Item 5.02.Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e) Material Compensatory Plan, Contract or Arrangement
On December 19, 2019, the board of directors (the “Board”) of Donegal Group Inc. (the “Company”) and the Compensation Committee of the Board unanimously approved new bonus plans, the Annual Executive Incentive Plan and the Long-Term Executive Incentive Plan (together, the “Executive Incentive Plans”), which provide the terms of bonus opportunities to be granted to the Company’s executive officers, including the Company’s President and Chief Executive Officer and other named executive officers.
Under the Annual Executive Incentive Plan, each of the Company’s named executive officers will be eligible to receive a bonus if the Donegal Insurance Group, which consists of Donegal Mutual Insurance Company (“Donegal Mutual”) and the insurance subsidiaries of the Company and Donegal Mutual, achieves target commercial lines premium growth, personal lines premium growth and statutory combined ratio objectives, and if the Company achieves a target operating return on equity objective, for the fiscal year 2020. The Annual Executive Incentive Plan specifies performance objectives and weightings with respect to annual bonuses that will be payable, if and to the extent earned, for each metric in 2020. Under the terms of the Annual Executive Incentive Plan, the joint Compensation Committee of the Board and the Donegal Mutual board of directors (the “Joint Compensation Committee“) may pay a discretionary bonus to a participant in such amount as the Joint Compensation Committee determines to be appropriate and in the best interests of Donegal Mutual and the Company.
Under the Long-Term Executive Incentive Plan, each of the Company’s named executive officers will be eligible to receive a bonus if the Donegal Insurance Group achieves a target average statutory combined ratio objective for the fiscal years 2020 through 2022.
The purpose of the Executive Incentive Plans is to (i) promote the interests of the Company and its stockholders by motivating and rewarding achievement of certain financial objectives and (ii) enable the Company to retain skilled executives by providing attractive performance-based compensation opportunities.
The Joint Compensation Committee retains the discretion to adjust the amount of any bonus to be paid under the Executive Incentive Plans, regardless of whether or the extent to which any of the objective criteria are achieved. Additional information with respect to the compensation arrangements for the Company’s named executive officers, including salary increases, annual bonus awards and stock option grants will be set forth in the Company’s Proxy Statement for its 2020 Annual Meeting of Stockholders.
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