2) | Aggregate number of securities to which transaction applies: |
3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
4) | Proposed maximum aggregate value of transaction: |
1) | Amount Previously Paid: |
2) | Form, Schedule or Registration Statement No.: |
3) | Filing Party: |
4) | Date Filed: |
NOTICE OF ANNUAL MEETING OF THE SHAREHOLDERS | ||
TIME AND DATE | 3:00 P.M. Central Daylight Time, Friday, May | |
PLACE | Old Republic Building 22nd Floor Conference Center 307 N. Michigan Avenue Chicago, Illinois 60601 | |
ITEMS OF BUSINESS | ||
RECORD DATE | You can vote if you are a shareholder of record on March | |
ANNUAL REPORT TO SHAREHOLDERS | Our annual report to shareholders for | |
PROXY VOTING | It is important that your shares be represented and voted at the | |
April | By order of the Board of Directors | |
John R. Heitkamp, Jr. Senior Vice President, General Counsel and Secretary |
Page No. | Table of Contents |
1 | GENERAL INFORMATION |
1 | Voting Procedures |
2 | Other Matters for the Annual |
3 | Principal Holders of Securities |
4 | ITEM 1: ELECTION OF DIRECTORS |
6 | |
Leadership Structure and Risk Management | |
Board of Directors’ Responsibilities and Independence | |
Procedures for the Approval of Related Person Transactions | |
Section 16(a) Beneficial Ownership Reporting Compliance | |
17 | The Board and Its Committees |
Shareholder Communication with the Board | |
ITEM 2: RATIFICATION OF THE SELECTION OF AN INDEPENDENT REGISTERED PUBLIC | |
ACCOUNTING FIRM | |
External Audit Services | |
Board of Directors’ Recommendation | |
21 | Audit Committee Report for |
COMPENSATION MATTERS | |
Compensation Committee Report for | |
Compensation Committee Interlocks and Insider Participation | |
Directors’ Compensation | |
Compensation Discussion and Analysis | |
Summary Compensation Table | |
Annual Salary Compensation Practices | |
28 | Incentive Awards and Bonuses |
28 | Key Employee Performance Recognition Plans |
29 | Deferred Compensation Under the KEPRP |
29 | Stock Options or Restricted Stock Awards Under Incentive Compensation Plan |
Stock Option Grants During | |
Exercises of Stock Option During | |
Equity Compensation Plan Information | |
Outstanding Equity Awards at Year End 2018 | |
33 | Financial Restatement |
33 | Hedging Prohibited |
33 | Change of Control, Severance or Retirement |
Tax Deductibility of Compensation | |
Pension Plan and Baseline Security Plan | |
Pension Benefits | |
Employees Savings and Stock Ownership Plan (ESSOP) | |
Other Benefits | |
ITEM 3: VOTE ON EXECUTIVE COMPENSATION | |
Board of Directors’ Recommendation | |
ITEM 4: | |
OLD REPUBLIC’S STATEMENT IN OPPOSITION TO THE SHAREHOLDER PROPOSAL | |
Board of Directors’ Recommendation | |
OTHER INFORMATION | |
Shareholder Proposals for the | |
GENERAL INFORMATION |
Title of Class | Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class(*) | |||
Common Stock | BlackRock, Inc. | 31,855,862 | (1) | 10.5 | ||
Shareholders’ beneficial ownership | 55 East 52nd Street | |||||
of more than 5% of the Common | New York, New York 10022 | |||||
Stock and the ESSOP ownership | ||||||
The Vanguard Group | 27,297,773 | (1) | 9.0 | |||
100 Vanguard Blvd. | ||||||
Malvern, Pennsylvania 19355 | ||||||
State Street Corporation | 21,981,051 | (1) | 7.3 | |||
State Street Financial Center | ||||||
One Lincoln Street | ||||||
Boston, Massachusetts 02111 | ||||||
Old Republic International Corporation | 15,055,318 | (2) | 5.0 | |||
Employees Savings and Stock Ownership Trust | ||||||
307 N. Michigan Avenue | ||||||
Chicago, Illinois 60601 |
Common Stock | Name of Beneficial Owner | Shares Subject to Stock Options(*) | Shares Held by Employee Plans(*)(2)(3) | Other Shares Beneficially Owned(*) | Total | Percent of Class (*) | ||||||
Directors’ and Executive Officers’(including nominees) Beneficial Ownership | Steven J. Bateman | 0 | 0 | 15,412 | 15,412 | ** | ||||||
Harrington Bischof | 0 | 0 | 20,239 | 20,239 | (4) | ** | ||||||
Jimmy A. Dew | 0 | 122,269 | 745,657 | 867,926 | (5) | 0.3 | ||||||
John M. Dixon | 0 | 0 | 21,061 | 21,061 | ** | |||||||
Charles J. Kovaleski | 0 | 0 | 5,586 | 5,586 | ** | |||||||
Spencer LeRoy III | 0 | 0 | 100,686 | 100,686 | (6) | ** | ||||||
Peter B. McNitt(***) | 0 | 0 | 0 | 0 | ** | |||||||
Karl W. Mueller | 198,000 | 20,151 | 22,009 | 240,160 | 0.1 | |||||||
R. Scott Rager | 340,000 | 85,783 | 2,500 | 428,283 | 0.1 | |||||||
Glenn W. Reed | 0 | 0 | 5,000 | 5,000 | ** | |||||||
Craig R. Smiddy | 47,000 | 12,424 | 6,720 | 66,144 | ** | |||||||
Arnold L. Steiner | 0 | 0 | 752,438 | 752,438 | (7) | 0.3 | ||||||
Fredricka Taubitz | 0 | 0 | 19,000 | 19,000 | ** | |||||||
Charles F. Titterton | 0 | 0 | 22,813 | 22,813 | (8) | ** | ||||||
Dennis Van Mieghem | 0 | 0 | 17,800 | 17,800 | (9) | ** | ||||||
Steven R. Walker | 0 | 0 | 60,000 | 60,000 | (10) | ** | ||||||
Rande K. Yeager | 146,500 | 46,953 | 45,297 | 238,750 | 0.1 | |||||||
Aldo C. Zucaro | 740,000 | 640,185 | 1,260,080 | 2,640,265 | 0.9 | |||||||
Directors and Executive Officers, as a group (20) | 1,622,275 | 994,677 | 3,178,909 | 5,795,861 | 1.9 |
Title of Class | Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class(*) | |||
Common Stock | BlackRock, Inc. | 23,140,506 | (1) | 8.8 | ||
Shareholders’ beneficial ownership | 55 East 52nd Street | |||||
of more than 5% of the Common | New York, New York 10022 | |||||
Stock | ||||||
State Street Corporation | 19,526,739 | (1) | 7.5 | |||
State Street Financial Center | ||||||
One Lincoln Street | ||||||
Boston, Massachusetts 02111 | ||||||
The Vanguard Group | 19,807,901 | (1) | 7.5 | |||
100 Vanguard Blvd. | ||||||
Malvern, Pennsylvania 19355 | ||||||
Loomis Sayles & Co., L.P. | 16,427,679 | (1) | 5.9 | |||
One Financial Center | ||||||
Boston, Massachusetts 02111 | ||||||
Old Republic International Corporation | 13,975,659 | (2) | 5.3 | |||
Employees Savings and Stock Ownership Trust | ||||||
307 N. Michigan Avenue | ||||||
Chicago, Illinois 60601 |
Common Stock | Name of Beneficial Owner | Shares to Stock Options(*) | Shares Held by Employee Plans(*)(2)(3) | Other Shares Beneficially Owned(*) | Total | Percent of Class(*) | ||||||
Directors’ and Executive Officers’(including nominees) Beneficial Ownership | Steven J. Bateman | 0 | 0 | 10,000 | 10,000 | ** | ||||||
Harrington Bischof | 0 | 0 | 20,239 | 20,239 | (4) | ** | ||||||
Jimmy A. Dew | 0 | 124,338 | 745,657 | 869,995 | (5) | 0.3 | ||||||
John M. Dixon | 0 | 0 | 21,061 | 21,061 | ** | |||||||
James C. Hellauer | 0 | 0 | 43,500 | 43,500 | ** | |||||||
Spencer LeRoy III | 148,900 | 24,564 | 76,716 | 250,180 | 0.1 | |||||||
Karl W. Mueller | 169,125 | 15,960 | 9,720 | 194,805 | 0.1 | |||||||
R. Scott Rager | 262,750 | 72,607 | 2,500 | 337,857 | 0.1 | |||||||
Craig R. Smiddy | 12,150 | 615 | 6,720 | 19,485 | ** | |||||||
Arnold L. Steiner | 0 | 0 | 812,438 | 812,438 | (6) | 0.3 | ||||||
Fredricka Taubitz | 0 | 0 | 19,000 | 19,000 | ** | |||||||
Charles F. Titterton | 0 | 0 | 21,587 | 21,587 | (7) | ** | ||||||
Dennis Van Mieghem | 0 | 0 | 17,800 | 17,800 | (8) | ** | ||||||
Steven R. Walker | 0 | 0 | 60,000 | 60,000 | (9) | ** | ||||||
Rande K. Yeager | 49,000 | 39,451 | 27,279 | 115,730 | ** | |||||||
Aldo C. Zucaro | 519,000 | 571,467 | 1,255,000 | 2,345,467 | 0.9 | |||||||
Directors and Executive Officers, as a group (17) | 1,248,650 | 906,990 | 3,166,057 | 5,321,697 | 2.0 |
** | Less than one-tenth of one percent. |
*** | Mr. McNitt joined the |
(b) | In addition to the ESSOP, the Old Republic International Employees Retirement Plan |
(c) | The trustees of the Company’s Baseline Security Plan (“BSP”), on December 31, |
(d) | American Business & Mercantile Insurance Mutual Inc. (“ABM”) and its subsidiary own 1,268,700 shares of the Company’s Common Stock. ABM is a mutual insurer controlled by its policyholders and indirectly by the Company through management agreements, the ownership of its surplus notes, and by directors and officers who are employees of the Company. |
(3) | Includes only the shares that have been allocated to the employer matching and employee savings accounts of the director or executive officer as a participant in the ESSOP. Excludes those shares for which the director or executive officer may be deemed to have investment and voting power as a result of being a member of the Executive Committee. These numbers include shares of the Company’s Common Stock held by the BSP for Mr. Rager. |
(4) | Includes 8,437 shares held in an IRA trust for Mr. Bischof’s benefit. |
(5) | Includes 315,908 shares owned by Mr. Dew’s wife and 93,682 shares held in an IRA trust for Mr. Dew. |
(6) | Includes 40,587 shares held in IRA or Roth IRA trusts for Mr. LeRoy’s benefit. |
(7) | Includes 270,237 shares owned by Mr. Steiner directly, |
(8) | Includes |
(9) | Includes 12,125 shares held in an IRA trust for Mr. Van Mieghem’s benefit. |
(10) | Includes 26,000 shares held in IRA and SEP-IRA trusts for Mr. Walker’s benefit, and |
ITEM 1 |
ELECTION OF DIRECTORS |
Name | Age | Positions with Company, Business Experience and Qualifications | ||
Nominees for | ||||
60 | Director since 2017. An audit partner with the accounting firm of PricewaterhouseCoopers LLP until his retirement, he had a 37 year career as an auditor and business advisor for a large number of organizations engaged in all major insurance fields. During that period of time, he gained a wealth of knowledge and experience in the business and the risk factors associated with the insurance industry. His background and experience will harmonize extremely well with the Company’s business and the Board’s governance objectives. | |||
Jimmy A. Dew | 78 | Director since | ||
John M. Dixon | 79 | Director since 2003. Formerly Chief Executive | ||
Glenn W. Reed | 66 | Director since 2017. Mr. Reed served as a Managing Director of The Vanguard Group, Inc., one of the world’s largest asset-management firms until his retirement from the firm in 2017. While at Vanguard, Mr. Reed had overall responsibility for Vanguard’s corporate finance and mutual fund finance functions, most recently heading up the firm’s Strategy division. Prior to joining Vanguard in 2007, he served as general counsel for a multi-line health and life insurance company following a 21-year career in the partnership of the Chicago-based law firm of Gardner, Carton & Douglas (now Drinker Biddle). This long-term experience and deep knowledge gained in these fields of endeavor harmonize extremely well with the Company’s business needs and the Board’s governance objectives. | ||
Dennis P. Van Mieghem | 78 | Director since 2004. A CPA by training, he was the Partner in charge of the National Insurance Tax Practice of the accounting firm of KPMG LLP until his 1998 retirement. With this background, he brings significant | ||
Continuing Directors: CLASS 3 (Term expires in 2020) | ||||
Charles J. Kovaleski | 70 | Director since August 2018. Retired as an attorney, he was formerly with Attorneys’ Title Insurance Fund, Orlando, Florida as well as | ||
Arnold L. Steiner | Director since 1974. Retired for more than five years from Steiner Bank, Birmingham, Alabama of which he was President and a substantial owner. He | |||
Fredricka Taubitz | Director since 2003. A CPA by training, she was until 2000 Executive Vice President and Chief Financial Officer of Zenith National Insurance Corp. Until 1985, she was a partner with the accounting firm of Coopers & Lybrand (now PricewaterhouseCoopers LLP). During her long professional career she has gained significant experience in, and knowledge of, the business and the risk factors associated with the insurance industry. | |||
Aldo C. Zucaro | Director since 1976. Chairman of the Board and Chief Executive Officer of the Company and various subsidiaries since 1993. A CPA by training, he brings a significant background as a former insurance specialist partner with Coopers & Lybrand (now PricewaterhouseCoopers LLP), and long-term experience with the insurance industry in general, and the Company in particular, since 1970. |
Continuing | ||||
Harrington Bischof | Director since 1997. President of Pandora Capital Corporation since 1996. Formerly Senior Advisor with Prudential Securities, Inc. and prior to that, a senior investment banker with the firms of Merrill, Lynch & Co. and White, Weld & Co. His experience in business, investment banking, and international finance are of significant value to the Company’s corporate governance. | |||
Spencer LeRoy III | Director since | |||
Peter B. McNitt | 64 | Director since January 30, 2019. He is the retired Vice Chair of BMO Harris Bank; a position he held since 2006. Prior to that, he led BMO Harris’ U.S. Corporate Banking as Executive Vice President and U.S. Investment Banking as Executive Managing Director. He has long-term experience and deep knowledge gained during his more than 40 year-long career. His wide range of responsibilities focused on the delivery of the full breadth of wealth, and commercial and investment banking services to customers. | ||
Charles F. Titterton | Director since 2004. Formerly Director | |||
Steven R. Walker | Director since 2006. Formerly Senior Counsel and Partner with Leland, Parachini, Steinberg, Matzger & Melnick, LLP, attorneys, San Francisco, California. He | |||
CORPORATE GOVERNANCE: |
BINDING ORGANIZATION, PURPOSE, AND LONG-TERM STRATEGY |
A. | Create long-term value for all stakeholders, including shareholders, policyholders, our people, and the American community at large. We believe that this desired outcome is best achieved by: |
B. | Create long-term value for long-term shareholders, whose interests are aligned with our Mission as they provide and support the retention of paid-in capital and the accumulated earnings retained in the business. We measure this value creation by these interrelated financial outcomes: |
Old Republic | Selected Benchmarks | |||||||||||
Period | Total Book Return | Total Market Return | GDP Index | S&P 500 Total Market Return | S&P Insurance Total Market Return | |||||||
Ten Years: | ||||||||||||
1969 - 1978 | 17.5 | % | 10.7 | % | 9.6 | % | 3.2 | % | ||||
1979 - 1988 | 16.0 | 13.0 | 8.3 | 16.3 | ||||||||
1989 - 1998 | 13.5 | 20.2 | 5.6 | 19.2 | 16.3 | % | * | |||||
1999 - 2008 | 9.4 | 3.5 | 5.0 | -1.4 | -4.2 | |||||||
2009 - 2018 | 6.0 | % | 11.8 | % | 3.4 | % | 13.1 | % | 11.0 | % | ||
2018 Only | 1.6 | % | 4.8 | % | 5.5 | % | -4.4 | % | -11.2 | % | ||
51 Years 1968-2018 | 12.5 | % | 12.2 | % | 6.4 | % | 9.8 | % | 7.0 | % | ** |
Old Republic International Corporation (1) | Nominal Gross Domestic Product (GDP)(2) | S&P 500 Index (3) | S&P Insurance Index (3) | |||||||||||||
Year | Year End Book Value | Year End Market Price | Annual Cash Dividend Declared | Total Book Value Annual & Compounded Return | Total Market Annual & Compounded Return | Total Annual & Compounded Return | Total Annual & Compounded Return | Total Annual & Compounded Return | ||||||||
1967 | $0.243 | $0.338 | ||||||||||||||
1968 | 0.280 | 0.472 | $0.007 | 18.2% | 41.8% | 9.4% | 11.0% | |||||||||
1969 | 0.312 | 0.336 | 0.010 | 15.1% | -26.6% | 8.2% | -8.4% | |||||||||
1970 | 0.360 | 0.528 | 0.012 | 19.2% | 60.7% | 5.5% | 3.9% | |||||||||
1971 | 0.472 | 0.840 | 0.014 | 34.9% | 61.7% | 8.5% | 14.3% | |||||||||
1972 | 0.480 | 1.240 | 0.016 | 5.1% | 49.5% | 9.8% | 19.0% | |||||||||
1973 | 0.472 | 0.456 | 0.018 | 2.2% | -61.7% | 11.4% | -14.7% | |||||||||
1974 | 0.376 | 0.408 | 0.020 | -16.1% | -6.1% | 8.4% | -26.5% | |||||||||
1975 | 0.288 | 0.440 | 0.020 | -18.1% | 12.7% | 9.0% | 37.2% | |||||||||
1976 | 0.560 | 0.624 | 0.011 | 98.3% | 44.4% | 11.2% | 23.9% | |||||||||
1977 | 0.792 | 0.792 | 0.022 | 45.3% | 30.4% | 11.1% | -7.2% | |||||||||
1978 | 0.976 | 0.976 | 0.033 | 27.4% | 27.4% | 13.0% | 6.6% | |||||||||
10 Year Compound Annual Growth Rate | 17.5% | 10.7% | 9.6% | 3.2% | ||||||||||||
1979 | 1.080 | 1.112 | 0.052 | 16.0% | 19.3% | 11.7% | 18.6% | |||||||||
1980 | 1.224 | 0.888 | 0.054 | 18.3% | -15.3% | 8.8% | 32.5% | |||||||||
1981 | 1.392 | 1.144 | 0.054 | 18.1% | 34.9% | 12.2% | -4.9% | |||||||||
1982 | 1.648 | 1.456 | 0.056 | 22.4% | 32.2% | 4.3% | 21.5% | |||||||||
1983 | 1.888 | 2.353 | 0.058 | 18.1% | 65.6% | 8.7% | 22.6% | |||||||||
1984 | 2.208 | 2.039 | 0.059 | 20.1% | -11.0% | 11.1% | 6.3% | |||||||||
1985 | 2.304 | 3.014 | 0.062 | 7.1% | 51.3% | 7.5% | 31.7% | |||||||||
1986 | 2.528 | 2.316 | 0.065 | 12.5% | -21.5% | 5.5% | 18.7% | |||||||||
1987 | 2.952 | 1.861 | 0.068 | 19.5% | -17.2% | 6.0% | 5.3% | |||||||||
1988 | 3.152 | 2.345 | 0.071 | 9.2% | 30.0% | 7.9% | 16.6% | |||||||||
10 Year Compound Annual Growth Rate | 16.0% | 13.0% | 8.3% | 16.3% | ||||||||||||
1989 | 3.544 | 2.604 | 0.076 | 14.8% | 14.2% | 7.7% | 31.7% | |||||||||
1990 | 3.920 | 2.465 | 0.081 | 12.9% | -2.3% | 5.7% | -3.2% | -13.5% | ||||||||
1991 | 4.456 | 4.207 | 0.086 | 15.9% | 75.0% | 3.3% | 30.4% | 29.3% | ||||||||
1992 | 5.072 | 5.896 | 0.094 | 15.3% | 42.7% | 5.9% | 7.6% | 18.4% | ||||||||
1993 | 5.744 | 5.363 | 0.102 | 15.3% | -7.4% | 5.2% | 10.1% | 5.2% | ||||||||
1994 | 6.112 | 5.037 | 0.111 | 8.3% | -4.0% | 6.3% | 1.3% | -0.3% | ||||||||
1995 | 7.248 | 8.415 | 0.121 | 20.6% | 70.1% | 4.8% | 37.5% | 41.0% | ||||||||
1996 | 7.768 | 9.511 | 0.148 | 9.2% | 15.1% | 5.7% | 22.9% | 23.5% | ||||||||
1997 | 8.312 | 13.222 | 0.178 | 9.3% | 41.2% | 6.2% | 33.3% | 46.4% | ||||||||
1998 | 9.216 | 12.000 | 0.206 | 13.4% | -7.8% | 5.7% | 28.5% | 9.7% | ||||||||
10 Year Compound Annual Growth Rate | 13.5% | 20.2% | 5.6% | 19.2% | 16.3% | |||||||||||
1999 | 9.590 | 7.267 | 0.262 | 6.9% | -37.5% | 6.3% | 21.0% | 7.4% | ||||||||
2000 | 11.000 | 17.066 | 0.294 | 17.8% | 142.1% | 6.5% | -9.1% | 34.9% | ||||||||
2001 | 12.480 | 14.938 | 0.314 | 16.3% | -10.6% | 3.2% | -11.9% | -12.4% | ||||||||
2002 | 13.960 | 14.934 | 0.336 | 14.6% | 2.0% | 3.4% | -22.1% | -20.7% | ||||||||
2003 | 15.650 | 20.288 | 0.890 | * | 18.5% | 42.4% | 4.8% | 28.7% | 21.0% | |||||||
2004 | 16.940 | 20.240 | 0.403 | 10.8% | 1.9% | 6.6% | 10.9% | 7.2% | ||||||||
2005 | 17.530 | 21.008 | 1.312 | * | 11.2% | 10.5% | 6.7% | 4.9% | 14.1% | |||||||
2006 | 18.910 | 23.280 | 0.590 | 11.2% | 13.9% | 6.0% | 15.8% | 10.9% | ||||||||
2007 | 19.710 | 15.410 | 0.630 | 7.6% | -31.5% | 4.6% | 5.6% | -6.3% | ||||||||
2008 | 15.910 | 11.920 | 0.670 | -15.9% | -18.0% | 1.8% | -37.0% | -58.1% | ||||||||
10 Year Compound Growth Rate | 9.4% | 3.5% | 5.0% | -1.4% | -4.2% | |||||||||||
2009 | 16.490 | 10.040 | 0.680 | 7.9% | -10.1% | -1.8% | 26.4% | 13.9% | ||||||||
2010 | 16.160 | 13.630 | 0.690 | 2.2% | 43.4% | 3.8% | 15.1% | 15.8% | ||||||||
2011 | 14.760 | 8.920 | 0.700 | -4.3% | -27.2% | 3.7% | 2.1% | -8.3% | ||||||||
2012 | 14.030 | 10.650 | 0.710 | -0.1% | 23.4% | 4.2% | 16.0% | 19.1% | ||||||||
2013 | 14.640 | 17.270 | 0.720 | 9.5% | 70.7% | 3.6% | 32.4% | 46.7% | ||||||||
2014 | 15.150 | 14.630 | 0.730 | 8.5% | -11.2% | 4.4% | 13.7% | 8.3% | ||||||||
2015 | 14.980 | 18.630 | 0.740 | 3.8% | 33.4% | 4.0% | 1.4% | 2.3% | ||||||||
2016 | 17.160 | 19.000 | 0.750 | 19.6% | 6.2% | 2.7% | 12.0% | 17.6% | ||||||||
2017 | 17.720 | 21.380 | 1.760 | * | 13.5% | 16.9% | 4.2% | 21.8% | 16.2% | |||||||
2018 | $17.230 | $20.570 | $0.780 | 1.6% | 4.8% | 5.5% | -4.4% | -11.2% | ||||||||
10 Year Compound Annual Growth Rate | 6.0% | 11.8% | 3.4% | 13.1% | 11.0% | |||||||||||
51 Year Compound Annual Growth Rate | 12.5% | 12.2% | 6.4% | 9.8% | 7.0% |
BOARD AND COMMITTEE MEMBERSHIP | ||||||||||||
Committees | Committees | |||||||||||
Director | Independent Directors(a) | Other Directors(b) | Executive | Audit | Governance and Nominating | Compensation | Independent Directors(a) | Other Directors(b) | Audit | Compensation | Executive | Governance and Nominating |
Steven J. Bateman (1) | l | l(e) | l | |||||||||
Steven J. Bateman | l | l(c) | l | |||||||||
Harrington Bischof | l | l | l | l | l | l | ||||||
Jimmy A. Dew | l | l | l | l | ||||||||
John M. Dixon | l | l | l | l(c) | l | l(d) | l | |||||
James C. Hellauer | l | l(e) | l | |||||||||
Charles J. Kovaleski (e) | l | |||||||||||
Spencer LeRoy III | l | l | l | |||||||||
Peter B. McNitt (f) | l | l(c) | l | |||||||||
Glenn W. Reed | l | l | l | |||||||||
Arnold L. Steiner | l(f) | l | l | l | l(g) | l | ||||||
Fredricka Taubitz | l | l(c)(e) | l | l | l(c)(d) | l | ||||||
Charles F. Titterton | l | l(e) | l(c) | l | l(c) | l(d) | ||||||
Dennis P. Van Mieghem | l | l(d)(e) | l(d) | l | l(c)(h) | l(h) | ||||||
Steven R. Walker | l | l | l | l(d) | l | l | l | l(h) | ||||
Aldo C. Zucaro | l | l(c) | l | l(d) | ||||||||
Number of scheduled and special meetings | 4 | 4 | 4 | 4 | 4 | 5 | ||||||
Number of written consents and telephone meetings | 1 | 1 | 3 | 4 | 1 | - | ||||||
Number of meetings | 5 | 7 | 5 | 4 | 5 |
(a) | Independent Director as that term is defined in SEC Rules and the Listed Company Standards of the NYSE. |
(b) | The Other Director classification includes all directors who are members of management, or do not currently meet the standard indicated in (a) above. |
(c) | Financial Experts as that term is defined in SEC Regulation S-K. |
(d) | Chairman |
(e) | Mr. |
(f) | Mr. Peter B. McNitt was elected as a |
(g) | Lead Independent Director |
(h) | Vice-Chairman |
Audit Committee | ||
Members: | Steven J. Bateman | Charles F. Titterton |
Peter B. McNitt | Dennis P. Van Mieghem, Vice-Chairman | |
Glenn W. Reed | Steven R. Walker | |
Fredricka Taubitz, Chairman |
Compensation Committee | ||
Members: | Steven J. Bateman | Glenn W. Reed |
Harrington Bischof | Arnold L. Steiner | |
Jimmy A. Dew | Fredricka Taubitz | |
John M. Dixon, Chairman | Dennis P. Van Mieghem, Vice-Chairman | |
Peter B. McNitt |
Executive Committee | ||
Members: | Harrington Bischof | Steven R. Walker |
John M. Dixon | Aldo C. Zucaro, Chairman | |
Arnold L. Steiner |
Governance and Nominating Committee | ||
Members: | Harrington Bischof | Arnold L. Steiner |
John M. Dixon | Charles F. Titterton, Chairman | |
Spencer LeRoy III | Steven R. Walker, Vice Chairman | |
Glenn W. Reed |
ITEM 2 |
RATIFICATION OF THE SELECTION OF AN INDEPENDENT |
REGISTERED PUBLIC ACCOUNTING FIRM |
Type of Fees | 2016 | 2015 | ||
Audit Fees | $5,408,600 | $4,993,650 | ||
Audit Related Fees | 88,725 | 77,500 | ||
Tax Fees | — | — | ||
All Other Fees | — | — | ||
Total | $5,497,325 | $5,071,150 |
Type of Fees | 2018 | 2017 | ||||
Audit Fees | $5,475,108 | $5,337,680 | ||||
Audit Related Fees | 167,992 | 27,100 | ||||
Tax Fees | — | — | ||||
All Other Fees | — | — | ||||
Total | $5,643,100 | $5,364,780 |
By the Audit Committee | ||
Steven J. Bateman | Charles F. Titterton | |
Glenn W. Reed | Dennis P. Van Mieghem, Vice Chairman | |
Fredricka Taubitz, Chairman | Steven R. Walker |
COMPENSATION MATTERS |
By the Compensation Committee: | ||
Steven J. Bateman | Glenn W. Reed | |
Harrington Bischof | Arnold L. Steiner | |
Jimmy A. Dew | Fredricka Taubitz | |
John M. Dixon, Chairman | Dennis P. Van Mieghem, Vice Chairman |
2018 Directors’ Compensation | ||
Name | Fees Earned or Paid in Cash | |
$ | ||
Harrington Bischof | 156,000 | |
Jimmy A. Dew | ||
John M. Dixon | ||
Spencer LeRoy III | ||
Glenn W. Reed | 152,000 | |
Arnold L. Steiner | ||
Fredricka Taubitz | ||
Charles F. Titterton | ||
Dennis Van Mieghem | ||
Steven R. Walker |
(1) | In 2018, Mr. |
COMPENSATION DISCUSSION AND ANALYSIS |
Other employment benefits such as life and health insurance programs, the ESSOP, and the BSP. |
Segmented Operating Results ($ in Millions) | ||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||
Pretax operating income (loss) (a): | ||||||||||||||
General insurance | $ | 319.9 | $ | 336.4 | $ | 221.3 | $ | 288.3 | $ | 261.0 | ||||
Title insurance | 210.2 | 166.8 | 99.5 | 124.3 | 73.8 | |||||||||
Corporate and other (b) | 13.0 | 7.6 | 5.7 | 2.1 | (2.7) | |||||||||
Subtotal | 543.3 | 511.0 | 326.7 | 414.7 | 332.1 | |||||||||
RFIG run-off business | 69.8 | 29.4 | 10.3 | 110.0 | (508.6) | |||||||||
Total | 613.1 | 540.4 | 337.1 | 524.8 | (176.4) | |||||||||
Income taxes (credits) on operating income (loss) | 193.5 | 177.7 | 104.3 | 173.2 | (76.6) | |||||||||
Net operating income (loss) (a) | $ | 419.6 | $ | 362.7 | $ | 232.7 | $ | 351.6 | $ | (99.7) |
Segmented Results ($ in Millions) | ||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||
Segmented and consolidated pretax income (loss) | ||||||||||||||
excluding investment gains (losses): | ||||||||||||||
General insurance | $ | 363.9 | $ | 340.3 | $ | 319.9 | $ | 336.4 | $ | 221.3 | ||||
Title insurance | 219.3 | 237.1 | 210.2 | 166.8 | 99.5 | |||||||||
Corporate and other (a) | 40.4 | 9.9 | 13.0 | 7.6 | 5.7 | |||||||||
Subtotal | 623.8 | 587.3 | 543.3 | 511.0 | 326.7 | |||||||||
RFIG run-off business | 49.9 | (73.5) | 69.8 | 29.4 | 10.3 | |||||||||
Consolidated pretax income (loss) | ||||||||||||||
excluding investment gains (losses) | 673.7 | 513.8 | 613.1 | 540.4 | 337.1 | |||||||||
Income taxes (credits) on above (b) | 117.2 | 195.7 | 193.5 | 177.7 | 104.3 | |||||||||
Net income (loss) excluding | ||||||||||||||
investment gains (losses) | $ | 556.4 | $ | 318.0 | $ | 419.6 | $ | 362.7 | $ | 232.7 |
Represents amounts for Old Republic’s holding company parent, minor corporate services subsidiaries, and a small life and accident insurance operation. |
(b) | 2017 Includes $41.8 of deferred income tax expense to adjust to the 21% tax rate of 2018 pertaining to operations as of December 31, 2017. |
SUMMARY COMPENSATION TABLE | |||||||||||||||||||||
(a) Name and Principal Positions | (b) Year | (c) Salary | (d) Bonus (1) | (e) Value of Stock Option Awards (2) | (f) Change in Pension Value and Nonqualified Deferred Compensation Earnings (3)(4) | (g) All Other Compensation (5) | (h) Total ($) | ||||||||||||||
Aldo C. Zucaro | 2018 | $ | 936,667 | $ | 797,332 | $ | 308,000 | $ | 1,076,134 | (3) | $ | 17,158 | $ | 3,135,291 | |||||||
ORI Chairman and | 2017 | 911,666 | 740,899 | 327,000 | 645,543 | (3) | 19,527 | 2,644,635 | |||||||||||||
Chief Executive Officer | 2016 | 895,000 | 636,809 | 350,000 | 306,047 | (3) | 18,017 | 2,205,873 | |||||||||||||
2015 | 870,000 | 582,978 | 268,000 | 416,266 | (3) | 18,526 | 2,155,770 | ||||||||||||||
2014 | 855,000 | 31,109 | 306,000 | 368,087 | 17,110 | 1,577,306 | |||||||||||||||
Karl W. Mueller | 2018 | 481,667 | 256,810 | 138,600 | — | (3) | 19,001 | 896,078 | |||||||||||||
ORI Senior Vice President | 2017 | 471,666 | 239,969 | 129,165 | 47,946 | 18,694 | 907,440 | ||||||||||||||
and Chief Financial Officer | 2016 | 465,000 | 209,901 | 131,250 | 288 | 17,657 | 824,096 | ||||||||||||||
2015 | 455,000 | 191,344 | 73,700 | — | (3) | 16,610 | 736,654 | ||||||||||||||
2014 | 445,000 | 140,701 | 107,100 | 63,151 | 13,034 | 768,986 | |||||||||||||||
R. Scott Rager | 2018 | 530,833 | 756,682 | 184,800 | — | 37,644 | 1,510,009 | ||||||||||||||
ORI Executive Vice Chairman | 2017 | 518,333 | 690,673 | 179,850 | — | 33,506 | 1,422,362 | ||||||||||||||
2016 | 510,000 | 602,869 | 175,000 | — | 32,469 | 1,320,338 | |||||||||||||||
2015 | 500,000 | 544,828 | 80,400 | — | 31,145 | 1,156,373 | |||||||||||||||
2014 | 490,000 | 303,977 | 113,220 | — | 30,571 | 937,768 | |||||||||||||||
(8) | |||||||||||||||||||||
Craig R. Smiddy | 2018 | 581,667 | 622,105 | 154,000 | — | 14,990 | 1,372,762 | ||||||||||||||
ORI President and Chief | 2017 | 494,999 | 562,367 | 98,100 | — | 14,888 | 1,170,354 | ||||||||||||||
Operating Officer | 2016 | 485,000 | 473,349 | 87,500 | — | 14,277 | 1,060,126 | ||||||||||||||
2015 | 475,000 | 428,780 | 33,500 | — | 13,518 | 950,798 | |||||||||||||||
2014 | 460,000 | 375,000 | 44,370 | — | 13,112 | 892,482 | |||||||||||||||
Rande K. Yeager | 2018 | 529,712 | 684,219 | 138,600 | — | (3) | 20,760 | 1,373,291 | |||||||||||||
Chairman and Chief | 2017 | 519,134 | 2,093,977 | (6) | 171,675 | 41,806 | 21,741 | 2,848,333 | |||||||||||||
Executive Officer − | 2016 | 510,000 | 686,357 | 140,000 | 26,674 | 20,704 | 1,383,735 | ||||||||||||||
Title Insurance Group | 2015 | 495,000 | 606,369 | 80,400 | — | (3) | 19,965 | 1,201,734 | |||||||||||||
2014 | 485,000 | 387,952 | 114,750 | 93,014 | 21,085 | 1,101,801 |
SUMMARY COMPENSATION TABLE | |||||||||
(a) Name and Principal Positions | (b) Year | (c) Salary | (d) Bonus (1) | (e) Value of Stock Option Awards (2) | (f) Change in Pension Value and Nonqualified Deferred Compensation Earnings (3)(4) | (g) All Other (5) Compensation | (h) Total ($) | ||
Aldo C. Zucaro | 2016 | $ 895,000 | $ 636,809 | $350,000 | $306,047 | (3) | $18,017 | $2,205,873 | |
ORI Chairman and | 2015 | 870,000 | 582,978 | 268,000 | 416,266 | 18,526 | 2,155,770 | ||
Chief Executive Officer | 2014 | 855,000 | 31,109 | 306,000 | 368,087 | 17,110 | 1,577,306 | ||
2013 | 828,333 | 283,340 | 119,700 | 69,315 | 13,677 | 1,314,365 | |||
2012 | 810,000 | 155,197 | 89,654 | 224,997 | 13,544 | 1,293,392 | |||
Karl W. Mueller | 2016 | 465,000 | 209,901 | 131,250 | 288 | 17,657 | 824,096 | ||
ORI Senior Vice President | 2015 | 455,000 | 191,344 | 73,700 | — | (3) | 16,610 | 736,654 | |
and Chief Financial Officer | 2014 | 445,000 | 140,701 | 107,100 | 63,151 | 13,034 | 768,986 | ||
2013 | 431,667 | 171,469 | 55,575 | 25,395 | 8,568 | 692,674 | |||
2012 | 421,667 | 152,045 | 41,625 | 56,292 | 7,984 | 679,613 | |||
R. Scott Rager (6) | 2016 | 510,000 | 602,869 | 175,000 | — | 32,469 | 1,320,338 | ||
ORI President and | 2015 | 500,000 | 544,828 | 80,400 | — | 31,145 | 1,156,373 | ||
Chief Operating Officer | 2014 | 490,000 | 303,977 | 113,220 | — | 30,571 | 937,768 | ||
2013 | 476,667 | 388,708 | 55,575 | — | 24,763 | 945,713 | |||
2012 | 466,667 | 336,115 | 41,625 | — | 21,547 | 865,954 | |||
Craig R. Smiddy (7) | 2016 | 485,000 | 473,349 | 87,500 | — | 14,277 | 1,060,126 | ||
President and Chief | 2015 | 475,000 | 428,780 | 33,500 | — | 13,518 | 950,798 | ||
Operating Officer − | 2014 | 460,000 | 375,000 | 44,370 | — | 13,112 | 892,482 | ||
General Insurance Group | 2013 | 184,327 | — | — | — | 239,733 | (8) | 424,060 | |
Rande K. Yeager | 2016 | 510,000 | 686,357 | 140,000 | 26,674 | 20,704 | 1,383,735 | ||
Chairman and Chief | 2015 | 495,000 | 606,369 | 80,400 | — | (3) | 19,965 | 1,201,734 | |
Executive Officer − | 2014 | 485,000 | 387,952 | 114,750 | 93,014 | 21,085 | 1,101,801 | ||
Title Insurance Group | 2013 | 471,250 | 400,656 | 51,300 | 53,308 | 16,683 | 993,197 | ||
2012 | 455,833 | 250,000 | 27,537 | 175,807 | 13,053 | 922,230 |
(1) |
(2) | The awards in this column (e) are made pursuant to the Incentive Compensation Plan. The value of options is calculated pursuant to the Black-Scholes model. The option values represent the estimated present value as of the date the options were granted. Accordingly, the option awards included under this column were granted in the years shown and reflect, among other factors previously noted, an evaluation of earnings trends and returns on equity for prior years. |
The significant factors and assumptions incorporated in the Black-Scholes model used to estimate the value of the options include the following: |
a) | Options are issued with an exercise price equal to 100% of the per share value at the close of trading (the “Fair Market Value”) of Common Stock on the business day immediately preceding the date of grant. The “Grant Date” shall be the date the Compensation Committee grants an option and the date from which the option term shall be measured. |
b) | The term of each option is 10 years (unless such terms are otherwise shortened or forfeited due to termination of employment) and it is assumed that these executives will hold these options for an average of 8 years. |
c) | Specific interest rates are used for valuing the awards. Such rates are predicated on the interest rate on U.S. Treasury securities on the date of grant with a maturity date corresponding to that of the expected option life. |
d) | A stock price volatility factor is utilized in valuing the option awards. This factor is calculated using daily stock prices for the period prior to the Grant Date corresponding with the expected option life. |
e) | Expected annual dividend yields ranging between |
(3) | Represents the aggregate change in the actuarial present value of the accumulated benefits under |
(4) | The Company does not have any non-qualified deferred compensation plans that credit above market or preferential earnings to participants. |
(5) | Includes all minor amounts |
(6) | Mr. |
The total annual compensation of the | $ 3,135,291 | |
The total annual compensation of the Median Employee: | $ 75,697 | |
Ratio of the CEO’s compensation to the Median Employee: | 41.4 to 1 |
Are reasonably competitive in the context of prevailing salary scales in the insurance industry, and |
Provide a fixed, reasonable source of annual income in context of individual work responsibilities. |
Business size and complexity of |
The person’s level of responsibility and experience; |
The success of the business unit with which the person is principally engaged; and |
Nonqualified Deferred Compensation | ||||||||||||
Name | Company’s Contributions in 2016 | Aggregate Interest Earnings 2016 | Aggregate Deferred Balance as of December 31, 2016 | Company’s Contributions in 2018(1) | Aggregate Interest Earnings 2018 | Aggregate Deferred Balance as of December 31, 2018 | ||||||
Aldo C. Zucaro | $281,250 | $36,809 | $7,408,424 | $350,000 | $47,332 | $8,171,655 | ||||||
Karl W. Mueller | 79,250 | 13,901 | 759,669 | 95,000 | 16,810 | 973,948 | ||||||
R. Scott Rager | 256,250 | 52,869 | 3,500,526 | 332,500 | 61,682 | 4,242,881 | ||||||
Craig R. Smiddy | 213,750 | 8,349 | 775,879 | 277,500 | 17,105 | 1,332,851 | ||||||
Rande K. Yeager | 318,750 | 11,357 | 1,098,834 | 305,000 | 24,219 | 1,732,786 |
Stock Option Grants | ||||||||
Name | Grant Date | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards | Grant Date Fair Value of Option Award | ||||
Aldo C. Zucaro | 3/23/16 | 100,000 | $18.14 | $350,000 | ||||
Karl W. Mueller | 3/23/16 | 37,500 | 18.14 | 131,250 | ||||
R. Scott Rager | 3/23/16 | 50,000 | 18.14 | 175,000 | ||||
Craig R. Smiddy | 3/23/16 | 25,000 | 18.14 | 87,500 | ||||
Rande K. Yeager | 3/23/16 | 40,000 | 18.14 | 140,000 |
Stock Option Grants | ||||||||
Name | Grant Date | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards | Grant Date Fair Value of Option Award | ||||
Aldo C. Zucaro | 2/20/18 | 100,000 | $20.98 | $308,000 | ||||
Karl W. Mueller | 2/20/18 | 45,000 | 20.98 | 138,600 | ||||
R. Scott Rager | 2/20/18 | 60,000 | 20.98 | 184,800 | ||||
Craig R. Smiddy | 2/20/18 | 50,000 | 20.98 | 154,000 | ||||
Rande K. Yeager | 2/20/18 | 45,000 | 20.98 | 138,600 |
Exercises of Stock Options During 2018 | ||||||
Option Awards | ||||||
Name | Number of Shares Acquired on Exercise | Value Realized on Exercise | ||||
Aldo C. Zucaro | — | — | ||||
Karl W. Mueller (1) | 15,000 | $198,785 | ||||
R. Scott Rager | — | — | ||||
Craig R. Smiddy | — | — | ||||
Rande K. Yeager | — | — |
(1) | During 2018, Mr. Mueller exercised an option granted to him in 2009, as such, the value realized that is shown above had accrued over the years since that option was granted. |
Equity Compensation Plan Status as of Year End 2016 | ||||||
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||
(a) | (b) | (c) | ||||
Equity compensation plans approved by security holders | 8,243,025* | $15.77 | 13,750,829 | |||
Equity compensation plans not approved by security holders | — | — | — | |||
Total | 8,243,025* | $15.77 | 13,750,829 |
Equity Compensation Plan Status as of Year End 2018 | ||||||
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||
(a) | (b) | (c) | ||||
Equity compensation plans approved by security holders | 7,163,567 | $17.24 | 10,569,560 | |||
Equity compensation plans not approved by security holders | — | — | — | |||
Total | 7,163,567* | $17.24 | 10,569,560 |
Outstanding Equity Awards at Year End 2018 | |||||||||
Number of Securities | |||||||||
Name | Underlying Unexercised Options Exercisable | Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | |||||
Aldo C. Zucaro | 100,000 | — | $ 12.33 | 03/23/21 | |||||
70,000 | — | 10.80 | 03/21/22 | ||||||
70,000 | — | 12.57 | 03/20/23 | ||||||
100,000 | — | 16.06 | 03/19/24 | ||||||
100,000 | — | 15.26 | 03/19/25 | ||||||
100,000 | — | 18.14 | 03/23/26 | ||||||
100,000 | — | 19.98 | 03/22/27 | ||||||
100,000 | — | 20.98 | 02/20/28 | ||||||
Karl W. Mueller | 17,500 | — | 12.08 | 03/25/20 | |||||
30,000 | — | 12.33 | 03/23/21 | ||||||
32,500 | — | 10.80 | 03/21/22 | ||||||
32,500 | — | 12.57 | 03/20/23 | ||||||
35,000 | — | 16.06 | 03/19/24 | ||||||
19,250 | 8,250 | 15.26 | 03/19/25 | ||||||
16,875 | 20,625 | 18.14 | 03/23/26 | ||||||
9,875 | 29,625 | 19.98 | 03/22/27 | ||||||
4,500 | 40,500 | 20.98 | 02/20/28 | ||||||
R. Scott Rager | 13,000 | — | 12.08 | 03/25/20 | |||||
30,000 | — | 12.33 | 03/23/21 | ||||||
32,500 | — | 10.80 | 03/21/22 | ||||||
32,500 | — | 12.57 | 03/20/23 | ||||||
37,000 | — | 16.06 | 03/19/24 | ||||||
30,000 | — | 15.26 | 03/19/25 | ||||||
50,000 | — | 18.14 | 03/23/26 | ||||||
55,000 | — | 19.98 | 03/22/27 | ||||||
60,000 | — | 20.98 | 02/20/28 | ||||||
Craig R. Smiddy | 14,500 | — | 16.06 | 03/19/24 | |||||
8,750 | 3,750 | 15.26 | 03/19/25 | ||||||
11,250 | 13,750 | 18.14 | 03/23/26 | ||||||
7,500 | 22,500 | 19.98 | 03/22/27 | ||||||
5,000 | 45,000 | 20.98 | 02/20/28 | ||||||
Rande K. Yeager | 9,000 | — | 12.57 | 03/20/23 | |||||
40,000 | — | 18.14 | 03/23/26 | ||||||
52,500 | — | 19.98 | 03/22/27 | ||||||
45,000 | — | 20.98 | 02/20/28 |
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted - Average | ||||||||||||||||||||
Ranges of Exercise Prices | Year(s) of Grant | Number Outstanding | Remaining Contractual Life | Exercise Price | Number Exercisable | Weighted Average Exercise Price | ||||||||||||||
$ | 10.48 | 2009 | 79,220 | 0.25 | $ | 10.48 | 79,220 | $ | 10.48 | |||||||||||
$ | 12.08 | 2010 | 161,340 | 1.25 | 12.08 | 161,340 | 12.08 | |||||||||||||
$ | 12.33 | 2011 | 346,980 | 2.25 | 12.33 | 346,980 | 12.33 | |||||||||||||
$ | 10.80 | 2012 | 386,063 | 3.25 | 10.80 | 386,063 | 10.80 | |||||||||||||
$ | 12.57 | 2013 | 510,047 | 4.25 | 12.57 | 510,047 | 12.57 | |||||||||||||
$ | 16.06 | 2014 | 795,470 | 5.25 | 16.06 | 795,470 | 16.06 | |||||||||||||
$ | 15.26 | 2015 | 835,264 | 6.25 | 15.26 | 624,521 | 15.26 | |||||||||||||
$ | 18.14 | 2016 | 1,159,218 | 7.25 | 18.14 | 668,390 | 18.14 | |||||||||||||
$ | 19.98 | 2017 | 1,354,665 | 8.25 | 19.98 | 571,503 | 19.98 | |||||||||||||
$ | 20.98 | 2018 | 1,535,300 | 9.25 | 20.98 | 412,816 | 20.98 | |||||||||||||
Total | 7,163,567 | $ | 17.24 | 4,556,350 | $ | 15.83 |
Outstanding Equity Awards at Year End 2016 | |||||||||
Number of Securities | |||||||||
Name | Underlying Unexercised Options Exercisable | Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | |||||
Aldo C. Zucaro | 200,000 | * | — | $ 21.77 | 03/13/17 | ||||
100,000 | — | 12.33 | 03/23/21 | ||||||
70,000 | — | 10.80 | 03/21/22 | ||||||
49,000 | 21,000 | 12.57 | 03/20/23 | ||||||
100,000 | — | 16.06 | 03/19/24 | ||||||
100,000 | — | 15.26 | 03/19/25 | ||||||
100,000 | — | 18.14 | 03/23/26 | ||||||
Karl W. Mueller | 38,000 | * | — | 21.77 | 03/13/17 | ||||
25,000 | — | 12.95 | 03/18/18 | ||||||
15,000 | — | 10.48 | 03/25/19 | ||||||
17,500 | — | 12.08 | 03/25/20 | ||||||
30,000 | — | 12.33 | 03/23/21 | ||||||
32,500 | — | 10.80 | 03/21/22 | ||||||
22,750 | 9,750 | 12.57 | 03/20/23 | ||||||
15,750 | 19,250 | 16.06 | 03/19/24 | ||||||
6,875 | 20,625 | 15.26 | 03/19/25 | ||||||
3,750 | 33,750 | 18.14 | 03/23/26 | ||||||
R. Scott Rager | 55,000 | * | — | 21.77 | 03/13/17 | ||||
37,500 | — | 12.95 | 03/18/18 | ||||||
10,000 | — | 10.48 | 03/25/19 | ||||||
13,000 | — | 12.08 | 03/25/20 | ||||||
30,000 | — | 12.33 | 03/23/21 | ||||||
32,500 | — | 10.80 | 03/21/22 | ||||||
22,750 | 9,750 | 12.57 | 03/20/23 | ||||||
37,000 | — | 16.06 | 03/19/24 | ||||||
30,000 | — | 15.26 | 03/19/25 | ||||||
50,000 | — | 18.14 | 03/23/26 | ||||||
Craig R. Smiddy | 6,525 | 7,925 | 16.06 | 03/19/24 | |||||
3,125 | 9,375 | 15.26 | 03/19/25 | ||||||
2,500 | 22,500 | 18.14 | 03/23/26 | ||||||
Rande K. Yeager | 5,000 | * | — | 21.77 | 03/13/17 | ||||
6,300 | — | 12.33 | 03/23/21 | ||||||
21,500 | — | 10.80 | 03/21/22 | ||||||
21,000 | 9,000 | 12.57 | 03/20/23 | ||||||
37,500 | — | 16.06 | 03/19/24 | ||||||
30,000 | — | 15.26 | 03/19/25 | ||||||
40,000 | — | 18.14 | 03/23/26 |
CEO of the | 6 times |
President of the Company | 4 times |
Certain other senior officers of the Company and its subsidiaries | 1.5 times |
Options Outstanding | Options Exercisable | |||||||||||||
Weighted – Average | ||||||||||||||
Ranges of Exercise Prices | Year(s) of Grant | Number Outstanding | Remaining Contractual Life | Exercise Price | Number Exercisable | Weighted Average Exercise Price | ||||||||
$21.78 | to | $23.16 | 2007 | 1,676,175 | 0.25 | $21.77 | 1,676,175 | $ 21.77 | ||||||
$ 7.73 | to | $12.95 | 2008 | 451,450 | 1.25 | 12.91 | 451,450 | 12.91 | ||||||
$10.48 | 2009 | 298,505 | 2.25 | 10.48 | 298,505 | 10.48 | ||||||||
$12.08 | 2010 | 355,745 | 3.25 | 12.08 | 355,745 | 12.08 | ||||||||
$12.33 | 2011 | 637,592 | 4.25 | 12.33 | 637,592 | 12.33 | ||||||||
$10.80 | 2012 | 760,237 | 5.25 | 10.80 | 760,237 | 10.80 | ||||||||
$12.57 | 2013 | 811,720 | 6.25 | 12.57 | 569,292 | 12.57 | ||||||||
$16.06 | 2014 | 1,045,461 | 7.25 | 16.06 | 607,102 | 16.06 | ||||||||
$15.26 | 2015 | 978,640 | 8.25 | 15.26 | 391,137 | 15.26 | ||||||||
$18.14 | 2016 | 1,227,500 | 9.25 | 18.14 | 347,876 | 18.14 | ||||||||
Total | 8,243,025 | $15.77 | 6,095,111 | $ 15.59 |
Pension Benefits | ||||
Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit (1) | Payments During Last Fiscal Year |
Aldo C. Zucaro | Company Plan | 36.4 | $2,073,242 | $ 247,168 |
Excess Benefit Plan | 36.4 | 6,025,286 | — | |
Karl W. Mueller | Company Plan | 8.3 | 321,124 | — |
R. Scott Rager | None | — | — | — |
Craig R. Smiddy | None | — | — | — |
Rande K. Yeager | Company Plan | 26.6 | 1,319,746 | — |
Pension Benefits | |||||||||
Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit (1) | Payments During Last Fiscal Year | |||||
Aldo C. Zucaro | Company Plan | 36.4 | $ | 1,886,667 | $ | 247,168 | |||
Excess Benefit Plan | 36.4 | 8,180,706 | — | ||||||
Karl W. Mueller | Company Plan | 8.3 | 345,806 | — | |||||
R. Scott Rager | None | — | — | — | |||||
Craig R. Smiddy | None | — | — | — | |||||
Rande K. Yeager | Company Plan | 26.6 | 1,243,555 | — |
(1) | The present value of accumulated benefits payable following assumed retirement is calculated using interest and mortality assumptions consistent with those used for financial reporting purposes with respect to the companies’ audited financial statements. No discount is assumed for separation prior to retirement due to death, disability or termination of employment. The amount shown is based upon accrued service through year end 2013 when Plan benefits were frozen. |
ITEM 3 |
VOTE ON EXECUTIVE COMPENSATION |
ITEM 4 |
SHAREHOLDER PROPOSAL by the |
CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM (“CalPERS”) |
a) | have beneficially owned 3% or more of Company’s outstanding common stock continuously for at least three years before submitting the nomination; |
b) | give Company, within the time period identified in its bylaws, written notice of the information required by the bylaws and any Securities and Exchange Commission rules about (i) the nominee, including consent to being named in the proxy materials and to serving as director if elected; and (ii) Nominator, including proof it owns the required shares (the “Disclosure”); and |
c) | certify that (i) it will assume liability stemming from any legal or regulatory violation arising out of Nominator’s communications with Company shareholders, including the Disclosure and the Statement; (ii) it will comply with all applicable laws and regulations if it uses soliciting material other than Company’s proxy materials; and (iii) to the best of its knowledge, the required shares were acquired in the ordinary course of business and not to change or influence control at Company. |
Has the potential to raise overall US market capitalization by up to $140.3 billion if adopted market-wide.1 |
OLD REPUBLIC’S STATEMENT IN OPPOSITION TO |
THE CalPERS SHAREHOLDER PROPOSAL |
Shareholders the ability to call special meetings and take action by written consent outside the context of an annual meeting of shareholders. |
That in the event that any director receives a significant withhold vote in an election, the Governance and Nominating Committee have stated that they would investigate the reason or reasons for such a withhold vote and following its investigation, the Committee would make such recommendations to the full Board as are appropriate in light of the facts and circumstances that they discover. |
Shareholders have the ability to recommend director candidates to Old Republic’s Governance and Nominating Committee. Such nominees would be evaluated and considered using the same criteria as are used for all candidates and would be reviewed with the same consideration made for the Company’s needs as all other candidates. |
A strong independent leadership structure, including a Lead Independent Director who is appointed from among the independent directors. |
Old Republic International Corporation (a) | S&P 500 (b) | Relative Results | |||||||||||
Year | Ending Book Value | Cash Dividends Paid (c) | Percentage Change in Book Value | Dividend Yield | Total Book Return (d) | Total Annual Return | ORI vs. S&P 500 | ||||||
1967 | $ 0.25 | $ 0.007 | 56.3% | 4.4% | 60.7% | 23.7% | 37.0% | ||||||
1968 | 0.28 | 0.007 | 15.2% | 2.8% | 18.0% | 11.0% | 7.0% | ||||||
1969 | 0.31 | 0.011 | 9.4% | 3.8% | 13.2% | –8.4% | 21.6% | ||||||
1970 | 0.36 | 0.012 | 15.5% | 4.0% | 19.5% | 4.0% | 15.5% | ||||||
1971 | 0.47 | 0.014 | 31.3% | 3.9% | 35.2% | 14.3% | 20.9% | ||||||
1972 | 0.48 | 0.016 | 2.3% | 3.4% | 5.7% | 19.0% | –13.3% | ||||||
1973 | 0.47 | 0.019 | –2.2% | 3.9% | 1.7% | –14.7% | 16.4% | ||||||
1974 | 0.38 | 0.020 | –19.3% | 4.2% | –15.1% | –26.5% | 11.4% | ||||||
1975 | 0.29 | 0.020 | –23.9% | 5.3% | –18.6% | 37.2% | –55.8% | ||||||
1976 | 0.56 | 0.011 | 94.4% | 3.9% | 98.3% | 23.8% | 74.5% | ||||||
1977 | 0.79 | 0.022 | 41.9% | 3.9% | 45.8% | –7.2% | 53.0% | ||||||
1978 | 0.98 | 0.033 | 22.8% | 4.2% | 27.0% | 6.6% | 20.4% | ||||||
1979 | 1.08 | 0.052 | 10.9% | 5.3% | 16.2% | 18.4% | –2.2% | ||||||
1980 | 1.22 | 0.054 | 12.8% | 5.0% | 17.8% | 32.5% | –14.7% | ||||||
1981 | 1.39 | 0.054 | 14.0% | 4.4% | 18.4% | –4.9% | 23.3% | ||||||
1982 | 1.65 | 0.056 | 18.4% | 4.0% | 22.4% | 21.6% | 0.8% | ||||||
1983 | 1.89 | 0.058 | 14.6% | 3.6% | 18.2% | 22.6% | –4.4% | ||||||
1984 | 2.21 | 0.059 | 16.9% | 3.3% | 20.2% | 6.3% | 13.9% | ||||||
1985 | 2.30 | 0.062 | 4.3% | 2.9% | 7.2% | 31.7% | –24.5% | ||||||
1986 | 2.53 | 0.065 | 9.7% | 2.7% | 12.6% | 18.7% | –6.1% | ||||||
1987 | 2.95 | 0.068 | 16.7% | 2.7% | 19.4% | 5.3% | 14.1% | ||||||
1988 | 3.15 | 0.071 | 6.9% | 2.3% | 9.2% | 16.6% | –7.4% | ||||||
1989 | 3.54 | 0.076 | 12.4% | 2.4% | 14.8% | 31.7% | –16.9% | ||||||
1990 | 3.92 | 0.081 | 10.7% | 2.2% | 13.1% | –3.1% | 16.2% | ||||||
1991 | 4.46 | 0.086 | 13.7% | 2.2% | 15.9% | 30.5% | –14.6% | ||||||
1992 | 5.07 | 0.093 | 13.8% | 2.1% | 15.9% | 7.6% | 8.3% | ||||||
1993 | 5.75 | 0.102 | 13.4% | 1.9% | 15.3% | 10.1% | 5.2% | ||||||
1994 | 6.11 | 0.111 | 6.3% | 2.0% | 8.3% | 1.3% | 7.0% | ||||||
1995 | 7.24 | 0.121 | 18.5% | 2.0% | 20.5% | 37.6% | –17.1% | ||||||
1996 | 7.77 | 0.148 | 7.3% | 2.0% | 9.3% | 23.0% | –13.7% | ||||||
1997 | 8.31 | 0.178 | 7.0% | 2.3% | 9.3% | 33.4% | –24.1% | ||||||
1998 | 9.21 | 0.206 | 10.8% | 2.5% | 13.3% | 28.6% | –15.3% | ||||||
1999 | 9.59 | 0.261 | 4.2% | 2.8% | 7.0% | 21.0% | –14.0% | ||||||
2000 | 11.00 | 0.293 | 14.6% | 3.1% | 17.7% | –9.1% | 26.8% | ||||||
2001 | 12.48 | 0.315 | 13.5% | 2.9% | 16.4% | –11.9% | 28.3% | ||||||
2002 | 13.96 | 0.336 | 11.8% | 2.7% | 14.5% | –22.1% | 36.6% | ||||||
2003 | 15.65 | 0.890 | (c) | 12.1% | 6.4% | (c) | 18.6% | 28.7% | –10.1% | ||||
2004 | 16.94 | 0.402 | 8.2% | 2.6% | 10.8% | 10.9% | –0.1% | ||||||
2005 | 17.53 | 1.312 | (c) | 3.5% | 7.7% | (c) | 11.2% | 4.9% | 6.3% | ||||
2006 | 18.91 | 0.590 | 7.9% | 3.4% | 11.3% | 15.8% | –4.5% | ||||||
2007 | 19.71 | 0.630 | 4.2% | 3.3% | 7.5% | 5.5% | 2.0% | ||||||
2008 | 15.91 | 0.670 | –19.3% | 3.4% | –15.9% | –37.0% | 21.1% | ||||||
2009 | 16.49 | 0.680 | 3.6% | 4.3% | 7.9% | 26.5% | –18.6% | ||||||
2010 | 16.16 | 0.690 | –2.0% | 4.2% | 2.2% | 15.1% | –12.9% | ||||||
2011 | 14.76 | 0.700 | –8.7% | 4.3% | –4.4% | 2.1% | –6.5% | ||||||
2012 | 14.03 | 0.710 | –4.9% | 4.8% | –0.1% | 16.0% | –16.1% | ||||||
2013 | 14.64 | 0.720 | 4.3% | 5.1% | 9.4% | 32.4% | –23.0% | ||||||
2014 | 15.15 | 0.730 | 3.5% | 5.0% | 8.5% | 13.7% | –5.2% | ||||||
2015 | 15.02 | 0.740 | –0.9% | 4.9% | 4.0% | 1.4% | 2.6% | ||||||
2016 | $ 17.20 | $ 0.750 | 14.5% | 5.0% | 19.5% | 11.9% | 7.6% | ||||||
Annual Average – 1967 to 2016 (50 years) | 11.1% | 3.6% | 14.7% | 11.5% | 3.2% | ||||||||
Old Republic International Corporation (a) | S&P 500 (b) | Relative Results | |||||||||||
Year | Ending Market Value | Cash Dividends Paid (c) | Percentage Change in Market Value | Dividend Yield | Total Market Return (d) | Total Annual Return | ORI vs. S&P 500 | ||||||
1967 | $ 0.34 | $ 0.007 | –10.5% | 1.8% | –8.7% | 23.7% | –32.4% | ||||||
1968 | 0.47 | 0.007 | 39.7% | 2.1% | 41.8% | 11.0% | 30.8% | ||||||
1969 | 0.34 | 0.011 | –28.4% | 2.3% | –26.1% | –8.4% | –17.7% | ||||||
1970 | 0.53 | 0.012 | 57.1% | 3.7% | 60.8% | 4.0% | 56.8% | ||||||
1971 | 0.84 | 0.014 | 59.6% | 2.6% | 62.2% | 14.3% | 47.9% | ||||||
1972 | 1.24 | 0.016 | 47.5% | 1.9% | 49.4% | 19.0% | 30.4% | ||||||
1973 | 0.45 | 0.019 | –63.5% | 1.5% | –62.0% | –14.7% | –47.3% | ||||||
1974 | 0.41 | 0.020 | –10.6% | 4.4% | –6.2% | –26.5% | 20.3% | ||||||
1975 | 0.44 | 0.020 | 7.9% | 5.0% | 12.9% | 37.2% | –24.3% | ||||||
1976 | 0.62 | 0.011 | 42.7% | 2.6% | 45.3% | 23.8% | 21.5% | ||||||
1977 | 0.79 | 0.022 | 27.4% | 3.5% | 30.9% | –7.2% | 38.1% | ||||||
1978 | 0.98 | 0.033 | 22.8% | 4.2% | 27.0% | 6.6% | 20.4% | ||||||
1979 | 1.11 | 0.052 | 14.2% | 5.3% | 19.5% | 18.4% | 1.1% | ||||||
1980 | 0.89 | 0.054 | –20.4% | 4.8% | –15.6% | 32.5% | –48.1% | ||||||
1981 | 1.14 | 0.054 | 28.8% | 6.1% | 34.9% | –4.9% | 39.8% | ||||||
1982 | 1.46 | 0.056 | 27.8% | 4.9% | 32.7% | 21.6% | 11.1% | ||||||
1983 | 2.35 | 0.058 | 61.4% | 4.0% | 65.4% | 22.6% | 42.8% | ||||||
1984 | 2.03 | 0.059 | –13.7% | 2.5% | –11.2% | 6.3% | –17.5% | ||||||
1985 | 3.01 | 0.062 | 48.4% | 3.0% | 51.4% | 31.7% | 19.7% | ||||||
1986 | 2.32 | 0.065 | –23.2% | 2.2% | –21.0% | 18.7% | ���39.7% | ||||||
1987 | 1.86 | 0.068 | –19.6% | 2.9% | –16.7% | 5.3% | –22.0% | ||||||
1988 | 2.35 | 0.071 | 26.0% | 3.8% | 29.8% | 16.6% | 13.2% | ||||||
1989 | 2.61 | 0.076 | 11.0% | 3.2% | 14.2% | 31.7% | –17.5% | ||||||
1990 | 2.46 | 0.081 | –5.3% | 3.1% | –2.2% | –3.1% | 0.9% | ||||||
1991 | 4.21 | 0.086 | 70.7% | 3.5% | 74.2% | 30.5% | 43.7% | ||||||
1992 | 5.90 | 0.093 | 40.2% | 2.2% | 42.4% | 7.6% | 34.8% | ||||||
1993 | 5.37 | 0.102 | –9.0% | 1.7% | –7.3% | 10.1% | –17.4% | ||||||
1994 | 5.04 | 0.111 | –6.1% | 2.1% | –4.0% | 1.3% | –5.3% | ||||||
1995 | 8.42 | 0.121 | 67.1% | 2.4% | 69.5% | 37.6% | 31.9% | ||||||
1996 | 9.51 | 0.148 | 13.0% | 1.8% | 14.8% | 23.0% | –8.2% | ||||||
1997 | 13.22 | 0.178 | 39.0% | 1.9% | 40.9% | 33.4% | 7.5% | ||||||
1998 | 12.00 | 0.206 | –9.2% | 1.6% | –7.6% | 28.6% | –36.2% | ||||||
1999 | 7.27 | 0.261 | –39.4% | 2.2% | –37.2% | 21.0% | –58.2% | ||||||
2000 | 17.06 | 0.293 | 134.8% | 4.0% | 138.8% | –9.1% | 147.9% | ||||||
2001 | 14.93 | 0.315 | –12.5% | 1.8% | –10.7% | –11.9% | 1.2% | ||||||
2002 | 14.93 | 0.336 | ––% | 2.2% | 2.2% | –22.1% | 24.3% | ||||||
2003 | 20.29 | 0.890 | (c) | 35.9% | 5.9% | (c) | 41.8% | 28.7% | 13.1% | ||||
2004 | 20.24 | 0.402 | –0.2% | 2.0% | 1.8% | 10.9% | –9.1% | ||||||
2005 | 21.01 | 1.312 | (c) | 3.8% | 6.5% | (c) | 10.3% | 4.9% | 5.4% | ||||
2006 | 23.28 | 0.590 | 10.8% | 2.8% | 13.6% | 15.8% | –2.2% | ||||||
2007 | 15.41 | 0.630 | –33.8% | 2.7% | –31.1% | 5.5% | –36.6% | ||||||
2008 | 11.92 | 0.670 | –22.6% | 4.3% | –18.3% | –37.0% | 18.7% | ||||||
2009 | 10.04 | 0.680 | –15.8% | 5.7% | –10.1% | 26.5% | –36.6% | ||||||
2010 | 13.63 | 0.690 | –35.8% | 6.9% | 42.7% | 15.1% | 27.6% | ||||||
2011 | 9.27 | 0.700 | –32.0% | 5.1% | –26.9% | 2.1% | –29.0% | ||||||
2012 | 10.65 | 0.710 | 14.9% | 7.7% | 22.6% | 16.0% | 6.6% | ||||||
2013 | 17.27 | 0.720 | 62.2% | 6.8% | 69.0% | 32.4% | 36.6% | ||||||
2014 | 14.63 | 0.730 | –15.3% | 4.2% | –11.1% | 13.7% | –24.8% | ||||||
2015 | 18.63 | 0.740 | 27.3% | 5.1% | 32.4% | 1.4% | 31.0% | ||||||
2016 | $ 19.00 | $ 0.750 | 2.0% | 4.0% | 6.0% | 11.9% | –5.9% | ||||||
Annual Average – 1967 to 2016 (50 years) | 13.7% | 3.6% | 17.3% | 11.5% | 5.8% | ||||||||
ANNUAL RETURN PERCENTAGE | ||||||
Years Ending | ||||||
Company Name / Index | Dec12 | Dec13 | Dec14 | Dec15 | Dec16 | |
Old Republic International Corp | 23.84 | 70.34 | -11.15 | 33.30 | 6.08 | |
S&P 500 Index | 16.00 | 32.39 | 13.69 | 1.38 | 11.96 | |
New Peer Group | 34.96 | 37.22 | 13.98 | 11.12 | 10.18 | |
Old Peer Group | 21.67 | 32.02 | 14.95 | 13.90 | 8.99 | |
INDEXED RETURNS | ||||||
Years Ending | ||||||
Base Period | ||||||
Company Name / Index | Dec11 | Dec12 | Dec13 | Dec14 | Dec15 | Dec16 |
Old Republic International Corp | 100.00 | 123.84 | 210.94 | 187.43 | 249.84 | 265.04 |
S&P 500 Index | 100.00 | 116.00 | 153.57 | 174.60 | 177.01 | 198.18 |
New Peer Group | 100.00 | 134.96 | 185.19 | 211.08 | 234.55 | 258.43 |
Old Peer Group | 100.00 | 121.67 | 160.62 | 184.64 | 210.29 | 229.20 |
OTHER INFORMATION |