The names of our executive officers and their ages, positions, and biographies as of April 7, 202025, 2023 are set forth below. Our executive officers are appointed by, and serve at the discretion of, our Board.
Executive Summary
Our compensation programs are designed to reward execution and value creation relating to the implementation of our strategies. InTo ensure that our compensation programs align with the expectations of our stockholders, in the Fall of each year, Ambac proactively seeks out opportunities to engage in a dialogue with our stockholders. In 2019, we solicited feedback from stockholders representing approximately 47% of our outstanding common stock. As a result of these stockholder engagements, over the last three years our Compensation Committee has made important enhancements to our compensation programs and processes. These enhancements include changes to the design of our annual and long-term incentive plans, and the implementation of important compensation-related policies, i.e.e.g., a Stock Ownership Policy and a Recoupment Policy, and changes to the compensation benchmarking peer group. In 2019, we addedaddition of a relative Total Shareholder Return ("rTSR") modifier as an additional metric with respect to our LTIP award payouts. The rTSR modifier will cause any final PSU award payout at the endis intended to further align compensation to Ambac's stock performance. In 2022, we solicited feedback from stockholders representing approximately 46% of a three year performance periodour outstanding common stock, which informed certain changes to be increased or decreased by 10% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively. In addition,our executive compensation program in 2018, we eliminated the "retesting" feature in the Long-Term Incentive Compensation Program that allowed performance at AAC to be measured by the greater of two metrics: an improved asset liability ratio ("ALR") or improved Net Asset Value over a three year performance period.2023. See "2022 Say on Pay Vote and Stockholder Outreach."
With the implementation of these changes, keyKey features of our compensation program include:
•Competitive compensation levels and practices;
•Performance-based incentive plans (annual STIP awards and three year LTIP PSU awards) that are based on quantitative and strategic performance goals and objectives, and aligned with our key business strategies;
Greater•Significant weighting on equity-based compensation as a component of total compensation, andincluding the existence of an Executivea Stock Ownership Policy;Policy applicable to our executives;
•A rTSR modifier that aligns compensation results with actual stock performance as compared to peers; and
•Policies to manage compensation-related risk and support good governance, including a Recoupment Policy.
2019Key Strategic Priorities and 2022 Company Performance
Our primary business objective is to maximize stockholder value through the execution of key strategies in both our key (i) Specialty P&C Insurance and Insurance Distribution businesses and (ii) Financial Guarantee Insurance companies, which were outlined in 2022 as follows:
Specialty P&C Insurance and Insurance Distribution strategic priorities specifically:included:
Active runoff•Growing and diversifying Everspan's participatory fronting platform with existing and new program partners.
•Building a leading federation of AACspecialty MGA/U partners through additional acquisitions and its subsidiaries through transaction terminations, policy commutations, reinsurance, settlementsde novo builds, supported by a centralized business services unit including core technology solutions.
•Making opportunistic investments that are strategic to the overall Specialty P&C Insurance and restructurings, with a focus on our watch list creditsInsurance Distribution businesses.
Financial Guarantee Insurance companies’ strategic priorities included:
•Actively managing, de-risking and known and potential future adversely classified credits, that we believe will improve our risk profile, and maximizing the risk-adjusted return on invested assets;mitigating insured portfolio risk.
Ongoing rationalization of Ambac's capital and liability structures;
Loss•Pursuing loss recovery through active litigation management and exercise of contractualother means, particularly residential mortgage back security representation and legal rights;warranty litigation.
Ongoing review•Improving operating efficiency and adjustments focused on improvingoptimizing our asset and liability profile.
•Exploring, at the effectiveness and efficiency of Ambac's operating platform; and
Evaluation of opportunities in certain business sectors that meet acceptable criteria that will generate long-term stockholderappropriate time, strategic options to further maximize value with attractive risk-adjusted returns.
for Ambac.
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Ambac Financial Group, Inc. |37 40 | 20202023 Proxy Statement |
In 2019,2022, we took important steps to enhance the Company’s ability to achieve this objective.advance these strategic objectives. Key highlights and results include the following:
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lExecuted | Reported net income of $522 million for the COFINA Planfull year 2022 |
l | Increased Book Value per Share by 24% to $27.85 and Adjusted Book Value per Share by 50% to $28.29 |
l | Received $1.98 billion from the settlement of AdjustmentRMBS representation and warranty litigations, recognizing $249 million of gains, partially offset by losses from the extinguishment of secured notes of $53 million. |
l | Reduced debt and accrued interest by $1.9 billion, primarily from the RMBS representation and warranty litigation proceeds, and recognized a $134 million discount capture on surplus note repurchases. |
l | Repurchased Auction Market Preferred Shares with a liquidation value of $23 million capturing approximately $15 million of discount capture. |
l | Increased Specialty Property and Casualty Insurance production by 172% from the fourth quarter of 2021 and $282 million for the full year 2022 up 116% over the prior year. Specialty Property and Casualty Insurance production includes gross premiums written by Ambac's Specialty Property and Casualty Insurance segment and premiums placed by the Insurance Distribution segment, which totaled $90 million in the firstfourth quarter resolving 78% of Ambac's total exposure to Puerto Rico.2022, and $282 million for the full year 2022. |
lCeded $1.5 billion of performing par exposure to third party reinsurers, including $662 million of Adversely Classified and Watch List Credits. |
lRealized $142 million in proceeds related to the settlement between the United States Securities and Exchange Commission and Citigroup Global Markets.
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lDecreased our insured portfolio net par outstanding at the Legacy Financial Guarantee business by 19% to $38.0$22.6 billion from year-end 2018. 2021. This includes reduced Watch List and Adversely Classified Credits by 24%, to $7.8 billion from $10.2 billion at year end 2021. The above mentioned declines were primarily the result of active de-risking transactions including the restructuring of all of our remaining Puerto Rico exposures. |
lDecreased Adversely Classified and Watch list Credits by 28% | Increased Everspan Gross Written Premium to $14.3 billion.$146 million in 2022, which was a 10 fold increase from 2021 |
lExecuted additional headcount and other cost reductions including | Reduced Gross Operating Run Rate Expense in the consolidationfourth quarter of space for the New York headquarters.2022 to $16.3 million |
lEnded 2019 with total Ambac stockholders’ equity (“Book Value“) | Acquired All Trans and Capacity Marine, representing approximately $60 million of $1.5 billion, or $32.41 per share, and Adjusted Book Value(1) of $1.3 billion, or $28.83 per share.expected premium placed for Cirrata |
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(1)
| Adjusted Book Value is a non-GAAP measure. A reconciliation of this non-GAAP financial measure and the most directly comparable GAAP financial measure is presented in Appendix A. In this Proxy Statement, we refer to Total Ambac Financial Group, Inc. stockholders' equity as "Book Value." |
2019
2022 Pay Decisions
20192022 compensation decisions reflect our compensation principles:
•Link short-term incentives to Companythe Company's operational, strategic, and financial performance;
•Use long-term incentives to further align the interests of our executives with stockholders by providing that all LTIP awards are denominated in stock units, that are earnedwith payouts based on Company performance;performance metrics that we believe drive long-term value for stockholders; and
•Support the retention and attraction of key executive talent.
Base salaries in 20192022 for each of our NEOs were reviewed and approved by the Compensation Committee, based on a review of relevant market data and each executive’s performance for the prior year, as well as each executive’s experience, expertise and position. Each of Messrs. LeBlanc, Trick
In 2022, the Compensation Committee incorporated gross written premiums as a financial performance metric for our specialty P&C insurance business, and Ksenak is a partyincreased the overall weightings assigned to an employment agreement withfinancial performance metrics in the Company that providesincentive compensation plans for a minimum annual base salary during the term of the respective agreement. See "Agreement with Claude LeBlanc," and “Agreements with Other Executive Officers.”senior management.
STIP awards for 20192022 were determined based on a structured and objective approach in which 60% of an executive officer's annual STIP award was based on the Company’s achievement of pre-established financial
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Ambac Financial Group, Inc. | 41 | 2023 Proxy Statement |
performance targets at the Company related to changes in: (i) Net Asset Value1increases in gross written premium at Everspan , (ii) reductions in Net Par Outstanding1 in the legacy financial guarantee insured portfolio, and (iii) reductions in Gross Operating Run Rate Expense Expense;1, and (iii) Watch List and Adversely Classified Credits1; and the remaining 40% of an executive officer's annual STIP award for 2022 was based on otherstrategic performance considerations,goals, including business unit results and individual performance. The Compensation Committee, after receiving advice from Meridian Compensation Partnersperformance, a majority of which are based on
1Net Asset Value is calculated by reducing Assets by Liabilities, determined as of December 31, 2019. See the definitions of Assets and Liabilities set forth in the CD&A under under "Pay Mix -- AAC LTIP Metric". Gross Operating Run Rate Expense is measured by comparing actual gross operating run rate expenses to performance goals established against budgeted amounts. Reductions in Watch List and Adversely Classified Credits as of December 31, 2019 under the STIP were measured against Watch List and Adversely Classified Credits as of January 1, 2019.
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Ambac Financial Group, Inc. |38 | 2020 Proxy Statement
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current market practices, and noting management's increased equity ownership overall, discontinued the practice of awarding deferred stock units ("DSUs") and approved an all cash payment of the 2019 STIP awards. objective, quantifiable or financial outcomes.
Long-term incentive awards granted in early 20202022 were also reviewed and approved by the Compensation Committee, based on a review of relevant market data and each executive’s performance for the prior year. The 20202022 long term incentive awards include restricted stock units (25%(30% of total long term incentive award) which vest annually over a three year period and performance stock units (75%(70% of total long term incentive award), tied to quantitative metrics that reflect the long term goals that the Compensation Committee believes will drive shareholderstockholder value. Vesting of the the performance stock units is subject to the satisfaction of certain performance goals, which will be determined at the end of a three year performance period.period, and application of the rTSR modifier at the end of three years (described below).
20192022 Say on Pay Vote and Stockholder Outreach
At our 20192022 annual meeting of stockholders, our Say on Pay proposal received support from stockholders representing approximately 91%over 50% of our common stock present, in person or by proxy at the meeting voted to approve, on an advisory basis, the compensation of our named executive officers described in our 2019 proxy statement. Wemeeting. While we greatly appreciate the affirmative support of a majority of our stockholders with regard to our executive compensation program, our Compensation Committee also endeavors to understand the concerns of our stockholders who did not support our executive compensation program. We are committed to a corporate governance approach that aligns the interestinterests of management, the Board of Directors and our stockholders. In pursuitOver the course of this approach, in the fall of 2019 our investor relations department reached out to stockholders representing approximately 47% of our outstanding common stock to offer a meeting with the with2022, the Chairman of the Board, andalong with the Chairs of the Compensation Committee and the Governance and Nominating Committee to solicitsolicited feedback from stockholders representing approximately 46% of our outstanding common stock and from certain proxy advisory firms. These stockholders onand proxy advisory firms provided important feedback concerning our executive compensation and corporate governance matters. Our Chief Executive Officer provided a brief business update and participatedprogram.
1 Reductions in a discussion regardingNet Par Outstanding as of December 31, 2022 under the event driven natureSTIP were measured against Net Par Outstanding as of our business atJanuary 1, 2022. Gross Operating Run Rate Expense is measured by comparing actual gross operating run rate expenses in the outset of each meeting before excusing himself and turningfourth quarter to performance goals established against budgeted amounts.
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Ambac Financial Group, Inc. | 42 | 2023 Proxy Statement |
While the meeting over to the directors. The feedback on our executive compensation program was verygenerally favorable, with a number of stockholders expressingprovided input on certain changes they would like the view thatCompany to consider. As a meetingresult of the feedback received from stockholders, the Compensation Committee and the Board of Directors responded as follows:
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WHAT WE HEARD | WHAT WE DID |
Increase the weighting of the financial performance metrics in the Short Term Incentive Plan. | l | In 2023, we increased the weighting of the Short-Term Incentive Compensation Plan ("STIP") financial performance metrics from 60% to 70%, |
Place a greater emphasis on total stockholder return as part on of the compensation program. | l | Given the unique profile of our business (legacy business in run-off and a new and growing specialty P&C business), which presents certain challenges in identifying directly comparable peers, we maintained the impact of the rTSR modifier at +/- 20% with respect to our LTIP Awards in 2023 so that any final performance stock unit ("PSU") award payout at the end of the three year performance period may be increased or decreased by 20% if the Company's stock performance compared to the Company's peer group is at or above the 75th percentile or at or below the 25th percentile, respectively. |
Continued focus needs to be on the legacy Financial Guaranty business to drive value. | l | Re-evaluated the key de-risking initiatives for the legacy Financial Guaranty business with a focus on value enhancing initiatives including reductions in Net Par Outstanding and Watch List and Adversely Classified Credits as key metrics in the STIP and LTIP, respectively. |
The timeline for value creation must be considered and should impact and incentivize management judgements. | l | Introduced a comprehensive strategic review of AAC, on a time and risk adjusted basis, as a key performance goal connected to the STIP evaluation |
The Compensation Committee also made the following changes to the design of the 2023 compensation program, with an increased emphasis on the specialty P&C insurance business.
Changes to the 2023 Short Term Incentive Plan Design, include:
•Increase in the weighting of the financial performance metrics from 60% to 70%; and
•Inclusion of an additional financial performance metric for the specialty P&C insurance business with aggregate weighting increased to 50%.
Changes to the 2023 Long Term Incentive Plan Design, include:
•Increase in the PSU weighting related to results from the specialty P&C insurance business from 40% to 78.5% with a corresponding reduction in weighting of performance metrics related to our Boardlegacy financial guarantee business.
As we have indicated in prior years, as Ambac's specialty P&C insurance business continues to grow and committee chairs was unnecessary at the time because they were very satisfied withlegacy Financial Guaranty business progresses to a stable run-off, the Compensation Committee intends to shift the Company's executive compensation programperformance metrics to be more heavily weighted to the achievement of results in the specialty P&C insurance business. Nevertheless, as the legacy Financial Guaranty business remains a material part of Ambac's business and had no concerns about other governance matters.value, we will retain key metrics and goals, which we believe will be material determinants of delivering value to shareholders from the legacy Financial Guaranty businesses.
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Ambac Financial Group, Inc. | 43 | 2023 Proxy Statement |
Our Compensation Philosophy and Objectives
Our executive compensation program is designed to support achievement of our key business objectives. The Compensation Committee monitors and oversees all facets of the program, including incentive plan design, benchmarking, and the performance goal-setting process, and approves executive pay programs that tie a substantial portion of compensation to goal achievement. The Compensation Committee also retains the authority to make discretionary adjustments to further recognize overall Company performance and enhance alignment with stockholders and is committed to monitoring and adapting to evolving compensation standards. Specifically, our executive compensation program has the following objectives:
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Ambac Financial Group, Inc. |39 | 2020 Proxy Statement
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Objectives | Details |
Attract, retain and motivate executives and professionals of the highest quality and effectiveness | l | Provide compensation opportunities that are competitive with practices of other similar financial services organizations operating within the same marketplace for executive talent. |
Align pay with performance | l | A substantial portion of each executive’s total compensation is variable and performance-based. |
l | The design of our incentive plans focus on rewarding performance aligned with our key business strategies. |
Further align our executives’ long-term interests with those of our stockholders | l | Balance use of cash and equity based compensation, with a greater emphasis on the latter and short and long-term incentives that further align management's interests with those of our stakeholdersstockholders and support retention. |
Discourage excessive risk taking | l | Maintain policies that support good governance practices and mitigate against excessive risk taking. |
Determining Executive Compensation
The Compensation Committee bases current pay levels on numerous factors, including competitive pay practices in the financial services industry, the scope and complexity of the functions of each NEO’s role, the contribution of those functions to our overall performance, individual experience and capabilities, and individual performance. Any variations in compensation among our NEOs reflect differences in these factors. The Compensation Committee monitors the effectiveness of our compensation programs throughout the year and performs an annual reassessment of the programs at the beginning of the year in connection with year-end compensation decisions and future goal settings.
Compensation Consultants
The Compensation Committee has authority to retain compensation consulting firms to assist it in the evaluation of executive officer and employee compensation and benefit programs. The Compensation Committee retained Meridian Compensation Partners, LLC (“Meridian”), as its independent compensation consultant to advise on the 20192022 compensation cycle, which included year-end compensation decisions made in the first quarter of 2020.2023. Meridian provides an objective perspective as to the reasonableness of our executive compensation programs and practices and their effectiveness in supporting our business and compensation objectives. Specifically, Meridian advised the Compensation Committee with respect to compensation trends and best practices, incentive plan design, competitive pay levels, and individual pay decisions with respect to our NEOs. The Compensation Committee has assessed the independence of Meridian pursuant to applicable SEC rules and concluded that no conflict of interests exists that would prevent Meridian from independently advising the Compensation Committee.
Competitive Compensation Considerations
Because the competition to attract and retain high performing executives and professionals in the financial services industry is intense, the amount and composition of total compensation paid to our executives must be
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Ambac Financial Group, Inc. | 44 | 2023 Proxy Statement |
considered in light of competitive compensation levels. To help inform the Compensation Committee's compensation decisions for the NEOs for 2022, Meridian prepared a benchmarking analysis that compared the compensation levels for our NEOs to that of officers in comparable positions across a selected peer group of companies. However, we dothe Compensation Committee does not rely on this information to target any specific pay percentile for our NEOs. Instead, wethey use this information to provide a general review of market pay levels and practices and to ensure that we make informed decisions are made regarding our executive pay programs.
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Ambac Financial Group, Inc. |40 | 2020 Proxy Statement
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To helpits peer group is the consideration of asset value and enterprise value as these variables are the best indicators of the complexity of an organization and are most useful when considering competitive compensation packages for our NEOs. Each year the Compensation Committee determine compensation levelsreviews the Company's peer group and considers adjustments if appropriate. Key criteria used to assess current and potential peer companies include financial services industry sector focus (i.e., specialty insurance, specialty finance, property and casualty insurance, financial guaranty and run-off insurance), organizations that manage distressed assets, and organizations of similar size and scope (market capitalization, assets and enterprise value). Based on a review conducted in 2022 in preparation for the NEOs, Meridian prepared an analysis that compared the level of compensation for our NEOs and compensation paid to officers at comparable positions across an industry comparator group. In the 20192022 compensation cycle, we revised the list of peer companies toto: (i) be more reflective of Ambac's size, (ii) add more property and casualty insurance companies, (iii) reflect the event driven nature of our business and the risks we face, and(iv) capture the markets and businesses in which we operate. The companies that compriseoperate and (v) reflect the comparatormarket for executive talent. We expect our peer group were selected because we competecomparability will materially change in the same marketplace with these companies for highly qualifiedcoming years as we transition fully from our legacy financial guaranty business to our new specialty property and talented financial service professionals.casualty insurance business.
The table below provides summary financial information regarding Ambac and the comparator group used for the 20192022 compensation cycles.
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Comparator Group used for 2022 Compensation Cycle | Primary Industry | Market Capitalization ($ in millions) | | Assets ($ in millions) | | Enterprise Value ($ in millions) |
Argo Group International Holdings, Ltd. | Property & Casualty Insurance | $906 | | | $10,034 | | | $1,465 | |
Assured Guaranty Ltd. | Financial Guaranty Insurance | 3,733 | | | 16,843 | | | 5,896 | |
Enstar Group Limited | Reinsurance | 3,933 | | | 22,154 | | | 5,292 | |
Hanover Group, Inc. | Property & Casualty Insurance | 4,806 | | | 13,997 | | | 5,283 | |
HCI Group, Inc. | Property & Casualty Insurance | 347 | | | 1,803 | | | 416 | |
Horace Mann Educators Corporation | Multi-line Insurance | 1,528 | | | 13,447 | | | 2,859 | |
MBIA Inc. | Financial Guaranty Insurance | 705 | | | 3,375 | | | 4,047 | |
PRA Group, Inc. | Consumer Finance | 1,317 | | | 4,176 | | | 3,809 | |
ProAssurance | Property & Casualty Insurance | 943 | | | 5,700 | | | 1,361 | |
RLI Corp. | Property & Casualty Insurance | 5,957 | | | 4,767 | | | 6,148 | |
Selective Insurance | Property & Casualty Insurance | 5,351 | | | 10,802 | | | 6,090 | |
SiriusPoint Ltd. | Property & Casualty Insurance | 946 | | | 11,036 | | | 1,275 | |
White Mountains Insurance Group, Ltd. | Property & Casualty Insurance | 3,589 | | | 7,389 | | | 4,137 | |
Ambac Financial Group, Inc. (1) | | $784 | | | $7,973 | | | $5,670 | |
Percentile Rank vs. Peer Group | | 12 | % | | 44 | % | | 80 | % |
Note: Financial data reflects information available as of December 31, 2022 |
Source: S&P Capital IQ |
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Comparator Group used for 2019 Compensation Cycle | | Market Capitalization ($ in millions) | | Assets ($ in millions) | | Book Value ($ in millions) |
Assured Guaranty Ltd. | | $3,376 | | $14,326 | | $6,639 |
ECN Capital Corp. | | 983 | | 1,724 | | 734 |
Element Fleet Management Corp. | | 4,097 | | 13,438 | | 2,415 |
Enstar Group Limited | | 3,839 | | 19,363 | | 4,753 |
MBIA Inc. | | 596 | | 7,284 | | 826 |
MGIC Investment Corporation | | 4,161 | | 6,230 | | 4,309 |
Navient Corporation | | 2,171 | | 94,903 | | 3,336 |
Syncora Holdings Ltd. | | 36 | | 1,311 | | 481 |
Radian Group Inc. | | 4,219 | | 6,808 | | 4,049 |
Mr. Cooper Group Inc. (fka WMIH Corp.) | | 1,169 | | 18,305 | | 2,232 |
Ambac Financial Group, Inc. (1) | | $876 | | $13,451 | | $1,569 |
Percentile Rank vs. Peer Group | | 19% | | 56% | | 28% |
Note: Financial data reflects information available as of February 29, 2020 |
Source: S&P Capital IQ |
(1) Ambac's Enterprise Value includes the obligations of Variable Interest Entities for which Ambac or its subsidiaries are required to consolidate as a result of its financial guarantee insurance policies, plus its market capitalization, the value of all outstanding debt, preferred equity and total noncontrolling interests, less cash and cash and cash equivalents. | |
(1)
| Assets include $6,199 of assets relating to Variable Interest Entities for which Ambac or its subsidiaries are required to consolidate as a result of its financial guarantee insurance policies. |
The Role of Management in Determining Pay
Generally, our Chief Executive Officer reviews the competitive compensation data for each of the other NEOs, considers both individual, departmental and Company performance, measured against financial performance metrics and strategic performance goals established at the beginning of the year, and makes a recommendation to
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Ambac Financial Group, Inc. | 45 | 2023 Proxy Statement |
the Compensation Committee for base salary and annual short- and long-term incentive awards. The Chief Executive Officer typically participates in Compensation Committee meetings at the Compensation Committee’s request to provide background information regarding performance against the Company’s strategic objectives and to evaluate the performance of, and compensation recommendations for, each of the other NEOs.
The Committee utilizes the information provided along with input from the compensation consultant and the knowledge and experience of the Committee’s members in making compensation decisions. Our NEOs do not propose or seek approval for their own compensation. The Chairman of the Compensation Committee, with input from the Chairman of the Board of Directors, recommends the Chief Executive Officer’s compensation to the Compensation Committee. See "Directors, Executive Officers, and Corporate Governance"Governance."
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Ambac Financial Group, Inc. |41 | 2020 Proxy Statement
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Elements of Pay
Compensation for each of our NEOs is viewed on a total compensation basis and comprised of the following elements of pay:
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Compensation Element | Purpose |
Base Salary | l | Provides a minimum, fixed level of cash compensation to compensate executive officers for services rendered during the fiscal year that is competitive with organizations operating within the same marketplace for executive talent. |
Bonuses | l | While bonus payments are not regular part of Ambac's compensation mix, from time to time, the Compensation Committee may approve a special one-time bonus in recognition of an extraordinary outcome or promotion. |
Short Term Incentive Awards | l | Drive achievement of annual corporate goals, including key financial and operating results by setting pre-established financial performance targets and strategic performance goals at the Company. Annual STIP awards for 2019 wereare paid in cash. |
Long-Term Incentives | l | Further align executive officers’ interests with the interests of stockholders by rewarding increases in the value of our share price, and tying long-term incentive compensation to performance metrics that we believe to be important value-drivers for our stockholders. LTIP awards are strictly equity based and denominated in PSUs and RSUs. |
Post-Employment Benefits | l | lProvide certain severance benefits to our executive officers. See “--Post-Employment Benefits” and for a description of post-employment benefits payable to Messrs. LeBlanc, Trick and Ksenak, see “Agreement with Claude LeBlanc,” and “Agreements with Other Executive Officers."
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Perquisites | l | Provide a limited number of perquisites to all our employees, including our executive officers. |
Before year-end compensation decisions are made, the Compensation Committee undertakes a comprehensive review of all elements of each executive officer’s compensation. This review includes information on cash and non-cash compensation for the past four fiscal years (including current and prior year base salaries, short-term and long-term incentive awards and other awards), and the value of benefits and other perquisites paid to our executive officers, as well as potential amounts to be delivered under all post-employment scenarios.officers. This comprehensive review is designed to ensure that each member of the Compensation Committee has a complete picture of the compensation and benefits paid to each of our executive officers.
The following table shows the base salary and incentive compensation paid to our NEOs for their performance in 20192022 in the manner it was considered by the Compensation Committee. This presentation differs from that contained in the Summary Compensation Table by showing the value of the LTIP stock unit awards granted in 2023 for 2022 performance. The actual number of PSUs and RSUs granted was calculated based on thean average closing price of Ambac common stock on the NYSE for the twenty trading days immediately preceding the grant date, March 4, 20203, 2023 ($19.50)16.30), which were awarded based on 20192022 performance, but are not reflected in the Summary Compensation Table because of SEC rules on proxy statement disclosure.
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| | | | Long Term Incentive Plan | |
Name | Year | Salary ($) | Short Term Incentive Plan ($) | PSU Awards ($) | RSU Awards ($) | Total ($) |
Claude LeBlanc | 2019 | 900,000 |
| 1,657,000 |
| 2,418,750 |
| 806,250 |
| 5,782,000 |
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David Trick | 2019 | 750,000 |
| 580,000 |
| 637,500 |
| 212,500 |
| 2,180,000 |
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David Barranco | 2019 | 500,000 |
| 400,000 |
| 562,500 |
| 187,500 |
| 1,650,000 |
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Stephen M. Ksenak | 2019 | 600,000 |
| 425,000 |
| 487,500 |
| 162,500 |
| 1,675,000 |
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R. Sharon Smith | 2019 | 500,000 |
| 350,000 |
| 450,000 |
| 150,000 |
| 1,450,000 |
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Ambac Financial Group, Inc. |42 46 | 20202023 Proxy Statement |
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| | | | | Long Term Incentive Plan | |
Name | Year | Salary ($) | Bonus ($) | Short Term Incentive Plan ($) | PSU Awards ($) | RSU Awards ($) | Total ($) |
Claude LeBlanc | 2022 | 900,000 | | 1,827,000 | 2,677,500 | 1,147,500 | 6,552,000 |
David Trick | 2022 | 750,000 | | 663,100 | 647,500 | 277,500 | 2,338,100 |
David Barranco | 2022 | 500,000 | | 707,500 | 595,000 | 255,000 | 2,057,500 |
Stephen M. Ksenak | 2022 | 600,000 | 74,000 | 646,600 | 525,000 | 225,000 | 2,070,600 |
R. Sharon Smith | 2022 | 500,000 | 20,000 | 685,400 | 577,500 | 247,500 | 2,030,400 |
Pay Mix
A substantial portion of target total compensation is delivered through variable performance or equity based incentives that are at risk. As reflected in the table above and the graphs below, variable performance or equity based incentives constitute 84%86% of our CEO compensation mix and 66%72% of our NEO compensation mix.
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CEO Total Direct Compensation | | CEO Performance/Equity Based Incentive Compensation |
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Other NEOs Total Direct Compensation | | Other NEOs Performance/Equity Based Incentive Compensation |
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Ambac Financial Group, Inc. | 47 | 2023 Proxy Statement |
Base Salary.Base salaries are intended to reflect the experience, skill and knowledge of our executive officers and other senior professionals in their particular roles and responsibilities, while retaining the flexibility to appropriately compensate for fluctuations in performance, both of the Company and the individual. Base salaries for our executive officers and any subsequent adjustments thereto are reviewed and approved by the Compensation Committee annually, based on a review of relevant market data and each executive’s performance for the prior year, as well as each executive’s experience, expertise and position. The base salaries paid in 20192022 to each of our NEOs was: $900,000was unchanged from prior years. Mr. LeBlanc received a base salary of $900,000; Mr. Trick, $750,000; Mr. Barranco, $500,000; Mr. Ksenak, $600,000; and Ms. Smith, $500,000. Each of Messrs. LeBlanc, Trick and Ksenak is a party to Mr. LeBlanc; $750,000 to Mr. Trick; $500,000 to Mr. Barranco; $600,000 to Mr. Ksenak;an employment agreement with the Company that provides for a minimum annual base salary during the term of the respective agreement. See "Agreement with Claude LeBlanc," and $500,000 to Ms. Smith.“Agreements with Other Executive Officers.”
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Incentive Compensation.Incentive compensation is a key component of our executive compensation strategy. Our incentive compensation awards generally have two components: short term incentive compensationShort Term Incentive Plan awards (consisting of an annual cash incentive award)awards) and Long Term Incentive Plan awards.awards (which are equity-based). Annual decisions with regard to incentive compensation are generally made in February of each year, following Compensation Committee meetings in December and January.year. Incentive compensation payouts can be highly variable from year to year.year, is at risk, subject to performance criteria and impacted by the value of Ambac's common stock.
Short Term Incentive Compensation.Compensation. Annual incentives for our NEOs are meant to reward performance. Sixty percent (60%) of NEO 20192022 short term incentive compensation awards were measured against pre-established financial performance targets at the Company related to: (i) gross written premium at Everspan; (ii) reductions in Watch ListNet Par Outstanding in the legacy financial guarantee insured portfolio and Adversely Classified Credits, (ii)(iii) reductions in Gross Operating Run Rate Expenses, and (iii) increases in Net Asset Value.Expenses. These metrics were chosen because the Compensation Committee believed that they would be the key drivers of stockholder value in 2019. 2022.
The remaining forty percent (40%) of the short term incentive compensation award is based on otherstrategic performance considerations, includinggoals, more than fifty percent (50%) of which can be reviewed against objective, quantifiable or financial outcomes. See "Compensation for Each of Our Named Executive Officers in 2022 - Strategic Performance Goals." These goals include formula driven financial performance targets as well as the following strategic goals:
•Continue to actively identify potential actionablenew business unit resultsopportunities to engage and individual performance. pursue that meet Board approved criteria, and are consistent with the Company's specialty property and casualty insurance strategy.
•Effective litigation management;
•Active de-risking and ongoing rationalization of Ambac's capital and liability structures; and
•Continue to increase organizational effectiveness, efficiency of the operating platform, and simplification of business controls, policies and procedures without increasing operational risk.
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Ambac Financial Group, Inc. | 48 | 2023 Proxy Statement |
The Compensation Committee believes that it is important to retainestablish strategic performance goals, a substantial levelmajority of discretion with respect to other performance considerationswhich are based on objective, quantifiable or financial outcomes, because of the uncertainties associated with our mainlegacy operating subsidiaries, AAC and Ambac U.K.,UK, which are not writing new business and are in runoff. Our inability to pay discretionary annual incentive awards could have a material adverse impact onrunoff, and Ambac’s strategic shift towards growing our ability to attract, motivate and retain high-quality and talented executives. specialty P&C insurance platform.
The Compensation Committee assigns to each NEO an annual target incentive opportunity, expressed as a percentage of eligible earnings (base salary amount paid during the year), which is based on the executive’s position and the scope of responsibilities. Target annual incentives (as a percent of base salary) for the NEOs for 20192022 were set as follows: 100%125% for the Chief Executive Officer; and between 55% for the Chief Financial Officer; and 50%85% for each of the other NEOs. Actual incentive payouts can range from 0% to 200% of target for the Chief Executive Officer, and from 0% to 150%each of target for the other NEOs based on the Compensation Committee’s review of overall corporate performance and individual and business unit achievement relative to the pre-establishedfinancial performance targets and strategic performance goals and objectives set forthnoted above.
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Key Changes in 20202023 to Short Term Incentive Program: For the 20202023 performance year, in order to address certain shareholder concerns about overlapping metrics between the STIP and LTIP programs, the Compensation Committee replacedamended the financial performance metrics of the STIP to include Everspan performance, weighted at 25%; Cirrata Group performance, weighted at 25%; reductions in Net Par outstanding in the insured portfolio, weighted at 10%; and reductions in Gross Operating Run Rate Expenses, weighted at 10%. In addition, the Committee amended the strategic performance goals to add AAC value realization; the expansion of Ambac's internal shared services platform, 220 Business Services; and eliminated the metric related to loss recovery through effective litigation management. The Committee also increased the weighting of the STIP financial performance metrics relatedfrom 60% to Watch List and Adversely Classified Credits, and Net Asset Value, with a new metric focused on reductions to the Net Par Outstanding of insured exposures.70%. |
Long Term Incentive Compensation.Compensation. Our LTIP awards focus on the attainment of long term performance goals and objectives, which are deemed instrumental in creating long term value for stockholders and long term retention incentives for our executives. The Compensation Committee reviews the LTIP targets each year for competitive alignment. The Compensation Committee also reviews market trends related to the award mix and determines the appropriate mix of equity instruments considering market benchmark data.
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Ambac Financial Group, Inc. | 49 | 2023 Proxy Statement |
In the first quarter of each year, LTIP compensation awards (which related(the size of which relates to the prior year's performance) are granted to our NEOs. Beginning in 2018, we eliminatedIn 2022, the "retesting" feature inCompensation Committee revised the Long-Term Incentive Compensation Program that allowedLTIP performance metrics to better align management's goals with certain key drivers of stockholder value: risk reduction and the achievement of certain EBITDA goals at AAC to be measured by the greater of two metrics: an improved asset liability ratio ("ALR") or improved Net Asset Value over a three year performance period.Everspan and Xchange. LTIP awards granted in 2019 that relate to AAC performance2022 will be measured based on (i) reductions in Watch List and Adversely Classified Credits at AAC weighted at 45%60% and (ii) improvements in Net Asset Value weighted at 25%. The portion of the 2019 LTIP award that relates to Ambac performance will be measured based on the achievement of a certain level of Cumulative EBITDA targets at at Everspan and Xchange each weighted at 30%20%. In addition, beginning in 2019, we added a relativethe 2022 LTIP awards were amended to increase the impact of the Total Shareholder Return ("rTSR") modifier which serves as an additional metric with respect to ourperformance based LTIP award payouts. The rTSR modifier willfor 2022 LTIP awards can cause any final PSU award payout at the end of a three year performancesettlement period to be increased or decreased by 10%20% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively.
LTIP awards in 20192022 were denominated 67%70% in performance stock units (“PSUs") and 33%30% in restricted stock units ("RSUs"). PSUs represent a promise
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Ambac Financial Group, Inc. |44 | 2020 Proxy Statement
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to deliver, within 75 days after the end of a three-year performance period, a number of shares of Ambac’s common stock ranging from 0% to 200% (not including any adjustment that may be applied pursuant to the rTSR modifier) of the amount of the initial grant, depending on the achievement by either Ambac or its principal operating subsidiary, AAC, of financial performance objectives determined by the Compensation Committee at the time of the grant. The RSUs are time basedtime-based awards and were granted in order to encourage the retention of our most valued employees. The RSUs granted as part of the 20192022 LTIP awards represent the right to receive an equivalent number of shares of Ambac’s common stock and will vest and settle in three equal annual installments in JanuaryFebruary of 2020, 2021,2023, 2024 and 2022.2025.
The Compensation Committee determined the target value of the 20192022 LTIP awards granted to each of our NEOs based on the Company’s overall results, the individual executive’s contribution to overall performance, external market benchmark data and the proportion of total compensation comprised of LTIP awards. In addition, in setting target value of the 20192022 LTIP awards granted to Messrs. LeBlanc, Trick and Ksenak, the Committee considered the terms and conditions set forth in their respective employment agreements. See "Agreement with Claude LeBlanc," and "Agreements with Other Executive Officers.”
For each of our NEOs, the Compensation Committee determined to weight the LTIP awards granted in March 2019 as follows: 70% of the award based on performance at AAC (an “AAC LTIP Target Award”) and 30% of the award based on performance at Ambac (an “Ambac LTIP Target Award”).
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Key Changes to Long Term Incentive Program for 20202023 LTIP Grants: In 2020, theThe Compensation Committee revised the LTIPPSU performance metrics to better align management's goals with certain key drivers of shareholder value: risk reduction,focus on new business growth at Everspan and managing the event driven nature of Ambac's business. LTIPCirrata Group. PSU awards granted in 20202023 will be measured based on AAC performance only with (i) reductionsthe achievement of certain goals related to cumulative gross written premium and cumulative EBITDA at each of Everspan and Cirrata Group. Reduction in Watch List and Adversely Classified Credits weighted at 70% and (ii) improvements in Net Asset Value weighted at 30%. Cumulative EBITDA at Ambac was eliminated as a performance metric. Whileretained for the payout of PSUs granted pursuant to the 2020 LTIP awards will not settle for a three year period and be subject to the rTSR modifier, the measurement period for determining the achievement of goals against the pre-set metrics was shortened to two years to create a better alignment between Company performance and management compensation. In addition,2023 Long Term Incentive Program. LTIP awards in 20202023 were denominated 75%70% in PSUs and 25%30% in RSUs. |
AAC | | |
Ambac Financial Group, Inc. | 50 | 2023 Proxy Statement |
LTIP MetricMetrics. The metrics used to judge performance at AAC for LTIPPSU awards granted in March 2019February 2022 are reductions in Watch List and Adversely Classified Credits and an improved Net Asset Value over a three-year performance period which runs from January 1, 2019 until December 31, 2021 (the “Performance Period”). Within the2 at AAC performance metrics, reductions in AAC's Watch List and Adversely Classified Credits are weighted at 45%60% and increases in AAC's Net Asset Value isthe achievement of certain cumulative EBITDA goals at Everspan3 and Xchange4 each weighted at 25%20%.
Adversely Classified Credits represent credits that are either in default or have developed problems that eventually may lead to a default. Watch List credits represent credits that demonstrate heightened potential for future adverse development based on qualitative and quantitative stress assumptions.
The Net Asset Value is calculated by reducing Assets by Liabilities, determined as of the last day of the performance period.
For purposes of the Net Asset Value calculation, “Assets” shall mean the sum of the following: (i) cash and cash equivalents, (ii) invested assets at fair value (except for Ambac-insured investments which will be measured at amortized cost and excluding the Secured Note issued in 2018 in connection with AAC's restructuring as it is included in liabilities), (iii) loans, (iv) investment income due and accrued, (v) net receivables (payables) for security sales (purchases), (vi) tax tolling payments or dividends made by AAC to Ambac during the Performance Period, (vii) cash, cash equivalents and securities pledged as collateral to counterparties, and (viii) other receivables.
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Ambac Financial Group, Inc. |45 | 2020 Proxy Statement
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“Liabilities” shall mean the sum of the following: (i) the present value of future probability weighted financial guarantee claims and CDS payments reduced by recoveries, including probability weighted estimated subrogation recoveries and reinsurance recoverables, using discount rates in accordance with GAAP ("Gross Claim Liability" or "GCL"), (ii) fair value of interest rate derivatives (prior to any AAC credit valuation adjustments), (iii) par value and accrued interest of all outstanding surplus notes of AAC (including junior surplus notes), (iv) par value and accrued interest on the Ambac Note and Tier 2 debt issued in 2018 in connection with AAC's restructuring (net of par value and accrued interest on AAC's holdings of the Secured Note), (v) accreted value of Ambac Assurance UK Limited debt, (vi) the liquidation value of outstanding preferred stock, and (vii) any other debt. Liabilities will also include the par and accrued interest on any new debt obligations issued in the future.
Additionally, the Net Asset Value will: (i) neutralize the effects of claim payments, ART Transaction payments, loss expense payments, advisor payments and the establishment of loss and loss expense reserves for credits that do not have a GCL at the beginning of the performance period, (ii) measure AAC's foreign subsidiaries utilizing the foreign exchange rate at the beginning of the performance period, (iii) add back capital restructuring and ongoing oversight costs of the Office of the Commissioner of Insurance of Wisconsin ("OCI") during performance period, and (iv) add back direct costs of risk remediation activities (including ART Transactions, and any sale of AUK or other disposition which has been structured as an ART Transaction) with respect to credits within Watch List or Adversely Classified Credits.
The following table sets forth the percentage of the AAC LTIP Target Award2022 PSU target award that each of our named executive officers could earn under the 2019 LTIP awards based on improvements in NAV and on reductions in Watch List and Adversely Classified Credits determined2022 PSU award agreement as of the last day of the Performance Period.three year performance period.
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Percentage of LTIP PSU Target Award Earned | | Cumulative EBITDA | | Watch List and Adversely Classified Credits ($ in billions) (*) |
| at Everspan ($ in millions) (*) | at Xchange ($ in millions) (*) | |
200% | | $8.5 | $33.3 | | $5.3 |
100% | | $4.5 | $26.6 | | $6.0 |
0 | | $0.0 | $20.0 | | $6.7 |
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Percentage of AAC LTIP Target Award Earned | | Net Asset Value ($ in millions) (1) | | Watch List and Adversely Classified Credits ($ in billions) (1) |
200% | | $(180) | | $11.50 |
100% | | $(380) | | $13.50 |
0 | | $(580) | | $15.00 |
(1) Linear interpolation between levels of Net Asset Value and Watch List and Adversely Classified Credits will result in a proportionate amount of the AAC LTIP Target Award becoming earned and vested. |
Ambac LTIP Metric. The metric used to judge performance at Ambac for LTIP awards granted in March 2019 is(*) Linear interpolation between levels of Cumulative EBITDA over the Performance Period. Ambac’s "Cumulative EBITDA" means Ambac’s earnings before interest, taxes, depreciation, amortization,at each of Everspan and non-controlling interests (as determined under GAAP) for the Performance Period. The choiceXchange and Watch List and Adversely Classified Credits will result in a proportionate amount of the Cumulative EBITDA metric is intended to reward participants on generating income from all of Ambac's subsidiaries excluding AACPSU target Award becoming earned and its subsidiaries.*
Cumulative EBITDA shall be adjusted for the effects of: (i) advisor and deal/transaction related costs related to capital and/or merger and acquisition transactions above budgeted amounts, (2) cost of post-employment guarantees, (iii) cost and impact of AAC and Ambac share repurchases, (iv) changes to Board fees and Board imposed expenses, (v) litigation and defense costs and any potential litigation gains in excess of damages incurred, (vi) (cost)/benefit of performance based compensation (above) or below target amounts, and (vii) any other costs as determined in the sole discretion of the Board.
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* | Upon the execution of a material transaction or acquisition by Ambac, revised Cumulative EBITDA metrics will be established by the Compensation Committee to incorporate performance goals for such material transaction or acquisition. |
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Ambac Financial Group, Inc. |46 | 2020 Proxy Statement
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The following table sets forth the percentage of the Ambac LTIP Target Award that each of our NEOs could earn under the 2019 LTIP awards based on the Cumulative EBITDA achieved over the Performance Period, determined as of the last day of the Performance Period.
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Ambac’s Cumulative EBITDA ($ in millions) (1) | Percentage of Ambac LTIP Target Award Earned |
$35.0 | 200% |
$20.0 | 100% |
$0 | 0% |
(1) Linear interpolation between levels of Cumulative EBITDA will result in a proportionate amount of the Ambac LTIP Target Award becoming earned and vested. |
vested.Following the end of the Performance Period, the Compensation Committee will determine the extent to which each participant’s LTIPPSU award has been earned and the amount payable. The Compensation Committee may, in the exercise of its discretion, reduce the amount of any LTIPPSU award that otherwise would have been earned based on the satisfaction of the performance metrics, but may not increase the size of any LTIPPSU award.
The purpose of the LTIP awards is to further align the long-term interests of our NEOs with those of our stockholders. We believe we have achieved this objective by making the vesting of the LTIP awards conditional upon Ambac achieving certain milestones that the Company believes will have a positive effect on the future value of our common stock. In addition, the ultimate value of the PSUs and RSUs directly depends on the value of our common stock at the time of vesting. Each individual who receives a PSU or RSU becomes, economically, a long-term stockholder of the Company, with the same interests as our other stockholders. As a result, we believe our NEOs have a demonstrable and significant interest in increasing stockholder value over the long term.
Bonus.While bonus payments are not regular part of Ambac's compensation mix, in 2022 Mr. LeBlanc recommended that special one-time bonuses be paid as performance outcome adjustments to Mr. Ksenak and Ms. Smith based on his assessment of their respective individual contributions to the strategic performance goals that were assigned to him by the Compensation Committee.
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2 Adversely Classified Credits represent credits that are either in default or have developed problems that eventually may lead to a default. Watch List credits represent credits that demonstrate heightened potential for future adverse development based on qualitative and quantitative stress assumptions.
3 Cumulative EBITDA at Everspan is calculated by taking 100% of Everspan Group’s earnings before interest, taxes, depreciation and amortization (calculated in accordance with US GAAP as in effect at beginning of the Performance Period) through the end of the performance period. Cumulative Everspan EBITDA shall be adjusted to exclude the impact of any other costs as determined in the sole discretion of the Board of Directors.
4 Cumulative EBITDA at Xchange is calculated by taking 100% of Xchange’s earnings before interest, taxes, depreciation and amortization (calculated in accordance with US GAAP as in effect at beginning of the performance period) through the end of the performance period. Cumulative Xchange EBITDA shall be adjusted to exclude the impact of retention payments to Xchange employees in connection with the acquisition by Ambac; M&A EBITDA or any associated costs; and any other adjustments as determined in the sole discretion of the Board of Directors.
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Ambac Financial Group, Inc. |47 51 | 20202023 Proxy Statement |
Compensation for Each of Our Named Executive Officers in 20192022
Our Chief Executive Officer
Mr. LeBlanc. Effective January 1, 2017, Claude LeBlanc was appointed President and Chief Executive Officer of Ambac and AAC. The Board believed that Mr. LeBlanc's significant experience and success over his career holding senior leadership functions overseeing strategy, corporate development, finance and risk, as well as his prior role actively leading the global remediation and asset recovery initiatives at Syncora Holdings Ltd., evaluating strategic alternatives and overseeing all aspects of Syncora's finance function, made him uniquely qualified to lead Ambac. Following extensive negotiations, the Compensation Committee, which received input and advice from its nationally recognized independent compensation consultant, Meridian Compensation Partners, LLC, authorized the Company to enter into an employment agreement with Mr. LeBlanc on December 8, 2016.2016, and amended on February 26, 2020. Pursuant to the employment agreement, as amended, Mr. LeBlanc has beenis paid an annual base salary of $900,000. On February 26, 2020, the Compensation Committee approved certain amendments to theThe employment agreement to providealso provides that Mr. LeBlanc would beis eligible to receive (i) a target annual STIP award set at no less than 100% of his base salary and (ii) a target annual long-term incentive award set at no less than 150% of his base salary, as determined in the discretion of the Compensation Committee.
The Short Term Incentive Plan is a blend of financial performance metrics and strategic performance goals, over 80% of which are, in the aggregate, objective and/or quantifiable. These goals include formula driven financial performance targets as well as strategic goals to de-risk the insured portfolio; effectively manage loss recovery through litigation; increase organizational effectiveness; and identify and pursue new business opportunities that meet Board approved criteria.
Sixty percent (60%) of the STIP award paid to Mr. LeBlanc for 20192022 was based on the achievement of the financial performance goals set forth below that were established by the Compensation Committeemetrics related to: (i) gross written premium at the beginning of 2019. The relative weighting for each of these financial performance metrics was as follows: improvementsEverspan weighted at 20%; (ii) reductions in Net Asset Value 15%;Par Outstanding in the legacy financial guaranty insured portfolio weighted at 60%, and (iii) reductions in Gross Operating Run Rate Expenses 15%;weighted at 20%.
The remaining forty percent (40%) of the STIP award paid to Mr. LeBlanc was based on the achievement of strategic performance goals established by the Compensation Committee for both the legacy financial guaranty business and reductionsthe growing specialty P&C insurance business. A majorityof these strategic performance goals are objective and/or quantifiable.
Given Ambac’s evolution and growing specialty P&C insurance platform, the Compensation Committee decided to increase the weighting in Watch List and Adversely Classified Credits 30%.STIP of the financial performance metrics compared with the strategic performance goals in 2022.
Performance Against STIP Metrics. Mr. LeBlanc’s target STIP was set at $1,125,000.On a blended basis, weighting the financial performance metrics at 60% and the strategic performance goals at 40%, Mr. LeBlanc's STIP award multiplier was set at 1.625x target, and he was granted a 2022 STIP award of $1,827,000, which was an increase from his 2021 STIP award of $1,699,000, which was based on a multiplier of 1.51x target. Described below are the metrics, performance goals and final measured outcomes used in determining Mr. LeBlanc’s award.
For the 20192022 fiscal year, we established the following goalstargets for each of our STIP financial performance metrics and assigned the following weighting factors:
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($ in millions) | Weighting Factor | Threshold ($ in millions) | Target ($ in millions) | Maximum ($ in millions) |
Net Par Outstanding | 60% | $24,900 | $24,200 | $23,200 |
Gross written premiums at Everspan | 20% | $125 | $160 | $175 |
Gross Operating Run Rate Expenses | 20% | $17.4 | $16.9 | $16.5 |
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($ in millions) | Weighting Factor | Threshold ($ in millions) | Target ($ in millions) | Maximum ($ in millions) |
Watch List and Adversely Classified Credits | 30% | $17,945 | $17,195 | $16,672 |
Gross Operating Run Rate Expenses | 15% | $17.8 | $17.2 | $16.6 |
Net Asset Value | 15% | $(85) | $(43) | $-0- |
The 2022 Gross Operating Run Rate Expense ("GORRE") target was higher than the target for 2021 ($16.7 million). The year-over-year increase in the target GORRE resulted from a change in budgeted performance compensation targets and grants, and the impact of inflation on budgeted expenses, such as healthcare, corporate insurance, audit services and other operating costs, which collectively outweighed the impact of other budgeted
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Ambac Financial Group, Inc. |48 52 | 20202023 Proxy Statement |
cost reductions. The 2023 GORRE target has been set to reflect materially lower expenses as compared to the 2022 target.
The following graph/charts shows the Company's 20192022 actual performance compared to the threshold, target and maximum achievement levels as established for each of the financial performance metrics.
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Watch List and Adversely
Classified Credits Net Par
| | Gross Operating
Run Rate Expenses
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Net Asset Value
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Gross Written Premiums at Everspan | ThresholdNet Par Outstanding | Gross Operating Run Rate Expenses |
($ in Millions) | Target($ in Billions) | | Maximum | - - - - | Actual($ in Millions) |
With respect to the reductions in Watch List and Adversely Classified Credits and improvements in Net Asset Value, under | | | | | | | | | | | | | | | | | | | | | | | |
| Threshold | | Target | | Maximum | ------ | Actual |
Under Mr. LeBlanc's leadership in 2019,2022, Ambac exceeded the maximum performance goal setgoals for each of these metrics. Credits that were onreducing Net Par Outstanding and reducing Gross Operating Run Rate Expenses. With respect to gross written premiums at Everspan, we finished the watch list or adversely classifiedyear below target, but exceeded threshold performance. Ambac's Net Par Outstanding at the beginning of the performance period wereof $28.0 billion was reduced to $14.27 billion net par outstanding, and Net Asset Value$22.9 billion. Gross written premiums at year-end was $273.7Everspan for the full year 2022 were $146.4 million. Gross Operating Run Rate Expenses for the fourth quarter of 20192022 were reduced to $16.8$16.3 million. Applying the appropriate weighting to each performance metric as set forth above and using the appropriate payout levels for STIP awards under Mr. LeBlanc's employment agreement, the Committee assigned a 1.921.76 multiplier to the financial performance portion of Mr. LeBlanc's 2019target STIP award.award for 2022.
OtherStrategic Performance Considerations. Goals. In determining the other forty percent of Mr. LeBlanc's 20192022 STIP award, the Compensation Committee gave consideration to the Company’s results against the followingstrategic performance goals and objectives,described below, which were communicated to Mr. LeBlanc in the first quarter of 2019:
Active derisking and ongoing rationalization of Ambac's and its subsidiaries' capital and liability structures;
Effective management of loss recovery through active litigation and exercise of contractual and legal rights;
Continue to increase organizational effectiveness, efficiency of the operating platform and simplification of business controls, policies and procedures without increasing operational risk; and
Develop structured process to pursue opportunities in certain business sectors; source and evaluate potential new business opportunities for Ambac.2022.
For each of these performance goals and objectives the Compensation Committee assigned a relative weighting based on itsthe current importance of such performance goals to the Company, andwith an aggregate total weighting of 100%. To assess results against these performance goals, the Committee utilized a qualitativedefinitive score card approach in its evaluationmethodology to achieve a consistent, and informedformula driven ratings process. In reviewing each of these performance goals and objectivesScore results were determined by the Committee consideredfor each category and could range from 0-5, with 0 to 1 indicating results that were below the following achievements, under Mr. LeBlanc’s leadership, in determininganticipated outcomes; a score between 2 and 3 indicating results were slightly below to slightly above the amount of Mr. LeBlanc's 2019 STIP Award:
Successful runoff of AACanticipated outcomes; and its subsidiaries through activea score between 4 and material transaction terminations, policy commutations, execution of reinsurance transactions, settlements and restructurings;
5 indicating results that exceeded or far exceeded the anticipated outcomes.
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Ambac Financial Group, Inc. |49 53 | 20202023 Proxy Statement |
The strategic performance goals for each category can be further bifurcated between (i) objective, quantifiable or financial performance goals to which the defined scorecard methodology is applied and (ii) well defined strategic goals relating to key components of the Company’s reported strategic priorities, to which the defined scorecard methodology is also applied.
After measuring and calculating the actual results against the strategic goals outlined herein, some of which are set forth below, the Committee utilized the pre-defined scorecard methodology to arrive at a performance rating for each category. The performance ratings were then applied against the pre-determined weightings outlined herein to arrive at a formulaic outcome for the Chief Executive Officer that was not subject to any override or adjustments.
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Strategic goals related to active de-risking and ongoing rationalization of Ambac's capital and liability structures, as well as organizational effectiveness were weighted at 20%, and included among other things |
Goals | Results |
✓ Active De-Risking at the Legacy Financial Guarantee business | ◦Total net par down $5.4 billion or 19% through December 31, 2022 (compared with an 17% reduction in full year 2021); ◦Watch List and Adversely Classified Credits’ down $2.4 billion or 24% through December 31, 2022 (compared with an 23% reduction in full year 2021); and ◦Final resolution of restructuring of all remaining Puerto Rico exposures resulting in, among other things, a cumulative reduction at year-end of $9.3 billion of insured P&I or 91% since 2019. |
✓ Ongoing rationalization of Ambac's and its subsidiaries' capital and liability structures. | ◦AAC redeemed $1.2 billion of Sitka Notes and $212 million of Tier II Notes; ◦AAC repurchased $602 million of principal and accrued interest of surplus notes (including $122 million from AFG) capturing $162 million of discount; ◦AAC repurchased Auction Market Preferred Shares with a liquidation preference of $23 million capturing approximately $15 million of discount ◦AFG Repurchased 1.6 million shares of Ambac common stock at an average price of $8.86 per share. |
✓ Continue to increase organizational effectiveness, efficiency of the operating platform and simplification of business controls, policies and procedures without increasing operational risk | ◦Launch of implementation of Cirrata’s IT platform to support growth of MGA/MGU businesses; ◦Implementation of robust cybersecurity infrastructure to ensure the integrity and security of Ambac’s systems, protect against emerging threats, Data Loss Prevention, provide for 24x7 Security Operations Center monitoring and ensure compliance with all regulatory requirements; ◦Build-out of ERM framework for Xchange and Everspan; and ◦Advancement of internal controls over financial reporting readiness for both Everspan and Xchange. |
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Strategic goals related to new business activities were weighted at 60%, and included among other things |
Goals | Results |
✓ Overall New Business ◦Stand up Business Services platform ◦Continue to manage deal pipeline of new business initiatives ◦Materially advance de novo/additional MGA acquisition strategy | ◦Acquisition of All Trans and Capacity Marine, representing approximately $60 million of expected premium placed for Cirrata ◦Announced the incubation of PenPoint Specialty Insurance Services LLC, Ambac's first de novo MGA ◦Xchange Benefits, LLC acquired the renewal rights of Employer Benefit Underwriters, Inc.’s employer stop loss portfolio |
✓ Everspan ◦Program Onboarding ◦Actively manage and facilitate AM Best relationship and maintain AM Best A- rating ◦Actively pursue P&C license expansion ◦Develop strategic relationships with MGAs to bolster Everspan growth |
◦Everspan added 8 new MGA programs in 2022 and generated $146 million of gross premiums ◦Everspan successfully renewed its AM Best A- rating and Class VIII designation ◦Material expansion of Everspan’s admitted licensing capabilities across 5 admitted carriers for all 50 states |
Shepherded through the COFINA Plan of Adjustment, including certain related commutation transactions, and subsequent distributions, which became effective on February 12, 2019, and subsequent redemptions of obligations of the COFINA Class 2 Trust materially reducing Ambac’s Puerto Rico exposure;
Completed the Ballantyne restructuring and commutation, one our largest credit exposures in Ambac UK, significantly reducing our Adversely Classified Credit exposure and strengthening Ambac UK’s Solvency II capital position to near required levels;
Materially decreased our insured portfolio by 19% to $38.0 billion at December 31, 2019;
Watch List and Adversely Classified Credit reduction of 28% in 2019 to $14.3 billion as of December 31, 2019; and
Executed additional headcount and other cost reductions including the consolidation of space for the New York headquarters. | | | | | |
Strategic goals related to litigation strategy were weighted at 20%, and included among other things |
Goals | Results |
✓ Effective Litigation Management ◦Progress toward resolution of main Countrywide case ◦Materially advance or resolve other Bank of America related litigations and Nomura litigation | ◦Settled legacy RMBS litigations with Bank of America for $1.84 billion ◦Settled litigation with Nomura Credit & Capital, Inc. for $140 million |
The Committee considered each of the strategic performance goals and objectivesoutlined above in evaluating Mr. LeBlanc's overall performance, and concluded that on an aggregate basis he had exceeded target expectations and assigned a 1.72score from 0-5 for each goal and then applied the scores to the relative weightings assigned to the performance goals at the beginning of 2022 to arrive a 1.42 multiplier to the discretionarystrategic performance portiongoals for Mr. LeBlanc's target 2022 STIP award. Weighting this multiplier at 40% and the 1.761 multiplier for the financial performance goals at 60% of Mr. LeBlanc's 2019target STIP award. On a blended basis weighting the discretionary performance metrics at 40% and financial performance metrics at 60%,award for 2022 produced an overall multiplier of 1.625 times target for Mr. LeBlanc's 2022 STIP award.
LTIP Award. In addition to his STIP award, multiplier was set at 1.84 x target, and he was granted a 2019 STIP award of $1,657,000. In addition,in 2023 Mr. LeBlanc received an LTIP award denominated 100% in stock units with an aggregate target value of $3,225,000$3,825,000, primarily reflecting Mr. LeBlanc's outstanding leadership and performance in,focus on executing the Company's strategic priorities through the challenges and uncertainties of 2022, including, among other things, shepherding throughthings:
•Reduced debt and accrued interest by $1.8 billion resulting in a $150 million discount capture;
•Reported $249 million gains related to conclusionRMBS representation and warranty litigation settlements;
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•Specialty P&C Insurance production, which includes gross premiums written by Ambac's Specialty P&C Insurance segment and premiums placed by the COFINA PlanInsurance Distribution segment, totaled $90 million in the fourth quarter of Adjustment,2022, an increase of 172% from the fourth quarter of 2021 and $282 million for the full year 2022 up 116% over the prior year; and
•Decreased our insured portfolio net par outstanding at AAC and its subsidiaries by 19% to $22.6 billion from year-end 2021 including the restructuring for all remaining Puerto Rico exposures.
Any payout under the 2023 LTIP awards is completely formula driven based on the achievement of Ballantyneobjective and leadingquantifiable financial performance metrics against pre-set targets at the Ambac management team in significantly de-risking the insured portfolio.end of a three-year performance period. The Compensation Committee believes it struck the right balance between paying for current performance, on the one hand, and the desire to keep Mr. LeBlanc focused on the Company’s long-term performance and continued growth, on the other hand.
Other Named Executive Officers
Performance Against STIP Performance Metrics and OtherStrategic Performance Considerations.Goals.
The Compensation Committee reviewed the Company's actual performance against each of the financial performance metrics set forth above, and after applying the appropriate weighting to each metric, the Committee assigned a 1.46the same multiplier as that of Mr. LeBlanc to the financial performance portion of each NEOs 2019NEO's 2022 STIP award (other than Mr. LeBlanc).award.In determining the other forty percent of the 20192022 STIP award for each of the NEOs (other than Mr. LeBlanc), Mr. LeBlanc reviewed with the Compensation Committee the performance of each NEO individually and their overall contribution to the Company in 2019. 2022.In this process, Mr. LeBlanc assigned the same strategic performance goals and objectives to each of the NEOs that were assigned to him by the Compensation Committee, but individually adjusted the relative weighting based on each executive officer's lineareas of sightresponsibility and responsibility.influence. In addition, Mr. LeBlanc utilized the same score card approach as the Committee in his evaluation of each NEO in an effort to achieve a consistent ratings process. He also recommended certain adjustments reflecting his view of the NEOs' contributions and influence regarding the outcomes for the strategic performance goals delineated in the score card. In addition, Mr. LeBlanc recommended that special one-time bonuses be paid as performance outcome adjustments to Mr. Ksenak and Ms. Smith based on his assessment of their respective individual contributions to the aforementioned performance goals that were assigned to him by the Compensation Committee. Based on the recommendation of Mr. LeBlanc, the Committee approved the 20192022 STIP awards, special one time bonuses, and 20202023 LTIP awards granted to each of Messrs. Trick, Barranco and Ksenak, and Ms. Smith.
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Pay."
Performance against 20162019 LTIP metrics.
In 2016,2019, we established the following three year goals for each of our LTIP performance metrics and assigned weighting factors based on each NEOsNEO's areas of responsibility. In addition, the Company incorporated a relative Total Stockholder Return modifier ("rTSR") that may adjust any calculated payout by 10%, either upwards or downwards, based on AFG’s rTSR percentile ranking for the performance period against a peer group.
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At AAC | | At Ambac | Percentage of Target Award Earned |
Net Asset Value (1) ($ in millions) | Watch List and Adversely Classified Credits Outstanding(1) ($ in billions) | | Cumulative EBITDA (1) ($ in millions) |
|
$(180) | $11.5 | | $35 | 200% |
$(380) | $13.5 | | $20 | 100% |
$(580) | $15.0 | | $— | —% |
(1) Linear interpolation between levels results in a proportionate amount of the Ambac LTIP Target Award becoming earned and vested.
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At AAC the Greater of | At Ambac | |
Asset to Liability Ratio (1) | Net Asset Value (1) ($ in millions) | Cumulative EBITDA (1) ($ in millions) | Percentage of Target Award Earned |
100% | $0 | $19 | 200% |
94% | $(349) | $16 | 175% |
89% | $(655) | $13 | 150% |
84% | $(979) | $6 | 100% |
79% | $(1,337) | $— | 0% |
(1) Linear interpolation between levels results in a proportionate amount of the Ambac LTIP Target Award becoming earned and vested. |
At AAC performance is judged based on the higher of the Asset to Liability Ratio or the(i) increases Net Asset Value (this dual testing feature was eliminatedweighted at 25% and (ii) reductions in 2018)Watch List and Adversely Classified Credit net par outstanding weighted 45%. ForAt Ambac performance is judged based on cumulative EBITDA over the three years ended December 31, 2018, the measure of the Net Asset Value exceeded the measure of Asset to Liability Ratio.performance period. The following graph/charts shows the Company's actual performance over the three year performance period running from January 1, 20162019 through December 31, 2018,2021, compared to the achievement levels set forth in the chart above.
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| AAC Adjusted Net Asset Value
| Watch List & Adversely Classified Credits Outstanding | Ambac Cumulative EBITDA |
($ in millions)Millions) | | Ambac
Cumulative EBITDA
($ in millions) Billions) | ($ in Millions) |
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The following table shows the grant date value of the 20162019 LTIP awards granted to each of our NEOs (other than Mr. LeBlanc and Ms. Smith, who were not employees of Ambac at the time that the 2016 LTIP awards were granted) and the amounts realized upon vesting and settlement.
| | | Grant Date Award at Target | | Vesting and Settlement | | | | | | | | | | | | | | | | | |
Named Executive Officer | PSU Award # | Cash Incentive Award | Weighting between AAC/ Ambac | Payout Percentage | Shares Acquired # | Cash Incentive Payout | Named Executive Officer | Grant Date value of PSU Award at Target $ | Weighting between AAC/ Ambac | Performance Percentage | 10% Reduction to Payout Percentage After Applying rTSR modifier | Value of PSU Award on Vesting and Settlement $ |
Claude LeBlanc | | Claude LeBlanc | 1,809,000 | 70% / 30% | 159.4% | 143.5% | 1,852,370 |
David Trick | 8,054 | $ | 125,000 |
| 80% / 20% | 187.2% | 15,076 | $ | 233,988 |
| David Trick | 318,250 | 70% / 30% | 159.4% | 143.5% | 325,889 |
David Barranco | 5,638 | $ | 87,500 |
| 50% / 50% | 192.0% | 10,824 | $ | 167,992 |
| David Barranco | 318,250 | 70% / 30% | 159.4% | 143.5% | 325,889 |
Stephen M. Ksenak | 7,249 | $ | 112,500 |
| 80% / 20% | 187.2% | 13,569 | $ | 210,589 |
| Stephen M. Ksenak | 268,000 | 70% / 30% | 159.4% | 143.5% | 274,429 |
R. Sharon Smith | | R. Sharon Smith | 268,000 | 70% / 30% | 159.4% | 143.5% | 274,429 |
The Committee considered the Company's actual performance against each of the LTIP metrics for AAC and Ambac for each of Messrs. LeBlanc, Trick, Barranco, and Ksenak and determined thatMs. Smith. The Net Asset Value at the end of the performance period was $42 million. While Net Asset Value was projected to decrease over the performance period, certain favorable achievements by management, such as (i) the COFINA restructuring, (ii) the Ballantyne Re PLC settlement, (iii) the Citibank - SEC settlement, and (iv) debt reduction from surplus note exchanges, along with the resulting lower net interest expense all contributed to the Net Asset Value had exceededincreasing during the performance period. Watchlist & Adversely Classified Credit net par outstanding was reduced to $10.3 billion at AAC during the performance period and was positively impacted by active de-risking strategies including credit
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exposure reductions at Ballantyne Re PLC, COFINA and and other risk remediation and reinsurance transactions. Cumulative EBITDA at Ambac of $13 million was below target expectations at a payout percentageand was adversely effected by the use of 184%assets for Xchange, Everspan and other investments over the performance period that did not generate revenues for this calculation. Ambac's relative total stockholders return lagged against our peers. Ambac's beginning stock price for the AAC portion2019 rTSR modifier was $16.39 while its ending price was $15.25 which resulted in a TSR of -6.98% and a ranking in the bottom 25th percentile of our peer participants which reduced the payout to 90% of the 2016 LTIP award. With respect to Ambac, the Company achieved a Cumulative EBITDA of $29.9 million exceeding target expectations at a payout percentage of 200% for the Ambac portion of the 2016 LTIP award. Weighting the AAC performance metric at 80% and Ambac performance metric at 20%, for each of Messrs. Trick and Ksenak, the 2016 LTIP percentage payout on a blended basis was set at 187.19% of the target award. Due to Mr. Barranco's focus on business development at Ambac at the date of grant, the weighting of his performance metrics were set at 50% each for Ambac and AAC, and the 2016 LTIP percentage payout was therefore higher on a blended basis at 191.99%.metrics.
Perquisites. The Company provided a limited number of perquisites to all our employees, including our executive officers. For Mr. LeBlanc and Ms. Smith, perquisites included reimbursement from Ambac for certain commuting expenses, and for Messrs. Trick and Barranco, perquisites included payments for tax preparation services as a result of their roles as executive directors of Ambac UK. InConsistent with past practice, in order to supportsupport the long-term wellness and productivity of our executive management team, Ambac arranged for each of our executive officers, the Company also provided access to undergo an extensive physical examination for all executive officers, at the Company's expense. Mr. Barranco and Ms. Smith accepted this offering in 2022.
Employment Agreements. Certain of our active NEOs have entered into employment agreements with the Company which provide for certain compensation and benefits, including severance benefits in certain circumstances. In December 2016, we entered into an employment agreement with our CEO, Claude LeBlanc, in connection with his appointment, which took effect on January 1, 2017. This agreement was subsequently amended on February 27, 2020. We also entered into an employment agreement with Mr. Trick in November of 2016, and with Mr. Ksenak in January 2017. While the Compensation Committee considers employment agreements customary for the chief executive officer, the Committee believed it was important to execute an employment agreement with each of Messrs. Trick and Ksenak to retain their services to Ambac for the foreseeable future. (See “Agreement with Claude LeBlanc”, and “Agreements with Other Executive Officers” below). Severance Agreements have been entered into with various executive officers when the Compensation Committee believes it is in the best interest of the Company to secure an orderly separation between such officers and the Company, which typically include certain continuing obligations from the departing executive.
Post-Employment Benefits.Pursuant to Ambac's Severance Pay Plan, to provide protection in the event of an involuntary termination, each of our current executive officers (other than Messrs. LeBlanc, Trick and Ksenak) is entitled to receive a severance payment equal to 52 weeks of such executive officer's weekly base salary at the time of termination of his or her employment by Ambac as the result of (i) a job elimination, job discontinuation, office closing, reduction in force, business restructuring, redundancy, or such other circumstances as the Company deems appropriate for the payment of severance or (ii) a “termination by mutual agreement” (as defined in the Severance Pay Plan). In addition to this severance payment, each of our current NEOs (other than Messrs. LeBlanc, Trick and Ksenak) would be entitled to receive reimbursement for a portion of the premiums paid for COBRA continuation coverage under the Company's group health plan for the first twelve months following his or her termination of employment. The portion of the premiums to be paid by the Company will be the same as
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the amount paid by the Company for the same group health insurance coverage for active employees. For a description of post-employment benefits payable to Messrs. LeBlanc, Trick and Ksenak, see “Agreement with Claude LeBlanc,” and “Agreements with Other Executive Officers."
The 20192022 LTIP awards consisted of both PSUs and RSUs. The PSU award agreements for our NEOs provide that if a termination occurs prior to the last day of the performance period by reason of disability, an involuntary termination other than for “cause,” or retirement, the recipient would be entitled to receive the number of earned PSUs which would only be payable at the end of the performance period provided that the performance conditions related to the award were satisfied. If a termination occurs by reason of death, the recipient would be entitled to receive the number of earned PSUs that the Participantrecipient would have been entitled to receive had the termination date not occurred prior to the end of the performance period at a 100% overall payout multiple regardless of the outcome of the performance goals or rTSR. Comparable provisions arewere included in the 20172020 and 20182021 PSU
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award agreements, except each of those award agreements provide that the recipient would only be entitled to receive a prorated portion of the LTIP award which would only be payable at the end of the performance period provided that the performance conditions related to the award were satisfied,agreements. The 2021 and with respect to the 2018 PSU award, each NEOs LTIP award would be pro-rated to reflect their actual service plus twelve months during the performance period. The 20192022 RSU award agreements for our NEOs generally provide that if a termination occurs, other than for “cause” or voluntary resignation, the entire grant of RSUs shall vest on the termination date.
ImpactCompensation Committee
The Compensation Committee is currently comprised of Regulatory RequirementsMr. Haft and Ms. Lamm-Tennant. Mr. Prieur, the former Chair of the Compensation Committee, resigned from the Board of Directors and each of its committees on February 22, 2023. As a result of Mr. Prieur's resignation, there is currently no Chair of the Compensation Committee. The purpose of our Compensation Committee is to assist the Board in overseeing our compensation programs. The Compensation Committee’s responsibilities include:
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• Reviewing the performance-basedoverall compensation principles governing the compensation and commission exceptionsbenefits of our executive officers and other employees.
• Evaluating the performance of our Chief Executive Officer.
• Reviewing the procedures for the evaluation of our executive officers, other than our Chief Executive Officer.
• Reviewing and approving the selection of our peer companies to use as a reference in determining competitive compensation packages.
• Determining all executive officer compensation (including but not limited to salary, bonus, incentive compensation, equity awards, benefits and perquisites).
• Reviewing and approving the Section 162(m) $1 million deduction limitation paidterms of any employment agreements and severance arrangements, change-in-control agreements, and any special or supplemental compensation and benefits for our executive officers and individuals who formerly served as executive officers.
• Acting as the administering committee for our stock and bonus plans and for any equity compensation arrangements that may be adopted by Ambac from time to covered employees. The definition of covered employees was modifiedtime.
• Reviewing and discussing with management the annual Compensation Discussion and Analysis (CD&A) disclosure, and, based on this review and discussion, making a recommendation to include the CD&A disclosure in our annual proxy statement.
• Preparing the annual Compensation Committee Report for inclusion in our annual proxy statement.
Each member of our Compensation Committee is a “non-employee” director within the meaning of Rule 16b-3 of the Exchange Act. Our Board of Directors has determined that each of the directors serving on our Compensation Committee is independent within the meaning of the Listing Rules of NYSE. The Compensation Committee met six times in 2022.
In 2022, the Compensation Committee directly engaged Meridian Compensation Partners, LLC, a nationally recognized independent compensation consulting firm ("Meridian"), to assist it with benchmarking and compensation analyses, as well as to provide information and advice on executive compensation practices and determinations, including information on award design for both our Short Term Incentive Plan (“STIP”) and Long Term Incentive Plan (“LTIP”).
Our Chief Executive Officer will attend meetings of the Compensation Committee (other than executive sessions) and express his view on the Company’s overall compensation philosophy. Following year-end, the Chief Executive Officer makes recommendations to the Compensation Committee as to the total compensation package (salary, and STIP and LTIP awards) to be paid to each of our executive officers.
Our Executive Vice President and Chief Strategy Officer serves as management’s main liaison with the Compensation Committee and assists the Compensation Committee Chairman in setting the agenda and gathering the requested supporting material for each Compensation Committee meeting. Our Corporate Secretary serves as secretary to the Compensation Committee.
Governance and Nominating Committee
The Governance and Nominating Committee is currently comprised of Ms. Lamm-Tennant (Chair), and Mr. Stein. Our Governance and Nominating Committee’s purpose is to assist our Board of Directors in identifying individuals qualified to become members of our Board of Directors based on criteria set by our Board of Directors, to oversee the evaluation of the Board of Directors and management, and to develop and update our corporate governance principles. The Governance and Nominating Committee’s responsibilities include:
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• Evaluating the composition, size, organization, and governance of our Board of Directors and its committees, determining future requirements, and making recommendations regarding future planning, the appointment of directors to our committees, and the selection of chairs of these committees.
• Periodically reviewing the standards for director independence and providing the Board with an assessment of which directors should be deemed independent.
• Determining the criteria for Board membership, including the need for both gender and ethnic diversity.
• Overseeing policies and practices relating to environmental, social, and governance (“ESG”) matters relevant to the Company.
• Overseeing the process for the self-evaluation of the Board and its committees.
• Reviewing and recommending to our Board of Directors the compensation of our non-employee directors.
• Reviewing plans for the succession of our executive officers.
• Reviewing and approving related party transactions according to our Related Party Transaction Policy.
• Administering a procedure to consider stockholder recommendations for director nominees.
• Evaluating and recommending candidates for election or re-election to our Board of Directors, including nominees recommended by stockholders.
• Reviewing periodically Ambac’s Code of Business Conduct and Ethics and compliance therewith.
Our Board of Directors has determined that each of the directors serving on our Governance and Nominating Committee is independent within the meaning of the Listing Rules of NYSE. The Governance and Nominating Committee met five times in 2022.
Strategy Committee
The Strategy Committee is currently comprised of Messrs. Haft (Chairman), Herzog and Ms. Lamm-Tennant,and its responsibilities include:
•Reviewing and making recommendations to the Board regarding strategic plans and initiatives, including potential material investments in joint ventures, mergers, acquisitions and other business combinations.
•Reviewing, evaluating and making recommendations to the Board regarding solicited or unsolicited strategic transactions, opportunities and alternatives involving the Company or the interest of the Company in any direct or indirect subsidiary.
The Strategy Committee met five times in 2022.
Board’s Role in Risk Oversight
Among other things, the Board is responsible for understanding the risks to which Ambac is exposed, overseeing management's strategy to manage these risks, and measuring management's performance against the strategy.
Our management team is responsible for managing the risks to which Ambac is exposed and reports on such matters to the Board and to the relevant committees of the Board depending on the nature of the risk, as described below.
The Audit Committee oversees the management of risk associated with the integrity of our financial statements and our compliance with legal and regulatory requirements. In addition, the Audit Committee reviews policies and procedures with respect to risk assessment and risk management, including major financial risk exposure and the steps management has taken to monitor and control such exposures. The Audit Committee reviews with management, our internal auditors, and our independent registered public accounting firm Ambac's critical
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accounting policies, the system of internal controls over financial reporting and the quality and appropriateness of disclosure and content in the financial statements and other external financial communications.
The Compensation Committee oversees the management of risk primarily associated with (i) our ability to attract, motivate and retain high-quality and talented employees, particularly executives; and (ii) compensation structures that might lead to undue risk taking.
The Governance and Nominating Committee oversees the management of risk primarily associated with our ability to attract, motivate and retain high-quality directors, our corporate governance and ESG programs and practices and our compliance therewith. Additionally, the Governance and Nominating Committee establishes a framework for the Board and each of its committees to conduct an annual self-evaluation process and ensures that risk management effectiveness is a part of this evaluation. The Governance and Nominating Committee also performs oversight of the business ethics and compliance program by conducting an annual review and assessment of our Code of Business Conduct and Ethics.
The Strategy Committee oversees the management of risk and risk appetite primarily with respect to strategic plans and initiatives.
The full Board also receives quarterly updates from Board committees and the Board provides guidance to individual committee activities as appropriate.
Director Independence
The Governance and Nominating Committee annually reviews the relationships that each director has with Ambac. In conducting this review, the Committee considers all relevant facts and circumstances, including any consulting, legal, accounting, charitable and familial relationships and such other criteria as the Governance and Nominating Committee may determine from time to time. Following such annual review, the Committee reports its conclusions to the full Board, and only those directors whom the Board affirmatively determines to have no material relationship with Ambac and otherwise satisfy the criteria for director independence established by the committee are considered independent directors.
Based on the review and recommendation of the Governance and Nominating Committee, the Board has determined that none of Messrs. Haft, Price or Stein, or Mses. Iglesias, Lamm-Tennant or Matus has a relationship that, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and each of them is an independent director as defined in the Listing Rules of NYSE. In determining the independence of our directors, the Board of Directors has adopted the independence standards specified by applicable laws and regulations of the SEC and the Listing Rules of NYSE.
Compensation Committee Interlocks and Insider Participation
None of the current members of the Compensation Committee has been an officer or employee of Ambac. In 2022, each of Messrs. Haft, Prieur, and Ms. Lamm-Tennant served as members of the Compensation Committee. None of our executive officers serves on the board of directors or compensation committee of a company that has an executive officer that serves on our Board of Directors or the Compensation Committee.
Consideration of Director Nominees
Stockholder Recommendations and Nominees
The Governance and Nominating Committee considers properly submitted recommendations for candidates to the Board of Directors from stockholders. In evaluating such recommendations, the Governance and Nominating Committee seeks to achieve a balance of experience, knowledge, expertise, and capability on the Board of Directors and to address the membership criteria set forth under “Director Selection Process and Qualifications”
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below. There are no differences in the manner in which the Governance and Nominating Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder or otherwise. Any stockholder recommendations for consideration by the Governance and Nominating Committee should be sent, together with the information required by Article II of our by-laws, c/o: Ambac Financial OfficerGroup, Inc., Attn: Corporate Secretary, One World Trade Center, New York, New York 10007. Stockholder nominations for directors that a stockholder wishes to have considered at a meeting of stockholders should be made in accordance with the provisions of our by-laws, as described under “Other Questions related to the Meeting or Ambac-What is the deadline to propose actions for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?” above.
Director Selection Process and Qualifications
Our Governance and Nominating Committee will evaluate and recommend candidates for membership on the Board of Directors consistent with our Corporate Governance Guidelines regarding the selection of director nominees. Pursuant to these guidelines, the Governance and Nominating Committee screens candidates and evaluates the qualifications of the persons nominated by or recommended by our stockholders for membership to our Board. Board diversity, both ethnic and gender, is an important consideration in evaluating Board composition. The Governance and Nominating Committee also considers each candidate's time commitments, including memberships on other public company boards and board committees. Thus, in assessing potential director candidates for the Board, the Governance and Nominating Committee endeavors to select the best directors from a pool of diverse candidates considering individuals with differing perspectives, backgrounds, genders and ethnicities, in addition to character, judgment, business experience, acumen and time commitments.
In evaluating non-incumbent candidates for the Board, the Governance and Nominating Committee reviews the composition of the Board as a whole, as well as the committees, and assesses the appropriate knowledge, experience, skills, expertise and gender and ethnic diversity in the context of the current make-up and perceived needs of the Board at the time of consideration. It also reviews the composition of the Board to ensure that it contains at least the minimum number of independent directors required by applicable law and stock exchange listing requirements. Candidates also are evaluated in light of other factors, such as those relating to service on other boards of directors and other professional commitments. We believe that it is important to have a Board that is reflective of the core values and diversity of our key constituents including our employees, clients and partners, and stockholder base.
The Governance and Nominating Committee uses a variety of methods for identifying and evaluating nominees for directors. The Committee considers the current directors who have expressed an interest in and that continue to satisfy the criteria for serving on the Board as set forth in our Corporate Governance Guidelines. Other nominees who may be proposed by current directors, members of management or by stockholders are also considered. The Committee may, at Ambac’s expense, engage search firms, consultants and other advisors to identify, screen and/or evaluate candidates in order to ensure that the Committee has a diverse pool of qualified candidates that includes both gender diversity and candidates from under-represented minority groups.
The Governance and Nominating Committee recommends director nominees who are ultimately approved by the full Board of Directors.
Executive Sessions
Executive sessions of independent directors are held in connection with each regularly scheduled meeting of the Board of Directors and at other times as appropriate. The Board of Directors’ policy is to hold executive sessions without the presence of management, including the Chief Executive Officer.
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Outside Advisors
Our Board of Directors and each of its committees may retain outside advisors and consultants of their choosing at our expense. The Board of Directors and its committees need not obtain management’s consent to retain outside advisors.
Board Effectiveness
The Governance and Nominating Committee retained a third party advisor to facilitate the Board's annual self-evaluation process in 2022. The effectiveness of the Board as a whole, and each of its individual committees, was assessed against the roles and responsibilities set forth in Ambac's Corporate Governance Guidelines, the relevant committee charters, and best practices. Matters considered as part of the evaluation included:
•the effectiveness of discussion and debate at Board and committee meetings;
•the effectiveness of Board and committee processes and in interacting with management;
•the quality and timeliness of Board and committee agendas, and preparation of reference materials to inform the Board and committees and support effective decision making; and
•the composition of the Board and each committee, focusing on the blend of skills, experience, independence and knowledge of the group and its diversity, both ethnic and gender.
This self-evaluation process is managed by the Chair of the Governance and Nominating Committee.
Corporate Governance Guidelines
The Corporate Governance Guidelines reflect the Board's commitment to monitor the effectiveness of policy and decision making at both the Board and management levels, with a view to enhancing long term stockholder value. The Corporate Governance Guidelines address, among other things, such topics as the role of directors; goals and development of long term strategy; size of the Board; other public company Board memberships; Board membership criteria; term limits; Board meeting procedures; and retirement policy. Ambac’s Corporate Governance Guidelines can be found in the Corporate Governance section of Ambac’s Investor Relations website at https://ambac.com/investor-relations/governance/governance-documents/default.aspx.
Code of Business Conduct and Ethics
Ambac has a Code of Business Conduct and Ethics which reflects the Board's commitment to maintaining strong standards of integrity for handling business situations appropriately and effectively. The Code of Business Conduct and Ethics can be found in the Corporate Governance section of Ambac’s Investor Relations website at https://ambac.com/investor-relations/governance/governance-documents/default.aspx. Ambac will disclose on its website any amendment to, or waiver from, a provision of its Code of Business Conduct and Ethics that applies to its Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer. Charters for Ambac's Audit Committee, Governance and officers whose total compensation is required to be disclosed to shareholders by reason of them being amongst the three highest paid officers. Additionally, any individual who is a covered employee for any taxable year beginning after December 31, 2016 will continue to be a covered employee for all subsequent taxable years, including years after the death of the individual.
Our compensation programsNominating Committee, Strategy Committee and Compensation Committee are structured to support organizational goals and priorities and stockholder interests. We do not make compensation determinations based on the income tax treatment of any particular type of award.
Compensation Risk Management
Risks Related to Compensation Policies. In keeping with our risk management framework, we consider risks not onlyalso available in the abstract, but also risks that might hinder the achievementCorporate Governance section of a particular objective. We have identified two primary risks relating to compensation: the risk that compensation will be insufficient to retain talent and the risk that compensation strategies might result in unintended incentives. To combat the first risk, as noted above, the compensation of employees throughout the Company is benchmarked against comparative compensation data, permitting us to set compensation levels that we believe contribute to low rates of employee attrition. Further, LTIP awards granted to our NEOs and other senior professionals are subject to vesting over a three-year period. We believe both the levels of compensation and the structure of the LTIP awards have had the effect of retaining key personnel.Ambac’s Investor Relations website at https://ambac.com/investor-relations/governance/governance-documents/default.aspx.
With respect to the second risk, our Company-wide year-end
Board Compensation Arrangements for Non-Employee Directors
Ambac's director compensation program is designed to reflect the performanceenable continued attraction and retention of highly qualified non-employee directors by ensuring that director compensation is reflective of the Company,time, effort, expertise, and accountability required of board membership. The program is structured to recognize the performanceunique nature of theour business unit in which the employee works and the performancelevel of experience and oversight needed at the individual employee, and is designedBoard level, particularly with respect to not encourage excessive risk taking. For example, the performance metrics usedour legacy financial guarantee insurance business in our 2019 Short Term Incentive Plan (Net Asset Value, Gross Operating Run Rate Expenses and Watch List and Adversely Classified Credits), are designed to encourage prudent management of the business. In addition, we pay a significant portion of our incentive compensation in the form of LTIP awards that vest over a three-year period, which makes each of our NEOs and other senior professionals sensitive to long-term risk outcomes,run-off, as the value of their awards increase or decrease with the price of our common stock. Further, performance criteria for the PSUs grantedwell as part of the LTIP awards include reductions in Watch List and
overseeing Ambac's expansion into new
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Adversely Classified Credits, an increase in Net Asset Value, and a relative Total Shareholder Return modifier, all of which we believe provide our employees additional incentives to prudently manage the wide range of risks inherent in the Company’s business. We are not aware of any employee behavior motivated by our compensation policies and practices that creates increased risks for our stockholders or other constituents.
The Compensation Committee has performed a review of compensation policies and practices for all of our employees and has concluded that our compensation policies and practices are not reasonably likely to have a material adverse impact on the Company.
Risk Mitigating Policies
Stock Ownership Policy. Effective January 1, 2017, all of our executive officers became subject to our Executive Stock Ownership and Retention Policy. The Chief Executive Officer is required to own Ambac common stock equal in value to at least six times his annual base salary, the Chief Financial Officer is required to own Ambac common stock equal in value to at least three times his annual base salary and each other executive officer is required to own Ambac common stock equal in value to at least two times their annual base salary.
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Stock Ownership RequirementAmbac Financial Group, Inc. | 31 | 2023 Proxy Statement |
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R. Sharon Smith has served as Executive Vice President and Chief Strategy Officer since February 2023. Previously Ms. Smith served as Chief of ContentsStaff and Senior Managing Director of Ambac from May 2017 until February 2023. Ms. Smith has executive responsibility for Ambac's Corporate Services Group which encompasses certain key functions within the Company including, Strategy, Corporate Communications and Model Governance and Analytics, as well as oversight of Internal Audit. Ms. Smith joined Ambac from Syncora Guarantee Inc., ("Syncora"), where she served in numerous capacities during her tenure, including as Associate General Counsel and Head of Investor Relations. Ms. Smith was also General Counsel and Chief Compliance Officer for Camberlink LLC (a wholly owned subsidiary of Syncora). Earlier in her career, Ms. Smith was Vice President and Assistant General Counsel of the Corporate Securities Department of New York Life Investment Management LLC, and an attorney for Clifford Chance; Skadden, Arps, Slate, Meagher & Flom LLP and Weil, Gotshal & Manges LLP. Ms Smith currently serves on the Board of Embrace Partners, Inc.
David Trick was named Executive Vice President of Ambac in November 2016. He has served as Chief Financial Officer of Ambac since January 2010 and as a Senior Managing Director from January 2010 until his appointment as Executive Vice President. Mr. Trick was interim President and Chief Executive Officer of AAC from January 2015 until March 2016. As Chief Financial Officer, Mr. Trick has executive responsibility for managing Ambac’s financial affairs, including financial reporting, asset and liability management, investment management, financial planning, tax strategy, capital resources, operations, capital markets and liquidity and investor relations. In addition, since May 2006, he has served as Treasurer of Ambac. Since September 2015, Mr. Trick has served as an Executive Director of Ambac Assurance UK Limited. Mr. Trick joined Ambac in 2005 from The Bank of New York Mellon, where he was a senior banker responsible for delivering strategic solutions to insurance industry clients with regard to a broad range of treasury, credit, and capital markets products.
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any singleCompensation Discussion and Analysis
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WE ASK THAT YOU VOTE TO APPROVE OUR 2023 SAY ON PAY PROPOSAL |
At our 2023 Annual Meeting, our stockholders will again have an opportunity to cast an advisory say on pay vote on the compensation paid to our named executive officers. We ask that our stockholders vote to approve executive officer compensation. Please see “Proposal No. 2—Advisory Vote to Approve Named Executive Officer Compensation.” |
This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program, including important changes the Committee has made since our 2022 annual meeting of stockholders, and decisions relating to the fiscal year of the performance period occurs during the three year look-back period. A complete copy of the Recoupment Policy is attached as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on December 1, 2016.
Prohibition on Pledging and Hedging and Restrictions on Other Transactions involving Common Stock. Our Insider Trading Policy prohibits our executive officers, employees, and Board members from pledging Ambac common stock or using Ambac common stock as collateral for any margin loan. In addition, the Insider Trading Policy contains the following restrictions:
Executive officers and Board members are prohibited from engaging in transactions (such as trading in options) designed to hedge against the value of the Ambac common stock, which would eliminate or limit the risks and rewards of the common stock ownership;
Executive officers and Board members are prohibited from short-selling Ambac common stock, buying or selling puts and calls on Ambac common stock, or engaging in any other transaction that reflects speculation about the price of Ambac common stock or that might place their financial interests against the financial interests of the Company;
Executive officers and Board members are prohibited from entering into securities trading plans pursuant to SEC Rule 10b5-1 without pre-approval; further, no Board member or executive officer may trade in our Common Stock without pre-approval; and
Executive officers and Board members may trade in Common Stock only during open window periods, and only after they have pre-cleared transactions.
Conclusion
Our compensation program is designed to permit the Company to provide our NEOs with total compensation that is competitive, linked to our performance and reinforces the alignment of employee and stockholder interests. At the same time, it is intended to provide us with sufficient flexibility to assure that such compensation is appropriate to attract and retain employees who are vital to the continued success of the Company and to drive outstanding individual and institutional performance. We believe the program met these objectives in 2019.
We are asking our stockholders to indicate their support for our named executive officer compensation as described in this Proxy Statement. This proposal, commonly known as a “say on pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall2022 compensation of our named executive officers (“NEOs”), identified in the table below.
Our Named Executive Officers
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Claude LeBlanc | | Stephen M. Ksenak |
President and Chief Executive Officer and Director | | Senior Managing Director and General Counsel |
David Trick | | R. Sharon Smith |
Executive Vice President, Chief Financial Officer and Treasurer | | Executive Vice President and Chief Strategy Officer |
David Barranco | | |
Senior Managing Director | | |
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Ambac Financial Group, Inc. | 39 | 2023 Proxy Statement |
Executive Summary
Our compensation programs are designed to reward execution and value creation relating to the implementation of our strategies. To ensure that our compensation programs align with the expectations of our stockholders, in the Fall of each year, Ambac proactively seeks out opportunities to engage in a dialogue with our stockholders. As a result of these stockholder engagements, over the years our Compensation Committee has made important enhancements to our compensation programs and processes. These enhancements include changes to the design of our annual and long-term incentive plans, and the philosophy,implementation of important compensation-related policies, e.g., a Stock Ownership Policy and practices describeda Recoupment Policy, and the addition of a relative Total Shareholder Return ("rTSR") modifier as an additional metric with respect to our LTIP award payouts. The rTSR modifier is intended to further align compensation to Ambac's stock performance. In 2022, we solicited feedback from stockholders representing approximately 46% of our outstanding common stock, which informed certain changes to our executive compensation program in this Proxy Statement. Accordingly, we will ask2023. See "2022 Say on Pay Vote and Stockholder Outreach."
Key features of our stockholderscompensation program include:
•Competitive compensation levels and practices;
•Performance-based incentive plans (annual STIP awards and three year LTIP PSU awards) that are based on quantitative and strategic performance goals and objectives, and aligned with our key business strategies;
•Significant weighting on equity-based compensation as a component of total compensation, including the existence of a Stock Ownership Policy applicable to vote “FOR”our executives;
•A rTSR modifier that aligns compensation results with actual stock performance as compared to peers; and
•Policies to manage compensation-related risk and support good governance, including a Recoupment Policy.
Key Strategic Priorities and 2022 Company Performance
Our primary business objective is to maximize stockholder value through the following resolutionexecution of key strategies in both our (i) Specialty P&C Insurance and Insurance Distribution businesses and (ii) Financial Guarantee Insurance companies, which were outlined in 2022 as follows:
Specialty P&C Insurance and Insurance Distribution strategic priorities included:
•Growing and diversifying Everspan's participatory fronting platform with existing and new program partners.
•Building a leading federation of specialty MGA/U partners through additional acquisitions and de novo builds, supported by a centralized business services unit including core technology solutions.
•Making opportunistic investments that are strategic to the overall Specialty P&C Insurance and Insurance Distribution businesses.
Financial Guarantee Insurance companies’ strategic priorities included:
•Actively managing, de-risking and mitigating insured portfolio risk.
•Pursuing loss recovery through active litigation and other means, particularly residential mortgage back security representation and warranty litigation.
•Improving operating efficiency and optimizing our asset and liability profile.
•Exploring, at the Annual Meeting:appropriate time, strategic options to further maximize value for Ambac.
“RESOLVED, that | | |
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In 2022, we took important steps to advance these strategic objectives. Key highlights and results include the stockholders approve, on an advisory basis,following:
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l | Reported net income of $522 million for the full year 2022 |
l | Increased Book Value per Share by 24% to $27.85 and Adjusted Book Value per Share by 50% to $28.29 |
l | Received $1.98 billion from the settlement of RMBS representation and warranty litigations, recognizing $249 million of gains, partially offset by losses from the extinguishment of secured notes of $53 million. |
l | Reduced debt and accrued interest by $1.9 billion, primarily from the RMBS representation and warranty litigation proceeds, and recognized a $134 million discount capture on surplus note repurchases. |
l | Repurchased Auction Market Preferred Shares with a liquidation value of $23 million capturing approximately $15 million of discount capture. |
l | Increased Specialty Property and Casualty Insurance production by 172% from the fourth quarter of 2021 and $282 million for the full year 2022 up 116% over the prior year. Specialty Property and Casualty Insurance production includes gross premiums written by Ambac's Specialty Property and Casualty Insurance segment and premiums placed by the Insurance Distribution segment, which totaled $90 million in the fourth quarter of 2022, and $282 million for the full year 2022. |
l | Decreased our insured portfolio net par outstanding at the Legacy Financial Guarantee business by 19% to $22.6 billion from year-end 2021. This includes reduced Watch List and Adversely Classified Credits by 24%, to $7.8 billion from $10.2 billion at year end 2021. The above mentioned declines were primarily the result of active de-risking transactions including the restructuring of all of our remaining Puerto Rico exposures. |
l | Increased Everspan Gross Written Premium to $146 million in 2022, which was a 10 fold increase from 2021 |
l | Reduced Gross Operating Run Rate Expense in the fourth quarter of 2022 to $16.3 million |
l | Acquired All Trans and Capacity Marine, representing approximately $60 million of expected premium placed for Cirrata |
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2022 Pay Decisions
2022 compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders pursuantdecisions reflect our compensation principles:
•Link short-term incentives to the compensation disclosure rulesCompany's operational, strategic, and financial performance;
•Use long-term incentives to further align the interests of our executives with stockholders by providing that all LTIP awards are denominated in stock units, with payouts based on performance metrics that we believe drive long-term value for stockholders; and
•Support the Securitiesretention and Exchange Commission, including the Summary Compensation Tableattraction of key executive talent.
Base salaries in 2022 for each of our NEOs were reviewed and the other related tables and disclosure.”
The say on pay vote is advisory, and therefore not binding on Ambac,approved by the Compensation Committee, based on a review of relevant market data and each executive’s performance for the prior year, as well as each executive’s experience, expertise and position.
In 2022, the Compensation Committee incorporated gross written premiums as a financial performance metric for our specialty P&C insurance business, and increased the overall weightings assigned to financial performance metrics in the incentive compensation plans for senior management.
STIP awards for 2022 were determined based on a structured and objective approach in which 60% of an executive officer's annual STIP award was based on the Company’s achievement of pre-established financial
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performance targets at the Company related to (i) increases in gross written premium at Everspan , (ii) reductions in Net Par Outstanding1 in the legacy financial guarantee insured portfolio, and (iii) reductions in Gross Operating Run Rate Expense;1 and the remaining 40% of an executive officer's STIP award for 2022 was based on strategic performance goals, including business unit results and individual performance, a majority of which are based on objective, quantifiable or financial outcomes.
Long-term incentive awards granted in early 2022 were also reviewed and approved by the Compensation Committee, based on a review of relevant market data and each executive’s performance for the prior year. The 2022 long term incentive awards include restricted stock units (30% of total long term incentive award) which vest annually over a three year period and performance stock units (70% of total long term incentive award), tied to quantitative metrics that reflect the long term goals that the Compensation Committee believes will drive stockholder value. Vesting of performance stock units is subject to the satisfaction of certain performance goals, which will be determined at the end of a three year performance period, and application of the rTSR modifier at the end of three years (described below).
2022 Say on Pay Vote and Stockholder Outreach
At our Board2022 annual meeting of Directors. Ourstockholders, our Say on Pay proposal received support from stockholders representing over 50% of our common stock present, in person or by proxy at the meeting. While we greatly appreciate the support of a majority of our stockholders with regard to our executive compensation program, our Compensation Committee also endeavors to understand the concerns of our stockholders who did not support our executive compensation program. We are committed to a corporate governance approach that aligns the interests of management, the Board of Directors and our stockholders. Over the course of 2022, the Chairman of the Board, along with the Chairs of the Compensation Committee valueand the opinionsGovernance and Nominating Committee solicited feedback from stockholders representing approximately 46% of our outstanding common stock and from certain proxy advisory firms. These stockholders and proxy advisory firms provided important feedback concerning our executive compensation program.
1 Reductions in Net Par Outstanding as of December 31, 2022 under the STIP were measured against Net Par Outstanding as of January 1, 2022. Gross Operating Run Rate Expense is measured by comparing actual gross operating run rate expenses in the fourth quarter to performance goals established against budgeted amounts.
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While the feedback on our executive compensation program was generally favorable, a number of stockholders provided input on certain changes they would like the Company to consider. As a result of the feedback received from stockholders, the Compensation Committee and the Board of Directors responded as follows:
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WHAT WE HEARD | WHAT WE DID |
Increase the weighting of the financial performance metrics in the Short Term Incentive Plan. | l | In 2023, we increased the weighting of the Short-Term Incentive Compensation Plan ("STIP") financial performance metrics from 60% to 70%, |
Place a greater emphasis on total stockholder return as part on of the compensation program. | l | Given the unique profile of our business (legacy business in run-off and a new and growing specialty P&C business), which presents certain challenges in identifying directly comparable peers, we maintained the impact of the rTSR modifier at +/- 20% with respect to our LTIP Awards in 2023 so that any final performance stock unit ("PSU") award payout at the end of the three year performance period may be increased or decreased by 20% if the Company's stock performance compared to the Company's peer group is at or above the 75th percentile or at or below the 25th percentile, respectively. |
Continued focus needs to be on the legacy Financial Guaranty business to drive value. | l | Re-evaluated the key de-risking initiatives for the legacy Financial Guaranty business with a focus on value enhancing initiatives including reductions in Net Par Outstanding and Watch List and Adversely Classified Credits as key metrics in the STIP and LTIP, respectively. |
The timeline for value creation must be considered and should impact and incentivize management judgements. | l | Introduced a comprehensive strategic review of AAC, on a time and risk adjusted basis, as a key performance goal connected to the STIP evaluation |
The Compensation Committee also made the following changes to the extent theredesign of the 2023 compensation program, with an increased emphasis on the specialty P&C insurance business.
Changes to the 2023 Short Term Incentive Plan Design, include:
•Increase in the weighting of the financial performance metrics from 60% to 70%; and
•Inclusion of an additional financial performance metric for the specialty P&C insurance business with aggregate weighting increased to 50%.
Changes to the 2023 Long Term Incentive Plan Design, include:
•Increase in the PSU weighting related to results from the specialty P&C insurance business from 40% to 78.5% with a corresponding reduction in weighting of performance metrics related to our legacy financial guarantee business.
As we have indicated in prior years, as Ambac's specialty P&C insurance business continues to grow and the legacy Financial Guaranty business progresses to a stable run-off, the Compensation Committee intends to shift the Company's performance metrics to be more heavily weighted to the achievement of results in the specialty P&C insurance business. Nevertheless, as the legacy Financial Guaranty business remains a material part of Ambac's business and value, we will retain key metrics and goals, which we believe will be material determinants of delivering value to shareholders from the legacy Financial Guaranty businesses.
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Ambac Financial Group, Inc. | 43 | 2023 Proxy Statement |
Our Compensation Philosophy and Objectives
Our executive compensation program is designed to support achievement of our key business objectives. The Compensation Committee monitors and oversees all facets of the program, including incentive plan design, benchmarking, and the performance goal-setting process, and approves executive pay programs that tie a substantial portion of compensation to goal achievement. The Compensation Committee also retains the authority to make discretionary adjustments to further recognize overall Company performance and enhance alignment with stockholders and is committed to monitoring and adapting to evolving compensation standards. Specifically, our executive compensation program has the following objectives:
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Objectives | Details |
Attract, retain and motivate executives and professionals of the highest quality and effectiveness | l | Provide compensation opportunities that are competitive with practices of similar financial services organizations operating within the same marketplace for executive talent. |
Align pay with performance | l | A substantial portion of each executive’s total compensation is variable and performance-based. |
l | The design of our incentive plans focus on rewarding performance aligned with our key business strategies. |
Further align our executives’ long-term interests with those of our stockholders | l | Balance use of cash and equity based compensation, with a greater emphasis on the latter and short and long-term incentives that further align management's interests with those of our stockholders and support retention. |
Discourage excessive risk taking | l | Maintain policies that support good governance practices and mitigate against excessive risk taking. |
Determining Executive Compensation
The Compensation Committee bases current pay levels on numerous factors, including competitive pay practices in the financial services industry, the scope and complexity of the functions of each NEO’s role, the contribution of those functions to our overall performance, individual experience and capabilities, and individual performance. Any variations in compensation among our NEOs reflect differences in these factors. The Compensation Committee monitors the effectiveness of our compensation programs throughout the year and performs an annual reassessment of the programs at the beginning of the year in connection with year-end compensation decisions and future goal settings.
Compensation Consultants
The Compensation Committee has authority to retain compensation consulting firms to assist it in the evaluation of executive officer and employee compensation and benefit programs. The Compensation Committee retained Meridian Compensation Partners, LLC as its independent compensation consultant to advise on the 2022 compensation cycle, which included year-end compensation decisions made in the first quarter of 2023. Meridian provides an objective perspective as to the reasonableness of our executive compensation programs and practices and their effectiveness in supporting our business and compensation objectives. Specifically, Meridian advised the Compensation Committee with respect to compensation trends and best practices, incentive plan design, competitive pay levels, and individual pay decisions with respect to our NEOs. The Compensation Committee has assessed the independence of Meridian pursuant to applicable SEC rules and concluded that no conflict of interests exists that would prevent Meridian from independently advising the Compensation Committee.
Competitive Compensation Considerations
Because the competition to attract and retain high performing executives and professionals in the financial services industry is intense, the amount and composition of total compensation paid to our executives must be
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considered in light of competitive compensation levels. To help inform the Compensation Committee's compensation decisions for the NEOs for 2022, Meridian prepared a benchmarking analysis that compared the compensation levels for our NEOs to that of officers in comparable positions across a selected peer group of companies. However, the Compensation Committee does not rely on this information to target any significant votespecific pay percentile for our NEOs. Instead, they use this information to provide a general review of market pay levels and practices and to ensure that informed decisions are made regarding our executive pay programs.
At present, Ambac has no directly comparable business peers, and thus peer selection is a challenge. Ambac believes that the most relevant criteria in the selection of its peer group is the consideration of asset value and enterprise value as these variables are the best indicators of the complexity of an organization and are most useful when considering competitive compensation packages for our NEOs. Each year the Compensation Committee reviews the Company's peer group and considers adjustments if appropriate. Key criteria used to assess current and potential peer companies include financial services industry sector focus (i.e., specialty insurance, specialty finance, property and casualty insurance, financial guaranty and run-off insurance), organizations that manage distressed assets, and organizations of similar size and scope (market capitalization, assets and enterprise value). Based on a review conducted in 2022 in preparation for the 2022 compensation cycle, we revised the list of peer companies to: (i) be more reflective of Ambac's size, (ii) add more property and casualty insurance companies, (iii) reflect the event driven nature of our business and the risks we face, (iv) capture the markets and businesses in which we operate and (v) reflect the market for executive talent. We expect our peer group comparability will materially change in the coming years as we transition fully from our legacy financial guaranty business to our new specialty property and casualty insurance business.
The table below provides summary financial information regarding Ambac and the comparator group used for the 2022 compensation cycles.
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Comparator Group used for 2022 Compensation Cycle | Primary Industry | Market Capitalization ($ in millions) | | Assets ($ in millions) | | Enterprise Value ($ in millions) |
Argo Group International Holdings, Ltd. | Property & Casualty Insurance | $906 | | | $10,034 | | | $1,465 | |
Assured Guaranty Ltd. | Financial Guaranty Insurance | 3,733 | | | 16,843 | | | 5,896 | |
Enstar Group Limited | Reinsurance | 3,933 | | | 22,154 | | | 5,292 | |
Hanover Group, Inc. | Property & Casualty Insurance | 4,806 | | | 13,997 | | | 5,283 | |
HCI Group, Inc. | Property & Casualty Insurance | 347 | | | 1,803 | | | 416 | |
Horace Mann Educators Corporation | Multi-line Insurance | 1,528 | | | 13,447 | | | 2,859 | |
MBIA Inc. | Financial Guaranty Insurance | 705 | | | 3,375 | | | 4,047 | |
PRA Group, Inc. | Consumer Finance | 1,317 | | | 4,176 | | | 3,809 | |
ProAssurance | Property & Casualty Insurance | 943 | | | 5,700 | | | 1,361 | |
RLI Corp. | Property & Casualty Insurance | 5,957 | | | 4,767 | | | 6,148 | |
Selective Insurance | Property & Casualty Insurance | 5,351 | | | 10,802 | | | 6,090 | |
SiriusPoint Ltd. | Property & Casualty Insurance | 946 | | | 11,036 | | | 1,275 | |
White Mountains Insurance Group, Ltd. | Property & Casualty Insurance | 3,589 | | | 7,389 | | | 4,137 | |
Ambac Financial Group, Inc. (1) | | $784 | | | $7,973 | | | $5,670 | |
Percentile Rank vs. Peer Group | | 12 | % | | 44 | % | | 80 | % |
Note: Financial data reflects information available as of December 31, 2022 |
Source: S&P Capital IQ |
(1) Ambac's Enterprise Value includes the obligations of Variable Interest Entities for which Ambac or its subsidiaries are required to consolidate as a result of its financial guarantee insurance policies, plus its market capitalization, the value of all outstanding debt, preferred equity and total noncontrolling interests, less cash and cash and cash equivalents.
The Role of Management in Determining Pay
Generally, our Chief Executive Officer reviews the competitive compensation data for each of the other NEOs, considers both individual, departmental and Company performance, measured against financial performance metrics and strategic performance goals established at the beginning of the year, and makes a recommendation to
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the Compensation Committee for base salary and annual short- and long-term incentive awards. The Chief Executive Officer typically participates in Compensation Committee meetings at the Compensation Committee’s request to provide background information regarding performance against the Company’s strategic objectives and to evaluate the performance of, and compensation recommendations for, each of the other NEOs.
The Committee utilizes the information provided along with input from the compensation consultant and the knowledge and experience of the Committee’s members in making compensation decisions. Our NEOs do not propose or seek approval for their own compensation. The Chairman of the Compensation Committee, with input from the Chairman of the Board of Directors, recommends the Chief Executive Officer’s compensation to the Compensation Committee. See "Directors, Executive Officers, and Corporate Governance."
Elements of Pay
Compensation for each of our NEOs is viewed on a total compensation basis and comprised of the following elements of pay:
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Compensation Element | Purpose |
Base Salary | l | Provides a minimum, fixed level of cash compensation to compensate executive officers for services rendered during the fiscal year that is competitive with organizations operating within the same marketplace for executive talent. |
Bonuses | l | While bonus payments are not regular part of Ambac's compensation mix, from time to time, the Compensation Committee may approve a special one-time bonus in recognition of an extraordinary outcome or promotion. |
Short Term Incentive Awards | l | Drive achievement of annual corporate goals, including key financial and operating results by setting pre-established financial performance targets and strategic performance goals at the Company. Annual STIP awards are paid in cash. |
Long-Term Incentives | l | Further align executive officers’ interests with the interests of stockholders by rewarding increases in the value of our share price, and tying long-term incentive compensation to performance metrics that we believe to be important value-drivers for our stockholders. LTIP awards are strictly equity based and denominated in PSUs and RSUs. |
Post-Employment Benefits | l | Provide certain severance benefits to our executive officers. See “--Post-Employment Benefits” and for a description of post-employment benefits payable to Messrs. LeBlanc, Trick and Ksenak, see “Agreement with Claude LeBlanc,” and “Agreements with Other Executive Officers." |
Perquisites | l | Provide a limited number of perquisites to all our employees, including our executive officers. |
Before year-end compensation decisions are made, the Compensation Committee undertakes a comprehensive review of all elements of each executive officer’s compensation. This review includes information on cash and non-cash compensation (including current and prior year base salaries, short-term and long-term incentive awards and other awards), and the value of benefits and other perquisites paid to our executive officers. This comprehensive review is designed to ensure that each member of the Compensation Committee has a complete picture of the compensation and benefits paid to each of our executive officers.
The following table shows the base salary and incentive compensation paid to our NEOs for their performance in 2022 in the manner it was considered by the Compensation Committee. This presentation differs from that contained in the Summary Compensation Table by showing the value of the LTIP stock unit awards granted in 2023 for 2022 performance. The actual number of PSUs and RSUs granted was calculated based on an average closing price of Ambac common stock on the NYSE for the twenty trading days immediately preceding the grant date, March 3, 2023 ($16.30), which were awarded based on 2022 performance, but are not reflected in the Summary Compensation Table because of SEC rules on proxy statement disclosure.
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| | | | | Long Term Incentive Plan | |
Name | Year | Salary ($) | Bonus ($) | Short Term Incentive Plan ($) | PSU Awards ($) | RSU Awards ($) | Total ($) |
Claude LeBlanc | 2022 | 900,000 | | 1,827,000 | 2,677,500 | 1,147,500 | 6,552,000 |
David Trick | 2022 | 750,000 | | 663,100 | 647,500 | 277,500 | 2,338,100 |
David Barranco | 2022 | 500,000 | | 707,500 | 595,000 | 255,000 | 2,057,500 |
Stephen M. Ksenak | 2022 | 600,000 | 74,000 | 646,600 | 525,000 | 225,000 | 2,070,600 |
R. Sharon Smith | 2022 | 500,000 | 20,000 | 685,400 | 577,500 | 247,500 | 2,030,400 |
Pay Mix
A substantial portion of target total compensation is delivered through variable performance or equity based incentives that are at risk. As reflected in the table above and the graphs below, variable performance or equity based incentives constitute 86% of our CEO compensation mix and 72% of our NEO compensation mix.
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CEO Total Direct Compensation | | CEO Performance/Equity Based Incentive Compensation |
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Other NEOs Total Direct Compensation | | Other NEOs Performance/Equity Based Incentive Compensation |
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Base Salary.Base salaries are intended to reflect the experience, skill and knowledge of our executive officers in their particular roles and responsibilities, while retaining the flexibility to appropriately compensate for fluctuations in performance, both of the Company and the individual. Base salaries for our executive officers and any subsequent adjustments thereto are reviewed and approved by the Compensation Committee annually, based on a review of relevant market data and each executive’s performance for the prior year, as well as each executive’s experience, expertise and position. The base salaries paid in 2022 to each of our NEOs was unchanged from prior years. Mr. LeBlanc received a base salary of $900,000; Mr. Trick, $750,000; Mr. Barranco, $500,000; Mr. Ksenak, $600,000; and Ms. Smith, $500,000. Each of Messrs. LeBlanc, Trick and Ksenak is a party to an employment agreement with the Company that provides for a minimum annual base salary during the term of the respective agreement. See "Agreement with Claude LeBlanc," and “Agreements with Other Executive Officers.”
Incentive Compensation. Incentive compensation is a key component of our executive compensation strategy. Our incentive compensation awards generally have two components: Short Term Incentive Plan awards (consisting of annual cash incentive awards) and Long Term Incentive Plan awards (which are equity-based). Annual decisions with regard to incentive compensation are generally made in February of each year. Incentive compensation payouts can be highly variable from year to year, is at risk, subject to performance criteria and impacted by the value of Ambac's common stock.
Short Term Incentive Compensation. Annual incentives for our NEOs are meant to reward performance. Sixty percent (60%) of NEO 2022 short term incentive compensation awards were measured against pre-established financial performance targets at the Company related to: (i) gross written premium at Everspan; (ii) reductions in Net Par Outstanding in the legacy financial guarantee insured portfolio and (iii) reductions in Gross Operating Run Rate Expenses. These metrics were chosen because the Compensation Committee believed that they would be key drivers of stockholder value in 2022.
The remaining forty percent (40%) of the short term incentive compensation award is based on strategic performance goals, more than fifty percent (50%) of which can be reviewed against objective, quantifiable or financial outcomes. See "Compensation for Each of Our Named Executive Officers in 2022 - Strategic Performance Goals." These goals include formula driven financial performance targets as well as the following strategic goals:
•Continue to actively identify potential actionablenew business opportunities to engage and pursue that meet Board approved criteria, and are consistent with the Company's specialty property and casualty insurance strategy.
•Effective litigation management;
•Active de-risking and ongoing rationalization of Ambac's capital and liability structures; and
•Continue to increase organizational effectiveness, efficiency of the operating platform, and simplification of business controls, policies and procedures without increasing operational risk.
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The Compensation Committee believes that it is important to establish strategic performance goals, a majority of which are based on objective, quantifiable or financial outcomes, because of the uncertainties associated with our legacy operating subsidiaries, AAC and Ambac UK, which are not writing new business and are in runoff, and Ambac’s strategic shift towards growing our specialty P&C insurance platform.
The Compensation Committee assigns to each NEO an annual target incentive opportunity, which is based on the executive’s position and the scope of responsibilities. Target annual incentives (as a percent of base salary) for the NEOs for 2022 were set as follows: 125% for the Chief Executive Officer; and between 55% and 85% for each of the other NEOs. Actual incentive payouts can range from 0% to 200% of target for each of the NEOs based on the Compensation Committee’s review of overall performance relative to the financial performance targets and strategic performance goals noted above.
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Key Changes in 2023 to Short Term Incentive Program: For the 2023 performance year, the Compensation Committee amended the financial performance metrics of the STIP to include Everspan performance, weighted at 25%; Cirrata Group performance, weighted at 25%; reductions in Net Par outstanding in the insured portfolio, weighted at 10%; and reductions in Gross Operating Run Rate Expenses, weighted at 10%. In addition, the Committee amended the strategic performance goals to add AAC value realization; the expansion of Ambac's internal shared services platform, 220 Business Services; and eliminated the metric related to loss recovery through effective litigation management. The Committee also increased the weighting of the STIP financial performance metrics from 60% to 70%. |
Long Term Incentive Compensation. Our LTIP awards focus on the attainment of long term performance goals and objectives, which are instrumental in creating long term value for stockholders and long term retention incentives for our executives. The Compensation Committee reviews the LTIP targets each year for competitive alignment. The Compensation Committee also reviews market trends related to the award mix and determines the appropriate mix of equity instruments considering market benchmark data.
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In the first quarter of each year, LTIP compensation awards (the size of which relates to the prior year's performance) are granted to our NEOs. In 2022, the Compensation Committee revised the LTIP performance metrics to better align management's goals with certain key drivers of stockholder value: risk reduction and the achievement of certain EBITDA goals at Everspan and Xchange. LTIP awards granted in 2022 will be measured based on (i) reductions in Watch List and Adversely Classified Credits at AAC weighted at 60% and (ii) the achievement of certain EBITDA targets at at Everspan and Xchange each weighted at 20%. In addition, the 2022 LTIP awards were amended to increase the impact of the Total Shareholder Return ("rTSR") modifier which serves as an additional metric with respect to performance based LTIP award payouts. The rTSR modifier for 2022 LTIP awards can cause any final PSU award payout at the end of a three year settlement period to be increased or decreased by 20% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively.
LTIP awards in 2022 were denominated 70% in performance stock units (“PSUs") and 30% in restricted stock units ("RSUs"). PSUs represent a promise to deliver, within 75 days after the end of a three-year performance period, a number of shares of Ambac’s common stock ranging from 0% to 200% (not including any adjustment that may be applied pursuant to the rTSR modifier) of the amount of the initial grant, depending on the achievement of financial performance objectives determined by the Compensation Committee at the time of the grant. The RSUs are time-based awards and were granted in order to encourage the retention of our most valued employees. The RSUs granted as part of the 2022 LTIP awards represent the right to receive an equivalent number of shares of Ambac’s common stock and will vest and settle in three equal annual installments in February of 2023, 2024 and 2025.
The Compensation Committee determined the target value of the 2022 LTIP awards granted to each of our NEOs based on the Company’s overall results, the individual executive’s contribution to overall performance, external market benchmark data and the proportion of total compensation comprised of LTIP awards. In addition, in setting target value of the 2022 LTIP awards granted to Messrs. LeBlanc, Trick and Ksenak, the Committee considered the terms and conditions set forth in their respective employment agreements. See "Agreement with Claude LeBlanc," and "Agreements with Other Executive Officers.”
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Key Changes to Long Term Incentive Program for 2023 LTIP Grants: The Compensation Committee revised the PSU performance metrics to focus on new business growth at Everspan and Cirrata Group. PSU awards granted in 2023 will be measured based on the achievement of certain goals related to cumulative gross written premium and cumulative EBITDA at each of Everspan and Cirrata Group. Reduction in Watch List and Adversely Classified Credits was retained for the 2023 Long Term Incentive Program. LTIP awards in 2023 were denominated 70% in PSUs and 30% in RSUs. |
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LTIP Metrics. The metrics used to judge performance for PSU awards granted in February 2022 are reductions in Watch List and Adversely Classified Credits2 at AAC weighted at 60% and the achievement of certain cumulative EBITDA goals at Everspan3 and Xchange4 each weighted at 20%. The following table sets forth the percentage of the 2022 PSU target award that each of our named executive officer compensationofficers could earn under the 2022 PSU award agreement as disclosedof the last day of the three year performance period.
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Percentage of LTIP PSU Target Award Earned | | Cumulative EBITDA | | Watch List and Adversely Classified Credits ($ in billions) (*) |
| at Everspan ($ in millions) (*) | at Xchange ($ in millions) (*) | |
200% | | $8.5 | $33.3 | | $5.3 |
100% | | $4.5 | $26.6 | | $6.0 |
0 | | $0.0 | $20.0 | | $6.7 |
(*) Linear interpolation between levels of Cumulative EBITDA at each of Everspan and Xchange and Watch List and Adversely Classified Credits will result in this Proxy Statement, we will consider our stockholders’ concernsa proportionate amount of the PSU target Award becoming earned and vested.
Following the end of the Performance Period, the Compensation Committee will evaluate whetherdetermine the extent to which each participant’s PSU award has been earned and the amount payable. The Compensation Committee may, in the exercise of its discretion, reduce the amount of any actionsPSU award that otherwise would have been earned based on the satisfaction of the performance metrics, but may not increase the size of any PSU award.
The ultimate value of the PSUs and RSUs directly depends on the value of our common stock at the time of vesting. Each individual who receives a PSU or RSU becomes, economically, a long-term stockholder of the Company, with the same interests as our other stockholders. As a result, we believe our NEOs have a demonstrable and significant interest in increasing stockholder value over the long term.
Bonus.While bonus payments are necessarynot regular part of Ambac's compensation mix, in 2022 Mr. LeBlanc recommended that special one-time bonuses be paid as performance outcome adjustments to address those concerns.Mr. Ksenak and Ms. Smith based on his assessment of their respective individual contributions to the strategic performance goals that were assigned to him by the Compensation Committee.
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2 Adversely Classified Credits represent credits that are either in default or have developed problems that eventually may lead to a default. Watch List credits represent credits that demonstrate heightened potential for future adverse development based on qualitative and quantitative stress assumptions.
3 Cumulative EBITDA at Everspan is calculated by taking 100% of Everspan Group’s earnings before interest, taxes, depreciation and amortization (calculated in accordance with US GAAP as in effect at beginning of the Performance Period) through the end of the performance period. Cumulative Everspan EBITDA shall be adjusted to exclude the impact of any other costs as determined in the sole discretion of the Board of Directors.
4 Cumulative EBITDA at Xchange is calculated by taking 100% of Xchange’s earnings before interest, taxes, depreciation and amortization (calculated in accordance with US GAAP as in effect at beginning of the performance period) through the end of the performance period. Cumulative Xchange EBITDA shall be adjusted to exclude the impact of retention payments to Xchange employees in connection with the acquisition by Ambac; M&A EBITDA or any associated costs; and any other adjustments as determined in the sole discretion of the Board of Directors.
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Compensation Committee Reportfor Each of Our Named Executive Officers in 2022
Our Chief Executive Officer
Mr. LeBlanc. Effective January 1, 2017, Claude LeBlanc was appointed President and Chief Executive Officer of Ambac and AAC. The Compensation Committee, which received input and advice from its nationally recognized independent compensation consultant, Meridian Compensation Partners, LLC, authorized the Company to enter into an employment agreement with Mr. LeBlanc on December 8, 2016, and amended on February 26, 2020. Pursuant to the employment agreement, as amended, Mr. LeBlanc is paid an annual base salary of $900,000. The employment agreement also provides that Mr. LeBlanc is eligible to receive (i) a target annual STIP award set at no less than 100% of his base salary and (ii) a target annual long-term incentive award set at no less than 150% of his base salary, as determined in the discretion of the Compensation Committee.
The Short Term Incentive Plan is a blend of financial performance metrics and strategic performance goals, over 80% of which are, in the aggregate, objective and/or quantifiable. These goals include formula driven financial performance targets as well as strategic goals to de-risk the insured portfolio; effectively manage loss recovery through litigation; increase organizational effectiveness; and identify and pursue new business opportunities that meet Board approved criteria.
Sixty percent (60%) of the STIP award paid to Mr. LeBlanc for 2022 was based on the achievement of the financial performance metrics related to: (i) gross written premium at Everspan weighted at 20%; (ii) reductions in Net Par Outstanding in the legacy financial guaranty insured portfolio weighted at 60%, and (iii) reductions in Gross Operating Run Rate Expenses weighted at 20%.
The remaining forty percent (40%) of the STIP award paid to Mr. LeBlanc was based on the achievement of strategic performance goals established by the Compensation Committee for both the legacy financial guaranty business and the growing specialty P&C insurance business. A majorityof these strategic performance goals are objective and/or quantifiable.
Given Ambac’s evolution and growing specialty P&C insurance platform, the Compensation Committee decided to increase the weighting in STIP of the financial performance metrics compared with the strategic performance goals in 2022.
Performance Against STIP Metrics. Mr. LeBlanc’s target STIP was set at $1,125,000.On a blended basis, weighting the financial performance metrics at 60% and the strategic performance goals at 40%, Mr. LeBlanc's STIP award multiplier was set at 1.625x target, and he was granted a 2022 STIP award of $1,827,000, which was an increase from his 2021 STIP award of $1,699,000, which was based on a multiplier of 1.51x target. Described below are the metrics, performance goals and final measured outcomes used in determining Mr. LeBlanc’s award.
For the 2022 fiscal year, we established the following targets for each of our STIP financial performance metrics and assigned the following weighting factors:
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($ in millions) | Weighting Factor | Threshold ($ in millions) | Target ($ in millions) | Maximum ($ in millions) |
Net Par Outstanding | 60% | $24,900 | $24,200 | $23,200 |
Gross written premiums at Everspan | 20% | $125 | $160 | $175 |
Gross Operating Run Rate Expenses | 20% | $17.4 | $16.9 | $16.5 |
The 2022 Gross Operating Run Rate Expense ("GORRE") target was higher than the target for 2021 ($16.7 million). The year-over-year increase in the target GORRE resulted from a change in budgeted performance compensation targets and grants, and the impact of inflation on budgeted expenses, such as healthcare, corporate insurance, audit services and other operating costs, which collectively outweighed the impact of other budgeted
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cost reductions. The 2023 GORRE target has been set to reflect materially lower expenses as compared to the 2022 target.
The following graph/charts shows the Company's 2022 actual performance compared to the threshold, target and maximum achievement levels as established for each of the financial performance metrics.
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Gross Written Premiums at Everspan | Net Par Outstanding | Gross Operating Run Rate Expenses |
($ in Millions) | ($ in Billions) | ($ in Millions) |
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| Threshold | | Target | | Maximum | ------ | Actual |
Under Mr. LeBlanc's leadership in 2022, Ambac exceeded the maximum performance goals for reducing Net Par Outstanding and reducing Gross Operating Run Rate Expenses. With respect to gross written premiums at Everspan, we finished the year below target, but exceeded threshold performance. Ambac's Net Par Outstanding at the beginning of the performance period of $28.0 billion was reduced to $22.9 billion. Gross written premiums at Everspan for the full year 2022 were $146.4 million. Gross Operating Run Rate Expenses for the fourth quarter of 2022 were reduced to $16.3 million. Applying the appropriate weighting to each performance metric as set forth above and using the appropriate payout levels for STIP awards under Mr. LeBlanc's employment agreement, the Committee assigned a 1.76 multiplier to the financial performance portion of Mr. LeBlanc's target STIP award for 2022.
Strategic Performance Goals. In determining the other forty percent of Mr. LeBlanc's 2022 STIP award, the Compensation Committee gave consideration to the Company’s results against the strategic performance goals described below, which were communicated to Mr. LeBlanc in the first quarter of 2022.
For each of these performance goals the Compensation Committee assigned a relative weighting based on the current importance of such performance goals to the Company, with an aggregate total weighting of 100%. To assess results against these performance goals, the Committee utilized a definitive score card methodology to achieve a consistent, formula driven ratings process. Score results were determined by the Committee for each category and could range from 0-5, with 0 to 1 indicating results that were below the anticipated outcomes; a score between 2 and 3 indicating results were slightly below to slightly above the anticipated outcomes; and a score between 4 and 5 indicating results that exceeded or far exceeded the anticipated outcomes.
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The strategic performance goals for each category can be further bifurcated between (i) objective, quantifiable or financial performance goals to which the defined scorecard methodology is applied and (ii) well defined strategic goals relating to key components of the Company’s reported strategic priorities, to which the defined scorecard methodology is also applied.
After measuring and calculating the actual results against the strategic goals outlined herein, some of which are set forth below, the Committee utilized the pre-defined scorecard methodology to arrive at a performance rating for each category. The performance ratings were then applied against the pre-determined weightings outlined herein to arrive at a formulaic outcome for the Chief Executive Officer that was not subject to any override or adjustments.
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Strategic goals related to active de-risking and ongoing rationalization of Ambac's capital and liability structures, as well as organizational effectiveness were weighted at 20%, and included among other things |
Goals | Results |
✓ Active De-Risking at the Legacy Financial Guarantee business | ◦Total net par down $5.4 billion or 19% through December 31, 2022 (compared with an 17% reduction in full year 2021); ◦Watch List and Adversely Classified Credits’ down $2.4 billion or 24% through December 31, 2022 (compared with an 23% reduction in full year 2021); and ◦Final resolution of restructuring of all remaining Puerto Rico exposures resulting in, among other things, a cumulative reduction at year-end of $9.3 billion of insured P&I or 91% since 2019. |
✓ Ongoing rationalization of Ambac's and its subsidiaries' capital and liability structures. | ◦AAC redeemed $1.2 billion of Sitka Notes and $212 million of Tier II Notes; ◦AAC repurchased $602 million of principal and accrued interest of surplus notes (including $122 million from AFG) capturing $162 million of discount; ◦AAC repurchased Auction Market Preferred Shares with a liquidation preference of $23 million capturing approximately $15 million of discount ◦AFG Repurchased 1.6 million shares of Ambac common stock at an average price of $8.86 per share. |
✓ Continue to increase organizational effectiveness, efficiency of the operating platform and simplification of business controls, policies and procedures without increasing operational risk | ◦Launch of implementation of Cirrata’s IT platform to support growth of MGA/MGU businesses; ◦Implementation of robust cybersecurity infrastructure to ensure the integrity and security of Ambac’s systems, protect against emerging threats, Data Loss Prevention, provide for 24x7 Security Operations Center monitoring and ensure compliance with all regulatory requirements; ◦Build-out of ERM framework for Xchange and Everspan; and ◦Advancement of internal controls over financial reporting readiness for both Everspan and Xchange. |
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Strategic goals related to new business activities were weighted at 60%, and included among other things |
Goals | Results |
✓ Overall New Business ◦Stand up Business Services platform ◦Continue to manage deal pipeline of new business initiatives ◦Materially advance de novo/additional MGA acquisition strategy | ◦Acquisition of All Trans and Capacity Marine, representing approximately $60 million of expected premium placed for Cirrata ◦Announced the incubation of PenPoint Specialty Insurance Services LLC, Ambac's first de novo MGA ◦Xchange Benefits, LLC acquired the renewal rights of Employer Benefit Underwriters, Inc.’s employer stop loss portfolio |
✓ Everspan ◦Program Onboarding ◦Actively manage and facilitate AM Best relationship and maintain AM Best A- rating ◦Actively pursue P&C license expansion ◦Develop strategic relationships with MGAs to bolster Everspan growth |
◦Everspan added 8 new MGA programs in 2022 and generated $146 million of gross premiums ◦Everspan successfully renewed its AM Best A- rating and Class VIII designation ◦Material expansion of Everspan’s admitted licensing capabilities across 5 admitted carriers for all 50 states |
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Strategic goals related to litigation strategy were weighted at 20%, and included among other things |
Goals | Results |
✓ Effective Litigation Management ◦Progress toward resolution of main Countrywide case ◦Materially advance or resolve other Bank of America related litigations and Nomura litigation | ◦Settled legacy RMBS litigations with Bank of America for $1.84 billion ◦Settled litigation with Nomura Credit & Capital, Inc. for $140 million |
The Committee considered each of the strategic performance goals outlined above in evaluating Mr. LeBlanc's overall performance, assigned a score from 0-5 for each goal and then applied the scores to the relative weightings assigned to the performance goals at the beginning of 2022 to arrive a 1.42 multiplier to the strategic performance goals for Mr. LeBlanc's target 2022 STIP award. Weighting this multiplier at 40% and the 1.761 multiplier for the financial performance goals at 60% of Mr. LeBlanc's target STIP award for 2022 produced an overall multiplier of 1.625 times target for Mr. LeBlanc's 2022 STIP award.
LTIP Award. In addition to his STIP award, in 2023 Mr. LeBlanc received an LTIP award denominated 100% in stock units with an aggregate target value of $3,825,000, primarily reflecting Mr. LeBlanc's outstanding leadership and focus on executing the Company's strategic priorities through the challenges and uncertainties of 2022, including, among other things:
•Reduced debt and accrued interest by $1.8 billion resulting in a $150 million discount capture;
•Reported $249 million gains related to RMBS representation and warranty litigation settlements;
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•Specialty P&C Insurance production, which includes gross premiums written by Ambac's Specialty P&C Insurance segment and premiums placed by the Insurance Distribution segment, totaled $90 million in the fourth quarter of 2022, an increase of 172% from the fourth quarter of 2021 and $282 million for the full year 2022 up 116% over the prior year; and
•Decreased our insured portfolio net par outstanding at AAC and its subsidiaries by 19% to $22.6 billion from year-end 2021 including the restructuring for all remaining Puerto Rico exposures.
Any payout under the 2023 LTIP awards is completely formula driven based on the achievement of objective and quantifiable financial performance metrics against pre-set targets at the end of a three-year performance period. The Compensation Committee believes it struck the right balance between paying for current performance, on the one hand, and the desire to keep Mr. LeBlanc focused on the Company’s long-term performance and continued growth, on the other hand.
Other Named Executive Officers
Performance Against STIP Performance Metrics and Strategic Performance Goals.
The Compensation Committee reviewed the Company's actual performance against each of the financial performance metrics set forth above, and after applying the appropriate weighting to each metric, the Committee assigned the same multiplier as that of Mr. LeBlanc to the financial performance portion of each NEO's 2022 STIP award.In determining the other forty percent of the 2022 STIP award for each of the NEOs (other than Mr. LeBlanc), Mr. LeBlanc reviewed with the Compensation Committee the performance of each NEO individually and their overall contribution to the Company in 2022.In this process, Mr. LeBlanc assigned the same strategic performance goals and objectives to each of the NEOs that were assigned to him by the Compensation Committee, but individually adjusted the relative weighting based on each executive officer's areas of responsibility and influence. In addition, Mr. LeBlanc utilized the same score card approach as the Committee in his evaluation of each NEO in an effort to achieve a consistent ratings process. He also recommended certain adjustments reflecting his view of the NEOs' contributions and influence regarding the outcomes for the strategic performance goals delineated in the score card. In addition, Mr. LeBlanc recommended that special one-time bonuses be paid as performance outcome adjustments to Mr. Ksenak and Ms. Smith based on his assessment of their respective individual contributions to the aforementioned performance goals that were assigned to him by the Compensation Committee. Based on the recommendation of Mr. LeBlanc, the Committee approved the 2022 STIP awards, special one time bonuses, and 2023 LTIP awards granted to each of Messrs. Trick, Barranco and Ksenak, and Ms. Smith, as shown in the table in the section entitled "Elements of Pay."
Performance against 2019 LTIP metrics.
In 2019, we established the following three year goals for each of our LTIP performance metrics and assigned weighting factors based on each NEO's areas of responsibility. In addition, the Company incorporated a relative Total Stockholder Return modifier ("rTSR") that may adjust any calculated payout by 10%, either upwards or downwards, based on AFG’s rTSR percentile ranking for the performance period against a peer group.
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At AAC | | At Ambac | Percentage of Target Award Earned |
Net Asset Value (1) ($ in millions) | Watch List and Adversely Classified Credits Outstanding(1) ($ in billions) | | Cumulative EBITDA (1) ($ in millions) |
|
$(180) | $11.5 | | $35 | 200% |
$(380) | $13.5 | | $20 | 100% |
$(580) | $15.0 | | $— | —% |
(1) Linear interpolation between levels results in a proportionate amount of the Ambac LTIP Target Award becoming earned and vested.
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At AAC performance is judged based on (i) increases Net Asset Value weighted at 25% and (ii) reductions in Watch List and Adversely Classified Credit net par outstanding weighted 45%. At Ambac performance is judged based on cumulative EBITDA over the performance period. The following graph/charts shows the Company's actual performance over the three year performance period running from January 1, 2019 through December 31, 2021, compared to the achievement levels set forth in the chart above.
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AAC Adjusted Net Asset Value | Watch List & Adversely Classified Credits Outstanding | Ambac Cumulative EBITDA |
($ in Millions) | ($ in Billions) | ($ in Millions) |
The following table shows the grant date value of the 2019 LTIP awards granted to each of our NEOs and the amounts realized upon vesting and settlement.
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Named Executive Officer | Grant Date value of PSU Award at Target $ | Weighting between AAC/ Ambac | Performance Percentage | 10% Reduction to Payout Percentage After Applying rTSR modifier | Value of PSU Award on Vesting and Settlement $ |
Claude LeBlanc | 1,809,000 | 70% / 30% | 159.4% | 143.5% | 1,852,370 |
David Trick | 318,250 | 70% / 30% | 159.4% | 143.5% | 325,889 |
David Barranco | 318,250 | 70% / 30% | 159.4% | 143.5% | 325,889 |
Stephen M. Ksenak | 268,000 | 70% / 30% | 159.4% | 143.5% | 274,429 |
R. Sharon Smith | 268,000 | 70% / 30% | 159.4% | 143.5% | 274,429 |
The Committee considered the Company's actual performance against each of the LTIP metrics for AAC and Ambac for each of Messrs. LeBlanc, Trick, Barranco, Ksenak and Ms. Smith. The Net Asset Value at the end of the performance period was $42 million. While Net Asset Value was projected to decrease over the performance period, certain favorable achievements by management, such as (i) the COFINA restructuring, (ii) the Ballantyne Re PLC settlement, (iii) the Citibank - SEC settlement, and (iv) debt reduction from surplus note exchanges, along with the resulting lower net interest expense all contributed to the Net Asset Value increasing during the performance period. Watchlist & Adversely Classified Credit net par outstanding was reduced to $10.3 billion at AAC during the performance period and was positively impacted by active de-risking strategies including credit
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exposure reductions at Ballantyne Re PLC, COFINA and and other risk remediation and reinsurance transactions. Cumulative EBITDA at Ambac of $13 million was below target and was adversely effected by the use of assets for Xchange, Everspan and other investments over the performance period that did not generate revenues for this calculation. Ambac's relative total stockholders return lagged against our peers. Ambac's beginning stock price for the 2019 rTSR modifier was $16.39 while its ending price was $15.25 which resulted in a TSR of -6.98% and a ranking in the bottom 25th percentile of our peer participants which reduced the payout to 90% of the performance metrics.
Perquisites. The Company provided a limited number of perquisites to all our employees, including our executive officers. For Mr. LeBlanc and Ms. Smith, perquisites included reimbursement from Ambac for certain commuting expenses, and for Messrs. Trick and Barranco, included payments for tax preparation services as a result of their roles as executive directors of Ambac UK. Consistent with past practice, in order to support the long-term wellness and productivity of our executive officers, the Company also provided access to an extensive physical examination for all executive officers, at the Company's expense. Mr. Barranco and Ms. Smith accepted this offering in 2022.
Employment Agreements. Certain of our active NEOs have entered into employment agreements with the Company which provide for certain compensation and benefits, including severance benefits in certain circumstances. In December 2016, we entered into an employment agreement with our CEO, Claude LeBlanc, in connection with his appointment, which took effect on January 1, 2017. This agreement was subsequently amended on February 27, 2020. We also entered into an employment agreement with Mr. Trick in November of 2016, and with Mr. Ksenak in January 2017. While the Compensation Committee considers employment agreements customary for the chief executive officer, the Committee believed it was important to execute an employment agreement with each of Messrs. Trick and Ksenak to retain their services to Ambac for the foreseeable future. (See “Agreement with Claude LeBlanc”, and “Agreements with Other Executive Officers” below). Severance Agreements have been entered into with various executive officers when the Compensation Committee believes it is in the best interest of the Company has reviewedto secure an orderly separation between such officers and discussed the Compensation DiscussionCompany, which typically include certain continuing obligations from the departing executive.
Post-Employment Benefits.Pursuant to Ambac's Severance Pay Plan, to provide protection in the event of an involuntary termination, each of our current executive officers (other than Messrs. LeBlanc, Trick and Analysis requiredKsenak) is entitled to receive a severance payment equal to 52 weeks of such executive officer's weekly base salary at the time of termination of his or her employment by Item 402(b)Ambac as the result of Regulation S-K(i) a job elimination, job discontinuation, office closing, reduction in force, business restructuring, redundancy, or such other circumstances as the Company deems appropriate for the payment of severance or (ii) a “termination by mutual agreement” (as defined in the Severance Pay Plan). In addition to this severance payment, each of our current NEOs (other than Messrs. LeBlanc, Trick and Ksenak) would be entitled to receive reimbursement for a portion of the premiums paid for COBRA continuation coverage under the Company's group health plan for the first twelve months following his or her termination of employment. The portion of the premiums to be paid by the Company will be the same as the amount paid by the Company for the same group health insurance coverage for active employees. For a description of post-employment benefits payable to Messrs. LeBlanc, Trick and Ksenak, see “Agreement with managementClaude LeBlanc,” and “Agreements with Other Executive Officers."
The 2022 LTIP awards consisted of both PSUs and based on such review and discussions, the Compensation Committee recommendedRSUs. The PSU award agreements for our NEOs provide that if a termination occurs prior to the Boardlast day of the performance period by reason of disability, an involuntary termination other than for “cause,” or retirement, the recipient would be entitled to receive the number of earned PSUs which would only be payable at the end of the performance period provided that the Compensation Discussion and Analysisperformance conditions related to the award were satisfied. If a termination occurs by reason of death, the recipient would be entitled to receive the number of earned PSUs that the recipient would have been entitled to receive had the termination date not occurred prior to the end of the performance period at a 100% overall payout multiple regardless of the outcome of the performance goals or rTSR. Comparable provisions were included in this proxy statement.the 2020 and 2021 PSU
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award agreements. The 2021 and 2022 RSU award agreements for our NEOs generally provide that if a termination occurs, other than for “cause” or voluntary resignation, the entire grant of RSUs shall vest on the termination date.
Compensation Committee
Alexander D. Greene (Chair), Ian D.The Compensation Committee is currently comprised of Mr. Haft and C. JamesMs. Lamm-Tennant. Mr. Prieur,
April 7, 2020
the former Chair of the Compensation Committee, resigned from the Board of Directors and each of its committees on February 22, 2023. As a result of Mr. Prieur's resignation, there is currently no Chair of the Compensation Committee. The purpose of our Compensation Committee is to assist the Board in overseeing our compensation programs. The Compensation Committee’s responsibilities include:
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• Reviewing the overall compensation principles governing the compensation and benefits of our executive officers and other employees.
• Evaluating the performance of our Chief Executive Officer.
• Reviewing the procedures for the evaluation of our executive officers, other than our Chief Executive Officer.
• Reviewing and approving the selection of our peer companies to use as a reference in determining competitive compensation packages.
• Determining all executive officer compensation (including but not limited to salary, bonus, incentive compensation, equity awards, benefits and perquisites).
• Reviewing and approving the terms of any employment agreements and severance arrangements, change-in-control agreements, and any special or supplemental compensation and benefits for our executive officers and individuals who formerly served as executive officers.
• Acting as the administering committee for our stock and bonus plans and for any equity compensation arrangements that may be adopted by Ambac from time to time.
• Reviewing and discussing with management the annual Compensation Discussion and Analysis (CD&A) disclosure, and, based on this review and discussion, making a recommendation to include the CD&A disclosure in our annual proxy statement.
• Preparing the annual Compensation Committee Report for inclusion in our annual proxy statement.
Each member of our Compensation Committee is a “non-employee” director within the meaning of Rule 16b-3 of the Exchange Act. Our Board of Directors has determined that each of the directors serving on our Compensation Committee is independent within the meaning of the Listing Rules of NYSE. The Compensation Committee met six times in 2022.
In 2022, the Compensation Committee directly engaged Meridian Compensation Partners, LLC, a nationally recognized independent compensation consulting firm ("Meridian"), to assist it with benchmarking and compensation analyses, as well as to provide information and advice on executive compensation practices and determinations, including information on award design for both our Short Term Incentive Plan (“STIP”) and Long Term Incentive Plan (“LTIP”).
Our Chief Executive Officer will attend meetings of the Compensation Committee (other than executive sessions) and express his view on the Company’s overall compensation philosophy. Following year-end, the Chief Executive Officer makes recommendations to the Compensation Committee as to the total compensation package (salary, and STIP and LTIP awards) to be paid to each of our executive officers.
Our Executive Vice President and Chief Strategy Officer serves as management’s main liaison with the Compensation Committee and assists the Compensation Committee Chairman in setting the agenda and gathering the requested supporting material for each Compensation Committee meeting. Our Corporate Secretary serves as secretary to the Compensation Committee.
Governance and Nominating Committee
The Governance and Nominating Committee is currently comprised of Ms. Lamm-Tennant (Chair), and Mr. Stein. Our Governance and Nominating Committee’s purpose is to assist our Board of Directors in identifying individuals qualified to become members of our Board of Directors based on criteria set by our Board of Directors, to oversee the evaluation of the Board of Directors and management, and to develop and update our corporate governance principles. The Governance and Nominating Committee’s responsibilities include:
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• Evaluating the composition, size, organization, and governance of our Board of Directors and its committees, determining future requirements, and making recommendations regarding future planning, the appointment of directors to our committees, and the selection of chairs of these committees.
• Periodically reviewing the standards for director independence and providing the Board with an assessment of which directors should be deemed independent.
• Determining the criteria for Board membership, including the need for both gender and ethnic diversity.
• Overseeing policies and practices relating to environmental, social, and governance (“ESG”) matters relevant to the Company.
• Overseeing the process for the self-evaluation of the Board and its committees.
• Reviewing and recommending to our Board of Directors the compensation of our non-employee directors.
• Reviewing plans for the succession of our executive officers.
• Reviewing and approving related party transactions according to our Related Party Transaction Policy.
• Administering a procedure to consider stockholder recommendations for director nominees.
• Evaluating and recommending candidates for election or re-election to our Board of Directors, including nominees recommended by stockholders.
• Reviewing periodically Ambac’s Code of Business Conduct and Ethics and compliance therewith.
Our Board of Directors has determined that each of the directors serving on our Governance and Nominating Committee is independent within the meaning of the Listing Rules of NYSE. The Governance and Nominating Committee met five times in 2022.
Strategy Committee
The Strategy Committee is currently comprised of Messrs. Haft (Chairman), Herzog and Ms. Lamm-Tennant,and its responsibilities include:
•Reviewing and making recommendations to the Board regarding strategic plans and initiatives, including potential material investments in joint ventures, mergers, acquisitions and other business combinations.
•Reviewing, evaluating and making recommendations to the Board regarding solicited or unsolicited strategic transactions, opportunities and alternatives involving the Company or the interest of the Company in any direct or indirect subsidiary.
The Strategy Committee met five times in 2022.
Board’s Role in Risk Oversight
Among other things, the Board is responsible for understanding the risks to which Ambac is exposed, overseeing management's strategy to manage these risks, and measuring management's performance against the strategy.
Our management team is responsible for managing the risks to which Ambac is exposed and reports on such matters to the Board and to the relevant committees of the Board depending on the nature of the risk, as described below.
The Audit Committee oversees the management of risk associated with the integrity of our financial statements and our compliance with legal and regulatory requirements. In addition, the Audit Committee reviews policies and procedures with respect to risk assessment and risk management, including major financial risk exposure and the steps management has taken to monitor and control such exposures. The Audit Committee reviews with management, our internal auditors, and our independent registered public accounting firm Ambac's critical
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accounting policies, the system of internal controls over financial reporting and the quality and appropriateness of disclosure and content in the financial statements and other external financial communications.
The Compensation Committee oversees the management of risk primarily associated with (i) our ability to attract, motivate and retain high-quality and talented employees, particularly executives; and (ii) compensation structures that might lead to undue risk taking.
The Governance and Nominating Committee oversees the management of risk primarily associated with our ability to attract, motivate and retain high-quality directors, our corporate governance and ESG programs and practices and our compliance therewith. Additionally, the Governance and Nominating Committee establishes a framework for the Board and each of its committees to conduct an annual self-evaluation process and ensures that risk management effectiveness is a part of this evaluation. The Governance and Nominating Committee also performs oversight of the business ethics and compliance program by conducting an annual review and assessment of our Code of Business Conduct and Ethics.
The Strategy Committee oversees the management of risk and risk appetite primarily with respect to strategic plans and initiatives.
The full Board also receives quarterly updates from Board committees and the Board provides guidance to individual committee activities as appropriate.
Director Independence
The Governance and Nominating Committee annually reviews the relationships that each director has with Ambac. In conducting this review, the Committee considers all relevant facts and circumstances, including any consulting, legal, accounting, charitable and familial relationships and such other criteria as the Governance and Nominating Committee may determine from time to time. Following such annual review, the Committee reports its conclusions to the full Board, and only those directors whom the Board affirmatively determines to have no material relationship with Ambac and otherwise satisfy the criteria for director independence established by the committee are considered independent directors.
Based on the review and recommendation of the Governance and Nominating Committee, the Board has determined that none of Messrs. Haft, Price or Stein, or Mses. Iglesias, Lamm-Tennant or Matus has a relationship that, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and each of them is an independent director as defined in the Listing Rules of NYSE. In determining the independence of our directors, the Board of Directors has adopted the independence standards specified by applicable laws and regulations of the SEC and the Listing Rules of NYSE.
Compensation Committee Interlocks and Insider Participation
None of the current members of the Compensation Committee has been an officer or employee of Ambac. In 2022, each of Messrs. Haft, Prieur, and Ms. Lamm-Tennant served as members of the Compensation Committee. None of our executive officers serves on the board of directors or compensation committee of a company that has an executive officer that serves on our Board of Directors or the Compensation Committee.
Consideration of Director Nominees
Stockholder Recommendations and Nominees
The Governance and Nominating Committee considers properly submitted recommendations for candidates to the Board of Directors from stockholders. In evaluating such recommendations, the Governance and Nominating Committee seeks to achieve a balance of experience, knowledge, expertise, and capability on the Board of Directors and to address the membership criteria set forth under “Director Selection Process and Qualifications”
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below. There are no differences in the manner in which the Governance and Nominating Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder or otherwise. Any stockholder recommendations for consideration by the Governance and Nominating Committee should be sent, together with the information required by Article II of our by-laws, c/o: Ambac Financial Group, Inc., Attn: Corporate Secretary, One World Trade Center, New York, New York 10007. Stockholder nominations for directors that a stockholder wishes to have considered at a meeting of stockholders should be made in accordance with the provisions of our by-laws, as described under “Other Questions related to the Meeting or Ambac-What is the deadline to propose actions for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?” above.
Director Selection Process and Qualifications
Our Governance and Nominating Committee will evaluate and recommend candidates for membership on the Board of Directors consistent with our Corporate Governance Guidelines regarding the selection of director nominees. Pursuant to these guidelines, the Governance and Nominating Committee screens candidates and evaluates the qualifications of the persons nominated by or recommended by our stockholders for membership to our Board. Board diversity, both ethnic and gender, is an important consideration in evaluating Board composition. The Governance and Nominating Committee also considers each candidate's time commitments, including memberships on other public company boards and board committees. Thus, in assessing potential director candidates for the Board, the Governance and Nominating Committee endeavors to select the best directors from a pool of diverse candidates considering individuals with differing perspectives, backgrounds, genders and ethnicities, in addition to character, judgment, business experience, acumen and time commitments.
In evaluating non-incumbent candidates for the Board, the Governance and Nominating Committee reviews the composition of the Board as a whole, as well as the committees, and assesses the appropriate knowledge, experience, skills, expertise and gender and ethnic diversity in the context of the current make-up and perceived needs of the Board at the time of consideration. It also reviews the composition of the Board to ensure that it contains at least the minimum number of independent directors required by applicable law and stock exchange listing requirements. Candidates also are evaluated in light of other factors, such as those relating to service on other boards of directors and other professional commitments. We believe that it is important to have a Board that is reflective of the core values and diversity of our key constituents including our employees, clients and partners, and stockholder base.
The Governance and Nominating Committee uses a variety of methods for identifying and evaluating nominees for directors. The Committee considers the current directors who have expressed an interest in and that continue to satisfy the criteria for serving on the Board as set forth in our Corporate Governance Guidelines. Other nominees who may be proposed by current directors, members of management or by stockholders are also considered. The Committee may, at Ambac’s expense, engage search firms, consultants and other advisors to identify, screen and/or evaluate candidates in order to ensure that the Committee has a diverse pool of qualified candidates that includes both gender diversity and candidates from under-represented minority groups.
The Governance and Nominating Committee recommends director nominees who are ultimately approved by the full Board of Directors.
Executive Sessions
Executive sessions of independent directors are held in connection with each regularly scheduled meeting of the Board of Directors and at other times as appropriate. The Board of Directors’ policy is to hold executive sessions without the presence of management, including the Chief Executive Officer.
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Outside Advisors
Our Board of Directors and each of its committees may retain outside advisors and consultants of their choosing at our expense. The Board of Directors and its committees need not obtain management’s consent to retain outside advisors.
Board Effectiveness
The Governance and Nominating Committee retained a third party advisor to facilitate the Board's annual self-evaluation process in 2022. The effectiveness of the Board as a whole, and each of its individual committees, was assessed against the roles and responsibilities set forth in Ambac's Corporate Governance Guidelines, the relevant committee charters, and best practices. Matters considered as part of the evaluation included:
•the effectiveness of discussion and debate at Board and committee meetings;
•the effectiveness of Board and committee processes and in interacting with management;
•the quality and timeliness of Board and committee agendas, and preparation of reference materials to inform the Board and committees and support effective decision making; and
•the composition of the Board and each committee, focusing on the blend of skills, experience, independence and knowledge of the group and its diversity, both ethnic and gender.
This self-evaluation process is managed by the Chair of the Governance and Nominating Committee.
Corporate Governance Guidelines
The Corporate Governance Guidelines reflect the Board's commitment to monitor the effectiveness of policy and decision making at both the Board and management levels, with a view to enhancing long term stockholder value. The Corporate Governance Guidelines address, among other things, such topics as the role of directors; goals and development of long term strategy; size of the Board; other public company Board memberships; Board membership criteria; term limits; Board meeting procedures; and retirement policy. Ambac’s Corporate Governance Guidelines can be found in the Corporate Governance section of Ambac’s Investor Relations website at https://ambac.com/investor-relations/governance/governance-documents/default.aspx.
Code of Business Conduct and Ethics
Ambac has a Code of Business Conduct and Ethics which reflects the Board's commitment to maintaining strong standards of integrity for handling business situations appropriately and effectively. The Code of Business Conduct and Ethics can be found in the Corporate Governance section of Ambac’s Investor Relations website at https://ambac.com/investor-relations/governance/governance-documents/default.aspx. Ambac will disclose on its website any amendment to, or waiver from, a provision of its Code of Business Conduct and Ethics that applies to its Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer. Charters for Ambac's Audit Committee, Governance and Nominating Committee, Strategy Committee and Compensation Committee are also available in the Corporate Governance section of Ambac’s Investor Relations website at https://ambac.com/investor-relations/governance/governance-documents/default.aspx.
Board Compensation Arrangements for Non-Employee Directors
Ambac's director compensation program is designed to enable continued attraction and retention of highly qualified non-employee directors by ensuring that director compensation is reflective of the time, effort, expertise, and accountability required of board membership. The program is structured to recognize the unique nature of our business and the level of experience and oversight needed at the Board level, particularly with respect to our legacy financial guarantee insurance business in run-off, as well as overseeing Ambac's expansion into new
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businesses in specialty property and casualty insurance and insurance distribution. It is essential that our Board members not only understand the risks that the Company faces and the steps that management is taking to manage those risks, but to also have a deep understanding of the appropriate level of risk for the Company as it actively prioritizes the runoff of legacy financial guarantee insurance business and pursues new business opportunities in specialty property and casualty insurance and insurance distribution. Additionally, it is critical that our non-employee director compensation program is appropriately designed to attract and retain Board members that are highly capable and well-suited to help us effectively achieve our goals.
The amount and composition of total compensation paid to our non-employee directors is considered in light of competitive compensation levels for directors in the financial services industry. The Governance and Nominating Committee uses this information to provide a general review of market pay levels and practices and to ensure that it makes informed decisions regarding our non-employee director compensation program. In 2020, the Governance and Nominating Committee eliminated the payment of meeting fees from the director compensation program. In 2021, the Governance and Nominating Committee reviewed the non-employee director compensation program that was put in place for the 2022 fiscal year, including comparisons to director compensation programs at other similarly-situated companies. The Governance and Nominating Committee concluded that no changes were appropriate for the 2022 fiscal year. This conclusion was based on the Committee’s views that the Company continued to face many of the same risks and issues as it had faced in recent years and was in the early stage of new business. The Committee further noted that the workload of the directors remained similar to that of recent years in overseeing the activities of the Company and the complexity of the issues faced by the Company, including those relating to the runoff of the legacy financial guarantee insurance business, particularly troubled credits like Puerto Rico, as well as certain longstanding litigation to recover billions of dollars in losses. The Committee will review the compensation program for non-employee directors on an annual basis to assess whether such compensation is appropriate in light of directors’ time commitments and contributions as well as the complexity of the business.
Director Compensation Program Components
The annual compensation for non-employee directors generally consists of both a cash and equity component. The compensation components are designed to compensate members for their service on the Board of Directors and its committees, to create an incentive for continued service on the Board, and to align the interests of directors and stockholders. In furtherance of such alignment, a significant portion of each non-employee director’s annual compensation is at-risk and granted in the form of restricted stock units on the first business day of each calendar quarter. These quarterly grants vest on the one year anniversary of the grant date. Restricted stock units granted in prior years that have vested will not settle and convert into shares of common stock until the director resigns from, or otherwise ceases to be a member of, the Board of Directors of Ambac. In 2022 the Governance and Nominating Committee recommended, and the Board of Directors approved, a change to fix the quarterly grant dates to be the first business day of each calendar quarter. This change in timing took effect on April 1, 2022. Restricted stock units granted during the course of the year vest on the one-year anniversary of the grant date, subject to accelerated vesting under certain circumstances.
Upon a non-employee director’s first appointment or election to our Board of Directors, such non-employee director will receive a one-time off-cycle pro-rata grant of restricted stock units, based on his or her expected time of service on the Board of Directors prior to the next quarterly restricted stock unit grant.
Mandatory Director Shareholding Requirements
To further align the interests of our Board of Directors with our stockholders, our Non-Employee Director Stock Ownership Policy requires each non-employee director to acquire and hold shares of our common stock equal to the lesser of $800,000 in value or 40,000 shares within five years of becoming a director. This requirement may be satisfied by restricted stock unit holdings and other share acquisitions.
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Compensation for Non-Employee Directors
Our non-employee director compensation is paid as follows:
•An annual cash retainer of $100,000, paid in monthly installments, and four quarterly grants of $50,000 of stock-based compensation, comprised of restricted stock units of Ambac (rounded up to the nearest whole unit), as permitted under Ambac’s 2020 Incentive Compensation Plan; and
•The Chairman of the Board received an additional annual fee of $125,000; the Audit Committee Chair received an additional annual fee of $35,000; the Compensation Committee Chair received an additional annual fee of $25,000; and the chairs of each of the Governance and Nominating Committee and the Strategy Committee received an additional annual fee of $15,000.
In addition Ambac reimburses its directors for reasonable out-of-pocket expenses in connection with their Board service, including attendance at Board of Directors and committee meetings. The restricted stock units that were granted to our non-employee directors on February 28, 2022, April 1, 2022, July 1, 2022, and October 3, 2022 and will vest on the one year anniversary of each quarterly grant date.
The following table summarizes compensation paid to non-employee directors during 2022.
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Name | Year | Fees Earned or Paid in Cash(1) ($) | Stock Awards (2) ($) | All Other Compensation ($) | Total ($) |
Ian D. Haft | 2022 | $115,000 | $189,557 | — | $304,557 |
David L. Herzog | 2022 | $135,000 | $189,557 | — | $324,557 |
Lisa G. Iglesias | 2022 | $100,000 | $189,557 | — | $289,557 |
Joan Lamm-Tennant | 2022 | $115,000 | $189,557 | — | $304,557 |
C. James Prieur | 2022 | $125,000 | $189,557 | — | $314,557 |
Jeffrey S. Stein | 2022 | $225,000 | $189,557 | — | $414,557 |
(1) Fees earned or paid in cash include an annual cash retainer and chairman or committee chair fees.
(2) The value of the restricted stock units (“RSUs”) received in 2022 and reported in the table above is based on the grant date fair value of awards computed in accordance with FASB ASC Topic 718. The grant date fair values of RSUs granted to each non-employee director on February 28, 2022, April 1, 2022, July 1, 2022 and October 3, 2022 were $43,211, $47,046, $53,821 and $45,479, respectively. The number of RSUs granted on each quarterly grant date is set forth in the table below and was calculated based on an average closing price of Ambac common stock on the NYSE for the immediately preceding twenty trading days prior to the grant date:
| | | | | | | | | | | | | | |
| | Number of RSUs Granted on |
Name | February 28. 2022 | April 1, 2022 | July 1, 2022 | October 3, 2022 |
Ian D. Haft | 3,368 | 4,626 | 4,538 | 3,567 |
David L. Herzog | 3,368 | 4,626 | 4,538 | 3,567 |
Lisa G. Iglesias | 3,368 | 4,626 | 4,538 | 3,567 |
Joan Lamm-Tennant | 3,368 | 4,626 | 4,538 | 3,567 |
C. James Prieur | 3,368 | 4,626 | 4,538 | 3,567 |
Jeffrey S. Stein | 3,368 | 4,626 | 4,538 | 3,567 |
Compensation for Non-Employee Directors in 2023
In 2022, the Governance and Nominating Committee directly engaged Meridian Compensation Partners, LLC, a nationally recognized independent compensation consulting firm, to assist it with benchmarking and compensation analyses for non-employee director compensation. The Governance and Nominating Committee reviewed the non-employee director compensation program that was put in place for the 2022 fiscal year, including a benchmarking
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Ambac Financial Group, Inc. | 33 | 2023 Proxy Statement |
report and analysis prepared by Meridian, comparing Ambac's director compensation program with other similarly situated companies, and concluded that no changes were indicated for the 2023 fiscal year. The conclusion that the amount of non-employee director compensation should remain unchanged from the 2022 fiscal year was based on the Committee’s views that the compensation was competitive relative to the peer companies. Although the amount of compensation per non-employee director was found to be higher than the median compensation level for non-employee directors in the peer group, the Committee noted that Ambac's compensation program was appropriate based on the following factors:
•Ambac director compensation is more heavily weighted to equity-based compensation than its peers
•The total cost to the Company of non-employee director compensation was lower than the median total cost of non-employee director compensation among the peer group, given the relatively small size of Ambac'c Board
•The time commitment and amount of work required of Ambac's directors was not expected to decrease in 2023
•The Company continues to be complex and to face substantial risks regarding its legacy financial guaranty operations and its new businesses initiatives
•Board members serve on the Boards of both Ambac and AAC, which involve different work streams and considerations that diverge increasingly over time
Accordingly, the non-employee director compensation program described above for the 2022 fiscal year will continue to apply to our non-employee directors in 2023.
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Ambac Financial Group, Inc. | 34 | 2023 Proxy Statement |
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the amount of our common stock beneficially owned as of April 25, 2023, by those known to us to beneficially own more than 5% of our common stock, by our directors, director nominees and named executive officers individually and by our directors, director nominees and executive officers as a group.
The percentage of shares outstanding provided in the table is based on 45,321,745shares of our common stock, par value $0.01 per share, outstanding as of April 25, 2023. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. The SEC’s rules generally attribute beneficial ownership of securities to each person who possesses, either solely or shared with others, the voting power or investment power, which includes the power to dispose of those securities. The rules also treat as outstanding all shares of capital stock that a person would receive upon exercise of stock options held by that person that are immediately exercisable or exercisable within 60 days. Under these rules, one or more persons may be a deemed beneficial owner of the same securities and a person may be deemed a beneficial owner of securities to which such person has no economic interest.
Except as otherwise indicated in the footnotes to this table, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of Common Stock. Unless otherwise indicated, the address for each beneficial owner who is also a director or executive officer is c/o Ambac Financial Group, Inc., One World Trade Center, New York, New York 10007.
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| Amount and Nature of Shares Beneficially Owned |
Name | Number (1) | Percent of Class (2) |
5% or Greater Stockholders | | |
BlackRock Inc.(3)(5) | 6,663,545 | | 14.7% |
The Vanguard Group(4)(5) | 4,987,974 | | 11.0% |
Named Executive Officers, Directors and Director Nominees | | |
David Barranco | 100,332 | | * |
Stephen M. Ksenak | 122,375 | | * |
Claude LeBlanc | 554,310 | | 1.2% |
R. Sharon Smith | 85,253 | | * |
David Trick | 165,661 | | * |
Ian D. Haft | 93,057 | | * |
David L. Herzog | 105,877 | | * |
Lisa G. Iglesias | 43,463 | | * |
Joan Lamm-Tennant | 68,126 | | * |
Krista A. Matus | — | | * |
Michael D. Price | — | | * |
Jeffrey S. Stein | 145,610 | | * |
All executive officers and current directors as a group (12 persons) | 1,546,333 | | 3.4% |
* Beneficial ownership representing less than 1% is denoted with an asterisk (*).
(1)The share ownership listed in the table includes shares of our common stock that are subject to issuance in the future with respect to RSUs, in the following aggregate amounts: Mr. Haft, 93,057 shares; Mr. Herzog, 93,057 shares; Ms. Iglesias, 28,913 shares; Ms. Lamm-Tennant, 68,126 shares; and Mr. Stein, 128,943 shares. The RSUs granted to each of our non-executive directors shall not settle and convert into shares of common stock until such director resigns from, or otherwise ceases to be a member of, the Board of Directors of the Company. Each RSU represents a contingent right to receive one share of the Company’s common stock. RSUs granted to our directors and named executive officers that vest more than 60 days after the Record Date for voting at the Annual Meeting have not been included in the table above in accordance with SEC rules.
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(2)In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed as outstanding shares of common stock subject to options, RSUs or warrants held by that person that are currently exercisable or exercisable within 60 days of the Record Date. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Each holder of common stock as of the record date is entitled to one vote per share of common stock on all matters submitted to our stockholders for a vote.
(3)According to the Schedule 13G/A filed on January 26, 2023, BlackRock Inc. beneficially owned 6,663,545 shares of our Common Stock. BlackRock Inc. reported sole voting power with respect to 6,475,493 shares and sole dispositive power with respect to 6,663,545 shares. The address of BlackRock Inc. is 55 East 52nd Street, New York, New York 10055.
(4)According to the Schedule 13G/A filed on February 9, 2023, The Vanguard Group beneficially owned 4,987,974 shares of our Common Stock. The Vanguard Group reported shared voting power with respect to 31,821 shares, sole dispositive power with respect to 4,915,913 shares, and shared dispositive power with respect to 72,061 shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
(5)See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for description of the limitations on voting and transfer of Ambac’s common stock pursuant to Ambac’s Amended and Restated Certificate of Incorporation. Ambac has determined that the holdings described above do not violate the restrictions set forth in its Amended and Restated Certificate of Incorporation.
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EXECUTIVE COMPENSATION
Executive Officers
The names of our executive officers and their ages, positions, and biographies as of April 25, 2023 are set forth below. Our executive officers are appointed by, and serve at the discretion of, our Board.
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Name | Age | Position with Ambac |
Claude LeBlanc | 57 | President and Chief Executive Officer and Director |
David Barranco | 52 | Senior Managing Director |
Robert B. Eisman | 55 | Senior Managing Director, Chief Accounting Officer and Controller |
Stephen M. Ksenak | 57 | Senior Managing Director and General Counsel |
Daniel McGinnis | 51 | Senior Managing Director, Chief Operating Officer |
R. Sharon Smith | 52 | Executive Vice President, Chief of Strategy |
David Trick | 51 | Executive Vice President, Chief Financial Officer and Treasurer |
Claude LeBlanc was appointed President and Chief Executive Officer of Ambac effective January 1, 2017. Mr. LeBlanc provides strategic leadership to Ambac by working with the Board and other members of senior management in developing and implementing the Company’s corporate strategies to maximize long-term stockholder value. Mr. LeBlanc actively oversees the Company's overall day to day operations and strategic advancement, including the pursuit of potential new business opportunities that meet acceptable criteria that the Company believes will generate long-term stockholder value with attractive risk-adjusted returns. See full biography under “Board of Directors - Directors” above.
David Barranco has served as Senior Managing Director of Ambac since February 2012. Mr. Barranco is the head of Risk Management, a position he has held since October 2016. Mr. Barranco has executive responsibility for risk remediation, credit risk management, surveillance and other related risk management responsibilities across AAC's insured portfolio. Previously, he was head of the Restructuring Group and had responsibility for corporate development and strategy. Since September 2011, Mr. Barranco has served as Executive Director of Ambac Assurance UK Limited, Ambac’s London-based financial guarantee subsidiary. Mr. Barranco joined Ambac in 1999.
Robert B. Eismanhas served as the Chief Accounting Officer, Controller, and a Senior Managing Director of Ambac since January 2010. Mr. Eisman is responsible for establishing Ambac’s U.S. GAAP and Ambac Assurance Corporation's U.S. statutory accounting policies and managing their respective financial reporting in compliance with SEC and U.S. insurance regulatory requirements. He is also responsible for enterprise-wide budgeting and forecasting and providing accounting services to Ambac’s subsidiaries, including Ambac Assurance UK Limited. Mr. Eisman joined Ambac in 1995 from KPMG LLP where he was an Audit Manager in the Financial Services group with a specialization in insurance companies.
Stephen M. Ksenak has served as Senior Managing Director and General Counsel of Ambac since July 2011. Mr. Ksenak has executive responsibility for managing Ambac’s legal affairs. Prior to joining Ambac as Vice President and Assistant General Counsel in 2002, Mr. Ksenak practiced at the law firm of King & Spalding LLP.
Daniel McGinnis has served as Chief Operating Officer and Senior Managing Director of Ambac since December 2021. He oversees key business areas for both Ambac’s legacy Financial Guarantee and new Specialty Property and Casualty Insurance and Insurance Distribution businesses, including Operations, Technology and Human Resources. Mr. McGinnis brings over 25 years of experience as a senior insurance industry professional, having previously worked as Chief Underwriting Officer and Chief Operating Officer of CapSpecialty, Inc. Previous to CapSpecialty, Mr. McGinnis was Division Executive of the Small Business Division at American International Group (AIG). Previous to AIG, he was with American Reinsurance Company and Marsh USA, where he was Vice President of Finite Risk Underwriting and Vice President of Marsh Risk Finance, respectively.
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R. Sharon Smith has served as Executive Vice President and Chief Strategy Officer since February 2023. Previously Ms. Smith served as Chief of Staff and Senior Managing Director of Ambac from May 2017 until February 2023. Ms. Smith has executive responsibility for Ambac's Corporate Services Group which encompasses certain key functions within the Company including, Strategy, Corporate Communications and Model Governance and Analytics, as well as oversight of Internal Audit. Ms. Smith joined Ambac from Syncora Guarantee Inc., ("Syncora"), where she served in numerous capacities during her tenure, including as Associate General Counsel and Head of Investor Relations. Ms. Smith was also General Counsel and Chief Compliance Officer for Camberlink LLC (a wholly owned subsidiary of Syncora). Earlier in her career, Ms. Smith was Vice President and Assistant General Counsel of the Corporate Securities Department of New York Life Investment Management LLC, and an attorney for Clifford Chance; Skadden, Arps, Slate, Meagher & Flom LLP and Weil, Gotshal & Manges LLP. Ms Smith currently serves on the Board of Embrace Partners, Inc.
David Trick was named Executive Vice President of Ambac in November 2016. He has served as Chief Financial Officer of Ambac since January 2010 and as a Senior Managing Director from January 2010 until his appointment as Executive Vice President. Mr. Trick was interim President and Chief Executive Officer of AAC from January 2015 until March 2016. As Chief Financial Officer, Mr. Trick has executive responsibility for managing Ambac’s financial affairs, including financial reporting, asset and liability management, investment management, financial planning, tax strategy, capital resources, operations, capital markets and liquidity and investor relations. In addition, since May 2006, he has served as Treasurer of Ambac. Since September 2015, Mr. Trick has served as an Executive Director of Ambac Assurance UK Limited. Mr. Trick joined Ambac in 2005 from The Bank of New York Mellon, where he was a senior banker responsible for delivering strategic solutions to insurance industry clients with regard to a broad range of treasury, credit, and capital markets products.
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Ambac Financial Group, Inc. | 38 | 2023 Proxy Statement |
Compensation Discussion and Analysis
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WE ASK THAT YOU VOTE TO APPROVE OUR 2023 SAY ON PAY PROPOSAL |
At our 2023 Annual Meeting, our stockholders will again have an opportunity to cast an advisory say on pay vote on the compensation paid to our named executive officers. We ask that our stockholders vote to approve executive officer compensation. Please see “Proposal No. 2—Advisory Vote to Approve Named Executive Officer Compensation.” |
This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program, including important changes the Committee has made since our 2022 annual meeting of stockholders, and decisions relating to the fiscal year 2022 compensation of our named executive officers (“NEOs”), identified in the table below.
Our Named Executive Officers
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Claude LeBlanc | | Stephen M. Ksenak |
President and Chief Executive Officer and Director | | Senior Managing Director and General Counsel |
David Trick | | R. Sharon Smith |
Executive Vice President, Chief Financial Officer and Treasurer | | Executive Vice President and Chief Strategy Officer |
David Barranco | | |
Senior Managing Director | | |
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Executive Summary
Our compensation programs are designed to reward execution and value creation relating to the implementation of our strategies. To ensure that our compensation programs align with the expectations of our stockholders, in the Fall of each year, Ambac proactively seeks out opportunities to engage in a dialogue with our stockholders. As a result of these stockholder engagements, over the years our Compensation Committee has made important enhancements to our compensation programs and processes. These enhancements include changes to the design of our annual and long-term incentive plans, and the implementation of important compensation-related policies, e.g., a Stock Ownership Policy and a Recoupment Policy, and the addition of a relative Total Shareholder Return ("rTSR") modifier as an additional metric with respect to our LTIP award payouts. The rTSR modifier is intended to further align compensation to Ambac's stock performance. In 2022, we solicited feedback from stockholders representing approximately 46% of our outstanding common stock, which informed certain changes to our executive compensation program in 2023. See "2022 Say on Pay Vote and Stockholder Outreach."
Key features of our compensation program include:
•Competitive compensation levels and practices;
•Performance-based incentive plans (annual STIP awards and three year LTIP PSU awards) that are based on quantitative and strategic performance goals and objectives, and aligned with our key business strategies;
•Significant weighting on equity-based compensation as a component of total compensation, including the existence of a Stock Ownership Policy applicable to our executives;
•A rTSR modifier that aligns compensation results with actual stock performance as compared to peers; and
•Policies to manage compensation-related risk and support good governance, including a Recoupment Policy.
Key Strategic Priorities and 2022 Company Performance
Our primary business objective is to maximize stockholder value through the execution of key strategies in both our (i) Specialty P&C Insurance and Insurance Distribution businesses and (ii) Financial Guarantee Insurance companies, which were outlined in 2022 as follows:
Specialty P&C Insurance and Insurance Distribution strategic priorities included:
•Growing and diversifying Everspan's participatory fronting platform with existing and new program partners.
•Building a leading federation of specialty MGA/U partners through additional acquisitions and de novo builds, supported by a centralized business services unit including core technology solutions.
•Making opportunistic investments that are strategic to the overall Specialty P&C Insurance and Insurance Distribution businesses.
Financial Guarantee Insurance companies’ strategic priorities included:
•Actively managing, de-risking and mitigating insured portfolio risk.
•Pursuing loss recovery through active litigation and other means, particularly residential mortgage back security representation and warranty litigation.
•Improving operating efficiency and optimizing our asset and liability profile.
•Exploring, at the appropriate time, strategic options to further maximize value for Ambac.
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In 2022, we took important steps to advance these strategic objectives. Key highlights and results include the following:
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l | Reported net income of $522 million for the full year 2022 |
l | Increased Book Value per Share by 24% to $27.85 and Adjusted Book Value per Share by 50% to $28.29 |
l | Received $1.98 billion from the settlement of RMBS representation and warranty litigations, recognizing $249 million of gains, partially offset by losses from the extinguishment of secured notes of $53 million. |
l | Reduced debt and accrued interest by $1.9 billion, primarily from the RMBS representation and warranty litigation proceeds, and recognized a $134 million discount capture on surplus note repurchases. |
l | Repurchased Auction Market Preferred Shares with a liquidation value of $23 million capturing approximately $15 million of discount capture. |
l | Increased Specialty Property and Casualty Insurance production by 172% from the fourth quarter of 2021 and $282 million for the full year 2022 up 116% over the prior year. Specialty Property and Casualty Insurance production includes gross premiums written by Ambac's Specialty Property and Casualty Insurance segment and premiums placed by the Insurance Distribution segment, which totaled $90 million in the fourth quarter of 2022, and $282 million for the full year 2022. |
l | Decreased our insured portfolio net par outstanding at the Legacy Financial Guarantee business by 19% to $22.6 billion from year-end 2021. This includes reduced Watch List and Adversely Classified Credits by 24%, to $7.8 billion from $10.2 billion at year end 2021. The above mentioned declines were primarily the result of active de-risking transactions including the restructuring of all of our remaining Puerto Rico exposures. |
l | Increased Everspan Gross Written Premium to $146 million in 2022, which was a 10 fold increase from 2021 |
l | Reduced Gross Operating Run Rate Expense in the fourth quarter of 2022 to $16.3 million |
l | Acquired All Trans and Capacity Marine, representing approximately $60 million of expected premium placed for Cirrata |
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2022 Pay Decisions
2022 compensation decisions reflect our compensation principles:
•Link short-term incentives to the Company's operational, strategic, and financial performance;
•Use long-term incentives to further align the interests of our executives with stockholders by providing that all LTIP awards are denominated in stock units, with payouts based on performance metrics that we believe drive long-term value for stockholders; and
•Support the retention and attraction of key executive talent.
Base salaries in 2022 for each of our NEOs were reviewed and approved by the Compensation Committee, based on a review of relevant market data and each executive’s performance for the prior year, as well as each executive’s experience, expertise and position.
In 2022, the Compensation Committee incorporated gross written premiums as a financial performance metric for our specialty P&C insurance business, and increased the overall weightings assigned to financial performance metrics in the incentive compensation plans for senior management.
STIP awards for 2022 were determined based on a structured and objective approach in which 60% of an executive officer's annual STIP award was based on the Company’s achievement of pre-established financial
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performance targets at the Company related to (i) increases in gross written premium at Everspan , (ii) reductions in Net Par Outstanding1 in the legacy financial guarantee insured portfolio, and (iii) reductions in Gross Operating Run Rate Expense;1 and the remaining 40% of an executive officer's STIP award for 2022 was based on strategic performance goals, including business unit results and individual performance, a majority of which are based on objective, quantifiable or financial outcomes.
Long-term incentive awards granted in early 2022 were also reviewed and approved by the Compensation Committee, based on a review of relevant market data and each executive’s performance for the prior year. The 2022 long term incentive awards include restricted stock units (30% of total long term incentive award) which vest annually over a three year period and performance stock units (70% of total long term incentive award), tied to quantitative metrics that reflect the long term goals that the Compensation Committee believes will drive stockholder value. Vesting of performance stock units is subject to the satisfaction of certain performance goals, which will be determined at the end of a three year performance period, and application of the rTSR modifier at the end of three years (described below).
2022 Say on Pay Vote and Stockholder Outreach
At our 2022 annual meeting of stockholders, our Say on Pay proposal received support from stockholders representing over 50% of our common stock present, in person or by proxy at the meeting. While we greatly appreciate the support of a majority of our stockholders with regard to our executive compensation program, our Compensation Committee also endeavors to understand the concerns of our stockholders who did not support our executive compensation program. We are committed to a corporate governance approach that aligns the interests of management, the Board of Directors and our stockholders. Over the course of 2022, the Chairman of the Board, along with the Chairs of the Compensation Committee and the Governance and Nominating Committee solicited feedback from stockholders representing approximately 46% of our outstanding common stock and from certain proxy advisory firms. These stockholders and proxy advisory firms provided important feedback concerning our executive compensation program.
1 Reductions in Net Par Outstanding as of December 31, 2022 under the STIP were measured against Net Par Outstanding as of January 1, 2022. Gross Operating Run Rate Expense is measured by comparing actual gross operating run rate expenses in the fourth quarter to performance goals established against budgeted amounts.
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While the feedback on our executive compensation program was generally favorable, a number of stockholders provided input on certain changes they would like the Company to consider. As a result of the feedback received from stockholders, the Compensation Committee and the Board of Directors responded as follows:
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WHAT WE HEARD | WHAT WE DID |
Increase the weighting of the financial performance metrics in the Short Term Incentive Plan. | l | In 2023, we increased the weighting of the Short-Term Incentive Compensation Plan ("STIP") financial performance metrics from 60% to 70%, |
Place a greater emphasis on total stockholder return as part on of the compensation program. | l | Given the unique profile of our business (legacy business in run-off and a new and growing specialty P&C business), which presents certain challenges in identifying directly comparable peers, we maintained the impact of the rTSR modifier at +/- 20% with respect to our LTIP Awards in 2023 so that any final performance stock unit ("PSU") award payout at the end of the three year performance period may be increased or decreased by 20% if the Company's stock performance compared to the Company's peer group is at or above the 75th percentile or at or below the 25th percentile, respectively. |
Continued focus needs to be on the legacy Financial Guaranty business to drive value. | l | Re-evaluated the key de-risking initiatives for the legacy Financial Guaranty business with a focus on value enhancing initiatives including reductions in Net Par Outstanding and Watch List and Adversely Classified Credits as key metrics in the STIP and LTIP, respectively. |
The timeline for value creation must be considered and should impact and incentivize management judgements. | l | Introduced a comprehensive strategic review of AAC, on a time and risk adjusted basis, as a key performance goal connected to the STIP evaluation |
The Compensation Committee also made the following changes to the design of the 2023 compensation program, with an increased emphasis on the specialty P&C insurance business.
Changes to the 2023 Short Term Incentive Plan Design, include:
•Increase in the weighting of the financial performance metrics from 60% to 70%; and
•Inclusion of an additional financial performance metric for the specialty P&C insurance business with aggregate weighting increased to 50%.
Changes to the 2023 Long Term Incentive Plan Design, include:
•Increase in the PSU weighting related to results from the specialty P&C insurance business from 40% to 78.5% with a corresponding reduction in weighting of performance metrics related to our legacy financial guarantee business.
As we have indicated in prior years, as Ambac's specialty P&C insurance business continues to grow and the legacy Financial Guaranty business progresses to a stable run-off, the Compensation Committee intends to shift the Company's performance metrics to be more heavily weighted to the achievement of results in the specialty P&C insurance business. Nevertheless, as the legacy Financial Guaranty business remains a material part of Ambac's business and value, we will retain key metrics and goals, which we believe will be material determinants of delivering value to shareholders from the legacy Financial Guaranty businesses.
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Ambac Financial Group, Inc. | 43 | 2023 Proxy Statement |
Our Compensation Philosophy and Objectives
Our executive compensation program is designed to support achievement of our key business objectives. The Compensation Committee monitors and oversees all facets of the program, including incentive plan design, benchmarking, and the performance goal-setting process, and approves executive pay programs that tie a substantial portion of compensation to goal achievement. The Compensation Committee also retains the authority to make discretionary adjustments to further recognize overall Company performance and enhance alignment with stockholders and is committed to monitoring and adapting to evolving compensation standards. Specifically, our executive compensation program has the following objectives:
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Objectives | Details |
Attract, retain and motivate executives and professionals of the highest quality and effectiveness | l | Provide compensation opportunities that are competitive with practices of similar financial services organizations operating within the same marketplace for executive talent. |
Align pay with performance | l | A substantial portion of each executive’s total compensation is variable and performance-based. |
l | The design of our incentive plans focus on rewarding performance aligned with our key business strategies. |
Further align our executives’ long-term interests with those of our stockholders | l | Balance use of cash and equity based compensation, with a greater emphasis on the latter and short and long-term incentives that further align management's interests with those of our stockholders and support retention. |
Discourage excessive risk taking | l | Maintain policies that support good governance practices and mitigate against excessive risk taking. |
Determining Executive Compensation
The Compensation Committee bases current pay levels on numerous factors, including competitive pay practices in the financial services industry, the scope and complexity of the functions of each NEO’s role, the contribution of those functions to our overall performance, individual experience and capabilities, and individual performance. Any variations in compensation among our NEOs reflect differences in these factors. The Compensation Committee monitors the effectiveness of our compensation programs throughout the year and performs an annual reassessment of the programs at the beginning of the year in connection with year-end compensation decisions and future goal settings.
Compensation Consultants
The Compensation Committee has authority to retain compensation consulting firms to assist it in the evaluation of executive officer and employee compensation and benefit programs. The Compensation Committee retained Meridian Compensation Partners, LLC as its independent compensation consultant to advise on the 2022 compensation cycle, which included year-end compensation decisions made in the first quarter of 2023. Meridian provides an objective perspective as to the reasonableness of our executive compensation programs and practices and their effectiveness in supporting our business and compensation objectives. Specifically, Meridian advised the Compensation Committee with respect to compensation trends and best practices, incentive plan design, competitive pay levels, and individual pay decisions with respect to our NEOs. The Compensation Committee has assessed the independence of Meridian pursuant to applicable SEC rules and concluded that no conflict of interests exists that would prevent Meridian from independently advising the Compensation Committee.
Competitive Compensation Considerations
Because the competition to attract and retain high performing executives and professionals in the financial services industry is intense, the amount and composition of total compensation paid to our executives must be
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considered in light of competitive compensation levels. To help inform the Compensation Committee's compensation decisions for the NEOs for 2022, Meridian prepared a benchmarking analysis that compared the compensation levels for our NEOs to that of officers in comparable positions across a selected peer group of companies. However, the Compensation Committee does not rely on this information to target any specific pay percentile for our NEOs. Instead, they use this information to provide a general review of market pay levels and practices and to ensure that informed decisions are made regarding our executive pay programs.
At present, Ambac has no directly comparable business peers, and thus peer selection is a challenge. Ambac believes that the most relevant criteria in the selection of its peer group is the consideration of asset value and enterprise value as these variables are the best indicators of the complexity of an organization and are most useful when considering competitive compensation packages for our NEOs. Each year the Compensation Committee reviews the Company's peer group and considers adjustments if appropriate. Key criteria used to assess current and potential peer companies include financial services industry sector focus (i.e., specialty insurance, specialty finance, property and casualty insurance, financial guaranty and run-off insurance), organizations that manage distressed assets, and organizations of similar size and scope (market capitalization, assets and enterprise value). Based on a review conducted in 2022 in preparation for the 2022 compensation cycle, we revised the list of peer companies to: (i) be more reflective of Ambac's size, (ii) add more property and casualty insurance companies, (iii) reflect the event driven nature of our business and the risks we face, (iv) capture the markets and businesses in which we operate and (v) reflect the market for executive talent. We expect our peer group comparability will materially change in the coming years as we transition fully from our legacy financial guaranty business to our new specialty property and casualty insurance business.
The table below provides summary financial information regarding Ambac and the comparator group used for the 2022 compensation cycles.
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Comparator Group used for 2022 Compensation Cycle | Primary Industry | Market Capitalization ($ in millions) | | Assets ($ in millions) | | Enterprise Value ($ in millions) |
Argo Group International Holdings, Ltd. | Property & Casualty Insurance | $906 | | | $10,034 | | | $1,465 | |
Assured Guaranty Ltd. | Financial Guaranty Insurance | 3,733 | | | 16,843 | | | 5,896 | |
Enstar Group Limited | Reinsurance | 3,933 | | | 22,154 | | | 5,292 | |
Hanover Group, Inc. | Property & Casualty Insurance | 4,806 | | | 13,997 | | | 5,283 | |
HCI Group, Inc. | Property & Casualty Insurance | 347 | | | 1,803 | | | 416 | |
Horace Mann Educators Corporation | Multi-line Insurance | 1,528 | | | 13,447 | | | 2,859 | |
MBIA Inc. | Financial Guaranty Insurance | 705 | | | 3,375 | | | 4,047 | |
PRA Group, Inc. | Consumer Finance | 1,317 | | | 4,176 | | | 3,809 | |
ProAssurance | Property & Casualty Insurance | 943 | | | 5,700 | | | 1,361 | |
RLI Corp. | Property & Casualty Insurance | 5,957 | | | 4,767 | | | 6,148 | |
Selective Insurance | Property & Casualty Insurance | 5,351 | | | 10,802 | | | 6,090 | |
SiriusPoint Ltd. | Property & Casualty Insurance | 946 | | | 11,036 | | | 1,275 | |
White Mountains Insurance Group, Ltd. | Property & Casualty Insurance | 3,589 | | | 7,389 | | | 4,137 | |
Ambac Financial Group, Inc. (1) | | $784 | | | $7,973 | | | $5,670 | |
Percentile Rank vs. Peer Group | | 12 | % | | 44 | % | | 80 | % |
Note: Financial data reflects information available as of December 31, 2022 |
Source: S&P Capital IQ |
(1) Ambac's Enterprise Value includes the obligations of Variable Interest Entities for which Ambac or its subsidiaries are required to consolidate as a result of its financial guarantee insurance policies, plus its market capitalization, the value of all outstanding debt, preferred equity and total noncontrolling interests, less cash and cash and cash equivalents.
The Role of Management in Determining Pay
Generally, our Chief Executive Officer reviews the competitive compensation data for each of the other NEOs, considers both individual, departmental and Company performance, measured against financial performance metrics and strategic performance goals established at the beginning of the year, and makes a recommendation to
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the Compensation Committee for base salary and annual short- and long-term incentive awards. The Chief Executive Officer typically participates in Compensation Committee meetings at the Compensation Committee’s request to provide background information regarding performance against the Company’s strategic objectives and to evaluate the performance of, and compensation recommendations for, each of the other NEOs.
The Committee utilizes the information provided along with input from the compensation consultant and the knowledge and experience of the Committee’s members in making compensation decisions. Our NEOs do not propose or seek approval for their own compensation. The Chairman of the Compensation Committee, with input from the Chairman of the Board of Directors, recommends the Chief Executive Officer’s compensation to the Compensation Committee. See "Directors, Executive Officers, and Corporate Governance."
Elements of Pay
Compensation for each of our NEOs is viewed on a total compensation basis and comprised of the following elements of pay:
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Compensation Element | Purpose |
Base Salary | l | Provides a minimum, fixed level of cash compensation to compensate executive officers for services rendered during the fiscal year that is competitive with organizations operating within the same marketplace for executive talent. |
Bonuses | l | While bonus payments are not regular part of Ambac's compensation mix, from time to time, the Compensation Committee may approve a special one-time bonus in recognition of an extraordinary outcome or promotion. |
Short Term Incentive Awards | l | Drive achievement of annual corporate goals, including key financial and operating results by setting pre-established financial performance targets and strategic performance goals at the Company. Annual STIP awards are paid in cash. |
Long-Term Incentives | l | Further align executive officers’ interests with the interests of stockholders by rewarding increases in the value of our share price, and tying long-term incentive compensation to performance metrics that we believe to be important value-drivers for our stockholders. LTIP awards are strictly equity based and denominated in PSUs and RSUs. |
Post-Employment Benefits | l | Provide certain severance benefits to our executive officers. See “--Post-Employment Benefits” and for a description of post-employment benefits payable to Messrs. LeBlanc, Trick and Ksenak, see “Agreement with Claude LeBlanc,” and “Agreements with Other Executive Officers." |
Perquisites | l | Provide a limited number of perquisites to all our employees, including our executive officers. |
Before year-end compensation decisions are made, the Compensation Committee undertakes a comprehensive review of all elements of each executive officer’s compensation. This review includes information on cash and non-cash compensation (including current and prior year base salaries, short-term and long-term incentive awards and other awards), and the value of benefits and other perquisites paid to our executive officers. This comprehensive review is designed to ensure that each member of the Compensation Committee has a complete picture of the compensation and benefits paid to each of our executive officers.
The following table shows the base salary and incentive compensation paid to our NEOs for their performance in 2022 in the manner it was considered by the Compensation Committee. This presentation differs from that contained in the Summary Compensation Table by showing the value of the LTIP stock unit awards granted in 2023 for 2022 performance. The actual number of PSUs and RSUs granted was calculated based on an average closing price of Ambac common stock on the NYSE for the twenty trading days immediately preceding the grant date, March 3, 2023 ($16.30), which were awarded based on 2022 performance, but are not reflected in the Summary Compensation Table because of SEC rules on proxy statement disclosure.
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| | | | | Long Term Incentive Plan | |
Name | Year | Salary ($) | Bonus ($) | Short Term Incentive Plan ($) | PSU Awards ($) | RSU Awards ($) | Total ($) |
Claude LeBlanc | 2022 | 900,000 | | 1,827,000 | 2,677,500 | 1,147,500 | 6,552,000 |
David Trick | 2022 | 750,000 | | 663,100 | 647,500 | 277,500 | 2,338,100 |
David Barranco | 2022 | 500,000 | | 707,500 | 595,000 | 255,000 | 2,057,500 |
Stephen M. Ksenak | 2022 | 600,000 | 74,000 | 646,600 | 525,000 | 225,000 | 2,070,600 |
R. Sharon Smith | 2022 | 500,000 | 20,000 | 685,400 | 577,500 | 247,500 | 2,030,400 |
Pay Mix
A substantial portion of target total compensation is delivered through variable performance or equity based incentives that are at risk. As reflected in the table above and the graphs below, variable performance or equity based incentives constitute 86% of our CEO compensation mix and 72% of our NEO compensation mix.
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CEO Total Direct Compensation | | CEO Performance/Equity Based Incentive Compensation |
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Other NEOs Total Direct Compensation | | Other NEOs Performance/Equity Based Incentive Compensation |
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Base Salary.Base salaries are intended to reflect the experience, skill and knowledge of our executive officers in their particular roles and responsibilities, while retaining the flexibility to appropriately compensate for fluctuations in performance, both of the Company and the individual. Base salaries for our executive officers and any subsequent adjustments thereto are reviewed and approved by the Compensation Committee annually, based on a review of relevant market data and each executive’s performance for the prior year, as well as each executive’s experience, expertise and position. The base salaries paid in 2022 to each of our NEOs was unchanged from prior years. Mr. LeBlanc received a base salary of $900,000; Mr. Trick, $750,000; Mr. Barranco, $500,000; Mr. Ksenak, $600,000; and Ms. Smith, $500,000. Each of Messrs. LeBlanc, Trick and Ksenak is a party to an employment agreement with the Company that provides for a minimum annual base salary during the term of the respective agreement. See "Agreement with Claude LeBlanc," and “Agreements with Other Executive Officers.”
Incentive Compensation. Incentive compensation is a key component of our executive compensation strategy. Our incentive compensation awards generally have two components: Short Term Incentive Plan awards (consisting of annual cash incentive awards) and Long Term Incentive Plan awards (which are equity-based). Annual decisions with regard to incentive compensation are generally made in February of each year. Incentive compensation payouts can be highly variable from year to year, is at risk, subject to performance criteria and impacted by the value of Ambac's common stock.
Short Term Incentive Compensation. Annual incentives for our NEOs are meant to reward performance. Sixty percent (60%) of NEO 2022 short term incentive compensation awards were measured against pre-established financial performance targets at the Company related to: (i) gross written premium at Everspan; (ii) reductions in Net Par Outstanding in the legacy financial guarantee insured portfolio and (iii) reductions in Gross Operating Run Rate Expenses. These metrics were chosen because the Compensation Committee believed that they would be key drivers of stockholder value in 2022.
The remaining forty percent (40%) of the short term incentive compensation award is based on strategic performance goals, more than fifty percent (50%) of which can be reviewed against objective, quantifiable or financial outcomes. See "Compensation for Each of Our Named Executive Officers in 2022 - Strategic Performance Goals." These goals include formula driven financial performance targets as well as the following strategic goals:
•Continue to actively identify potential actionablenew business opportunities to engage and pursue that meet Board approved criteria, and are consistent with the Company's specialty property and casualty insurance strategy.
•Effective litigation management;
•Active de-risking and ongoing rationalization of Ambac's capital and liability structures; and
•Continue to increase organizational effectiveness, efficiency of the operating platform, and simplification of business controls, policies and procedures without increasing operational risk.
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The Compensation Committee believes that it is important to establish strategic performance goals, a majority of which are based on objective, quantifiable or financial outcomes, because of the uncertainties associated with our legacy operating subsidiaries, AAC and Ambac UK, which are not writing new business and are in runoff, and Ambac’s strategic shift towards growing our specialty P&C insurance platform.
The Compensation Committee assigns to each NEO an annual target incentive opportunity, which is based on the executive’s position and the scope of responsibilities. Target annual incentives (as a percent of base salary) for the NEOs for 2022 were set as follows: 125% for the Chief Executive Officer; and between 55% and 85% for each of the other NEOs. Actual incentive payouts can range from 0% to 200% of target for each of the NEOs based on the Compensation Committee’s review of overall performance relative to the financial performance targets and strategic performance goals noted above.
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Key Changes in 2023 to Short Term Incentive Program: For the 2023 performance year, the Compensation Committee amended the financial performance metrics of the STIP to include Everspan performance, weighted at 25%; Cirrata Group performance, weighted at 25%; reductions in Net Par outstanding in the insured portfolio, weighted at 10%; and reductions in Gross Operating Run Rate Expenses, weighted at 10%. In addition, the Committee amended the strategic performance goals to add AAC value realization; the expansion of Ambac's internal shared services platform, 220 Business Services; and eliminated the metric related to loss recovery through effective litigation management. The Committee also increased the weighting of the STIP financial performance metrics from 60% to 70%. |
Long Term Incentive Compensation. Our LTIP awards focus on the attainment of long term performance goals and objectives, which are instrumental in creating long term value for stockholders and long term retention incentives for our executives. The Compensation Committee reviews the LTIP targets each year for competitive alignment. The Compensation Committee also reviews market trends related to the award mix and determines the appropriate mix of equity instruments considering market benchmark data.
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In the first quarter of each year, LTIP compensation awards (the size of which relates to the prior year's performance) are granted to our NEOs. In 2022, the Compensation Committee revised the LTIP performance metrics to better align management's goals with certain key drivers of stockholder value: risk reduction and the achievement of certain EBITDA goals at Everspan and Xchange. LTIP awards granted in 2022 will be measured based on (i) reductions in Watch List and Adversely Classified Credits at AAC weighted at 60% and (ii) the achievement of certain EBITDA targets at at Everspan and Xchange each weighted at 20%. In addition, the 2022 LTIP awards were amended to increase the impact of the Total Shareholder Return ("rTSR") modifier which serves as an additional metric with respect to performance based LTIP award payouts. The rTSR modifier for 2022 LTIP awards can cause any final PSU award payout at the end of a three year settlement period to be increased or decreased by 20% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively.
LTIP awards in 2022 were denominated 70% in performance stock units (“PSUs") and 30% in restricted stock units ("RSUs"). PSUs represent a promise to deliver, within 75 days after the end of a three-year performance period, a number of shares of Ambac’s common stock ranging from 0% to 200% (not including any adjustment that may be applied pursuant to the rTSR modifier) of the amount of the initial grant, depending on the achievement of financial performance objectives determined by the Compensation Committee at the time of the grant. The RSUs are time-based awards and were granted in order to encourage the retention of our most valued employees. The RSUs granted as part of the 2022 LTIP awards represent the right to receive an equivalent number of shares of Ambac’s common stock and will vest and settle in three equal annual installments in February of 2023, 2024 and 2025.
The Compensation Committee determined the target value of the 2022 LTIP awards granted to each of our NEOs based on the Company’s overall results, the individual executive’s contribution to overall performance, external market benchmark data and the proportion of total compensation comprised of LTIP awards. In addition, in setting target value of the 2022 LTIP awards granted to Messrs. LeBlanc, Trick and Ksenak, the Committee considered the terms and conditions set forth in their respective employment agreements. See "Agreement with Claude LeBlanc," and "Agreements with Other Executive Officers.”
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Key Changes to Long Term Incentive Program for 2023 LTIP Grants: The Compensation Committee revised the PSU performance metrics to focus on new business growth at Everspan and Cirrata Group. PSU awards granted in 2023 will be measured based on the achievement of certain goals related to cumulative gross written premium and cumulative EBITDA at each of Everspan and Cirrata Group. Reduction in Watch List and Adversely Classified Credits was retained for the 2023 Long Term Incentive Program. LTIP awards in 2023 were denominated 70% in PSUs and 30% in RSUs. |
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LTIP Metrics. The metrics used to judge performance for PSU awards granted in February 2022 are reductions in Watch List and Adversely Classified Credits2 at AAC weighted at 60% and the achievement of certain cumulative EBITDA goals at Everspan3 and Xchange4 each weighted at 20%. The following table sets forth the percentage of the 2022 PSU target award that each of our named executive officers could earn under the 2022 PSU award agreement as of the last day of the three year performance period.
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Percentage of LTIP PSU Target Award Earned | | Cumulative EBITDA | | Watch List and Adversely Classified Credits ($ in billions) (*) |
| at Everspan ($ in millions) (*) | at Xchange ($ in millions) (*) | |
200% | | $8.5 | $33.3 | | $5.3 |
100% | | $4.5 | $26.6 | | $6.0 |
0 | | $0.0 | $20.0 | | $6.7 |
(*) Linear interpolation between levels of Cumulative EBITDA at each of Everspan and Xchange and Watch List and Adversely Classified Credits will result in a proportionate amount of the PSU target Award becoming earned and vested.
Following the end of the Performance Period, the Compensation Committee will determine the extent to which each participant’s PSU award has been earned and the amount payable. The Compensation Committee may, in the exercise of its discretion, reduce the amount of any PSU award that otherwise would have been earned based on the satisfaction of the performance metrics, but may not increase the size of any PSU award.
The ultimate value of the PSUs and RSUs directly depends on the value of our common stock at the time of vesting. Each individual who receives a PSU or RSU becomes, economically, a long-term stockholder of the Company, with the same interests as our other stockholders. As a result, we believe our NEOs have a demonstrable and significant interest in increasing stockholder value over the long term.
Bonus.While bonus payments are not regular part of Ambac's compensation mix, in 2022 Mr. LeBlanc recommended that special one-time bonuses be paid as performance outcome adjustments to Mr. Ksenak and Ms. Smith based on his assessment of their respective individual contributions to the strategic performance goals that were assigned to him by the Compensation Committee.
________________________
2 Adversely Classified Credits represent credits that are either in default or have developed problems that eventually may lead to a default. Watch List credits represent credits that demonstrate heightened potential for future adverse development based on qualitative and quantitative stress assumptions.
3 Cumulative EBITDA at Everspan is calculated by taking 100% of Everspan Group’s earnings before interest, taxes, depreciation and amortization (calculated in accordance with US GAAP as in effect at beginning of the Performance Period) through the end of the performance period. Cumulative Everspan EBITDA shall be adjusted to exclude the impact of any other costs as determined in the sole discretion of the Board of Directors.
4 Cumulative EBITDA at Xchange is calculated by taking 100% of Xchange’s earnings before interest, taxes, depreciation and amortization (calculated in accordance with US GAAP as in effect at beginning of the performance period) through the end of the performance period. Cumulative Xchange EBITDA shall be adjusted to exclude the impact of retention payments to Xchange employees in connection with the acquisition by Ambac; M&A EBITDA or any associated costs; and any other adjustments as determined in the sole discretion of the Board of Directors.
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Ambac Financial Group, Inc. | 51 | 2023 Proxy Statement |
Compensation for Each of Our Named Executive Officers in 2022
Our Chief Executive Officer
Mr. LeBlanc. Effective January 1, 2017, Claude LeBlanc was appointed President and Chief Executive Officer of Ambac and AAC. The Compensation Committee, which received input and advice from its nationally recognized independent compensation consultant, Meridian Compensation Partners, LLC, authorized the Company to enter into an employment agreement with Mr. LeBlanc on December 8, 2016, and amended on February 26, 2020. Pursuant to the employment agreement, as amended, Mr. LeBlanc is paid an annual base salary of $900,000. The employment agreement also provides that Mr. LeBlanc is eligible to receive (i) a target annual STIP award set at no less than 100% of his base salary and (ii) a target annual long-term incentive award set at no less than 150% of his base salary, as determined in the discretion of the Compensation Committee.
The Short Term Incentive Plan is a blend of financial performance metrics and strategic performance goals, over 80% of which are, in the aggregate, objective and/or quantifiable. These goals include formula driven financial performance targets as well as strategic goals to de-risk the insured portfolio; effectively manage loss recovery through litigation; increase organizational effectiveness; and identify and pursue new business opportunities that meet Board approved criteria.
Sixty percent (60%) of the STIP award paid to Mr. LeBlanc for 2022 was based on the achievement of the financial performance metrics related to: (i) gross written premium at Everspan weighted at 20%; (ii) reductions in Net Par Outstanding in the legacy financial guaranty insured portfolio weighted at 60%, and (iii) reductions in Gross Operating Run Rate Expenses weighted at 20%.
The remaining forty percent (40%) of the STIP award paid to Mr. LeBlanc was based on the achievement of strategic performance goals established by the Compensation Committee for both the legacy financial guaranty business and the growing specialty P&C insurance business. A majorityof these strategic performance goals are objective and/or quantifiable.
Given Ambac’s evolution and growing specialty P&C insurance platform, the Compensation Committee decided to increase the weighting in STIP of the financial performance metrics compared with the strategic performance goals in 2022.
Performance Against STIP Metrics. Mr. LeBlanc’s target STIP was set at $1,125,000.On a blended basis, weighting the financial performance metrics at 60% and the strategic performance goals at 40%, Mr. LeBlanc's STIP award multiplier was set at 1.625x target, and he was granted a 2022 STIP award of $1,827,000, which was an increase from his 2021 STIP award of $1,699,000, which was based on a multiplier of 1.51x target. Described below are the metrics, performance goals and final measured outcomes used in determining Mr. LeBlanc’s award.
For the 2022 fiscal year, we established the following targets for each of our STIP financial performance metrics and assigned the following weighting factors:
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($ in millions) | Weighting Factor | Threshold ($ in millions) | Target ($ in millions) | Maximum ($ in millions) |
Net Par Outstanding | 60% | $24,900 | $24,200 | $23,200 |
Gross written premiums at Everspan | 20% | $125 | $160 | $175 |
Gross Operating Run Rate Expenses | 20% | $17.4 | $16.9 | $16.5 |
The 2022 Gross Operating Run Rate Expense ("GORRE") target was higher than the target for 2021 ($16.7 million). The year-over-year increase in the target GORRE resulted from a change in budgeted performance compensation targets and grants, and the impact of inflation on budgeted expenses, such as healthcare, corporate insurance, audit services and other operating costs, which collectively outweighed the impact of other budgeted
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cost reductions. The 2023 GORRE target has been set to reflect materially lower expenses as compared to the 2022 target.
The following graph/charts shows the Company's 2022 actual performance compared to the threshold, target and maximum achievement levels as established for each of the financial performance metrics.
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Gross Written Premiums at Everspan | Net Par Outstanding | Gross Operating Run Rate Expenses |
($ in Millions) | ($ in Billions) | ($ in Millions) |
| | | | | | | | | | | | | | | | | | | | | | | |
| Threshold | | Target | | Maximum | ------ | Actual |
Under Mr. LeBlanc's leadership in 2022, Ambac exceeded the maximum performance goals for reducing Net Par Outstanding and reducing Gross Operating Run Rate Expenses. With respect to gross written premiums at Everspan, we finished the year below target, but exceeded threshold performance. Ambac's Net Par Outstanding at the beginning of the performance period of $28.0 billion was reduced to $22.9 billion. Gross written premiums at Everspan for the full year 2022 were $146.4 million. Gross Operating Run Rate Expenses for the fourth quarter of 2022 were reduced to $16.3 million. Applying the appropriate weighting to each performance metric as set forth above and using the appropriate payout levels for STIP awards under Mr. LeBlanc's employment agreement, the Committee assigned a 1.76 multiplier to the financial performance portion of Mr. LeBlanc's target STIP award for 2022.
Strategic Performance Goals. In determining the other forty percent of Mr. LeBlanc's 2022 STIP award, the Compensation Committee gave consideration to the Company’s results against the strategic performance goals described below, which were communicated to Mr. LeBlanc in the first quarter of 2022.
For each of these performance goals the Compensation Committee assigned a relative weighting based on the current importance of such performance goals to the Company, with an aggregate total weighting of 100%. To assess results against these performance goals, the Committee utilized a definitive score card methodology to achieve a consistent, formula driven ratings process. Score results were determined by the Committee for each category and could range from 0-5, with 0 to 1 indicating results that were below the anticipated outcomes; a score between 2 and 3 indicating results were slightly below to slightly above the anticipated outcomes; and a score between 4 and 5 indicating results that exceeded or far exceeded the anticipated outcomes.
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The strategic performance goals for each category can be further bifurcated between (i) objective, quantifiable or financial performance goals to which the defined scorecard methodology is applied and (ii) well defined strategic goals relating to key components of the Company’s reported strategic priorities, to which the defined scorecard methodology is also applied.
After measuring and calculating the actual results against the strategic goals outlined herein, some of which are set forth below, the Committee utilized the pre-defined scorecard methodology to arrive at a performance rating for each category. The performance ratings were then applied against the pre-determined weightings outlined herein to arrive at a formulaic outcome for the Chief Executive Officer that was not subject to any override or adjustments.
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Strategic goals related to active de-risking and ongoing rationalization of Ambac's capital and liability structures, as well as organizational effectiveness were weighted at 20%, and included among other things |
Goals | Results |
✓ Active De-Risking at the Legacy Financial Guarantee business | ◦Total net par down $5.4 billion or 19% through December 31, 2022 (compared with an 17% reduction in full year 2021); ◦Watch List and Adversely Classified Credits’ down $2.4 billion or 24% through December 31, 2022 (compared with an 23% reduction in full year 2021); and ◦Final resolution of restructuring of all remaining Puerto Rico exposures resulting in, among other things, a cumulative reduction at year-end of $9.3 billion of insured P&I or 91% since 2019. |
✓ Ongoing rationalization of Ambac's and its subsidiaries' capital and liability structures. | ◦AAC redeemed $1.2 billion of Sitka Notes and $212 million of Tier II Notes; ◦AAC repurchased $602 million of principal and accrued interest of surplus notes (including $122 million from AFG) capturing $162 million of discount; ◦AAC repurchased Auction Market Preferred Shares with a liquidation preference of $23 million capturing approximately $15 million of discount ◦AFG Repurchased 1.6 million shares of Ambac common stock at an average price of $8.86 per share. |
✓ Continue to increase organizational effectiveness, efficiency of the operating platform and simplification of business controls, policies and procedures without increasing operational risk | ◦Launch of implementation of Cirrata’s IT platform to support growth of MGA/MGU businesses; ◦Implementation of robust cybersecurity infrastructure to ensure the integrity and security of Ambac’s systems, protect against emerging threats, Data Loss Prevention, provide for 24x7 Security Operations Center monitoring and ensure compliance with all regulatory requirements; ◦Build-out of ERM framework for Xchange and Everspan; and ◦Advancement of internal controls over financial reporting readiness for both Everspan and Xchange. |
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Ambac Financial Group, Inc. | 54 | 2023 Proxy Statement |
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Strategic goals related to new business activities were weighted at 60%, and included among other things |
Goals | Results |
✓ Overall New Business ◦Stand up Business Services platform ◦Continue to manage deal pipeline of new business initiatives ◦Materially advance de novo/additional MGA acquisition strategy | ◦Acquisition of All Trans and Capacity Marine, representing approximately $60 million of expected premium placed for Cirrata ◦Announced the incubation of PenPoint Specialty Insurance Services LLC, Ambac's first de novo MGA ◦Xchange Benefits, LLC acquired the renewal rights of Employer Benefit Underwriters, Inc.’s employer stop loss portfolio |
✓ Everspan ◦Program Onboarding ◦Actively manage and facilitate AM Best relationship and maintain AM Best A- rating ◦Actively pursue P&C license expansion ◦Develop strategic relationships with MGAs to bolster Everspan growth |
◦Everspan added 8 new MGA programs in 2022 and generated $146 million of gross premiums ◦Everspan successfully renewed its AM Best A- rating and Class VIII designation ◦Material expansion of Everspan’s admitted licensing capabilities across 5 admitted carriers for all 50 states |
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Strategic goals related to litigation strategy were weighted at 20%, and included among other things |
Goals | Results |
✓ Effective Litigation Management ◦Progress toward resolution of main Countrywide case ◦Materially advance or resolve other Bank of America related litigations and Nomura litigation | ◦Settled legacy RMBS litigations with Bank of America for $1.84 billion ◦Settled litigation with Nomura Credit & Capital, Inc. for $140 million |
The Committee considered each of the strategic performance goals outlined above in evaluating Mr. LeBlanc's overall performance, assigned a score from 0-5 for each goal and then applied the scores to the relative weightings assigned to the performance goals at the beginning of 2022 to arrive a 1.42 multiplier to the strategic performance goals for Mr. LeBlanc's target 2022 STIP award. Weighting this multiplier at 40% and the 1.761 multiplier for the financial performance goals at 60% of Mr. LeBlanc's target STIP award for 2022 produced an overall multiplier of 1.625 times target for Mr. LeBlanc's 2022 STIP award.
LTIP Award. In addition to his STIP award, in 2023 Mr. LeBlanc received an LTIP award denominated 100% in stock units with an aggregate target value of $3,825,000, primarily reflecting Mr. LeBlanc's outstanding leadership and focus on executing the Company's strategic priorities through the challenges and uncertainties of 2022, including, among other things:
•Reduced debt and accrued interest by $1.8 billion resulting in a $150 million discount capture;
•Reported $249 million gains related to RMBS representation and warranty litigation settlements;
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Ambac Financial Group, Inc. | 55 | 2023 Proxy Statement |
•Specialty P&C Insurance production, which includes gross premiums written by Ambac's Specialty P&C Insurance segment and premiums placed by the Insurance Distribution segment, totaled $90 million in the fourth quarter of 2022, an increase of 172% from the fourth quarter of 2021 and $282 million for the full year 2022 up 116% over the prior year; and
•Decreased our insured portfolio net par outstanding at AAC and its subsidiaries by 19% to $22.6 billion from year-end 2021 including the restructuring for all remaining Puerto Rico exposures.
Any payout under the 2023 LTIP awards is completely formula driven based on the achievement of objective and quantifiable financial performance metrics against pre-set targets at the end of a three-year performance period. The Compensation Committee believes it struck the right balance between paying for current performance, on the one hand, and the desire to keep Mr. LeBlanc focused on the Company’s long-term performance and continued growth, on the other hand.
Other Named Executive Officers
Performance Against STIP Performance Metrics and Strategic Performance Goals.
The Compensation Committee reviewed the Company's actual performance against each of the financial performance metrics set forth above, and after applying the appropriate weighting to each metric, the Committee assigned the same multiplier as that of Mr. LeBlanc to the financial performance portion of each NEO's 2022 STIP award.In determining the other forty percent of the 2022 STIP award for each of the NEOs (other than Mr. LeBlanc), Mr. LeBlanc reviewed with the Compensation Committee the performance of each NEO individually and their overall contribution to the Company in 2022.In this process, Mr. LeBlanc assigned the same strategic performance goals and objectives to each of the NEOs that were assigned to him by the Compensation Committee, but individually adjusted the relative weighting based on each executive officer's areas of responsibility and influence. In addition, Mr. LeBlanc utilized the same score card approach as the Committee in his evaluation of each NEO in an effort to achieve a consistent ratings process. He also recommended certain adjustments reflecting his view of the NEOs' contributions and influence regarding the outcomes for the strategic performance goals delineated in the score card. In addition, Mr. LeBlanc recommended that special one-time bonuses be paid as performance outcome adjustments to Mr. Ksenak and Ms. Smith based on his assessment of their respective individual contributions to the aforementioned performance goals that were assigned to him by the Compensation Committee. Based on the recommendation of Mr. LeBlanc, the Committee approved the 2022 STIP awards, special one time bonuses, and 2023 LTIP awards granted to each of Messrs. Trick, Barranco and Ksenak, and Ms. Smith, as shown in the table in the section entitled "Elements of Pay."
Performance against 2019 LTIP metrics.
In 2019, we established the following three year goals for each of our LTIP performance metrics and assigned weighting factors based on each NEO's areas of responsibility. In addition, the Company incorporated a relative Total Stockholder Return modifier ("rTSR") that may adjust any calculated payout by 10%, either upwards or downwards, based on AFG’s rTSR percentile ranking for the performance period against a peer group.
| | | | | | | | | | | | | | |
At AAC | | At Ambac | Percentage of Target Award Earned |
Net Asset Value (1) ($ in millions) | Watch List and Adversely Classified Credits Outstanding(1) ($ in billions) | | Cumulative EBITDA (1) ($ in millions) |
|
$(180) | $11.5 | | $35 | 200% |
$(380) | $13.5 | | $20 | 100% |
$(580) | $15.0 | | $— | —% |
(1) Linear interpolation between levels results in a proportionate amount of the Ambac LTIP Target Award becoming earned and vested.
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Ambac Financial Group, Inc. | 56 | 2023 Proxy Statement |
At AAC performance is judged based on (i) increases Net Asset Value weighted at 25% and (ii) reductions in Watch List and Adversely Classified Credit net par outstanding weighted 45%. At Ambac performance is judged based on cumulative EBITDA over the performance period. The following graph/charts shows the Company's actual performance over the three year performance period running from January 1, 2019 through December 31, 2021, compared to the achievement levels set forth in the chart above.
| | | | | | | | |
AAC Adjusted Net Asset Value | Watch List & Adversely Classified Credits Outstanding | Ambac Cumulative EBITDA |
($ in Millions) | ($ in Billions) | ($ in Millions) |
The following table shows the grant date value of the 2019 LTIP awards granted to each of our NEOs and the amounts realized upon vesting and settlement.
| | | | | | | | | | | | | | | | | |
Named Executive Officer | Grant Date value of PSU Award at Target $ | Weighting between AAC/ Ambac | Performance Percentage | 10% Reduction to Payout Percentage After Applying rTSR modifier | Value of PSU Award on Vesting and Settlement $ |
Claude LeBlanc | 1,809,000 | 70% / 30% | 159.4% | 143.5% | 1,852,370 |
David Trick | 318,250 | 70% / 30% | 159.4% | 143.5% | 325,889 |
David Barranco | 318,250 | 70% / 30% | 159.4% | 143.5% | 325,889 |
Stephen M. Ksenak | 268,000 | 70% / 30% | 159.4% | 143.5% | 274,429 |
R. Sharon Smith | 268,000 | 70% / 30% | 159.4% | 143.5% | 274,429 |
The Committee considered the Company's actual performance against each of the LTIP metrics for AAC and Ambac for each of Messrs. LeBlanc, Trick, Barranco, Ksenak and Ms. Smith. The Net Asset Value at the end of the performance period was $42 million. While Net Asset Value was projected to decrease over the performance period, certain favorable achievements by management, such as (i) the COFINA restructuring, (ii) the Ballantyne Re PLC settlement, (iii) the Citibank - SEC settlement, and (iv) debt reduction from surplus note exchanges, along with the resulting lower net interest expense all contributed to the Net Asset Value increasing during the performance period. Watchlist & Adversely Classified Credit net par outstanding was reduced to $10.3 billion at AAC during the performance period and was positively impacted by active de-risking strategies including credit
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Ambac Financial Group, Inc. | 57 | 2023 Proxy Statement |
exposure reductions at Ballantyne Re PLC, COFINA and and other risk remediation and reinsurance transactions. Cumulative EBITDA at Ambac of $13 million was below target and was adversely effected by the use of assets for Xchange, Everspan and other investments over the performance period that did not generate revenues for this calculation. Ambac's relative total stockholders return lagged against our peers. Ambac's beginning stock price for the 2019 rTSR modifier was $16.39 while its ending price was $15.25 which resulted in a TSR of -6.98% and a ranking in the bottom 25th percentile of our peer participants which reduced the payout to 90% of the performance metrics.
Perquisites. The Company provided a limited number of perquisites to all our employees, including our executive officers. For Mr. LeBlanc and Ms. Smith, perquisites included reimbursement from Ambac for certain commuting expenses, and for Messrs. Trick and Barranco, included payments for tax preparation services as a result of their roles as executive directors of Ambac UK. Consistent with past practice, in order to support the long-term wellness and productivity of our executive officers, the Company also provided access to an extensive physical examination for all executive officers, at the Company's expense. Mr. Barranco and Ms. Smith accepted this offering in 2022.
Employment Agreements. Certain of our active NEOs have entered into employment agreements with the Company which provide for certain compensation and benefits, including severance benefits in certain circumstances. In December 2016, we entered into an employment agreement with our CEO, Claude LeBlanc, in connection with his appointment, which took effect on January 1, 2017. This agreement was subsequently amended on February 27, 2020. We also entered into an employment agreement with Mr. Trick in November of 2016, and with Mr. Ksenak in January 2017. While the Compensation Committee considers employment agreements customary for the chief executive officer, the Committee believed it was important to execute an employment agreement with each of Messrs. Trick and Ksenak to retain their services to Ambac for the foreseeable future. (See “Agreement with Claude LeBlanc”, and “Agreements with Other Executive Officers” below). Severance Agreements have been entered into with various executive officers when the Compensation Committee believes it is in the best interest of the Company to secure an orderly separation between such officers and the Company, which typically include certain continuing obligations from the departing executive.
Post-Employment Benefits.Pursuant to Ambac's Severance Pay Plan, to provide protection in the event of an involuntary termination, each of our current executive officers (other than Messrs. LeBlanc, Trick and Ksenak) is entitled to receive a severance payment equal to 52 weeks of such executive officer's weekly base salary at the time of termination of his or her employment by Ambac as the result of (i) a job elimination, job discontinuation, office closing, reduction in force, business restructuring, redundancy, or such other circumstances as the Company deems appropriate for the payment of severance or (ii) a “termination by mutual agreement” (as defined in the Severance Pay Plan). In addition to this severance payment, each of our current NEOs (other than Messrs. LeBlanc, Trick and Ksenak) would be entitled to receive reimbursement for a portion of the premiums paid for COBRA continuation coverage under the Company's group health plan for the first twelve months following his or her termination of employment. The portion of the premiums to be paid by the Company will be the same as the amount paid by the Company for the same group health insurance coverage for active employees. For a description of post-employment benefits payable to Messrs. LeBlanc, Trick and Ksenak, see “Agreement with Claude LeBlanc,” and “Agreements with Other Executive Officers."
The 2022 LTIP awards consisted of both PSUs and RSUs. The PSU award agreements for our NEOs provide that if a termination occurs prior to the last day of the performance period by reason of disability, an involuntary termination other than for “cause,” or retirement, the recipient would be entitled to receive the number of earned PSUs which would only be payable at the end of the performance period provided that the performance conditions related to the award were satisfied. If a termination occurs by reason of death, the recipient would be entitled to receive the number of earned PSUs that the recipient would have been entitled to receive had the termination date not occurred prior to the end of the performance period at a 100% overall payout multiple regardless of the outcome of the performance goals or rTSR. Comparable provisions were included in the 2020 and 2021 PSU
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award agreements. The 2021 and 2022 RSU award agreements for our NEOs generally provide that if a termination occurs, other than for “cause” or voluntary resignation, the entire grant of RSUs shall vest on the termination date.
Impact of Regulatory Requirements on Compensation
Effective for tax years beginning on January 1, 2018 or later, The Tax Cut and Jobs Act repealed the performance-based compensation and commission exceptions to the Section 162(m) $1 million tax deduction limitation for compensation paid to covered employees. The definition of covered employees was modified to include the Chief Financial Officer as well as the Chief Executive Officer and officers whose total compensation is required to be disclosed to stockholders by reason of them being amongst the three highest paid officers. Additionally, any individual who is a covered employee for any taxable year beginning after December 31, 2016 will continue to be a covered employee for all subsequent taxable years, including years after the death of the individual.
Our compensation programs are structured to support organizational goals and priorities and stockholder interests. We do not make compensation determinations based on the income tax treatment of any particular type of award.
Compensation Risk Management
Risks Related to Compensation Policies. In keeping with our risk management framework, we consider risks not only in the abstract, but also risks that might hinder the achievement of a particular objective. We have identified two primary risks relating to compensation: the risk that compensation will be insufficient to retain talent and the risk that compensation strategies might result in unintended incentives. To combat the first risk, as noted above, the compensation of employees throughout the Company is benchmarked against comparative compensation data, permitting us to set compensation levels that we believe contribute to low rates of employee attrition. Further, LTIP awards granted to our NEOs and other senior professionals are subject to vesting over a three-year period. We believe both the levels of compensation and the structure of the LTIP awards have had the effect of retaining key personnel.
Our Company-wide year-end compensation program is designed to reflect the performance of the Company, the performance of the business unit in which the employee works and the performance of the individual employee, and is designed to not encourage excessive risk taking. For example, two of the performance metrics used in our 2023 Short Term Incentive Plan (reductions in: Net Par Outstanding in the legacy financial guaranty insured portfolio; and Gross Operating Run Rate Expense), are designed to encourage the reduction of risk and prudent management of the business. In addition, we pay a significant portion of our incentive compensation in the form of LTIP awards that vest over a three-year period, which makes each of our NEOs and other senior professionals sensitive to long-term risk outcomes, as the value of their awards increase or decrease with the price of our common stock.
Further, performance criteria for the PSUs granted as part of the LTIP awards include a relative Total Shareholder Return modifier, which we believe provide our employees additional incentives to prudently manage the wide range of risks inherent in the Company’s business. We are not aware of any employee behavior motivated by our compensation policies and practices that creates increased risks for our stockholders or other constituents.
Risk Mitigating Policies
Stock Ownership Policy. Effective January 1, 2017, all of our executive officers became subject to our Executive Stock Ownership and Retention Policy. The Chief Executive Officer is required to own Ambac common stock equal in value to at least six times his annual base salary, the Chief Financial Officer is required to own Ambac common stock equal in value to at least three times his annual base salary and each other executive officer is required to own Ambac common stock equal in value to at least two times their annual base salary.
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Stock Ownership Requirement |
Name | Position with Ambac | Value of required shareholdings | Value of Shares owned at Record Date |
Claude LeBlanc | President and Chief Executive Officer and Director | $5,400,000 | $8,553,003 |
David Trick | Executive Vice President, Chief Financial Officer and Treasurer | $2,250,000 | $2,556,149 |
David Barranco | Senior Managing Director | $1,000,000 | $1,548,123 |
Stephen M. Ksenak | Senior Managing Director, and General Counsel | $1,200,000 | $1,888,246 |
R. Sharon Smith | Executive Vice President, and Chief Strategy Officer | $1,000,000 | $1,315,454 |
There is no required time period within which these executive officers must attain the applicable stock ownership level under the Stock Ownership Policy and nothing in the Stock Ownership Policy requires executive officers to meet their applicable stock ownership levels through open market purchases of Company common stock. Until a covered executive complies with the Stock Ownership Policy, the covered executive is required to retain 100% of net profit shares (which excludes shares withheld or sold to cover applicable taxes) from any compensatory stock award on exercise, vesting or earn-out. A copy of the Stock Ownership Policy was filed with the SEC as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on December 1, 2016.
Recoupment Policy. Effective January 1, 2017, the Board adopted a Recoupment Policy. Pursuant to the Recoupment Policy, in the event of a “material financial restatement” or the imposition of a “material financial penalty,” the Company will require, to the fullest extent permitted by applicable law, that a covered employee forfeit and/or reimburse the Company for all or such portion (if any) of the covered employee’s “recoverable compensation” as determined in the sole and absolute discretion of the Board, in accordance with the guidelines set forth in the Recoupment Policy. A “material financial restatement” means the restatement of one or more previously issued financial statements of the Company, for any period ending after December 1, 2016, due to a material error or a series of immaterial errors which could be considered material when viewed in the aggregate of any applicable financial reporting requirements under the securities laws. “Material financial penalty” means a penalty, fine, or other monetary sanction levied against the Company after December 1, 2016, by a regulator or other Federal or state governmental authority in an amount deemed material by the Board of Directors in its sole and absolute discretion. “Recoverable compensation” means certain incentive-based compensation received during a three year look-back period during which (i) the financial reporting measure specified in the applicable award was attained or (ii) the conduct giving rise to the imposition of a material financial penalty against the Company took place. If the grant or earning of an award is based, either wholly or in part, on satisfaction of a financial reporting measure, the award would be deemed received in the fiscal period when that measure was satisfied, in each case without regard to any ongoing service-based vesting requirements. Furthermore, if an award is granted or earned upon satisfaction of financial reporting measures that are based on multiple fiscal years (e.g., a three-year average), the whole award would be deemed Recoverable Compensation for purposes of this Policy if any single fiscal year of the performance period occurs during the three year look-back period. A copy of the Recoupment Policy was filed with the SEC as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on December 1, 2016.
Prohibition on Pledging and Hedging and Restrictions on Other Transactions involving Common Stock. Our Insider Trading Policy prohibits our executive officers, employees, and Board members from pledging Ambac common stock or using Ambac common stock as collateral for any margin loan. In addition, the Insider Trading Policy contains the following restrictions:
•Executive officers, employees, and Board members are prohibited from engaging in transactions (such as trading in options) designed to hedge against the value of the Ambac common stock, which would eliminate or limit the risks and rewards of the common stock ownership;
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•Executive officers, employees, and Board members are prohibited from short-selling Ambac common stock, buying or selling puts and calls on Ambac common stock, or engaging in any other transaction that reflects speculation about the price of Ambac common stock or that might place their financial interests against the financial interests of the Company;
•Executive officers, employees, and Board members are prohibited from entering into securities trading plans pursuant to SEC Rule 10b5-1 without pre-approval; further, no Board member or executive officer may trade in our Common Stock without pre-approval; and
•Executive officers, employees, and Board members may trade in Common Stock only during open window periods, and only after they have pre-cleared transactions.
The Compensation Committee has performed a review of compensation policies and practices for all of our employees and has concluded that our compensation policies and practices are not reasonably likely to have a material adverse impact on the Company.
Conclusion
Our compensation program is designed to permit the Company to provide our NEOs with total compensation that is competitive, linked to our performance and reinforces the alignment of employee and stockholder interests. At the same time, it is intended to provide us with sufficient flexibility to assure that such compensation is appropriate to attract and retain employees who are vital to the continued success of the Company and to drive outstanding individual and institutional performance. We believe the program met these objectives in 2022.
We are asking our stockholders to indicate their support for our named executive officer compensation as described in this Proxy Statement. This proposal, commonly known as a “say on pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we will ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2023 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Summary Compensation Table and the other related tables and disclosure.”
The say on pay vote is advisory, and therefore not binding on Ambac, the Compensation Committee or our Board of Directors. Our Board of Directors and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
Compensation Committee Report
The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee
Ian D. Haft and Joan Lamm-Tennant
April 20, 2023
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Ambac Financial Group, Inc. | 61 | 2023 Proxy Statement |
2022 Summary Compensation Table
The table below provides information concerning the compensation of our President and Chief Executive Officer, Chief Financial Officer, and our three most highly compensated executive officers who were executive officers as of December 31, 2019.2022.
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Name and Principal Position | Year | Salary ($) | Bonus (1) ($) | Stock Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) (3) | All Other Compensation ($) (4) | Total ($) |
Claude LeBlanc | 2022 | 900,000 | — | 3,420,095 | 1,827,000 | 38,667 | 6,185,762 |
President and Chief Executive Officer | 2021 | 900,000 | — | 4,358,942 | 1,699,000 | 21,373 | 6,979,315 |
2020 | 900,000 | — | 3,285,787 | 1,795,500 | 30,214 | 6,011,501 |
David Trick | 2022 | 750,000 | — | 827,087 | 663,100 | 14,573 | 2,254,760 |
Executive Vice President, Chief Financial Officer and Treasurer | 2021 | 750,000 | — | 1,054,141 | 659,000 | 13,898 | 2,477,039 |
2020 | 750,000 | — | 866,025 | 698,000 | 13,648 | 2,327,673 |
David Barranco | 2022 | 500,000 | — | 760,033 | 707,500 | 21,273 | 1,988,806 |
Senior Managing Director | 2021 | 500,000 | — | 968,662 | 688,000 | 20,723 | 2,177,385 |
2020 | 500,000 | — | 764,144 | 688,000 | 13,423 | 1,965,567 |
Stephen M. Ksenak | 2022 | 600,000 | 74,000 | 670,619 | 646,600 | 13,323 | 2,004,542 |
Senior Managing Director and General Counsel | 2021 | 600,000 | — | 854,696 | 596,000 | 12,723 | 2,063,419 |
2020 | 600,000 | — | 662,263 | 610,000 | 12,523 | 1,884,786 |
R. Sharon Smith | 2022 | 500,000 | 20,000 | 737,673 | 685,400 | 42,464 | 1,985,537 |
Executive Vice President and Chief Strategy Officer | 2021 | 500,000 | — | 911,689 | 612,000 | 19,623 | 2,043,312 |
2020 | 500,000 | — | 611,323 | 650,000 | 17,383 | 1,778,706 |
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Name and Principal Position | Year | Salary ($) | Stock Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) (2) | All Other Compensation ($) (3) | Total ($) |
Claude LeBlanc | 2019 | 900,000 |
| 3,005,464 |
| 1,657,000 |
| 25,772 |
| 5,588,236 |
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President and Chief Executive Officer | 2018 | 900,000 |
| 4,117,020 |
| 1,170,000 |
| 15,987 |
| 6,203,007 |
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2017 | 900,000 |
| — |
| 1,081,000 |
| 5,898 |
| 1,986,898 |
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David Trick | 2019 | 750,000 |
| 604,652 |
| 813,988 |
| 19,975 |
| 2,188,615 |
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Executive Vice President, Chief Financial Officer and Treasurer | 2018 | 750,000 |
| 791,762 |
| 784,526 |
| 12,750 |
| 2,339,038 |
|
2017 | 750,000 |
| 420,017 |
| 573,088 |
| 12,849 |
| 1,755,954 |
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David Barranco | 2019 | 500,000 |
| 550,154 |
| 567,992 |
| 19,925 |
| 1,638,071 |
|
Senior Managing Director | 2018 | 500,000 |
| 536,004 |
| 423,500 |
| 12,800 |
| 1,472,304 |
|
2017 | 500,000 |
| 242,522 |
| 313,440 |
| 11,175 |
| 1,067,137 |
|
Stephen M. Ksenak | 2019 | 600,000 |
| 486,985 |
| 635,589 |
| 19,050 |
| 1,741,624 |
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Senior Managing Director and General Counsel | 2018 | 600,000 |
| 628,021 |
| 438,910 |
| 11,950 |
| 1,678,881 |
|
2017 | 600,000 |
| 325,023 |
| 397,703 |
| 11,550 |
| 1,334,276 |
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R. Sharon Smith | 2019 | 500,000 |
| 466,734 |
| 350,000 |
| 36,510 |
| 1,353,244 |
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Senior Managing Director and Chief of Staff | 2018 | 450,000 |
| 700,504 |
| 237,750 |
| 28,305 |
| 1,416,559 |
|
2017 | 273,460 |
| — |
| 226,500 |
| 10,306 |
| 510,266 |
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(1)A special one-time bonus was paid as a performance outcome adjustment to Mr. Ksenak and Ms. Smith based on Mr. LeBlanc's assessment of their respective individual contributions to the performance goals that were established by the Compensation Committee. | |
(1)
| In 2019 and 2018, each of our NEOs received DSUs pursuant to the Short Term Incentive Plan (the "STIP") and received performance stock units (“PSUs”) and restricted stock units ("RSUs") pursuant to Ambac’s Long Term Incentive Plan (the "LTIP"). The LTIP and STIP are sub-plans of the 2013 Incentive Compensation Plan. In addition, in May of 2018, in recognition of the executive management team's efforts to successfully execute a holistic restructuring transaction, including the exit of the Segregated Account of AAC from rehabilitation, a special off-cycle RSU award was granted to each of our NEOs. In 2017, each of our NEOs received DSUs granted pursuant to the STIP, and Messrs. Trick, Barranco, and Ksenak also received PSUs granted pursuant to the LTIP. As required by Item 402(c)(2) of Regulation S-K, the value of the DSUs, PSUs and RSUs reported in the Summary Compensation Table is based on the grant date fair value of awards in the fiscal year actually granted and computed in accordance with FASB ASC Topic 718 based on the probable outcome of performance conditions being achieved, including the value of the rTSR multiplier, if any, without regard to estimated forfeitures. For a discussion of the assumptions made in the valuation, see footnote 2, Basis of Presentation and Significant Accounting Policies, to Ambac’s consolidated financial statements for the year-ended December 31, 2019. Each of our NEOs received DSUs in 2019 as part of their STIP award grant as follows: for Mr. LeBlanc, 19,394 DSUs valued at $390,000; for Mr. Trick, 7,186 DSUs valued at $144,500; for Mr. Barranco, 4,476 DSUs valued at $90,000; for Mr. Ksenak, 4,948 DSUs valued at $99,500; and for Ms. Smith, 3,941 DSUs valued at $79,250; in 2018 DSUs were issued as part of their STIP in the following amounts: for Mr. LeBlanc, 23,924 DSUs valued at $361,000; for Mr. Trick, 9,394 DSUs valued at $141,750; for Mr. Barranco, 5,700 DSUs valued at $86,000; for Mr. Ksenak, 6,826 DSUs valued at $103,000; and for Ms. Smith, 16,602 DSUs valued at $250,500; and in 2017 DSUs were issued as part of the STIP in the following amounts: for Mr. Trick, 6,712 DSUs valued at $150,000; for Mr. Barranco, 2,797 DSUs valued at $62,500; and for Mr. Ksenak, 4,475 DSUs valued at $100,000. DSUs represent vested common stock units of Ambac with a deferred settlement provision. These DSUs will settle and convert into Ambac common stock annually over a two-year period; 50% on the first anniversary of the grant date and the remaining 50% on the second anniversary of the grant date (unless settled earlier due to an executive’s departure from the Company). The value of PSUs awarded in 2019 to each of our NEOs, assuming the maximum payout level of 220% and a share price of $20.11 would have been as follows: for Mr. LeBlanc, $3,979,789; for Mr. Trick, $700,174; for Mr. Barranco, $700,174; for Mr. Ksenak, $589,613; and for Ms. Smith, $589,613. The value of PSUs awarded in 2018 to each of our NEOs, assuming the maximum payout level of 200% and a share price of $15.09 would have been as follows: for Mr. LeBlanc, $3,600,000; for Mr. Trick, $533,340; for Mr. Barranco, $400,006; for Mr. Ksenak, $433,324; and for Ms. Smith, $400,006. The value of PSUs awarded in 2017 to Messrs. Trick, Barranco and Ksenak assuming the maximum payout level of 200% and a share price of $22.35 would have been as follows: for Mr. Trick, $600,008; for Mr. Barranco, $400,020; and for Mr. Ksenak, $500,014. Each of our NEOs received RSUs on March 4, 2019 as part of their 2019 LTIP award grant. These RSUs vest in three equal annual installments on January 2nd, 2020, 2021, and 2022. Each of our NEOs received RSUs on March 2, 2018 as part of their 2018 LTIP award grant. These RSUs vest in three equal annual installments on March 2nd, 2019, 2020, and 2021.
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(2)In 2020, 2021 and 2022, each of our NEOs received received performance stock units (“PSUs”) and restricted stock units ("RSUs") pursuant to Ambac’s Long Term Incentive Plan (the "LTIP"). The LTIP is a sub-plan of the 2020 Incentive Compensation Plan. As required by Item 402(c)(2) of Regulation S-K, the value of the PSUs and RSUs reported in the Summary Compensation Table is based on the grant date fair value of awards in the fiscal year actually granted and computed in accordance with FASB ASC Topic 718 based on the probable outcome of performance conditions being achieved, including the value of the rTSR multiplier, if any, without regard to estimated forfeitures. For a discussion of the assumptions made in the valuation, see Note 2, Basis of Presentation and Significant Accounting Policies, to Ambac’s consolidated financial statements for the year-ended December 31, 2022. The value of PSUs awarded in 2022 to each of our NEOs, assuming the maximum payout level of 240% and a share price of $14.85, would have been as follows: for Mr. LeBlanc, $6,426,035; for Mr. Trick, $1,554,011; for Mr. Barranco, $1,428,024; for Mr. Ksenak, $1,260,052; and for Ms. Smith, $1,386,040. The value of PSUs awarded in 2021 to each of our NEOs, assuming the maximum payout level of 220% and a share price of $16.19. would have been as follows: for Mr. LeBlanc, $5,049,030; for Mr. Trick, $1,221,021; for Mr. Barranco, $1,122,038; for Mr. Ksenak, $990,002; and for Ms. Smith, $1,056,038. The value of PSUs awarded in 2020 to each of our NEOs, assuming the maximum payout level of 220% and a share price of $19.50 would have been as follows: for Mr. LeBlanc, $5,321,273; for Mr. Trick, $1,402,530; for Mr. Barranco, $1,237,536; for Mr. Ksenak, $1,072,543; and for Ms. Smith, $990,046. Each of our NEOs received RSUs on February 28, 2022 as part of their 2022 LTIP award grant. These RSUs vest in three equal annual installments on February 28th, 2023, 2024, and 2025. Each of our NEOs received RSUs on March 8, 2021 as part of their 2021 LTIP award grant. These RSUs vest in three equal annual installments on March 8th, 2022, 2023, and 2024. Each of our NEOs received RSUs on March 4, 2020 as part of their 2020 LTIP award grant. These RSUs vested in three equal annual installments on January 2nd, 2021, 2022, and 2023.
(3)The amount included in the "Non-Equity Incentive Plan Compensation " column above includes cash incentive award payments pursuant to the Company's year-end 2022, 2021 and 2020 STIP program, as approved by the Compensation Committee.
(4)"All Other Compensation” for each of our named executive officers in 2022 includes, among other things, contributions by Ambac to the AAC Savings Incentive Plan, as well as a portion of the life insurance premiums paid. In addition for Mr. LeBlanc and Ms. Smith, the amount reported also includes reimbursement from Ambac for certain commuting expenses, and for Messrs. LeBlanc, Barranco and Ms. Smith, the amount reported includes reimbursement from Ambac for the cost of an executive physical. For Messrs. Trick and Barranco, the amount reported includes reimbursement from Ambac for payments for tax preparation services received as a result of services rendered to Ambac UK.
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Ambac Financial Group, Inc. |57 62 | 20202023 Proxy Statement |