mail: shareholderinfo@archgroup.com
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| | Contacting Our Board, Individual Directors and Committees |
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You can contact any of our directors by writing to them care of:
Arch Capital Group Ltd.
Waterloo House, Ground Floor
100 Pitts Bay Road
Pembroke HM 08, Bermuda
Attention: Secretary
E-Mail: shareholderinfo@archgroup.com
Employees and others who wish to contact the Board or any member of the Audit Committee to report any complaint or concern with respect to accounting, internal accounting controls or auditing matters, may do so anonymously by using the above address.
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| | Registered and Principal Executive Offices |
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| Our registered office is located at: | Our principal executive offices are located at: |
Clarendon House
2 Church Street
Hamilton HM 11, Bermuda
Phone: (441) 295-1422 | Waterloo House, Ground Floor
100 Pitts Bay Road
Pembroke HM 08, Bermuda
Phone: (441) 278-9250 |
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| A-6 | | 20222024 PROXY STATEMENT | |
ANNEX B—ARCH CAPITAL GROUP LTD. 2022 LONG-TERM INCENTIVE AND SHARE AWARD PLAN
1.Purposes. The purposes of the 2022 Long-Term Incentive and Share Award Plan are to advance the interests of Arch Capital Group Ltd. and its shareholders by providing a means to attract, retain, and motivate employees and directors of the Company its subsidiaries and affiliates, to provide for competitive compensation opportunities, to encourage long-term service, to recognize individual contributions and reward achievement of performance goals, and to promote the creation of long-term value for shareholders by aligning the interests of such persons with those of shareholders. In consideration for the Participant’s continuous service to the Company, any Shares that are issued under the Plan shall be issued fully paid.
2.Definitions. For purposes of the Plan, the following terms shall be defined as set forth below:
“Affiliate” means any entity other than the Company and its Subsidiaries that is designated by the Board or the Committee as a participating employer under the Plan, provided that the Company directly or indirectly owns at least 20% of the combined voting power of all classes of stock of such entity or at least 20% of the ownership interests in such entity.
“Award” means any Option, SAR, Restricted Share, Restricted Share Unit, Performance Share, Performance Unit, Dividend Equivalent or Other Share-Based Award granted to an Eligible Person under the Plan.
“Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award.
“Beneficiary” means the person, persons, trust or trusts which have been designated by an Eligible Person in his or her most recent written beneficiary designation filed with the Company to receive the benefits specified under this Plan upon the death of the Eligible Person, or, if there is no designated Beneficiary or surviving designated Beneficiary, then the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits.
“Board” means the Board of Directors of the Company.
“Cause”means, with respect to an Eligible Person, (a) theft or embezzlement by the Eligible Person with respect to the Company, its Subsidiaries or Affiliates; (b) malfeasance or negligence in the performance of the Eligible Person’s duties; (c) the commission by the Eligible Person of any felony or any crime involving moral turpitude; (d) willful or prolonged absence from work by the Eligible Person (other than by reason of disability due to physical or mental illness); (e) failure, neglect or refusal by the Eligible Person to adequately perform his or her duties and responsibilities as determined by the Company; (f) continued and habitual use of alcohol by the Eligible Person to an extent which materially impairs the Eligible Person’s performance of his or her duties without the same being corrected within ten (10) days after being given written notice thereof; or (g) the Eligible Person’s use of illegal drugs without the same being corrected within ten (10) days after being given written notice thereof. Notwithstanding the foregoing, in the event that an Eligible Person is party to an employment or similar agreement with the Company or any of its Subsidiaries or Affiliates and such agreement contains a definition of “Cause,” the definition of “Cause” set forth above shall be deemed replaced and superseded, with respect to such Eligible Person, by the definition of “Cause” used in such employment or similar agreement.
“Change in Control”, unless otherwise defined in an applicable Award Agreement, shall mean:
(A) any person (within the meaning of the Exchange Act), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or
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| 2022 PROXY STATEMENT | | B-1 |
(B) the individuals who, as of the date hereof, constitute the Board together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of such date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or
(C) the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company's assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this definition.
Notwithstanding the foregoing, to the extent necessary to comply with Section 409A of the Code with respect to the payment of “non-qualified deferred compensation” (as defined for purposes of Section 409A of the Code), “Change in Control” shall be limited to a “change in control event” as defined under Section 409A of the Code.
“Code” means the Internal Revenue Code of 1986, as amended from time to time. References to any provision of the Code shall be deemed to include successor provisions thereto and regulations thereunder.
“Committee” means the Compensation Committee of the Board, or such other Board committee or subcommittee (or the entire Board) as may be designated by the Board to administer the Plan.
“Company” means Arch Capital Group Ltd., a company organized under the laws of Bermuda, or any successor company.
“Director” means a member of the Board who is not an employee of the Company, a Subsidiary or an Affiliate.
“Dividend Equivalent” means a right, granted under the Plan, to receive cash, Shares, or other property equal in value to dividends paid with respect to a specified number of Shares. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award, and may be paid currently or on a deferred basis.
“Eligible Person” means (i) an employee of the Company, a Subsidiary or an Affiliate, including any director who is an employee, and (ii) any Director. Notwithstanding any provisions of this Plan to the contrary, an Award may be granted to an employee, in connection with his or her hiring or retention prior to the date the employee first performs services for the Company, a Subsidiary or an Affiliate; provided, however, that any such Award shall not become vested or exercisable prior to the date the employee first performs such services.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and regulations thereunder.
“Fair Market Value” means, with respect to Shares or other property, the fair market value of such Shares or other property determined by such methods or procedures as shall be established from time to time by the Committee. Unless otherwise determined by the Committee in good faith, the Fair Market Value of Shares shall mean the closing price per Share on the date (or, if the Shares were not traded on that day, the next preceding day that the Shares were traded) on the principal exchange or market system on which the Shares are traded, as such prices are officially quoted thereon.
“ISO” means any Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the Code.
“NQSO” means any Option that is not an ISO.
“Option” means a right, granted under Section 5(b), to purchase Shares.
“Other Share-Based Award” means a right, granted under Section 5(h), that relates to or is valued by reference to Shares.
“Participant” means an Eligible Person who has been granted an Award under the Plan.
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B-2 | | 2022 PROXY STATEMENT | |
“Performance Share” means a performance share granted under Section 5(f).
“Performance Unit” means a performance unit granted under Section 5(f).
“Permitted Persons” means (A) the Company; (B) any Related Party; or (C) any group (as defined in Rule 13b-3 under the Exchange Act) comprised of any or all of the foregoing.
“Plan” means this 2022 Long-Term Incentive and Share Award Plan.
“Related Party” means (A) a majority-owned subsidiary of the Company; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (C) any entity, 50% or more of the voting power of which is owned directly or indirectly by the shareholders of the Company in substantially the same proportion as their ownership of Voting Securities immediately prior to the transaction.
“Restricted Shares” means an Award of Shares under Section 5(d) that may be subject to certain restrictions and to a risk of forfeiture or reacquisition for no further consideration.
“Restricted Share Unit” means a right, granted under Section 5(e), to receive Shares or cash at the end of a specified deferral period.
“Rule 16b‑3” means Rule 16b‑3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.
“SAR” or “Share Appreciation Right” means the right, granted under Section 5(c), to be paid an amount measured by the difference between the exercise price of the right and the Fair Market Value of Shares on the date of exercise of the right, with payment to be made in cash, Shares, or property as specified in the Award or determined by the Committee.
“Shares” means common shares, $.0033 par value per share, of the Company, and such other securities as may be substituted for Shares pursuant to Section 4(c) hereof.
“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns shares possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
“Voting Security” means any security of the Company which carries the right to vote generally in the election of directors.
3.Administration.
(a) Authority of the Committee. The Plan shall be administered by the Committee, and the Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan:
(i) to select Eligible Persons to whom Awards may be granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be granted to each Eligible Person;
(iv) to determine the type and number of Awards to be granted, the number of Shares to which an Award may relate, the terms and conditions of any Award granted under the Plan (including, but not limited to, any exercise price, grant price, or purchase price, any restriction or condition, any schedule for lapse of restrictions or conditions relating to transferability or forfeiture, reacquisition, exercisability, or settlement of an Award, and waivers of performance or vesting conditions relating to an Award, based in each case on such considerations as the Committee shall determine), and all other matters to be determined in connection with an Award;
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| 2022 PROXY STATEMENT | | B-3 |
(v) to determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Shares, other Awards, or other property, or an Award may be cancelled, forfeited, reacquired, exchanged, or surrendered;
(vi) to determine whether, to what extent, and under what circumstances cash, Shares, other Awards, or other property payable with respect to an Award will be deferred either automatically, at the election of the Committee, or at the election of the Eligible Person; provided that such deferral shall be structured with the intent to be in compliance with Section 409A of the Code;
(vii) to prescribe the form of each Award Agreement, which need not be identical for each Eligible Person;
(viii) to adopt, amend, suspend, waive, and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations, Award Agreement, or other instrument hereunder;
(x) to extend the period during which an Award is exercisable; and
(xi) to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. The Committee shall have sole discretion in exercising its authority under the Plan. Any action of the Committee with respect to the Plan shall be final, conclusive, and binding on all persons, including the Company, Subsidiaries, Affiliates, Eligible Persons, any person claiming any rights under the Plan from or through any Eligible Person, and shareholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Company or any Subsidiary or Affiliate the authority, subject to such terms as the Committee shall determine, to perform administrative functions and, with respect to Awards granted to persons not subject to Section 16 of the Exchange Act, to perform such other functions as the Committee may determine, to the extent permitted under Rule 16b‑3 (if applicable) and applicable law. Notwithstanding any provision of this Plan to the contrary, the Committee may grant Awards which are subject to the approval of the Board; provided that an Award shall be subject to Board approval only if the Committee expressly so states.
(c) Limitation of Liability. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or other employee of the Company or any Subsidiary or Affiliate, the Company’s independent certified public accountants, or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee, and no officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.
(d) No Option or SAR Repricing Without Shareholder Approval. Except as provided in the first sentence of Section 4(c) hereof relating to certain anti-dilution adjustments, unless the approval of shareholders of the Company is obtained, (i) Options and SARs issued under the Plan shall not be amended to lower their exercise price, (ii) Options and SARs issued under the Plan will not be exchanged for other Options or SARs with lower exercise prices, (iii) Options and SARs issued under the Plan with an exercise price in excess of the Fair Market Value of the underlying Shares will not be exchanged for cash or other property, and (iv) no other action shall be taken with respect to Options or SARs that would be treated as a repricing under the rules of the principal stock exchange or market system on which the Shares are listed.
(e) Limitation on Committee’s Authority Under 409A. Anything in this Plan to the contrary notwithstanding, the Committee’s authority to modify outstanding Awards shall be limited to the extent necessary so that the existence of such authority does not (i) cause an Award that is not otherwise deferred compensation subject to Section 409A of the Code to become deferred compensation subject to Section 409A of the Code or (ii) cause an Award that is otherwise deferred compensation subject to Section 409A of the Code to fail to meet the requirements prescribed by Section 409A of the Code.
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B-4 | | 2022 PROXY STATEMENT | |
(f) Award Vesting Limitations. Notwithstanding any provision of the Plan to the contrary, the Awards will be granted with vesting periods of not less than one year following the date the applicable Award is granted (other than in the case of death or disability); provided, however, that, notwithstanding the foregoing, Awards that result in the issuance of an aggregate of up to 5% of the Shares reserved for issuance under Section 4(a) may be granted to Eligible Persons without regard to such minimum vesting provisions.
4.Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 4(c) hereof, the total number of Shares reserved for issuance under the Plan shall be 9,000,000; provided, however, that, subject to adjustment as provided in Section 4(c) hereof, no more than 6,000,000 Shares may be issued as ISOs. No Award may be granted if the number of Shares to which such Award relates, when added to the number of Shares previously issued under the Plan, exceeds the number of Shares reserved under the applicable provisions of the preceding sentence. If any Awards are forfeited, reacquired, cancelled, terminated, exchanged or surrendered or such Award is settled in cash or otherwise terminates without a distribution of Shares to the Participant, any Shares counted against the number of Shares reserved and available under the applicable provisions of the Plan with respect to such Award shall, to the extent of any such forfeiture, reacquisition, settlement, termination, cancellation, exchange or surrender, again be available for Awards under the Plan; provided, however, that Shares subject to an Award under the Plan may not again be made available for issuance under the Plan if such Shares are (x) Shares that were subject to an Option or a stock-settled SAR and were not issued upon the net settlement or net exercise of such Option or SAR, or (y) Shares delivered to or withheld by the Company to pay the exercise price or the withholding taxes under Options or SARs. For the avoidance of doubt, Shares delivered to or withheld by the Company to pay the withholding taxes under Awards (other than Options or SARs) shall again be available for Awards under the Plan. Upon the exercise of any Award granted in tandem with any other Awards, such related Awards shall be cancelled to the extent of the number of Shares as to which the Award is exercised.
(b) Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or treasury Shares including Shares acquired by purchase in the open market or in private transactions.
(c) In the event that the Committee shall determine that any dividend in Shares, recapitalization, Share split, reverse split, reorganization, merger, amalgamation, consolidation, spin-off, combination, repurchase, share exchange, extraordinary distribution or other similar corporate transaction or event, affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Eligible Persons under the Plan, then the Committee shall make such equitable changes or adjustments as it deems appropriate and, in such manner as it may deem equitable, (i) adjust any or all of (x) the number and kind of shares which may thereafter be issued under the Plan, (y) the number and kind of shares, other securities or other consideration issued or issuable in respect of outstanding Awards, and (z) the exercise price, grant price, or purchase price relating to any Award, or (ii) provide for a distribution of cash or property in respect of any Award; provided, however, in each case that, with respect to ISOs, such adjustment shall be made in accordance with Section 424(a) of the Code, unless the Committee determines otherwise; providedfurther, however, that no adjustment shall be made pursuant to this Section 4(c) that causes any Award that is not otherwise deferred compensation subject to Section 409A of the Code to be treated as deferred compensation pursuant to Section 409A of the Code. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria and performance objectives, if any, included in, Awards in recognition of unusual or non-recurring events (including, without limitation, events described in the preceding sentence) affecting the Company or any Subsidiary or Affiliate or the financial statements of the Company or any Subsidiary or Affiliate, or in response to changes in applicable laws, regulations, or accounting principles.
5.Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set forth in this Section 5. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 8(d)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms regarding forfeiture of Awards or continued exercisability of Awards in the event of termination of service by the Eligible Person.
(b) Options. The Committee is authorized to grant Options, which may be NQSOs or ISOs, to Eligible Persons on the following terms and conditions:
(i) Exercise Price. The exercise price per Share purchasable under an Option shall be determined by the Committee; provided, however, that the exercise price per Share of an Option shall not be less than the Fair
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| 2022 PROXY STATEMENT | | B-5 |
Market Value of a Share on the date of grant of the Option. The Committee may, without limitation, set an exercise price that is based upon achievement of performance criteria if deemed appropriate by the Committee.
(ii) Option Term. The term of each Option shall be determined by the Committee, but such term shall not exceed ten years from the date of grant of the Option.
(iii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part (including, without limitation, upon achievement of performance criteria if deemed appropriate by the Committee), the methods by which such exercise price may be paid or deemed to be paid (including, without limitation, broker-assisted exercise arrangements), the form of such payment (including, without limitation, cash, Shares or other property), and the methods by which Shares will be delivered or deemed to be delivered to Eligible Persons.
(iv) ISOs. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, including but not limited to the requirement that no ISO shall be granted more than ten years after the earlier of the date of adoption or shareholder approval of the Plan. ISOs may only be granted to employees of the Company or a Subsidiary.
(c) SARs. The Committee is authorized to grant SARs (Share Appreciation Rights) to Eligible Persons on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Eligible Person to whom it is granted a right to receive with respect to each Share subject thereto, upon exercise thereof, the excess of (1) the Fair Market Value of one Share on the date of exercise over (2) the exercise price per Share of the SAR as determined by the Committee as of the date of grant of the SAR (which shall not be less than the Fair Market Value per Share on the date of grant of the SAR and, in the case of a SAR granted in tandem with an Option, shall be equal to the exercise price of the underlying Option).
(ii) Other Terms. The Committee shall determine the time or times at which a SAR may be exercised in whole or in part (which shall not be more than ten years after the date of grant of the SAR), the method of exercise, method of settlement, form of consideration payable in settlement, method by which Shares will be delivered or deemed to be delivered to Eligible Persons, whether or not a SAR shall be in tandem with any other Award, and any other terms and conditions of any SAR. Unless the Committee determines otherwise, a SAR (1) granted in tandem with a NQSO may be granted at the time of grant of the related NQSO or at any time thereafter or (2) granted in tandem with an ISO may only be granted at the time of grant of the related ISO.
(d) Restricted Shares. The Committee is authorized to grant Restricted Shares to Eligible Persons on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Shares shall be subject to such restrictions on transferability and other restrictions as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including, without limitation, upon achievement of performance criteria if deemed appropriate by the Committee), in such installments or otherwise, as the Committee may determine. Except to the extent restricted under the Award Agreement relating to the Restricted Shares, an Eligible Person granted Restricted Shares shall have all of the rights of a shareholder including, without limitation, the right to vote Restricted Shares and the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of service during any applicable restriction period, Restricted Shares and any accrued but unpaid dividends or Dividend Equivalents that are at that time subject to restrictions shall be forfeited and reacquired by the Company; provided, however, that the Committee may determine that restrictions or forfeiture conditions relating to Restricted Shares will be waived in whole or in part in the event of terminations resulting from specified causes.
(iii) Certificates for Shares. Restricted Shares granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Shares are registered in the name of the Eligible Person, such certificates shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Shares, and, unless otherwise determined by the Committee, the Company shall retain physical possession of the certificate.
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B-6 | | 2022 PROXY STATEMENT | |
(iv) Dividends. Dividends paid on Restricted Shares shall be either paid at the dividend payment date, or deferred for payment to such date, and subject to such conditions, as determined by the Committee, in cash or in restricted or unrestricted Shares having a Fair Market Value equal to the amount of such dividends. Unless otherwise determined by the Committee, Shares distributed in connection with a Share split or dividend in Shares, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture and reacquisition to the same extent as the Restricted Shares with respect to which such Shares or other property has been distributed.
(e) Restricted Share Units. The Committee is authorized to grant Restricted Share Units to Eligible Persons, subject to the following terms and conditions:
(i) Award and Restrictions. Delivery of Shares or cash, as the case may be, will occur upon expiration of the deferral period specified for Restricted Share Units by the Committee (or, if permitted by the Committee, as elected by the Eligible Person). In addition, Restricted Share Units shall be subject to such restrictions as the Committee may impose (including, without limitation, the achievement of performance criteria if deemed appropriate by the Committee), which restrictions may lapse at the expiration of the deferral period or at earlier or later specified times, separately or in combination, in installments or otherwise, as the Committee may determine.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of service (as determined under criteria established by the Committee) during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the Restricted Share Units), or upon failure to satisfy any other conditions precedent to the delivery of Shares or cash to which such Restricted Share Units relate, all Restricted Share Units that are at that time subject to deferral or restriction shall be forfeited; provided, however, that the Committee may determine that restrictions or forfeiture conditions relating to Restricted Share Units will be waived in whole or in part in the event of termination resulting from specified causes.
(iii) Dividend Equivalents. Unless otherwise determined by the Committee at the date of grant, Dividend Equivalents on the specified number of Shares covered by a Restricted Share Unit shall be either (A) paid with respect to such Restricted Share Unit at the dividend payment date in cash or in restricted or unrestricted Shares having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Restricted Share Unit and the amount or value thereof automatically deemed reinvested in additional Restricted Share Units or other Awards, as the Committee shall determine.
(f) Performance Shares and Performance Units. The Committee is authorized to grant Performance Shares or Performance Units or both to Eligible Persons on the following terms and conditions:
(i) Performance Period. The Committee shall determine a performance period (the “Performance Period”) of one or more years or other periods and shall determine the performance objectives for grants of Performance Shares and Performance Units. Performance objectives may vary from Eligible Person to Eligible Person and shall be based upon the performance criteria as the Committee may deem appropriate. The performance objectives may be determined by reference to the performance of the Company, or of a Subsidiary or Affiliate, or of a division or unit of any of the foregoing. Performance Periods may overlap and Eligible Persons may participate simultaneously with respect to Awards for which different Performance Periods are prescribed.
(ii) Award Value. The Committee shall determine for each Eligible Person or group of Eligible Persons with respect to that Performance Period the range of number of Shares, if any, in the case of Performance Shares, and the range of dollar values, if any, in the case of Performance Units, which may be fixed or may vary in accordance with such performance or other criteria specified by the Committee, which shall be paid to an Eligible Person as an Award if the relevant measure of Company performance for the Performance Period is met.
(iii) Significant Events. If during the course of a Performance Period there shall occur significant events as determined by the Committee which the Committee expects to have a substantial effect on a performance objective during such period, the Committee may revise such objective.
(iv) Forfeiture. Except as otherwise determined by the Committee, upon termination of service during the applicable Performance Period, Performance Shares and Performance Units for which the Performance Period was prescribed shall be forfeited; provided, however, that the Committee may determine
| | | | | | | | |
| 2022 PROXY STATEMENT | | B-7 |
that restrictions or forfeiture conditions relating to Performance Shares and Performance Units will be waived in whole or in part in the event of terminations resulting from specified causes.
(v) Payment. Each Performance Share or Performance Unit may be paid in whole Shares, or cash, or a combination of Shares and cash either as a lump sum payment or in installments, all as the Committee shall determine, at the time of grant of the Performance Share or Performance Unit or otherwise, commencing at the time determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to Eligible Persons. The Committee may provide, at the date of grant or thereafter, that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Shares, or other investment vehicles as the Committee may specify, provided that unless otherwise determined by the Committee, Dividend Equivalents (other than freestanding Dividend Equivalents) shall be subject to all conditions and restrictions of any underlying Awards to which they relate.
(h) Other Share-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Eligible Persons such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, other rights convertible or exchangeable into Shares, purchase rights for Shares, Awards with value and payment contingent upon performance of the Company or any other factors designated by the Committee, and Awards valued by reference to the performance of specified Subsidiaries or Affiliates. The Committee shall determine the terms and conditions of such Awards consistent with the provisions of this Plan. Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 5(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, shall also be authorized pursuant to this Section 5(h).
6.Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted to Eligible Persons either alone or in addition to, in tandem with, or in exchange or substitution for, any other Award granted under the Plan or any award granted under any other plan or agreement of the Company, any Subsidiary or Affiliate, or any business entity to be acquired by the Company or a Subsidiary or Affiliate, or any other right of an Eligible Person to receive payment from the Company or any Subsidiary or Affiliate. Awards may be granted in addition to or in tandem with such other Awards or awards, and may be granted either as of the same time as or a different time from the grant of such other Awards or awards. Subject to the provisions of Section 3(d) hereof prohibiting Option and SAR repricing without shareholder approval, the per Share exercise price of any Option, grant price of any SAR, or purchase price of any other Award conferring a right to purchase Shares which is granted, in connection with the substitution of awards granted under any other plan or agreement of the Company or any Subsidiary or Affiliate, or any business entity to be acquired by the Company or any Subsidiary or Affiliate, shall be determined by the Committee, in its discretion.
(b) Term of Awards. The term of each Award granted to an Eligible Person shall be for such period as may be determined by the Committee; provided, however, that in no event shall the term of any Option or SAR exceed a period of ten years from the date of its grant (or, in the case of an ISO, such shorter period as may be applicable under Section 422 of the Code).
(c) Form of Payment Under Awards. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or a Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award may be made in such forms as the Committee shall determine at the date of grant or thereafter, including, without limitation, cash, Shares, or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis; provided that any such deferral shall be intended to be in compliance with Section 409A of the Code. The Committee may make rules relating to installment or deferred payments with respect to Awards, including the rate of interest to be credited with respect to such payments, and the Committee may require deferral of payment under an Award if, in the sole judgment of the Committee, it may be necessary in order to avoid nondeductibility of the payment under Section 162(m) of the Code.
(d) Nontransferability. Except as set forth below and except for vested Shares, Awards shall not be transferable by an Eligible Person except by will or the laws of descent and distribution (except pursuant to a Beneficiary
| | | | | | | | |
B-8 | | 2022 PROXY STATEMENT | |
designation) and shall be exercisable during the lifetime of an Eligible Person only by such Eligible Person or his guardian or legal representative. Notwithstanding the foregoing, if the Committee expressly so provides in the applicable Award Agreement (at the time of grant or at any time thereafter), an Award (other than an ISO) granted hereunder may be transferred by a Participant to members of his or her “immediate family”, to a trust established for the exclusive benefit of solely one or more members of the Participant’s “immediate family”, or to a partnership, limited liability company or other entity under which the only partners, members or equity holders are one or more members of the Participant’s “immediate family.” Any Award held by the transferee will continue to be subject to the same terms and conditions that were applicable to the Award immediately prior to the transfer, except that the Award will be transferable by the transferee only by will or the laws of descent and distribution. For purposes hereof, “immediate family” means the Participant’s children, stepchildren, grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brothers and sisters), in-laws, and relationships arising because of legal adoption. An Eligible Person’s rights under the Plan may not be pledged, mortgaged, hypothecated, or otherwise encumbered, and shall not be subject to claims of the Eligible Person’s creditors.
(e) Restrictive Covenants. The Committee may, by way of the Award Agreements or otherwise, establish such other terms, conditions, restrictions and/or limitations, if any, of any Award, provided they are not inconsistent with the Plan, including, without limitation, the requirement that the Participant not engage in competition with, solicit customers or employees of, or disclose or use confidential information of, the Company or its Affiliates.
(f) No Dividends or Dividend Equivalents on Unvested Awards. Notwithstanding any provision of this Plan to the contrary, dividends and Dividend Equivalents shall not be paid with respect to unvested Awards prior to the time of vesting of the underlying Award, or portion thereof, with respect to which the dividend or Dividend Equivalent is accrued.
7.Change in Control Provisions. Unless otherwise provided in the applicable Award Agreement, notwithstanding any other provision of this Plan to the contrary, upon a Change in Control:
(a) Awards Assumed or Substituted by Surviving Entity. With respect to Awards assumed by the surviving entity or otherwise equitably converted or substituted in connection with a Change in Control: if within two years after the effective date of the Change in Control, a Participant’s employment is terminated without Cause or the Participant resigns for Good Reason, then (i) all of that Participant’s outstanding Options, SARs and other Awards in the nature of rights that may be exercised shall become fully vested and exercisable, (ii) all time-based vesting restrictions on his or her outstanding Awards shall lapse, and (iii) the payout level under all of that Participant’s performance-based Awards that were outstanding immediately prior to effective time of the Change in Control shall be determined and deemed to have been earned as of the date of termination based upon the greater of: (A) an assumed achievement of all relevant performance goals at the “target” level pro-rated based upon the number of days within the performance period that have elapsed prior to the termination of employment date, or (B) the actual level of achievement of all relevant performance goals (measured as of the latest date immediately preceding the date of termination for which performance can, as a practical matter, may be determined), and, in either such case, there shall be a payout to such Participant within sixty (60) days following the termination of employment date (unless a later date is required by Section 8(l) hereof). With regard to each Award, a Participant shall not be considered to have resigned for Good Reason unless either (i) the Award Agreement includes such provision (and Good Reason shall be as defined therein), or (ii) the Participant is party to an employment, severance or similar agreement with the Company or an Affiliate that includes provisions in which the Participant is permitted to resign for Good Reason (and Good Reason shall be as defined therein). Any Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award Agreement. To the extent that this provision causes ISOs to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be NQSOs.
(b) Awards not Assumed or Substituted by Surviving Entity. Upon the occurrence of a Change in Control, and except with respect to any Awards assumed by the surviving entity or otherwise equitably converted or substituted in connection with the Change in Control in a manner approved by the Committee or the Board: (i) outstanding Options, SARs, and other Awards in the nature of rights that may be exercised shall become fully vested and exercisable, (ii) time-based vesting restrictions on outstanding Awards shall immediately lapse and such Awards shall become vested in full, and (iii) the target payout opportunities attainable under outstanding performance-based Awards shall be deemed to have been fully earned as of the effective date of the Change in Control based upon the greater of: (A) an assumed achievement of all relevant performance goals at the “target” level pro-rated based upon the number of days within the performance period that have elapsed prior to the Change in Control, or (B) the actual level of achievement of all relevant performance goals (measured as of the latest date immediately preceding the Change in Control for which performance can, as a practical matter, be determined), and, in either such case, there shall be a payout to Participants within sixty
| | | | | | | | |
| 2022 PROXY STATEMENT | | B-9 |
(60) days following the Change in Control (unless a later date is required by Section 8(l) hereof). Any Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award agreement. To the extent that this provision causes ISOs to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be NQSOs.
8.General Provisions.
(a) Compliance with Legal and Trading Requirements. The Plan, the granting and exercising of Awards thereunder, and the other obligations of the Company under the Plan and any Award Agreement, shall be subject to all applicable federal, state and foreign laws, rules and regulations, and to such approvals by any stock exchange, regulatory or governmental agency as may be required. The Company, in its discretion, may postpone the issuance or delivery of Shares under any Award until completion of such stock exchange or market system listing or registration or qualification of such Shares or any required action under any state, federal or foreign law, rule or regulation as the Company may consider appropriate, and may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Shares in compliance with applicable laws, rules and regulations. No provisions of the Plan shall be interpreted or construed to obligate the Company to register any Shares under federal, state or foreign law. The Shares issued under this Plan may be subject to such other restrictions on transfer as determined by the Committee.
(b) No Right to Continued Employment or Service. Neither the Plan nor any action taken thereunder shall be construed as giving any employee or director the right to be retained in the employ or service of the Company or any of its Subsidiaries or Affiliates, nor shall it interfere in any way with the right of the Company or any of its Subsidiaries or Affiliates to terminate any employee’s or director’s employment or service at any time.
(c) Taxes. The Company or any Subsidiary or Affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to an Eligible Person, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Eligible Persons to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority, in the discretion of the Committee, to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of an Eligible Person’s tax obligations; provided, however, that the amount of tax withholding to be satisfied by withholding Shares may not exceed the maximum individual tax rate applicable in the relevant jurisdiction.
(d) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue, or terminate the Plan or the Committee’s authority to grant Awards under the Plan without the consent of shareholders of the Company or Participants, except that any such amendment, alteration, suspension, discontinuation, or termination shall be subject to the approval of the Company’s shareholders (i) to the extent such shareholder approval is required under the rules of any stock exchange or automated quotation system on which the Shares may then be listed or quoted, or (ii) as it applies to ISOs, to the extent such shareholder approval is required under Section 422 of the Code; provided, however, that, without the consent of an affected Participant, no amendment, alteration, suspension, discontinuation, or termination of the Plan may materially and adversely affect the rights of such Participant under any Award theretofore granted to him or her. The Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate, any Award theretofore granted, prospectively or retrospectively; provided, however, that, without the consent of a Participant, no amendment, alteration, suspension, discontinuation or termination of any Award may materially and adversely affect the rights of such Participant under any Award theretofore granted to him or her.
(e) No Rights to Awards; No Shareholder Rights. No Eligible Person or employee shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons and employees. No Award shall confer on any Eligible Person any of the rights of a shareholder of the Company unless and until Shares are duly issued or transferred to the Eligible Person in accordance with the terms of the Award.
(f) Unfunded Status of Awards. The Plan is intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided, however, that the Committee may authorize the creation of trusts or make other arrangements to meet the Company’s obligations under the Plan to deliver cash, Shares, other Awards, or other property pursuant to any Award, which trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected Participant.
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B-10 | | 2022 PROXY STATEMENT | |
(g) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of options and other awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.
(h) Not Compensation for Benefit Plans. No Award payable under this Plan shall be deemed salary or compensation for the purpose of computing benefits under any benefit plan or other arrangement of the Company for the benefit of its employees or directors unless the Company shall determine otherwise.
(i) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. In the case of Awards to Eligible Persons, the Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan, and any Award Agreement shall be determined in accordance with the laws of New York without giving effect to principles of conflict of laws.
(k) Effective Date; Plan Termination. The Plan shall become effective as of May 4, 2022 (the “Effective Date”), subject to approval by the shareholders of the Company. The Plan shall terminate as to future awards on February 25, 2032.
(l) Section 409A. Awards granted under the Plan are intended to comply with, or be exempt from, the applicable requirements of Section 409A and Section 457A of the Code and shall be limited, construed and interpreted in accordance with such intent. Although the Company does not guarantee any particular tax treatment, to the extent that any Award is subject to Section 409A of the Code, it shall be paid in a manner that is intended to comply with Section 409A of the Code, including regulations and any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto. No payment that constitutes deferred compensation under Section 409A of the Code that would otherwise be made under the Plan or an Award Agreement upon a termination of service will be made or provided unless and until such termination is also a “separation from service,” as determined in accordance with Section 409A of the Code. Notwithstanding the foregoing or anything elsewhere in the Plan or an Award Agreement to the contrary, if a Participant is a “specified employee” as defined in Section 409A of the Code at the time of “separation from service” with respect to an Award, then with regard to any payment or benefit that is considered deferred compensation under Section 409A payable on account of a “separation from service” that is required to be delayed pursuant to Section 409A(a)(2)(B) of the Code (after taking into account any applicable exceptions to such requirement), the commencement of any payments or benefits under the Award shall be deferred until the expiration of the six (6)-month period measured from the date of the Participant’s “separation from service,” or, if earlier, the Participant’s death (or such other period as required to comply with Section 409A). In no event whatsoever shall the Company be liable for any additional tax, interest or penalties that may be imposed on a Participant by Sections 409A or 457A of the Code or any damages for failing to comply with Sections 409A or 457A of the Code.
(m) Titles and Headings. The titles and headings of the sections in the Plan are for convenience of reference only. In the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
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| 2022 PROXY STATEMENT | | B-11 |
ANNEX C—NON-GAAP FINANCIAL MEASURES
In presenting our results for purposes of compensation determinations, we include and discuss certain non-GAAP financial measures as defined in Regulation G. We believe that these non-GAAP financial measures, which may be defined differently by other companies, are important for an understanding of our overall results of operations and financial condition. However, they should not be viewed as a substitute for measures determined in accordance with GAAP.
After-tax operating income available to Arch common shareholders whichis defined as net income available to Arch common shareholders, excluding net realized gains or losses (which includes changes in the allowance for credit losses on financial assets and net impairment losses recognized in earnings), equity in net income or loss of investment funds accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other, income taxes and(which for the 2023 fourth quarter includes a one-time deferred income tax benefit related to the enactment of Bermuda’s new corporate income tax), loss on redemption of preferred shares.shares, and the use of annualized operating return on average common equity. The table below presents the reconciliation of net income available to Arch common shareholders to after-tax operating income available to Arch common shareholders.
Annualized operating return on average common equity represents after-tax operating income available to Arch common shareholders divided by average common shareholders’ equity during the period. Management uses Operating ROE as a key measure of the return generated to our common shareholders.
The following table summarizes our consolidated financial data, including a reconciliation of net income available to Arch common shareholders to after-tax operating income available to Arch common shareholders. Each line item reflects the impact of our percentage ownership of Somers’ common equity through June 30, 2021. In July 2021, the Company announced the completion of the previously disclosed acquisition of Somers by Greysbridge Holdings Ltd., (“Greysbridge”). Based on the governing documents of Greysbridge, the Company has concluded that, while it will retain significant influence over Somers, Somers no longer constitutes a variable interest entity. Accordingly, effectiveEffective July 1, 2021, Arch no longer consolidates the results of Somers in its consolidated financial statements and footnotes.
| | | | | | | | | | | | |
| Year Ended | |
| | December 31, | | December 31, | |
| (U.S. Dollars in thousands, except share data) | 2021 | | 2020 | |
| Net income available to Arch common shareholders (a) | $ | 2,093,405 | | | $ | 1,363,909 | | |
| Net realized (gains) losses | (307,466) | | | (814,808) | | |
| Equity in net (income) of investment funds accounted for using the equity method | (366,402) | | | (146,693) | | |
| Net foreign exchange losses (gains) | (42,743) | | | 80,591 | | |
| Transaction costs and other | 1,199 | | | 9,964 | | |
| Loss on redemption of preferred shares | 15,101 | | | — | | |
| Income tax expense (benefit) | 41,836 | | | 64,145 | | |
| After-tax operating income available to Arch common shareholders (b) | $ | 1,434,930 | | | $ | 557,108 | | |
| | | | |
| Beginning common shareholders’ equity | $ | 12,325,886 | | | $ | 10,717,371 | | |
| Ending common shareholders’ equity | 12,715,896 | | | 12,325,886 | | |
| Average common shareholders’ equity (c) | $ | 12,520,891 | | | $ | 11,521,629 | | |
| | | | |
| Annualized return on average common equity (a)/(c) | 16.7 | % | | 11.8 | % | |
| Annualized operating return on average common equity (b)/(c) | 11.5 | % | | 4.8 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended | |
| | December 31, | |
| (in millions) | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | | |
| Net income available to Arch common shareholders (a) | $4,403 | $1,436 | $2,093 | $1,364 | $1,595 | $714 | $567 | $665 | $516 | $812 | | |
| Net realized (gains) losses | 165 | 663 | (307) | (815) | (350) | 301 | (142) | (47) | 129 | (100) | | |
| Equity in net (income) of investment funds accounted for using the equity method | (278) | (115) | (366) | (147) | (124) | (46) | (142) | (48) | (25) | (20) | | |
| Net foreign exchange losses (gains) | 62 | (102) | (43) | 81 | 11 | (60) | 114 | (32) | (63) | (83) | | |
| Transaction costs and other | 6 | — | 1 | 10 | 14 | 12 | 22 | 42 | — | — | | |
| Loss on redemption of preferred shares | — | — | 15 | — | — | 3 | 7 | — | — | — | | |
| Income tax expense (benefit) | (1,157) | (42) | 42 | 64 | 16 | (15) | 22 | (2) | 9 | 7 | | |
| After-tax operating income available to Arch common shareholders (b) | $3,201 | $1,840 | $1,435 | $557 | $1,163 | $909 | $447 | $577 | $565 | $617 | | |
| | | | | | | | | | | | |
| Beginning common shareholders’ equity | $12,080 | $12,716 | $12,326 | $10,717 | $8,660 | $8,324 | $7,481 | $5,842 | $5,767 | $5,284 | | |
| Ending common shareholders’ equity | 17,523 | 12,080 | 12,716 | 12,326 | 10,717 | 8,660 | 8,324 | 7,481 | 5,842 | 5,767 | | |
| Average common shareholders’ equity (c) | $14,802 | $12,398 | $12,521 | $11,522 | $9,689 | $8,492 | $7,903 | $6,114 | $5,804 | $5,525 | | |
| | | | | | | | | | | | |
| Annualized return on average common equity (a)/(c) | 29.7% | 11.6% | 16.7% | 11.8% | 16.5% | 8.4% | 7.2% | 10.9% | 8.9% | 14.7% | | |
| Annualized operating return on average common equity (b)/(c) | 21.6% | 14.8% | 11.5% | 4.8% | 12.0% | 10.7% | 5.7% | 9.4% | 9.7% | 11.2% | | |
| | | | | | | | |
C-1 | | 20222024 PROXY STATEMENT | | B-1 |
Tangible book value per common share represents common shareholders’ equity available to Arch less goodwill and intangible assets (excluding amounts attributable to non-controlling interests). We believe that tangible book value per common share is useful to investors because it provides a more accurate measure of the realizable value of shareholder returns by excluding the impact of goodwill and intangible assets. The following table provides a reconciliation of book value per common share to tangible book value per common share:
| | | | | | | | | | | |
| Year Ended |
| | December 31, | | December 31, |
| (U.S. Dollars in thousands, except share data) | 2021 | | 2020 |
| Total shareholders’ equity available to Arch | $ | 13,545,896 | | | $ | 13,105,886 | |
| Less preferred shareholders’ equity | 830,000 | | | 780,000 | |
| Common shareholders’ equity available to Arch (a) | $ | 12,715,896 | | | $ | 12,325,886 | |
| Less: goodwill and intangible assets | 941,962 | | | 681,943 | |
| Common shareholders’ equity available to Arch less goodwill and intangible assets (b) | $ | 11,773,934 | | | $ | 11,643,943 | |
| | | |
| Common shares and common share equivalents outstanding, net of treasury shares (c) | 378,923,894 | | | 406,720,642 | |
| | | |
| Book value per common share (a)/(c) | $ | 33.56 | | | $ | 30.31 | |
| Tangible book value per common share (b)/(c) | $ | 31.07 | | | $ | 28.63 | |
Underwriting income represents the pre-tax profitability of our underwriting operations and includes net premiums earned plus other underwriting income, less losses and loss adjustment expenses, acquisition expenses and other operating expenses. Other operating expenses include those operating expenses that are incremental and/or directly attributable to ouror individual underwriting operations. Underwriting income or loss does not incorporate items included in the corporate segment. Refer toWhile these measures are presented in note 4, “Segment Information,” on pages 107-113114-120 to the consolidated financial statements in our 20212023 Annual Report, forthey are considered non-GAAP financial measures when presented elsewhere on a consolidated basis.
The following table provides a reconciliation of underwriting incomebook value per common share to net income.tangible book value per common share:
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| Year Ended |
| | December 31 |
| (in millions, except per share amounts) | 2023 | 2022 | 2021 | 2020 | 2019 | | | | | | | | | | | | | | | | | | 2001 |
| Total shareholders’ equity available to Arch | $18,353 | $12,910 | $13,546 | $13,106 | $11,497 | | | | | | | | | | | | | | | | | | $1,020 |
| Less preferred shareholders’ equity | 830 | 830 | 830 | 780 | 780 | | | | | | | | | | | | | | | | | | — |
| Common shareholders’ equity available to Arch (a) | $17,523 | $12,080 | $12,716 | $12,326 | $10,717 | | | | | | | | | | | | | | | | | | $1,020 |
| Less: goodwill and intangible assets | 730 | 802 | 942 | 682 | 731 | | | | | | | | | | | | | | | | | | 26 |
| Common shareholders’ equity available to Arch less goodwill and intangible assets (b) | $16,793 | $11,278 | $11,774 | $11,644 | $9,986 | | | | | | | | | | | | | | | | | | $994 |
| | | | | | | | | | | | | | | | | | | | | | | |
| Common shares and common share equivalents outstanding, net of treasury shares (c) | 373.3 | 370.3 | 378.9 | 406.7 | 405.6 | | | | | | | | | | | | | | | | | | 502.2 |
| | | | | | | | | | | | | | | | | | | | | | | |
| Book value per common share (a)/(c) | $46.94 | $32.62 | $33.56 | $30.31 | $26.42 | | | | | | | | | | | | | | | | | | $2.03 |
| Tangible book value per common share (b)/(c) | $44.99 | $30.45 | $31.07 | $28.63 | $24.62 | | | | | | | | | | | | | | | | | | $1.98 |
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| B-2 | 2022| 2024 PROXY STATEMENT | | C-2 |
