SCHEDULE 14A |
NMI Holdings, Inc. |
Bradley M. Shuster Executive Chairman and Chairman of the Board March 28, 2024 |
Table of Contents | ||||||||
NOTICE OF 2024 ANNUAL MEETING | |||||
PROXY STATEMENT SUMMARY | |||||
Matters To Be Voted Upon | |||||
Virtual Annual Meeting Detail | |||||
How to Vote In Advance of the Annual Meeting | |||||
How to Participate and Vote in the Annual Meeting | |||||
Director Nominees Summary Chart | |||||
Performance Highlights and Strategy | |||||
PROXY STATEMENT | |||||
About the Annual Meeting | |||||
ITEM 1 — ELECTION OF DIRECTORS | |||||
Director Criteria, Qualifications, Experience and Tenure | |||||
Our Director Nominees and Diversity | |||||
Personal Attributes and Skills of the Director Nominees | |||||
Biographies of the Director Nominees | |||||
2023 Director Compensation | |||||
Corporate Governance and Board Matters | |||||
Board Leadership | |||||
Board Committees | |||||
Audit Committee Report | |||||
Board Oversight of Risk | |||||
Board Oversight of Our Values and People | |||||
Corporate Responsibility | |||||
Sustainability Report | |||||
Environmental Impact | |||||
Social Responsibility | |||||
Governance | |||||
Director Independence | |||||
Certain Relationships and Related Party Transactions | |||||
Stockholder Engagement | |||||
Information Online | |||||
Board Communication | |||||
Information of Our Executive Officers | |||||
Beneficial Ownership of Common Stock | |||||
Named Executive Officers and Directors | |||||
Greater Than 5% Stockholders | |||||
Equity Compensation Plans Information | |||||
COMPENSATION OF NAMED EXECUTIVE OFFICERS | |||||
Compensation Discussion and Analysis | |||||
Executive Summary and Overview of Performance | |||||
Executive Compensation Philosophy |
Stockholder Say-on-Pay Votes | |||||
Our Process for Executive Compensation | |||||
Benchmarking | |||||
Our Peer Group | |||||
Elements of Executive Compensation Program (Overview) | |||||
Compensation of our CEO and Executive Officers Are Weighed Towards Variable Compensation | |||||
Compensation Program Details | |||||
Other Important Governance and Executive Compensation Policies | |||||
Compensation Committee Report | |||||
2023 Summary Compensation Table | |||||
Employment Arrangements with our NEOs | |||||
Grants of Plan-Based Awards for 2023 | |||||
Outstanding Equity Awards at 2023 Fiscal Year-End | |||||
Option Exercises and Stock Vested during Fiscal Year 2023 | |||||
Potential Payments upon Termination of Employment or Change in Control | |||||
CEO Pay Ratio | |||||
Pay Versus Performance Table | |||||
Relationship Between "Compensation Actually Paid" and Performance | |||||
ITEM 2 — ADVISORY APPROVAL OF OUR EXECUTIVE COMPENSATION | |||||
Stockholder Vote Required | |||||
ITEM 3 — RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS | |||||
Audit and Other Fees | |||||
Stockholder Vote Required | |||||
ITEM 4 —APPROVAL OF AN AMENDMENT AND RESTATEMENT OF OUR CERTIFICATE OF INCORPORATION TO PROVIDE EXCULPATION FOR CERTAIN OFFICERS | |||||
Background | |||||
Rationale for the Amended Certificate | |||||
Stockholder Vote Required | |||||
APPENDIX A — AMENDED AND RESTATED CERTIFICATE | |||||
Redline of the Amended Certificate | |||||
APPENDIX B — EXPLANATION AND RECONCILIATION OF OUR USE OF NON-GAAP FINANCIAL MEASURES | |||||
Non-GAAP Financial Measure Reconciliation |
Notice of 2024 Annual Meeting of Stockholders | |||||||||||
DATE Thursday, May 9, 2024 | PROPOSALS | |||||||||||||
1 |
nine directors; | ||||||||||||||
TIME: 8:30 a.m. Pacific Time. | 2 | Advisory approval of our executive compensation; | ||||||||||||
LOCATION: www.virtualshareholdermeeting.com/NMIH2024 | 3 | Ratification of the appointment of BDO USA, |
RECORD DATE: March 12, 2024 | 4 | Amendment and restatement of NMI's current amended and restated certificate of incorporation to provide exculpation for certain officers. |
1 | ||||||||
NMI Holdings, Inc. (NMIH) |
Proxy StatementSummary | ||||||||
PROPOSAL | VOTES REQUIRED FOR APPROVAL | EFFECT OF ABSTENTION1 | SHARES/EFFECT OF BROKER NON-VOTES2 | SIGNED BUT UNMARKED PROXY CARDS | BOARD RECOMMENDATION | PAGE REFERENCE | |||||||||||||||||
1 | Election of directors | Plurality of Votes Cast | No effect | Not voted/No effect | Voted "For" each nominee | FOR each nominee | |||||||||||||||||
2 | Advisory, non-binding vote to approve executive compensation | Majority of shares present or represented by proxy and entitled to vote | Same effect as a vote "Against" | Not voted/No effect | Voted "For" | FOR | |||||||||||||||||
3 | Ratification of the appointment of BDO USA, P.C. as NMI's independent registered public accounting firm | Majority of shares present or represented by proxy and entitled to vote | Same effect as a vote "Against" | Discretionary Vote3 | Voted "For" | FOR | |||||||||||||||||
4 | Approval of an amendment and restatement of NMI's current amended and restated certificate of incorporation to provide exculpation for certain officers | Majority of shares outstanding as of the record date | Same effect as a vote "Against" | Same effect as a vote "Against" | Voted "For" | FOR |
NMI Holdings, Inc. (NMIH) | 2 | 2024 Proxy Statement |
DATE AND TIME: Thursday, May 9, 2024 8:30 a.m. Pacific Time. | LOCATION: www.virtualshareholdermeeting.com/NMIH2024 | RECORD DATE: March 12, 2024 | ||||||||||||||||||||||||
ONLINE: Visit www.proxyvote.com and follow the voting instructions on the website. | PHONE: Call 1-800-690-6903 and follow the voting instructions provided in the recorded message. | MAIL Return your completed and signed proxy card if you request a printed set of the proxy materials. |
2024 Proxy Statement | 3 | NMI Holdings, Inc. (NMIH) |
Fees earned or paid in cash | Stock awards | Total | |
Name | ($) | ($)(4) | ($) |
Michael Embler(1) | $70,000 | $79,991 | $149,991 |
James G. Jones(1) | $70,000 | $79,991 | $149,991 |
Michael Montgomery(1) | $70,000 | $79,991 | $149,991 |
Regina L. Muehlhauser (2) | $52,500 | $159,982 | $212,482 |
James H. Ozanne(3) | $70,000 | $79,991 | $149,991 |
Steven L. Scheid(3) | $70,000 | $79,991 | $149,991 |
NAME & EXPERIENCE | AGE | DIRECTOR SINCE | INDEPENDENT | AC | GNC | RC | CC | OTHER PUBLIC COMPANY BOARDS | |||||||||||||||||||||
Bradley M. Shuster Executive Chairman and Chairman of the Board, NMI Holdings, Inc. | 69 | 2012 | No | 2 | |||||||||||||||||||||||||
Adam S. Pollitzer President and Chief Executive Officer, NMI Holdings, Inc. | 45 | 2022 | No | — | |||||||||||||||||||||||||
Steven L. Scheid t Former Partner, Strategic Execution Group Former Chairman and Chief Executive Officer, Janus Capital Group Inc. | 70 | 2012 | Yes | l | l | — | |||||||||||||||||||||||
Michael Embler Former Chief Investment Officer, Franklin Mutual Advisers LLC | 59 | 2012 | Yes | n | l | 2 | |||||||||||||||||||||||
John C. Erickson Former Chief Risk Officer and Chief Corporate Banking Officer, Union Bank, N.A. | 63 | 2023 | Yes | l | l | 1 | |||||||||||||||||||||||
Priya Huskins Partner, Senior Vice President and Board Member, Woodruff Sawyer | 52 | 2021 | Yes | l | l | 1 | |||||||||||||||||||||||
Lynn S. McCreary Chief Legal Officer, Sportradar Group AG | 64 | 2019 | Yes | n | l | __ | |||||||||||||||||||||||
Michael Montgomery Former Chief Compliance Officer, Glendon Capital Management Former Chief Executive Officer, Barclays Group US, Inc. | 68 | 2012 | Yes | l | l | — | |||||||||||||||||||||||
Regina Muehlhauser Former President, Bank of America, San Francisco | 75 | 2017 | Yes | l | n | — |
NMI Holdings, Inc. (NMIH) | 4 | 2024 Proxy Statement |
2024 Proxy Statement | 5 | NMI Holdings, Inc. (NMIH) |
n | Base Salary | ||||||||||
n | Short-Term Incentive | ||||||||||
n | RSUs | ||||||||||
n | PRSUs | ||||||||||
NMI Holdings, Inc. (NMIH) | 6 | 2024 Proxy Statement |
Proxy Statement | ||||||||
2024 Proxy Statement | 7 | NMI Holdings, Inc. (NMIH) |
NMI Holdings, Inc. (NMIH) | 8 | 2024 Proxy Statement |
2024 Proxy Statement | 9 | NMI Holdings, Inc. (NMIH) |
Item 1 Election of Directors | ||||||||
possess fundamental qualities of intelligence, honesty, perceptiveness, good judgment, maturity, high ethics and standards, integrity, fairness and responsibility; | |||||
have financial services or other relevant industry experience gained through senior management or board of director service; | |||||
have prior board experience, either as a director of a public company, or as an executive officer of a public company and a director of a privately held company; | |||||
maintain a genuine interest in the Company and recognize that as a member of the Board he or she is accountable to the stockholders of the Company and not to any particular interest group; | |||||
be compatible and able to work well with other directors and executives in a team effort with a view to a long-term relationship with the Company as a director; | |||||
possess independent opinions and be willing to express them in a constructive manner; | |||||
have the ability and be willing to spend the time required to function effectively as a director; | |||||
not serve on more than three other boards of directors of public companies; and | |||||
meet the independence requirements under NASDAQ listing requirements and the SEC (other than any management directors). |
NMI Holdings, Inc. (NMIH) | 10 | 2024 Proxy Statement |
NAME | AGE | DIRECTOR SINCE | CURRENT POSITION | INDEPENDENT | ||||||||||
Bradley M. Shuster | 69 | 2012 | Executive Chairman and Chairman of the Board | No | ||||||||||
Adam S. Pollitzer | 45 | 2022 | President and Chief Executive Officer | No | ||||||||||
Steven L. Scheid | 70 | 2012 | Lead Independent Director | Yes | ||||||||||
Michael Embler | 59 | 2012 | Director | Yes | ||||||||||
John C. Erickson | 63 | 2023 | Director | Yes | ||||||||||
Priya Huskins | 52 | 2021 | Director | Yes | ||||||||||
Lynn S. McCreary | 64 | 2019 | Director | Yes | ||||||||||
Michael Montgomery | 68 | 2012 | Director | Yes | ||||||||||
Regina Muehlhauser | 75 | 2017 | Director | Yes |
Median Tenure: 6 Years | Median Age: 57 Years | 33% Female | 78% Independent |
2024 Proxy Statement | 11 | NMI Holdings, Inc. (NMIH) |
BOARD DIVERSITY MATRIX (AS OF MARCH 28, 2024) | Total Number of Director Nominees: 9 | |||||||
FEMALE | MALE | |||||||
PART I: GENDER IDENTITY | ||||||||
Directors | 3 | 6 | ||||||
PART II: DEMOGRAPHIC BACKGROUND | ||||||||
Asian | 2 | 0 | ||||||
White | 1 | 6 | ||||||
LGBTQ+ | 0 | 1 | ||||||
Did Not Disclose Demographic Background | 0 | 0 |
SKILL/EXPERIENCE | NUMBER OF DIRECTORS (OUT OF 9) | |||||||||||||||||||||||||||||||||||||
SENIOR EXECUTIVE AND CORPORATE GOVERNANCE: Directors bring valuable senior executive experience on matters relating to corporate governance, management, operations and compensation. | ||||||||||||||||||||||||||||||||||||||
9 | ||||||||||||||||||||||||||||||||||||||
PUBLIC COMPANY AND FINANCIAL REPORTING: Directors bring extensive knowledge of or experience in accounting, financial reporting, auditing processes and standards and public company reporting. | ||||||||||||||||||||||||||||||||||||||
7 | ||||||||||||||||||||||||||||||||||||||
FINANCIAL SERVICES: Directors possess in-depth knowledge of the financial services industry, providing valuable expertise on issues facing the Company and its industry. | ||||||||||||||||||||||||||||||||||||||
9 | ||||||||||||||||||||||||||||||||||||||
RISK MANAGEMENT AND COMPLIANCE: Directors have experience in risk management and compliance oversight relevant to exercising corporate and fiduciary responsibilities. | ||||||||||||||||||||||||||||||||||||||
8 | ||||||||||||||||||||||||||||||||||||||
TECHNOLOGY: Directors possess experience in the development and adoption of new technology as well as leading innovation initiatives at companies. | ||||||||||||||||||||||||||||||||||||||
5 | ||||||||||||||||||||||||||||||||||||||
REGULATED INDUSTRIES: Directors bring valuable experience with regulated businesses, operating under regulatory requirements and relationships with regulatory agencies. | ||||||||||||||||||||||||||||||||||||||
9 | ||||||||||||||||||||||||||||||||||||||
NMI Holdings, Inc. (NMIH) | 12 | 2024 Proxy Statement |
Bradley M. Shuster Mr. Shuster has served as Executive Chairman of the Board since January 2012. Mr. Shuster served as our Chief Executive Officer from 2012 to 2018. From 2012 to 2014, Mr. Shuster also served as our President. From 2008 to 2011, Mr. Shuster held various consulting positions assisting private investors with evaluating opportunities in the insurance industry. Mr. Shuster was an executive of The PMI Group, Inc. (PMI) from 2003 to 2008, where he served as president of International and Strategic Investments and chief executive officer of PMI Capital Corporation. Prior to that, he served as PMI's executive vice president of Corporate Development and senior vice president, treasurer and chief investment officer. Before joining PMI in 1995, Mr. Shuster was a partner at Deloitte LLP, where he served as partner-in-charge of Deloitte's Northern California Insurance Practice and Mortgage Banking Practice. He holds a B.S. from the University of California, Berkeley and an M.B.A. from the University of California, Los Angeles. He is an independent director of McGrath RentCorp (NASDAQ: MGRC) (since 2017) and of WaFd, Inc. (NASDAQ: WAFD) (since 2024). Mr. Shuster also served on the board of Luther Burbank Corporation before its merger with WaFd, Inc. (1999-2024). Mr. Shuster completed the National Association of Corporate Directors Cyber-Risk Oversight Program, earning the CERT Certificate in Cybersecurity Oversight. Mr. Shuster's vision and status as our founder and the Executive Chairman of the Board, as well as his previous tenure as our Chief Executive Officer, bring unique and invaluable experience to our Board. Further, his extensive experience developing and operating mortgage insurance companies and his insurance industry background, as well as his service on the boards of other publicly held companies, supports our conclusion he has the necessary and desired skills, experience and perspectives to serve on our Board, and to serve as the Chairman of our Board. | ||||||||||||||||||||
EXECUTIVE CHAIRMAN AND CHAIRMAN OF THE BOARD (EXECUTIVE CHAIRMAN) | ||||||||||||||||||||
AGE:69 DIRECTOR SINCE: 2012 | ||||||||||||||||||||
2024 Proxy Statement | 13 | NMI Holdings, Inc. (NMIH) |
Adam S. Pollitzer Mr. Pollitzer serves as our President and Chief Executive Officer (CEO). As President and CEO, Mr. Pollitzer is responsible for the Company’s day-to-day management, financial performance, and long-term growth strategy. Mr. Pollitzer joined NMI in May 2017 and served as our Executive Vice President and Chief Financial Officer from 2017 to 2021. Before joining the Company in 2017, Mr. Pollitzer was a Managing Director in the corporate and investment banking division of J.P. Morgan Securities, LLC, where he led advisory and capital raising efforts on behalf of North American insurance companies. Before serving as a Managing Director, Mr. Pollitzer held other senior leadership positions with J.P. Morgan. He holds a bachelor’s degree in business administration from the Stephen M. Ross School of Business at the University of Michigan. A seasoned mortgage industry and finance executive, Mr. Pollitzer draws on over 20 years of broad mortgage insurance and industry knowledge, business development and financial expertise, and as our CEO, a day-to-day perspective on our Company’s strategy and operations. Mr. Pollitzer's extensive background, in addition to his experience in other senior positions, supports our conclusion Mr. Pollitzer has the necessary and desired skills, experience and perspective to serve on our Board. | ||||||||||||||||||||
PRESIDENT AND CHIEF EXECUTIVE OFFICER | ||||||||||||||||||||
AGE:45 DIRECTOR SINCE: 2022 | ||||||||||||||||||||
Steven L. Scheid Mr. Scheid has served as our Lead Independent Director since 2012. He served on the boards of Blue Nile Company, an online retailer of diamonds and fine jewelry (2007-2015); Janus Capital Group Inc., a global investment firm (2002-2012); and The PMI Group, Inc. (2002-2009). Mr. Scheid was previously a partner at Strategic Execution Group, a consulting firm, from 2007 to 2012. He served as the chairman of Janus Capital Group Inc. until 2012 and also served as the company's chief executive officer from 2004 to 2006. Mr. Scheid was an operating partner at Thoma Bravo, LLC, a private equity firm from 2008 to 2011. From 1996 to 2002, Mr. Scheid served in multiple senior executive positions for Charles Schwab Corporation. He was vice chairman of the Charles Schwab Corporation and president of the Schwab Retail Group. Prior to these roles, Mr. Scheid served as Schwab's chief financial officer and was the chief executive officer of Charles Schwab Investment Management. He served as the Federal Reserve Bank of San Francisco's representative on the Federal Advisory Council in Washington, D.C. from September 2000 to February 2002. Mr. Scheid is a certified public accountant and holds a B.S. in accounting from Michigan State University. A veteran financial industry executive with over 40 years of experience, Mr. Scheid's extensive and deep background in finance, retail strategies, risk management and investment services, supports our conclusion Mr. Scheid has the necessary and desired skills, experience and perspective to serve on our Board. | ||||||||||||||||||||
LEAD INDEPENDENT DIRECTOR | ||||||||||||||||||||
AGE: 70 DIRECTOR SINCE: 2012 COMMITTEE(S):Governance and Nominating; Compensation | ||||||||||||||||||||
NMI Holdings, Inc. (NMIH) | 14 | 2024 Proxy Statement |
Michael Embler Mr. Embler has over 25 years of experience in investments and financial markets. Mr. Embler also serves on the board of American Airlines Group (NASDAQ: AAL) (from 2013) and the board of Ventas, Inc. (NYSE: VTR) (from 2022). Previously, he was on the boards of Taubman Centers (2018-2020), Abovenet, Inc. (2003-2012), Dynegy Inc. (2011-2012), CIT Group (2009-2016), Kindred Healthcare (2001-2008) and Grand Union Company (1999-2000). Mr. Embler served as the chief investment officer of Franklin Mutual Advisers LLC, an asset management subsidiary of Franklin Resources, Inc., overseeing approximately $60 billion in assets and 25 investment professionals. He joined Franklin in 2001 and retired in 2009. Prior to serving as chief investment officer, he managed the firm's distressed investing strategy. Previously, from 1992 to 2001, he held various positions at Nomura Holdings America, culminating in a position as the managing director overseeing a team which invested a proprietary fund focused on distressed and other event-driven corporate investments. Mr. Embler received a B.S. in economics from the State University of New York at Albany and earned an M.B.A. in finance from George Washington University. Mr. Embler has also earned the CERT Certificate in Cybersecurity Oversight from the National Association of Corporate Directors Cyber-Risk Oversight Program, and a certificate in Environmental Conservation and Sustainability from The Earth Institute, Center for Environmental Research and Conservation at Columbia University. Mr. Embler's extensive financial industry background and commitment to board-level cyber-risk oversight and sound conservation and sustainability practices, as well as his service on the boards of other publicly held companies, supports our conclusion he has the necessary and desired skills, experience and perspectives to serve on our Board. | ||||||||||||||||||||
DIRECTOR | ||||||||||||||||||||
AGE:59 DIRECTOR SINCE: 2012 COMMITTEE(S):Audit (Chair); Compensation | ||||||||||||||||||||
John C. Erickson Mr. Erickson is a seasoned finance executive with four decades of experience in the financial services industry. Mr. Erickson served for over 30 years at Union Bank, N.A. where he held many executive roles, including two vice chairman positions of Chief Risk Officer and Chief Corporate Banking Officer between 2007 and 2014. Since 2019, Mr. Erickson has served on the board of Bank of Hawaii Corp. (NYSE: BOH), where he serves on the Nominating & Corporate Governance Committee and as Vice Chair of the Audit & Risk Committee. He was a director of Luther Burbank Corp. from 2017 to February 2024, where he served on the Audit & Risk Committee, and Compensation Committee. He was also a director of Zions Bancorporation NA from 2014 to 2016, and was chair of the Risk Oversight Committee as well as a member of the Audit Committee. He also served as President, Consumer Banking and President, California, for CIT Group, Inc. in 2016. Mr. Erickson received his bachelor’s degree with an emphasis in economics and his M.B.A. with an emphasis in finance from the University of Southern California. Mr. Erickson’s extensive experience and background in business, management and financial services, as well as his service on the boards of other publicly held companies, supports our conclusion he has the necessary and desired skills, experience and perspectives to serve on our Board. | ||||||||||||||||||||
DIRECTOR | ||||||||||||||||||||
AGE: 63 DIRECTOR SINCE: 2023 COMMITTEE(S):Audit, Risk | ||||||||||||||||||||
2024 Proxy Statement | 15 | NMI Holdings, Inc. (NMIH) |
Priya Huskins Ms. Huskins has been an executive at Woodruff Sawyer & Co. (Woodruff Sawyer), a commercial insurance brokerage and consulting firm since 2003, serving as a partner and senior vice president since 2005 and a member of its board since 2016. Prior to joining Woodruff Sawyer, Ms. Huskins served as a corporate and securities attorney at the law firm of Wilson Sonsini Goodrich & Rosati from 1997 until 2003. Since 2007, Ms. Huskins has served as a director of the board of Realty Income Corporation (NYSE: O), a publicly traded REIT, currently serving as chair of its Compensation Committee and as a member of its Nominating and Corporate Governance Committee. Since 2022, Ms. Huskins has served as a director of the board of Long-Term Stock Exchange, an SEC-registered national securities exchange built to serve companies and investors who share a long-term vision. From 2021 to 2023, Ms. Huskins also served as a director of the board of Anzu Special Acquisition Corp I, a publicly traded special purpose acquisition corporation. She has served on the advisory board of the Stanford Rock Center for Corporate Governance since 2012. Ms. Huskins earned her undergraduate degree from Harvard College and J.D. from the University of Chicago Law School. Ms. Huskins' extensive financial, legal and insurance industry background, as well as her service on the boards of other publicly held companies, supports our conclusion she has the necessary and desired skills, experience and perspectives to serve on our Board. | ||||||||||||||||||||
DIRECTOR | ||||||||||||||||||||
AGE:52 DIRECTOR SINCE: 2021 COMMITTEE(S):Governance and Nominating; Compensation | ||||||||||||||||||||
Lynn S. McCreary Ms. McCreary is a seasoned executive with over 40 years of experience in business and management. She is the chief administrative officer, chief legal officer, corporate secretary and member of the management team of Sportradar Group AG (Sportradar), a multinational company that aggregates and analyzes sports data and provides services to a wide range of constituents in the sports and media worlds. Ms. McCreary leads the legal, enterprise risk, compliance and privacy functions, and is responsible for Sportradar's ESG/Sustainability program. Prior to joining Sportradar in June 2021, Ms. McCreary served as the chief legal officer, corporate secretary and a member of the executive committee of Fiserv, Inc., a fortune 500 global leader in payment and fintech where, from 2013-2021, she advised the CEO, board and business leaders on a broad array of business and legal matters. From 2010-2013, Ms. McCreary served as Fiserv's deputy general counsel. Prior to joining Fiserv, Ms. McCreary was a partner at Bryan Cave LLP where she represented commercial, retail, financial and insurance companies. She began her career in financial services in 1982, holding positions at Citicorp Person to Person and Metmor Financial, then a subsidiary of Metropolitan Life Insurance Company. Ms. McCreary earned a bachelor's degree from Western New England College and a J.D. from Washburn University School of Law. Ms. McCreary's extensive experience and background business, management, law and financial services supports our conclusion she has the necessary and desired skills, experience and perspectives to serve on our Board. | ||||||||||||||||||||
DIRECTOR | ||||||||||||||||||||
AGE:64 DIRECTOR SINCE: 2019 COMMITTEE(S):Governance and Nominating (Chair); Risk | ||||||||||||||||||||
NMI Holdings, Inc. (NMIH) | 16 | 2024 Proxy Statement |
Michael Montgomery Mr. Montgomery has served on the boards of directors for numerous regulated entities, including FDIC-insured banks, mortgage origination companies, mortgage servicing companies, broker dealers and investment advisers. Mr. Montgomery was a member of the boards of directors of Barclays Bank Delaware from 2005 until 2012 and of Barclays Capital Inc. and Barclays Group US, Inc. from 2002 to 2012. From 2013 to 2018, Mr. Montgomery served as Glendon Capital Management's chief compliance officer. From 2010 to 2013, Mr. Montgomery served as chief compliance officer of Barclays Asset Management Group LLC (Barclays). Previously, Mr. Montgomery served as chief executive officer of Barclays Group US, Inc., the top-tier U.S. holding company for Barclays from 2003 to 2010, and he has significant experience as an audit committee member. From 2006 to 2010, he served as chief administrative officer of Mortgage Origination and Servicing at Barclays Capital, a position in which he managed mortgage origination and servicing activities and coordinated the underwriting, production, warehousing and servicing functions with its New York-based asset securitization business. From 1998 to 2000, Mr. Montgomery served as chief financial officer for Deutsche Bank Securities Inc. He served in various positions at Goldman Sachs & Co. (Goldman Sachs) from 1987 to 1998, including as vice-president of UK Regulatory Reporting, vice-president of Subsidiary Accounting, vice-president and director of Regulatory Reporting and chief financial officer of Goldman Sachs Canada. Mr. Montgomery has also previously held operating roles as chief financial officer and chief administrative officer and has served on several industry-wide committees for the Securities Industry Association, the Bond Market Association and the Public Securities Association. Mr. Montgomery earned a B.A. in economics and French literature from the University of Virginia and a J.D. from Georgetown University Law Center. Mr. Montgomery's extensive experience in financial services and the mortgage industry supports our conclusion he has the necessary and desired skills, experience and perspectives to serve on our Board. | ||||||||||||||||||||
DIRECTOR | ||||||||||||||||||||
AGE:68 DIRECTOR SINCE: 2012 COMMITTEE(S):Audit; Risk | ||||||||||||||||||||
2024 Proxy Statement | 17 | NMI Holdings, Inc. (NMIH) |
Regina Muehlhauser Ms. Muehlhauser retired as president of Bank of America, San Francisco, a subsidiary of Bank of America Corporation (BAC), in 2004. Ms. Muehlhauser was a member of BAC's Global Management Operating Committee and was global treasury management executive, responsible for the sales and delivery of treasury management services to large corporations in 35 countries and approximately two million commercial and small business companies in the United States. From 1997 to 2004, Ms. Muehlhauser reported to the chairman & CEO as executive vice president, overseeing BAC's Client Focus Initiative, having joined Bank of America in 1991 as senior vice president. Ms. Muehlhauser began her career at Wells Fargo Bank where she held a variety of client management and organizational leadership responsibilities within the real estate industries group, rising to senior-vice president. In 2003, Treasury & Risk Management Magazine named her among the "100 Most Influential People in Finance" in the United States. In 2002, 2003 and 2004, Ms. Muehlhauser was named as one of the most influential women in the San Francisco Bay Area by the San Francisco Business Times. In 2002, she received the Woman of Honor award by the Chinese Historical Society of America for her impact on society as a business leader and was named 2006 Board Leader Volunteer of the Year for the San Francisco and San Mateo, California counties. Ms. Muehlhauser earned a bachelor's degree in political science from American University. Ms. Muehlhauser's extensive experience in the financial services industry supports our conclusion she has the necessary and desired skills, experience and perspectives to serve on our Board. | ||||||||||||||||||||
DIRECTOR | ||||||||||||||||||||
AGE:75 DIRECTOR SINCE: 2017 COMMITTEE(S):Audit; Risk (Chair) | ||||||||||||||||||||
NON-EMPLOYEE DIRECTORS | AUDIT COMMITTEE CHAIR | OTHER COMMITTEE CHAIR | LEAD INDEPENDENT DIRECTOR | |||||||||||
ANNUAL COMPENSATION PACKAGE | ($) | ($) | ($) | ($) | ||||||||||
Cash Retainer | 110,000 | 25,000 | 20,000 | 40,000 | ||||||||||
RSU Award | 140,000 | N/A | N/A | N/A |
NMI Holdings, Inc. (NMIH) | 18 | 2024 Proxy Statement |
FEES EARNED OR PAID IN CASH (1) | RSU AWARDS (2) | TOTAL COMPENSATION | |||||||||
NAME | ($) | ($) | ($) | ||||||||
Michael Embler3 | 131,401 | 139,977 | 271,378 | ||||||||
John C. Erickson4 | 32,582 | 244,979 | 277,561 | ||||||||
Priya Huskins | 106,401 | 139,977 | 246,378 | ||||||||
James G. Jones5 | 124,602 | 139,977 | 264,579 | ||||||||
Lynn S. McCreary6 | 124,602 | 139,977 | 264,579 | ||||||||
Michael Montgomery | 106,401 | 139,977 | 246,378 | ||||||||
Regina Muehlhauser7 | 124,602 | 139,977 | 264,579 | ||||||||
Steven L. Scheid8 | 146,401 | 139,977 | 286,378 |
TITLE | STOCK OWNERSHIP GUIDELINES | ||||
Non-Employee directors | 5.0 x annual cash retainer |
The Board unanimously recommends that you vote FOR each of the director nominees. | ||||||||
2024 Proxy Statement | 19 | NMI Holdings, Inc. (NMIH) |
NMI Holdings, Inc. (NMIH) | 20 | 2024 Proxy Statement |
DIRECTOR NAME | AUDIT COMMITTEE | GOVERNANCE AND NOMINATING COMMITTEE | RISK COMMITTEE | COMPENSATION COMMITTEE | ||||||||||
Bradley M. Shuster | ||||||||||||||
Priya Huskins* | n | n | ||||||||||||
Adam S. Pollitzer | ||||||||||||||
Steven L. Scheid* | n | n | ||||||||||||
Michael Embler* | n | n | ||||||||||||
John C. Erickson* | n | n | ||||||||||||
James G. Jones* | n | n | n | |||||||||||
Lynn S. McCreary* | n | n | ||||||||||||
Michael Montgomery* | n | n | ||||||||||||
Regina Muehlhauser* | n | n |
2024 Proxy Statement | 21 | NMI Holdings, Inc. (NMIH) |
The Audit Committee is responsible for, among other things, monitoring: •the integrity of the financial statements of the Company; •the independent auditor's qualifications and independence; •the performance of the Company's internal audit function and independent auditors; •the Company's system of disclosure controls and system of internal controls over financial reporting; •the Company's information technology and cybersecurity risk; and •the Company's compliance with legal and regulatory requirements. AUDIT COMMITTEE REPORT Before we filed our Annual Report on Form 10-K for the year ended December 31, 2023 with the SEC, the Audit Committee reviewed and discussed with management our audited Consolidated Financial Statements for the year ended December 31, 2023, and the notes thereto and other financial information included in the report, including the section of the report entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" (collectively, the 2023 10-K). The Audit Committee also discussed with BDO, our independent registered public accounting firm for 2023, the matters required to be discussed by Public Company Accounting Oversight Board (PCAOB) Auditing Standard 1301, including, among other things, matters related to the conduct of the audit of our financial statements. The Audit Committee has received the written disclosures and the letter from BDO required by applicable requirements of the PCAOB regarding BDO's communications with the Audit Committee concerning independence and has discussed with BDO their independence from the Company. Based on its reviews and discussions described above, the Audit Committee recommended to our Board that our audited financial statements be included in our 2023 10-K, which we filed with the SEC. | ||||||||||||||
Audit Committee | ||||||||||||||
MEMBERS: Michael Embler (Chair) John C. Erickson Michael Montgomery Regina Muehlhauser | ||||||||||||||
NMI Holdings, Inc. (NMIH) | 22 | 2024 Proxy Statement |
The Governance and Nominating Committee is responsible for, among other things: •identifying individuals qualified to become Board members and recommending to the Board nominees for election for the next annual meeting of stockholders; •reviewing the qualifications and independence of the members of the Board and its committees on a regular •recommending to the Board corporate governance guidelines and reviewing such guidelines, as well as the Governance and Nominating Committee charter, to confirm that they remain consistent with sound corporate governance practices and with any legal requirements; •overseeing our environmental (including climate), social and governance efforts and initiatives; •leading the Board in its annual review of the Board's and its committees' performance; and •recommending committee assignments for members of the Board. The Governance and Nominating Committee evaluates director candidates for the Company's nominees for the Board under the criteria described above under " | ||||||||||||||
Governance and Nominating Committee | ||||||||||||||
MEMBERS: James G. Jones* Steven L. Scheid MEETINGS IN 2023: 4 Each director qualifies as an "independent" director | ||||||||||||||
*Mr. Jones is expected to serve on the |
The Risk Committee is responsible for the oversight of the Company's management of key risks and exposures that could materially impact the Company and management's operation of the Company's mortgage insurance business and the management of the Company's investment portfolio, including, among other things: •monitoring the performance of the Company's insured books of business and the principal factors affecting performance; •discussing, reviewing and monitoring the Company's mortgage insurance products, including premium rates, underwriting guidelines and returns; •reviewing and approving the Company's investment policy and reviewing the performance of the investment portfolio; •reviewing the mortgage insurance operating environment, including the state of local and regional housing markets, competitive forces affecting the Company and the Company's relationships with residential mortgage lenders and investors; •assisting the Board in its oversight of the Company's enterprise risk management approach, including the significant risk management policies, procedures and processes; and •reviewing and approving the Company's directors and officers liability coverage for adequacy and scope. | ||||||||||||||
Risk Committee | ||||||||||||||
MEMBERS: Regina Muehlhauser (Chair) John C. Erickson James G. Jones* Michael Montgomery Lynn S. McCreary MEETINGS IN 2023: 4 Each director qualifies as an "independent" director under the applicable rules and regulations of NASDAQ and the SEC. | ||||||||||||||
*Mr. Jones is expected to serve on the Risk Committee until his retirement from the Board | ||||||||||||||
2024 Proxy Statement | 23 | NMI Holdings, Inc. (NMIH) |
Compensation Committee | •overseeing our executive compensation program, including approving corporate objectives relating to compensation for our President and CEO, Executive Chairman and other senior executives and determining the annual compensation of •reviewing and approving the •evaluating the relationship between our risk •reviewing and approving incentive and equity-based compensation plans and grants; •reviewing transition and succession planning for senior executives; and •preparing the Compensation Committee Report and reviewing any Compensation Discussion and Analysis included in The Compensation Committee | |||||||||||||
MEMBERS: James G. Jones (Chair)* Michael Embler Priya Huskins Steven L. Scheid MEETINGS IN 2023: 6 Each director qualifies as an "independent" director under the applicable rules and regulations of NASDAQ and the SEC. | ||||||||||||||
*Mr. Jones is the current Chair of the Compensation Committee and is expected to serve on the Compensation Committee in such capacity until his retirement from the Board on May 9, 2024. |
NMI Holdings, Inc. (NMIH) | 24 | 2024 Proxy Statement |
Board of Directors | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Audit Committee | Governance and Nominating Committee | Management | Compensation Committee | Risk Committee | |||||||||||||||||||||||||||||||||||||||||||||||||
Internal Audit | Management Risk Committee | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Enterprise Risk Management Committee | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2024 Proxy Statement | 25 | NMI Holdings, Inc. (NMIH) |
NMI Holdings, Inc. (NMIH) | 26 | 2024 Proxy Statement |
2024 Proxy Statement | 27 | NMI Holdings, Inc. (NMIH) |
TITLE | STOCK OWNERSHIP GUIDELINES | ||||
Non-Employee directors | 5.0 x annual cash retainer |
NMI Holdings, Inc. (NMIH) | 28 | 2024 Proxy Statement |
2024 Proxy Statement | 29 | NMI Holdings, Inc. (NMIH) |
NMI Holdings, Inc. (NMIH) | 30 | 2024 Proxy Statement |
2024 Proxy Statement | 31 | NMI Holdings, Inc. (NMIH) |
SHARES OF CLASS A COMMON STOCK BENEFICIALLY OWNED | ||||||||
NAMED EXECUTIVE OFFICERS AND DIRECTORS: | NUMBER | % | ||||||
Bradley M. Shuster (1) | 961,780 | 1.2% | ||||||
Adam S. Pollitzer (2) | 211,488 | * | ||||||
Ravi Mallela (3) | 44,566 | * | ||||||
William J. Leatherberry (4) | 196,411 | * | ||||||
Robert Smith (5) | 95,360 | * | ||||||
Steven L. Scheid (6) | 90,554 | * | ||||||
Michael Embler (7) | 92,480 | * | ||||||
John Erickson (8) | 3,735 | * | ||||||
James G. Jones (9) | 62,847 | * | ||||||
Michael Montgomery (10) | 61,678 | * | ||||||
Regina Muehlhauser (11) | 60,687 | * | ||||||
Lynn S. McCreary (12) | 35,640 | * | ||||||
Priya Huskins (13) | 20,482 | * | ||||||
All executive officers and directors as a group (15 persons) | 1,986,007 | 2.4% |
NMI Holdings, Inc. (NMIH) | 32 | 2024 Proxy Statement |
GREATER THAN 5% STOCKHOLDERS, AS OF MARCH 12, 2024 | NUMBER | % | ||||||
BlackRock, Inc.(1) | 13,925,793 | 17.2% | ||||||
Vanguard Group Inc.(2) | 6,809,208 | 8.4% | ||||||
Oaktree Value Equity Holdings, L.P.(3) | 4,682,823 | 5.8% | ||||||
Dimensional Fund Advisors LP (4) | 4,567,372 | 5.6% |
PLAN CATEGORY | NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS, AND RIGHTS (2) | WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS, AND RIGHTS (3) ($) | NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS(4) | ||||||||
Equity compensation plans approved by security holders (1) | 2,066,965 | $15.53 | 2,497,177 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | ||||||||
Total | 2,066,965 | $15.53 | 2,497,177 |
2024 Proxy Statement | 33 | NMI Holdings, Inc. (NMIH) |
Compensation of Named Executive Officers | ||||||||
NMI Holdings, Inc. (NMIH) | 34 | 2024 Proxy Statement |
OVERVIEW OF OUR FINANCIAL PERFORMANCE AS OF YEAR END 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$197 billion IIF | We closed the year with a record of $197 billion of high-quality, high-performing primary insurance-in-force, up 7% compared to December 31, 2022. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$40.5 billion NIW | We delivered $40.5 billion of high quality, new insurance written (NIW)
Key matters addressed by the Compensation Committee (in consultation with its Compensation Consultant, Semler Brossy) with respect to executive compensation in 2023 included: •Setting performance objectives for the Company's 2023 bonus plan, including incentives to manage costs, write high-quality business to achieve sustainable revenues, and achieve objectives for adjusted operating income and strong ROE targets; •Reviewing performance outcomes relative to the performance objectives at the end of the year in determining incentive plan payouts; •Reviewing our CEO compensation to ensure alignment with competitive market practice; •Analyzing and determining the Executive Chairman's compensation; •Conducting a comprehensive review and evaluation of our •Reviewing the compensation
Executive Compensation Philosophy We have designed our compensation program to attract, retain and motivate talented and qualified executives, while maximizing Our compensation programs provide a strong alignment between Company performance results and resulting payouts: •Our annual incentive •Our long-term incentive •RSUs vest over three years and promote a long-term focus for Stockholder Say-on-Pay Votes We are holding an annual say-on-pay advisory vote in this proxy statement as proposal Item 2. We value stockholder input and see Item 2 as giving our stockholders the opportunity to express their views on the design and effectiveness of our executive compensation program. The Compensation Committee takes into consideration stockholder input, including the outcome of the We have Following our 2023 Annual Meeting, as it does following each of our annual meetings of stockholders, our Compensation Committee reviewed the Strong Executive Compensation Policies and Practices We maintain strong compensation-related governance policies and practices. Our compensation-related governance policies and practices align our executive compensation with long-term stockholder Minimum Stock Ownership and Holding Period Requirements The Company's Stock Ownership Policy imposes rigorous stock ownership requirements on our NEOs, with our CEO required to hold Company shares Our policies prohibit our directors and NEOs from engaging in all forms of speculative hedging and pledging transactions involving the Company's equity securities. Clawback Policy In 2023, the Compensation Committee adopted a new Compensation Recovery Policy, effective September 13, 2023 (Clawback Policy), to
required to prepare an accounting restatement. A copy of the Clawback Policy is included as Exhibit 97.1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Compensation Consultant Performs No Additional Services for Us The Compensation Consultant is retained by the Compensation Committee and performs no other services for the Company. Compensation Risk Evaluation Annually, the Compensation Committee Change-in-Control Severance Plan (CIC Severance Plan) Provides Limited Benefits A No Tax Gross-Ups We do not provide golden parachute excise tax or other income tax gross-ups to any of our Compensation of our Mr. Pollitzer has served as the Mr. Pollitzer's performance-based RSUs are eligible to vest after three years based on meeting cumulative performance metrics set forth in his award agreement. See "Compensation of Named Executive Officers — Compensation Discussion and Analysis — Elements of Executive Compensation Program — Compensation Program Details — Long Term Incentive Program & BVPS Growth Targets" for a Mr. Pollitzer's time-based RSUs are eligible to vest 40% on each of the first and second anniversaries of the grant date, with
The chart below illustrates the components of Role of the Compensation Committee The Compensation Committee, which consists solely of independent directors, is responsible for overseeing the development and administration of our executive compensation program. The Compensation Committee The Compensation Committee maintains an annual agenda to help ensure that it discharges its duties in a thoughtful and timely manner. Each meeting has a primary purpose, and as a general practice, the Compensation Committee makes significant decisions over multiple meetings by discussing conceptual matters, reviewing preliminary recommendations, discussing recommendations
among the Compensation Committee members, and reviewing final recommendations before acting. The Compensation Committee also holds special meetings as necessary in order to perform its duties. In Role of the Compensation Consultant Role of the CEO As part of its review and determination of the
Benchmarking Our executive compensation philosophy emphasizes competitive objectives for executive pay. Our peer group for fiscal year
1.Based on 2023 proxy statements.
Overview of Compensation Elements The table below describes the principal elements and characteristics of our executive compensation program, which align with our overall executive compensation philosophy.
In 2023, the Compensation Book Value Per Share (BVPS) The PRSUs granted in 2023, similar to prior years, are earned based on the achievement of a compound annual BVPS growth target over a three-year performance period. We base the performance assessment in our PRSUs on compound annual BVPS growth because we believe (i) it is an appropriate measure and key indicator of the Company's long-term performance and (ii) it correlates with management’s ability to drive long-term stockholder value creation. BVPS growth serves as a comprehensive indicator of our performance encompassing the scale of our new business production and insured portfolio development, effectiveness of our credit risk management strategy, consistency and yield of our investment portfolio returns, stability of our funding profile and regulatory capital position, and the efficiency of our operating platform. Growth in BVPS provides a more stable indication of financial performance than total shareholder return (TSR), which can be
more volatile over discrete measurement periods due to factors that are outside of management’s control, including changes in economic conditions and stock market volatility, among others. Issuing 2023 PRSUs with a performance assessment based on compound annual BVPS growth over a three-year period serves to directly link a material element of our receiving NEOs' compensation with the Company’s achievement of long-term financial performance and sustainable long-term returns on equity, directly aligns their compensatory incentives with outcomes that are expected to drive long-term stockholder value, and further provides a basis for comparison with other companies in the MI industry and broader financial services landscape that measure performance and award compensation based on a similar measure of book value. Compensation of Our CEO and Executive Officers Are Weighted Towards Variable Compensation Our total annual compensation structure embodies our commitment to align pay with performance. Fixed compensation continues to represent a limited portion of our NEOs' total compensation. Base salary represented 13% of Mr. Pollitzer's 2023 total target compensation and, on average, 26% of the total target compensation of our other NEOs. The remaining target compensation of our NEOs was tied to, and is contingent upon, Company and individual performance. Structuring CEO and other NEO compensation to include a significant majority of at-risk incentives serves to align our executive officer and stockholder interests because a significant portion of each executive's overall compensation is directly linked to the Company's financial performance. The following charts highlight, for our CEO and our other NEOs, the components of their average total annualized target compensation for fiscal year 2023. The information presented is based on components of average compensation at target, and therefore, is not directly comparable to amounts set forth in the 2023 Summary Compensation Table on page 48.
1. Percentages used in the charts above have been rounded to the nearest whole percent.
COMPENSATION PROGRAM DETAILS Base Salary Base salaries provide our NEOs with fixed cash compensation for service during the year, with consideration given to the scope of each NEO's responsibilities, experience and other qualifications essential to the NEO's role. The following table shows our NEOs' annual base salaries
In order to appropriately motivate and reward our The following table sets forth the target awards established by the Compensation Committee for our NEOs for fiscal year
In early 2023, the Compensation Committee approved corporate performance objectives for fiscal year 2023, with threshold, target and maximum achievement levels, which were developed by the executive management team consistent with the Company's 2023 operational plan and budget approved by the Board. With respect to our corporate performance objectives, the 2023 bonus plan included three achievement benchmarks: (i) a 75% payout for threshold achievement, (ii) 100% payout for target achievement, and (iii) 180% payout for maximum achievement. Bonus awards are interpolated linearly if actual results fall between the threshold and target measurement points, or between the target and maximum measurement points.
The following table sets forth the corporate performance
1.Adjusted Return on Equity (AROE), Adjusted Net Operating Income, and Adjusted Expense Ratio are non-GAAP measures. For a description of how we define these measures under the 2023 bonus
When determining the final awards for our NEOs under the 2023 bonus plan, the Compensation Committee After evaluating the Company's financial performance in 2023, achievement levels with respect to the 2023 performance objectives and the significant accomplishments of our executive team during 2023, the Long-Term Incentive Program & BVPS Growth Targets Our NEOs may be awarded equity at the discretion of the Compensation Committee under the Company's equity plans. Equity awards are intended i.further align the interests of our NEOs with the interests of our ii.emphasize long-term iv.support the retention of our management team. In 2023, the Compensation Committee The Compensation Committee granted our CEO and other NEOs the following 2023 equity awards as
2023 RSUs Granted: The 2023 RSU awards 2023 PRSUs Granted:
1.As defined for purposes of the 2023 PRSUs, BVPS, for any year during the Performance Period, is equal to the "Adjusted Book Value" for such year divided by the number of "Common Shares Outstanding." "Adjusted Book Value" is a non-GAAP measure, and 2.BVPS Growth Percentage means, for the Performance Period, the compounded annual growth rate in BVPS measured at the end of the Performance Period over the No later than 60 days following the completion of the Performance Period, the Compensation Committee will determine the Company's BVPS Growth Percentage, certify the level of achievement with respect to the BVPS Vesting Percentage, if any, and determine the portion of shares that have been earned in accordance with the terms of the applicable plan and/or award agreement, with any unearned PRSUs to be forfeited at that time. 2023 Payouts Under Our 2021 PRSU Awards In 2021, the Company granted PRSUs to our NEOs that are earned based on the achievement of cumulative BVPS growth targets over a three-year performance period commencing on January 1, 2021 and ending on December 31, 2023. In February 2024, the Compensation Committee determined the extent to which the fiscal year 2021 PRSUs had been earned: a 200% payout based on BVPS Growth Percentage of 21.2% over the three-year performance period. The terms of the fiscal year 2021 PRSUs, including the target performance and payout level, actual results and vesting schedule, are summarized in the following
1.As defined for purposes of the 2021 PRSUs, BVPS, for any year during the Performance Period, is equal to the "Adjusted Book Value" for such year divided by the number of "Common Shares Outstanding." "Adjusted Book Value" is a non-GAAP measure, and means, for any year, the consolidated stockholder's equity of the Company computed in accordance with GAAP, adjusted to exclude the impact of (i) accumulated other comprehensive income (loss); (ii) the cumulative effect of cash dividends paid on the Company's common stock during the Performance Period, (iii) the cumulative effect of the repurchase of the Company's common stock during the Performance Period, (iv) the cumulative effect of changes in the fair value of the Company's warrant liability to the extent such warrants are not exercised, (v) the cumulative effect of changes in accounting principles under GAAP, and (vi) the cumulative effect of changes in tax law. 2.BVPS Growth Percentage means, for the Performance Period, the compounded annual growth rate in BVPS measured at the end of the Performance Period over the BVPS measured as of December 31, 2020. Retirement Savings Plan Since 2014, the Company has offered a tax-qualified defined contribution retirement savings plan Executive Cash Allowance Program The Company includes in the annual compensation of each NEO a standardized, fixed cash amount to be used at the discretion of the executive officer, in lieu of individualized perquisite programs. In our other NEOs. Minimum Stock Ownership Our Stock Ownership Policy, which is administered by the Compensation Committee, is applicable to the
Each executive officer is required to hold 50% of shares delivered by the Company upon vesting or exercise of equity awards granted under the Absolute Hedging and Pledging Prohibitions Our executive officers (including all of our NEOs) and directors are subject to the
Clawback Policy In Tax Considerations and Deductibility of Compensation Severance Plan workforce reduction, elimination of an eligible employee's position, lack of work or any other reason approved in the sole discretion of the Company (each, a Upon a Change in Control Severance Plan (CIC Severance Plan) The Compensation Committee has named each of the Periods:
The CIC Severance Plan •a lump sum cash payment equal to (A) the sum of the participant's base salary and target
•a lump sum cash payment equal to the cost of •a lump sum cash payment equal to the participant's target •any other earned and vested amounts or benefits that the Company is required to pay or provide or COMPENSATION COMMITTEE REPORT We, the Members of the Compensation Committee James Michael Embler Priya Huskins Steven L. Scheid
COMPENSATION AND RELATED TABLES The following summary compensation table sets forth information regarding the compensation paid, awarded to or earned by our NEOs who were serving as executive officers on December 31,
2.The amounts reported in this column for each fiscal year represent each NEO's annual incentive bonus that was earned in such year, awarded by the Compensation Committee, and paid in the subsequent fiscal year. See "Compensation Discussion and Analysis — Elements of Executive Compensation Program — Compensation Program Details — Short-Term Incentive Program & Corporate Performance Objectives," above for additional information regarding our NEOs' 2023 bonus awards. 3.The amounts reported in this column for 2023 include: (a) executive cash allowances of approximately $38,400 for each of Messrs. Pollitzer and Shuster and approximately $30,000 for each of Messrs. Leatherberry, Mallela and Smith; (b) matching 401(k) Plan contributions of $16,500 on behalf of each of Messrs. Pollitzer, Shuster, Mallela, Leatherberry and Smith; (c) reserved parking fees for each NEO; and (d) reimbursement for the travel costs of Mr. Shuster's spouse to accompany him on certain business-related travel itineraries. 4.Mr. Pollitzer became our CEO and President effective January 1, 2022 and his compensation in fiscal year 2021 reflects his compensation received as our CFO during that year. 5.In connection with Mr. Mallela's appointment as our CFO effective January 10, 2022, and as previously disclosed in our Current Report on Form 8-K filed with the SEC on December 21, 2021, during fiscal year 2022, in addition to his regular equity award, Mr. Mallela also received a one-time make-whole RSU award with a grant date fair value of $1,870,000 in consideration for equity awards Mr. Mallela forfeited from his previous employer and an inducement RSU award with a grant date fair value of $380,000. 6.Mr. Smith became an NEO for the first time in 2022.
EMPLOYMENT ARRANGEMENTS WITH OUR NEOs Our NEOs are employed by the Company on an "at-will" basis and are party to certain offer, employment and/or promotion letters with the Company (collectively, the Offer Letters). Among other things, each of the Offer Letters provides that the relevant executive shall (i) receive an annual base salary; (ii) participate in the Company's benefit plans; (iii) be eligible for a discretionary annual cash bonus under the Company's annual bonus plan; and (iv) be eligible for equity grants under the Company's equity plans. The material components of our NEOs' 2023 employment arrangements are summarized below. Salary. Each NEO is entitled to an annual base salary as determined annually by the Compensation Committee. Each NEO's 2023 base salary is quantified above, in "Compensation Discussion and Analysis — Elements of Executive Compensation Program — Compensation Program Details — Base Salary." Annual Bonus. Each NEO is eligible for a discretionary annual cash bonus, with Equity Awards. Each NEO received equity awards in 2023 under our 2014 Benefit Plans. Each NEO is eligible to participate in the Company's benefit plans, including the Company's 401(k) retirement plan Severance Benefits. In 2023, each NEO was eligible to participate in the Company's Severance Plan. See "Compensation Discussion and Analysis — Elements of Executive Compensation Program — Other Important Governance and Executive Compensation Policies — Severance Plan." CIC Severance Plan Benefits. Each of our NEOs was a participant in the Company's CIC Severance Plan in 2023. See "Compensation Discussion and Analysis — Elements of Executive Compensation Program — Other Important Governance and Executive Compensation Policies — Change In Control Severance Plan (CIC Severance Plan)" above. See below under "— Potential Payments Upon Termination of Employment or Change in Control as of December 31, 2023" for a description of the change-in-control severance benefits that our NEOs would have been eligible to receive as of December 31, 2023.
GRANTS OF PLAN-BASED AWARDS FOR 2023
1.In 2023, the Compensation Committee established corporate performance objectives under the 2023 bonus plan to provide for compensation that was intended to serve as an incentive for performance in 2023, based on established performance measures, notwithstanding that the Compensation Committee retained discretion to award payouts of any amount irrespective of the Company's actual performance against such objectives. The amounts earned by our NEOs in 2023 based on actual achievement of the 2023 performance objectives, but awarded and paid in 2024, are shown in the "Non-Equity Incentive Plan Compensation" column of the 2023 Summary Compensation Table above. See "Compensation Discussion and Analysis — Elements of Executive Compensation Program — Compensation Program Details — Short-Term Incentive Program & Corporate Performance Objectives," above for additional information regarding our NEOs' 2023 bonus awards. 2.Represents February 8, 2023 PRSU awards, which are eligible to vest after the Performance Period ends on December 31, 2025, generally subject to such NEOs' continued employment with the Company through the vesting date, with the percentage of the PRSUs that are eligible to vest dependent on the Company meeting cumulative BVPS growth targets set forth in the awards. See "Compensation Discussion and Analysis — Elements of Executive Compensation Program — Compensation Program Details — Long-Term Incentive Program & BVPS Growth Targets," above for a description of the 2023 PRSU awards. 3.Our NEOs' (other than Mr. Shuster) 2023 RSU grants are eligible to vest 40% on each of the first and second anniversaries of the grant date, with the remaining 20% eligible to vest on the third anniversary of the grant date. Mr. Shuster's 2023 RSU grant is eligible to vest in thirds on the first, second, and third anniversaries of the grant date. 4.The amounts included in this column reflect the grant date fair value of our NEOs' 2023 RSU and PRSU awards at target level of performance. Actual amounts to be paid to our NEOs will depend on our performance against the applicable performance conditions and at maximum performance, would result in an additional 2,137,486, 449,990, 584,491, and 446,494 for each of Messrs. Pollitzer, Mallela, Leatherberry and Smith.
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END The following table provides our NEOs' outstanding equity awards as of December 31, 2023:
1.These RSUs vested on 2/10/2024. 2.Two-thirds of these RSUs vested on 2/9/2024, with the remaining one-third eligible to vest on 2/9/2025. 3.40% of these RSUs vested on 2/8/2024, with another 40% eligible to vest on 2/8/2025 and the remaining 20% eligible to vest on 2/8/2026. 4.Represents February 9, 2022 PRSU award, which is eligible to vest after the Performance Period ends on December 31, 2024, subject to such NEO's continued employment with the Company through the vesting date, with the percentage of the PRSUs that are eligible to vest dependent on the Company meeting BVPS growth targets specified in the award. The amount in the table assumes maximum performance. See "Compensation Discussion and Analysis - Elements of Executive Compensation Program - Compensation Program Details - 6.One-half of these RSUs vested on 2/9/2024, with the remaining eligible to vest on 2/9/2025. 7.One-third of these RSUs vested on 2/8/2024, with the second third eligible to vest on 2/8/2025 and the remaining third eligible to vest on 2/8/2026. 8.The value is based on the $29.68 Closing Price of our common stock on NASDAQ on 12/31/2023 multiplied by the number of unvested RSUs or PRSUs, as applicable, as of 12/31/2023.
OPTION EXERCISES AND STOCK VESTED DURING FISCAL YEAR 2023
1.The value realized on the exercise of option awards is calculated by determining the difference between the market value of the underlying Company common stock on the exercise date and the exercise price of the option awards. Reflects the gross amount realized without netting the value of shares surrendered to cover the exercise price and to satisfy tax withholding obligations. 2.These shares include shares vested under (i) RSU awards granted to each of Messrs. Pollitzer, Shuster, Leatherberry and Smith in fiscal years 2020, 2021, and 2022, and to Mr. 3.The value realized on the vesting of stock awards is calculated by multiplying the number of shares of Company common stock vested by the market value of the common stock on the vesting date. Reflects the gross amount realized without netting the value of shares surrendered to satisfy tax withholding obligations. POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL AS OF DECEMBER 31, 2023 The following summarizes the compensation and benefits payable to each of our NEOs if an NEO's employment
TERMINATION OF EMPLOYMENT WITHOUT CAUSE OR RESIGNATION WITH GOOD REASON NEOs' Unvested RSU and PRSU Awards All of our NEOs' outstanding, unvested RSU and PRSU grants have been made under the 2014 Plan. Each NEO's 2021, 2022 and 2023 RSU award agreement provides for pro-rata vesting if the NEO's employment is terminated by us without cause on or after the first anniversary of the grant date. Each of our NEOs (other than Mr. Shuster) received PRSU awards. Each NEO's PRSU award agreement provides for vesting under the following terms, if such an NEO is terminated by us without cause during the term of the agreement: (i) If such a termination occurs on or following the completion of the Performance Period, the then outstanding PRSUs shall vest, with the number of earned shares determined by the Compensation Committee in accordance with the standard vesting terms that apply following completion of the Performance Period. See "Compensation Discussion and Analysis — Compensation Program Details — Long Term Incentive Program & BVPS Growth Targets" above; or (ii) If such a termination occurs prior to the expiration of the Performance Period, (A) the PRSUs shall remain outstanding through the last day of the Performance Period, without regard to the termination, (B) the number of PRSUs that become earned shares, if any, shall be determined based on the Compensation Committee's computation and certification of the BVPS Vesting Percentage as if no termination of employment had occurred, and (C) the number of earned shares that become vested shall be determined by multiplying (x) the number of earned shares by (y) a fraction, the numerator of which is the number of days which elapsed from the commencement of the Performance Period through the date of the termination of employment and the denominator of which is 1,095 (or 1,096 in the event of any leap year in the Performance Period (e.g., in 2024)), and any then unvested PRSUs and shares which are earned but do not vest in accordance with such formula as of such date shall immediately be forfeited for no consideration, and the NEO's rights in any such unvested PRSUs or unvested earned shares shall immediately lapse and expire.
SEVERANCE PLAN TERMINATION In 2023, each NEO was eligible to participate in the Severance Plan. See "Compensation Discussion and Analysis — Elements of Executive Compensation Program — Other Important Governance and Executive Compensation Policies - Severance Plan," above. Upon a Severance Termination as of December 31, 2023, subject to the NEO's execution of a separation agreement and release and based on their years of service, each of Messrs. Pollitzer, Shuster, Leatherberry, and Smith would have received 12 months' base salary and 12 months of healthcare insurance premium contributions, and Mr. Mallela would have received 3 months' base salary and 3 months of healthcare insurance premium contributions. On January 9, 2024, Mr. Mallela became eligible to receive 6 months' base salary and 6 months of healthcare insurance premium contributions. Insurance premium contributions are paid at the active employee rate. See "Compensation Discussion and Analysis - Elements of Executive Compensation Program - Other Important Governance and Executive Compensation Policies - Severance Plan". TERMINATION OF EMPLOYMENT FOR CAUSE OR VOLUNTARY RESIGNATION For each of our NEOs, all unvested equity awards will be forfeited following Upon a termination of employment due to death or disability, our NEOs are entitled to payment of or disability, i.a lump sum cash payment equal to (A) the sum of the ii.a lump sum cash payment equal to the cost of iii.a lump sum cash payment equal to the iv.any In addition, pursuant to the terms of the applicable award agreements, upon a "change in Under our NEOs' 2023 PRSU award agreements, if a change in control occurs: i.on or following the completion of the Performance Period, then (A) the Compensation Committee would determine the number of earned shares which is equal to the level of achievement that would result by determining the Company's BVPS Vesting Percentage through the completion of the Performance Period, and (B) all earned shares would immediately vest and any unvested PRSUs as of such date would be forfeited, or ii.prior to the expiration of the Performance Period, then (A) the last day of the calendar quarter prior to the date of the change in control shall be deemed to be the last day of the Performance Period, (B) the Compensation Committee would determine that the number of earned shares is equal to the greater of (x) the level of achievement that would result by determining the BVPS Vesting Percentage through such date and (y) the total number of shares at target achievement, and (C) all earned shares would immediately vest and any unvested PRSUs as of such date would be forfeited.
NEO TERMINATION PAYMENTS The following table reflects the estimated payments to our NEOs that The closing price of our common stock on December
1.At December 31, 2023, each of Messrs. Pollitzer, Shuster, Leatherberry and Smith's 2021 and 2022 RSU grants provided for pro-rata vesting for a termination by us without cause, including a Severance Termination under the Severance Plan. Mr. Mallela received RSU grants in 2022 after joining the Company in 2022. No value is included in this table for pro-rata vesting under our NEOs' 2023 RSU grants, because pro-rata vesting of our RSU grants would only have been triggered on or after the first anniversary of the grant date. Each of Messrs. Pollitzer, Mallela, Leatherberry and Smith received PRSU awards in 2022. Mr. Shuster did not receive any PRSUs. With a hypothetical termination of employment without cause or severance termination at December 31, 2023 and prior to the end of the
2.Amounts payable under the Severance Plan upon a 3.At December 31, 2023, our NEOs' equity awards (other than 2022 and 2023 PRSUs granted to NEOs other than Messrs. Shuster) provided for pro-rata vesting if an NEO's employment had been terminated due to death or disability. Each NEO's unvested 2022 and 2023 PRSUs would have vested and been deemed to be earned in full at target performance if such NEO's employment had been terminated due to death or disability at December 31, 2023. 4.Under the CIC Severance Plan, upon a qualifying termination, at December 31, 2023, each of Messrs. Shuster and Pollitzer would have been entitled to a lump sum cash payment equal to the sum of (i) two times the sum of his 2023 annual base salary and 2023 target annual bonus; plus (ii) his 2023 target annual bonus; plus (iii) the cost of monthly healthcare premiums in effect as of the date of termination for the duration of his COBRA period. In 2023, the COBRA period was 24 months for each of Messrs. Shuster and Mr. Pollitzer. 5.Upon a change in control at December 31, 2023, any unvested RSUs would 6.Under our CIC Severance Plan, upon a qualifying termination, at December 31, 2023, each of Messrs. Mallela, Leatherberry and Smith would have been entitled to a lump sum cash payment equal to the sum of (i) one and one-half times the sum of the NEO's 2023 annual base salary and 2023 target annual bonus; (ii) the NEO's 2023 target annual bonus; and (iii) the cost of monthly healthcare premiums in effect as of the date of termination for the duration of the participant's COBRA period. In 2023, the COBRA period was 18 months for each of Messrs. Mallela, Leatherberry and Smith. CEO PAY RATIO Below is: (i) the 2023 annual total compensation of our CEO; (ii) the 2023 annual total compensation of our median employee; (iii) the ratio of the annual total compensation of our CEO to that of our median employee; and (iv) the methodology we used to calculate our CEO pay ratio.
* Our CEO's 2023 annual total compensation is the same amount disclosed above in the 2023 Summary Compensation Table. METHODOLOGY Our CEO pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules. We explain below our methodology and process for identifying our median employee and calculating our CEO to median employee pay ratio: Determined Employee Population. Our employee population consisted of all full- and part-time employees (other than Mr. Pollitzer) who were employed by the Company on December 31, 2023, the date we selected to identify our employees for Identified the Median Employee. Consistent with Instruction 2 to Item 402(u) of Regulation S-K, we may identify the median employee for purposes of providing pay ratio disclosure once every three years and calculate and disclose total compensation for that employee each year; provided that, during the last completed fiscal year, there has been no change in the employee population or employee compensation arrangements that we reasonably believe would result in a significant change to our 2023 CEO pay ratio disclosure. We reviewed the changes in our employee population and employee compensatory arrangements and determined there has been no change in our employee population or employee compensatory arrangements that would significantly impact the 2023 CEO pay ratio disclosure and ultimately require us to identify a new median employee for 2023. Accordingly, the Company is permitted to use the same median employee as was used in fiscal 2022. Our methodology to confirm the median employee is consistent with last year's. We compiled compensation information for each employee in the 2023 Population for full fiscal year 2023 using a consistently applied compensation measure in accordance with SEC rules. To confirm the median employee, we used the following elements of compensation: 2023 annual cash compensation (i.e., salary, or wages, as applicable); cash bonuses and commissions earned and/or paid in 2023 and the grant date fair value of equity awards granted in
2023. We included bonuses, commissions, equity grants and the value of other benefits in our calculation, as these compensation components are widely distributed across our workforce. Calculated CEO Pay Ratio. We calculated our median employee's 2023 annual total compensation according to the SEC's instructions for preparing the Summary Compensation Table, including the value of all other compensation earned. We then calculated our CEO's 2023 annual total compensation using the same approach to determine the pay ratio shown above. COMPARABILITY We believe the ratio above is a reasonable estimate, based on the methodology we have described. Given the different methodologies, exclusions, estimates and assumptions other companies may use to calculate their respective CEO pay ratios, as well as differences in employment and compensation practices between companies, the estimated ratio reported above may not be comparable to that reported by other companies. PAY VERSUS PERFORMANCE TABLE
1.Our PEO and Non-PEO NEOs for each applicable year were as follows: •2023: Mr. Pollitzer served as our PEO and Messrs. Shuster, Mallela, Leatherberry and Smith served as our non-PEO NEOs. •2022: Mr. Pollitzer served as our PEO and Messrs. Shuster, Mallela, Leatherberry and Smith served as our non-PEO NEOs. •2021: Ms. Claudia Merkle served as our PEO and Messrs. Shuster, Pollitzer (as our Chief Financial Officer), Leatherberry, and Patrick Mathis served as our non-PEO NEOs. •2020: Ms. Merkle served as our PEO and Messrs. Shuster, Pollitzer (as our Chief Financial Officer), Leatherberry, and Patrick Mathis served as our non-PEO NEOs. 2.The "2023 Summary Compensation Table" totals reported for the PEO and the average of the Non-PEO NEOs for each year were subject to the following adjustments as set forth in the below table, per Item 402(v)(2)(iii) of Regulation S-K to calculate “compensation actually paid”. We did not make any assumptions in valuation that differs materially from those disclosed as of the grant date of such equity awards with respect to the amounts added relative to stock and option awards.
a.Compensation Actually Paid excludes the Stock Awards column from the relevant fiscal year’s "Summary Compensation Table" total. The Rule 402(v) Equity Values instead reflect the aggregate of the following components, where applicable to us: (i) the fair value as of the end of the listed fiscal year of unvested equity awards granted in that year; (ii) the change in fair value during the listed fiscal year of equity awards granted in prior years that remained outstanding and unvested at the end of the listed fiscal year; and (iii) the change in fair value during the listed fiscal year through the vesting date of equity awards granted in prior years that vested during the listed fiscal year. Equity values are calculated in accordance with ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of the grant. The Company does not maintain, nor do the NEOs participate in, any defined benefit or actuarial pension plans for which adjustments were required pursuant to Item 402(v). 3.The peer group used by the Company consists of the companies, including Essent Group Ltd., MGIC Investment Corporation, and Radian Group Inc., used in the Company’s performance graph as required by Item 201(e) of Regulation S-K and reported in Part II, Item 5 of its annual report on Form 10-K for the fiscal year ended December 31, 2023. 4.BVPS (excluding net unrealized gains and losses) is a non-GAAP measure, and is defined as total shareholder's equity, excluding the after-tax effects of unrealized gains and losses on investments, divided by shares outstanding. For more detail, please see Appendix B.
Relationship Between "Compensation Actually Paid" and Performance The following graphs show the relationship between compensation actually paid to our executives in the last four years from 2020 through the end of 2023 as disclosed in the Pay vs. Performance table,
Tabular List of Most Important Financial Performance Measures Below are the financial performance measures that we believe are the most important financial performance measures used to link NEO compensation to Company performance. For more information,
Under Section 14A of the Exchange Act, this "say-on-pay" proposal gives our stockholders the opportunity to approve on a non-binding, advisory basis, the compensation of our This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described above. Accordingly, we strongly believe you should approve our NEOs' compensation paid in STOCKHOLDER VOTE REQUIRED Advisory approval of the
The Audit Committee has appointed the accounting firm of BDO USA, For the years ended December 31,
Audit Fees for Audit-Related Fees are generally fees for assurance and related services (e.g., due diligence services) that are reasonably related to the performance of the audit or review of the financial statements and which are not reported under "Audit Fees." Audit-Related Fees for 2022 also included professional services rendered in connection with reinsurance transactions. The Audit Committee is responsible for pre-approving audit services and all permitted non-audit services to be performed by the independent auditor that will cost in excess of The ratification of the appointment of BDO USA,
The Board BACKGROUND Effective August 1, 2022, the state of Delaware, our state of incorporation, enacted legislation that Consistent with Section 102(b)(7) of the •authorizes us to provide for exculpation of the following officers: (i) our president, chief executive officer, chief operating officer, chief financial officer, chief legal officer, controller, treasurer or chief accounting officer, (ii) “named executive officers” identified in our SEC filings, and (iii) other individuals who have agreed to be identified as officers of the Company; •only permits limiting the liability for breaches of the fiduciary duty of care for direct claims (including class actions); •does not eliminate our officers’ monetary liability for breach of fiduciary duty claims brought by us or for derivative claims brought by stockholders in our name; and •does not permit the elimination of liability of officers for: (i) any breach of the duty of loyalty to us or our stockholders; (ii) any acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law; or (iii) any transaction from which the officer derived an improper personal benefit. The Current Certificate also contains certain inoperative and historical provisions, and contains certain other related miscellaneous provisions, which our Board is proposing to remove in the Amended Certificate, as it believes such provisions and their removal do not substantively affect stockholder rights. Specifically, •Article III is being amended to remove historical provisions that apply only if we did not receive GSE approval. We received GSE approval in 2013. •Article IV is being amended to remove provisions relating to the Class B Non-Voting Common Stock (the Class B Stock) and make related conforming changes. We have not issued, nor do we intend to issue, such Class B Stock, and accordingly we intend to retire the Class B Stock prior to the filing of the Amended Certificate. •Article V is being amended to remove provisions which terminated upon our receiving GSE approval in 2013. •Article XI is being removed as its provisions terminated as of the date of the public offering of our Class A common stock on a national exchange in 2013.
RATIONALE FOR THE AMENDED CERTIFICATE Our Board desires to streamline the Current Certificate, provide exculpation from liability for our officers to the extent permitted by the DGCL, remove historical provisions that are no longer applicable, and update certain other related miscellaneous provisions related to such revisions. With respect to officer exculpation, our Board believes that such protection would better position us to attract and retain qualified and experienced officers. Officers must regularly navigate important decisions, often in reaction to time-sensitive situations and opportunities. These decisions may carry the potential for investigations, claims, lawsuits, or other legal actions seeking to assign blame after the fact, particularly given the current litigious landscape, regardless of their validity. Restricting the financial repercussions of such litigation to our Company would enable officers to exercise their business judgment effectively in advancing the interests of stockholders. In the absence of such protection, such individuals might be deterred from serving as officers due to exposure to personal liability and the risk of incurring substantial expense in defending lawsuits, regardless of merit. Accordingly, aligning the protections available to our officers with those available to our directors to the extent such protections are available under the DGCL empowers our officers to exercise their business judgment in furtherance of stockholder interests without the potential for distraction posed by the risk of personal liability. Taking into account the narrow class and type of claims for which officers would be exculpated, and the benefits our Board believes would accrue to us and our stockholders—enhancing our ability to attract and retain talented officers and potentially reducing future litigation costs associated with frivolous lawsuits—our Board determined that the Amended Certificate is in our best interests and of our stockholders. The aforementioned description is a summary only and is qualified in its entirety by reference to the Amended Certificate, which is attached as Appendix A to this proxy statement and is marked to show the changes described above. ADDITIONAL INFORMATION If this Item 4 is not approved by stockholders representing a majority of the shares of our common stock outstanding as of the record date, then the Amended Certificate will not be approved and will not be implemented or become effective. The vote on the Amended Certificate is binding. Approval of Item 4 will constitute approval for all purposes under the DGCL of the Amended Certificate, as set forth in Appendix A to this proxy statement. If this Item 4 is approved, we intend to file the Amended Certificate with the Secretary of State of the State of Delaware as soon as practicable following stockholder approval of the Amended Certificate, which will become effective at the time of that filing. The Board may, at any time prior to the effectiveness of the Amended Certificate, abandon it without further action by the stockholders or the Board (even if the requisite stockholder vote is obtained). STOCKHOLDER VOTE REQUIRED The approval of the amendment and restatement of our Current Certificate requires the affirmative vote of a majority of the shares outstanding as of the record date. BOARD RECOMMENDATION
EXHIBIT 3.1 State of Delaware Secretary of State Division of Corporations Delivered 08:01 AM 04/24/2012 FILED 08:00 AM 04/24/2012 SRV 120464047 - 4985193 FILE SECONDTHIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF NMI HOLDINGS, INC. NMI Holdings, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify as follows: FIRST: The Corporation’s Certificate of Incorporation was filed with the Secretary of State of Delaware on May 19, 2011; and the Corporation’s Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on March 5, 2012; and the Corporation’s Second Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on April 24, 2012. SECOND: Pursuant to Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware, this SecondThird Amended and Restated Certificate of Incorporation (this “Certificate of Incorporation”) has been duly adopted in accordance therewith, and amends, restates and integrates the provisions of the Second Amended and Restated Certificate of Incorporation, THIRD: The text of the Amended and Restated Certificate of Incorporation is further amended and restated by this Second Amended and Restated Certificate of Incorporation is further amended and restated by this Third Amended and Restated Certificate of Incorporation to read in its entirety as follows: ARTICLE I The name of the corporation (which is hereinafter referred to as the NMI Holdings, Inc. ARTICLE II -1- EXHIBIT 3.1 The address of the Corporation’s registered office in the State of Delaware is c/o National Registered Agents, Inc., 160 Greentree Drive, Suite 101The Corporation Trust Company, Corporation Trust Center, 1209 Orange St. in the City of DoverWilmington, County of KentNew Castle, State of Delaware, 1990419801. The name of the Corporation’s registered agent at such address is National Registered Agents, IncThe Corporation Trust Company. ARTICLE III
The purpose of the Corporation shall be to engage in any lawful act or activity for which corporations may be organized and incorporated under the General Corporation Law of the State of Delaware (the “DGCL”); provided, however, that in the event the Corporation does not receive GSE Approval (as defined below) prior to the Deadline (as defined below), then the purposes of the Corporation shall automatically, with no action required by the Board of Directors of the Corporation (the “Board”) or the stockholders of the Corporation, on the date of the Deadline and thereafter, be limited to effecting and implementing the dissolution and liquidation of the Corporation and the taking of any other actions expressly required to be taken herein on or after the Deadline, and the Corporation’s powers shall thereupon be limited to those set forth in Section 278 of the DGCL and as otherwise may be necessary to implement the limited purposes of the Corporation as provided herein or as required by applicable law, rule or regulation. This Article III may not be amended, unless GSE Approval (as defined herein) is received prior to the Deadline (as defined herein) without the approval of the affirmative vote of 85% or more of the shares of Class A Common Stock (as defined below) outstanding and entitled to vote on such proposed amendment, at a meeting called and held upon notice in accordance with Section 222 of the DGCL.. -2- EXHIBIT 3.1 ARTICLE IV Section 1. Capital Stock. The Corporation shall be authorized to issue 260,250,000260,000,000 shares of capital stock, of which (ia) 250,000,000 shares shall be shares of Class A Common Stock, $0.01 par value (“Class A Common Stock”), (ii) 250,000 shares shall be shares of Class B Non-Voting Common Stock, $0.0 \ par value (the “Class B Non-Voting Common Stock” and, together with the Class A Common Stock, the “Common Slack”), and (iiib) 10,000,000 shares shall be shares of Preferred Stock, $0.01 par value (“Preferred Stock”). Section 2. Common Stock. (a) Except as expressly provided herein, the rights, preferences and privileges of the Class A Common Stock and the Class B Non-Voting Common Stock shall be in all respects and for all purposes and in all circumstances absolutely and completely identical. (ba) The holders of the Common Stock shall be entitled to receive an equal amount of dividends per share if, and when declared from time to time by the Board. In no event shall any stock dividends or stock splits or combinations of stock be declared or made on the Class A Common Stock or Class B Non-Voting Common Stock unless the shares of Class A Common Stock and Class B Non-Voting Common Slack at the time outstanding are treated equally and identically, provided that, in the event of a dividend on Common Stock, shares of Class B NonVoting Common Stock shall only be entitled to receive shares of Class B Non-Voting Common Stock and shares of Class A Common Stock shall only be entitled to receive shares of Class A Common Stock.
-3- EXHIBIT 3.1 (cb) In the event of the voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, (I1) the rights of the holders of the Preferred Stock shall first be satisfied and (2) thereafter, the holders of the Class A Common Stock shall be entitled to receive all remaining assets of the Corporation of whatever kind available for distributions to the Class A stockholders of the Corporation. Holders of the Class B Non-Voting Common Stock shall not be entitled to receive any assets of the Corporation of whatever kind on a voluntary or involuntary liquidation, dissolution or winding up of the Corporation.holders of the Common Stock. (dc) Except as otherwise required by law, herein or as otherwise provided in any Preferred Stock Designation, the holders of the Class A Common Stock shall exclusively possess all voting power and each share of Class A Common Stock shall be entitled to one vote, and the holders of the Class B Non-Voting Common Stock shall have no voting power, and shall not have the right to participate in any meeting of stockholders or to have notice thereof, except as required by applicable law and except that any action that would significantly and adversely affect the rights of the Class B Non-Voting Common Stock with respect to (1) the modification of the terms of the Class B Non-Voting Common Stock or (2) the rights of the holders of the Class B NonVoting Common Stock on a liquidation, dissolution or winding up of the Corporation, shall require the approval of the Class B Non-Voting Common Stock voting separately as a class.. (e) Immediately upon the receipt by the Corporation of GSE Approval but prior to the Deadline, each share of Class B Non-Voting Stock issued and outstanding at that time shall automatically be converted into, and become entitled to any rights set forth herein, or that otherwise may exist at law, associated with, one fully paid and non-assessable share of Class A Common Stock without any action by the holder or by the Corporation. “GSE Approval” shall -4- EXHIBIT 3.1 mean the approval in a form acceptable to the Corporation from either the Federal National Home Mortgage Association or the Federal Home Loan Mortgage Corporation to become a private mortgage insurer. All such shares of Class B Non-Voting Common Stock converted into shares of Class A Common Stock shall no longer be outstanding and shall automatically be cancelled and any certificates representing shares of Class B Non-Voting Common Stock (“Class B Certificates”) shall automatically be deemed to represent the equivalent number of shares of Class A Common Stock; provided, that at the request of the holder, the Corporation shall exchange any Class B Certificates for certificates in respect of the equivalent number of shares of Class A Common Stock. The Corporation’s stock register shall be amended to reflect the cancellation of the shares of Class B Non-Voting Common Stock and the issuance of the equivalent number of shares of Class A Common Stock. If the Corporation does not receive GSE Approval within nine (9) months following the date of the Corporation’s final offering memorandum relating to the initial private placement of shares of Class A Common Stock (the “Private
Offering”) (or during any subsequent extension period if one is approved by holders of a majority of the Class A Common Stock sold in the Private Offering) (the “Deadline”), then the shares of Class B Non-Voting Common Stock shall be immediately forfeited to the Corporation for no consideration, and become effective without any action on the part of the holder or the Corporation, on the date that is one day after the Deadline. Shares of Class B Non-Voting Common Stock that have been converted or forfeited, as set forth herein, shall be retired and may not be reissued by the Corporation. (f) The shares of Class B Non-Voting Common Stock are non-transferable and may not be sold, transferred, pledged, encumbered assigned or otherwise disposed of, except that such shares -5- EXHIBIT 3.1 of Class B Non- Voting Common Stock may be transferred by will or for estate or tax planning purposes. A restrictive legend in substantially the form set forth below shall be placed on all Class B Certificates: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH SUCH ACT. IN ADDITION, THE SALE, TRANSFER, ASSIGNMENT, DISTRIBUTION, PLEDGE, ENCUMBRANCE OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN THE CERTIFICATE OF INCORPORATION OF NMI HOLDINGS, INC., AS IT MAYBE AMENDED FROM TIME TO TIME. A COPY OF THE CERTIFICATE OF INCORPORATION MAYBE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF NMI HOLDINGS, INC. Section 3. Preferred Stock. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized, by filing a certificate (a “Preferred Stock Designation”) pursuant to the General Corporation Law of the State of Delaware, to fix or alter from time to time the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions of any wholly unissued series of Preferred Stock, and to establish from time to time the number of shares constituting any such series or any of them, and to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the -6- EXHIBIT 3.1 status they had prior to the adoption of the resolution originally fixing the number of shares of such series. ARTICLE V This Article V shall apply during the period commencing upon the filing of this Certificate of Incorporation and terminating upon the receipt by the Corporation of GSE Approval (as defined below) and may not be amended during the Target Approval Period (as defined below), other than as set forth in the following Section 5.
“Target Approval Period” shall mean the period from the consummation of the Private Offering up to and including the Deadline. Section 1. In the event that the Corporation does not receive GSE Approval by the Deadline, then to the fullest extent permitted by law, the Board and the officers of the Corporation shall take all such action necessary to dissolve the Corporation and liquidate the Investment Account (as defined below) to holders of Class A Common Stock and fulfill all of the Corporation’s obligations under Section 2.6 of that certain Stock Purchase Agreement, dated November 30, 2011, between the Corporation and MAC Financial, Ltd. as promptly as practicable. subject to the requirements of the DGCL, including (but not limited to) the adoption of a resolution by the Board on or prior to such Investment Deadline pursuant to Section 275(a) of the DGCL finding the dissolution of the Corporation advisable and providing such notices as are required by Section 275(a) of the DGCL of the adoption of the resolution and of a meeting of the stockholders of the Corporation to take action upon such resolution. In the event that the Corporation is to be dissolved pursuant to this Section 1, the Corporation shall promptly adopt and implement a plan of distribution which provides that, subject to applicable law, only the -7- EXHIBIT 3.1 holders of Class A Common Stock (subject to the rights of any holders of Preferred Stock) shall be entitled to share ratably in the Investment Account plus any other net assets of the Corporation not used for or reserved to pay obligations and claims or such other corporate expenses relating to or arising during the Corporation’s remaining existence, including costs of dissolving and liquidating the Corporation. Section 2. Upon consummation of the Private Offering, approximately 93.3% of the net proceeds from the Private Offering (after deduction for the initial purchaser’s discount and placement fees related thereto) shall be deposited and thereafter held in an account (the “Investment Account”) established by the Corporation for the purpose of investing such proceeds on a short-term basis prior to the receipt of GSE Approval or a distribution in accordance with Section 1 above. If FBR Capital Markets & Co. exercises its option to purchase or place any of the additional 8,250,000 shares of Class A Common Stock in the Private Offering (the “Over Allotment Option”), approximately 95% of the net proceeds from the exercise of the Over Allotment Option will be placed into the Investment Account. Section 3. A holder of Class A Common Stock shall be entitled to receive distributions from the Investment Account only in the event of a dissolution or liquidation of the Corporation as provided in Section 1 above. In no other circumstances shall a holder of Class A Common Stock have any right or interest of any kind in or to the Investment Account. Under no circumstances shall holders of shares of Class B Non-Voting stock have any right or interest of any kind in or to the Investment Account or proceeds thereof. Section 4. The Corporation shall not, and no officer, director or employee of the Corporation shall, disburse or cause to be disbursed any of the proceeds held in the
-8- EXHIBIT 3.1 Investment Account until the earlier of (i) receipt by the Corporation of GSE Approval or (ii) the liquidation of the Corporation as described in Section 1 above. Section 5. During the Target Approval Period, this Article V may only be amended upon (i) the adoption, in accordance with Section 242 of the DGCL, by the Board of a resolution in favor of the proposed amendment, declaring that such amendment is in the best interests of an advisable to the Corporation and the stockholders and calling for the proposed amendment to be presented to the stockholders for approval; and (ii) the approval of the proposed amendment by the affirmative vote of 85% or more of the shares of Class A Common Stock purchased in the Private Offering and outstanding and entitled to vote on such proposed amendment, at a meeting called and held upon notice in accordance with Section 222 of the DGCL. ARTICLE VI Unless and except to the extent that the By-Laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot. ARTICLE VIIVI In furtherance and not in limitation of the powers conferred by law, the Board is expressly authorized and empowered to make, alter and repeal the By-Laws of the Corporation by a majority vote at any regular or special meeting of the Board or by written consent, subject to the power of the stockholders of the Corporation to alter or repeal any By-Laws made by the Board, provided, however, that except as therein . -9- EXHIBIT 3.1 provided, the Board may not alter or repeal Section 2.2(b), Section 2.2(c), Section 3.13 or the last proviso of Section 9.1 of the By-Laws. ARTICLE VIIIVII Subject to the rights of the holders of any series of Preferred Stock with respect to such series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. ARTICLE IXVIII
The Corporation reserves the right at any time from time to time to amend, alter, change or repeal any provisions contained in this Third Amended and Restated Certificate of Incorporation or any Preferred Stock Designation, and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Third Amended and Restated Certificate of Incorporation or any Preferred Stock Designation in its present form or as hereafter amended are granted subject to the right reserved in this Article. ARTICLE XIX -10- EXHIBIT 3.1 Section 1. Elimination of Certain Liability of Directors and Officers. A director or officer of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, respectively, except to the extent such exemption from liability or limitation thereof is not permitted under the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended. Any repeal or modification of the foregoing paragraph shall not apply to or adversely affect any right or protection of, or any limitation of the liability of, a director or officer of the Corporation existing hereunder at the time of such repeal or modification with respect to any act or omission occurring prior to such repeal or modification. Section 2. Indemnification and Insurance. (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, to the fullest extent permitted by law, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and
-11- EXHIBIT 3.1 loss (including attorneys’ fees, judgments, fines, amounts paid or to be paid in settlement, and excise taxes or penalties arising under the Employee Retirement Income Security Act of 1974) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) of this Section, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of the Board, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the -12- EXHIBIT 3.1 Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of
Delaware, nor an actual determination by the Corporation (including its Board, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Laws, agreement, vote of stockholders or disinterested directors or otherwise. (d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability -13- EXHIBIT 3.1 or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. ARTICLE XI Section 1. From and after the date of the Corporation’s final offering memorandum relating to the Private Offering and up until and not including the date on which the Class A Common Stock begins trading on a national securities exchange, subject to the terms and conditions of this Article Xl and applicable securities laws, if the Corporation proposes to offer or sell any of its equity securities, as well as rights, options, or warrants to purchase such equity securities, or securities that may be or become convertible or exchangeable into or exercisable for such equity securities (collectively, “New Securities”), the Corporation shall first offer such New Securities to each stockholder holding, individually or together with its affiliates, at least 1% of the outstanding Class A Common Stock on the record date set by the Board for determining such stockholders, which record date shall be at least fifteen (15) calendar days prior to the closing of such offering of New Securities (each such shareholder, a “Purchaser”), in the amount and on the terms set forth in Section 2 and Section 3 of this Article XI. Section 2. The Corporation shall give notice (the “Offer Notice”) to each Purchaser, stating (a) its bona fide intention to offer such New Securities, (b) the number of such New Securities to be offered and (c) the price and terms, if any, upon which it proposes to offer such New Securities.
Section 3. By notification to the Corporation within ten (10) calendar days after the Offer Notice is given (the “Acceptance Period”), each Purchaser may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that -14- EXHIBIT 3.1 portion of such New Securities which equals the proportion that the number of shares of Class A Common Stock held by such Purchaser bears to the total number of shares of Class A Common Stock of the Corporation outstanding on the date of the Offer Notice. The closing of any sale pursuant to this Article Xl shall occur within the later of ninety (90) calendar days of (1) the date that the Offer Notice is given, or (2) the date of the initial sale of New Securities pursuant to Section 4 of this Article XI. Section 4. If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired within the Acceptance Period as provided in Section 3 of this Article XI, the Corporation may, during the ninety (90) calendar day period following the expiration of the Acceptance Period, offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than that specified in the Offer Notice. Section 5. The provisions of this Article XI shall not apply to (i) any offer and sale of New Securities in a registered public -15- EXHIBIT 3.1 IN WITNESSWHEREOFWITNESS WHEREOF, the Corporation has caused this SecondThird Amended and Restated Certificate of Incorporation to be executed on its behalf by its duly authorized officer this 24th[●] day of April 2012[●]. NMI HOLDINGS, INC. /s/ Joseph Kavanagh ______________________ Name: Joseph Kavanagh[●] Title: Director and Authorized Officer[●] -16-
EXPLANATION AND RECONCILIATION OF OUR USE OF NON-GAAP FINANCIAL MEASURES We believe Adjusted Adjusted net incomeis defined as GAAP net income, •Change in fair value of warrant liability. Outstanding warrants at the end of each reporting period are revalued, and any change in fair value is reported in the •Capital markets transaction costs. Capital markets transaction costs result from activities that are undertaken to improve our debt profile or enhance our capital position through activities such as debt refinancing and capital markets reinsurance transactions that may vary in their size and timing due to factors such as market opportunities, tax and capital profile, and overall market cycles. •Net realized investment gains and losses. The recognition of the net realized investment gains or losses can vary significantly across periods as the timing is highly discretionary and is influenced by factors such as market opportunities, tax and capital profile, and overall market cycles that do not reflect our current period operating results. •Other infrequent, unusual or non-operating items. Items that are the result of unforeseen or uncommon events, and are not expected to recur with frequency in the future. Identification and exclusion of these
NON-GAAP FINANCIAL MEASURE RECONCILIATION
We also believe that use of the non-GAAP Adjusted operating income, as
Adjusted return-on-equity, as approved by the Compensation Committee, is calculated as GAAP net income, excluding the after-tax impact of bonus above/below target and performance awards above/below budget, changes in fair value of warrant liability and embedded derivatives (if recorded), realized investment gains/losses, non-budgeted capital transactions, budgeted capital transactions with unexpected accounting treatment and changes to the U.S. federal tax code, divided by the average of 12/31/22 and 12/31/23 GAAP shareholders' equity, excluding the impact of changes in accumulated comprehensive other income from plan, changes in the fair value of our Adjusted expense ratio, as approved by the Compensation Committee, is calculated as GAAP underwriting and operating expenses excluding the pre-tax impact of bonuses, reinsurer ceding commissions and deferred acquisition cost reimbursement, performance awards above/below budget, non-budgeted capital and reinsurance transactions, budgeted capital and reinsurance transactions with unexpected accounting treatment, and changes to the U.S. federal tax code, divided by GAAP net Adjusted book value per share,as approved by the Compensation Committee, is defined as The items excluded from adjusted operating income, adjusted return-on-equity, adjusted expense ratio, and adjusted book value Net realized investment gains and losses,the recognition of net investment gains or losses can vary significantly across periods as the timing is highly discretionary and is influenced by factors such as market opportunities, tax and capital profile, and overall market cycles that do not reflect our current period operating results. Net unrealized gains and losses on investments, the recognition of the net unrealized gains or losses on investments can vary significantly across periods and is influenced by factors such as interest rate movement, overall market and economic conditions, and tax and capital profiles. These valuation adjustments may not necessarily result in economic gains or losses and not reflective of ongoing operations. Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these unrealized gains or losses. Change in fair value of warrant liability, we exclude fluctuations related to the change in fair value of our warrant liability. Outstanding warrants at the end of each reporting period are revalued, and any change in fair value is reported in the statements of operations in the period in which the change occurred. The change in fair value of our warrant liability can vary significantly across periods and is influenced principally by the equity market and general economic factors that do not impact or reflect our current period operating results. Bonus accruals and performance awards above/below target, adjusted operating income is one of the metrics used to set the threshold for the establishment of a bonus pool and Capital markets transactions Non-budgeted capital transactions and budgeted capital transactions with unexpected accounting treatment are excluded. Capital markets transaction costs result from activities that are undertaken to improve our debt profile or enhance our capital position through activities such as debt refinancing and capital markets reinsurance transactions that may vary in their size and timing due to factors such as market opportunities, tax and capital profile, and overall market cycles. We exclude fluctuations in results related to changes in the U.S. federal tax code. We believe such changes are infrequent or non-recurring in nature, and are not indicative of the performance of, or ongoing trends in, our primary operating
FORM OF PROXY CARD
To the Stockholders of NMI Holdings, Inc.: The 1. Election of nine directors; 2. Advisory approval of NMI's executive compensation; 3. Ratification of the appointment of BDO USA, P.C. as NMI's independent auditors; and 4. Amendment and restatement of NMI's current amended and restated certificate of incorporation to provide exculpation for certain officers. We also will transact any other business that may properly come before the Annual Meeting. The proxy statement contains information regarding the Annual Meeting, including information on the matters to be voted on prior to and during the Annual Meeting. Your vote is important. Whether or not you expect to attend the Annual Meeting, we encourage you to promptly vote these shares by one of the methods listed on the reverse side of this proxy card. You will be able to attend the Annual Meeting via live audio webcast by visiting NMI's virtual meeting website at www.virtualshareholdermeeting.com/ Sincerely, Bradley M. Shuster Executive Chairman Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
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