UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to SectionPROXY STATEMENT PURSUANT TO SECTION 14(a) of
OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Securities Exchange Act of 1934 (Amendment No. )registrant ☒ Filed by a party other than the registrant ☐
Check the appropriate box:
☒ | Preliminary proxy statement |
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Confidential, for | ||
☐ | Definitive proxy statement. |
☐ | Definitive additional materials. |
☐ | Soliciting material pursuant toSection 240.14a-12 |
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
No fee required. | ||||
☐ | Fee computed on table below per Exchange Act Rules14a-6(i)(1) and0-11. | |||
Title of each class of securities to which transaction applies: | ||||
Aggregate number of securities to which transaction applies: | ||||
Per unit price or other underlying value of transaction computed pursuant to Exchange ActRule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||||
Proposed maximum aggregate value of transaction: | ||||
Total fee paid: | ||||
☐ | Fee paid previously with preliminary materials. | |||
☐ | Check box if any part of the fee is offset as provided by Exchange ActRule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the | |||
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Argo House110 Pitts Bay RoadPembroke HM 08, Bermuda
PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION – DATED MARCH 6, 2020
NOTICE OF THE ANNUAL GENERAL MEETING OF SHAREHOLDERS
The Annual General Meeting (the "Annual General Meeting") of Argo Group International Holdings, Ltd. ("(“Argo Group"Group” or the “Company”), a Bermuda exempted company limited by shares, will be held on May 8, 2012April 16, 2020 at 10:30 am9:00 a.m. local Bermuda time at 110 Pitts Bay Road, Hamilton,Pembroke, Bermuda and at such other meeting upon any adjournments or postponements thereof.
The Annual General Meeting is called for the following purposes:
1. | To vote on a proposal to amend the Amended and RestatedBye-Laws of the Company (the “Bye-Laws”) to declassify the Board of Directors; |
2. | If Proposal 1 is approved by the shareholders, to vote on a proposal to elect each of the 11 director nominees named in this proxy statement to serve on the Board of Directors until the next annual general meeting, or, if Proposal 1 is not approved, to elect (i) Thomas A. Bradley, Anthony P. Latham and Carol A. McFate as Class I directors to our Board of Directors for a term of three years, and (ii) to elect Bernard C. Bailey, Fred R. Donner and Kevin J. Rehnberg as Class II directors to our Board of Directors for the remaining term of one year; |
3. | To vote on a proposal to approve, on an advisory,non-binding basis, the compensation of our Named Executive Officers; |
4. | To vote on a proposal to approve the appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2020 and to refer the determination of its remuneration to the Audit Committee of our Board of Directors; |
5. | To vote on a proposal to amend theBye-Laws to provide a range in the size of the Board of Directors of 3 to 11 directors, with the exact number to be determined by the Board of Directors; |
6. | To vote on a proposal to amend theBye-Laws to modify certain provisions relating to the voting of equity securities of Company subsidiaries; and |
7. | To take action upon any other matter that may properly come before the meeting or any adjournments thereof. |
The Board has fixed the close of business on March 7, 20122, 2020 as the record date for determining those shareholders who will be entitled to vote at the Annual General Meeting.
The vote of each shareholder is important. I urgeWhether you plan to accessbe present at the Annual General Meeting or not, you are requested to promptly submit your proxy either electronically via the Internet or by telephone as described on the proxy materials oncard or by completing, signing and returning the internet or to request an electronic or a paper copy of them as promptly as possible. This will ensure that you will be able to complete your proxy card in a timely manner soto ensure that your shares will be voted atrepresented. Under our Amended and RestatedBye-Laws, all proxies must be received not less than 48 hours prior to the time of the commencement of the Annual General Meeting.
By Order of the Board of Directors
Craig S. Comeaux
Secretary
[●], 2020
Important Notice Regarding the Availability of Proxy Materials
For the Annual General Meeting to be Held on April 16, 2020
The Proxy Statement, Notice of Annual General Meeting and 2019 Annual Report to Stockholders are available atwww.argolimited.com
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WHETHER YOU PLAN TO BE PRESENT AT THE ANNUAL GENERAL MEETING OR NOT, YOU ARE REQUESTED TO SUBMIT YOUR PROXY EITHER ELECTRONICALLY VIA THE INTERNET OR TELEPHONE AS DESCRIBED ON THE PROXY CARD OR, IF YOU REQUEST A PAPER COPY, BY COMPLETING, SIGNING AND RETURNING THE PROXY CARD TO ENSURE THAT YOUR SHARES WILL BE REPRESENTED.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE ANNUAL GENERAL MEETING
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Our Strong Corporate Governance Practices
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Director Independence | 6 | ||||
Executive Sessions of Independent Directors
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Process for Nominating Directors | 11 | ||||
Shareholder | 11 | ||||
Related | 12 | ||||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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Delinquent Section 16(a) Reports
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PROPOSAL 1: APPROVAL OF AN AMENDMENT TO THE BYE-LAWS TO DECLASSIFY THE
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Proposed Amendment to the Bye-Laws
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Required Vote and Board Recommendation
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PROPOSAL 2: ELECTION OF DIRECTORS
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Required Vote and Board Recommendation
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NON-EMPLOYEE DIRECTOR COMPENSATION
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PROPOSAL 3: ADVISORY VOTE ON THE COMPENSATION OF THE | 30 | ||||
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COMPENSATION DISCUSSION AND ANALYSIS | 31 | ||||
Executive Summary | 31 | ||||
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Revised and Updated Information about Perquisites Resulting from Investigation
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Management Transition Compensation
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Compensation Setting Process and Governance Elements
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HUMAN RESOURCES COMMITTEE REPORT | 51 | ||||
EXECUTIVE COMPENSATION | 52 | ||||
2019 Summary Compensation Table | 52 | ||||
2019 Grants of Plan-Based Awards | 56 | ||||
Outstanding Equity Awards at 2019 Fiscal | 57 | ||||
2019 Option Exercises and Stock Vested | 58 | ||||
2019 Pension Benefits | 58 | ||||
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Potential Payments upon Termination or a Termination following a Change in Control | |||||
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PROPOSAL 6: APPROVAL OF AN AMENDMENT TO THE BYE-LAWS TO MODIFY THE VOTING PUSH-UP REQUIREMENT | 69 | ||||
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ANNEX A – Reconciliation of Adjusted Operating Income (Loss) to Net Income (Loss) | A-1 | ||||
ANNEX B – Proposed Amendments to the Amended and Restated Bye-Laws | B-1 |
Argo House
110 Pitts Bay Road
Pembroke HM 08, Bermuda
PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION – DATED MARCH 6, 2020
PART 1
This proxy statement is furnished in connection with the solicitation byon behalf of the Board of Directors (the “Board” or “Board of Directors”) of Argo Group International Holdings, Ltd. ("(“Argo Group"Group” or the "Company"“Company”) of the enclosed proxy to vote common shares of Argo Group's Group (the “Common Shares (the "Common Shares"” or “shares”) at the Annual General Meeting of shareholders (the "Annual General Meeting") to be held on May 8, 2012,April 16, 2020, at 10:30 am9:00 a.m. local Bermuda time at 110 Pitts Bay Road, Hamilton,Pembroke, Bermuda and at such other meeting upon any adjournments, postponements or continuations thereof. This proxy statement and the accompanying proxy card are first being sent to shareholders on [●], 2020.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL GENERAL MEETING
Why am I receiving this Proxy Statement?
The Board of Directors of Argo Group is soliciting your proxy for use at the Company’s 2020 Annual General Meeting to be held on April 16, 2020, at 9:00 a.m. local Bermuda time at 110 Pitts Bay Road, Pembroke, Bermuda and at such other meeting upon any postponements or adjournments thereof.
As permitted by rules adopted by the United States Securities and Exchange Commission (the "SEC") and by the statutory provisions Only holders of the Companies Act 1981record of Bermuda, Argo Group is making this proxy statement, the proxy card and the annual report to shareholders (the "proxy materials") available to shareholders electronically via the Internet. A notice (the "Notice") which includes instructions on how to access and review the proxy materials and how to submit your proxy online will be mailed to shareholders beginning on or about March [ ], 2012. Shareholders may request a printed copy of the proxy materials by following the instructions included in the Notice. In addition Argo Group will post copies of the 2011 Annual Report on Form 10-K and this proxy statement on its web site atwww.argolimited.com. The reference to Argo Group's web site does not incorporate by reference the information contained in the web site and such information should not be considered a part of this proxy statement.
The Annual General Meeting to which the Notice and this proxy statement apply is being convened solely for the purposes discussed in this document. Shares represented by duly executed proxies in the accompanying form received before the Annual General Meeting will be votedshares at the Annual General Meeting. Any shareholder giving a proxy has the power to revoke it at any time before it is voted by filing with the Secretaryclose of Argo Group either an instrument revoking the proxy or a duly executed proxy bearing a later date. Proxies may also be revoked by any shareholder present at the Annual General Meeting who expresses a desire to vote in person. If a shareholder specifies a choicebusiness on any matter to be acted upon by means of the ballot provided in the accompanying proxy, the sharesMarch 2, 2020 (the “Record Date”) will be voted accordingly. If no specification is made, the shares represented by the proxy will be voted in favor of the proposals set forth in the Notice, subject to limitations prohibiting brokers from voting on certain matters on behalf of their clients absent specific instructions (so called "broker non-votes" as described below in this Proxy Statement).
Argo Group will bear the cost of preparing, assembling and mailing this Proxy Statement and the material enclosed herewith. Our directors, officers and employees may solicit proxies orally or in writing, without additional compensation. Argo Group will also request that banks, brokerage houses and other custodians, nominees and fiduciaries send proxy materials to the beneficial owners of Argo Group Common Shares and will, if requested, reimburse the record holders for their reasonable out-of-pocket expenses in so doing.
VOTING SECURITIES AND VOTING RIGHTS
March 7, 2012 has been fixed as the record date for the determination of shareholders entitled to notice of and to vote at the Annual General Meeting or such other meeting upon any adjournments or postponements thereof. On that date,As of the Record Date, there were 26,145,17034,499,456 Common Shares issued, outstanding and entitled to vote. Argo Group has
What proposals are to be presented at the Annual General Meeting and what are the Board’s voting recommendations?
As described in further detail later in this proxy statement, the purpose of the Annual General Meeting is to consider and vote upon the following proposals. The Board’s recommendation on each of the proposal is indicated below.
PROPOSAL | BOARD RECOMMENDATION | PAGE REFERENCE | ||||
PROPOSAL 1 | Approval of an amendment to the Amended and RestatedBye-Laws of the Company (the “Bye-Laws”) to declassify the Board of Directors | FOR | 16 | |||
PROPOSAL 2 | Election of Directors: If Proposal 1 is approved by the shareholders, to vote on a proposal to elect each of the 11 directors named in this proxy statement to serve on the Board of Directors until the next annual general meeting and until their successors are duly elected and qualified, or, if Proposal 1 is not approved, to elect (i) Thomas A. Bradley, Anthony P. Latham and Carol A. McFate as Class I directors to our Board of Directors for a term of three years and until their successors are duly elected and qualified, and (ii) to elect Bernard C. Bailey, Fred R. Donner and Kevin J. Rehnberg as Class II directors to our Board of Directors for the remaining term of one year and until their successors are duly elected and qualified. | FOR | 17 | |||
PROPOSAL 3 | Approval, on an advisory,non-binding basis, of our executive compensation | FOR | 28 |
PROPOSAL | BOARD RECOMMENDATION | PAGE REFERENCE | ||||
PROPOSAL 4 | Approval of the appointment of Ernst & Young LLP (“Ernst & Young”) as our independent auditors for the fiscal year ending December 31, 2020 and to refer the determination of its remuneration to the Audit Committee of our Board of Directors | FOR | 64 | |||
PROPOSAL 5 | Approval of an amendment to theBye-Laws to provide a range in the size of the Board of Directors of 3 to 11 directors, with the exact number to be determined by the Board of Directors | FOR | 66 | |||
PROPOSAL 6 | Approval of an amendment to theBye-Laws to modify certain provisions relating to the voting of equity securities of Company subsidiaries (the “VotingPush-up Requirement”) | FOR | 67 |
As of the date of the Notice of Annual General Meeting, we knew of no other voting securities outstanding. Pursuantmatters to Argo Group's Bye-Laws, a majority of all the shares entitled to vote, present in person or represented by proxy, will constitute a quorum for the transaction of businessbe presented at the Annual General Meeting.
TableWhat is the required vote to approve each proposal?
The election of Contentseach director nominee named in this proxy statement will be decided by the affirmative vote of a majority of votes casts. All other proposals in this proxy statement will be decided by the affirmative vote of a majority of the votes cast.
EachHow will my shares be voted?
Subject to certain restrictions set forth in ourBye-Laws (as described below), each shareholder of record is entitled to one vote per share held on all matters submitted to a vote of shareholders. Proposals in this proxy statementYour shares will be decided as follows:
A resolution put to a vote atelection appointed for the Annual General Meeting, who will be decided on by a show of hands, unless a poll has been demanded pursuant to our Bye-Laws. Shares represented at the Annual General Meeting whoseseparately tabulate affirmative and negative votes, are withheld on any matter, shares that are represented by "broker non-votes" (that is, shares held by brokers or nominees that are represented at the Annual General Meeting but with respect to which theabstentions and broker or nominee has not received voting instructions from the beneficial owner and is not empowered to vote on a particular proposal) and the shares that abstain from voting on any particular matter are not included in the tabulation of the shares voting on such matter, but are counted for quorum purposes. Member brokerage firms of the New York Stock Exchange, Inc. that hold shares in street name for beneficial owners, to the extent that such beneficial owners do not furnish voting instructions with respect to any or all proposals submitted for shareholder action, may vote in their discretion upon the proposal for the ratification of the appointment of Ernst & Young LLP and the proposal to vote on the amendment and restatement to Argo Group's Bye-Laws.non-votes.
Under ourBye-Laws, no "U.S. Person"“U.S. Person” (as that term is defined in ourBye-Laws) that owns our shares directly, or indirectly through foreign entities, is entitled to exercise voting power on a matter (either directly or through a person whose ownership of shares in us is attributed to such U.S. Person) thatwhere such voting power equals or exceeds 9.5% of the votes conferred on all of our shares entitled to vote on such matter, after taking into consideration all votes held by such U.S. Person directly or through attribution.
How many shares must be present to conduct the Annual General Meeting?
Pursuant to ourTableBye-Laws, a majority of Contentsthe outstanding shares carrying the right to vote, present in person or represented by proxy, will constitute a quorum for the transaction of business at the Annual General Meeting. Under Bermuda law, abstentions and “brokernon-votes” are counted as present in determining whether the quorum requirement is satisfied. A brokernon-vote, as further explained below, occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.
CORPORATE GOVERNANCE
What is the difference between holding shares as a “shareholder of record” and as a “beneficial owner”?
The BoardIf your shares are registered in your name on the Record Date, you are a shareholder of Directors has determined that each of its directors except Mark E. Watson III, the Chief Executive Officer of Argo Group, is "independent"record. When you properly vote in accordance with the applicable corporate governance requirementsinstructions provided on the proxy card, you are instructing the named proxies to vote your shares in the manner you indicate on your proxy.
If your shares are held in the name of your bank, broker or other nominee (herein referred to generally as a “Broker”), which is usually the case if you hold your shares in a brokerage or similar account, your shares are held in “street name.” Your Broker is the shareholder of record for your shares. As the holder of record, only your Broker is
authorized to vote or grant a proxy for your shares. If your shares are held in “street name,” you should follow the instructions on your voting instruction form and provide specific instructions to your Broker on how to vote the shares they hold for you.
What is a “BrokerNon-Vote”?
A brokernon-vote occurs when a Broker submits a proxy on behalf of a beneficial owner for the Annual General Meeting, but does not vote on a particular proposal because such Broker does not have discretionary voting power with respect to that proposal and has not received voting instructions from the beneficial owner. Brokernon-votes (like abstentions) will be counted as present for purposes of determining a quorum. Such Broker has the discretion to vote your shares on “routine” matters, but not onnon-routine matters. Routine matters include only Proposal 4 (Approval of the listing rulesappointment of Ernst & Young as our independent auditors for the fiscal year ending December 31, 2020 and to refer the determination of its remuneration to the Audit Committee of our Board of Directors). All other proposals to be presented at the Annual General Meeting are considered“non-routine” and therefore Brokers will not have discretionary authority to vote your shares with respect to the other proposals to be presented at the Annual General Meeting. Therefore, it is important that you instruct your Broker how to vote your shares.
How do I vote my shares?
If you are a shareholder of record with respect to shares on the Record Date. You may vote by one of the Nasdaqfollowing four options:
Vote via the Internet. Go to the web address specified on the enclosed proxy card and follow the instructions indicated on the site. Your vote by Internet authorizes the named proxies to vote your shares in the same manner as if you had signed, dated and returned a proxy card.
Vote by Telephone. On a touch tone phone, dial the number indicated on the enclosed proxy card and follow the simple voice prompts. Your vote by telephone authorizes the named proxies to vote your shares in the same manner as if you had signed, dated and returned a proxy card.
Vote by Proxy Card. Complete, sign, date and mail the enclosed proxy card in the postage-paid envelope provided.
Vote in Person. Complete, sign and date a ballot at the Annual General Meeting.
Even if you plan to attend the Annual General Meeting in person, we encourage you to vote your shares in advance via the Internet, by telephone or by signing, dating and returning your proxy card in the postage-paid envelope provided.
If your shares are held by a Broker in “street name,” please follow the instructions you receive from your Broker to vote your shares. You may need to contact your Broker to determine whether you will be able to vote electronically via the Internet or by telephone. If you wish to vote in person at the Annual General Meeting you must provide an executed proxy from your Broker indicating that you were the beneficial owner of the shares on the Record Date, and that such Broker is giving you its proxy to vote the shares.
Please note that under ourBye-Laws, all proxies must be received 48 hours prior to the time of the commencement of the Annual General Meeting. This means that your proxy must be received by 7:00 a.m. Eastern Standard Time on April 14, 2020.
If you return your proxy by mail, please ensure you leave enough time for your proxy to be mailed and received by the inspector of election. Also note that if your shares are held through a Broker, such entity may have even earlier deadlines by which to submit your vote. Please follow their instructions accordingly.
What do I need for admission to attend the Annual General Meeting?
All shareholders attending the Annual General Meeting in person will be required to show valid picture identification. If your Common Shares are in the name of your Broker, you will also need to bring evidence of your share ownership as of the Record Date, such as your most recent brokerage account statement or a copy of your voting instruction form. If you do not have valid picture identification or proof of your stock ownership, you may not be admitted to the meeting. For security purposes, packages and bags will be inspected and you may be required to check these items. Please arrive early enough to allow yourself adequate time to clear security.
Who will count the votes?
All votes will be counted by an independent inspector of election appointed for the Annual General Meeting, who will separately tabulate affirmative and negative votes, abstentions and brokernon-votes (if any).
How can I find out the results of the voting at the Annual General Meeting?
We will report voting results of the Annual General Meeting within four business days in a Current Report onForm 8-K or other appropriate filing with the Securities and Exchange Commission (the “SEC”), as applicable.
Can I change my vote?
If your shares are registered in your name, you may revoke your proxy and change your vote prior to the completion of voting at the Annual General Meeting by:
submitting a valid, later dated proxy card in a timely manner that is received no later than 48 hours prior to the time of the commencement of the Annual General Meeting; that is, by 7:00 a.m. Eastern Standard Time on April 14, 2020;
submitting a later dated vote by telephone or through the Internet in a timely manner (and in any event no later than 48 hours prior to the time of the commencement of the Annual General); that is, by 7:00 a.m. Eastern Standard Time on April 14, 2020;
giving written notice of such revocation to the Company’s corporate secretary (at Argo House, 110 Pitts Bay Road, Pembroke HM 08, Bermuda), which written notice is received at least 48 hours prior to the time of the commencement of the Annual General Meeting; that is, by 7:00 a.m. Eastern Standard Time on April 14, 2020; or
attending and voting at the Annual General Meeting (although attendance at the meeting will not by itself revoke a proxy).
If your shares are held by a Broker “street name” and you wish to revoke a proxy, you should contact your Broker and follow its procedures for changing your voting instructions. You also may vote in person at the Annual General Meeting to revoke an earlier proxy if you provide an executed proxy from your Broker indicating that you were the beneficial owner of the shares on the Record Date, and that such Broker is giving you its proxy to vote the shares.
Only the latest dated validly executed proxy that you submit will count.
Please note that under ourBye-Laws, all proxies must be received 48 hours prior to the time of the commencement of the Annual General Meeting. This means that your proxy must be received by 7:00 a.m. Eastern Standard Time on April 14, 2020.
Who will pay the costs of solicitation?
Argo Group will bear the expense of this mail solicitation, which may be supplemented by telephone, facsimile, email and personal solicitation by our officers, employees and agents. To aid in the solicitation of proxies, we have retained Innisfree M&A Incorporated for a fee of $20,000, plus reimbursement of expenses. We may incur additional fees if we request additional services.
Why did I receive multiple copies of the proxy materials?
If you receive more than one package of our proxy materials, it means that you have multiple accounts holding your Common Shares. These may include: accounts with our transfer agent, American Stock Market ("Nasdaq")Transfer & Trust Company, and accounts with a Broker. In order to vote all of the shares held by you in multiple accounts, you will need to vote the shares held in each account separately. Please follow the voting instructions provided on the proxy card and any voting instruction card from your Broker that you received to ensure that all of your shares are voted.
What is “householding” and how does it work?
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more shareholders sharing the same address by delivering a single proxy statement and annual report addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for shareholders and cost savings for companies.
A single proxy statement will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement, please notify your broker and direct your request to Investor Relations, Argo Group, 110 Pitts Bay Road Pembroke, HM 08, Bermuda or by calling441-296-5858. Shareholders who currently in effect.receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should also contact their broker and the Company.
Our Strong Corporate Governance Practices
✓ | Independent Chairman |
✓ | Fully independent Board (except CEO) |
✓ | Shareholders holding 10% of shares have right to call a special meeting |
✓ | Shareholder right to remove any director without cause |
✓ | Majority vote standard for director elections |
✓ | Single voting class stock |
✓ | No poison pill |
✓ | Regular executive sessions of independent directors |
✓ | Annual management succession planning |
✓ | Annual“say-on-pay” vote |
✓ | Clawback provisions |
✓ | Prohibition on hedging of shares |
✓ | Deployment of internal Corporate Governance Guidelines and Code of Conduct and Business Ethics |
✓ | Regular Charter review |
The Board of Directors has chosen to separate the position of PrincipalChief Executive Officer (held by the Company's Chief Executive Officer) from the position of Board Chairman. The Company believes that this separation of positions is the mostan appropriate structure that provides both support and balance for effectively dealing with both management and overall risk oversight for the Company because it creates a lead director that is independent from management. Separating these positions allows our Chief Executive Officer to focus on developing and implementing the Company’s business plans and supervising the Company’sday-to-day business operations, and allows our Board Chairman to lead the Board in its oversight, advisory, and risk management whose job duties include, but are not limited to, chairing meetingsroles. Our current Board Chairman, Gary V. Woods, will retire from the Board effective as of the Annual General Meeting. We anticipate that Thomas A. Bradley will become Board Chairman following the Annual General Meeting.
The Board has determined that each of its directors and director nominees except Kevin J. Rehnberg, the President and Chief Executive Officer of Argo Group, is “independent” in accordance with the applicable corporate governance requirements of the listing rules of the New York Stock Exchange (“NYSE”) as currently in effect. In addition, Mark E. Watson III, who served on the Board during 2019, was not independent directors.due to his role as the former President and Chief Executive Officer.
Executive Sessions of Independent Directors
In order to promote open discussion among the independent directors, the Board schedules regular executive sessions at least two times each year in which those directors meet without management participation. During 2019, the independent directors met in executive session seven times.
Corporate Governance GuidelinesFamily Relationships
There are no family relationships among the Company’s directors and executive officers.
Code of ConductBusiness Ethics and Business Ethics
Conduct
The Board of Directors has adopted Corporate Governance Guidelines and a Code of Conduct and Business Ethics (the "Code“Code of Conduct"Conduct”) that applies to all its directors, officers and employees, including the principal executive officer
and the principal financial officer, copies of which are available on the Company's web siteCompany’s website atwww.argolimited.com. In addition, copies of the Code of Conduct can be obtained, free of charge, upon written request to our principal executive offices as follows: Investor Relations, 110 Pitts Bay Road, Pembroke HM 08, Bermuda. Any amendments to or waivers of the Code of Conduct that apply to the Company's Board or its executive officers will be disclosed on the web site.our website. The reference to the Company's web siteCompany’s website does not incorporate by reference the information contained in the web sitewebsite and such information should not be considered a part of this proxy statement.
Committees and Meetings of the Board of Directors
During 2011, theThe standing committees of the Board of Directors wereare the ExecutiveAudit Committee, the AuditHuman Resources Committee, the Investment Committee, the Human ResourcesNominating and Corporate Governance Committee and the NominatingRisk & Capital Committee. In addition to these standing committees, the Board of Directors assigned oversight of the Company's existing risk management framework to a Risk Committee of the Board of Directors in 2011. The Board of Directors has no other committees. The Board of Directors has adopted written charters for the Audit, Investment, Human Resources, Investment, Nominating and NominatingCorporate Governance and Risk & Capital Committees that specify the scope of each committee'scommittee’s responsibilities. Each Chartercommittee charter is available on our website atwww.argolimited.com under the Company's web site atwww.argolimited.com.“Investors” tab and then the “Governance” tab. The reference to the Company's web siteCompany’s website does not incorporate by reference the information contained in the web sitewebsite and such information should not be considered a part of this proxy statement.
During 2011, the Board of Directors met 4 times, the Audit Committee met 4 times, the Investment Committee met 4 times, the Human Resources Committee met 4 times, the Nominating Committee met 3 times, the Risk Committee met 2 times and the Executive Committee did not meet. During that time,2019, all directors attended 75% or more of the aggregate meetings of the Board of Directors and of the Committees of the Board on which they served. The independent directors met in executive session 4 times.
served except forAl-Noor Ramji who was unable to attend two of four Investment Committee meetings due to scheduling conflicts. While Argo Group does not have a policy requiring directors to attend the Annual General Meeting, a meeting ofMeetings, the Board of Directors is customarily held on the same day as the Annual General Meeting and Argo GroupCompany encourages directors to attend the shareholder meeting. Allmeetings and all of the directors attended the Company'sCompany’s Annual General Meeting held in May of 2011.2019.
Executive Sessions of Independent Directors
Board Committees
In order to promote open discussion among
Current* Committee Composition and Number of Meetings in 2019 | ||||||||||
Director | Audit | Human Resources | Investment | Nominating | Risk & Capital | |||||
Thomas A. Bradley | ✓ | ✓ (Chair) | ||||||||
F. Sedgwick Browne | ✓ | ✓ (Chair) | ||||||||
Hector De Leon | ✓ | ✓ | ||||||||
Mural R. Josephson | ✓ (Chair) | ✓ | ||||||||
Anthony P. Latham | ✓ | ✓ | ||||||||
Dymphna A. Lehane | ✓ | ✓ | ||||||||
Samuel G. Liss | ✓ | ✓ | ||||||||
Carol A. McFate | ||||||||||
Kathleen A. Nealon | ✓ | ✓ | ||||||||
John R. Power | ✓ | ✓ (Chair) | ||||||||
Al-Noor Ramji | ✓ | ✓ | ||||||||
John H Tonelli | ✓ (Chair) | ✓ | ||||||||
Gary V. Woods | ✓ | ✓ | ||||||||
Number of Meetings in 2019 | 4 | 5 | 4 | 5 | 4 |
* | Following the Annual General Meeting, the composition of the Board committees will be adjusted to reflect the new composition of the Board, assuming all nominees are elected, as noted in the paragraphs below. |
Audit Committee
Following the independent directors, the Board of Directors schedules regular executive sessions at least 2 timesAnnual General Meeting, assuming each year in which those directors meet without management participation. Any interested party may contact the independent directors as a group by using the procedures set forth below under "Shareholder Communication with Board Members."
The Executive Committee consists of Messrs. Woods, De Leon, and Watson. The Executive Committee may exercise all powers and authority of the Board nominees are elected, the Audit Committee is anticipated to consist of Directors in the managementFred R. Donner (Chair), Bernard C. Bailey, Thomas A. Bradley, Dymphna A.
Lehane, and Kathleen A. Nealon. Each current and expected member of the business of the Company.
The Audit Committee consists of Messrs. Browne, De Leon, Josephson, Power and Ms. Nealon, each of whomfollowing the Annual General Meeting is "independent"“independent” and meets the other requirements for audit committee membership as defined by applicable NasdaqNYSE listing rules and SEC rules for audit committee members.
The Audit Committee assists the Board in its oversight of the quality and integrity of the accounting, auditing, and financial reporting processes of the Company. Its primary responsibilities include (a) review of quarterly and annual financial results and other financial information of the Company, (b) the appointment, replacement, compensation and oversight of independent auditors, (c) review of all recommendations by the auditors with respect to accounting methods and internal controls of the Company, (d) review and advance approval of audit andnon-audit services provided by the auditors, and the scope of such audits and services and the impact on the auditors’ independence, (e) oversight of the performanceeffectiveness of the Company'sCompany’s internal audit function.function and (f) otherwise providing oversight for the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. The Committee'sCommittee’s role furtheralso includes discussing with Senior Management, Internal Audit and the independent auditors the Company'sCompany’s processes to managefor managing its business and financial riskrisks and processes for compliance with significant applicable legal and regulatory requirements.requirements in relation to the Company’s accounting and financial reporting processes. In addition, the Committee establishes procedures for complaints relating to accounting, internal accounting controls or auditing matters as well as procedures for confidential, anonymous submission by Company employees of any concerns regarding questionable accounting or auditing matters.
In recommending independent auditors for the Company, the Audit Committee annually considers the performance and integrity of the independent auditors, the experience and qualifications of the lead audit partner, the geographic scope of their practice as compared to the Company’s geographic scope, their insurance industry expertise, the appropriateness of their fees, the Public Company Accounting Oversight Board (“PCAOB”) reports on the firm and its peers, and other factors deemed appropriate.
Report of the Audit Committee
In connection with performing its oversight role related to the audited consolidated financial statements contained in the Company'sCompany’s Annual Report onForm 10-K, the Audit Committee has:
reviewed and discussed the audited consolidated financial statements with management and with representatives from Ernst &Young LLP ("E&Y");
discussed with E&YErnst & Young the matters required to be discussed by Statement on Auditing Standards No. 61 as amended (Communication With Audit Committees) as adopted by the Public Company Accounting Oversight Board ("PCAOB");applicable requirements of the PCAOB and
received from E&YErnst & Young the written disclosures and the letter regarding E&Y'sthe auditors’ independence, as required byPCAOB Rule 3526,Communication with Audit Committees Concerning Independence and discussed with the independence of E&Y with representatives of E&Y.independent auditors, the independent auditors’ independence.
Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Company'sCompany’s audited consolidated financial statements be included in the Company'sCompany’s Annual Report onForm 10-K for the year ended December 31, 2011,2019, for filing with the Securities and Exchange Commission.SEC.
AUDIT COMMITTEE:
Mural R. Josephson, Chairman
Thomas A. Bradley
F. Sedgwick Browne
Hector De Leon
Dymphna A. Lehane
Kathleen A. Nealon
John R. Power, Jr.
Audit Committee Financial Expert
Experts
MuralMessrs. Bradley and Josephson, isas well as Board nominee Mr. Donner, are qualified as an "audit“audit committee financial expert"experts” within the meaning of applicable SEC rules and regulations governing the composition of the Audit Committee. In addition, the Audit Committee has determined that he hasthey have the appropriate experience and background to satisfy the "financial sophistication"“financial sophistication” requirements of Nasdaq'sNYSE’s listing rules.
TheFollowing the Annual General Meeting, assuming each of the Board nominees are elected, the Investment Committee consistsis anticipated to consist of Messrs. Cash, El-Hage,John H. Tonelli Watson(Chair), Carol A. McFate,Al-Noor Ramji, and Woods.Kevin J. Rehnberg. The Investment Committee assists the Board in the oversight of the Company'sCompany’s key investment objectives, strategies and policies. The
Committee is responsible for Committee’s responsibilities include (a) approval of the Company'sCompany’s investment policies, strategies, and transactions, and (b) review of the performance of the Company'sCompany’s investment portfolios.portfolios and investment managers, (c) review of the criteria used to select outside investment managers, and approval of allocations to outside investment managers and (d) approval of any Company derivative policy and review of management analysis and reports on potential hedging programs and derivative transactions. All investment transactions are ratified by the full Board of Directors.Board.
TheFollowing the Annual General Meeting, assuming each of the Board nominees are elected, the Human Resources Committee consistsis anticipated to consist of Messrs. Browne, Cash, De Leon, PowerDymphna A. Lehane (Chair), Bernard C. Bailey, Thomas A. Bradley, and Woods, eachSamuel G. Liss. Each current and expected member of whomthe Human Resources Committee following the Annual General Meeting is "independent"“independent” in accordance with the applicable corporate governance requirements of the listing rules of NasdaqNYSE as currently in effect. Each member of the Human Resources Committee also qualifies as a "non-employee director"“non-employee director” under Section 16 of the Exchange Act and as an "outside director" under 162(m)Act. The Human Resources Committee’s responsibilities include overseeing the compensation of the U.S. Internal Revenue Code. DiscussionsCompany’s executive officers and directors, reviewing and discussing with the Company’s management the Compensation Discussion and Analysis contained in this proxy statement, producing an annual report on executive compensation for inclusion in the Company’s proxy statement, overseeing and advising the Board on the adoption of plans and policies that govern the Human Resources Committee's roleCompany’s compensation programs, reviewing management’s succession plans for the Company’s Chief Executive Officer and the Company's Compensation Philosophy begin on page 23.other primary executive officers, and determining and monitoring stock ownership guidelines.
None of the members of the Human Resources Committee during the fiscal year 20112019 or as of the date of this proxy statement is or has been an officer or employee of the Company and no executive officer ofCompany. See “Related Persons Transactions – Certain Related Person Transactions” below for certain transactions involving the Company served on the Human Resources Committee or board of any company that employedin which Mr. Woods may be deemed to have an indirect interest. The Company does not deem such interest to be material. No interlocking relationships existed between any member of the Company'sBoard or Human Resources Committee and any member of the board of directors or Boardcompensation committee of Directors.any other company during the last fiscal year.
TheFollowing the Annual General Meeting, assuming each of the Board nominees are elected, the Risk & Capital Committee is anticipated to consist of DirectorsAl-Noor Ramji (Chair), Fred R. Donner, Anthony P. Latham, Kathleen A. Nealon, and Kevin J. Rehnberg. While the Board has the ultimate responsibility for overseeing and approving and overseeing the Company'sCompany’s risk strategy, risk appetite and risk tolerance levels.levels, the Risk & Capital Committee provides oversight of the Company’s policies and procedures relating to compliance and risk management and also oversees the adequacy of the Company’s capital as measured using our own economic capital model and against various regulatory and other requirements taking into account all risks to which the Company is exposed. Risk management is a collaborative effort of management, the Company's Board of Directors and several functions within the Company that are focused on risk, including risks associated with the Company's compensation plans. risk.
The Company's Risk Committee plays a key role in risk oversight. Prior to 2011, this committee consisted of senior management including the Company's Chief Executive Officer and its Chief Financial Officer, with the Head of Enterprise Risk Management reporting directly to it. In light of Argo Group's geographic and product expansion plans, and due to ever growing regulatory requirements and demands on an international scale, the Board of Directors decided to establish a Risk Committee consisting of all members of the Board. The Risk Committee met in the course of the fourth quarter to review, consider, and approve the Company's revised Corporate Governance Guidelines and its Compliance and Risk Management Policies and Procedures. The Risk Committee in its current composition will provide oversight of these subject matters and will continue to serve in this capacity unless and until the Board decides to convert it into a standing committee.
The Company'sCompany’s enterprise risk management framework consists of 3 levelsthree lines of defense and begins at the departmental level. Each business department isand function are charged with the task of identifying, assessing, measuring, monitoring, reporting and mitigating risks associated with the department'stheir respective functions and responsibilities. The HeadCompany’s Chief Risk Officer, who gives presentations on risk management matters directly to the Risk & Capital Committee, leads the second line of Enterprise Risk Managementdefense and plays a key role in managing the next levelrisk management by coordinating, facilitating and overseeing the effectiveness and integrity of the Company'sour risk management activities. This risk management function is also charged with establishing, maintaining and enhancing the methodology and tools used to identify and evaluate risks and, where risks are outside the Company'sour risk appetite, or tolerance, ensuring that there is an appropriate response applied by the respective risk owner. The third level consists of the Company's Internal Audit department which independently assessesprovides a third line of defense by assessing the effectiveness of the Company'sour risk management processes, practices and practices, including the risks associated with the Company's compensation plans, byinternal controls and providing timely feedback and assurance to the Audit Committee on the effectiveness of the Company'sadherence to our risk management framework. The Head of Internal Audit reports on issues related to the internal control framework directly to the Audit Committee.
The Company believes that the foregoing corporateenterprise risk management framework and oversight activities are structured in a way that enables the Companyus to take an active approach to managing risksrisk management in an ever changinga dynamic legal, regulatory and business environment. Through the efforts of management, the Company'sour internal risk management functionsfunction and the Board, of Directors, the Company believes it is ablewe seek to avoid or mitigate unnecessarymanage our risk exposures within agreed risk tolerances, while recognizing that taking appropriate risks while accepting certain other risks which may be deemedenables us to exploit opportunities beneficial to the Company and its shareholders.
The Nominating Committee consists of Messrs. Browne, Power and Woods,Following the Annual General Meeting, assuming each of whomthe Board nominees are elected, the Nominating and Corporate Governance Committee is "independent"expected to consist of Samuel G. Liss (Chair), Anthony P. Latham, Carol A. McFate, and John H. Tonelli. Each current and expected member of the Nominating and Corporate Governance Committee following the Annual General Meeting is “independent” in accordance with the applicable director independence rules of NasdaqNYSE as currently in effect. The purpose of the Nominating and Corporate Governance Committee is to (a) establish criteria for Board member selection and retention, (b) identify individuals qualified to become Board members, (c) review and recommend to the Board individuals to be nominated orre-nominated for
election as directors, including nominees submitted by shareholders in accordance with the requirements of ourBye-Laws as well as the Shareholder Recommendation Procedure set forth in our Nominating and Corporate Governance Committee charter, and (d) recommend directors for appointments to one or more of the Board'sBoard’s standing committees. The Committee is also charged with establishing the evaluation criteria and implementing an evaluation process applied by the Board and each Committee in its self-evaluation process. The Special Nominating Committee is subject to the charter, policies and procedures of the Nominating and Corporate Governance Committee, as disclosed in this proxy statement.
The Nominating and Corporate Governance Committee assesses several factors when evaluating director nominees including, but not limited to, the current needs of the Board and, the nominee's: (i)with regard to a nominee, their: (a) integrity, honesty and accountability; (ii)(b) successful leadership experience and strong business acumen; (iii)(c) forward-looking strategic focus; (iv)(d) collegiality; (v)(e) independence and absence of conflicts of interests; and (vi)(f) ability to devote necessary time to meet director responsibilities. In addition, the Nominating and Corporate Governance Committee looks for nominees exhibiting specific skills and expertise in the following areas: (a) accounting and finance; (b) business operations; (c) business strategy; (d) corporate governance; (e) technology/digital strategies; (f) executive leadership; (g) industry knowledge; (h) international operations/global markets; (i) investment management; (j) legal/regulatory; and (k) risk management. The Nominating and Corporate Governance Committee will ultimately recommend nominees that it considers to be fit and proper who will enhance the Board'sBoard’s ability to oversee, in an effective manner, the management of the affairs and business of the Company as it evolves into a complex, global enterprise.Company. While the Nominating and Corporate Governance Committee does not have a formal policy when considering the overall composition of the Board with regard to the consideration of diversity in identifying director nominees, the Nominating and Corporate Governance Committee seeks a diverse and appropriate balance of members who have the experience, qualifications, attributes and skills that are necessary to oversee a
publicly traded, financially complex, growth oriented, international insurance organization that operates in multiple jurisdictions when considering the overall composition of the Board.jurisdictions. In addition, the Nominating and Corporate Governance Committee seeks directors with experience in a variety of professional disciplines and business ventures that can provide diverse perspectives on the Company'sCompany’s operations. The Committee evaluates the types of backgrounds that are needed to strengthen and balance the Board based on the foregoing factors and will nominate candidates to fill vacancies accordingly. For a discussion of the specific experiences, qualifications, attributes or skills that led the Nominating and Corporate Governance Committee to conclude that each director should serve on the Company's Board, of Directors, see the skills chart and biographical information section beginning on page 10.20.
Board Refreshment and Cooperation Agreement
The diverse skillset on our Board is enhanced by both the fresh perspectives brought by our newer directors, as well as the industry and company-specific expertise of our longer-tenured directors, who have the experience of guiding our company through the extended business cycles faced by the insurance industry. The Board has experienced significant refreshment events recently, both as a result of the Board’s internal refreshment efforts and as a result of the Cooperation Agreement by and among the Company and Voce Catalyst Partners LP, Voce Capital Management LLC, Voce Capital LLC and Voce Catalyst Partners New York LLC (collectively, “Voce”), dated as of December 31, 2019 (the “Cooperation Agreement”). Mark E. Watson III, the Company’s former President and Chief Executive Officer, resigned from the Board effective December 30, 2019. Following the Annual General Meeting, five of ourlonger-tenured directors will be retiring from the Board — Messrs. Woods, Browne, De Leon, Josephson and Power.
Pursuant to the Cooperation Agreement, the Board appointed Carol McFate as director on February 7, 2020, to fill the vacancy resulting from the retirement of Mr. Watson from the Board, and also nominated Bernard Bailey and Fred Donner as director nominees to stand for election at the Annual General Meeting. Dr. Bailey was selected as a director nominee from a list of three independent director candidates provided by Voce to the Company, and Mr. Donner was selected as a director nominee from a list of three independent director candidates provided by the Company to Voce.
The Nominating and Corporate Governance Committee identifiesmay receive recommendations for director nominees from various sources such as officers, directors and shareholders and it may also use third party consultants such as search firms to assist in identifying and evaluating potential nominees. The Nominating and Corporate Governance Committee will consider and evaluate a director candidate recommended by a shareholder in the same manner as a candidate recommended by a current director.an officer, director or consultant.
Shareholders wishing to recommend a director candidate to serve on the Board may do so by providing advance written notice to the Company. To make a director nomination at the 20132021 Annual General Meeting, a shareholder must follow the same procedures required for submitting a shareholder proposal. See "Shareholder“Shareholder Proposals for 20132021 Annual General Meeting" beginning on page 42.Meeting” for a description of these procedures. Notices should be sent to Argo Group International Holdings, Ltd. c/o David J. Doyle,Craig S. Comeaux, Secretary, Clarendon House, 2 Church Street, Hamilton110 Pitts Bay Road, Pembroke HM 11,08, Bermuda. Any such notice must also meet certain other requirements specified in our Bye-Laws.Bye-Laws as well as the Shareholder Recommendation Procedure set forth in our Nominating and Corporate Governance Committee charter.
Shareholder CommunicationEngagement
Our Board believes that shareholder engagement is essential to understanding our investors’ interests and is a key part of our commitment to strong corporate governance. Our goals in our most recent shareholder engagement program included:
Obtaining shareholder insight into our corporate governance, executive compensation, and other policies and practices, as well as soliciting feedback from shareholders on their concerns and priorities;
Describing our changes and enhancements to our executive compensation program in response to shareholder feedback;
Discussion of certain governance controls put in place as a result of shareholder feedback and in response to matters raised by regulators; and
Discussion of the recent leadership changes at the Company.
For more information regarding our recent engagement efforts and our response, please refer to “Compensation Discussion and Analysis — Shareholder Engagement and Responsiveness to 2019 Advisory Vote on Executive Compensation” on page 34.
In addition to this recent shareholder engagement effort, the Company regularly meets with Board Members
its investors throughout the year. These meetings are conducted at major financial services industry conferences and at events sponsored by the Company and are attended by various members of our senior management. Our independent directors also periodically engage with our shareholders, in an effort to pursue important dialogue. All of these engagements cover a variety of matters that are important to our shareholders, including recent developments at the Company, our financial and operational performance, our long-term strategic and financial goals and industry-wide trends, and other topics that may be raised by our shareholders. The Company has a process foralso welcomes opportunities to meet with its significant shareholders to discuss and receive feedback on matters related to the Company’s corporate governance and related environmental and social issues.
Our Board receives regular briefings on these shareholder meetings and incorporates the resulting input as appropriate.
Shareholders and other interested parties who wish to communicate with the Board, of Directors, a specific director or the non-management or independent directors as a group. Shareholdersgroup may send written communications to Argo Group International Holdings, Ltd. c/o David J. Doyle,Craig S. Comeaux, Secretary, Clarendon House, 2 Church Street, Hamilton110 Pitts Bay Road, Pembroke HM 11,08, Bermuda. The Secretary will review the communication and forward such communication to the individual director or directors to whom the communication is directed, if any. If the communication does not specify a recipient, the Secretary will forward it to the full Board of Directors or to the director or directors the Secretary believes isare most appropriate.
Related PersonPersons Transactions
The Board of Directors has adopted a written policy relating to the Audit Committee'sCommittee’s review and approval of transactions with related persons that are required to be disclosed in proxy statements by SEC regulations ("(“related person transactions"transactions”). A "related person"“related person” is defined under the applicable SEC regulation and includes our directors, executive officers and 5% or more beneficial owners of our Common Shares. Management administers procedures adopted by the Board of Directors with respect to related person transactions and the Audit Committee reviews and approves all such transactions.transactions (including the one described below). At times, it may be advisable to initiate a transaction before the Audit Committee has evaluated it, or a transaction may begin before discovery of a related person'sperson’s participation. In such instances, management consults with the Chairman of the Audit Committee to determine the appropriate course of action. Approval of a related person transaction
requires the vote of the majority of disinterested directors on the Audit Committee. In approving any related person transaction,Committee and the Audit Committee must determine that the transaction is fair and reasonable to the Company.Company for a related person transaction to be approved. The Audit Committee periodically reports on its consideration of related party activities to the Board of Directors.Board. The written policy relating to the Audit Committee'sCommittee’s review and approval of related person transactions is available on our web sitewebsite atwww.argolimited.com. The reference to the Company's web siteCompany’s website does not incorporate by reference the information contained in the web sitewebsite and such information should not be considered a part of this proxy statement.
Certain Related Person Transactions
Kinetica Partners, LLC. In 2013, our Surety unit received a submission through its established broker network to issue approximately $12.4 million of surety bonds on behalf of Kinetica Partners, LLC (“Kinetica”) in connection with a Gulf of Mexico pipeline project. Mr. Gary Woods, Chairman of our Board, is also the Chairman of the board of directors of Kinetica, and beneficially owns 10% of Kinetica through a family trust. The Audit Committee has determinedsubmission was underwritten, priced and bound in the ordinary course of business by the Surety unit. The terms and conditions of the surety bonds that there were no related person transactionsissued and the premium charged to Kinetica for issuance of the bonds, were consistent with those routinely applied and charged for similarly situated risks bound for unrelated third-parties. As of December 31, 2019, the surety bonds were still outstanding. Per the Surety unit’s standard requirements in connection with the Company during 2011.issuance of surety bonds, Kinetica and Mr. Woods, in his personal capacity, among others, executed our Surety unit’s standard form of indemnity agreement holding our Surety unit harmless against any and all losses and expenses incurred resulting from the issuance of the surety bonds.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSHIP
OWNERS AND MANAGEMENT
Security Ownership of Principal Shareholders and Management
The following table sets forth certain information regarding the beneficial ownership of Argo Group common shares ("our Common Shares")Shares as of March 7, 2012the Record Date of each person known to Argo Group to beneficially own more than 5% of the Common Shares.
| |||||||
---|---|---|---|---|---|---|---|
| Common Shares | ||||||
Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Class | |||||
Wells Fargo & Company / MN | 3,133,161 | (1) | 11.67 | % | |||
Dimensional Fund Advisors LP | 2,252,689 | (1) | 8.39 | % | |||
BlackRock, Inc. | 1,520,574 | (2) | 5.67 | % | |||
The Vanguard Group, Inc. | 1,465,925 | (1) | 5.46 | % |
Name and Address of Beneficial Owner | Common Shares | |||||||
Number of Shares Beneficially Owned | Percent of Class | |||||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 | 3,018,342 (1) | 8.75% | ||||||
Dimensional Fund Advisors LP Building One 6300 Bee Cave Road Austin, TX 78746 | 2,567,700 (2) | 7.44% | ||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 2,414,467 (3) | 7.00% | ||||||
Voce Capital Management LLC 600 Montgomery Street, Suite 4400 San Francisco, CA 94111 | 1,990,676 (4) | 5.77% | ||||||
Champlain Investment Partners, LLC 180 Battery St. Burlington, Vermont 05401 | 1,872,583 (5) | 5.43% |
(1) | The Vanguard Group, Inc.’s Schedule 13G/A was filed with the SEC on February 12, 2020, and includes (a) 27,651 Common Shares beneficially owned by Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc., as a result of it serving as investment manager of collective trust accounts and (b) 10,546 Common Shares beneficially owned by Vanguard Investments Australia, Ltd., a wholly owned subsidiary of The Vanguard Group, Inc., as a result of its serving as investment manager of Australian investment offerings. The Vanguard Group, Inc. has sole dispositive power over 2,985,113 Common Shares, shared dispositive power over 33,229 Common Shares, sole voting power over 32,619 Common Shares and shared voting power over 5,578 Common Shares. |
(2) | The Dimensional Fund Advisors LP Schedule 13G/A was filed with the SEC on February 12, 2020 and provides that Dimensional Fund Advisors has sole voting power with respect to 2,529,958 Common Shares and sole dispositive power with respect to 2,567,700 Common Shares. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager orsub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser orsub-adviser to certain Funds. In its role as investment advisor,sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over the securities of the Issuer that are owned by the Funds and may be deemed to be the beneficial owner of the shares of Argo Group held by the Funds. However, all securities reported in the Schedule 13G/A are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. |
(3) | The BlackRock, Inc. Schedule 13G/A was filed with the SEC on February 5, 2020, and provides that BlackRock, Inc. has sole voting power over 2,330,091 Common Shares and sole dispositive power with respect to 2,414,467 Common Shares. |
(4) | Voce Capital Management LLC filed a Schedule 13D/A (Amendment No. 7) with the SEC on January 2, 2020 and reported shared voting and dispositive power with respect to all of its shares. |
(5) | The Champlain Investment Partners, LLC Schedule 13G was filed with the SEC on February 13, 2020, and provides that Champlain Investment Partners, LLC has sole voting power over 1,376,918 Common Shares and sole dispositive power with respect to 1,872,583. |
The following table sets forth certain information regarding the beneficial ownership of the Common Shares as of March 7, 2012the Record Date, unless otherwise indicated, of (i) each director or director nominee of Argo Group, (ii) each individual who has been identified as a named executive officer (“Named Executive Officer ("Named Executive Officer"” or "NEO"“NEO”) of Argo Group or its subsidiaries, and (iii) all directors and individuals who have been identified as executive officers of Argo Group or its subsidiaries as a group:
Name of Beneficial Owner | Number of Common Shares Beneficially Owned(1) (2) | Percent of Class(1) | ||
Gary V. Woods | 68,226 | * | ||
Bernard C. Bailey | — | * | ||
Thomas A. Bradley | 2,857 | * | ||
F. Sedgwick Browne | 26,538 | * | ||
Fred Donner | — | * | ||
Hector De Leon | 25,389 | * | ||
Mural R. Josephson | 18,388 | * | ||
Anthony P. Latham | — | * | ||
Dymphna A. Lehane | 1,189 | * | ||
Samuel G. Liss | — | * | ||
Carol A. McFate | 2,250 | * | ||
Kathleen A. Nealon | 22,485 | * | ||
John R. Power, Jr | 20,304 | * | ||
Al-Noor Ramji | 1,189 | * | ||
John H. Tonelli | 24,260 | * | ||
Mark E. Watson III (3) | 749,461 | 2.17% | ||
Jay S. Bullock | 178,994 | * | ||
Matthew J. Harris | 1,774 | * | ||
Jose A. Hernandez (4) | 13,841 | * | ||
Kevin J. Rehnberg (3) | 34,421 | * | ||
Axel Schmidt | 56,522 | * | ||
Total (a) | 484,786 | 1.41% |
(a) | All directors and individuals identified as executive officers of Argo Group and its subsidiaries as a |
* | Less than 1% of the outstanding Common Shares |
(1) | The information in this table is based on information supplied directly to Argo Group by executive officers and directors. Shares beneficially owned by a person include shares to which the person has the right to acquire beneficial ownership within 60 days of the Record Date, including equity grants that were exercisable on March 2, 2020 or that become exercisable within 60 days after such date. Unless otherwise indicated in the footnotes below, the persons and entities named in this table have sole voting and dispositive power with respect to all shares beneficially owned, subject to community property laws where applicable. |
(2) | Includes the following stock appreciation rights that were vested and exercisable on March 2, 2020 or that become exercisable within 60 days after such date: Mr. Browne – 7,652; Mr. De Leon – 7,652; Mr. Josephson – 7,652; Ms. Nealon – 7,652; Mr. Power – 7,652; Mr. Tonelli – 7,652 . Also includes the following restricted shares that will vest within 60 days after March 2, 2020: Mr. Rehnberg – 8,020; Mr. Bullock – 6,127; Mr. Harris – 1,352; Mr. Schmidt – 5,111. 14,745 of Mr. Watson’s shares are held in a family trust for which Mr. Watson serves as trustee. |
(3) | Includes the following number of shares pledged as security and held by brokers in margin accounts regardless of whether there are loans outstanding: Mr. Rehnberg – 5,099 shares; Mr. Watson – 165,031. Mr. Watson’s share ownership reported in this table is as of his last day as a director of the Company on December 30, 2019. |
Name of Beneficial Owner | Number of Shares Beneficially Owned (1)(2) | Percent of Class (1) | | ||||
---|---|---|---|---|---|---|---|
Gary V. Woods | 26,333 | * | |||||
F. Sedgwick Browne | 24,589 | * | |||||
H. Berry Cash | 24,262 | * | |||||
Hector De Leon | 24,783 | * | |||||
Nabil N. El-Hage | 5,000 | * | |||||
Mural R. Josephson | 20,607 | * | |||||
Kathleen A. Nealon | 5,000 | * | |||||
John R. Power, Jr | 25,684 | * | |||||
John H. Tonelli | 10,000 | * | |||||
Mark E. Watson III | 638,199 | 2.38% | |||||
Jay S. Bullock | 118,128 | * | |||||
Barbara C. Bufkin | 98,342 | * | |||||
Andrew Carrier | 55,706 | * | |||||
Julian Enoizi | 918 | * | |||||
Total(a) | 1,076,633 | 4.01% |
(4) | Mr. Hernandez’s share ownership reported in this table is as of the date of his departure from the Company on December 31, 2019. |
Delinquent Section 16(a) Beneficial Ownership Reporting Compliance
Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires directors, executive officers and holders of more than 10% of Common Shares to file with the Securities and Exchange CommissionSEC reports regarding their ownership and changes in ownership of Argo Group'sGroup’s securities. Argo Group believesBased on our review of these reports, we believe that during 20112019 all reports for the registrant'sregistrant’s executive officers, directors and 10% shareholders that were required to be filed under Section 16(a) of the Exchange Act were timely filed.
PROPOSAL 11: APPROVAL OF AN AMENDMENT TO THEBYE-LAWS TO DECLASSIFY THE BOARD
OF DIRECTORS
As a result of our shareholder engagement efforts and our commitment to enhancing our corporate governance, after careful consideration, our Board of Directors has proposed to amend ourBye-Laws to immediately declassify our Board of Directors, such that all directors will be elected forone-year terms starting at the Annual General Meeting. In anticipation of an immediate declassification, our Class II and Class III directors have tendered conditional resignations to the Company, resigning from their service on the Board for the remainder of their current term to allow such directors to be elected immediately for annual terms if this proposal is approved by shareholders. If this proposal is not approved by shareholders, then (i) the three Class I director nominees will stand for election to a three-year term as provided in the existingBye-Laws, (ii) the three Class II director nominees will stand for election to the remainingone-year term as Class II directors, and (iii) the continuing Class II and Class III directors will continue serving their terms.
Proposed Amendment to theBye-Laws
Currently theBye-Laws divide our Board of Directors into three classes. Directors in each class serve for a term of three years and until their successors are duly elected and qualify. The term of directors of one class expires at each Annual General Meeting. In order to instead provide for the annual election of directors, Section 22 of theBye-Laws will need to be amended.
By unanimous resolution, our Board of Directors declared advisable the amendment to ourBye-Laws set forth onAnnex B which provides that, beginning with the 2020 Annual General Meeting, our directors will be elected for a term ending at the next Annual General Meeting following their election and until their successors are duly elected and qualify, and directed that this amendment to theBye-Laws be submitted for consideration by our shareholders at the Annual General Meeting.
Required Vote and Board Recommendation
The approval of the proposal to declassify the Board of Directors will be decided by an ordinary resolution; that is a resolution duly adopted by the Board of Directors, which has already occurred, and then approved by shareholders with a simple majority of votes cast in person or by proxy. Votes may be cast in favor of or against this proposal or a shareholder may abstain from voting. Abstentions and brokernon-votes will not count as votes cast on this proposal and, therefore, will have no effect on the outcome of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE
PROPOSAL TO DECLASSIFY THE BOARD OF DIRECTORS.
PROPOSAL 2: ELECTION OF DIRECTORS
Board of Director Nominees
Name | Age | Director Since | Position | |||
Bernard C. Bailey | 66 | n/a | President of Paraquis Solutions | |||
Thomas A. Bradley | 62 | 2018 | Former Chief Financial Officer and Vice President of Allied World Assurance Company Holdings, AG | |||
Fred R. Donner | 62 | n/a | Senior Managing Director in the Global Insurance Practice of FTI Consulting | |||
Anthony P. Latham | 69 | 2019 | Independent Director of Argo Managing Agency Limited | |||
Dymphna A. Lehane | 56 | 2017 | Former Global Managing Partner Insurance Accenture | |||
Samuel G. Liss | 63 | 2019 | Managing Principal of Whitegate Partners LLC | |||
Carol A. McFate | 66 | 2020 | Former Chief Investment Officer of Xerox Corporation | |||
Kathleen A. Nealon | 66 | 2011 | Independent Director of Argo Managing Agency Limited | |||
Al-Noor Ramji | 65 | 2017 | Group Chief Digital Officer of Prudential plc | |||
Kevin J. Rehnberg | 56 | n/a | President and Chief Executive Officer of the Company | |||
John H. Tonelli | 55 | 2010 | Managing Director and Head of Debt Capital Markets & Syndication at Oppenheimer & Co., Inc. |
✓ 10 of 11 Are Independent (91%) | ✓ 3 of 11 Are Female (27%) | ✓ Average Age: |
Our Our Bye-Laws provide for the election of directors by our shareholders. EachCurrently, in accordance with ourBye-Laws, each class of directors serves for a term of three (3) years. In accordance with the Bye-Laws,years and our Board of Directors is divided into three classes (Classes I, II and III). The classes are determined by dividingIf Proposal 1, an amendment to the numberBye-Laws to declassify the Board of directors by 3. If this results in a whole number, thereDirectors, is approved, then shareholders will be an equal number of directors in each class. If this results in a fraction of 1/3, one additionalvoting at the Annual General Meeting to elect all director nominees for annual terms, expiring at the next annual general meeting and until their successors are duly elected and qualified, or, if Proposal 1 is not approved, then shareholders will be placed intovote to elect (i) Thomas A. Bradley, Anthony P. Latham and Carol A. McFate as Class III. If this results in a fraction of2/3 one director will be placed into Class II and one into Class III. The Company's Bye-Laws further provide that the Board may re-designateI directors to different classes so that they conform to the preceding formula. A classified board structure is common among Bermuda domiciled companies and is consistent with the board structureour Board of the Company's peer group.
Three Class II directors are to be elected at the 2012 Annual General Meeting. The Nominating Committee has nominated Nabil N. El-Hage, Mural R. Josephson and Gary V. Woods, eachDirectors for a term of whom is presently serving on the Board, to stand for re-election as Class II directors. If elected, the three nominees will serve as Class II directors for three-year termsyears until the Annual General Meeting of shareholders in 2015 or2023 and until their successors have beenare duly elected and qualified, and (ii) Bernard C. Bailey, Fred R. Donner and Kevin J. Rehnberg as Class II directors to our Board of Directors for the remaining term of one year until the Annual General Meeting in 2021 and until their successors are duly elected and qualified. ItIn anticipation of an immediate declassification, our continuing Class II and Class III directors will tender conditional resignations to the Company, resigning from their service on the Board for the remainder of their current term to allow such directors to be elected immediately for annual terms if Proposal 1 is intended that proxiesapproved by shareholders.
As previously disclosed, Gary Woods, F. Sedgwick Browne, Hector De Leon, Mural Josephson and John Power, Jr. will retire from the Board effective as of the Annual General Meeting. There are three new nominees to the Board, Kevin J. Rehnberg, the Company’s President and Chief Executive Officer, and Bernard C. Bailey and Fred R. Donner, who were nominated by the Board pursuant to the terms of the Cooperation Agreement. Mr. Donner was originally identified as a director candidate by a third-party search firm and Dr. Bailey was originally identified as a director candidate by Voce. Carol A. McFate, who was appointed to the Board in February 2020, will be votedstanding for election for the first time and was originally identified as a director candidate by Voce pursuant to the Cooperation Agreement. Thomas A. Bradley and Anthony P. Latham, current members of the Board since 2018 and 2019, respectively, are also standing for election for the first time. Mr. Bradley and Mr. Latham were first identified as
director candidates by the Company’s Chief Executive Officer at the time and have been subsequently recommended as director nominees by the Nominating and Corporate Governance Committee. Further information regarding the nominees and their qualifications are provided below.
Currently our Board consists of 13 directors. Following the Annual Meeting, we expect that the Board will consist of 11 directors. If Proposal 5 is approved, an amendment to theBye-Laws to provide a range in the size of the Board of Directors of 3 to 11 directors, with the exact number to be determined by the Board of Directors, the Board expects to set the size of the Board at 11 directors following the Annual Meeting.
Each person nominated for election has consented to be named in this proxy statement and to serve, if elected, and the Board has no reason to believe that any nominee will be unable to serve. However, if, before the Annual General Meeting, one or more nominees are unable to serve or for good cause will not serve (a situation that we do not anticipate), the proxy holders will vote the proxies for the remaining nominees and for substitute nominees chosen by the Board (unless the Board reduces the number of directors to be elected). If any substitute nominees are designated, we will file an amended proxy statement that, as applicable, identifies the substitute nominees, discloses that such nominees have consented to being named in the revised proxy statement and to serve as directors of the Company if elected, and includes certain biographical and other information about such nominees required by the rules of the SEC.
Required Vote and Board Recommendation
The election of directors will be decided by an ordinary resolution as to each nominee; that is a resolution duly adopted by the Board of Directors, which has already occurred, and then approved by shareholders with a simple majority of votes cast in person or by proxy. Votes may be cast in favor of these persons. If, foror against each nominee, or a shareholder may abstain from voting. Abstentions and brokernon-votes, if any, reason, anywill not count as votes cast and, therefore, will have no effect on the outcome of the nominees is not able or willing to serve as a director when the election occurs (a situation which is not presently contemplated), it is intended that the proxies will be voted for the election of a substitute nominee in accordance with the judgment of the proxy holder.directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
OF EACH OF THE NOMINEES LISTED ABOVE AS DIRECTORS AND, UNLESS DIRECTED OTHERWISE, IT IS THE INTENTION OF THE PROXIES NAMED IN THE FORM OF PROXY THAT ACCOMPANIES THIS PROXY STATEMENT TO VOTE FOR SUCH NOMINEES AS DIRECTORS.
Biographical information forBoard Leadership Skills
Our Board of Directors reflects a diverse array of experiences, skills and backgrounds. Each director is individually qualified to make unique and substantial contributions. This diverse skillset is enhanced by both the three Class II nominees to be elected this year:
Nabil N. El-Hage (53) was appointed as a director of the company in February 2011. Mr. El-Hage founded Academy of Executive Education, LLC, an independent provider of executive education programs to institutional clients, and has served as its chairman since June 2011. From June 2010 to June 2011, Mr. El-Hage was an independent consultant specializing in the corporate governance area. During 2009 and 2010, Mr. El-Hage served as Senior Associate Dean for External Relations and Adjunct Professor of Business Administration at Harvard Business School. From 2005 until June 2009, Mr. El-Hage was a Professor of Management Practice at Harvard Business School in the Finance Area. From January 2003 to June 2005, he was a Senior Lecturer at Harvard Business School. Mr. El-Hage originally joined the faculty of Harvard Business School in 1984. Prior to 2003, Mr. El-Hage gained experience in venture capital and private equity with TA Associates, Levant Capital Partners, and Advent International,fresh perspectives brought by our newer directors, as well as operatingthe industry and company-specific expertise of our longer-tenured directors, who have the experience of guiding our company through the extended business cycles faced by the insurance industry.
The following chart provides an overview of certain types of knowledge, skills and experiences possessed by one or more of our director nominees and which our Board of Directors believes are relevant to our company, business and industry, both today and as the Chief Financial Officer ofwe execute our long-term business strategy. The Westwood Group, Inc. He also served from 1995 to 2003 as Chairman and from 1995 to 2002 as Chief Executive Officer of Jeepers! Inc., a private equity-financed national chain of indoor theme parks. Mr. El-Hage has been a trusteechart does not encompass all of the MassMutual Premier Funds since 2003, a trusteeknowledge, skills and experience of the MML Series Investment Fund II since 2005, and a trustee of the MassMutual Select Funds and the MML Series Investment Fund since 2012. Mr. El-Hage was also the Chairman of the Premier and MML II Funds from 2006 to 2011. From May 2007 until July 2010, Mr. El-Hage was also a director of Virtual Radiologic Corporation. Mr. El-Hage's diverseour directors, but rather indicates specific areas of focus or expertise including his unique knowledgerelied on by the Board of management, finance, and corporate governance practices, allow himDirectors.
Director Nominees | |||||||||||||||||||||||||||||||||
Bailey | Bradley | Donner | Latham | Lehane | Liss | McFate | Nealon | Ramji | Rehn- berg | Tonelli | |||||||||||||||||||||||
Skills & Experience | |||||||||||||||||||||||||||||||||
Executive Leadership | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||
Accounting and Finance | ✓ | ✓ | ✓ | - | - | ✓ | ✓ | - | - | - | ✓ | ||||||||||||||||||||||
Business Operations | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | - | ||||||||||||||||||||||
Business Strategy | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||
Corporate Governance | ✓ | - | - | ✓ | ✓ | ✓ | ✓ | - | - | - | ✓ | ||||||||||||||||||||||
Technology / Digital Strategy | ✓ | - | - | - | ✓ | - | - | - | ✓ | - | - | ||||||||||||||||||||||
Industry Knowledge | - | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||
International Operations / Global Markets | - | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||
Investment Management | - | - | - | - | - | - | ✓ | - | ✓ | - | ✓ | ||||||||||||||||||||||
Legal / Regulatory | ✓ | - | - | ✓ | - | - | - | ✓ | - | - | - | ||||||||||||||||||||||
Risk Management | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | - | ✓ | - |
Director Nominee Biographical Information
The biographical information for director nominees provided below is presented according to bring a great dealour current classification of knowledge and perspectivedirectors. However, if Proposal 1, an amendment to the Company.
Mural R. Josephson (63) continued as a director of the Company following the merger of Argonaut Group and PXRE in August 2007. Mr. Josephson had been a director of PXRE since August 2004. Mr. Josephson retired from Kemper Insurance Companies ("Kemper") in 2002. During his 5-year tenure at Kemper, he held key management positions, including senior vice president and chief financial officer and senior vice president of finance. PriorBye-Laws to joining Kemper, Mr. Josephson held several senior level positions at KPMG, including 19 years as an audit partner. While at KPMG, he was a member of the National Insurance Practice Committee and a member of the Professional Practice Review Committee. Mr. Josephson has been a director of Health Markets, Inc., an insurance holding company, since May of 2003 and is currently chairman of its Audit Committee. He has also been a director of SeaBright Holdings, Inc., a NYSE traded insurance holding company, and its wholly owned subsidiary, SeaBright Insurance Company, since July of 2004 and is the Chairman of its Audit Committee. In addition to his historical knowledge of PXRE's operations and his extensive background in the insurance sector, Mr. Josephson brings to the Board experience, qualifications and skills that are specific to the Company's accounting, internal control and audit functions. Due to his background, Mr. Josephson also
possesses financial reporting expertise and a level of financial sophistication that qualifies him as a financial expert in his role as the Chair of the Audit Committee.
Gary V. Woods (68) became a director of the Company immediately following the merger of Argonaut Group and PXRE in August 2007. Mr. Woods had been a director of Argonaut since March 2000 and Chairman ofdeclassify the Board of Directors, of Argonaut since April 2001. Mr. Woods has been President of McCombs Enterprises since 1979. He also serves on the boards ofis approved, then shareholders will be voting to elect all directors of the Southwest Research Institutefor annual terms and the Cancer Therapyour Board will be declassified immediately. If Proposal 1 is not approved, then shareholders will vote to elect (i) Thomas A. Bradley, Anthony P. Latham and Research Center Foundation. Mr. Woods brings to the Board an entrepreneurial background with experience in overseeing complex business organizations. As President of McCombs Enterprises, Mr. Woods has successfully funded and promoted numerous growth companies in a diverse array of industries, both domestically and internationally, providing him with the necessary skills and qualifications to serveCarol A. McFate as the Chairman of the Company's Board of Directors.
Biographical information for the directors whose terms will expire in 2013 and 2014:
The following biographical information is for the four Class III directors whose terms will expire in 2013:
F. Sedgwick Browne (69) continued as a director of the Company following the merger of Argonaut Group and PXRE in August 2007. Mr. Browne had been a director of PXRE since 1999. Mr. Browne served as Vice-Chairman of the board of directors of PXRE from 2003 until the merger. He retired as counsel at Sidley Austin Brown & Wood LLP (now known as Sidley Austin LLP), a law firm, on September 30, 2004. Mr. Browne previously was a partner at Morgan, Lewis & Bockius LLP and prior thereto at Lord Day & Lord, Barrett Smith, where he specialized in the insurance and reinsurance industry. Mr. Browne is also a past trustee and director of the Swiss Reinsurance US Group and of the Winterthur Swiss Insurance US Group. In addition to his historical knowledge of PXRE's operations, Mr. Browne brings to the Board a corporate transactional background that is specific to the Company's operations in the insurance sector. Mr. Browne also possesses financial reporting expertise and the legal experience and qualifications necessary to guide the Company through the myriad of regulatory requirements currently imposed on publicly traded companies.
Hector De Leon (65) became a director of the Company immediately following the merger of Argonaut Group and PXRE in August 2007. Mr. De Leon had been a director of Argonaut since February 2003. Mr. De Leon is the managing partner of De Leon & Washburn, P.C., a law firm in Austin, Texas, which he founded in 1977. Prior to 1977, Mr. De Leon was the General Counsel of the Texas State Insurance Board. From February 1985 to November 1997, Mr. De Leon served as a director of Titan Holdings, Inc., a publicly traded property and casualty insurance holding company. Mr. De Leon brings to the Board experience and skills relating to the insurance regulatory environment in which the Company operates combined with a corporate legal background. In addition, Mr. De Leon's experience includes prior service as a director of a publicly traded, growth oriented, specialty property and casualty insurance holding company.
Kathleen A. Nealon (58) was appointed as a director of the Company in February 2011. Ms. Nealon's international career includes significant experience with risk management, compliance and regulatory issues with global companies. Ms. Nealon was the group head of legal and compliance at Standard Chartered Plc in London from 2001 until her retirement in 2004 where she also held additional international legal and compliance positions from 1992 to 2001. Prior to Standard Chartered Plc, Ms. Nealon practiced international banking and regulatory law in New York for 14 years. Ms. Nealon is also the Co-Chair of the European Advisory Board of Georgetown Law School and serves on the advisory council of the Institute of Business Ethics. Ms. Nealon also served on the boards of directors of Shire Plc from 2006 to 2010, Halifax Bank of Scotland Plc from 2004 to 2009 when it was merged into Lloyds Bank Plc. In addition, Ms. Nealon served on the board of directors of Cable and Wireless Communications Plc and its predecessor company, Cable and Wireless Plc, from 2005 until 2011. Ms. Nealon brings to the Board specialized expertise in the areas of corporate governance, compliance and risk management specific to the banking and financial services industry.
John H. Tonelli (47) became a director in 2010. Mr. Tonelli has been the Chief Executive Officer of Advanced Global Investments, Ltd., a New York based investment company with holdings in Eastern Europe, the Middle East and Latin America, since 2009. Mr. Tonelli has over twenty years of experience in finance, working both as an investment banker and as an attorney. Mr. Tonelli has advised the governments of Argentina, Chile, Paraguay and Uruguay on a wide variety of matters, including privatizations, debt and equity financings, and infrastructure projects. He has been a director of Converse Bank since August, 2009. From 2003 to 2009, Mr. Tonelli was a Senior Managing Director with J.P. Morgan & Co., Inc. and Bear Stearns & Co. Inc. where he was Head of International Project Finance and Emerging Markets Structured Finance. From 1999 to 2003, he was the founder and chief executive officer of International Venture Partners, LLC, an NASD member broker-dealer specializing in emerging markets. From 1992 to 1999, Mr. Tonelli was an attorney with Cadwalader, Wickersham & Taft where he was head of the Latin American practice group and founded the
firm's project finance group. Mr. Tonelli brings to the Board specialized expertise in finance and emerging markets that will benefit the Company's international growth strategy.
The following biographical information is for the three Class I directors whose terms will expire in 2014:
H. Berry Cash (73) becameto our Board of Directors for a directorterm of the Company immediately following the merger of Argonaut Group and PXRE in August 2007. Mr. Cash had been a director of Argonaut since May 2005. Mr. Cash has been a general partner of InterWest Partners, a venture capital fund, since 1985. Mr. Cash has also served on the board of directors of Ciena Corporation since April 1994, Silicon Laboratories Inc. since December 1997, and First Acceptance Corporation since November 1996. Mr. Cash also served as a director of i2 Technologies, Inc. from January 1996 until April of 2009. In addition to his capital raising experience, Mr. Cash brings to the Board a strong background in information technology, which plays an integral role in the Company's operations. Due to his experience in the venture capital sector, Mr. Cash also brings perspectives to the Board associated with the capitalization and management of organizations through the corporate life cycle.
John R. Power, Jr. (56) became a director of the Company immediately following the merger of Argonaut Group and PXRE in August 2007. Mr. Power had been a director of Argonaut since January 2000. He is currently President of the Patrician Group, a private investment firm located in Lisle, Illinois. Mr. Power has also been a director of certain financial subsidiaries of CNH Global, N.V. since January 1997. Mr. Power brings to the Board skills and attributes derived from a finance and commercial and investment banking background. In addition, due to his past and present service as a director of other publicly traded companies, Mr. Power has experience with the design and implementation of effective compensation programs that benefit the Company in his role as Chair of the Human Resources Committee. Mr. Power's prior service on the audit and executive committees of other publicly traded companies gives him a range of experiences and skills that compliment his current committee assignments with the Company.
Mark E. Watson III (47) became a director of the Company immediately following the merger of Argonaut Group and PXRE in August 2007. He has been President and Chief Executive Officer of Argo Group since the merger. He was President and Chief Executive Officer of Argonaut from January 2000three years until the merger after having joined ArgonautAnnual
General Meeting in 2023 and until their successors are duly elected and qualified, and (ii) Bernard C. Bailey, Fred R. Donner and Kevin J. Rehnberg as a director in June of 1999. He was a principal of Aquila Capital Partners, a San Antonio, Texas-based investment firm from 1998Class II directors to 1999 and served from 1992 to 1997 as a director and Executive Vice President, General Counsel and Secretary of Titan Holdings, Inc., a publicly traded property and casualty insurance holding company. Prior to that, Mr. Watson was an attorney with the New York based law firm Kroll & Tract from 1989 to 1992 where he represented international insurance and reinsurance companies. Due to his lengthy tenure, having previously held several executive positions at Titan Holdings, Inc. which was ultimately sold to USF&G Specialty Insurance Company, Mr. Watson brings to the Board a wealth of experience in the specialty property and casualty insurance sector. In his role as President and Chief Executive Officer of the Company, Mr. Watson brings to the Board critical insight into the Company's operating environment and growth strategy. Mr. Watson has been a member of theour Board of GovernorsDirectors for the remaining term of one year until the Property Casualty Insurers Association of America since June 2005Annual General Meeting in 2021 and has been a director of Houston International Insurance Group, Ltd. since December 2010.
Non-Employee Director Compensation
| ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(a) Name | (b) Fees Earned or Paid in Cash (1) | (c) Stock Awards | (d) Option Awards (2) | (e) All Other Compensation | (f) Total | |||||||||||
Gary V. Woods (a) (e) (h) | $ | 142,000 | $ | 0 | $ | 41,650 | $ | 0 | $ | 183,650 | ||||||
F. Sedgwick Browne (d) (h) | $ | 123,000 | $ | 0 | $ | 41,650 | $ | 0 | $ | 164,650 | ||||||
H. Berry Cash (f) (h) | $ | 115,000 | $ | 0 | $ | 41,650 | $ | 0 | $ | 156,650 | ||||||
Hector De Leon (b) (d) (h) | $ | 125,000 | $ | 0 | $ | 41,650 | $ | 0 | $ | 166,650 | ||||||
Nabil N. El-Hage (f) | $ | 74,250 | $ | 0 | $ | 41,650 | $ | 0 | $ | 115,900 | ||||||
Mural R. Josephson (c) | $ | 119,000 | $ | 0 | $ | 41,650 | $ | 0 | $ | 160,650 | ||||||
Kathleen A. Nealon (d) | $ | 81,750 | $ | 0 | $ | 41,650 | $ | 0 | $ | 123,400 | ||||||
John R. Power, Jr. (d) (g) | $ | 138,000 | $ | 0 | $ | 41,650 | $ | 0 | $ | 179,650 | ||||||
John H. Tonelli (f) | $ | 121,000 | $ | 0 | $ | 41,650 | $ | 0 | $ | 162,650 | ||||||
References next to each director's name in column (a) above refer to the applicable committee legend included in the committee fees section of the Non-Employee Director Fees Schedule on page 15. Amounts described in the tables aboveuntil their successors are duly elected and below are for all periods during 2011.
| |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Director | Cash Portion of Fees Earned for 2011 Service | Fees Earned for 2011 Service and Contributed to the Non-qualified Directors Deferred Compensation Plan | Total Fees Earned or Paid in Cash for 2011 Service | ||||||||
Gary V. Woods | $ | 0 | $ | 142,000 | $ | 142,000 | |||||
F. Sedgwick Browne | $ | 123,000 | $ | 0 | $ | 123,000 | |||||
H. Berry Cash | $ | 115,000 | $ | 0 | $ | 115,000 | |||||
Hector De Leon | $ | 125,000 | $ | 0 | $ | 125,000 | |||||
Nabil N. El-Hage | $ | 0 | $ | 74,250 | $ | 74,250 | |||||
Mural R. Josephson | $ | 59,500 | $ | 59,500 | $ | 119,000 | |||||
Kathleen A. Nealon | $ | 40,875 | $ | 40,875 | $ | 81,750 | |||||
John R. Power, Jr. | $ | 69,000 | $ | 69,000 | $ | 138,000 | |||||
John H. Tonelli | $ | 121,000 | $ | 0 | $ | 121,000 | |||||
Table of Contentsqualified.
The aggregate number of stock units and stock option awards owned by each of the non-employee directors and outstanding at December 31, 2011 was:
| ||||||||
---|---|---|---|---|---|---|---|---|
Name | Stock Units (#) | Stock Options (#) | ||||||
Gary V. Woods | 9,967 | 23,242 | ||||||
F. Sedgwick Browne | 3,298 | 22,357 | ||||||
H. Berry Cash | 1,701 | 23,242 | ||||||
Hector De Leon | 3,580 | 23,242 | ||||||
Nabil N. El-Hage | 3,531 | 5,000 | ||||||
Mural R. Josephson | 5,377 | 21,357 | ||||||
Kathleen A. Nealon | 2,693 | 5,000 | ||||||
John R. Power, Jr. | 6,858 | 23,242 | ||||||
John H. Tonelli | 1,695 | 10,000 | ||||||
| |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Name | ASC TOPIC 718 Expense (a) | GAAP Fair Value on the Grant Date (b) | Market Value at 12/30/2011 (c) | ||||||||
Gary V. Woods | $ | 31,322 | $ | 41,650 | $ | 0 | |||||
F. Sedgwick Browne | $ | 31,322 | $ | 41,650 | $ | 0 | |||||
H. Berry Cash | $ | 31,322 | $ | 41,650 | $ | 0 | |||||
Hector De Leon | $ | 31,322 | $ | 41,650 | $ | 0 | |||||
Nabil N. El-Hage | $ | 27,767 | $ | 41,650 | $ | 0 | |||||
Mural R. Josephson | $ | 31,322 | $ | 41,650 | $ | 0 | |||||
Kathleen A. Nealon | $ | 27,767 | $ | 41,650 | $ | 0 | |||||
John R. Power, Jr | $ | 31,322 | $ | 41,650 | $ | 0 | |||||
John H. Tonelli | $ | 31,329 | $ | 41,650 | $ | 0 | |||||
Bernard C. Bailey Age: 66 Director Since: N/A Committees: Expected to serve on Audit and Human Resources Other Current Public Directorships: Telos Corporation Other Previous Public Directorships Analogic Corp Experience: • President of Paraquis Solutions, a private consulting company focused on corporate governance and strategy (January 2020 – present). • During the period September 2018 to December 2019, he served as President of the Committee for Economic Development, abusiness-led, nonpartisan economic think tank. • Served as Chairman and CEO of Authentix, a private equity-backed global enterprise focused on anticounterfeiting and brand protection practices, from 2012 to 2018. Since its sale by the Carlyle Group to Blue Water Energy, he has continued to serve as Chairman of the Board of Authentix since September 2018. • Prior to that, he ran his own consulting company, Paraquis Solutions, LLC. Dr. Bailey also served as President and CEO of Viisage Technology, Inc. • Ph.D. in Management from Case Western Reserve University where his dissertation focused on corporate governance; MBA from The George Washington University School of Business as well as degrees in engineering and systems management from the University of California, Berkeley, University of Southern California, and the United States Naval Academy. Key Qualifications: Dr. Bernard Bailey’s career spans over three decades of business and management experience, including experience as a public-company Chief Executive Officer, as well as extensive board experience. He has expertise in the security and technology industries, serving both public and private sector customers. Thomas A. Bradley Age: 62 Director Since: 2018 Committees: Audit Committee Nominating (Chair) Other Current Public Directorships: None Other Previous Public Directorships None Experience: • Retired from Allied World Assurance Company Holdings, AG, a global provider of insurance and reinsurance solutions, in July 2017. He had served there as the Chief Financial Officer and Executive Vice President since 2012. • Prior to that, Mr. Bradley had previously served as the Executive Vice President & Chief Fıinancial Officer for two other public companies, Fair Isaac Corporation and the St. Paul Companies. • Also held senior financial and operational positions at Zurich Insurance Group, including Chief Financial Officer for North America and Chief Executive Officer of the Universal Underwriters Group (now Zurich Direct Markets). • Formerly a director of Nuveen Investments, Inc. • Received a Bachelor’s degree in accounting from the University of Maryland and a Masters in Business Administration from Loyola University of Maryland and is a Certified Public Accountant (inactive). Key Qualifications: Our Board considered Mr. Bradley’s extensive accounting, internal control, and audit functions. Mr. Bradley also possesses financial reporting expertise and a level of financial sophistication that qualifies him as a financial expert in his role as a member of the Audit Committee.Argo Group Deferred Compensation Plan for Non-Employee Directors
During Last Five Years:
During Last Five Years:
The Argo Group International Holdings Ltd. Deferred Compensation Plan for Non-Employee Directors was adopted on February 12, 2008. The plan provides that:
Non-Employee Director Fees Schedule
Fred R. Donner | ||
Age: 61 Director Since: N/A Committees: Expected to serve on Audit and Risk & Capital Other Current Public Directorships: None Other Previous Public Directorships None | Experience: • Senior Managing Director in the Global Insurance Practice of FTI Consulting (2018-present). • Former Executive Vice President, Enterprise Risk Management for Travelers Insurance Co. (“Travelers”) and Chief Financial Officer for its Business and International Insurance segment from 2014 until his retirement in 2017. • Joined Travelers in 2009 as Senior Vice president and Chief Financial Officer of its Personal Lines Insurance segment. Also served as Chief Financial Officer and Chief Operating Officer of its Business Insurance segment from 2010 to 2014. • Prior thereto, served as Executive Vice President and Chief Financial Officer of RenaissanceRe Ltd., a New York Stock Exchange listed, Bermuda-based international reinsurance company. • Began his career in the audit practice in KPMG’s New York City office and during his 23 years at the firm he rose through the ranks to become the NationalPartner-in-Charge of the firm’s Insurance Practice, overseeing the delivery of audit, advisory and tax services to all facets of the insurance industry. • Holds a bachelor’s degree in business administration from Pace University and currently serves on the advisory board for the University’s Lubin School of Business. He is a member of the American Institute of Certified Public Accountants. | |
Key Qualifications: Our Board considered that Mr. Donner is a senior finance executive with over 30 years of experience in the insurance industry. He has extensive experience in financial and operational roles and advising corporations through restructurings, international expansion, risk management and capital market transactions. |
Anthony P. Latham | ||
Age: 69 Director Since: 2019 Committees: Nominating Risk & Capital Other Current Public Directorships: None Other Previous Public Directorships Ecclesiastical Insurance | Experience: • Independent director of the Company’s wholly owned subsidiary, Argo Managing Agency Limited, which underwrites insurance risks for the Company’s syndicate at Lloyd’s of London, since 2016. • Previously a board member of Pool Re for over two decades where he served as chairman for more than 12 years. • Previously a board member of Codan A/S, Airclaims, Flagstone Re, British Aviation Insurance and Ecclesiastical Insurance where he chaired its Risk Committee. • Began his career with Sedgwick (now part of Marsh Inc.) before joining RSA Group where, over a period of 17 years, he served as a member of the group executive and held a number of senior executive roles, including managing director of the global risks division. | |
Key Qualifications: Our Board considered Mr. Latham’s significant international insurance industry management and operational experience gained as a senior executive of a global insurance business and governance experience. Mr. Latham has international insurance industry experience spanning more than four decades. |
Dymphna A. Lehane | ||
Age: 56 Director Since: 2017 Committees: Audit Human Resources Other Current Public Directorships: None Other Previous Public Directorships Aviva Insurance Ireland | Experience: • Independent Chair of the Debt Market Integrator, a United Kingdom Government (Cabinet Office) venture serving a number of government departments, and has served in such capacity since January 2016 and Chairman of ORIC International, the Insurance Industry Risk Consortium, since December 2015. • From 1988 to 2007, Ms. Lehane was a Senior Partner at Accenture, including serving as Global Managing Partner, Insurance Industry. • Holds a BSc Computer Science from the University of Witwatersrand and an MBA from the International Institute for Management Development in Lausanne, Switzerland. | |
Key Qualifications: Our Board considered Ms. Lehane’s specialized expertise in the global insurance industry and experience in the areas of corporate governance and risk management specific to the financial services industry. Ms. Lehane’s30-year international career includes significant experience dealing with strategic issues andtechnology-led business change at global insurance companies. |
Samuel G. Liss | ||
Age: 63 Director Since: 2019 Committees: Human Resources Nominating Other Current Public Directorships: Verisk Analytics, Inc. Other Previous Public Directorships DST Systems, Inc. | Experience: • Managing principal of Whitegate Partners LLC, an advisory firm to operating companies and private equity firms specializing in the financial services and business services sectors, since 2011. • Adjunct Professor at both New York University Stern School of Business and Columbia Law School. • From an operational perspective, Mr. Liss served as Executive Vice President and member of the Management Committee at Travelers Insurance, where he was responsible for corporate development, as well as group business head of one of Travelers’ three operating divisions - Financial, Professional and International Insurance. • Prior to Travelers and an Executive Vice President role at the St Paul Companies, Mr. Liss was a Managing Director in the investment banking and equity divisions at Credit Suisse. He began his career at Salomon Brothers. • Previously served on the board of directors of Ironshore Insurance, Inc. and Nuveen Investments, Inc. • Mr. Liss received a Bachelor of Arts degree from Wesleyan University, pursued graduate studies at the London School of Economics and received a Masters of Business Administration from New York University. | |
Key Qualifications: Our Board considered Mr. Liss’ management and operational experience gained as a senior executive of a global insurance business, expertise in investment banking and capital markets, and a broad range of public company governance experience. |
Carol A. McFate | ||
Age: 66 Director Since: 2020 Committees: Expecting to Serve on Nominating and Investment Other Current Public Directorships: Rent-A-Center, Inc. Other Previous Public Directorships None | Experience: • Former Chief Investment Officer of Xerox Corporation, a global corporation that sells print and digital document products and services, from late 2006 until she retired in October 2017. She was responsible for the insourcing, oversight and management of retirement investments for the US, Canada and the UK. • Prior to that, Ms. McFate served in a number of senior executive finance and investment management roles in the insurance industry over nearly two decades, including Executive Vice President and Global Treasurer of XL Global Services (the shared services subsidiary of XL Capital Ltd); Vice President & Treasurer of American International Group, Inc.; and Senior Vice President, Prudential Investment Corp. (investment subsidiary of The Prudential Insurance Company). • In July 2019, Ms. McFate joined the Board of Verger Capital Management, LLC, a registered investment manager, and serves on the Audit & Compliance Committee, Nominating & Governance Committee and the Investment Committee. • Ms. McFate was elected to the Board of Directors ofRent-A-Center, Inc. in June 2019, where she serves on the Audit and Risk Committee and the Nomination and Corporate Governance Committee. • Previously, she served on the Board of Directors of CIEBA, Inc. and the Board of Trustees of The Katharine Hepburn Cultural Arts Center and the Parsons Dance Foundation. • Ms. McFate earned an MBA from the Harvard University Graduate School of Business (Harvard Business School) and a B.S. in Economics from Juniata College. She is also a Chartered Financial Analyst (CFA). | |
Key Qualifications: Our Board considered Ms. McFate’s extensive experience in senior positions over her40-year career in executive roles in the insurance and financial services industries. Her experience in finance and investment management brings expertise in global capital and investment markets, multi-discipline risk management, capital and liquidity management, and insurance company financial management. |
Kathleen A. Nealon | ||
Age: 66 Director Since: 2011 Committees: Audit Risk & Capital Other Current Public Directorships: None Other Previous Public Directorships None | Experience: • Independent director of the Company’s wholly owned subsidiary, Argo Managing Agency Limited, which underwrites insurance risks for the Company’s syndicate at Lloyd’s of London, since 2013. • Group head of legal and compliance at Standard Chartered plc in London from 2001 until 2004 where she also held additional international legal and compliance positions from 1992 to 2001. • Prior to Standard Chartered plc, Ms. Nealon practiced international banking and regulatory law in New York for 14 years. • Ms. Nealon is also theCo-Chair of the European Advisory Board of Georgetown Law School and served on the advisory council of the Institute of Business Ethics for many years. • In 2012, Ms. Nealon was named to the board of Health Education England, an executivenon-departmental public body, sponsored by the Department of Health that manages health education in England. Ms. Nealon also serves on the Finance and Planning Committee of Westminster Cathedral in London, England. • Was a Senior Associate at Judge Business School, Cambridge University for Executive Education Training with an emphasis on Corporate Governance and Business Ethics. Ms. Nealon also served as a member of the Advisory Board of the Centre for Business Research specializing in Corporate Governance at Cambridge University. • Earned an AB degree in English from Georgetown University in 1975 and a JD degree from Georgetown University School of Law in 1978. Ms. Nealon received the Women’s Forum Award for outstanding female Alumnae in 2008 and the Deans Award for outstanding Alumna for her contributions to the culture of Georgetown and the practice of law in 2018. | |
Key Qualifications: Our Board considered Ms. Nealon’s specialized expertise in the areas of corporate governance, compliance and risk management specific to the banking and financial services industries. Ms. Nealon’s international career includes significant experience with risk management, compliance and regulatory issues of global companies. |
Al-Noor Ramji | ||
Age: 65 Director Since: 2017 Committees: Human Resources Investment Other Current Public Directorships: Virtusa Corporation Other Previous Public Directorships Evry AS | Experience: • Group Chief Digital Officer at Prudential plc, an international financial services group, since January of 2016 and is responsible for developing and executing an integrated, long-term digital strategy for the group. • Before joining Prudential, he worked at Northgate Capital, a venture firm in Silicon Valley, from November 2014 to December 2015 where he ran technology-focused funds. • Prior to working at Northgate Capital, Mr. Ramji served as Chief Strategy Officer of Calypso Technology, Inc. from March 2014 until July 2015. Prior to this, he was a director of Misys plc, a financial services group, and also served as an executive vice president of Misys Plc. • Previously held leading technology and innovation roles at BT Group, Qwest Communications, Dresdner Kleinwort Benson and Swiss Bank Corporation. | |
Key Qualifications: Our Board considered Mr. Ramji’s extensive background in information technology services and digital strategies which play an integral role in the Company’s operations. |
Kevin J. Rehnberg | ||
Age: 56 Director Since: N/A Committees: None Other Current Public Directorships: None Other Previous Public Directorships None | Experience: • President and Chief Executive Officer of the Company since February 2020; Interim President and Chief Executive Officer of the Company from November 2019 until February 2020. • Prior thereto, Mr. Rehnberg was President of the Americas and Chief Administrative Officer of the Company since January 2019. • From March 2013 to January 2019, served President of Argo Group’s U.S. Operations. • Prior to joining the Company, Mr. Rehnberg served as executive vice president for specialty lines at OneBeacon Insurance where he oversaw specialty business. • Began his career at Chubb in 1986 and held a number of roles with increasing responsibility at Chubb Atlantic, Liberty, St. Paul and St. Paul Travelers through 2005. • Holds a bachelor’s degree in History from Princeton University. | |
Key Qualifications: Our Board considered Mr. Rehnberg’s wealth of experience in the specialty property and casualty insurance sector and his critical understanding of Argo Group operations. |
John H. Tonelli | ||
Age: 55 Director Since: 2010 Committees: Investment (Chair) Nominating Other Current Public Directorships: None Other Previous Public Directorships Garnero Group Acquisition | Experience: • Managing Director and Head of Debt Capital Markets & Syndication at Oppenheimer & Co., Inc. since June of 2015. • Previously, he was the Chief Executive Officer of Advanced Global Capital, a New York-based private investment-company, from 2012 until 2015 and Chairman of Advanced Global Securities, a FINRA registered Broker-Dealer based in New York. • Director of Garnero Group Acquisition Company from May 2014 to January 2016 where he also served as Chairman of its Audit Committee. • From 2009 to 2013, Mr. Tonelli was Chief Financial Officer of Corporacion America, S.A., a global transportation and infrastructure company. Mr. Tonelli continues to serve as a financial advisor to Corporacion America. • From 2003 to 2009, Mr. Tonelli was a Senior Managing Director with J.P. Morgan & Co., Inc. and Bear Stearns & Co. Inc. where he was Head of International Structured Finance. • From 1999 to 2003, he was CEO of International Venture Partners, LLC, a NASD member broker-dealer specializing in emerging markets. • From 1992 to 1999, Mr. Tonelli was an attorney with Cadwalader, Wickersham & Taft where he was head of the Latin American practice group. • Earned a BA from Columbia University in 1987 and earned a JD/MBA from Fordham University in 1993. | |
Key Qualifications: Our Board considered Mr. Tonelli’s specialized expertise in finance and emerging markets knowledge beneficial to the Company’s international operations. Mr. Tonelli has over 25 of experience in finance, working both as an investment banker and as an attorney. Mr. Tonelli has advised numerous companies and governments on direct investments, securities issuance, privatizations and infrastructure financings. |
NON-EMPLOYEE DIRECTOR COMPENSATION
Ournon-employee directors receive a combination of cash retainers, meeting fees and travel fees as described in the following table. In addition, ournon-employee directors receive annual grants of equity compensation. We also reimburse our directors for travel, lodging and related expenses incurred in attending our board or committee meetings or for travel related to the Company’s business. The following table sets forth the 2019 director compensation program, which did not change as compared to 2018.
Cash Compensation | ||
Annual Retainer (paid quarterly installments) | $ | |
Board Meeting Fees | Special Meetings of the Board = $2,000 per meeting Special Meetings of the Audit Committee = $1,000 per meeting Travel for Board and Travel | |
Board and Committee Retainers (paid installments) | (a) | |
(b) | ||
(c) Member, Audit Committee = $10,000 annual retainer | ||
(d) Chair, Human Resources Committee = $15,000 annual retainer | ||
(e) Member, Human Resources Committee = $8,000 annual retainer | ||
(f) Chair, Investment Committee = $15,000 annual retainer | ||
(g) Member, Investment Committee = $8,000 annual retainer | ||
(h) Chair, Nominating and Corporate Governance Committee = $15,000 annual retainer | ||
(i) Member, Nominating and Corporate Governance Committee = $8,000 annual retainer | ||
(j) Chair, Risk & Capital Committee = $15,000 annual retainer | ||
(k) Member, Risk & Capital Committee = $8,000 annual retainer | ||
Equity Compensation | ||
Annual Equity Awards | Annual grant of $70,000 awarded in restricted stock granted on the date of the annual general meeting of shareholders each year. Awards vest on the day preceding the next annual general meeting of shareholders |
2019Non-Employee Director Compensation
The following table sets forth ournon-employee directors’ 2019 cash and equity compensation. References next to each director’s name refer to the applicable committee legend included in the “Committee Retainers” section of theNon-Employee Director Compensation cash compensation schedule above.
Name | Fees Earned or Paid in Cash(1) | Stock Awards(5) | Option Awards | All Other Compensation | Total | |||||||||||||||
Gary V. Woods (a) (e) (g) | $ | 208,750 | $ | 69,333 | $ | — | $ | — | $ | 278,683 | ||||||||||
Thomas A. Bradley (c) (h) | $ | 188,250 | $ | 69,333 | $ | — | $ | 7,500(6) | $ | 265,683 | ||||||||||
F. Sedgwick Browne (c) (j) | $ | 164,000 | $ | 69,333 | $ | — | $ | — | $ | 233,933 | ||||||||||
Hector De Leon (c) (e) | $ | 148,000(2) | $ | 69,333 | $ | — | $ | — | $ | 217,933 | ||||||||||
Mural R. Josephson (b) (k) | $ | 206,000 | $ | 69,333 | $ | — | $ | — | $ | 275,933 | ||||||||||
Anthony P. Latham (i) (k) | $ | 261,590(3) | $ | 87,381 | $ | — | $ | — | $ | 348,971 | ||||||||||
Dymphna A. Lehane (c) (e) | $ | 138,000 | $ | 69,333 | $ | — | $ | — | $ | 207,933 | ||||||||||
Samuel G. Liss (e) (i) | $ | 113,375 | $ | 87,381 | $ | — | $ | 7,500(6) | $ | 208,256 | ||||||||||
Kathleen A. Nealon (c) (k) | $ | 215,700(4) | $ | 69,333 | $ | — | $ | — | $ | 285,633 | ||||||||||
John R. Power, Jr. (c) (d) | $ | 224,000 | $ | 69,333 | $ | — | $ | — | $ | 293,933 | ||||||||||
Al-Noor Ramji (e) (g) | $ | 110,000 | $ | 69,333 | $ | — | $ | — | $ | 179,933 | ||||||||||
John H. Tonelli (f) (i) | $ | 152,000 | $ | 69,333 | $ | — | $ | — | $ | 221,933 |
(1) | Includes all fees related to special meetings of the Board and travel for Board and Committee meetings, as well as for Company affairs as noted in the narrative disclosure above. |
(2) | $15,000 of this amount represents payment to Mr. De Leon for service on the board of directors of the Company’s subsidiary, Argo Group US, Inc. |
(3) | $158,215 of this amount represents payments to Mr. Latham for service on the board of directors of the Company’s subsidiary, Argo Managing Agency Ltd. Mr. Latham receives 120,000 in British Pounds for his service as Chairman of the Board of this subsidiary. The payment was converted into U.S. dollars for purposes of the foregoing table using a December 31, 2019 exchange rate of 1.31846 US$/GBP. |
(4) | $85,700 of this amount represents payments to Ms. Nealon for service on the board of directors of the Company’s subsidiary, Argo Managing Agency Ltd. Ms. Nealon was paid 65,000 in British Pounds for her service as a board member and chair of the Remuneration Committee of this subsidiary. The payment was converted into U.S. dollars for purposes of the foregoing table using a December 31, 2019 exchange rate of 1.31846 US$/GBP. |
(5) | Represents the grant date fair value of restricted stock granted by the Company during 2019, calculated in accordance with U.S. GAAP ASC Topic 718, calculated based on the closing stock price of a share of Company common stock on the date of grant. |
(6) | Represents contributions by the Company to a charitable organization selected by the director under a charitable contribution matching program. |
The following table sets forth the aggregate number of shares of restricted stock and stock appreciation rights owned by each of ournon-employee directors on December 31, 2019:
Name | Shares of Restricted Stock | SARs* | ||||
Gary V. Woods | 68,226 | 0 | ||||
Thomas A. Bradley | 2,857 | 0 | ||||
F. Sedgwick Browne | 18,886 | 7,652 | ||||
Hector De Leon | 17,737 | 7,652 | ||||
Mural R. Josephson | 10,736 | 7,652 | ||||
Anthony P. Latham | — | — | ||||
Dymphna A. Lehane | 1,189 | — | ||||
Samuel G. Liss | — | — | ||||
Kathleen A. Nealon | 14,833 | 7,652 | ||||
John R. Power, Jr. | 12,652 | 7,652 | ||||
Al-Noor Ramji | 1,189 | — | ||||
John H. Tonelli | 16,608 | 7,652 |
* | Prior to 2014, the Company provided a portion of director equity awards in the form of stock appreciation rights. |
All Argo Groupof ournon-employee directors are requiredexpected to meet Argo Group's Stock Ownership Guidelines which are discussed on page 27 of the Compensation Discussion & Analysis.
PROPOSAL 2APPROVAL OF AMENDMENT AND RESTATEMENT OF BYE-LAWS
Shareholders are asked to consider and approve amendments to the Company's Amended & Restated Bye-Laws. The proposed amendments relate to advance notice and information requirements for shareholders to bring proposals and director nominations before any meeting of our shareholders. The full text of the proposed Amended & Restated Bye-Laws incorporating the proposed amendments is attached to this proxy statement as Appendix I. The following summary of the proposed amendments is qualified in its entirety by reference to the text set forth in Appendix I, which text is incorporated herein by reference:
or to increase or decrease the voting power or pecuniary or economic interest of such party, with respect to Argo Group's shares and (iii) a description of all agreements between or among such party and any other person or persons in connection with the proposal of any such business and any material interest of such party in such business, including any anticipated benefit therefrom to such party.
In addition, all of ournon-employee directors are subject to the Company’s Insider Trading Policy that, among other things, prohibits hedging transactions involving the Company’s equity securities and the rules and regulations promulgated thereunder.
We believe these additional disclosure and advance notice requirements benefit our shareholders by enabling us to take appropriate steps and have sufficient time to evaluate shareholder proposals and director nominees so that our board of directors can properly advise our shareholders. Historically, we have filed our proxy statement approximately 50 days prior to our annual general meeting to give our shareholders sufficient time to review and consider the proposals and other matters set forth in our proxy statement and we intend to continue this practice. Under our current bye-laws, such a timeline would leave us with as little as ten days to undertake the review and analysis necessary for our board of directors to determine the validity of a proposalplaces restrictions on direct or nomination and to undertake the necessary due diligence to further determine whether the proposal or nomination is in the best interestsindirect pledging of our company and should be recommended for or against by our board of directors. We believe that the benefit to all of our shareholders of allowing our board the necessary time to review and consider any proposal or nomination significantly exceeds any adverse effect of moving the advance notice requirement from 60 days to 90 days, which we believeequity securities. The Company’s Insider Trading Policy is a more typical requirement for publicly traded companies of our size.discussed beginning on page 49.
We further believe that the additional information required to be provided by the proposing or nominating shareholder(s) and any applicable board of directors nominee (and certain affiliates and associates of such parties) will aid our board of directors in collecting information necessary to review the nature of the proposal and any interests of the proposing shareholders or nominees that may differ from the interests of our company or our shareholders generally, as well as the qualifications and independence of any director nominee.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE AMENDMENT AND RESTATEMENT OF ARGO GROUP'S BYE-LAWS. UNLESS DIRECTED OTHERWISE, IT IS THE INTENTION OF THE PROXIES NAMED IN THE FORM OF THE PROXY THAT ACCOMPANIES THIS PROXY STATEMENT TO VOTE FOR THE APPROVAL OF SUCH PROPOSAL.
PROPOSAL 3
3: ADVISORY VOTE ON THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY
STATEMENT
The Dodd-Frank Wall Street Reform and Consumer ProtectionSection 14A of the Exchange Act enacted in July 2010 (the "Dodd-Frank Act"), included a requirementrequires that companies provide shareholders with an opportunity to vote on an advisory,non-binding basis on the compensation of the Company's NEOs,Company’s Named Executive Officers, as disclosed in the Compensation Discussion &and Analysis and related tables in thethis proxy statement in which the vote is included.statement. This vote is on the compensation reported for the NEOs in the proxy for the prior year and is commonly referred to as “say on pay.” Consistent with the preference expressed by our shareholders at our 2017 annual general meeting, our Board of Directors has been named Say-on-Pay.determined that we will include a vote to approve, on an advisory,non-binding basis, our executive compensation in our proxy materials every year until the next required advisory vote to approve the frequency of an advisory vote on executive compensation, which will occur no later than our 2023 annual general meeting.
As discussed more fully in the Executive Summary of the Compensation Discussion and Analysis section which begins on page 1931 and the discussion whichthat follows it, the Company'sCompany’s compensation program is designed to link pay to both business and individual performance and is intended both to retain superior, productive employees and to attract new talent necessary to continue the company's expansion both internationally and in the United States.Company’s profitable growth. The program is designed to align the interests and motivations of employeesour executives with the creation and protection of shareholder value. The program includes three main components:components – base salary, cashannual incentive awards and long-term incentive awards. The components of the program interact to provide both short-term and long-term incentives for our NEOs.
We consider growth in book value per share as the most comprehensive assessment of our ability to create shareholder value. Since 2002, the Company's book value has grown at a compounded rate of 10.2% per year. In our view, this is the most relevant measurement period since it represents the point after which current management actions are most clearly reflected in the Company's financial results. During this time the Company transformed itself from being primarily a California-based workers compensation carrier to an international specialty carrier. The Company believes that its NEOs were instrumental in achieving these results and the compensation packages designed for them were intended both to reward them for their current achievements and to incent them to continue to excel in the future. Due to the unprecedented frequency of catastrophe activity during 2011, the Company recorded a decrease in book value of 3.8%. Nonetheless, we believe our record continues to compare well with any of our peers or direct competitors in terms of overall value creation, particularly given the extraordinary economic and market conditions facing our industry over the past several years. Accordingly, the Company requests shareholder approval of the following resolution:
"RESOLVED,RESOLVED, that the Company's ShareholdersCompany’s shareholders approve, on an advisory,non-binding basis, the compensation of the Named Executive Officers as disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion included herein."
An advisory vote is not binding upon the Company. However, the Human Resources Committee, which is responsible for designing and administering the Company'sCompany’s executive compensation program, values the opinions expressed by shareholders and will consider the outcome of the vote when making future compensation decisions related to the Company’s NEOs.
Required Vote and Board Recommendation
The approval, on an advisory,non-binding basis, of the compensation of our Named Executive Officers will be decided by an ordinary resolution; that is a resolution duly adopted by the Board of Directors, which has already occurred, and then approved by shareholders with a simple majority of votes cast in person or by proxy. Votes may be cast in favor of or against this proposal or a shareholder may abstain from voting. Abstentions and brokernon-votes will not count as votes cast and, therefore, will have no effect on the outcome of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THIS
PROPOSAL. IT IS THE INTENTION OF THE PROXIES NAMED IN THE FORM OF THE PROXY
THAT ACCOMPANIES THIS PROXY STATEMENT TO VOTE FOR THE APPROVAL OF SUCH
PROPOSAL.
Table of ContentsCOMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“NAMED EXECUTIVE OFFICERS
CD&A”) discusses our compensation policies and determinations that applied to the following named executive officers, or NEOs:
The following table sets forth, for the individuals who are currently serving as NEOs of Argo Group and its subsidiaries, such person's name, age and position with Argo Group and its principal subsidiaries. Each such executive officer serves at the pleasure of the Board of Directors.
Name | Title | ||||||
| President and Chief Executive | ||||||
Jay S. Bullock | |||||||
| |||||||
| Group Head of International Operations | ||||||
Axel Schmidt | Chief Underwriting Officer | ||||||
Former Named Executive Officers | |||||||
Mark E. Watson III | Former President and Chief Executive Officer | ||||||
Jose Hernandez | Former Chair, International Operations |
Business Experience of Named Executive Officers
Mark E. Watson III has been* Appointed to Interim President and Chief Executive Officer of Argo Group since August 2007. He had previously beenon November 5, 2019 and President and Chief Executive Officer on February 18, 2020.
Leadership Transition
The Company undertook a number of Argonaut sinceleadership changes in 2019. In January 2000. A description of Mr. Watson's business experience can be found on page 12 where the biographical information for the three Class I directors whose terms will expire in 2014 is set forth.
Jay S. Bullock was appointed Chief Financial Officer of Argo Group on May 13, 2008. He joined Argo Group from Bear Stearns & Co. Inc. where he was a Senior Managing Director2019, Kevin J. Rehnberg, formerly our President and Head of Bear Stearns' Insurance Investment Banking Group. WhileU.S. Operations, was appointed Group Chief Administrative Officer and Head of the Americas. In January 2019, Matt Harris, former Head of Europe and Asia, was promoted to Group Head of International Operations, succeeding Jose Hernandez, who transitioned to the role of Chair, International Operations at Bear Stearns,that time. On November 5, 2019, we announced that Mark E. Watson III, our former President and Chief Executive Officer, would step down from the position of President and Chief Executive Officer, effective immediately, and would remain anon-executive employee of the Company through December 31, 2019. The Board appointed Mr. Bullock focusedRehnberg the Interim President and Chief Executive Officer, effective on November 5, 2019. Mr. Hernandez left the Company as of December 31, 2019. On February 18, 2020, the Board appointed Mr. Rehnberg as the Company’s President and Chief Executive Officer. Please see the “Management Transition Compensation” section of this CD&A for further information regarding compensation adjustments made in connection with the 2019 management transition.
Business Overview
Argo is an underwriter of specialty insurance sector. In this role, he advised on company acquisitions, mergers and salesreinsurance products in the property and casualty market, a consistent leader in U.S. excess and surplus lines for over two decades, and a top Lloyd’s syndicate by stamp capacity. The Company operates in two segments, U.S. and International, with U.S. comprised mostly of liability products and International being dominated by both property and specialty insurance. We target niches where we can develop a meaningful position and where we believe we will generate superior underwriting profits.
2019 Company Performance and Strategy
Our underwriting results were adversely impacted by increases to loss reserve estimates during 2019. Primarily concentrated in our International segment, these changes in actuarial estimates affected both the current and prior accident years, reflecting rising claims severity experienced across the industry, as well as all formsnew information received during the year relating to specific claims across various lines of publicbusiness. A significant portion of the reserve charges came from businesses where we have taken aggressive underwriting actions, including exiting
underperforming lines of business, and private financings and restructurings. During this period, he was an advisor to Argonaut Group, Argo Group's predecessor company, onwhere we had previously terminated coverholder contracts. In addition, the decline in net income reflects the effects of a number of transactions. Priorunique items relating to joining Bear Stearns in 2000, Mr. Bullock was a Managing Director at First Union Securities. He is an honors graduaterecent proxy solicitation efforts, our Board of Southern Methodist UniversityDirectors review of certain governance and received his MBA from The McColl Schoolcompensation matters, costs associated with the departure of Business, Queen's College, Charlotte, North Carolina. Mr. Bullock also holds the designation of Certified Public Accountant (CPA).
Barbara C. Bufkin was appointed Senior Vice President, Business Development of Argo Group in August 2007our former CEO and was promoted to Executive Vice President in March 2011. She began working with Argonaut Group as a reinsurance consultant in 2001 and formally joined the company as Vice President, Corporate Business Development in September, 2002. In 2007, after the merger with PXRE, she agreed to relocate to Bermuda and assumed responsibility for new business strategies and development as well as ceded reinsurance for Argo Group. She has spent her entire career in reinsurance and insurance. Before she joined Argonaut, she held a number of senior positions with Swiss Re subsidiaries and a number of executive positions as a reinsurance intermediary with Sedgwick Group and EW Blanch. She graduated cum laude from the State University of New York at Buffalo, with a B.A. in Philosophy. She is an alumna of Leadership Texas, Stanford Executive Education, and Wharton Executive Education. She was a Director of the Southwestern Insurance Information Service for eight years. In 2000, she was nominatedcharges related to the Texas Women's Halltermination of Fame and in 2004 she was selected to the Class of Leadership America.
Andrew Carrier joined Argo Group as President of its Reinsurance Segment in June 2007 and led the formation of the Company's Bermuda based reinsurance company, Argo Re. In May 2009, Mr. Carrier assumed the role of Syndicate 1200's Director of Underwriting in addition to his responsibilities as President of Argo Re. In January 2011, Mr. Carrier became Chief Underwriting Officer of Argo Group. After graduating from Cambridge University with a degree in Modern Languages, Mr. Carrier joined the Kiln Group at Lloyd's in 1984. He became a Director of its Managing Agency in 1995 and was appointed Active Underwriter of its flagship Syndicate 510 and its catastrophe Syndicate 557 in 2000. While at Kiln, Mr. Carrier was Chairman of the Lloyd's International Reinsurance Committee and a member of the Lloyd's Underwriting Advisory Committee.
COMPENSATION OF EXECUTIVE OFFICERS
The information referenced in Item 11 of the Company's Form 10-K for the year ended December 31, 2011 can be found under the "Compensation Discussion and Analysis," "Executive Compensation" and "Human Resources Committee Interlocks and Insider Participation" headings of this Proxy Statement.
COMPENSATION DISCUSSION AND ANALYSISExecutive Summary
The business of underwriting insurance is cyclical. Because not all lines of business in all geographic regions follow the same path during a cycle, we believe that a company with a diverse underwriting platform, both by line of business and geography, is best positioned to succeed across the underwriting cycle. The existence of a diverse platform allows a company to deploy capital in the most attractive product lines while reducing its presence in lines where the competition is more aggressive. To this end, the Company has developed a platform with operations in Bermuda, the United States, the United Kingdom, Europe, Brazilcertain sponsorship agreements and the Middle East offering products in both the insurance and reinsurance businesses. The Company is continuingdisposal of certain long-lived assets. Our investment portfolio continued to yield strong returns, as our focus on both product and geographic expansion to add to the diversity of its operations.
In 2011, the insurance industry recorded over $100 billionstrategic asset allocation benefitted our results, specifically in losses from catastrophic events worldwide and the U.S. property and casualty industry experienced its largest underwriting loss since 2002 according to A.M. Best. Despite this unusual catastrophe activity, our losses were commensurate with our expectations for such events and the strength and integritycore investment portfolio. A summary of our platform ensured that these significant catastrophes were within our capacityfinancial results for fiscal 2019 as compared to manage. In addition, we made a strategic decision to reposition our property catastrophe portfolio by materially reducing our exposure to risks situated in geographies where returns are currently inadequate.
During periods of intense competition and depressed prices, or soft markets, insurers often choose to examine and strengthen their strategies and platforms while constraining underwriting. We believe companies that are able to act quickly when a hard market materializes are likely to benefit the most from it. Accordingly, throughout the current prolonged soft market period, Argo Group has remained focused on initiatives intended to position the Company for success across the cycle and in the next hard market. As described below, we took steps to improve our financial strength and the capability and efficiency of our operations, we expanded our geographic footprint and we enhanced our support functions to reduce the time and cost of delivering our services.
During 2011 Argo Group's accomplishments included the following:
For the Year Ended December 31, | ||||||||
(in millions, except per share amounts) | 2019 | 2018 | ||||||
Gross written premiums | $ 3,129.2 | $ 2,955.2 | ||||||
Total revenue | 1,969.7 | 1,801.8 | ||||||
Net (loss) income | (8.4) | 63.6 | ||||||
Adjusted operating (loss) income before taxes (1) | (36.2) | 139.6 | ||||||
Comprehensive income (loss) | 72.5 | (14.3) | ||||||
Book value per share | 51.80 | 51.43 | ||||||
Cash dividends paid per share during the year | 1.24 | |||||||
Book value per share including dividends | 53.04 | |||||||
Book value per share percentage decrease | 3.1% |
(1) | Excludes net realized investment gains of $80.0 million, foreign currency exchange gains of $9.6 million, other corporate expenses of $37.6 million and impairment of goodwill of $15.6 million for the year ended December 31, 2019. Excludes net realized investment losses of $72.0 million and foreign currency exchange gains of $0.1 million for the year ended December 31, 2018. |
Remaining well capitalized is the most relevant measurement period since it represents the point after which current management actions are most clearly reflected in the financial results. Due to the unprecedented frequency of catastrophe activity during 2011, the Company recorded a decrease in book value of 3.8%. Nonetheless, we believe our record continues to compare well with anyone of our peers or direct competitors in termskey financial objectives. This objective is balanced against our efforts to return excess capital to our shareholders through the payment of overall value creation, particularly given the extraordinary economiccash dividends and, market conditions facing our industry over the past several years.
Our Track Record:Maximizing Shareholder ValueBVPS Growth Since 2002
We remained focused on improving the capabilities and efficiency of our operations:
solutions provider for MGA's, acquired the operating assets of SN Potter Insurance Agency, a boutique insurance program manager known for its industry-leading expertise in winery programs, which insures bonded and virtual wineries, vineyard estates, custom crush facilities and storage operations. Alteris' ARIS division, the world's first underwriter of title insurance for fine art and collectibles, also launched partnering initiatives with several of the world's top insurers serving the art industry. In addition, our Commercial Programs unit established a landscape and arborist program partnership tailored to the needs of landscape and arborist contractors that offers coverage for property, crime, inland marine, commercial auto and excess risks.
Overview of Company's Compensation Philosophy
The Company's compensation program is intended both to retain superior, productive employees and attract new talent necessary to continue the Company's expansion internationally and in the United States. The program is designed to align the interests and motivations of employees with the creation and protection of shareholder value. The program includes three main components: base salary, annual cash incentive awards and long-term incentive awards. The components of the program interact to provide both short-term and long-term incentives for our NEOs. Specifically:
A complete discussion of the Company's Compensation Philosophy including the Stock Ownership Guidelines begins on page 24.
During 2011, the Company took the following compensation actions related to the NEOs:
The graph below illustrates our growth in BVPS over the combined ratio achievedpast ten years. The increase in BVPS during 2019 was primarily a function of an increase in the total returns recognized across the investment portfolio, partially offset by an underwriting loss driven by the Company. Although it was determined that each of the NEOs had met or exceeded their individual performance goals, due to the unprecedented frequency of catastrophe activity during 2011, none of the NEOs were able to meet or exceed the Company's financial goals for the year based on these metrics. The individual performance metrics included, among other things, the execution of the Company's capital management program, development of expense management initiatives and growth initiatives including the continued expansion of the Company's global platform.
sets forth the fair market value as of the grant date for grants made to the NEOs during 2011 reported in columns (e) and (f) of the Summary Compensation Table after adjustments for non-completion of performance goals:
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Name | 2011Target Awards as Reported in Columns (e) and (f) of the Summary Compensation Table ($) | % of Goals Achieved | 2011Actual Awards – Subject to Time Vesting ($) | |||||||
Mark Watson | $ | 2,515,097 | 50 | % | $ | 1,257,549 | ||||
Jay Bullock | $ | 673,913 | 69 | % | $ | 465,000 | ||||
Barbara Bufkin | $ | 616,133 | 69 | % | $ | 425,132 | ||||
Andrew Carrier | $ | 764,057 | 55 | % | $ | 420,231 |
A complete discussion of 2011 compensation decisions is included in the 2011 Compensation Decisions section beginning on page 28.
Human Resources Committee Role
(1) | Book value per common share: |
- | Adjusted for June 2013, March 2015, June 2016 and March 2018 stock dividends. |
- | 2009-2011 restated to reflect adoption of ASU 2010-26 (related to accounting for costs associated with acquiring or renewing insurance contracts); 2007 and prior not restated. |
Compensation Governance
The Human Resources Committee of(the “Committee”) reviews on an ongoing basis the Board has responsibility for establishing, implementingCompany’s executive compensation program to evaluate whether it supports the Company’s executive compensation philosophies and monitoring adherence with Argo Group's compensation philosophy. The Committee strives to ensure that the total compensation paid to our managementobjectives and is fair, reasonable, competitive and aligned with performance.
The Human Resources Committee hasshareholder interests. Our executive compensation practices include the authority to consult with management and to engage the servicesfollowing, each of outside advisors, experts and others to assist it. In conjunction with input from management and outside consultants,which the Committee makes decisionsbelieves reinforces our executive compensation objectives:
What We Do | What We Don’t Do | |||||
Pay for performance by structuring a significant percentage of target annual compensation in the form of variable,at-risk compensation | No guaranteed annual salary increases or bonuses | |||||
Pre-established performance goals that are designed to be aligned with the creation of shareholder value | No excise taxgross-ups | |||||
Use of a compensation comparison group to evaluate market competitiveness of our executive compensation program | No repricing of stock options | |||||
Maximum payout caps for incentive compensation | No hedging or significant pledging of Company stock | |||||
Annual incentive awards subject to negative discretion by the Committee allowing the Committee to reduce payouts when deemed appropriate | No counting of pledged shares toward equity ownership guidelines No dividends or dividend equivalents paid on unvested equity awards | |||||
Double-trigger vesting for equity awards in the event of a change in control | No multi-year compensation guarantees No single-trigger change in control provisions |
What We Do | What We Don’t Do | |||||
Require meaningful equity ownership by executive officers | ||||||
Maintain a clawback policy that applies to annual incentive and other performance-based compensation awards | ||||||
Thorough risk assessment process | ||||||
Retain an independent compensation consultant | ||||||
Engage in regular shareholder outreach |
Shareholder Engagement and Responsiveness to 2019 Advisory Vote on the appropriate measures to incorporate into its process. In determining the amount and formExecutive Compensation
Following our 2019 Annual General Meeting of compensation for Argo Group's senior executives,Shareholders, the Committee receives and considers recommendations from Argo Group's management, including recommendations regarding the compensation for the NEOs. When evaluating management's recommendations, the Committee considers the compensation levels of the Company's competition, data from other publicly traded firms and the NEO's specific circumstances and performance. This process helps to develop the proper level and mix of compensation to best motivate and reward and retain the Company's employees.
When setting compensation for 2012 and in determining compensation policies, the Human Resources Committee took into account the Company's strategic and financial plans as well as individual performance goals for each of the NEOs and other members of the management team. Financial metrics considered included growth in book value, return on equity, income before tax and the Company's combined ratio. Individual performance goals included execution of the Company's capital management strategy, expense management initiatives and growth initiatives. The Committee also took into accountreviewed the results of the shareholder advisory votesvote on executive compensation in which approximately 50.5% of the votes were cast in favor of the proposal. In 2019 and the first quarter of 2020, we sought meetings with 37 shareholders, representing the holders of more than 64% of our outstanding shares. Our engagement efforts resulted in meetings with 14 shareholders, representing the holders of more than 36% of our outstanding shares, including four of our top five shareholders.
In order to expand our direct dialogue between our shareholders and our Board, certain members of our Board participated in a number of our shareholder engagement meetings, along with our Head of Investor Relations, Head of Total Rewards and Chief Financial Officer and, on occasion, our Chief Executive Officer. Following the completion of our shareholder engagement meetings, the feedback was discussed with our executive management team and the Committee for their review and consideration.
Our goals for the shareholder engagement program included:
Obtaining shareholder insight into our corporate governance, executive compensation, and other policies and practices, as well as listening to shareholder concerns and priorities;
Describing our proposed changes and enhancements to our executive compensation program;
Discussing certain proposed governance controls consistent with shareholder feedback and regulator input; and
Discussing the recent leadership changes that took place in May 2011. In those votes,occurred at the Company.
During our shareholder engagement meetings, we received very constructive shareholder feedback on our governance and executive compensation programs. Our executive management team and the Board carefully considered this feedback as well as insights gathered through our prior engagement efforts and implemented several enhancements to our governance and executive compensation programs. We believe that these enhancements fit well within our overall compensation philosophy and the objectives of our executive compensation and governance programs, and directly address the feedback we received during our 2019 and 2020 shareholder engagement meetings.
The following chart captures some key themes that emerged during 2019 and 2020 discussions with shareholders regarding executive compensation along with the Company’s related response:
What We Heard | What We Did | |
• Performance Periods –shareholders expressed a desire for longer performance periods as theone-year performance period under the long-term incentive (“LTI”) program was not viewed as aligned with shareholder value creation. | • Beginning with the 2020 LTI grants, wewill measure performance over a period of three cumulative years. |
What We Heard | What We Did | |
• Mix of Performance Goals –shareholders expressed a desire for additional performance metrics, noting that the LTI’s program’s reliance on BVPS neglects the importance of Return on Equity (“ROE”) to shareholders who believe ROE is a key driver of stock performance in the insurance industry. | • Beginning with the 2020 LTI grants, we introduced a ROE metric that will measure average ROE over a three-year performance period, resulting inequally weighted performance metrics of ROE and BVPS growthunder the LTI program. | |
• Reduce Emphasis on Individual Performance –shareholders expressed a desire for LTI compensation to be tied more directly to overall Company performance, with a reduced emphasis on individual performance. | • Beginning with the 2020 LTI grants, we eliminated the individual performance modifier, resulting in an LTI mix of 75% performance-based restricted stock and 25% time-based restricted stock, withvesting of the performance-based portion tied solely topre-established Company-wide goals.If threshold goals are not met, there would be no payout under this portion of the plan. | |
• Size Appropriate Peer Group – shareholders expressed a desire for the executive compensation program to be aligned with a relevant group of peers. | • In December 2019, the Committee approved amodified peer group to remove peers that were deemed not to be representative of the Company’s size | |
• Alignment with Shareholders –shareholders expressed a desire for the executive compensation program to be further aligned with shareholders. | • Weincreased our stock ownership guidelinesas follows: CEO 6x Base Salary Other NEOs 3x Base Salary Segment Heads 2x Base Salary Other Executives 0.5 – 1x Base Salary Independent Directors 5x Annual Retainer | |
• Governance Controls –shareholders noted the need for robust governance controls in place with respect to the identification, appropriateness and disclosure of perquisites. | • During 2019, the Committee and Board undertook anextensive review of the governance controls with respect to the Company’s perquisite compensation program and enhanced the Company’s internal controls and adopted a revised perquisite policy, revised airplane use policy and revised corporate charitable contribution policy. |
The following charts graphically illustrate the changes made to the 2020 LTI program, which were advisoryimplemented after considering shareholder feedback as discussed above.
Prior LTI Design
Time-Based Weighting: 25% Performance Period: N/A Payout Range: N/A Vesting:4-Year Ratable | Book Value Per Share Growth Metric Weighting: 50% Performance Period: 1-Year Payout Range: 0% to 150% Vesting: 4-Year Ratable | Individual Metric Weighting: 25% Performance Period:1-Year Payout Range: 0% to 200% Vesting:4-Year Ratable |
2020 LTI Design
Time-Based Weighting: 25% | Performance-Based Weighting: 75% | |
• Performance Period: N/A • Payout Range: N/A • Vesting:4-Year Ratable | • Performance Period: 3 Years • 50% Book Value Per Share Growth • 50% Return on Equity • Payout range: 0% to 150% • Vesting:3-year Cliff |
The key changes under the new LTI design are the elimination of the individual modifier and tying a total of 75% of the award to book value per share and ROE goals. If threshold level goals are not binding, our shareholders approvedmet, there would be no payout under the compensationperformance-based component of the new plan.
Compensation Philosophy
The main objective of our NEOs as disclosedexecutive compensation philosophy is to focus executives on the achievement of financial and operational performance over theshort-and long-term in the proxy statement for the 2011 Annual General Meeting and approved our Board's recommendationorder to hold advisory votes on an annual basis. The Committee believes that the results of these advisory votes support the Company's compensation practices.
Table of Contentsmaximize shareholder value, with a focus on:
During 2011 the Human Resources Committee retained Meridian Compensation Partners, LLC to provide it with U.S. and international compensation information including: (i) a review of the 2011 proxy; (ii) long term incentive modeling; and (iii) advice on Internal Revenue Code Section 457A compliance. The information was provided directly to the Human Resources Committee. During 2011, Meridian did not perform any projects directly for Argo Group management.
Generally, the management of Argo Group and its subsidiaries is tasked with the administration of the
Our compensation program within the parameters approved by the Human Resources Committee. Argo Group's Human Resources and Legal Departmentsis designed to support the Human Resources Committee in its oversightour business objective of Argo Group's compensation programs and act pursuant to authority delegated by the Human Resources Committee to administer such programs. The Committee reviews the CEO's performance and makes recommendations regarding his pay to the full Board for approval. The CEO provides his assessment of the other NEOs' performances and makes his recommendations regarding pay adjustments and award grants. These recommendations are reviewed, adjusted as necessary, and approved by the Committee.
Objectives of Argo Group's Compensation Program
increasing shareholder value by:
Argo Group's compensation philosophy links
Linking pay to both businessCompany and individual performance. Itperformance;
Aligning our executives’ incentive compensation with the Company’s short- and long-term strategic and financial goals and ensuring that a significant component of compensation is designed to meet the following objectives:performance-based;
Providing a performance basedcompetitive compensation program whichthat allows Argo Groupus to successfully attract and retain superior talent in the very competitive specialty insurance marketplace in which it operates;
Appropriately managing risk.
Compensation Elements and Pay Mix
Our goal is to retain and attract experienced and talented executive officers and to motivate them to achieve our short- and long-term financial, operational and strategic objectives that produce and promote shareholder value. To developachieve this goal, we strongly emphasize a strong linkage between financial results, team affiliation,culture of pay for performance in order to provide incentives and employee pay; and
InteractionA summary of the Elementskey components of the Compensation Program
The Human Resources Committee has structured Argo Group'sour executive compensation program to include three elements, each of which serves a specific purposeis set forth below and which combine to provide NEOs with both short-term and long-term incentives.
Compensation | Link to Business Strategy and Shareholder Value | 2019 Compensation Decision | ||
Base Salary | • Provide a competitive level of fixed compensation that allows us to attract and retain executive talent. | • Three of our NEOs received base salary increases, with the increases ranging from 6% to, in the case of our Interim CEO appointment, 50%. | ||
• Base salaries reflect experience, skills and responsibilities of each NEO, the pay practices of companies with whom we compete for talent, economic conditions, and the Committee’s assessment of Company and individual performance. | • Mr. Hernandez’s base salary was reduced 17% in connection with his 2019 transition arrangement with the Company | |||
Annual Incentive Compensation | • Incentivize executives to achievepre-established annual corporate/business unit financial goals and individual performance objectives aligned with the Company’s financial, operational and strategic objectives. • Financial goal based on achieving adjustedpre-tax operating or underwriting income targets, with payout ranging from 0% to 200% of target opportunity, adjusted+/-30% based on individual performance. • Payouts are capped at 200% of target opportunity regardless of individual performance. • The Committee viewsnon-financial individual performance as an important contributor to the Company’s future operational and financial performance. | • Payout to Mr. Rehnberg based on the results of the Americas business ispro-rated for the ten months he served in his role as Group Chief Administrative Officer, Head of the Americas • No payouts for the other NEOs as threshold financial goals for their respective business units/departments or for Argo Group were not achieved. | ||
Long-Term Incentive | • Encourage stock ownership and align the long-term interests of NEOs with those of our shareholders. • Reward and retain executives who contribute to the Company’s success through achievingpre-established corporate financial goals and individual performance objectives that are designed to be aligned with building shareholder value. • Payouts range from 25% to 150% of target opportunity and may not exceed 150% of target regardless of individual performance. | • 2019 LTI awards granted as a mix of time-based and performance-based awards, with performance-based awards vesting based on achievement of book value per share (BVPS) growth and partially on the achievement of individual long-term performance objectives. • Threshold BVPS goal was not achieved, resulting in our NEOs forfeiting the 50% of target shares that were based on BVPS performance. | ||
When determining the appropriate level of compensation for an NEO, the Human Resources Committee looks not only at the component partsseparate components of the compensation package and the incentive provided by each but also at the NEO’s aggregate level of compensation for an NEO.compensation. This procedurephilosophy allows the Human Resources Committee to determine the bestprovide a mix of component partscomponents to produceincentivize and reward the desired performance from each NEO. The following graphs illustrate the pay mix and the fixed versus variable portion of Mr. Rehnberg’s and, on average, the other continuing NEOs’ total target direct compensation. The
CEO pay chart provides an overview of Mr. Rehnberg’s target direct compensation, including the additional salary he received as interim CEO.
CEO Target Mix of Pay | NEO Average Target Mix of Pay | |
The Elements of the Compensation Program
To ensure that Argo Group's compensation packages are competitive, the Human Resources Committee compares compensation for its executives with the compensation received by employees of our competitors. Although the Company considers compensation data for the designated comparison group when establishing compensation, the Company does not target a specific percentage of compensation reported by the group. Instead the Company uses the data as a guide in determining the level of compensation by geographic region necessaryOur goal is to successfully compete for employees. Because the Company strives to hireattract and retain experienced and talented employees,executive officers and to motivate them to achieve our short- and long-term financial, operational and strategic objectives that produce and promote shareholder value. To achieve this goal, we strongly emphasize a culture of pay for performance in order to provide incentives and accountability for our executive officers in working toward the designated comparison group incorporates the companies with whom we compete for employees. The Company's 2011 comparison group included:achievement of our objectives.
Allied World Assurance Co. Holdings Ltd.
Alterra Capital
Amlin plc
Arch Capital Group Ltd.
Aspen Insurance Holdings Ltd.
Axis Capital Holdings Ltd.
Beazley plc
Catlin Group Limited
Endurance Specialty Holdings Ltd.
Flagstone Reinsurance Holdings Ltd.
HCC Insurance Holdings Inc.
Hiscox Ltd
Markel Corporation
Montpelier Re Holdings Ltd.
Platinum Underwriters Holdings Ltd.
RLI Corporation
RenaissanceRe Holdings Ltd.
Validus Holdings Ltd.
Consistent with Argo Group'sour desire to provide compensation that is sufficient towill attract and retain superior employees,executives, when establishing base pay we consider both:
The 2019 base salaries for our NEOs were as follows:
Executive | 2018 Base Salary | (%) Change | 2019 Base Salary | |||||||||
Kevin J. Rehnberg | $ | 650,000 | 50 | % | $ | 975,000 | * | |||||
Jay S. Bullock | $ | 525,000 | 14 | % | $ | 600,000 | ||||||
Matt Harris | $ | 494,423 | 6 | % | $ | 527,384 | ** | |||||
Axel Schmidt | $ | 500,000 | 0 | % | $ | 500,000 | ** | |||||
Former Named Executive Officer | ||||||||||||
Mark E. Watson III | $ | 1,200,000 | 0 | % | $ | 1,200,000 | ||||||
Jose Hernandez | $ | 600,000 | -17 | % | $ | 500,000 | ||||||
* Reflects base salary approved when Mr. Rehnberg was promoted to the position of Interim President and Chief Executive Officer in November 2019.
** These salaries were converted into U.S. dollars for purposes of the foregoing table using a December 31, 2019 exchange rate of 1.31846 US$/GBP |
|
Annual Incentive Compensation Awards
The Annual Incentive Compensation Plan approved by shareholders in 2007Performance Goal and Target Establishment
Our annual cash incentive compensation plan is structured to providemotivate and reward achievement of short-term incentive compensation to employees, including the NEOs, who contribute to the growth and success of Argo Group during the year. This plan was designed to comply with section 162(m) of the U.S. Internal Revenue Code and thus provide a tax efficient mechanism for incentive compensation to NEOs. Currently this plan does not provide a benefit to the Company because most of the NEO compensation is non-U.S. compensation.
Annual cash incentive awards under the Argonaut Group, Inc. Annual Incentive Compensation Plan that has been used by the Company for a number of years are determined by the extent to which agreed upon financial goals and individual performance goals forobjectives and to provide a strong linkage between pay and performance. For our NEOs, annual incentive awards are determined based on an individual target award multiplied by, in the preceding year are achievedcase of corporate executives, the percentage of plan Companypre-tax operating income and, in the case of business unit executives, the percentage of plan Companypre-tax operating income and business unit underwriting income, weighted 30% and 70%, respectively. This result is then subject to upward or downward adjustment by up to 30% if deemed appropriate by the Company and by the NEO. Committee to factor in individual achievement of annual objectives. Payouts are capped at 200% of target opportunity regardless of individual performance.
Individual Target Award | x | % | = | Calculated Preliminary Award | +/- | Individual Performance Modifier +/- 30% applied to preliminary award | = | Individual Final Award |
At the beginning of the year, financial andeach NEO’s individual performance goals and target incentive opportunities areaward is established as a percentage of his or her base salary. The Company andFor 2019, the individual goals as well as the target opportunities were established based on market data provided by the Committee’s independent compensation consultant. In addition, in the case of Messrs. Rehnberg and Bullock, their individual bonus opportunities were determined based on the negotiations of the parties in conjunction with their new employment agreements.
Executive | 2019 Target Annual Incentive as Percent of Base Salary (%) | 2019 Target Annual Incentive ($) | ||||
Kevin J. Rehnberg | 88.5%(1) | $ | 863,000 | |||
Jay S. Bullock | 116.7% | $ | 700,000 | |||
Matt Harris | 75% | $ | 395,538 | |||
Axel Schmidt | 80% | $ | 400,000 | |||
Former Named Executive Officers | ||||||
Mark E. Watson III | 125% | $ | 1,500,000 | |||
Jose Hernandez
| (2)
|
| (2)
|
|
(1) | This percentage is calculated based onyear-end base salary; however, Mr. Rehnberg’s annual incentive opportunity was originally determined by reference to his base salary approved in connection with his promotion to the position of Group Chief Administrative Officer and Head of the Americas in January 2019. The annual incentive opportunity based on Mr. Rehnberg’s base salary for the position of Group Chief Administrative Officer and Head of the Americas was approximately 115% of base salary. |
(2) | As discussed further below, Mr. Hernandez was eligible for an incentive bonus subject to his achievement of certain transition-related performance goals. |
Performance Results
2019 Financial Goals
At the end of the year, a pool is established based upon the Company’spre-tax operating income for the year subject to a minimum achievement of at least 50% of plan, with a maximum funding opportunity of up to 200% of
plan.Pre-tax operating income is defined as net income before taxes excludingnon-recurring net realized investment gains and losses and foreign currency exchange gains and losses. The Committee selectedpre-tax operating income as a key financial metric because it believes it is a strong indicator of the Company’s short-term financial and operational performance. For 2019, partly in recognition of the evolution of the Company’s investment strategy towards a total return objective, the Committee included in the plan the return on certain investments that had historically been recorded as net realized gains and losses. Achievement against the plan includes the realized return on those investments. If the Company does not achieve 50% of the planpre-tax operating income for the year, the pool is not funded and no awards are thenpaid atyear-end. This minimum funding requirement is designed to align the interests of management with the interests of shareholders while not providing incentives for undue risk taking. When evaluating financial performance at the end of the year, the Committee may also consider the state of the insurance market, the state of the investment market, the impact of unusual catastrophic events, accounting changes or other factors affectingpre-tax operating income outside of management’s control, in adjusting the calculated preliminary award. In accordance with historical practice, the Committee adjusted both plan and actualpre-tax operating income by eliminating the expense related to certain types of cash-settled equity awards that are directly impacted by a change in the Company’s stock price.
For 2019, the Company’spre-tax operating income goal of $218.4 million, as adjusted by the Committee in the manner described above, was not met. This goal was set taking into account the challenging market conditions facing our industry, but despite those conditions, the Committee set a significantly higherpre-tax operating income goal in 2019 as compared to 2018 ($218.4 million in 2019 vs. $178.2 million in 2018).
As a business unit leader, the annual incentive award for Mr. Rehnberg was measured based on both Company-widepre-tax operating income performance (weighted 30%) and business unit underwriting income performance (weighted 70%). Underwriting income represents the net amount earned from underwriting activities (net premiums earned less underwriting expenses and claims incurred). Consistent with financial targets communicated to shareholders, business unit targets for underwriting income were set at levels that were intended to be challenging. Mr. Rehnberg’s weighted preliminary award, based on the performance results of the Americas business, was 32.9%. Mr. Rehnberg’s award waspro-rated for the ten months he served in his role as Group Chief Administrative Officer, Head of the Americas.
2019 Individual Performance Objectives
At the beginning of the year, the Committee also establishes and communicates annual individual performance objectives for each NEO. Individual performance objectives are designed to be achievable, but required the coordinated, cross-functional focus and effort of the NEOs. At the end of the year, the Human Resources Committee evaluates the overall performance of the Company and the contributions of the NEOs to that performance, as well as the extent to which each NEO achieved his or her individual performance goals, in orderobjectives and adjusts the calculated preliminary award by up to determine+/- 30% as appropriate to reach a final individual award, subject to a maximum total payout of 200% of target. In making such adjustments, the appropriate award. The Committee considers theeach NEO’s performance measuresobjectives collectively for each of the NEOs rather than applying a formula or weighting to any one or more measures.
each of the objectives. Accordingly, payouts under the plan are directly linked to both the Company’s financial performance and each NEO’s individual performance during the year. For 2019, the CEO and functional leaders had individual performance metrics tied to the categories of financial performance, client focus, talent development, organizational goals, and strategic goals. As noted above, the Company did not achieve the thresholdpre-tax operating income goal and, accordingly, none of the NEOs were eligible for an individual performance modifier.
TableMr. Hernandez did not participate in the annual incentive program as a result of Contentshismid-year transition; however, he was eligible for a special bonus conditioned on the successful completion of certain targets, related to the following: final handover of all matters pertaining to the international division; successful management of the relocation of the Head of Bermuda Property to the US, including management of all the regulatory aspects; working with the Chairman of the AMA board to secure a newnon-executive director; and successful communication of
Because insurance is
international profit share payouts. For 2019, the Committee awarded Mr. Hernandez a cyclical business, we believe it is important that financial goals be both challengingbonus equal to $239,000 based on his performance with respect to the performance goals.
Payouts
The table below sets forth the annual incentive program targets and realisticpayouts to each of our Named Executive Officers based upon the state of the underwriting and financial markets. A financial goal which might be appropriate when pricing in the market is strong might be an irresponsible goal in a soft market2019 performance, as it could encourage the wrong behavior. Thus financial performance goals are developed as part of the Company's planning process and then reviewed and approved by the Company's Board of Directors. Similarly when evaluating performance at the end of the year, the Human Resources Committee considers the state of the insurance market, the state of the investment market and any unusual catastrophes that might impact the goals originally set. The Company believes that disciplined underwriting and expense management are keys to its success as they result in underwriting income, the ultimate operational goal of an insurance company. Thus one of the metrics the Committee considers is the combined ratio generated by the operations. This metric which incorporates both the loss ratio and the expense ratio, is an effective way to measure both disciplined underwriting and expense management.described above:
Because the Company views book value per share as the most comprehensive assessment of our ability to create shareholder value, when evaluating NEO performance the Human Resources Committee pays special attention to those factors which contribute to this metric. Such factors include the components of income, capital management and investment portfolio structure, all of which play key roles in the creation of book value and all of which are influenced by the behavior of one or more of the NEOs.
Executive | 2019 Target Annual Incentive ($) | Annual Incentive Payouts ($) | ||||
Kevin J. Rehnberg | $ 863,000 | $ | 283,815 | |||
Jay S. Bullock | $ 700,000 | $ | 0 | |||
Matt Harris | $ 395,538 | $ | 0 | |||
Axel Schmidt | $ 400,000 | $ | 0 | |||
Former Named Executive Officers | ||||||
Mark E. Watson III | $ 1,500,000 | $ | 0 | |||
Jose Hernandez
| (1)
|
| (1)
|
|
(1) | As discussed above, Mr. Hernandez was eligible for an incentive bonus subject to his achievement of certain transition-related performance goals. |
Long-Term Incentive Plan
Awards
In addition to the cash awards granted under the Company's annualOur long-term equity incentive compensation plans, employeesis designed to provide a strong linkage between pay and non-employee directors, including the NEOs, may also receive equity grants underCompany’s strategic goals, and to align the Long-Term Incentive Plan. Grants may beinterests of our executives with those of our shareholders by awarding compensation in the form of equity, which may be restricted stock, restricted stock units, stock options or stock appreciation rights ("SARs"(“SARs”). Awards will generally vest over a four year period beginning onWith the exception of awards granted assign-on incentives, each such grant date.
Grants to employees, including the NEOs, will generally beis primarily conditioned upon the achievement of financial and individual performance goalsobjectives during the year in which the grant is made. An employee is notifiedmade as further described below. Subject to the achievement of boththese goals, the awards (on a performance-modified basis) vest ratably over a four-year period from the grant date.
Individual target awards for our NEOs are established at the beginning of the year along withpre-determined threshold, target and maximum growth in BVPS goals for the Company and long-term performance objectives for the individual. Our BVPS target was set taking into account challenging global economic conditions and market conditions facing our industry. The 2019 growth in BVPS target under the Company’s LTI program was established based on an assessment of the current operating environment, evidenced by continued and heightened competition relative to prior periods, a modestly improving economic environment, and an improving interest rate environment, which at times has had the effect of increasing investment income. The Committee sets individual performance objectives under the LTI plan that are more forward-looking and strategic in nature when compared to the individual objectives set under the annual incentive plan, which are shorter term and more operational in nature.
At the end of the year, the target awards are then adjusted based on the following formula:
Target LTI Award | x | BVPS Modifier | + | Individual Modifier | = | Performance |
Payouts range from 25% to 150% of target opportunity, and will not exceed 150% of target regardless of individual performance. For 2019, the BVPS adjustment factor was determined on a linear basis according to the
ranges of achievement, with the growth rate measured as compared to December 31, 2018. For 2019, the Company’s BVPS increased in 2019 by 3.1% (inclusive of cash dividends paid to our shareholders during the year), which was below the threshold of 4%, resulting in a BVPS modifier of-100% applied to 50% of the target awards in accordance with the following schedule:
| Performance Level |
|
2019 BVPS Growth Rate |
| % Modifier | |||||||
Maximum | 10% | + 50% | ||||||||||
Target | 7% | 0% | ||||||||||
Threshold | 4% | - 50% | ||||||||||
Below Threshold | < 4% | -100% |
For the Individual Modifier, the full target award may be adjusted up to +/- 25% based on the Committee’s evaluation of each NEO’s individual performance against thepre-determined individual performance objectives. For 2019, the CEO and functional leaders had individual performance metrics tied to the categories of financial performance, client focus, talent development, organizational goals, and strategic goals. Individual performance objectives were designed to be achievable, but require the coordinated, cross-functional focus and effort of the NEOs.
The following table sets forth the calculation of the final 2019 LTI awards for each NEO as adjusted based on growth in BVPS in 2019 and the performance goal for the year at the time the contingent grant is made. NEOs may be given multiple performance goals. The Human Resources Committee reviews the performanceCommittee’s assessment of achievement of the NEOslong-term individual performance objectives and determination not to apply individual modifiers for any NEO. The 2019 Summary Compensation Table on page 52 includes the year. If the Human Resources Committee determines that an NEO has achieved his or her goal[s], the award will continue to vest. In the case of an NEO with multiple performance goals, if the Human Resources Committee decides that one or moregrant date fair value of the performance goals was met,target award. However, as noted below, the NEO's award or aCommittee adjusted down the BVPS portion of the award by 100% for each of the current NEOs, and number of shares represented by the Performance Modified Grant Date Fair Value will vest over the four year vesting period of the award.
2019 LTI Awards | ||||||||||||||||||||||||||||||||||||||||
+ | BVPS Modifier | + | Individual Modifier | = | ||||||||||||||||||||||||||||||||||||
Name | 2019 LTI Target Award | % of Applied to 50% of Target | Amount | +/-25% of Target | Amount | Performance Modified Grant Date Fair Value | ||||||||||||||||||||||||||||||||||
Kevin J. Rehnberg | $ 1,000,000 | (100)% | $ (500,000) | 0% | $ — | $ 500,000 | ||||||||||||||||||||||||||||||||||
Jay S. Bullock | $ 420,000 | (100)% | $ (210,000) | 0% | $ — | $ 210,000 | ||||||||||||||||||||||||||||||||||
Matt Harris | $ 302,841 | (100)% | $ (151,421) | 0% | $ �� — | $ 151,421 | ||||||||||||||||||||||||||||||||||
Axel Schmidt | $ 333,300 | (100)% | $ (166,650) | 0% | $ — | $ 166,650 | ||||||||||||||||||||||||||||||||||
Former Named Executive Officers | ||||||||||||||||||||||||||||||||||||||||
Mark E. Watson III (1) |
| $ 2,800,000 |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
|
| $ 2,800,000 |
| ||||||||||||||||||||||
Jose Hernandez (2) | N/A |
Placeholder footnotes
(1) | Award was accelerated on December 31, 2019 per the terms of Mr. Watson’s separation agreement |
(2) | Mr. Hernandez was not eligible for an LTI award in 2019. |
One-time Performance Award to Certain NEOs
In November 2018, the Committee approved performance-based restricted stock awards on a selective basis to Messrs. Rehnberg, Bullock, Schmidt and Watson and certain other key executives (the “2018 Performance Awards”). The 2018 Performance Awards may be earned based on the achievement of specific stock price and expense ratio reduction hurdles by the end of a three-year performance period from January 1, 2019 to December 31, 2021. For Messrs. Rehnberg and Bullock, 50% of the 2018 Performance Award will be allowed to continue to vest. Awards under this program are made atearned based on the closingachievement of stock price hurdles and the remaining 50% will be earned based on the dateachievement of expense ratio hurdles. For Mr. Schmidt (and, prior to his departure, Mr. Watson), the 2018 Performance Award will be earned (or would have been earned, with respect to Mr. Watson) based on the achievement of stock price hurdles and expense ratio hurdles, weighted 75% and 25%, respectively. Mr. Watson’s 2018 Performance Award was forfeited in its entirety in connection with his separation from the Company on December 31, 2019. The 2018 Performance Awards granted to
Messrs. Rehnberg, Bullock and Schmidt remain outstanding and will vest, if at all, based on performance through December 31, 2021. See the “Outstanding Equity Awards at 2019 FiscalYear-End” table for further information regarding these awards.
Other Compensation and Benefit Programs
Savings Plans
Substantially all of our United States based employees, including our NEOs who are U.S. citizens, are eligible to participate in ourtax-qualified savings plan (the “Qualified Savings Plan”). This plan provides an opportunity for employees to save for retirement on both atax-deferred andafter-tax basis. Participants may contribute up to 75% of their base pay throughtax-deferred andafter-tax contributions up to the Internal Revenue Code (“IRC”) limit on employee contributions. We match 100% of the grantfirst 5% of each employee’sbi-weekly contributions. Participants are vested on a five-year graded vesting schedule for employer matching contributions. In addition, we contribute 1% of base pay up to the IRC compensation limit. This contribution vests upon completing three years of service.
Our NEOs who are U.S. citizens are also eligible for atax-deferrednon-qualified defined contribution plan (the “Non-Qualified Savings Plan”). TheNon-Qualified Savings Plan provides retirement benefits which would be payable under the Qualified Plan but for the limits imposed by the IRC. Our NEOs who are U.S. citizens may contribute up to 5% of their pay to theNon-Qualified Savings Plan after reaching the maximum allowable IRS contribution to the Qualified Plan. The participant’s investment return is calculated as though the account was invested as designated by the individual from substantially the same funds that are available under the Qualified Savings Plan.
Our NEOs who arenon-U.S. citizens are eligible to participate in accordancedefined contribution pension plans pursuant to the laws of the jurisdictions where they work and reside. The Company generally contributes 15% of a participant’s base salary to these plans up to the limits permitted by applicable legislation.
Welfare Benefits and Perquisites
To provide our executives with competitive compensation packages similar to those available at other companies in our grant practice.
peer group, the Company provides certain welfare benefits to all of our executives, including our NEOs. Welfare benefits consist of company-paid portions of life, disability, medical and dental insurance premiums. The Human Resources Committee mayCompany also grant special equity awards to employees, including NEOs, to recognize an exceptional achievement or to establish an incentive for a specific performance goal. The awards may take a number of forms but generally restricted stock, stock options and either cash settled or stock settled stock appreciation rights will be granted. Such grants may or may not include performance triggers.
Argo Group may provide NEOsprovides our executives with limitedcertain perquisites as part of itsour compensation program. Perquisites providedgenerally available to one or moreeach of our NEOs during 2011 includedin 2019 consisted of financial planning assistance, coverage underterm life insurance and a group umbrella casualty insurance policypolicy. Certain of our NEOs also receive supplemental term life, disability and coverage under a life or disabilitymedical insurance policy.coverage.
In addition, Argo Group may provide NEOs who are headquartered outsideHistorically, the United StatesCompany has provided certain executives with expatriate benefits that are consistent with those provided to executive officersexecutives holding comparable positions in other insurance and reinsurance companies operating in the global marketplace. TheseSuch benefits may include relocation assistance, housing allowances, home leave and travel allowances, education allowances and cost of livingcost-of-living allowances. The Company has also providesprovided a tax gross-upequalization on housing, educational and home leave travel allowance benefits to certain NEOsexecutives who are asked to relocate internationally in order to reduce the related negative tax consequences of such allowances. The goal of the gross-upProviding a tax equalization under such circumstance is a customary practice and is intended to insureensure that an employee's executive’safter-tax income wouldis not be substantially less thandifferent from that of his or her U.S. counterpart as a result of being compensated for the higher housing, educational and travel costs associated with aan international relocation. The tax gross-up is only applicable to housing, educational and travel allowance benefits. During 2019, the Company began phasing out these benefits for the NEOs.
The Company chosehas historically maintained fractional leasehold interests and a term lease in private aircraft. In December 2019, the Company sold the private aircraft associated with the term lease. The Company still maintains fractional leasehold interests in corporate aircraft; however, the Board has adopted a policy that limits the use of corporate aircraft to gross up those benefits rather thanonly business travel. The Company’s corporate aircraft program enables NEOs and other
executives, directors and employees to increasemeet with Company personnel, vendors, professional service providers, clients and business partners, to attend board meetings, and to engage in business development activities in multiple locations where the allowances in order to provide better transparency.
Occasionally, non-employees, includingCompany conducts business throughout the world. An NEO may also have family members or other guests accompany the NEO on corporate aircraft in transit for business travel when there is space available on the corporate aircraft.
Revised and Updated Information about Perquisites Resulting from Investigation
As previously disclosed, the Company received a subpoena from the SEC seeking documents primarily with respect to the Company’s disclosure of certain compensation-related perquisites received by Mr. Watson from 2014 through 2019 (the “Review Period”). This subpoena prompted the Company to conduct an extensive investigation, which included the engagement of outside counsel and a forensic auditor, to review Mr. Watson’s use of corporate aircraft, his travel and entertainment expenditures, and any other amounts paid by, or benefits provided by, the Company at his request or on his behalf during the Review Period (the “Investigation”).
The Investigation was subsequently extended to the other NEOs for 2018 and 2017. Please see footnote 5 to the 2019 Summary Compensation Table regarding perquisites the Company has identified based on the Investigation for Mr. Watson and the other NEOs in 2019 to 2017.
Watson Separation Agreement
As previously disclosed, Mr. Watson entered into a Separation Agreement with the Company pursuant to which he agreed to reimburse the Company for certain alleged personal expenses that were paid for by the Company, subject to proceeding to arbitration as to expenses Mr. Watson disputes.
Improvements in Perquisite-Related Management and Controls
In connection with the Investigation, the Company has adopted and implemented a set of new and enhanced written policies and procedures to strengthen the Company’s internal controls and procedures regarding travel, entertainment and related expenses. These include:
Adoption and implementation of a revised executive perquisite policy
Adoption and implementation of a revised airplane use policy
Adoption and implementation of a revised corporate charitable contributions policy
Adoption and implementation of an executive, may accompanyaddendum to the Travel & Expense Reimbursement policy for NEOs
Enhancement of the Company’s internal process of perquisites reporting
Enhancement of the Company’s internal controls, including controls relating to the review of expense reports and compliance with the Company’s new policies
Our NEOs are eligible to receive severance payments and benefits pursuant to the terms of their employment agreements in the event their employment is terminated by the Company without cause or by the executive who is travelingwith good reason, as discussed in detail beginning on Argo Group business onpage 60. The Company provides severance payments and benefits because they are deemed essential to attracting and retaining highly-qualified executives. The Company also mitigates potential liability under these circumstances by requiring the executive to sign a plane which is part of Argo Group's aircraft program. Unless there is an additional cost
associated with this travel, there is no incremental costseparation and release agreement acceptable to the Company as a condition to receiving severance benefits. The post-termination benefits are determined based on market data, input from the Committee’s independent compensation consultant, the Company’s historical pay practices and thus, no additional cost is allocatednegotiations of the parties. Please see the “2019 Potential Payments Upon Termination or a Change in Control” section for further information regarding the post-termination benefits under the Company’s employment agreements.
Management Transition Compensation
As noted above, the Company undertook a number of leadership changes in 2019. The compensation adjustments made in connection with the 2019 management transitions were determined based on market data and the negotiations of the parties.
Mr. Watson
On December 6, 2019, the Company and Mr. Watson entered into a Separation Agreement and Release (the “Separation Agreement”) to set out the terms of Mr. Watson’s separation from the Company. Under the terms of the Separation Agreement, Mr. Watson continued to serve as a full-time,non-executive employee of the Company through December 31, 2019 (the “separation date”) and continued to receive his existing base salary during such period as well as medical, welfare and health insurance benefit plans on the same terms and conditions as were in effect for Mr. Watson prior to the termination of his tenure as an executive employee. IfMr. Watson was not entitled to receive any annual cash incentive awards.
Effective as of the date on which the Separation Agreement became fully enforceable and binding, Mr. Watson fully vested in his unvested restricted stock from each of his (i) March 10, 2016 grant (11,285 shares), (ii) March 29, 2017 grant (14,558 shares), (iii) March 27, 2018 grant (10,500 shares) and (iv) March 15, 2019 grant (41,013 shares). All of Mr. Watson’s vested share appreciation rights will remain vested and fully exercisable without restriction, and will be governed by the terms of the underlying award agreements, provided that following the separation date, Mr. Watson will not be bound to any restrictive covenant or post-termination obligation, duty or restriction under such award agreements, other than certain obligations relating to confidential information. The Company paid Mr. Watson (a) an employee,amount equal to $1,750,000 within two business days after the Separation Agreement became fully enforceable and binding, and (b) an amount equal to $725,833.33. The 73,481 performance-based restricted shares granted by the Company to Mr. Watson on November 5, 2018 were forfeited by Mr. Watson on December 31, 2019 in connection with Mr. Watson’s separation. The compensation reported in the 2019 Summary Compensation Table includes the separation payments paid to Mr. Watson under the Separation Agreement as well as compensation relating to the accelerated vesting of his outstanding equity awards pursuant to the terms of the Separation Agreement.
The Separation Agreement included a general release of claims by Mr. Watson in favor of the Company and superseded all prior agreements between Mr. Watson and the Company, including Mr. Watson’s employment agreement with the Company, dated November 5, 2018 (the “Employment Agreement”), except for certain provisions of the Employment Agreement set forth in the Separation Agreement, which will survive, including provisions relating tonon-disclosure of confidential information, return of Company property, mutualnon-disparagement, cooperation following termination of employment, indemnification and clawback.
Mr. Rehnberg
During fiscal 2019, we executed a NEO, usesnew employment with Kevin J. Rehnberg, in connection with his promotion to Group Chief Administrative Officer and Head of the Americas. Mr. Rehnberg’s employment agreement replaced and superseded the employment agreement previously entered into between the Company and Mr. Rehnberg and terminates as of December 31, 2022. The new employment agreement provided that Mr. Rehnberg would receive an annualized base salary of $750,000 and may be eligible to earn annual incentive awards in the sole discretion of the Company with an annual target participation rate of $863,000 and long-term incentive awards with an annual target participation rate of $1,000,000. In addition, as discussed further in the 2019 Potential Payments Upon Termination or a Change in Control section, Mr. Rehnberg’s employment agreement also entitles him to severance benefits in connection with certain qualifying terminations of employment.
In connection with Mr. Rehnberg’s appointment as Interim President and Chief Executive Officer, his annual base salary was increased from $750,000 to $975,000.
Mr. Bullock
On April 26, 2019, the Company entered into a new employment agreement with Jay S. Bullock. Pursuant to Mr. Bullock’s employment agreement, Mr. Bullock will continue to serve as the Company’s Executive Vice President and Chief Financial Officer for a term beginning on April 26, 2019 until April 25, 2023, subject to earlier termination under the terms of the employment agreement. Under Mr. Bullock’s revised employment agreement, Mr. Bullock’s annual base salary was set at $600,000, which will be reviewed annually by the Committee for possible increases (but not decreases) in its sole discretion. Mr. Bullock will continue to be eligible to earn annual cash incentive and/or long-term incentive awards in the sole discretion of the Company from time to time, subject to his continued employment through any payment date. In addition, as discussed further in Argo Group's aircraft programthe 2019 Potential Payments Upon Termination or a Change in Control section, Mr. Bullock’s employment agreement also entitles him to severance benefits in connection with certain qualifying terminations of employment.
Mr. Hernandez
On April 26, 2019, the Company entered into an agreement amending the employment agreement of Mr. Hernandez. The amendment provided that Mr. Hernandez transitioned to a new position as Chair, International Operations of the Company, effective as of January 1, 2019, for personal purposes,a term scheduled to terminate on December 31, 2019. Under the Company's practice isamendment, Mr. Hernandez’s annual base salary was reduced to require the employee to reimburse Argo Group$500,000 effective May 1, 2019 for the incremental costremainder of the trip.calendar year, and he remained eligible for standard health and welfare benefits. Mr. Hernandez ceased to be eligible to receive an annual cash incentive award or an LTI award with respect to the calendar year 2019, and any outstanding LTI awards continued to be governed by the terms and conditions of the incentive plan and award agreements pursuant to which such awards were granted. Further, as discussed above, Mr. Hernandez became eligible to receive a bonus conditioned on the successful completion of several targets provided for in the amendment, as determined by the Committee in its sole discretion.
Compensation Setting Process and Governance Elements
StockProcess for Compensation Decisions
In making decisions with respect to the compensation of our executive officers, the Committee considers both Company performance and peer group practices to evaluate whether our executive compensation program remains competitive and consistent with best practices and our compensation philosophy. In determining the amount and form of compensation for our CEO, the Committee reviews our CEO’s performance and makes recommendations regarding his pay to the full Board for approval. In determining the amount and form of compensation for our other NEOs, the Committee considers our CEO’s assessment of their performance and his recommendations regarding their compensation.
When setting compensation levels and awarding compensation for 2019, the Committee took into account the Company’s strategic and financial goals as well as individual short- and long-term performance objectives for each NEO and other members of the executive management team. The Committee also considers the compensation levels of the Company’s peers as discussed in the Comparison Group section below.
2019 Comparison Group
To evaluate whether our executive compensation program is competitive, the Committee compares compensation for its executives with the compensation received by the executives of our competitors. Although the Committee considers compensation data for a designated comparison group when establishing compensation, the Committee does not target a specific percentage of compensation reported by such group. Instead the Committee uses the data as a guide in determining the level of compensation necessary to successfully compete for executives. Because the Company seeks to hire and retain experienced and talented executives, the Committee has selected a designated comparison group that incorporates the companies with whom we compete.
In deciding whether a company should be included in the peer group, the Committee considered the following criteria: (a) global operations; (b) revenue; (c) market capitalization; and (d) peers that the Company competes with in the marketplace and for talent.
The designated comparison group for 2019 consisted of the following companies, which was the same group of companies as used to evaluate 2018 compensation decisions:
2019 Comparison Group | ||||
Alleghany Corporation | Enstar Group | Renaissance Re Holdings | ||
Arch Capital Group | Hiscox | RLI Corporation | ||
American Financial Group | James River Group | Selective Insurance Group | ||
Axis Capital Holdings | Markel Corporation | W.R. Berkley | ||
Beazley plc | ProAssurance |
2020 Comparison Group
In December 2019, the Committee, with assistance from its independent compensation consultant, undertook a thorough review of the comparison group. As part of this review the Committee endeavored to consider the removal of peers that were either much larger or much smaller than the Company. In determining which companies should be removed or added to the comparison group, the following criteria were considered:
If the company was size appropriate; i.e., companies with revenue ranging from one third to three times that of the Company’s and market capitalization ranging from one fifth to five times that of the Company’s
Companies in the same industry with similar business mix and geographic reach
Companies that the Company competes with in the marketplace and for talent
As a result of this review, the Committee removed four companies that were significantly larger and added three companies that are considered reasonably similar to the Company in terms of size and business mix:
Deletions | Additions | |
Alleghany Corporation | Hanover Insurance Group | |
American Financial Group | ProSight Global | |
Markel | Sirius International Insurance | |
W.R. Berkley |
The resulting 2020 comparison group is below:
2020 Comparison Group | ||||
Arch Capital Group | Hiscox | RLI Corporation | ||
Axis Capital Holdings | James River Group | Selective Insurance Group | ||
Beazley | ProAssurance | Sirius International Insurance | ||
Enstar Group | ProSight Global | |||
Hanover Insurance Group | Renaissance Re Holdings |
Equity Ownership Guidelines
The Company requires non-employee directors and a designated group of the Company's senior executives including(including the NEOsNEOs) to adhere to its stock ownership guidelines. TheseEquity Ownership Guidelines. The guidelines are considered an integral part of the Company'sCompany’s executive and director compensation
program as they align the economic interests of the Company'sCompany’s executives and directors with those of its shareholders. The stock guidelines are an incentive to encourage behavior whichthat will foster long-term, sustainable value creation because the value of the stock being held by the participants is dependent uponinfluenced by the long term performance of the Company.Company’s long-term performance.
Pursuant to the guidelines, designated executives must hold at least 50% of earned or acquired shares until the guideline ownership level is attained (andnon-employee directors must hold 100% of earned or acquired shares until the guideline ownership level is attained). Compliance is tested annually as of the first business day of the second quarter each non-employee directoryear. Compliance with the guidelines is requireda factor that the Committee takes into consideration when determining whether to holdgrant future equity inawards to our executives under the Company with a value equal toCompany’s LTI plan. As of December 31, 2019, each of our continuing NEOs either held the requisite number of shares or greater than $150,000. An executivewas subject to the 50% retention requirement.
In 2019, the Committee made certain changes to the guidelines to increase stock ownership guidelines must hold equity withmultiples and clarify that pledged shares do not count toward compliance. The following table shows the ownership levels applicable to our designated executives, which are expressed as a value equal to or greater than the participant's basemultiple of salary multiplied by a factor that ranges from 5.0 to .25 depending upon the position he or she holds. A director has four years and an executive has five years to meet the guidelines from the date that the guidelines first apply to him or her.their position:
CEO | 6x Base Salary | |||
Other NEOs | 3x Base Salary | |||
Segment Leaders | 2x Base Salary | |||
Operating Company & Functional Leaders | 1x Base Salary | |||
Business Unit Leaders | 0.5x Base Salary |
For purposes of the stock ownership guidelines, equity includes: (1) shares of common stock beneficiallyonly Common Shares owned by or on behalf of an individual or an immediate family member residing in the same household, including stock held in trusts or IRS approved plans; (2) vested or unvested shares of restricted common stock; (3) the net value, expressed in shares of common stock, oftax-qualified retirement plans, are counted, but excluding any vested stock options; and (4) the net value, expressed in shares of common stock, of any other vested award that is linked to the price of the Company's common stock and granted pursuant to one of the Company's qualified or non-qualified compensation or stock incentive plans.
Compliance is tested annually as of the first business day of the second quarter. For this purpose, thepledged shares. The value of each common share is equalassumed to be the greater of the market value or the book value per common share of the Company's stock on the test date.Company’s stock.
A more detailed summary of the Company's stock ownership guidelines can be found on the Company's web site atwww.argolimited.com. The reference to the Company's web site does not incorporate by reference the information contained in the web site and such information should not be considered a part of this proxy statement.Compensation Clawback Policy
Argo Group enters into employment agreements with certain employees stationed outside of the United States where it is advantageous to clarify terms of employment in relation to local employment law statutes. In addition, because the Company recognizes that it is in an industry which competes aggressively for talented individuals, the Company may enter into employment agreements with select executives, including our NEOs, to reduce the risk that they will leave the organization.
Limitation on Tax Deductibility of U.S. Compensation for Federal Tax Purposes
Section 162(m) of the Internal Revenue Code (the "Code") generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to the Chief Executive Officer or any of the four other most highly compensated officers. Performance-based compensation arrangements may qualify for an exemption from the deduction limitation if they satisfy requirements under Section 162(m). This rule has limited effect on us because Argo Group is headquartered in Bermuda. Section 162(m) only applies to expenses which are deductible in the United States and are not considered to be "performance-based".
Compensation awarded under the Annual Incentive Plan and the Long-Term Incentive Plan is intended to qualify as 162(m) compensation. While the Human Resources Committee considers the impact of Section 162(m) when developing and implementing Argo Group's executive compensation programs, the Human Resources Committee believes that it is important to preserve flexibility in designing compensation programs. Accordingly, the Human Resources Committee has not adopted a policy that all compensation must qualify as deductible under Section 162(m).
2011 Compensation DecisionsNew Employment Agreement
The Company did not previously have an employment agreement with Ms. Bufkin. Because the Company recognizes that there is aggressive competition for talent within the industry, the Company decided to enter into an employment agreement with Ms. Bufkin to enhance the Company's ability to retain her. The Company has been executing on a multi-year strategy to expand into an international specialty underwriter. This strategy involves diversification both geographically and by line of business and providesTo provide the Company with the flexibilityability to take advantagerecoup performance-based compensation obtained through misconduct on the part of opportunities as they arise aroundmanagement that is detrimental to the world.Company, performance-based compensation may be recovered at the discretion of the Board if an executive officer (i) has engaged in fraud or other misconduct and the misconduct resulted in the need for a restatement of the Company’s financial statements that affect such executive officer’s compensation or (ii) the executive officer has engaged in certain other egregious conduct that is substantially detrimental to the Company. The Company believes that this strategy providespotential for a stable platform for long-term growthclawback in shareholder value. Ms. Bufkinresponse to egregious conduct has been instrumental in craftingincorporated into our revised policy after taking into consideration shareholder feedback and executingour internal review of compensation practices. The Board also has the expansion anddiscretion to recoup performance-based compensation if the Company believes it is important to maintain her leadership as the Company continues to pursue this strategy. As an incentive for Ms. Bufkin to enter into the agreement, the Company decided to provide her with a cash retentionpayment, grant of $400,000 and an award of 9,615 shares of restricted stockor vesting ratably over three years. The employment arrangement includes the right to recover a portion of the cash retention grant paid to Ms. Bufkin if her employment is voluntarily terminated prior to March 15, 2014. The Company believes that the structure of both the employment agreement and the retention grant are beneficial to the economic and operational stability of the organization as it continues its expansion.
On March 10, 2011 Argo Group and Ms. Bufkin entered into an employment arrangement with the following key provisions:
Ms. Bufkin's employment agreement is available in the Company's public filings.
As part of the 2011 compensation review process, the Human Resources Committee of the Company's Board of Directors reviewed the salaries of the NEOs and increased Barbara Bufkin's base salary to $400,000 from $350,000. This $50,000 increase was effective in March 2011. This increase positions Ms. Bufkin appropriately relative to her peers and reflects her responsibilities as we continue to grow as an international specialty underwriter. All other NEOs base salaries remained unchanged.
Upon considering the Company's financial performance, the Human Resources Committee determined that none of the NEOs would receive a cash incentive award for 2011. The Human Resources Committee determined the annual incentive awards based on its analysis of the Company's and each individual NEOs performance during the year. Financial metrics considered in 2011 included growth in book value per share, return on equity, income before tax and the combined ratio achieved by the Company. Although it was determined that each of the NEOs had met or exceeded their individual performance goals, due to the unprecedented frequency of catastrophe activity during 2011, none of the NEOs were able to meet or exceed the Company's financial goals for the year based on these metrics. The individual performance metrics included, among other things, the execution of the Company's capital management program, development of expense management initiatives and growth initiatives including the continued expansion of the Company's global platform.
As discussed on page 26, the Company provides a limited number of perquisites to some of its employees including its NEOs. In 2011, Argo Group agreed to provide Mr. Bullock with a housing allowance and Ms. Bufkin with relocation assistance.
As part of Argo Group's annual long-term incentive award process, on March 15, 2011, Mr. Watson, Mr. Bullock, Ms. Bufkin, and Mr. Carrier were awarded long-term equity grants which vest ratably over a four year period contingent upon successful completion of defined performance triggers. The grant information, performance goals and achievement percentages for each of the NEOs are described below:
Mr. Watson received a grant of 113,960 stock appreciation rights which will be settled in stock and 45,584 restricted shares subject to the achievement of a performance metric that was calculated by the following performance goals:Company in a substantially inaccurate manner. Our Compensation Clawback Policy is available on our website atwww.argolimited.com.
Prohibition of Hedging and investment portfolio.
Our Insider Trading Policy prohibits our employees, officers and systems through a shared services model.
Mr. Bullock received a grant of 54,701 stock appreciation rights which will be settled in stock and 5,470 restricted shares subject to achievementother derivative securities of the followingCompany’s stock. We prohibit all hedging transactions involving our securities that would insulate our employees, officers and directors from the effects of our stock price performance. The Policy places restrictions on our officers and directors from directly or indirectly pledging more than the lesser of 1% of the Company’s outstanding equity securities and 50% of the equity securities of the Company owned by such officer or director. Equity securities include Common Shares, voting preferred shares, options and any other securities beneficially owned by an officer or director.
Compensation Risk Assessment
In line with the Company’s application of its enterprise risk management (“ERM”) framework to compensation risk, the Committee seeks to ensure that our executive compensation program does not encourage executives to take risks that are inconsistent with the long-term success of the Company. More broadly, the Company’s compensation philosophy is a core part of our risk culture and ensures that underwriters are motivated to produce profitable business and executives are compensated to operate within our Board approved risk appetite.
The Committee believes the Company’s executive compensation program does not encourage inappropriate risk-taking. Specifically, in 2019, the Company’s annual incentive and LTI plans were tied to operating performance goals:
During 2019, our ERM function, led by the Chief Risk Officer, undertook a risk profile.
Ms. Bufkin received a grant
The Committee retains negative discretion in determining compensation payouts, such that meaningful reductions in compensation are possible if our financial results do not meet our expectations. Our executive compensation clawback policy helps ensure that our executives are not inappropriately rewarded in the event that we are required to restate our financial results;
Executive stock ownership guidelines are designed to ensure that the long-term interests of 31,909 stock appreciation rights which will be settled in stock subject to achievementour executives are aligned with those of our shareholders;
The Chairman of the followingCommittee regularly attends our Risk & Capital Committee and has the opportunity to review the outcomes of Compensation Risk Assessment presented by the Chief Risk Officer;
The Committee also receives a summary of the Compensation Risk Assessment work as part of its review of proposed changes to the schemes;
The Committee retains an independent consultant, apart from any consultant retained by management. The independent consultant reviewed the findings of the Compensation Risk Assessment and found them to be both comprehensive and appropriate to the risk exposures and concurred with the conclusions.
Compensation Consultant
During 2019, the Committee continued to engage FW Cook to assist in the evaluation of our executive compensation program. The scope of FW Cook’s engagement was to provide assistance with (1) updating our stock award agreements, (2) conducting a review of our compensation peer group, (3) conducting competitive reviews of executive andnon-employee director compensation, (4) conducting competitive reviews of incentive design and performance goals:
Mr. Carrier received a grant of 42,120 stock appreciation rights which will be settled in cash and 42,120 stock appreciation rights which will be settled in stock subject to achievement of the following performance goals:
The following table sets forth the adjustmentsits services to the foregoing awards for non-completion of performance goals and the fair market value as of the grant date for grants made to the NEOs during 2011:Committee.
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Name | 2011 Target Awards as Reported in Columns (e) and (f) of the Summary Compensation Table ($) | % of Goals Achieved | 2011 Actual Awards – Subject to Time Vesting ($) | ||||||||
Mark Watson | $ | 2,515,097 | 50 | % | $ | 1,257,549 | |||||
Jay Bullock | $ | 673,913 | 69 | % | $ | 465,000 | |||||
Barbara Bufkin | $ | 616,133 | 69 | % | $ | 425,132 | |||||
Andrew Carrier | $ | 764,057 | 55 | % | $ | 420,231 | |||||
Principal Executive Officer Compensation
Mr. Watson's compensation was awarded under the same policies that were used to determine the compensation for the other NEOs. During 2011, no adjustment to Mr. Watson's base salary was made and, although it was determined that Mr. Watson had met or exceeded his individual performance goals, upon considering the Company's financial performance, the Committee determined that Mr. Watson would not receive a cash incentive award for 2011. Mr. Watson participated in and will receive an award from the Long-Term Incentive Plan based on achievement of his individual performance goals. The Human Resources Committee determined that Mr. Watson achieved 50% of his Long-Term Incentive Plan performance goals compared with 69% achieved by Mr. Bullock, 69% achieved by Ms. Bufkin, and 55% achieved by Mr. Carrier. 50% of Mr. Watson's grant will be allowed to vest compared with 85% in 2011.
Interaction of the Elements in the Compensation Programs
As discussed above, Argo Group offers three main types of compensation: base salary, Annual Incentive Plan awards, and Annual Long-Term Incentive awards. The Human Resources Committee reviews both the individual awards and the aggregate impact of all awards made to an NEO during a given year.
Because the Human Resources Committee wants to retain its NEOs and is aware that they have other employment opportunities, its compensation decisions are based upon current performance consistent with what a competitor would pay the NEO, without the imposition of artificial limits on compensation based upon wealth accumulated as compensation for prior year achievements.
HUMAN RESOURCES COMMITTEE REPORT
The Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis which begins on page 19 with management. Based on their review and discussions, the Human Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the registrant'sregistrant’s annual report onForm 10-K and proxy statement.
HUMAN RESOURCES COMMITTEE
John R. Power, Jr., ChairmanF. Sedgwick BrowneH. Berry Cash
Hector De Leon
Dymphna A. Lehane
Samuel G. Liss
Al-Noor Ramji
Gary V. Woods
2019 Summary Compensation Table
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(a) Name & Principal Position | (b) Year | (c) Salary ($) (1) | (d) Bonus ($) (2) | (e) Stock Awards ($) (3) | (f) Option Awards ($) (3) | (g) Non-Equity Incentive Plan Comp ($) (4) | (h) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (5) | (i) All Other Compensation ($) (6) | (j) Total ($) | |||||||||||||||||||
Mark Watson, PEO | 2011 | $ | 1,000,000 | $ | 0 | $ | 1,481,480 | $ | 1,033,617 | $ | 0 | $ | 106,186 | $ | 350,239 | $ | 3,971,522 | |||||||||||
Argo Group | 2010 | $ | 1,000,000 | $ | 3,000,000 | $ | 1,143,368 | $ | 745,912 | $ | 495,000 | $ | 19,150 | $ | 792,255 | $ | 7,195,685 | |||||||||||
2009 | $ | 1,038,462 | $ | 0 | $ | 631,912 | $ | 919,581 | $ | 942,000 | $ | 20,548 | $ | 817,709 | $ | 4,370,212 | ||||||||||||
Jay Bullock, PFO | 2011 | $ | 500,000 | $ | 0 | $ | 177,775 | $ | 496,138 | $ | 0 | $ | 14,954 | $ | 57,886 | $ | 1,246,753 | |||||||||||
Argo Group | 2010 | $ | 488,462 | $ | 1,500,000 | $ | 0 | $ | 447,518 | $ | 310,000 | $ | 0 | $ | 34,143 | $ | 2,780,123 | |||||||||||
2009 | $ | 467,308 | $ | 0 | $ | 0 | $ | 372,432 | $ | 529,875 | $ | 0 | $ | 37,797 | $ | 1,407,412 | ||||||||||||
Barbara Bufkin, SVP | 2011 | $ | 403,462 | $ | 400,000 | $ | 326,718 | $ | 289,415 | $ | 0 | $ | 13,116 | $ | 243,294 | $ | 1,676,005 | |||||||||||
Argo Group | 2010 | $ | 372,212 | $ | 0 | $ | 0 | $ | 208,920 | $ | 235,000 | $ | 1,512 | $ | 342,143 | $ | 1,159,787 | |||||||||||
2009 | $ | 363,462 | $ | 41,475 | $ | 0 | $ | 193,112 | $ | 247,275 | $ | 1,735 | $ | 297,371 | $ | 1,144,430 | ||||||||||||
Andrew Carrier, | 2011 | $ | 617,552 | $ | 0 | $ | 0 | $ | 764,057 | $ | 0 | $ | 0 | $ | 39,278 | $ | 1,420,887 | |||||||||||
Chief Underwriting Officer | ||||||||||||||||||||||||||||
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Julian Enoizi, CEO | 2011 | $ | 146,441 | $ | 155,625 | $ | 0 | $ | 0 | $ | 0 | — | $ | 0 | $ | 302,066 | ||||||||||||
Argo Intl | 2010 | $ | 480,500 | $ | 0 | $ | 0 | $ | 219,300 | $ | 0 | — | $ | 78,560 | $ | 778,360 | ||||||||||||
2009 | $ | 293,333 | 470,415 | $ | 143,450 | $ | 315,350 | $ | 0 | — | $ | 104,135 | $ | 1,326,683 |
Name & Principal Position | Year | Salary ($)(1) | Stock Awards ($)(2) | Non- Equity Incentive Plan Comp ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($)(6) | |||||||||||||||||||||
Kevin J. Rehnberg, CEO, Argo Group | 2019 | $ | 785,137 | $ | 999,951 | $ | 283,815 | $ | — | $ | 48,580 | $ | 2,117,483 | |||||||||||||||
2018 | $ | 650,000 | $ | 1,634,291 | $ | 688,500 | $ | — | $ | 43,891 | $ | 3,016,682 | ||||||||||||||||
2017 | $ | 633,462 | $ | 449,979 | $ | 420,000 | $ | — | $ | 38,608 | $ | 1,542,049 | ||||||||||||||||
Jay S Bullock, CFO Argo Group | 2019 | $ | 570,205 | $ | 419,997 | $ | — | $ | — | $ | 36,049 | $ | 1,026,252 | |||||||||||||||
2018 | $ | 525,000 | $ | 814,716 | $ | 511,875 | $ | — | $ | 70,385 | (7) | $ | 1,921,976 | |||||||||||||||
2017 | $ | 525,000 | $ | 420,202 | $ | — | $ | — | $ | 42,850 | (7) | $ | 988,052 | |||||||||||||||
Matt Harris, Group Head of International Operations | 2019 | $ | 527,384 | $ | 302,777 | $ | — | $ | — | $ | 126,501 | $ | 956,663 | |||||||||||||||
Axel Schmidt, Chief Underwriting Officer | 2019 | $ | 523,706 | $ | 333,294 | $ | — | $ | — | $ | 132,663 | $ | 989,663 | |||||||||||||||
2018 | $ | 490,904 | $ | 728,063 | $ | 312,000 | $ | — | $ | 135,717 | $ | 1,666,684 | ||||||||||||||||
2017 | $ | 520,111 | $ | 333,296 | $ | — | $ | — | $ | 140,054 | $ | 1,022,461 | ||||||||||||||||
Former Named Executive Officers | ||||||||||||||||||||||||||||
Mark E. Watson III Former President & CEO | 2019 | $ | 1,200,000 | $ | 7,850,530 | $ | — | 58,233 | $ | 3,361,737 | $ | 12,470,500 | ||||||||||||||||
2018 | $ | 1,090,300 | $ | 6,080,480 | $ | 1,020,521 | $ | (28,973 | ) | $ | 1,166,770 | (7) | $ | 8,162,328 | ||||||||||||||
2017 | $ | 1,070,000 | $ | 1,569,310 | $ | — | $ | 26,858 | $ | 1,727,886 | (7) | $ | 2,666,168 | |||||||||||||||
Jose Hernandez, Former Chair of International Operations | 2019 | $ | 532,877 | $ | — | $ | 239,000 | $ | — | $ | 99,946 | $ | 871,823 | |||||||||||||||
2018 | $ | 600,000 | $ | 599,959 | $ | 210,000 | $ | — | $ | 40,891 | $ | 1,450,850 | ||||||||||||||||
2017 | $ | 600,000 | $ | 599,972 | $ | — | $ | — | $ | 36,300 | $ | 1,236,272 |
(1) | Mr. Rehnberg’s salary increased from $750,000 effective January 1, 2019 to $975,000 effective November 5, 2019 in connection with his appointment to Interim President and Chief Executive Officer. Mr. Bullock’s salary increased from $525,000 to $600,000 effective May 26, 2019 in connection with his new employment agreement. Mr. Harris’s salary increased from 375,000 GBP to 400,000 GBP effective January 1, 2019 in connection with his promotion to Group Head of Operations. Mr. Hernandez’s salary decreased from $600,000 to $500,000 effective May 1, 2019 as part of the terms of his transition agreement. Mr. Harris and Mr. Schmidt were paid in British Pounds. Their salaries were converted into U.S. dollars for purposes of the foregoing table using a December 31, 2019 exchange rate of 1.31846 US$/GBP. |
(2) | Represents the grant date fair value of all LTI equity awards granted in 2019. The calculation of grant date fair value for the annual performance awards assumes target level performance against the specified financial goals set forth in the award and is calculated in accordance with FASB ASC Topic 718. The receipt of annual target equity awards is primarily conditioned upon the achievement of financial and individual performance goals during the year in which the grant is made, as discussed in the Long-Term Incentive Awards section that begins on page 42. After adjustment for achievement of these goals, the annual awards then vest ratably over a four-year period beginning on the first anniversary of the date of the grant. Assuming the highest level of performance is achieved for the 2019 LTI awards, the maximum grant date fair value of the 2019 performance-based LTI awards would be as follows: Mr. Watson ($3,500,000), Mr. Bullock ($525,000), Mr. Rehnberg ($1,250,000), Mr. Schmidt ($416,625), Mr. Harris ($378,551), and Mr. Hernandez ($0). In addition, for Mr. Watson, as a result of the acceleration of certain previously granted awards in connection with his separation agreement, this amount includes the incremental fair value associated with the modification of Mr. Watson’s outstanding stock awards in 2019 totaling $5,050,573. As noted in the CD&A, in 2019, the vesting terms of certain of Mr. Watson’s prior restricted stock awards were modified in connection with his separation from the Company to provide for accelerated vesting. This amount represents the modification of existing equity awards, including 2019 equity grants, and does not represent new equity grants made at the time of the separation. |
(3) | Non-Equity Incentive Plan Compensation consists of cash awards made under the Company’s annual incentive plan. Please refer to the Annual Incentive Awards section on page 40 for a discussion of the decisions made related to these awards. Amounts for Mr. Hernandez for 2019 represent a bonus paid in connection with achievement of specific targets relating to his transition from the Company. |
(4) | Represents the change in the present value of the Argo Group US Retirement and Pension Equalization Plans that occurred during 2019. The Pension Benefits table on page 58 presents additional information about both the calculation of the change in value and the foregoing plans. |
(5) | Please see the All Other Compensation Table below and related tables and footnotes for information regarding the amounts reported in this column. |
2019 All Other Compensation Table
Name | 401(k) and Retirement Contributions | Imputed Value of Company Provided Insurance Coverage(1) | Supplemental Executive Retirement Plan Benefit | Tax Gross-Up Payments | Separation Benefits | Perquisites | Total(3) | |||||||||||||||||||||
Kevin J. Rehnberg | $ | 16,800 | $ | 1,953 | $ | 29,827 | $ | — | $ | — | $ | — | $ | 48,580 | ||||||||||||||
Jay S. Bullock | $ | 4,819 | $ | 1,953 | $ | 29,277 | $ | — | $ | — | $ | — | $ | 36,049 | ||||||||||||||
Matt Harris | $ | 71,114 | $ | — | $ | — | $ | — | $ | — | $ | 55,388 | $ | 126,501 | ||||||||||||||
Axel Schmidt | $ | 71,487 | $ | — | $ | — | $ | — | $ | — | $ | 61,177 | $ | 132,663 | ||||||||||||||
Former Named Executive Officers | ||||||||||||||||||||||||||||
Mark. E. Watson III | $ | 5,108 | $ | 70,201 | $ | 66,892 | $ | — | $ | 2,475,833(2) | $ | 743,703 | $ | 3,361,737 | ||||||||||||||
Jose Hernandez | $ | 16,800 | $ | 1,953 | $ | 15,775 | $ | 20,209 | $ | — | $ | 45,209 | $ | 99,946 |
(1) | Imputed Value of Company Provided Insurance Coverage includes the following: term life insurance coverage which is provided to all employees, umbrella insurance coverage provided to all senior executives and company paid life and disability insurance policies provided to Mr. Watson. |
(2) | This amount represents cash payments made to Mr. Watson pursuant to the terms of his separation agreement, as described further in the CD&A. |
(3) | As noted above, the Investigation was extended to the NEOs other than Mr. Watson for 2018 and 2017. Based on those findings, the Company did not identify any perquisites that should have been, but were not, disclosed with respect to those other NEOs, except with respect to Mr. Schmidt and Mr. Bullock. For Mr. Schmidt, the review identified approximately $600 in additional perquisites for 2018 and also for 2017, consisting of credit card membership fees. For Mr. Bullock, the review identified $27,892 in additional perquisites in 2018, consisting of a trip as a passenger on corporate aircraft, additional financial planning costs, certain club and credit card membership fees, and additional home leave and travel costs. For 2017, the review identified $9,975 in additional perquisites for Mr. Bullock, consisting of additional financial planning costs, certain club and credit card membership fees, and additional home leave and travel costs. |
2019 Perquisites Table
Name | Financial Planning | Housing Benefits(1) | Home Leave & Travel Allowance | Medical Premium | Other Perquisites and Personal Benefits(2) | Total Perquisites | ||||||||||||||||||
Kevin J. Rehnberg | $ | — | $ | — | $ | 5,157 | $ | — | $ | — | $ | 5,157 | ||||||||||||
Jay S. Bullock | $ | 995 | $ | — | $ | 796 | $ | — | $ | 400 | $ | 2,191 | ||||||||||||
Matt Harris | $ | 2,650 | $ | 52,738 | $ | — | $ | — | $ | — | $ | 55,388 | ||||||||||||
Axel Schmidt | $ | 1,846 | $ | — | $ | 59,331 | $ | — | $ | — | $ | 61,177 | ||||||||||||
Former Named Executive Officers | ||||||||||||||||||||||||
Mark E. Watson III | $ | — | $ | — | $ | — | $ | 11,500 | $ | 732,203 | $ | 743,703 | ||||||||||||
Jose Hernandez | $ | 45,209 | $ | — | $ | — | $ | — | $ | — | $ | 45,209 |
(1) | Housing allowance was eliminated for Mr. Harris as of August 31, 2019 in connection with his revised employment agreement. |
(2) | Please see the 2019-2017 Watson Perquisites Table for further information regarding certain perquisites that Mr. Watson received in 2019-2017. |
2019-2017 Mr. Watson Perquisites Table
The Investigation applied the definition of “perquisite” as set forth in the SEC’s Release No.33-8732A: an item is not a perquisite if it is “integrally and directly related to the performance of the executive’s duties”; otherwise, an item is a perquisite if it “confers a direct or indirect benefit that has a personal aspect, without regard to whether it may be provided for some business reason or for the convenience of the company, unless it is generally available on anon-discriminatory basis to all employees.” This principles-based definition requires judgment to be applied to the facts.
Based on the Investigation, for the 2019 to 2017 period, the Company expensed for each NEOidentified the perquisites set forth below that Mr. Watson received, which were not disclosed or, in 2011some cases, not fully disclosed in the previously filed 2019 and 2018 annual meeting proxy statements. In accordance with SEC rules, only amounts greater than $25,000 have been separately quantified in the fair market value ontable below. As noted above, the grant date for grants made to the NEOs during 2011 reported in columns (e) and (f)SEC is conducting an investigation of the Summary Compensation Table. The Fair Market Value onperquisites received by Mr. Watson. It is possible that the Grant Date is alsoSEC could conclude that the maximum possible value ontypes and amounts of perquisites received by Mr. Watson in 2019 to 2017 differ from the grant date. No adjustments for non-completion of performance goals were made.
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| Equity Grants | Option Grants | |||||||||||
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Name | Total ASC TOPIC 718 Expense for 2011 Grants | Fair Market Value of 2011 Grants on Grant Date | Total ASC TOPIC 718 Expense for 2011 Grants | Fair Market Value of 2011 Grants on Grant Date | |||||||||
Mark Watson | $ | 517,925 | $ | 1,481,480 | $ | 503,328 | $ | 1,033,617 | |||||
Jay Bullock | $ | 135,993 | $ | 177,775 | $ | 243,990 | $ | 496,138 | |||||
Barbara Bufkin | $ | 94,301 | $ | 326,718 | $ | 124,205 | $ | 289,415 | |||||
Andrew Carrier | $ | 0 | $ | 0 | $ | 121,067 | $ | 764,057 |
Type of Perquisite Received by Mr. Watson | 2019 | 2018 | 2017 | |||||||||
Use of Corporate Aircraft(2) | $ | 73,535 | $ | 236,085 | $ | 512,571 | ||||||
Use of Sedan and Car Rental Services | $ | (3) | $ | (3) | $ | 35,083 | ||||||
Use of Company Cars(4) | $ | 37,666 | $ | — | $ | (3) | ||||||
Bermuda Residence(5) | $ | 319,000 | $ | 348,000 | $ | 348,000 | ||||||
Bermuda Housekeeper | $ | 57,679 | $ | 62,642 | $ | 75,114 | ||||||
Bermuda Furniture | $ | — | $ | 58,250 | $ | 115,636 | ||||||
Bermuda Sundry Personal Expenses(6) | $ | 39,069 | $ | 59,669 | $ | 75,372 | ||||||
New York City Residence(7) | $ | — | $ | 30,000 | $ | 60,000 | ||||||
New York City Furniture | $ | 26,875 | $ | — | $ | 169,411 | ||||||
Tickets to Museum Benefit Event(8) | $ | 70,000 | $ | 60,000 | $ | — | ||||||
Private Club Membership Dues | $ | (3) | $ | 31,143 | $ | 59,596 | ||||||
Concierge Service Membership Dues | $ | (3) | $ | 70,651 | $ | 50,004 | ||||||
Personal Assistant | $ | 58,227 | $ | — | $ | — | ||||||
Family Vacations(9) | $ | — | $ | 27,010 | $ | (3) | ||||||
Other Perquisites | $ | 50,152(10) | $ | 38,825(11) | $ | 75,488(12) | ||||||
Total(13) | $ | 732,203 | $ | 1,022,275 | $ | 1,576,275 |
(1) | Unless otherwise noted, the amounts disclosed in this table represents the amount paid by the Company to the service provider or vendor, as applicable, or, in a limited number of instances, reimbursed directly to Mr. Watson. Although no additional incremental cost was incurred, Mr. Watson also received personal investment advice from Company investment personnel and had personal use of Company-owned condominiums in Miami Beach and of a Company-owned boat. |
(2) | This represents the aggregate incremental cost of Mr. Watson’s personal use of private aircraft and related personal expenses. For many of the airplane flights and for helicopter flights, theper-flight cost was available on the service provider’s invoice, from which the Company excluded management fees and rent. For the other airplane flights, the Company calculated the total variable cost plus certain fixed costs per month (excluding service fees, engine service contracts, crew training expense, avionics contracts and certain maintenance) and divided that amount by total miles per month in order to arrive at a cost per mile, which was then multiplied by the number of miles associated with each personal flight during the monthly period. In addition, during 2019 to 2017, the Company found that Mr. Watson was accompanied by a family member on a majority of the flights taken on corporate aircraft. |
(3) | Perquisites were received in this category with individual incremental costs less than $25,000, and are therefore captured under “Other Perquisites.” |
(4) | Mr. Watson had personal use of Company-owned cars in San Antonio, Texas during this period. This represents the cost of a car purchased in 2019 for Mr. Watson’s use. The Company did not purchase any cars for Mr. Watson’s use in 2018 and 2017. |
(5) | This represents the rent paid by the Company in respect of Mr. Watson’s lease on his Bermuda residence. |
(6) | For this period, this includes the costs of home maintenance, utilities, cleaning services, flowers, cable, golf cart, wine, food, and other home goods and supplies. |
(7) | The Company owns the New York City condominium. This represents the undisclosed rental value associated with Mr. Watson’s use of the condominium. |
(8) | This represents the cost for Mr. Watson and his spouse to attend the Metropolitan Museum of Art’s annual benefit event for the Costume Institute, for which the Company was able to take a charitable deduction. |
(9) | This represents the incremental cost associated with Mr. Watson’s family accompanying him on business trips. The incremental cost was calculated based on the amount of lodging in excess of what the Company typically paid for him or for other Company attendees on the same business trip. |
(10) | For 2019, Mr. Watson also received the following perquisites whose individual incremental costs were less than $25,000: sedan services; private club membership dues; concierge service membership dues; personal website hosting costs; expenses/fees for his boat; and credit card membership fee. |
(11) | For 2018, Mr. Watson also received the following perquisites whose individual incremental costs were less than $25,000: sedan and car rental services; spa retreat; personal website hosting costs; expenses/fees for his boat; and credit card membership fee. |
(12) | For 2017, Mr. Watson also received the following perquisites whose individual incremental costs were less than $25,000: family vacations; spa retreat; personal website hosting costs; expenses/fees for his boat; car detailing services; and IT and A/V products and services. |
(13) | The Review Period also includes 2016, 2015 and 2014, which are not included in the 2019 Summary Compensation Table. The amounts and types of perquisites received by Mr. Watson during these years are substantially similar to the amounts and types of perquisites received during the 2019 to 2017 period. |
(6) | The “Total” for Mr. Watson includes $2,475,833 in separation payments he received under the terms of his Separation Agreement as well as $5,050,573 associated with the modification of certain of Mr. Watson’s outstanding equity awards. Excluding these two amounts, Mr. Watson’s total compensation would be $4,940,945. This alternative “total” is being provided for context and should not be viewed as a substitute for the Total calculated in accordance with the SEC executive compensation disclosure rules. |
(7) | Amounts updated from prior years to reflect (i) for Mr. Schmidt, approximately $600 in additional perquisites for 2018 and 2017 consisting of credit card membership fees and (ii) for Mr. Bullock, $27,892 in additional perquisites in 2018, consisting of a trip as a passenger on corporate aircraft, additional financial planning costs, certain club and credit card membership fees, and additional home leave and travel costs, and $9,975 in additional perquisites in 2017, consisting of additional financial planning costs, certain club and credit card membership fees, and additional home leave and travel costs. |
2019 Grants of Plan-Based Awards discussion on page 33 for information about the actual grants.5.The change in the present value of the pension plan which occurred during 2011. The Pension Benefits table on page 36 presents additional information about both the calculation of the change in value and the plan itself.
Estimated Future Payouts UnderNon- Equity Incentive Plan Awards(1) | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards($)(3) | |||||||||||||||||||||||||||||||||||||
Name | Committee Approval Date | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||
Kevin J. Rehnberg | — | — | $ | 431,500 | $ | 863,000 | $ | 1,726,000 | — | — | — | — | — | |||||||||||||||||||||||||||
2/19/2019 | 3/15/2019 | — | — | — | 3,662 | 10,985 | 18,309 | — | $ 749,946 | |||||||||||||||||||||||||||||||
2/19/2019 | 3/15/2019 | — | — | — | — | — | — | 3,662(4) | $ 250,005 | |||||||||||||||||||||||||||||||
Jay S. Bullock | — | — | $ | 350,000 | $ | 700,000 | $ | 1,400,000 | — | — | — | — | ||||||||||||||||||||||||||||
2/19/2019 | 3/15/2019 | — | — | — | 1,538 | 4,614 | 7,690 | — | $ 314,998 | |||||||||||||||||||||||||||||||
2/19/2019 | 3/15/2019 | — | — | — | — | — | — | 1,538(4) | $ 104,999 | |||||||||||||||||||||||||||||||
Matt Harris | 2/19/2019 | 3/15/2019 | $ | 197,769 | $ | 395,538 | $ | 791,076 | — | — | — | — | — | |||||||||||||||||||||||||||
2/19/2019 | 3/15/2019 | — | — | — | 1,109 | 3,326 | 5,544 | — | $ 227,066 | |||||||||||||||||||||||||||||||
2/19/2019 | 3/15/2019 | — | — | — | — | — | — | 1,109(4) | $ 75,711 | |||||||||||||||||||||||||||||||
Axel Schmidt | 2/19/2019 | 3/15/2019 | $ | 200,000 | $ | 400,000 | $ | 800,000 | — | — | — | — | — | |||||||||||||||||||||||||||
2/19/2019 | 3/15/2019 | — | — | — | 1,221 | 3,662 | 6,105 | — | $ 249,936 | |||||||||||||||||||||||||||||||
2/19/2019 | 3/15/2019 | — | — | — | — | — | — | 1,221(4) | $ 83,358 | |||||||||||||||||||||||||||||||
Former Named Executive Officers |
| |||||||||||||||||||||||||||||||||||||||
Mark E. Watson III | 2/19/2019 | 3/15/2019 | $ | 750,000 | $ | 1,500,000 | $ | 3,000,000 | — | — | — | — | — | |||||||||||||||||||||||||||
2/19/2019 | 3/15/2019 | — | — | — | 10,253 | 30,760 | 51,266 | — | $ 2,099,985 | |||||||||||||||||||||||||||||||
2/19/2019 | 3/15/2019 | — | — | — | — | — | — | 10,253(4) | $ 699,972 | |||||||||||||||||||||||||||||||
12/13/2019 | 12/13/2019 | — | — | — | — | — | — | 77,356(5) | $ 5,050,573 | |||||||||||||||||||||||||||||||
Jose Hernandez(6) | n/a | $ | — | $ | 239,000 | $ | — | — | — | — | — | $ — |
(1) | Other than with respect to Mr. Hernandez, these amounts represent threshold, target and maximum cash award levels set in 2019 under the Annual Incentive Plan. As noted in the CD&A, the threshold performance goals were not achieved and the Company did not pay any 2019 annual incentive awards under the 2019 Annual Incentive Plan. Mr. Watson’s 2019 annual incentive award was forfeited as a result of his separation from the Company on December 31, 2019. Mr. Hernandez was eligible to receive an incentive award based on the achievement of goals relating to his transition. Because a target bonus opportunity was not established, the amount reported is the representative amount of payment, determined based on actual performance. |
(2) | These amounts represent the threshold, target and maximum shares of performance-based restricted stock granted under the Argo Group International Holdings, Ltd. 2014 Long-Term Incentive Plan. For actively employed executives, shares of performance-based restricted stock are scheduled to vest in annual installments, subject to the achievement of a threshold BVPS goal and individual performance goals over the 2019 calendar year and the executive’s continued service through the applicable vesting date. As noted in the CD&A, the Company failed to achieve the BVPS goal and these shares of performance-based restricted stock were forfeited, other than Mr. Watson’s award which vested pursuant to the terms of his separation agreement. Please see the CD&A for further information regarding this award. |
(3) | The amounts in this column represent the aggregate grant date fair value of equity awards granted to our NEOs during the fiscal year ended December 31, 2019. The Grant Date Fair Value in column (l) was calculated in accordance with FASB ASC Topic 718, with performance-based restricted stock awards valued based on the probable outcome of such criteria. This column also includes the incremental fair value associated with the modification of Mr. Watson’s outstanding restricted stock awards in connection with his separation, as discussed further in the CD&A and footnote 5 to this table. |
(4) | Represents the time-based restricted stock awards granted under the Argo Group International Holdings, Ltd. 2014 Long-Term Incentive Plan as a component of the annual LTI awards, which vest in four equal installments beginning on the first anniversary of the date of the grant, subject to the executive’s continued employment through the applicable vesting date. |
(5) | This amount represents the number of shares of restricted stock that were impacted by the modification to Mr. Watson’s outstanding restricted stock awards in connection with his separation from the Company and does not reflect a new equity grant. As noted in the CD&A, in 2019, the vesting terms of certain of Mr. Watson’s outstanding restricted stock awards were modified in connection with his separation from the Company. |
(6) | Mr. Hernandez was not eligible for LTI awards in 2019. |
| |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | 401(k) and Retirement Contributions | Imputed Value of Company Provided Insurance Coverage (a) | Supplemental Executive Retirement Plan Benefit | Gross Up on Housing, Home Travel & Education (b) | Perquisites (c) | Total | |||||||||||||
Mark Watson | $ | 14,700 | $ | 42,167 | $ | 45,300 | $ | 78,823 | $ | 169,249 | $ | 350,239 | |||||||
Jay Bullock | $ | 14,700 | $ | 4,387 | $ | 15,300 | $ | 0 | $ | 23,499 | $ | 57,886 | |||||||
Barbara Bufkin | $ | 14,296 | $ | 3,701 | $ | 9,150 | $ | 17,063 | $ | 199,084 | $ | 243,294 | |||||||
Andrew Carrier | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 39,278 | $ | 39,278 | |||||||
Julian Enoizi (d) | $ | 18,676 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 18,676 |
| ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Financial Planning | Relocation Costs | Housing Allowance | Home Leave Travel Allowance | Education Allowance | Cost of Living Allowance | Total Perquisites | |||||||||||||||
Mark Watson | $ | 4,750 | $ | 0 | $ | 126,750 | $ | 25,749 | $ | 12,000 | $ | 0 | $ | 169,249 | ||||||||
Jay Bullock (1) | $ | 1,325 | $ | 0 | $ | 20,000 | $ | 2,174 | $ | 0 | $ | 0 | $ | 23,499 | ||||||||
Barbara Bufkin (2) | $ | 5,150 | $ | 61,226 | $ | 105,400 | $ | 2,308 | $ | 0 | $ | 25,000 | $ | 199,084 | ||||||||
Andrew Carrier (1) | $ | 0 | $ | 0 | $ | 0 | $ | 39,278 | $ | 0 | $ | 0 | $ | 39,278 |
| |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | | | |||||||||||||||
(a) | (b) | (d) | (e) | (i) | (j) | (k) | (l) | ||||||||||||||
Name | Grant Date | Target ($)(1) | Maximum ($) | All Other Stock Awards: Number of Shares of Stock or Units (#) (2) | All Other Stock Options: Number of Shares Underlying Options (#) (2) | Exercise or Base Price of Option Awards ($–Share) | Grant Date Fair Value of Stock and Option Awards (2) | ||||||||||||||
$ | 1,000,000 | $ | 2,000,000 | ||||||||||||||||||
Mark Watson | 3/15/2011 | 45,584 | $ | 32.50 | $ | 1,481,480 | |||||||||||||||
3/15/2011 | 113,960 | $ | 32.50 | $ | 1,033,617 | ||||||||||||||||
$ | 625,000 | $ | 1,250,000 | ||||||||||||||||||
Jay Bullock | 3/15/2011 | 5,470 | $ | 32.50 | $ | 177,775 | |||||||||||||||
3/15/2011 | 54,701 | $ | 32.50 | $ | 496,138 | ||||||||||||||||
$ | 300,000 | $ | 600,000 | ||||||||||||||||||
Barbara Bufkin | 3/10/2011 | 9,615 | $ | 33.98 | $ | 326,718 | |||||||||||||||
3/15/2011 | 31,909 | $ | 32.50 | $ | 289,415 | ||||||||||||||||
$ | 598,560 | $ | 1,197,120 | ||||||||||||||||||
Andrew Carrier | 3/15/2011 | 84,240 | $ | 32.50 | $ | 764,057 | |||||||||||||||
|
Outstanding Equity Awards at 2019 Fiscal Year End
Year-End
| |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Option Awards | Stock Awards | |||||||||||||||||
| |||||||||||||||||||
Name | Number of Securities Underlying Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | |||||||||||||
64,840 | $ | 34.33 | 03/12/2012 | ||||||||||||||||
64,840 | $ | 35.35 | 08/06/2013 | ||||||||||||||||
12,968 | $ | 20.05 | 08/05/2014 | ||||||||||||||||
45,764 | 15,254 (a | ) | $ | 35.23 | 03/25/2015 | ||||||||||||||
Mark Watson | 15,158 | 15,158 (b | ) | $ | 28.14 | 03/13/2016 | 10,104 (b | ) | $ | 292,612 | |||||||||
35,369 | 35,368 (b | ) | $ | 28.14 | 03/13/2016 | ||||||||||||||
21,684 | 65,050 (f | ) | $ | 28.01 | 03/01/2017 | 26,022 (f | ) | $ | 753,597 | ||||||||||
9,077 | $ | 53.98 | 04/21/2013 | ||||||||||||||||
0 | 113,960 (g | ) | $ | 32.50 | 3/16/2018 | 45,584 (g | ) | $ | 1,320,113 | ||||||||||
33,750 | 11,250 (c | ) | $ | 38.26 | 05/13/2015 | 2,500 (c | ) | $ | 72,400 | ||||||||||
1,063 | 354 (d | ) | $ | 38.97 | 06/04/2015 | ||||||||||||||
6,140 | 6,138 (b | ) | $ | 28.14 | 03/13/2016 | ||||||||||||||
Jay Bullock | 14,325 | 14,324 (b | ) | $ | 28.14 | 03/13/2016 | |||||||||||||
12,091 | 36,273 (f | ) | $ | 28.01 | 03/01/2017 | ||||||||||||||
0 | 54,701 (g | ) | $ | 32.50 | 3/16/2018 | 5,470 (g | ) | $ | 158,411 | ||||||||||
12,968 | $ | 34.33 | 03/12/2012 | ||||||||||||||||
2,593 | $ | 53.98 | 04/21/2013 | ||||||||||||||||
12,968 | $ | 27.11 | 09/03/2013 | ||||||||||||||||
628 | $ | 36.43 | 09/03/2013 | ||||||||||||||||
12,968 | $ | 18.57 | 05/14/2014 | ||||||||||||||||
Barbara Bufkin | 7,208 | 2,402 (a | ) | $ | 35.23 | 03/25/2015 | 267 (a | ) | $ | 7,732 | |||||||||
3,538 | 3,536 (b | ) | $ | 28.14 | 03/13/2016 | ||||||||||||||
8,253 | 8,252 (b | ) | $ | 28.14 | 03/13/2016 | ||||||||||||||
6,574 | 19,720 (f | ) | $ | 28.01 | 03/01/2017 | ||||||||||||||
0 | 31,909 (g | ) | $ | 32.50 | 3/16/2018 | 9,615 (h | ) | $ | 278,450 | ||||||||||
36,400 | 9,100 (i | ) | $ | 40.79 | 12/20/2014 | ||||||||||||||
8,126 | 24,374 (f | ) | $ | 28.01 | 3/1/2017 | ||||||||||||||
Andrew Carrier | 19,453 | 19,452 (b | ) | $ | 28.14 | 3/13/2016 | |||||||||||||
0 | 84,240 (g | ) | $ | 32.50 | 3/16/2018 |
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||||||||||||||||||
Kevin J. Rehnberg | — | — | — | — | — | 3,198(2) | $ 210,269 | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | 3,977(3) | $ 261,488 | — | — | ||||||||||||||||||||||||||||
— | — | — | — | — | 3,011(4) | $ 197,973 | — | — | ||||||||||||||||||||||||||||
— | — | — | — | — | 3,662(5) | $ 240,777 | — | — | ||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 19,595(6) | $1,288,371 | ||||||||||||||||||||||||||||
Jay S. Bullock | 3,359 | — | — | $ 26.19 | 3/15/2020 | 5,661(2) | $ 372,211 | — | — | |||||||||||||||||||||||||||
37,561 | — | — | $ 31.92 | 3/14/2021 | 7,056(3) | $ 463,932 | — | — | ||||||||||||||||||||||||||||
21,504 | — | — | $ 37.85 | 2/26/2022 | 3,747(4) | $ 246,365 | — | — | ||||||||||||||||||||||||||||
— | — | — | — | — | 1,538(5) | $ 101,124 | — | — | ||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 6,531(6) | $ 429,413 | ||||||||||||||||||||||||||||
Axel Schmidt | 26,920 | — | — | $ 37.85 | 2/26/2022 | 2,357(2) | $ 154,973 | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | 2,800(3) | $ 184,100 | — | — | ||||||||||||||||||||||||||||
— | — | — | — | — | 2,231(4) | $ 146,688 | — | — | ||||||||||||||||||||||||||||
— | — | — | — | — | 1,221(5) | $ 80,281 | — | — | ||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 6,531(6) | $ 429,413 | ||||||||||||||||||||||||||||
Matt Harris | — | — | — | — | — | 2,393(4) | $ 157,334 | — | ||||||||||||||||||||||||||||
1,109(5) | $ 72,917 | — | — | |||||||||||||||||||||||||||||||||
6,531(6) | $ 429,413 | |||||||||||||||||||||||||||||||||||
Former Named Executive Officers |
| |||||||||||||||||||||||||||||||||||
Mark E. Watson III(2) | 74,807 | $ 26.19 | 3/15/2020 | |||||||||||||||||||||||||||||||||
3,240 | $ 26.19 | 3/15/2020 | ||||||||||||||||||||||||||||||||||
167,656 | $ 31.92 | 3/14/2021 | ||||||||||||||||||||||||||||||||||
118,421 | $ 37.85 | 2/26/2022 | ||||||||||||||||||||||||||||||||||
Jose Hernandez |
(1) | The stock price used to calculate the value of equity awards was $65.75, the price at which the Company’s common stock closed on December 31, 2019. |
(2) | This award was granted on March 10, 2016 and vests in four annual installments on the anniversary of the grant date, subject to the executive’s continued employment through such date. |
(3) | This award was granted on March 29, 2017 and vests in four annual installments on the anniversary of the grant date, subject to the executive’s continued employment through such date. |
(4) | This award was granted on March 27, 2018 and vests in four annual installments on the anniversary of the grant date, subject to the executive’s continued employment through such date. |
(5) | This award was granted on March 15, 2019 and vests in four annual installments on the anniversary of the grant date, subject to the executive’s continued employment through such date. |
(6) | |||||||
This award was granted on November 5, |
(1) The stock price used to calculate the value of equity awards was $28.96, the price at which the Company's common stock closed on December 30, 2011, the last trading day of 2011.
(7) | Mr. Watson had no stock awards outstanding as of December 31, 2019 due to the acceleration of certain outstanding awards that occurred on December 13, 2019, per the terms of his separation agreement. Mr. Watson’s 2018 performance-based equity award was forfeited upon his termination on December 31, 2019. |
2019 Option Exercises and Stock Vested
| ||||||||
---|---|---|---|---|---|---|---|---|
| Option Awards | Stock Awards | ||||||
| ||||||||
(a) | (b) | (c) | (d) | (e) | ||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value realized on Vesting ($) | ||||
Mark Watson | 0 | $0 | 13,728 (1) | $492,582 | ||||
Jay Bullock | 0 | $0 | 2,500 | $75,275 | ||||
Barbara Bufkin | 0 | $0 | 267 | $8,552 | ||||
Andrew Carrier | 0 | $0 | 0 | $0 | ||||
Julian Enoizi | 328 | $9,775 | 0 | $0 |
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
Kevin J. Rehnberg | 13,739 | $ | 459,157 | 23,836 | $ | 1,786,666 | ||||||||||
Jay S. Bullock | 23,623 | $ | 1,005,395 | 24,256 | $ | 1,816,767 | ||||||||||
Matt Harris | 797 | $ | 57,185 | |||||||||||||
Axel Schmidt | 5,677 | $ | 397,857 | |||||||||||||
Former Named Executive Officers |
| |||||||||||||||
Mark E. Watson III | 286,498 | $ | 20,944,278(1) | |||||||||||||
Jose Hernandez | 7,984 | $ | 553,234 |
(1) | Included in this amount are 35,296 shares that were transferred to an escrow account per the terms of Mr. Watson’s separation agreement, as discussed further in the CD&A. |
(a) | (b) | (c) | (d) | (e) | ||||
---|---|---|---|---|---|---|---|---|
Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit as of 12/31/2010 ($) (a) | Present Value of Accumulated Benefit as of 12/31/2011 ($) (b) | ||||
Mark Watson | Argo Group US Retirement Plan | 3.42 | $42,618 | $51,432 | ||||
| ||||||||
Argo Group US Pension Equalization Plan | 3.42 | $67,516 | $81,478 | |||||
| ||||||||
Barbara Bufkin | Argo Group US Retirement Plan | 0.42 | $8,177 | $9,427 | ||||
| ||||||||
Argo Group US Pension Equalization Plan | 0.42 | $2,913 | $3,359 | |||||
|
Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit as of 12/31/2019 ($) | |||||||||
Mark E. Watson III | Argo Group US Retirement Plan | 3.42 | $ | 107,082 | ||||||||
Mark E. Watson III | Argo Group US Pension Equalization Plan | 3.42 | $ | 168,972 |
In November, 2003, the Company amended both the Argonaut Group, Inc.its Retirement Plan, (the "Pension Plan"), a defined benefit plan, and the Argonaut Group, Inc.its Pension Equalization Plan, (the "Pension Equalization Plan"), a plan which provided retirement benefits which would have been payable under the PensionRetirement Plan but for the limits imposed by the Code, to freeze benefits as of February 29, 2004. No additional benefits have been accrued since that date.
Mr. Watson was eligible to receive payments under such plans at the age of 65 or upon his termination of employment from the Company, whichever came first. Mr. Watson had the option to elect to receive his payments in lump sum or in annuity payments, or rollover his payments into another plan. The changes in the values of the accumulated benefits for Mr. Watson and Ms. Bufkin during 20112019 were due solely to the change in the present value of the vested benefit that existed at February 29, 2004.
Please refer to footnote 1216 of the 2011 Consolidated Financial Statements included in ourForm 10-K for the year ended December 31, 2011 which provides2019 for details regarding valuation method and material assumptions forthe status of the plans.
2019Non-qualifiedNonqualified Deferred Compensation
(a) | (b) | (c) | (d) | (e) | ||||
---|---|---|---|---|---|---|---|---|
Name | Executive Contributions in last fiscal year ($) | Registrant Contributions in last fiscal year ($) | Aggregate Earnings in last fiscal year ($) | Aggregate Balance at last fiscal year end ($) | ||||
Mark Watson | $33,500 | $45,300 | $8,841 | $668,578 | ||||
| ||||||||
Jay Bullock | $8,500 | $15,300 | ($6,731) | $105,463 | ||||
| ||||||||
Barbara Bufkin | $3,824 | $9,150 | $138 | $64,072 | ||||
|
Name | Executive contributions in last fiscal year ($) | Registrant contributions in last fiscal year ($)(1) | Aggregate earnings in last fiscal year ($)(1) | Aggregate withdrawals/ distributions ($) | Aggregate balance at last fiscal year end ($)(2) | |||||||||||||||
Kevin J. Rehnberg | $ | 13,856 | $ | 29,827 | $ | 24,500 | $ | – | $ | 214,346 | ||||||||||
Jay S. Bullock | $ | 26,394 | $ | 29,277 | $ | 110,604 | $ | – | $ | 553,893 | ||||||||||
Former Named Executive Officers |
| |||||||||||||||||||
Mark E. Watson III | $ | 57,693 | $ | 66,892 | $ | 764,202 | $ | – | $ | 3,378,151 | ||||||||||
Jose Hernandez | $ | 2,146 | $ | 15,75 | $ | 17,532 | $ | – | $ | 83,121 |
(1) | All of the Company’s contributions in the last fiscal year are included in the 2019 Summary Compensation Table. None of the aggregate earnings in the last fiscal year are included in the 2019 Summary Compensation Table. |
(2) | The amounts included in the Summary Compensation Table for this year and all prior years were: $214,347 for Mr. Rehnberg, $555,893 for Mr. Bullock, $3,378,151 for Mr. Watson and $83,121 for Mr. Hernandez. |
Under the Argo Group USCompany’s 401(k) Plan, a defined contribution plan, the contribution made by the Company on behalf of an employeeeligible U.S. employees is equal to the sum of:
a. | 100% of the first 5% of eligible pay that the employee contributes per pay period to the plan; and |
b. | 1% of the employee’s eligible pay. |
During 2011,2019, the Internal Revenue Code limited the maximum amount of compensation used to calculate benefits under a defined contribution plan to $245,000$280,000 and the maximum dollar amount of the 401(k) contribution that could be made to $16,500$19,000 plus an additional $5,500$6,000 for employees over the age of 50. The Argo Group USCompany’s Supplemental Executive Retirement Plan ("SERP"(“SERP”) provides retirement benefits to its U.S. employees which would be payable under the Argo Group US 401(k) Plan but for the limits imposed by the Internal Revenue Code. The investment return on an individual'sindividual’s SERP amount balance is calculated as though the funds in the account were invested, inas directed by the individual, from among substantially the same funds the individual designates for the investment of his or her account balanceavailable under the Company'sCompany’s 401(k) Plan.
During 2011,2019, the Company credited contributions to the account maintained for each U.S. NEO for the following.
a. | The difference between the Company matching contribution which would have been made to the individual’s account under the Company’s 401(k) Plan based upon the individual’s 401(k) election had his or her contributions under that plan not been limited by reason of the Code and the amount that was actually credited to the individual’s account under the Company’s 401(k) Plan; |
b. | A supplemental Company contribution equal to 1% of the excess of the NEO’s eligible compensation for the 2019 fiscal year less the maximum amount of compensation permitted to be taken into account under the Code ($280,000 for the 2019 fiscal year); and |
c. | Investment income calculated as though the funds in the account were invested, as designated by the individual, from substantially the same funds that are available under the Company’s 401(k) Plan. |
In addition, executives under the age of 50 who elect to contribute more than the $16,500$19,000 allowed under the Code and executives 50 years old or older who elect to contribute more than the $22,000$25,000 allowed under the Code can contribute up to 5% of the pay earned after the limit is reached to the SERP. Executives may elect to receive payments in lump sum or in annual cash installments between one and 10 years. Payments may be distributed through one of the following options, as elected by the executive: (i) as soon as possible following separation from service, (ii) in the calendar year following the year separated from service, or (iii) on a specified date elected by the executive following separation from service. Regardless of the election, no distributions may commence sooner than six months following separation from service.
Potential Payments upon Termination or a Termination following a Change in Control
While we do not maintain a formal severance plan for our employees, we believe that reasonable severance arrangements are essential to attracting and retaining highly qualified executives. Our employment arrangements are designed to provide reasonable compensation to departing executives under certain circumstances to facilitate their transition to new employment. As part of Control
Thethese arrangements, we also mitigate potential Company maintainsliability by requiring executives to sign a numberseparation and release agreement acceptable to us as a condition to receiving severance benefits. While we do not believe that the provisions of plansa severance benefit would be a determinative factor in an executive’s decision to join or remain with the Company, the absence of such a provision in an executive’s employment agreement would present a distinct competitive disadvantage in the market for highly skilled and agreements which would governexperienced executives. Furthermore, we believe that it is important to set forth the amountbenefits payable in triggering circumstances in advance in an NEO would receive if heattempt to avoid future disputes or she resignedlitigation. In determining severance arrangements provided for in an executive’s employment agreement, the Committee has drawn a distinction between voluntary resignations and terminations for cause versus terminations without cause or was terminated. Shouldby the executive for good reason. We believe severance arrangements for a termination event occur,without cause or by the amounts received will dependexecutive for good reason are appropriate since the executive’s departure is due to circumstances not within his or her control.
We have entered into an employment agreement with each of our NEOs. The employment agreements set forth the general terms and conditions of each NEO’s employment with the Company and provide for certain severance benefits upon the facts applicableoccurrence of certain events. Severance benefits are limited to those set forth in the dateNEO’s employment agreement.
Mr. Watson
Under Mr. Watson’s agreement in effect during 2019, Mr. Watson was eligible for the following severance benefits upon resignation for Good Reason (as defined in the agreement) or termination by the Company without Cause (as defined in the agreement): (A) the target annual incentive award for the year in which his employment is terminated, (B) all unvested equity awards will remain in force as if no termination had occurred; provided that (i) any performance-based equity awards will vest based on actual performance through the end of the eventapplicable performance period, (ii) unvested options and similar awards will remain exercisable for some NEOs, whether12 months following the last vesting date, but not beyond the original term and (iii) any such termination within two years after a change of control (as defined in the agreement) will result in all unvested equity awards fully vesting, (C) a payment equal to two times his base salary and target annual cash incentive award in the year of termination (or, if no target has occurred. The following calculations arebeen set, the target amount for illustration purposes onlythe prior year) and are based on(D) continuation of health benefits at the following assumptions:active executive rate until he receives reasonably equivalent coverage or for 18 months from the date of termination.
i. The trigger event occurredUpon expiration of the employment agreement on December 31, 2011;2023, Mr. Watson would have been entitled to receive the following benefits: (A) all unvested equity awards will remain in force as if no termination had occurred, provided that any performance-based equity awards will vest on actual performance through the end of the applicable performance period, (B) unvested options and similar awards will remain exercisable for 12 months following the last vesting date, but not beyond the original term, and (C) payment of the bonus that he would have been awarded in respect of the 2023 performance year based on actual performance had he remained employed through the date for such bonus award.
ii. TheAs noted in the CD&A, the Company and Mr. Watson entered into a separation agreement on December 6, 2019. Under the terms of the separation agreement, as of the date on which the separation agreement became fully enforceable and binding, Mr. Watson fully vested in his unvested restricted stock from each of his (i) March 10, 2016 grant (11,285 shares), (ii) March 29, 2017 grant (14,558 shares), (iii) March 27, 2018 grant (10,500 shares) and (iv) March 15, 2019 grant (41,013 shares) (estimated value of $5,050,573, based on a closing stock price usedof $65.29 per share on December 13, 2019, the date on which the agreement became enforceable). All of Mr. Watson’s vested share appreciation rights remained vested and fully exercisable without restriction, and continued to calculatebe governed by the terms of the underlying award agreements, provided that following the separation date, Mr. Watson ceased to be bound
to any restrictive covenant or post-termination obligation, duty or restriction under such award agreements, other than certain obligations relating to confidential information. In addition, the Company paid Mr. Watson (a) an amount equal to $1,750,000 within two business days after the Separation Agreement becoming fully enforceable and binding, and (b) an amount equal to $725,833.33 within two business days after hisre-execution andnon-revocation of the Separation Agreement on January 1, 2020. The 73,481 performance-based restricted shares granted by the Company to Mr. Watson on November 5, 2018 were forfeited by Mr. Watson as of the separation date.
Mr. Watson agreed to reimburse the Company for certain alleged personal expenses that were paid for by the Company, in an amount to be determined after the Company concludes its investigation into such expenses and 35,296 of the shares of restricted stock referred to in the previous paragraph were placed into an escrow account. All or a portion of such shares will be returned to the Company in full satisfaction of Mr. Watson’s reimbursement obligation. If the amount that Mr. Watson is required to reimburse the Company for personal expenses is equal to or greater than the aggregate value of equity awards was $28.96, the shares placed in the escrow account (based on the closing price at whichof the Company'sCompany’s common stock closed on December 30, 2011,November 1, 2019, or $63.04), then all of the last trading dayshares held in the escrow account will be returned to the Company in full satisfaction of 2011.
Employment Agreement with Mark E.Mr. Watson’s reimbursement obligation. If the amount that Mr. Watson III
The following describesis required to reimburse the circumstancesCompany for personal expenses is less than the aggregate value of the shares placed in the escrow account (based on the $63.04 closing price), then the shares held in the escrow account having an aggregate value equal to the required reimbursement amount (based on the $63.04 closing price), rounded up to the nearest whole share, will be returned to the Company in full satisfaction of Mr. Watson’s reimbursement obligation and the related payments that mightremaining shares held in the escrow account will be triggered underreleased to Mr. Watson.
The separation agreement included a general release of claims by Mr. Watson in favor of the Company. The separation agreement superseded all prior agreements between Mr. Watson and the Company, including Mr. Watson’s employment agreement with the Company, except for certain provisions of the employment agreement set forth in the separation agreement, which survive, including provisions relating tonon-disclosure of confidential information, return of Company property, mutualnon-disparagement, cooperation following termination of employment, indemnification and clawback.
Mr. Rehnberg
Under the terms of Mr. Watson's Employment Agreement usingRehnberg’s employment agreement in effect during 2019, in the assumptions set forth above:
1) Termination By the Company With Cause
Ifevent that the Company terminates Mr. Watson with "Cause"Rehnberg for Cause (as defined in the Agreement), or if Mr. Rehnberg elects to terminate his employment with the Company, he will receive his Base Salarybase salary, certain expense reimbursements and any benefits accrued through(collectively, the “Accrued Benefits”), in each case to the extent accrued as of the date of termination, plus any bonus that has been allocated or awarded for any measuring period that ends prior to the date of termination that has not yet been paid and he will not be entitled to any other benefits except as required by law.
2) Termination WithoutIn the event that the Company terminates Mr. Rehnberg without Cause, Mr. Rehnberg will receive the Accrued Benefits, any earned but unpaid annual cash incentive award for the year immediately preceding termination, and any target annual cash incentive award for the year of such termination (pro rated for such year through the date of termination), and all unvested equity awards will remain in force as if no termination had occurred; provided that (i) any performance-based equity awards (other than the November 2018 performance-based awards) will vest based on actual performance through the end of the applicable performance period, (ii) unvested options will remain exercisable for 90 days following the last vesting date, but not beyond the original term and (iii) any such termination within 2 years after a Change of Control (as defined in the Agreement) will result in all unvested equity awards fully vesting. In addition, Mr. Rehnberg will be entitled to receive a payment equal to the sum of his base salary and target annual cash incentive award in the year of termination (or, if no target has been set, the target amount for the prior year), or Voluntary Resignationtwo times such amount if a Change in Control has then occurred or is reasonably expected to occur. In addition, Mr. Rehnberg shall also be eligible for Good Reason
Ifcontinuation of health benefits at the active rate for up to 18 months or, if earlier, until he obtains reasonably equivalent coverage. The agreement also provides for payments upon termination under the agreement to be reduced, to the extent doing so would not reduce Mr. WatsonRehnberg’s aggregate (after tax) payments and benefits under the Agreement, so that no portion of such payments will be subject to excise taxes under Section 4999 of the Internal Revenue Code of 1986, as amended.
The agreement contains certain confidentiality provisions and prohibits Mr. Rehnberg from competing with the Company or its affiliates, or soliciting its customers or employees for theone-year period following his termination.
Mr. Bullock
Under the terms of Mr. Bullock’s agreement in effect during 2019, if Mr. Bullock’s employment is terminated by the Company without "Cause"“cause,” or, if he resignswithin two years following a “change in control,” by Mr. Bullock for "Good Reason" (as each term is defined in“good reason,” Mr. Bullock will be entitled to the Agreement), he will receive his Base Salary andfollowing severance benefits: (i) accrued benefits accrued and any bonus Fully Earned (as defined inearned but unpaid annual cash incentive award for the Agreement) throughyear preceding the dateyear of termination. In addition, he will receivetermination, (ii) an aggregate amount equal to 2.99one times (or, if a “change in control” has occurred or is reasonably expected to occur, two times) the sum of (A) his Base Salary onbase salary and (B) his target annual cash incentive award for the first dayyear of termination (or, if a target annual cash incentive award has not yet been established for such year, his target annual cash incentive award for the month afteryear prior to the 60th day followingyear of termination), such amounts to be paid in installments over a period of 12 months, (iii) any target annual cash incentive award for the year of termination, (iv) continuation of health benefits at the active rate of executives until Mr. Bullock receives reasonably equivalent coverage or for 18 months, whichever is earlier, provided Mr. Bullock’s timely election of benefit continuation coverage under COBRA, and (v) continued vesting of all unvested equity grants previously awardedawards (other than the November 2018 performance awards in the case of a termination prior to Mr. Watson will remaina “change in full force and effectcontrol”), to be paid or settled in accordance with the terms of the applicable award agreements as if no termination had occurred. Finally, heoccurred and Mr. Bullock had remained employed by the Company through the applicable vesting date, provided that the vesting of any outstanding performance-based equity awards will be eligible for continuation of medical and health benefitsdetermined based on actual performance through the same terms and conditions as they are made available to active employeesend of the Company until he obtains reasonably equivalent employment orapplicable performance period, provided further that all outstanding, unvested stock options will remain exercisable for 18 months froma period of 90 days following the last vesting date of his termination, whichever occurs earlier.
Under the termsstock option, but not beyond the original term of the Agreement using the assumptions above, if Mr. Watson was terminated without Cause or had resigned for Good Reason on December 31, 2011, in addition to amounts earned before his termination, he would have received a payment of $2,990,000 six months after the termination took place and medical coverage which, if he received it for the entire 18 month period, would be valued at $41,842 based on the rates in effect for the medical coverage at December 31, 2011. In addition, all unvested equity grants previously awarded to Mr. Watson would have remained in full force and effect as if no termination had occurred. The value of his unvested stock appreciation rights and stock options, calculated as the difference between the Company's common stock price at the close of market on December 30, 2011 and the exercise price, was $103,229. The value of his unvested cash settled performance units was $292,612 based on the Company's common stock price at the close of market on December 30, 2011. The value of his unvested restricted stock was $2,073,710 based on the Company's common stock price at the close of market on December 30, 2011.
3) Death or Disability
option. In the event of Mr. Watson'sBullock’s involuntary termination of employment by the Company without “cause” or by Mr. Bullock for “good reason,” in each case, within two years following a “change in control,” all outstanding unvested equity awards will vest immediately upon the date of such termination of employment. All severance benefits are conditioned upon Mr. Bullock’s execution within 30 days following the termination date of a full and complete release of claims in favor of the Company and its subsidiaries and affiliates, and his compliance with the restrictive covenants to which he is bound under the employment agreement.
In the event Mr. Bullock’s employment is terminated due to his death or disability, Mr. Bullock (or his estate or surviving spouse in the case of his death) is entitled to: (i) accrued benefits, (ii) any earned but unpaid annual cash incentive award for the year preceding the year of termination, (iii) any target annual cash incentive award for the year of termination, and (iv) continuation of family health benefits at the active rate of executives for an eighteen month period, provided Mr. Bullock’s (or, in the case of his death, his estate shallsurviving spouse’s) timely election of benefit continuation coverage under COBRA. In the event Mr. Bullock’s employment is terminated due to his disability, it will be a condition precedent to the receipt of the continuation of family health benefits that Mr. Bullock execute a full and complete release of claims in favor of the Company and its subsidiaries and affiliates. In the event Mr. Bullock’s employment is terminated by the Company for “cause,” Mr. Bullock will only be entitled to receive the amount of his Base Salary accrued through the date of his death plus any bonus that is Fully Earned. In addition, his surviving spouse would be entitled to purchase medicalbenefits, and health benefits on the same terms and conditions as they are made available to active employees of the Company for a period of 18 months. The value of this benefit calculated using the rates in effect for the medical coverage Mr. Watson had selected on December 31, 2011 assuming that his spouse purchased the coverage for 18 months was $34,601.
In case of disability, Mr. Watson would be entitled to receive the amount of his Base Salary accrued through the date of disability plus any bonus that is Fully Earned. In addition, he would be entitled to purchase medical and health benefits on the same terms and conditions as if he were an active employee of the Company for a period of 18 months. The value of this benefit calculated using the rates in effect for the medical coverage Mr. Watson had selected on December 31, 2011 assuming that he purchased the coverage for 18 months was $41,842.
Employment Agreement with Jay S. Bullock
The following describes the circumstances and the related payments that might be triggered under the terms of Mr. Bullock's Employment Agreement using the assumptions set forth above:
1) Termination By the Company With Cause
If the Company terminates Mr. Bullock with "Cause" (as defined in the Agreement), he shall receive his Base Salary accrued through the date of termination plus any bonus that has been allocated or awarded for any measuring period that ends prior to the date of termination that has not yet been paid and he shallwill not be entitled to any other benefits, except asunless otherwise required by applicable law.
2) Termination Without Cause or Voluntary ResignationDuring employment and for Good Reason
Ifa12-month period thereafter, Mr. Bullock is subject tonon-competition andnon-solicitation covenants. Mr. Bullock’s employment agreement also contains customarynon-disclosure, intellectual property, andnon-disparagement covenants.
Mr. Schmidt
Mr. Schmidt’s employment agreement provides that his employment agreement will continue for an indefinite term unless and until terminated by either the Company without "Cause" or if he resigns for "Good Reason" (as each term is defined in the Agreement), he will receive his Base Salary and benefits accrued and any bonus Fully Earned (as defined in the Agreement) through the date of termination. In addition, he will receive an amount equal to one times his Base Salary on the six month anniversary of the dateMr. Schmidt uponsix-months’ notice of such termination. Iftermination of employment. Mr. Schmidt’s employment agreement includes confidentiality provisions and prohibits Mr. Schmidt from competing with the termination occurs in connection with a "Change of Control" (as defined inCompany or its affiliates, or soliciting its customers or employees for the Agreement), heone-year period following his termination.
Mr. Harris
Mr. Harris’ employment agreement provides that his employment will receive two times his Base Salary payable oncontinue for an indefinite term unless and until terminated by either the six month anniversary of the dateCompany or Mr. Harris uponsix-months’ notice of such termination. In either case, all unvested equity grants previously awarded to termination of employment.
Mr. Bullock will remain in full forceHarris’ employment agreement includes confidentiality provisions and effect as if no termination had occurred. Finally, he will be eligible for continuation of medical and health benefits on the same terms and conditions as they are made available to active employees ofprohibits Mr. Harris from competing with the Company until he obtains reasonably equivalent employment or for 18 months from the date of his termination, whichever occurs earlier.
Under the terms of the Agreement using the assumptions described above, if Mr. Bullock was terminated without Causeits affiliates, or had resigned for Good Reason on December 31, 2011, in addition to the amounts earned before his termination, he would have received $500,000 on the six month anniversary of his termination (or $1,000,000 if the termination occurred in connection with a Change of Control) on the first day of the month after the 60th day following the termination and medical coverage which, if he received itsoliciting its customers or employees for the entire 18 monthone-year period would be valued at $22,127 based on the rates in effect for the medical coverage at December 31, 2011. In addition, all unvested equity grants previously awarded to Mr. Bullock would have remained in full force and effect as if no termination had occurred. The value offollowing his unvested stock appreciation rights and stock options, calculated as the difference between the Company's common stock price at the close of market on December 30, 2011 and the exercise price, was $51,238. The value of his unvested restricted stock was $230,811 based on the Company's common stock price at the close of market on December 30, 2011.termination.
In the event of Mr. Bullock's death, his estate shall be entitled to receive the amount of his Base Salary accrued through the date of his death plus any bonus that is Fully Earned. In addition, his surviving spouse would be entitled to purchase medical and health benefits on the same terms and conditions as they are made available to active employees of the Company for a period of 18 months. The value of this benefit calculated using the rates in effect for the medical coverage Mr. Bullock had selected on December 31, 2011 assuming that his spouse purchased the coverage for 18 months was $15,417.
In case of disability, Mr. Bullock would be entitled to receive the amount of his Base Salary accrued through the date of disability plus any bonus that is Fully Earned. In addition, he would be entitled to purchase medical and health benefits on the same terms and conditions as if he were an active employee of the Company for a period of 18 months. The value of this benefit calculated using the rates in effect for the medical coverage Mr. Bullock had selected on December 31, 2011 assuming that he purchased the coverage for 18 months was $22,127.
Employment Agreement with Barbara Bufkin
The following describes the circumstances and the related payments that might be triggered under the terms of Ms. Bufkin's Employment Agreement using the assumptions set forth above:
1) Termination By the Company With Cause
If the Company terminates Ms. Bufkin with "Cause" (as defined in the Agreement), she shall receive her Base Salary accrued through the date of termination plus any bonus that has been allocated or awarded for any measuring period that ends prior to the date of termination that has not yet been paid and she shall not be entitled to any other benefits except as required by law.
2) Termination Without Cause or Voluntary Resignation for Good Reason
If Ms. Bufkin is terminated by the Company without "Cause" or if she resigns for "Good Reason" (as each term is defined in the Agreement), she will receive her Base Salary and benefits accrued and any bonus Fully Earned (as defined in the Agreement) through the date of termination. In addition, she will receive an amount equal to one times her Base Salary on the six month anniversary of the date of such termination. If the termination occurs in connection with a "Change of Control" (as defined in the Agreement), she will receive two times her Base Salary payable on the six month anniversary of the date of such termination. In either case, all unvested equity grants previously awarded to Ms. Bufkin will remain in full force and effect as if no termination had occurred. Finally, she will be eligible for continuation of medical and health benefits on the same terms and conditions as they are made available to active employees of the Company until she obtains reasonably equivalent employment or for 18 months from the date of her termination, whichever occurs earlier.
Under the terms of the Agreement using the assumptions described above, if Ms. Bufkin was terminated without Cause or had resigned for Good Reason on December 31, 2011, in addition to the amounts earned before her termination, she would have received $400,000 on the six month anniversary of her termination (or $800,000 if the termination occurred in connection with a Change of Control) on the first day of the month after the 60th day following the termination and medical coverage which, if she received it for the entire 18 month period, would be valued at $32,073 based on the rates in effect for the medical coverage at December 31, 2011. In addition, all unvested equity grants previously awarded to Ms. Bufkin would have remained in full force and effect as if no termination had occurred. The value of her unvested stock appreciation rights and stock options, calculated as the difference between the Company's common stock price at the close of market on December 30, 2011 and the exercise price, was $28,400. The value of her unvested restricted stock was $286,183 based on the Company's common stock price at the close of market on December 30, 2011.
3) Death or Disability
In the event of Ms. Bufkin's death, her estate shall be entitled to receive the amount of her Base Salary accrued through the date of her death plus any bonus that is Fully Earned. In addition, her surviving spouse would be entitled to purchase medical and health benefits on the same terms and conditions as they are made available to active employees of the Company for a period of 18 months. The value of this benefit calculated using the rates in effect for the medical coverage Ms. Bufkin had selected on December 31, 2011 assuming that her spouse purchased the coverage for 18 months was $22,456.
In case of disability, Ms. Bufkin would be entitled to receive the amount of her Base Salary accrued through the date of disability plus any bonus that is Fully Earned. In addition, she would be entitled to purchase medical and health benefits on the same terms and conditions as if she were an active employee of the Company for a period of 18 months. The value of this benefit calculated using the rates in effect for the medical coverage Ms. Bufkin had selected on December 31, 2011 assuming that she purchased the coverage for 18 months was $32,073.
Employment Agreement with Andrew Carrier
The following describes the circumstances and the related payments that might be triggered under the terms of Mr. Carrier's Employment Agreement using the assumptions set forth above:
1) Notice Period
Mr. Carrier's Agreement contains a notice provision requiring the Company to give him not less than twelve months written notice to terminate his employment and requiring him to give the Company not less than six months written notice to terminate his employment (the "Notice Period"). During the Notice Period, Mr. Carrier remains an employee of the Company and continues to receive his base salary and benefits as set forth in the Agreement. Pursuant to the terms of the Agreement, the Company has the option to pay Mr. Carrier his salary in lieu of the Notice Period and terminate his employment. Following termination of Mr. Carrier's employment, the Company is required to pay Mr. Carrier one day's salary for each day of accrued vacation not taken during the calendar year. Mr. Carrier is also required to provide reasonable assistance to the Company for up to twelve months following termination of his employment with regard to any matters within his knowledge and the Company is required to reimburse Mr. Carrier for any reasonable out of pocket expenses he incurs in providing such assistance.
In addition to the foregoing Mr. Carrier's long termemployment agreements, our long-term incentive plan, which was approved by our shareholders in 2019, gives our Committee the discretion, among other methods, to provide for the accelerated vesting and/or a purchase of our NEOs’ equity grants by the Company upon the occurrence of a change in control (as defined in the plan). Further, the NEO equity grant agreements with the Company provide for accelerated vesting upon termination of employment due to death or disability. Other than in the occurrencecase of a "Changechange in control or a termination of Control" as definedemployment due to death or disability, if an NEO voluntarily terminates his or her employment with the Company or is terminated for cause, he or she forfeits all unvested equity awards.
The amounts shown in the agreements.table below are calculated based on the assumption that a termination or change of control occurred on December 31, 2019. The value of his unvested stock appreciation rights and stock options,values shown are calculated asusing the difference between the Company's commonCompany’s closing stock price on that date. The actual amounts that would be paid out if such a termination were to occur can only be determined at the closetime of marketsuch executive officer’s actual termination and would be subject to the achievement of financial and individual performance goals and thresholds and their current salaries and benefits at such time. Please see the summary above for the amounts paid to Mr. Watson in connection with his separation. Mr. Hernandez is excluded from the following table as he did not receive any separation benefits in connection with stepping down as an executive officer during 2019 or his subsequent departure from the Company on December 30, 201131, 2019.
Name | Benefit | Death or Disability | Termination Without Cause | Termination Without Cause / for Good Reason with a CIC | ||||||||||
Kevin J. Rehnberg | Cash Severance(1) | $ | – | $ | 1,838,000 | $ | 3,676,000 | |||||||
Annual Incentive Award(2) | $ | 283,815 | $ | 863,000 | $ | 863,000 | ||||||||
Unvested Restricted Stock Awards(3) | $ | 2,921,141 | $ | 1,632,770 | $ | 2,921,141 | ||||||||
| Health, Medical, Dental Benefits(4) | $ | 12,139 | $ | 12,139 | $ | 12,139 | |||||||
|
|
|
|
|
|
| ||||||||
Total | $ | 3,217,095 | $ | 4,345,909 | $ | 7,472,280 | ||||||||
Jay S. Bullock | Cash Severance(1) | $ | – | $ | 1,300,000 | $ | 2,600,000 | |||||||
Annual Incentive Award(2) | $ | 682,620 | $ | 682,620 | $ | 682,620 | ||||||||
Unvested Restricted Stock Awards(3) | $ | 1,425,394 | $ | 995,981 | $ | 1,425,394 | ||||||||
Health, Medical, Dental Benefits(4) | $ | 29,895 | $ | 29,895 | $ | 29,895 | ||||||||
|
|
|
|
|
|
| ||||||||
Total | $ | 2,137,909 | $ | 3,008,496 | $ | 4,737,909 | ||||||||
Matt Harris | Cash Severance(1) | $ | – | $ | 263,692 | $ | 263,692 | |||||||
Annual Incentive Award(2) | $ | – | $ | – | $ | – | ||||||||
Unvested Restricted Stock Awards(3) | $ | 878,354 | $ | – | $ | 878,354 | ||||||||
|
|
|
|
|
|
| ||||||||
| Total | $ | 878,354 | $ | 263,692 | $ | 1,142,046 | |||||||
Axel Schmidt | Cash Severance(1) | $ | – | $ | 245,452 | $ | 245,452 | |||||||
Annual Incentive Award(2) | $ | – | $ | – | $ | – | ||||||||
Unvested Restricted Stock Awards(3) | $ | 1,236,166 | $ | – | $ | 1,236,166 | ||||||||
|
|
|
|
|
|
| ||||||||
Total | $ | 1,236,166 | $ | 245,452 | $ | 1,481,618 |
(1) | For Messrs Rehnberg and Bullock, cash severance is equal to one times base salary plus target bonus in the event of termination without cause, or two times base salary plus target bonus in the event of a termination without cause, or, in the case of Mr. Bullock by the Executive for good reason, within 2 years following change in control of the Company. For Messrs. Schmidt and Harris, amounts represent the aggregatepre-tax value of the portion of base salary that would continue to be paid over the course of thesix-month notice period, or that would be paid in lieu of the notice period if employment was terminated with immediate effect, in the case of a termination without cause. Mr. Schmidt and Mr. Harris are paid in British Pounds. Their salaries were converted into U.S. dollars for purposes of the foregoing table using the December 31, 2019 exchange rate of 1.31846 US$/GBP. |
(2) | In the case of Mr. Rehnberg’s, amounts represent earned annual incentive award for death and disability and target annual incentive for termination without cause and termination without cause in connection with a change in control. In the case of Mr. Bullock, amounts represent target annual incentive payable in connection with each scenario. |
(3) | Amounts represent the intrinsicpre-tax value of each NEO’s unvested restricted stock awards using the closing market price of the Company’s Common Shares on December 31, 2019 of $65.75 that would continue to vest upon termination of employment in accordance with terms of their employment agreements or that would accelerate and vest upon termination of employment due to death or disability or that may accelerate and vest upon termination of employment in connection with a change in control. |
(4) | Amounts represent continued participation in the Company’s health and medical plans on the same terms and conditions available to active employees of the Company for a full18-month period following the termination date based on the rates in effect for coverage at December 31, 2019. |
We are providing the following information about the relationship of the annual total compensation of our employees and the exercise price,annual total compensation of our CEO:
For 2019, our last completed fiscal year:
the median of the annual total compensation of all employees of our company (other than our CEO) was $39,106.$121,637; and
the annual total compensation of our CEO was $2,117,483.
Based on this information for fiscal year 2019, we reasonably estimate that the ratio of our CEO’s annual total compensation to the annual total compensation of our median employee was 17:1. Our pay ratio estimate has been calculated in a manner consistent with Julian Enoizi
Item 402(u) of RegulationS-K using the data and assumptions summarized below.
On January 13, 2011,The total compensation of the Company announcedmedian employee, including any perquisites and other benefits, is determined in the same manner that we determine the total compensation of our named executive officers for purposes of the 2019 Summary Compensation Table disclosed above. For 2019, the total compensation of our median employee was determined to be $121,637. This total compensation amount for our median employee was then compared to the 2019 total compensation of our CEO as reported in the 2019 Summary Compensation Table to determine the pay ratio. To annualize Mr. EnoiziRehnberg’s compensation, we adjusted his base salary to reflect the adjustments made to his base salary in connection with his promotion and which became effective on November 5, 2019. We did not adjust Mr. Rehnberg’s 2019 annual incentive or LTI awards since no adjustments were made to those awards for 2019 in connection with his promotion.
Given the different methodologies that various public companies will use to determine their pay ratio, the pay ratio disclosed above should not be used as a basis for comparison between or among companies.
There have not been any material changes to the Company’s employee population or compensation arrangements during 2019 or 2018 that we believe would leavesignificantly impact this year’s pay ratio disclosure. Accordingly, as permitted by SEC executive compensation disclosure rules, we are electing to use the Company effectivesame median employee as was used for purposes of our 2017 pay ratio disclosure. To identify our median employee, we first determined our employee population as of March 4, 2011. The Company paid Mr. Enoizi £100,100December 31, 2017 (the “Determination Date”). We had 1,373 employees, representing all full-time, part-time, seasonal and temporary employees as of the Determination Date. This number does not include any independent contractors or “leased” workers, as permitted by the applicable SEC rules. We then measured the employee population’s total target cash compensation for the termination ofperiod beginning on January 1, 2017 and ending on December 31, 2017. This compensation measurement was calculated by totaling, for each employee, his employmentor her base salary and Mr. Enoizi agreed to releasetarget annual cash incentive award for 2017. We annualized compensation for any and all claims (whether presentemployees who were employed for less than the full fiscal year, but we did not annualize the compensation for employees in temporary or future) against the Company and its subsidiaries arising out of his employment or its termination.seasonal positions.
PROPOSAL 4APPOINTMENT OF4: APPROVE ERNST & YOUNG AS OUR INDEPENDENT AUDITORS
AND TO REFER DETERMINATION OF THE AUDITORS’ REMUNERATION TO THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
On the recommendation of the Board'sBoard’s Audit Committee, the Board recommends that the firm of Ernst & Young ("E&Y") be appointed as our independent auditors for the fiscal year ending December 31, 2012.2020. This recommendation is being presented to the shareholders for their approval at the Annual General Meeting. If the shareholders do not approve the appointment of Ernst & Young, the Board’s Audit Committee will reconsider whether or not to retain Ernst & Young as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020 but will not be obligated to terminate the appointment. Even if the shareholders approve the appointment of Ernst & Young, the Board’s Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Board’s Audit Committee determines that such a change would be in the best interests of the Company and its shareholders.
A representative of E&YErnst & Young is expected to attend the Annual General Meeting, with the opportunity to make a statement if he or she so desires and to respond to questions. Shareholders at the Annual General Meeting will also be asked to vote to refer the determination of the auditors'auditors’ remuneration to the Audit Committee of the Board of Directors.
Required Vote and Board Recommendation
The approval of the appointment of Ernst & Young as our independent auditors and to refer determination of the auditors’ remuneration to the Audit Committee of the Board of Directors will be decided by an ordinary resolution; that is a resolution duly adopted by the Board of Directors, which has already occurred, and then approved by shareholders with a simple majority of votes cast in person or by proxy. Votes may be cast in favor of or against this proposal or a shareholder may abstain from voting. Abstentions and brokernon-votes will not count as votes cast and, therefore, will have no effect on the outcome of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO RATIFY THE APPOINTMENT OFAPPROVE ERNST AND& YOUNG AS OUR INDEPENDENT AUDITORAUDITORS AND TO REFER DETERMINATION OF THE AUDITORS'AUDITORS’ REMUNERATION TO THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS. UNLESS DIRECTED OTHERWISE, IT IS THE INTENTION OF THE PROXIES NAMED IN THE FORM OF THE PROXY THAT ACCOMPANIES THIS PROXY STATEMENT TO VOTE FOR THE APPROVAL OF SUCH PROPOSAL.
Relationship with Independent Auditors
Fees paid to the Independent Auditors by Argo Group in 20102018 and 2011
2019
The fees incurred in 20102018 and 20112019 for services provided by E&YErnst & Young to Argo Group were as follows:
Category | 2018 | 2019 | ||||||
Audit Fees (1) | $ | 5,946,250 | $ | 5,930,000 | ||||
Audit-Related Fees(2) | 132,000 | 50,000 | ||||||
Tax Fees(3) | 1,353,694 | 972,527 | ||||||
All Other Fees(4) | 138,000 | 3,000 | ||||||
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TOTAL | $ | 7,569,944 | $ | 6,955,527 | ||||
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(1) | “Audit Fees” include the aggregate fees incurred for professional services rendered by Ernst & Young for the review of Argo Group’s quarterly reports for 2018 and 2019 and its fee for the audit of Argo Group’s annual consolidated financial statements for the years ended December 31, 2018 and 2019. “Audit Fees” also include fees incurred for professional services related to other statutory and regulatory filings. The fees include Ernst & Young’s estimate of unbilled fees related to services for 2019. |
(2) | “Audit-Related Fees” include fees incurred for assurance and related services that are reasonably related to the performance of the audit and not included in the “Audit Fees” described above. These services include audits of the employee benefits plans for 2018 and 2019. These services include independent actuarial reviews, consent filings, and providing access to audit work papers for regulatory examinations in 2018. |
Category | 2010 | 2011 | |||||
---|---|---|---|---|---|---|---|
Audit Fees (1) | $ | 2,655,074 | $ | 2,789,771 | |||
Audit-Related Fees (2) | 45,800 | 62,310 | |||||
Tax Fees (3) | 685,967 | 621,909 | |||||
All Other Fees (4) | 105,301 | 146,134 | |||||
TOTAL | $ | 3,492,142 | $ | 3,620,124 | |||
(3) | “Tax Fees” are fees incurred for Ernst & Young’s tax services, which include tax planning, advice and assistance for Argo Group regarding statutory, regulatory or administrative developments and other international, federal, state and local issues andnon-income tax minimization and planning. |
(4) | “All Other Fees” includes fees for services related to the purchase of online accounting research software for 2018 and 2019 and for permitted advisory services in 2018. |
Argo Group regarding statutory, regulatory or administrative developments and other international, federal, state and local issues and non-income tax minimization and planning.
Pre-ApprovalArgo Group Pre-Approval Process
All services provided by E&YErnst & Young to Argo Group in 20102018 and in 20112019 were permissible under applicable laws and regulations and were specificallypre-approved by the Audit Committee of Argo Group, as required under its charter. The Audit Committee can delegate authority to subcommittees or an individual committee member to approve services by E&YErnst & Young in the event there is a need for such approval prior to the next full Audit Committee meeting. A full report of such interim approvals, if any, is required to be given at the next Audit Committee meeting.
PROPOSAL 5: APPROVAL OF AN AMENDMENT TO THEBYE-LAWS TO PROVIDE A RANGE IN THE SIZE OF THE BOARD OF DIRECTORS OF 3 TO 11 DIRECTORS, WITH THE EXACT NUMBER TO BE DETERMINED BY THE BOARD OF DIRECTORS
TableBackground of Contentsthe Proposal
After careful consideration, our Board of Directors has proposed to amend ourBye-Laws fixing the size of the Board of Directors at not less than 3 nor more than 11 directors, with the exact number to be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors. Presently, theBye-Laws provide that the Board of Directors may not be less than 3 nor more than 13 directors, with the exact number determined by ordinary resolution of the Company.
Proposed Amendment to theBye-Laws
The Board of Directors have declared it advisable to amend theBye-Laws as set forth onAnnex B which provides that, the maximum size of the Board of Directors will be a size not less than 3 nor more than 11 directors, with the exact number to be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors. If this amendment is approved by our shareholders, it will become effective immediately.
FORM 10-K AND PROXY AVAILABILITY
Required Vote and Board Recommendation
As permittedThe approval of the proposal will be decided by rulesan ordinary resolution; that is a resolution duly adopted by the SECBoard of Directors, which has already occurred, and then approved by shareholders with a simple majority of votes cast in person or by proxy. Votes may be cast in favor of or against this proposal or a shareholder may abstain from voting. Abstentions and brokernon-votes will not count as votes cast and, therefore, will have no effect on the outcome of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE PROPOSAL TO PROVIDE A RANGE IN THE SIZE OF THE BOARD OF DIRECTORS OF 3 TO 11 DIRECTORS, WITH THE EXACT NUMBER TO BE DETERMINED BY THE BOARD OF DIRECTORS.
PROPOSAL 6: APPROVAL OF AN AMENDMENT TO THEBYE-LAWS TO MODIFY THE VOTINGPUSH-UP REQUIREMENT
The Board unanimously determined that it is in the best interests of the Company and its shareholders to make certain amendments to ourBye-Laws as described inAnnex B of this proxy statement. After careful consideration, our Board of Directors has proposed to amend ourBye-Laws so as to modify the VotingPush-up Requirement.
Proposed Amendment to theBye-Laws
TheBye-laws currently provide that, subject to certain exceptions, if the Company, in its capacity as a shareholder of any directnon-U.S. subsidiary of the Company, has the right to vote at a general meeting of such subsidiary (whether in person or by itsattorney-in-fact or proxy, or by written resolution in lieu of a general meeting), the Board of the Company shall refer the subject matter of the vote to the shareholders of the Company and seek authority from the shareholders of the Company for the Company’s corporate representative or proxy to vote with respect to the resolution proposed by such subsidiary. The primary purpose of thisBye-law provision is to mitigate the risk of a direct or indirect U.S. shareholder of the Company having current income inclusions pursuant to the controlled foreign corporation rules under the U.S. Internal Revenue Code.
The Board of Directors has proposed to modify the VotingPush-up Requirement so that it only applies topush-up the votes with respect to a Company subsidiary for exercise by the statutory provisionsCompany’s shareholders in the event that the voting rights of any shares of the Companies Act 1981Company are adjusted. The amendedBye-law updates thisBye-law provision with a more flexible approach, which appears appropriate in circumstances such as ours where we have a broad andun-concentrated shareholder base. Also, this will facilitate a more orderly meeting process, as we will not be required to include numerous proposals related to our subsidiaries, including certain proposals that are ministerial in nature.
By unanimous resolution, our Board of Bermuda, Argo GroupDirectors declared advisable the amendment to ourBye-Laws set forth onAnnex B which modifies the VotingPush-up Requirement. If this amendment is making this proxy statement,approved by our shareholders, it will become effective immediately.
Required Vote and Board Recommendation
The approval of the proxy card andproposal to modify the annual report to shareholders (the "proxy materials") available to shareholders electronically via the Internet.
A Notice which includes instructions on how to access and review the proxy materials and how to submit your proxy onlineVotingPush-up Requirement will be mailed todecided by an ordinary resolution; that is a resolution duly adopted by the Board of Directors, which has already occurred, and then approved by shareholders beginningwith a simple majority of votes cast in person or by proxy. Votes may be cast in favor of or against this proposal or a shareholder may abstain from voting. Abstentions and brokernon-votes will not count votes cast and, therefore, will have no effect on or about March [ ], 2012. Shareholders may request a printedthe outcome of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE PROPOSAL TO MODIFY THE VOTINGPUSH-UP REQUIREMENT.
A copy of the proxy materialsour Annual Report, excluding exhibits, may be obtained by following the instructions included in the Notice. shareholders without charge by request to Investor Relations, 110 Pitts Bay Road Pembroke, HM 08, Bermuda or by calling441-296-5858 and may be accessed on our website at www.argolimited.com.
In addition, Argo Group will post copies of the 2011 Annual Report onForm 10-K for the fiscal year 2019 and this proxy statement on its web sitewebsite at www.argolimited.com.www.argolimited.com. The reference to Argo Group's web siteGroup’s website does not incorporate by reference the information contained in the web sitewebsite and such information should not be considered a part of this proxy statement.
The Company's Annual Report contains financial and other information about the Company, but is not incorporated into this Proxy Statement and is not to be considered a part of these proxy-soliciting materials or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act. The information contained in the "Human Resources Committee Report" and the Audit Committee's report to the Board of Directors shall not be deemed filed with the Securities and Exchange Commission or subject to Regulations 14A or 14C or to the liabilities of the Section 18 of the Exchange Act, and shall not be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended (the "1933 Act"), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
SHAREHOLDER PROPOSALS FOR 20132021 ANNUAL GENERAL MEETING
Under SEC rules and ourBye-Laws, shareholders must follow certain prescribed procedures to introduce an item of business at an annual general meeting.
Under these procedures, if a shareholder desires to present a proposal for inclusion in our 2013 Proxy Statement,2021 proxy statement, such shareholder must submit the proposal in writing to us for receipt not later than November 26, 2012.[•], 2020. Proposals must comply with the proxy rules relating to shareholder proposals, in particularRule 14a-8 under the Exchange Act, to be included in our 20132021 proxy materials.
Shareholders who wish to submit a proposal or nomination for consideration at our 20132021 Annual General Meeting, but who do not wish to submit a proposal for inclusion in our proxy materials pursuant toRule 14a-8 under the Exchange Act, should deliver a copy of their proposal or nomination to us for receipt not earlier than November 26, 2012 and not later than December 26, 2012; provided that, if the proposal amending our Bye-Laws as described in this proxy statement is not approved at our 2012 Annual General Meeting, such proposal must be received by us not later than 60 days prior to the date of our 20132021 Annual General Meeting (such proposal deadline currently expected to be on or about March 9, 2013)February 15, 2021). Any such notice must also meet certain other requirements specified in ourBye-Laws.
In either case, proposals or nominations should be delivered to Argo Group International Holdings, Ltd. c/o David J. Doyle,Craig S. Comeaux, Secretary, Clarendon House, 2 Church Street, Hamilton110 Pitts Bay Road, Pembroke HM 11,08, Bermuda.
You may obtain a copy of Argo Group's Group’sBye-Laws by writing to our Secretary at the above address.
By Order of the Board of Directors
Craig S. Comeaux
Secretary
[●], 2020
TableRECONCILIATION OF ADJUSTED OPERATING INCOME (LOSS) TO NET INCOME (LOSS)
“Adjusted operating income” is an internal performance measure used in the management of Contentsthe Company’s operations and represents operational results excluding, as applicable, net realized investment gains or losses, net foreign exchange gain or loss, other corporate expenses, impairment of goodwill, and othernon-recurring items. The Company excludes net realized investment gains or losses, net foreign exchange gain or loss, other corporate expenses, impairment of goodwill, and othernon-recurring items from the calculation of adjusted operating income because these amounts are influenced by and fluctuate in part according to the availability of market opportunities. In addition to presenting net income determined in accordance with U.S. GAAP, the Company believes that showing adjusted operating income enables investors, analysts, rating agencies and other users of the Company’s financial information to more easily analyze our results of operations and underlying business performance. Adjusted operating income should not be viewed as a substitute for U.S. GAAP net income. The reconciliation of adjusted operating income to net income is as follows:
APPENDIX I
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF ADJUSTED OPERATING INCOME TO NET INCOME
(in millions)
(unaudited)
For the Years Ended December 31, | ||||||||
2019 | 2018 | |||||||
Net (loss) income, as reported | $ | (8.4) | $ | 63.6 | ||||
Income tax provision | 8.6 | 4.1 | ||||||
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Net income, before taxes | 0.2 | 67.7 | ||||||
Add (deduct): | ||||||||
Net realized investment losses (gains) | (80.0) | 72 | ||||||
Foreign currency exchange gains | (9.6) | (0.1) | ||||||
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Other corporate expenses | 37.6 | - | ||||||
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Impairment of goodwill | 15.6 | - | ||||||
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Adjusted operating (loss) income before taxes | $ | (36.2) | $ | 139.6 | ||||
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PROPOSED AMENDMENTS TO THE AMENDED AND RESTATEDBYE-LAWS
INTERPRETATION
SHARES AND SHARE CAPITAL
COMMON SHARES
3. (1) Subjectexact number to these Bye-Laws, at a General Meeting of the Company every holder of Common Shares shall be entitled to one vote for each share held by him on all matters submitted to a vote of the Members, but in all cases after giving effect to any adjustments to or restrictions on exercise of voting rights under Bye-Law 20.
(2) The Board may in its discretion, at any time, and from time to time, issue or cause to be issued all or any part of the authorized but unissued Common Shares of the Company for consideration of such character and value as the Board shall in its absolute discretion from time to time fix or determine.
(3) Notwithstanding the foregoing or any other provision of these Bye-Laws, the Company may not issue any shares or grant options or warrants in a manner that the Board determines in its sole discretion may result in a non de minimis adverse tax, legal or regulatory consequence to the Company, any of its subsidiaries or any direct or indirect holder of shares or its affiliates.
AUTHORITY OF BOARD TO ISSUE AND DIVIDEPREFERRED SHARES INTO DIFFERENT SERIES
4. (1) The Board may in its discretion at any time, and from time to time, issue or cause to be issued all or any part of the authorized but unissued Preferred Shares of the Company for consideration of such character and value as the Board shall in its absolute discretion from time to time fix or determine.
(2) Notwithstanding the foregoing or any other provision of these Bye-Laws, the Company may not issue any shares or grant options or warrants in a manner that the Board determines in its sole discretion may result in a non de minimis adverse tax, legal or regulatory consequence to the Company, any of its subsidiaries or any direct or indirect holder of shares or its affiliates.
(3) Without prejudice to the generality of paragraph (1) of this Bye-Law, the Board is hereby further expressly authorized at any time, and from time to time, to consolidate, divide or subdivide any or all of the authorized but unissued Preferred Shares of the Company into several series, and to set the par value of any of the unissued Preferred Shares, and in the resolution or resolutions establishing a particular series, before issuance of any of the shares thereof, to fix and determine the number of shares and the designation of such series, so as to distinguish it from the shares of all other series and classes, and to fix and determine the voting rights, preferences, qualifications, privileges, limitations, options, conversion rights, redemption features, restrictions, and other special or relative rights of such series. Each of such series may differ from every other series previously authorized, as may be determined by the Board, in any or all respects, toand (iii) the fullest extent now, or hereafter, permitted by the laws of Bermuda including, but not limited to, the variations between different series in the following respects:
Proposed Amendments to issue,Bye-Lawprovided, however, that the par value shall in no case be set at less than $1.00 per share;
purchase money nor shall such Person's title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale.
(4) Notwithstanding the foregoing or any other provision of these Bye-Laws, the Company may not consolidate, divide or subdivide Preferred Shares in a manner that the Board determines in its sole discretion may result in a non- de minimis adverse tax, legal or regulatory consequence to the Company, any of its subsidiaries or any direct or indirect holder of shares or its affiliates.
EMPLOYEE SHARE PURCHASE
5. (1) The Board may from time to time:
COMPANY SHARE PURCHASE
6. (1) Subject to the Act, the Company's Memorandum of Association and these Bye-Laws and, where applicable, the rules of any Designated Stock Exchange and/or any competent regulatory authority, the Company may purchase or otherwise acquire its own shares upon such terms and conditions as the Board shall determine, provided, however, that such purchase or acquisition may not be made if the Board determines in its sole discretion that it may result in a non-de minimis adverse tax, legal or regulatory consequence to the Company, any of its subsidiaries or any direct or indirect holder of shares or its affiliates.
(2) The Board may, at its discretion and without the sanction of a resolution of the Members, authorise the acquisition by the Company of its own shares, of any class, at any price (whether at par or above or below par), and any shares to be so purchased may be selected in any manner whatsoever, to be held as treasury shares, upon such terms as the Board may in its discretion determine, provided always that such acquisition is effected in accordance with the provisions of the Act. The whole or any part of the amount payable on any such acquisition may be paid or satisfied otherwise than in cash, to the extent permitted by the Act.
ALTERATION OF CAPITAL
Notwithstanding the foregoing or any other provision of these Bye-Laws, the Company shall not alter the rights attaching to any class of shares if the Board, after taking into account any adjustments to or restrictions on exercise of voting rights under Bye-Law 20, determines in its sole discretion that any non de minimis adverse tax, regulatory or legal consequences to the Company, any subsidiary of the Company, or any direct or indirect holders of shares or its affiliates may result from such variation.
(2) The Board may settle as it considers expedient any difficulty which arises in relation to any consolidation, division or subdivision under this Bye-Law and in particular but without prejudice to the generality of the foregoing may issue certificates in respect of fractions of shares or arrange for the sale of the shares representing fractions and the distribution of the net proceeds of sale (after deduction of the expenses of such sale) in due proportion among the Members who would have been entitled to the fractions, and for this purpose the Board may authorize a Person to transfer the shares representing fractions to the purchaser thereof or resolve that such net proceeds be paid to the Company for the Company's benefit. Such purchaser will not be bound to see to the application of the purchase money nor shall such Person's title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale.
(3) The Company may from time to time by Ordinary Resolution in accordance with the Act reduce its authorized or issued share capital or any share premium account or other undistributable reserve in any manner permitted by applicable law.
(4) Except so far as otherwise provided by the conditions of issue, or by these Bye-Laws, any capital raised by the creation of new shares shall be treated as if it formed part of the original capital of the Company, and such shares shall be subject to the provisions contained in these Bye-Laws with reference to the payment of calls and installments, transfer and transmission, forfeiture, lien, cancellation, surrender, voting and otherwise.
(5) Subject to the Act and Bye-Laws 20 and 7(2), all or any of the special rights attached to the shares or any class of shares may, unless otherwise provided by the terms of issue of the shares of that class, from time to time (whether or not the Company is being wound up) be varied, modified or abrogated either with the consent in writing of the holders of not less than sixty-six and two-thirds percent (662/3%) of the issued shares of that class or with the sanction of a special resolution passed at a separate General Meeting of the holders of the shares of that class. To every such separate General
Meeting all the provisions of these Bye-Laws relating to General Meetings of the Company shall, as the case may be, apply, but so that:
(6) The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied, modified or abrogated by the creation or issue of further shares ranking pari passu therewith.
WARRANTS
8. (1) The Board may issue warrants conferring the right upon the holders thereof to subscribe for any class of shares or securities in the capital of the Company on such terms as the Board may from time to time determine. Notwithstanding the foregoing or any other provision of these Bye-Laws, the Company may not issue any warrants in a manner that the Board determines in its sole discretion may result in a non de minimis adverse tax, legal or regulatory consequence to the Company, any of its subsidiaries or any direct or indirect holder of shares or its affiliates.
(2) The Company may in connection with the issue of any shares exercise all powers of paying commission and brokerage conferred or permitted by the Act. Subject to the Act, the commission may be satisfied by the payment of cash or by the allotment of fully or partly paid shares or partly in one and partly in the other.
(3) INTENTIONALLY LEFT BLANK
(4) Except as required by applicable law, no Person shall be recognized by the Company as holding any share in the capital of the Company upon any trust and the Company shall not be bound by or required in any way to recognize (even when having Notice thereof) any equitable, contingent, future or partial interest in any share or any fractional part of a share or (except only as otherwise provided by these Bye-Laws or by applicable law) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.
(5) Subject to the Act and these Bye-Laws, the Board may at any time after the allotment of shares in the capital of the Company but before any Person has been entered in the Register as the holder, recognize a renunciation thereof by such recipient in favor of some other Person and may accord to any such recipient of a share a right to effect such renunciation upon and subject to such terms and conditions as the Board determines to impose.
SHARE CERTIFICATES
9. (1) Every share certificate shall specify the number and class and distinguishing numbers of the shares to which it relates, and the amount paid up thereon and may otherwise be in such form as the Directors may from time to time determine be issued under the Seal or signed by a Director, the Secretary or any person authorised by the Board for that purpose. No certificate shall be issued representing shares of more than one class. The Board may by resolution determine, either generally or in any particular case or cases, that any signatures on any such certificates (or certificates in respect of other securities) need not be autographic but may be affixed to such certificates by some mechanical means or may be printed thereon or that such certificates need not be signed by any Person. If any person holding office in the Company who has signed, or whose facsimile signature has been used on, any certificate ceases for any reason to hold office, such certificate may nevertheless be issued as though that person had not ceased to hold such office. Every share certificate shall recite that the voting rights relating to such shares are subject to the limitations contained in these Bye-Laws.
(2) In the case of a share held jointly by several Persons, the Company shall not be bound to issue more than one certificate therefor and delivery of a certificate to one of several joint holders shall be sufficient delivery to all such holders.
(3) Where a share stands in the names of two or more Persons, the Person first named in the Register shall as regards service of Notices and, subject to the provisions of these Bye-Laws, all or any other matters connected with the Company, except the transfer of the shares, be deemed the sole holder thereof.
(4) Every Person whose name is entered, upon an allotment of shares, as a Member in the Register shall be entitled, without payment, to receive one certificate for all such shares of any one class, or several certificates each for one or more of such shares of such class upon payment, for every certificate after the first, of such reasonable out-of-pocket expenses as the Board from time to time determines.
(5) Subject to paragraph (2) hereof, share certificates shall be issued, in the case of an issue of shares within twenty-one (21) days (or such longer period as the terms of the issue provide) after allotment, or in the case of a transfer of fully or partly paid shares within twenty-one (21) days after delivery of a transfer to the Company, not being a transfer which the Company is for the time being entitled to refuse to register and does not register.
(6) Notwithstanding any provision in these Bye-Laws to the contrary, a Person may by Notice to the Company elect that no certificate be issued in respect of shares registered or to be registered in his name and on receipt of such election the Company shall not be required to issue a certificate for such shares or may cancel an existing certificate without issuing another certificate in lieu thereof.
(7) Upon every transfer of shares, the certificate held by the transferor shall be given up to be canceled, and shall forthwith be canceled accordingly, and a new certificate shall be issued to the transferee in respect of the shares transferred to him. If any of the shares included in the certificate so given up shall be retained by the transferor a new certificate for the balance shall be issued to him.
(8) If a share certificate shall be damaged or defaced or alleged to have been lost, stolen or destroyed, a new certificate representing the same shares may be issued to the relevant Member upon request and on payment of such fee as the Designated Stock Exchange or the Board may determine to be payable, and, subject to compliance with such terms (if any) as to evidence and indemnity and to payment of the costs and reasonable out-of-pocket expenses of the Company in investigating such evidence and preparing such indemnity as the Board shall determine and, in case of damage or defacement, on delivery of the old certificate to the Company, provided always that where share warrants have been issued, no new share warrant shall be issued to replace one that has been lost, stolen or destroyed unless the Directors are satisfied beyond reasonable doubt that the original has been lost, stolen or destroyed.
REGISTER
10. (1) The Company shall keep in one or more books a Register and shall enter therein the following particulars:
(2) Subject to the Act, the Company may keep an overseas or local or other branch register of Members resident in any place, and the Board may make and vary such regulations as it determines in respect of the keeping of any such register and maintaining a Registration Office in connection therewith.
INSPECTION OF REGISTER OF MEMBERS
11. The Register and branch register of Members, as the case may be, shall be open to inspection on every business day by any Person without charge or by any other Person, upon the maximum payment permitted under the Act, subject to such reasonable restrictions as the Board may impose, so that not less then two (2) hours in each business day be allowed for inspections, at the Office or such other place in Bermuda at which the Register is kept in accordance with the Act or, if appropriate, upon the maximum payment permitted under the Act at the Registration Office. The Register, including any overseas or local or other branch register of Members, may, after Notice has been given by advertisement in an appointed newspaper and, where applicable, any other newspapers in accordance with the requirements of any Designated Stock Exchange to that effect, be closed at such times or for such periods not exceeding in the aggregate thirty (30) days in each year as the Board may determine and either generally or in respect of any class or series of shares.
RECORD DATES
12.�� Notwithstanding any provision of these Bye-Laws to the contrary, the Company or the Directors may fix any date as the record date for:
TRANSFER OF SHARES
13. (1) Subject to the Act and to such of the restrictions contained in these Bye-Laws, as may be applicable, any Member may transfer all or any of his shares by an instrument of transfer in the usual or common form or in any other form approved by the Board.
(2) The instrument of transfer shall be executed by or on behalf of the transferor. The Board may also resolve, either generally or in any particular case, upon request by the transferor, to accept mechanically executed transfers. The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register in respect thereof. Nothing in these Bye-Laws shall preclude the Board from recognizing a renunciation of the allotment or provisional allotment of any share by the allottee in favor of some other Person.
(3) The Board may, in its absolute discretion, and without giving any reason therefor, refuse to register a transfer of any share issued under any share plan for employees upon which a restriction on transfer imposed thereby still subsists, and it may also refuse to register a transfer of any share to more than four (4) joint holders. The Board may decline to approve or register or permit the registration of any transfer of shares if it appears to the Board that any non-de minimis adverse tax, regulatory or legal consequences to the Company, any subsidiary of the Company, or any direct or indirect holder of shares or its Affiliates would result from such transfer. Nothing in these Bye-Laws shall impair the settlement of transactions entered into through the facilities of a Designated Stock Exchange except as provided by such exchange.
(4) No transfer shall be made to an infant or to a Person of unsound mind or under other legal disability, known as such by the Company.
(5) INTENTIONALLY LEFT BLANK
(6) INTENTIONALLY LEFT BLANK
(7) Without limiting the generality of the preceding paragraph, the Board may decline to recognize any instrument of transfer unless:
(8) If the Board refuses to register a transfer of any share in accordance with these Bye-Laws, it shall, within one hundred twenty (120) days after the date on which the transfer was delivered to the Company, send to each of the transferor and transferee Notice of the refusal.
(9) The registration of transfers of shares or of any class of shares may, after Notice has been given by advertisement in an appointed newspaper and, where applicable, any other newspapers in accordance with the requirements of any Designated Stock Exchange to that effect, be suspended at such times and for such periods (not exceeding thirty (30) days in any year) as the Board may determine.
TRANSMISSION OF SHARES
14. (1) If a Member dies, the survivor or survivors where the deceased was a joint holder, and his legal representatives where he was a sole or only surviving holder, will be the only Persons recognized by the Company as having any title to his interest in the shares; but nothing in this Bye-Law will release the estate of a deceased Member (whether sole or joint) from any liability in respect of any share which had been solely or jointly held by him.
(2) Subject to the Act, any Person becoming entitled to a share in consequence of the death or bankruptcy or winding-up of a Member may, upon such evidence as to his title being produced as may be required by the Board, elect either to become the holder of the share or to have some Person nominated by him registered as the transferee thereof. If he elects to become the holder he shall notify the Company in writing either at the Registration Office or Office, as the case may be, to that effect. If he elects to have another Person registered he shall execute a transfer of the share in favor
of that Person. The provisions of these Bye-Laws relating to the transfer and registration of transfers of shares shall apply to such Notice or transfer as aforesaid as if the death or bankruptcy of the Member had not occurred and the Notice or transfer were a transfer signed by such Member.
The Board may decline to approve or register or permit the registration of shares if it appears to the Board that any non-de minimis adverse tax, regulatory or legal consequences to the Company, any subsidiary of the Company, or any direct or Indirect holder of shares or its Affiliates would result from such transfer.
(3) A Person becoming entitled to a share by reason of the death or bankruptcy or winding-up of a Member shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share. However, the Board may determine to withhold the payment of any dividend payable or other advantages in respect of such share until such Person shall become the registered holder of the share or shall have effectually transferred such share, but, subject to the requirements of these Bye-Laws being met, such a Person may vote at meetings.
UNTRACEABLE MEMBERS
15. (1) Without prejudice to the rights of the Company under paragraph (2) of this Bye-Law, the Company may cease sending a check for dividend entitlements or dividend warrants by mail if such check or warrants have been left uncashed on two consecutive occasions. However, the Company may exercise the power to cease sending a check for dividend entitlements or dividend warrant after the first occasion on which such a check or warrant is returned undelivered.
(2) The Company shall have the power to sell, in such manner as the Board shall determine, any shares of a Member who is untraceable, but no such sale shall be made unless:
For the purpose of the foregoing, the "relevant period" means the period commencing twelve years before the date of publication of the advertisement referred to in sub-paragraph (2)(c) of this Bye-Law and ending at the expiration of the period referred to in that paragraph.
(3) To give effect to any such sale the Board may authorize a Person to transfer the said shares and an instrument of transfer signed or otherwise executed by or on behalf of such Person shall be as effective as if it had been executed by the registered holder or the Person entitled by transmission to such shares, and the purchaser shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale. The net proceeds of the sale will belong to the Company and upon receipt by the Company of such net proceeds it shall become indebted to the former Member for an amount equal to such net proceeds. No trust shall be created in respect of such debt and no interest shall be payable in respect of it and the Company shall not be required to account for any money earned from the net proceeds which may be employed in the business of the Company or as the Board shall determine. Any sale under this Bye-Law shall be valid and effective notwithstanding that the Member holding the shares sold is dead, bankrupt or otherwise under any legal disability or incapacity.
GENERAL MEETINGS OF THE MEMBERS
16. (1) The Board shall convene and the Company shall hold Annual General Meetings of the Members in accordance with the requirements of the Act and these Bye-Laws. The Board may, whenever it shall determine, and shall, when required by the Act or these Bye-Laws, convene a General Meeting, other than an Annual General Meeting, which shall be called a Special General Meeting. Except with the unanimous approvalimmediate declassification of the Board all Annual or Special General Meetings of the Company shall be held in Bermuda, but under no circumstance shall any General Meeting be heldand to provide a range in the United States.
(2) The Board may determine to call Special General Meetings, and Members holding at the date of delivery of the written Notice not less than one-tenth (1/10) of the paid up capital of the Company carrying the right of voting at General Meetings of the Company shall at all times have the right, by written Notice to the Board or the Secretary of the Company, to require a Special General Meeting to be called by the Board for the transaction of any business specified in such Notice; and such meeting shall be held within sixty (60) days after the deposit of such Notice. If within twenty-one (21) days of such delivery, the Board fails to proceed to convene such meeting such Members may do so in accordance with the provisions of the Act.
NOTICE OF GENERAL MEETINGS
17. (1) An Annual General Meeting and any Special General Meeting of the Members shall be called by not less than twenty-one (21) Clear Days' Notice.
(2) Notice of every General Meeting shall be given in any manner permitted by these Bye-Laws to all Members other than those who, under the provisions of these Bye-Laws or the terms of issue of the shares they hold, are not entitled to receive such Notice from the Company.
(3) Notwithstanding that a General Meeting of the Company is called by shorter Notice than that specified in this Bye-Law, it shall be deemed to have been duly called if it is so agreed:
(4) At any Annual or Special General Meeting of the Members, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an Annual or Special General Meeting, business must be specified in the Notice of meeting (or any supplement thereto) given by or at the directionsize of the Board otherwise properly brought before the meeting by or at the direction of the Board, or otherwise properly brought before the meeting by a Member. In addition3 to any other applicable requirements, for business to be properly brought before an Annual or Special General Meeting by a Member, the Member must have given timely Notice thereof in writing to the Secretary of the Company. To be timely, a Member's Notice must be delivered to or mailed and received at the Registration Office of the Company, (i) in the case of an Annual General Meeting, not more than one hundred and twenty (120) days nor less than ninety (90) days prior to the date of the Company's Annual General Meeting in the immediately preceding year and (ii) in the case of a Special General Meeting, not later than the close of business on the later of (A) the 60th day prior to the date of such meeting or (B) the close of business on the 10th day following the day on which a public announcement with respect to the date of such meeting is first made by the Company. A Member's Notice to the Secretary shall set forth as to each matter the Member proposes to bring before the meeting and any material interest of the Member in such business (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting and, if such business includes a proposal to amend either the Memorandum of Association or these Bye-Laws, the text of the proposed amendment, (ii) the name and record address of the Member proposing such business and the beneficial owner, if any, on whose behalf the proposal is being made, (iii) a representation that the Member is a holder of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to present such proposal or nomination, (iv) the class and number of shares of the Company which are beneficially owned or owned of record by the Member and the beneficial owner, if any, on whose behalf the proposal is being made, and any affiliates of associates of such Person and (v) any material interest of the Member in such business, including with respect to the Member and the beneficial owner, if any, on whose behalf the proposal is being made: (A) whether and the extent to which any derivative instrument, swap, option,
warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such Person, or any affiliates or associates of such Person, with respect to shares of the Company, (B) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of the Company) has been made by or on behalf of such Person, or any affiliates or associates of such Person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of share price changes for, such Person, or any affiliates or associates of such Person, or to increase or decrease the voting power or pecuniary or economic interest of such Person, or any affiliates or associates of such Person, with respect to shares of the Company and (C) a description of all agreements, arrangements or understandings (whether written or oral) between or among such Person, or any affiliates or associates of such Person, and any other person or persons (including their names) in connection11 directors, with the proposal of any such business and any material interest of such Person or any affiliates or associates of such Person, in such business, including any anticipated benefit therefrom to such Person, or any affiliates or associates of such Person;provided, however, that Members may only give Notice to the Secretary of matters to be brought before an Annual or Special General Meeting for the purposes of this Bye-Law that are matters that are suitable and appropriate for submission to General Meetings of the Members of a publicly-quoted company as determined by the Board. In no event shall any adjournment or postponement of a meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of a Member's notice as described under this paragraph of this Bye-Law or of a Member's notice as described under paragraph (4) of Bye-Law 22.
(5) For the avoidance of doubt, paragraph (4) of this Bye-Law shall be the exclusive means for a Member to submit business (other than matters properly brought under Rule 14a-8 under the Exchange Act and included in the Company's notice of meeting) for consideration by the Members at a meeting of the Members of the Company. Notwithstanding paragraph (4) of this Bye-Law and paragraph (4) of Bye-Law 22, a Member shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in these Bye-Laws;provided,however, that any references in these Bye-Laws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit the requirements applicable to any nomination or other business to be considered pursuant to this Bye-Law 17 or Bye-Law 22. Nothing in these Bye-Laws shall be deemed to affect any rights of shareowners to request inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
(6) Notwithstanding anything in the Bye-Laws to the contrary, no business shall be conducted at an Annual or Special General Meeting except in accordance with the procedures set forth in this Bye-Law;provided, however, that nothing in this Bye-Law shall be deemed to preclude discussion by any Member of any business properly brought before the Annual or Special General Meeting in accordance with the procedures herein detailed.
(7) The Chairman of an Annual or Special General Meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Bye-Law, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
(8) Any nomination or nominations of Persons for election to the Board of the Company made in accordance with the provisions of these Bye-Laws shall be deemed for the purposes of this Bye-Law to constitute business properly brought before an Annual or Special General Meeting, as the case may be.
(9) The accidental omission to give Notice of a meeting or (in cases where instruments of proxy are sent out with the Notice) to send such instrument of proxy to, or the non-receipt of such Notice or such instrument of proxy by, any Person entitled to receive such Notice shall not invalidate any resolution passed or the proceedings at that meeting.
(10) For purposes of these Bye-Laws: (i) "beneficially owned" (and phrases of similar import), when referring to shares owned by a person, shall mean all shares which such person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the Exchange Act and the rules and regulations promulgated thereunder, including shares which are beneficially owned, directly or indirectly, by any other person with which such person has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of the capital stock of the Company; and (ii) "publicly announced" and "public announcement" shall mean disclosure by the Company in a press release reported by a national news service or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
PROCEEDINGS AT GENERAL MEETINGS
18. (1) No business shall be transacted at any General Meeting unless it shall have been properly brought before the Annual or Special General Meeting in accordance with these Bye-Laws and a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment, choice or election of a Chairman which shall not be treated as part of the business of the meeting. Except as provided to the contrary in these Bye-Laws, Members representing a majority of the outstanding shares carrying the right to vote in the Company, represented in person or by proxy, shall constitute a quorum for all purposes. In calculating the amount of voting shares represented in person or by proxy to determine whether or not a quorum is present for purposes of this Bye-Law, the inspectors appointed in accordance with Bye-Law 19 hereof, shall calculate the number of votes represented in person or by proxy in accordance with the provisions of Bye-Law 20 hereof.
(2) If within five (5) minutes (or such longer time as the Chairman of the meeting may determine to wait) after the time appointed for the meeting, a quorum is not present, the meeting, if convened on the requisition of Members, shall be dissolved. In any other case, it shall stand adjourned to such other day and such other time and place as the Chairman of the meeting may determine and at such adjourned meeting two Members present in person (whatever the number of shares held by them) shall be a quorum. The Company shall give not less than seven (7) days' Notice of any meeting adjourned through want of a quorum and such Notice shall state that two Members present in person (whatever the number of shares held by them) shall be a quorum.
(3) Each Director shall be entitled to attend and speak at any General Meeting of the Company.
(4) The Chairman of the Board shall preside as Chairman at every General Meeting. In his absence, the following shall preside in the order stated: the Deputy Chairman, any other Director appointed by the Board, the President, any Executive Vice President or any other Officer of the Company. If none of the foregoing is present within five (5) minutes after the time appointed for holding the meeting, or if none of them is willing to act as Chairman, the Directors present shall choose one of theirexact number to act or if one Director only is present he shall preside as Chairman if willing to act. If no Director is present or if each of the Directors present declines to take the chair, the Persons present and entitled to vote shall elect one of their number to be Chairman.
(5) The Chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place. When a meeting is adjourned for three (3) months or more, Notice of the adjourned meeting shall be given as in the case of an original meeting.
(6) Except as provided to the contrary in these Bye-Laws, it shall not be necessary to give any Notice of an adjournment or of the business to be transacted at an adjourned meeting.
INSPECTORS
19. The Board may, in advance of any meeting of Members, appoint one or more inspectors to act at such meeting or any adjournment thereof. If the inspectors shall not be so appointed or if any of them shall fail to appear or act, the Chairman of the meeting may and on the request of any Member entitled to vote thereat shall, appoint inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to exercise the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all Members. On the request of the Chairman of the meeting or any Member entitled to vote thereat, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No Director or candidate for the office of Director shall act as inspector. Inspectors need not be Members.
VOTING AT GENERAL MEETINGS
20. (1) Subject to the provisions of Bye-Law 20 below, and subject to any rights and restrictions for the time being attached to any class or classes or series of shares, every Member shall have one vote for each share carrying the right to vote on the matter in question of which he is the holder. Notwithstanding any other provisions of these Bye-Laws, all determinations in these Bye-Laws that are made by or subject to a vote or approval of Members shall be based upon the voting power of such Members' shares as determined pursuant to Bye-Law 20.
(2) Adjustment of Voting Power
(3) Other Adjustments of Voting Power
In addition to the provisions of Bye-Law 20 (2), any shares shall not carry any right to vote to the extent that the Board of Directors determines that it is necessary that such shares should not carry the right to vote in order to avoid adverse tax, legal or regulatory consequences to the Company, any subsidiary of the Company, or any other direct or indirect holder of shares or its affiliates, provided that no adjustment pursuant to this sentence shall cause any person to become a 9.5% U.S. Member.
(4) Notice
Prior to the meeting on which Members shall vote on any matter (or prior to any vote in the case of notification to Members specified in item (3) of this Bye-Law), the Board may, in its sole discretion, (i) retain the services of an internationally recognized accounting firm or organization with comparable professional capabilities in order to assist the Company in applying the principles of Bye-Laws 20 (2) and 20 (3) and (ii) obtain from such firm or organization a statement describing the information obtained and procedures followed and setting forth the determinations made with respect to Bye-Laws 20 (2) and 20 (3), and (iii) notify in writing or orally each Member of the voting power conferred by its shares determined in accordance with Bye-Laws 20 (2) and 20 (3). For the avoidance of doubt, any
failure by the Board to take any of the actions described in this Bye-Law 20 (4) shall not invalidate any votes cast or the proceedings at the meeting.
(5) Board Determination Binding
Any determination by the Board as to any adjustments or eliminations of voting power of any shares made pursuant to Bye-Law 20 shall be final and binding and any vote taken based on such determination shall not be capable of being challenged solely on the basis of such determination.
(6) Requirement to Provide Information and Notice
For the avoidance of doubt, the Company shall be permitted to disclose to the Members and others the relative voting percentages of all Members after application of Bye-Law 20. At the written request of a Member, the Confidential Information of such Member shall be destroyed or returned to such Member after the later to occur of (i) such Member no longer being a Member or (ii) the expiration of the applicable statute of limitations with respect to any Confidential Information obtained for purposes of engaging in any tax-related analysis.
(7) Subject to these Bye-Laws and to the Act, any matter submitted to the Members at a General Meeting for approval shall be approved by an Ordinary Resolution of the Membersprovided, however, that any matter submitted to the Members at a General Meeting for approval which relates to the amalgamation, merger or consolidation of the Company with another company or the sale, lease or exchange of all or substantially all of the assets of the Company shall be approved by at least a majority of the voting power of the then outstanding shares entitled to vote on such matter.
(8) A resolution put to the vote of a meeting shall be decided on a show of hands (and every Member present in person and every person holding a valid proxy at such meeting shall be entitled to, for each voting share of which such person is the holder or for which such person holds a proxy, the number of votes determined pursuant to Bye-Law 20 and shall cast such vote by raising his or her hand) unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a vote) a vote is demanded by:
A demand by a Person as proxy for a Member, or in the case of a Member being a corporation by its duly authorized representative, shall be deemed to be the same as a demand by a Member.
(9) Unless a vote is duly demanded and the demand is not withdrawn, a declaration by the Chairman that a resolution has been carried, or carried unanimously, or by a particular majority, or not carried by a particular majority, or lost, and an entry to that effect made in the minute book of the Company, shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded for or against the resolution.
(10) If a vote is duly demanded, the result of the vote shall be deemed to be the resolution of the meeting at which the vote was demanded. There shall be no requirement for the Chairman to disclose the voting figures on a vote.
(11) A vote demanded on the election of a Chairman, or on a question of adjournment, shall be taken forthwith. A vote demanded on any other question shall be taken in such manner (including the use of ballot or voting papers) and either forthwith or at such time (being not later than thirty (30) days after the date of the demand) and place as the Chairman directs. It shall not be necessary (unless the Chairman otherwise directs) for Notice to be given of a vote not taken immediately.
(12) The demand for a vote shall not prevent the continuance of a meeting or the transaction of any business other than the question on which the vote has been demanded, and, with the consent of the Chairman, it may be withdrawn at any time before the close of the meeting or the taking of the vote, whichever is the earlier.
(13) Where a vote is taken, votes may be given either personally or by proxy. and every person present at such meeting shall have for each voting share of which such person is the holder or for which such person holds a proxy, the number of votes determined pursuant to Bye-Law 20.
(14) A Person entitled to more than one vote on a vote need not use all his votes or cast all the votes he uses in the same way. Notwithstanding the preceding sentence, nothing herein is intended to allow for cumulative voting in the election of Directors and cumulative voting in the election of Directors is expressly prohibited.
(15) In the case of an equality of votes, whether on a show of hands or on a vote, the Chairman of such meeting shall be entitled to a second or casting vote in addition to any other vote he may have.
(16) Where there are joint holders of any share any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register in respectBoard):
Bye-Law 22 of the joint holding. Several executors or administrators of a deceased Member in whose name any share stands shall for the purposes of this Bye-Law be deemed joint holders thereof.
(17) A Member who is a patient for any purpose relating to mental health or in respect of whom an order has been made by any court having jurisdiction for the protection or management of the affairs of Persons incapable of managing their own affairs may vote, whether on a show of hands or on a vote, by his receiver, committee, curator bonis or other Person in the nature of a receiver, committee or curator bonis appointed by such court,Company’s Amended and such receiver, committee, curator bonis or other Person may vote by proxy, and may otherwise act and be treated as if he were the registered holder of such shares for the purposes of General Meetings, provided that such evidence as the Board may require of the authority of the Person claiming to vote shall have been deposited at the Office, Registration Office or such other place as the Board may designate, as appropriate, not less than forty-eight (48) hours before the time appointed for holding the meeting, or adjourned meeting or vote, as the case may be.
(18) Any Person entitled under these RestatedBye-Laws to be registered as the holder of any shares may vote at any General Meeting in respect thereof in the same manner as if he were the registered holder of such shares, provided that at least forty-eight (48) hours before the time of the holding of the meeting or adjourned meeting, as the case may be, at which he
proposes to vote, he shall satisfy the Board of his entitlement to such shares, or the Board shall have previously admitted his right to vote at such meeting in respect thereof.
(19) No Member shall, unless the Board otherwise determines, be entitled to attend and vote and to be counted in a quorum at any General Meeting unless he is duly registered and all calls or other sums presently payable by him in respect of shares in the Company have been paid.
(20) If: (a) any objection shall be raised to the qualification of any voter; or (b) any votes have been counted which ought not to have been counted or which might have been rejected; or (c) any votes are not counted which ought to have been counted; the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any resolution unless the same is raised or pointed out at the meeting or,amended as the case may be, the adjourned meeting at which the vote objected to is given or tendered or at which the error occurs. Any objection or error shall be referred to the Chairman of the meeting and shall only vitiate the decision of the meeting on any resolution if the Chairman decides that the same may have affected the decision of the meeting. The decision of the Chairman on such matters shall be final and conclusive.provided below:
(21) Notwithstanding section 77A of the Act anything which may be done by resolution of the Members in a general meeting shall not be done by resolution in writing.
CERTAIN SUBSIDIARIES
20A. (1) Voting of Subsidiary Shares. Notwithstanding any other provision of these Bye-Laws to the contrary, if the Company is required or entitled to vote at a general meeting of any direct non-U.S. subsidiary of the Company, the Board shall refer the subject matter of the vote to the Members of the Company on a poll (subject to Bye-Law 20) and seek authority from the Members for the Company's corporate representative or proxy to vote in favour of the resolution proposed by the subsidiary. The Board shall cause the Company's corporate representative or proxy to vote the Company's shares in the subsidiary pro rata to the votes received at the general meeting of the Company, with votes for or against the directing resolution being taken, respectively, as an instruction for the Company's corporate representative or proxy to vote the appropriate proportion of its shares for and the appropriate proportion of its shares against the resolution proposed by the subsidiary. The Board shall have authority to resolve any ambiguity.
(2) Bye-Law or Articles of Association of Certain Subsidiaries. The Board in its discretion shall require that the Bye-Law or Articles of Association or similar organizational documents of each subsidiary of the Company, organized under the laws of a jurisdiction outside the United States of America, other than any non-U.S. subsidiary that is a direct or indirect subsidiary of a U.S. Person, shall contain provisions substantially similar to Bye-Law 23 and 24. The Company shall enter into agreements, as and when determined by the Board, with each such subsidiary, only if and to the extent reasonably necessary and permitted under applicable law, to effectuate or implement this Bye-Law.
PROXIES AND CORPORATE REPRESENTATION
21. (1) Any Member entitled to attend and vote at a meeting of the Company shall be entitled to appoint another Person as his proxy to attend and vote instead of him. A Member may appoint a proxy in respect of part only of his holding of shares in the Company. A proxy need not be a Member of the Company.
(2) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorized in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other Person authorized to sign the same. In the case of an instrument of proxy purporting to be signed on behalf of a corporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer was duly authorized to sign such instrument of proxy on behalf of the corporation without further evidence of the fact.
(3) The instrument appointing a proxy and (if required by the Board) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered to such place or one of such places (if any) as may be specified for that purpose in or by way of Notice to or in any document accompanying the Notice convening the meeting (or, if no place is so specified at the Registration Office or the Office, as may be appropriate) not less than forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the Person named in the instrument proposes to vote or, in the case of a vote taken subsequently to the date of a meeting or adjourned meeting, not less than twenty-four (24) hours before the time appointed for the taking of the vote, and in default the instrument of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the expiration of one (1) year from the date named in it as the date of its execution, except at an adjourned meeting or on a vote demanded at a meeting or an adjourned meeting in cases where the meeting was originally held within one (1) year from such date. Delivery of an instrument appointing a proxy shall not preclude a Member from attending and voting in person at the meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked.
(4) Instruments of proxy shall be in any common form or in such other form as the Board may approve (provided that this shall not preclude the use of the two-way form) and the Board may send out with the Notice of any meeting, forms of instrument of proxy for use at the meeting. The instrument of proxy shall be deemed to confer authority to demand or join in demanding a vote and to vote on any amendment of a resolution put to the meeting for which it is given as the proxy may determine. The instrument of proxy shall, unless the contrary is stated therein, be valid as well for any adjournment of the meeting as for the meeting to which it relates.
(5) A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the principal, or revocation of the instrument of proxy or of the authority under which it was executed, provided that no intimation in writing of such death, insanity or revocation shall have been received by the Company at the Office or the Registration Office (or such other place as may be specified for the delivery of instruments of proxy in the Notice convening the meeting or other document sent therewith) at least two (2) hours before the commencement of the meeting or adjourned meeting, or the taking of the vote, at which the instrument of proxy is used.
(6) Anything which under these Bye-Laws a Member may do by proxy he may likewise do by his duly appointed attorney and the provisions of these Bye-Laws relating to proxies and instruments appointing proxies shall apply, as the case may be, in relation to any such attorney and the instrument under which such attorney is appointed.
(7) Any corporation which is a Member may by any authorized officer authorize such Person as it may determine to act as its representative at any meeting of the Company or any class of Members. The Person so authorized shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual Member and such corporation shall for the purposes of these Bye-Laws be deemed to be present in person at any such meeting if a Person so authorized is present thereat. Any reference in these Bye-Laws to a duly authorized representative of a Member being a corporation shall mean a representative authorized under the provisions of this Bye-Law.
(8) If a clearing house is a Member, it may authorize such Person or Persons as it determines to act as its representative or representatives at any meeting of the Company or at any meeting of any class of Members provided that, if more than one Person is so authorized, the authorization shall specify the number and class of shares in respect of which each such Person is so authorized. A Person so authorized under the provisions of this Bye-Law shall be entitled to exercise the same powers on behalf of the clearing house (or its nominee) which he represents as that clearing house (or its nominee) could exercise if it were an individual Member. For the purposes of this Bye-Law, "clearing house" means
any clearing house or other similar body recognized by the laws of the jurisdiction in which the shares of the Company are listed or quoted on a Designated Stock Exchange.
NOMINATION AND REMOVAL OF DIRECTORS
22. (1) The number of Directors which shall constitute the whole Board of Directors of the Company shall be such number (not less than three (3) or more thaneleven (11)thirteen (13)) as to be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directorsasthe Company may by Ordinary Resolution .determine. determineThe Board shall be divided into three classes, Class I, Class II and Class III. The number of Directors in each class shall be the whole number contained in the quotient arrived at by dividing the authorized number of Directors by three and if a fraction is also contained in such quotient, then if such fraction isone-thirdEach Director shall serve for a term ending on the date of the next (1/3) (1/3) the extra Director shall be a member of Class III and if the fraction istwo-thirds (2/3) (2/3) one of the Directors shall be member of Class III and the other shall be a member of Class II.thirdAnnual General Meeting following the annual meetingaAnnual GeneralmMeeting at which such Director was elected;elected; provided however, that the initial term of each Class and the classes to which the first slate of Directors elected hereunder belong, shall be determined by the Ordinary Resolution at the time of such initial . The foregoing notwithstanding, each Director shall serve until his successor shall have been duly elected and qualified, unless he shall resign, become disqualified, disabled or shall otherwise be removed.election.election
(2) For the purpose of the preceding paragraph, reference to the first election of Directors is to the election at the 1999 Annual General Meeting of the Company. At each annual election held thereafter, the Directors chosen to succeed those whose terms then expire shall be identified as being of the same class as the Directors they succeed. If for any reason the number of Directors in the various classes shall not conform with the formula set forth in the preceding paragraph, the Board may redesignate any Director to a different class in order that the balance of Directors in such classes shall conform thereto.
(3)(32) A Director need not be a Member.
( (4)43) Only Persons who are nominated in accordance with the following procedures shall be eligible for election as Directors. Nominations of Persons for election to the Board of the Company may be made at a meeting of Members called for the election of directors, or at the discretion of the Board, by any nominating committee or Person appointed by the Board, by any Member of the Company entitled to vote for the election of Director at the meeting who complies with the Notice procedures set forth in thisBye-Law. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely Notice to the Secretary of the Company. To be timely, a Member'sMember’s Notice shall be delivered to or mailed and received at the Registration Office of the Company (i) in the case of an Annual General Meeting, not more than one hundred and twenty (120) days nor less than ninety (90)sixty (60) days prior to the date of the Company's Annual General Meeting in the immediately preceding year and (ii) in the case of a Special General Meeting, not later than the close of business on the later of (A) the 60th day prior to the date of such meeting or (B) the close of business on the 10th day following the day on which a public announcement with respect to the date of such meeting is first made by the Company.meeting. Such Member'sMember’s Notice to the Secretary shall set forth (a) as to each Person whom the Member proposes to nominate for election orre-election as a Director, (i) the name, age, business address and residence address of the Person, (ii) the principal occupation or employment of the Person, (iii) the class and number of shares of Common Shares of the Company which are beneficially owned or owned of record by the Person, and any affiliates of associates of such Person and the name of and number of shares of the Company beneficially held by each such Person, (iv) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such Person, or any affiliates or associates of such Person, with respect to shares of the Company, (v) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of the Company) has been made by or on behalf of such Person, or any affiliates or associates of such Person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of share price changes for, such Person, or any affiliates or associates of such Person, or to increase or decrease the voting power or pecuniary or economic interest of such Person, or any affiliates or associates of such Person, with respect to shares of the Company, (vi) any other information relating to the Person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Schedule 14A of the Exchange Act, and (vii)(v) the consent of each nominee to serve as a Director, if so elected, together with an undertaking, signed by each proposed nominee, to furnish the Company any information it may request upon the advice of counsel for the purpose of determining such proposed nominee's eligibility to serve as a Director;elected; and (b) as to the Member
giving the Notice (i) the name and record address of the Member and the beneficial owner, if any, on whose behalf the proposal is being made, (ii) a representation that the Member is a holder of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to present such proposal or
nomination, (iii) the class and number of shares of capital stock of the Company which are beneficially owned or owned of record by the Member and the beneficial owner, if any, on whose behalf the proposal is being made, and any affiliates of associates of such Person and (iv) any material interest of the Member in such business, including with respect to the Member and the beneficial owner, if any, on whose behalf the proposal is being made: (A) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such Person, or any affiliates or associates of such Person, with respect to shares of the Company, (B) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of the Company) has been made by or on behalf of such Person, or any affiliates or associates of such Person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of share price changes for, such Person, or any affiliates or associates of such Person, or to increase or decrease the voting power or pecuniary or economic interest of such Person, or any affiliates or associates of such Person, with respect to shares of the Company and (C) a description of all agreements, arrangements or understandings (whether written or oral) between or among such Person, or any affiliates or associates of such Person, and any other person or persons (including their names) in connection with the proposal of any such business and any material interest of such Person or any affiliates or associates of such Person, in such business, including any anticipated benefit therefrom to such Person, or any affiliates or associates of such Person.Member. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as a Director of the Company. No Persons shall be eligible for election as a Director of the Company unless nominated in accordance with the procedures set forth herein.
(5)(54) The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.
(6)(65) The Directors shall (subject to any resolution of the Members to the contrary) have the power from time to time and at any time to appoint any Person as a Director to fill a casual vacancy on the Board, provided, however, that the number of Directors so appointed shall notcause the number of Directors to exceedtheanymaximum number determined from time to time by theBoard pursuant to paragraph (1) of thisBye-LawMembers in a General . Any Director so appointed by the Board shall hold office until the next electionMeeting.Meetingof the class for which suchof directorsshall have been chosenand shall then be eligible forre-election at that meeting.
(7)(76) Neither a Director nor an Alternate Director, as the case may be, shall be required to hold any shares of the Company by way of qualification and a Director or an Alternate Director (as the case may be) who is not a Member shall be entitled to receive Notice of and to attend and speak at any General Meeting of the Company and of all classes of shares of the Company.
(8)(87) Notwithstanding anything to the contrary in theseBye-Laws, the Members may remove a Director, with or without cause, at any time prior to the expiration of such Director'sDirector’s period of office or in any agreement between the Company and such Director (but without prejudice to any claim for damages under any such agreement) at a General Meeting convened and held in accordance with theseBye-Laws at which a majority of the holders of shares entitled to vote thereon vote in favor of such action provided that the Notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention so to do and be served on such Director fourteen (14) days before the meeting and at such meeting such Director shall be entitled to be heard on the motion for his removal.
(9)(98) A vacancy on the Board created by the removal of a Director under paragraph (8)(87) of thisBye-Law may be filled by the election or appointment by the Members at the meeting at which such Director is removed to hold office until the next election ofthe class for which suchdirectors shall have been chosen, but subject to any resolution of the Members to the contrary, the Board may fill any vacancy in the number left unfilled.
(10)(109) A retiring Director shall be eligible forre-election.
(11)(1110) The office of a Director shall be vacated if the Director:
(a) | resigns his office by Notice delivered to the Company at the Office or tendered at a meeting of the Board whereupon the Board resolves to accept such resignation; or |
(b) | becomes of unsound mind (as determined by the Board in its sole discretion) or dies; or |
(c) | without special leave of absence from the Board, is absent from meetings of the Board for six consecutive meetings, and the Board resolves that his office be vacated; or |
(d) | becomes bankrupt or has a receiving order made against him or suspends payment or comprises with his creditors; or |
(e) | is prohibited by law from being a Director; or |
(f) | ceases to be a Director by virtue of any provision of the Act or is removed from office pursuant to thisBye-Law. |
Proposed Amendments toBye-Law 20A, Paragraph (1), of the Board whereuponArgo Group International Holdings, Ltd. Amended and RestatedBye-Laws (amending the Board resolves to accept such resignation; or(b)becomesVotingPush-up Requirement):
(1) Voting of unsound mind (as determined by the Board in its sole discretion) or dies; or
theseALTERNATE DIRECTORSBye-Laws
23. (1) Any Director may at any time by Notice delivered to the Office or at a meeting of the Directors appoint any Person to be his alternate Director (an "Alternate Director"). Any Person so appointed shall have all the rights and powers of the Director or Directors for whom such Person is appointed in the alternative provided that such Person shall not be counted more than once in determining whether or not a quorum is present. An Alternate Director may be removed at any time by the Director who appointed him and, subject thereto, the office of Alternate Director shall continue until the next annual election of Directors or, if earlier, the date on which the relevant Director ceases to be a Director. Any appointment or removal of an Alternate Director shall be effected by Notice signed by the appointor and delivered to the Office or tendered at a meeting of the Board. An Alternate Director may also be a Director in his own right and may act as alternate to more than one other Director. An Alternate Director shall, if his appointor so requests, be entitled to receive Notices of meetings of the Board or of committees of the Board to the same extent as, but in lieu of, the Director appointing him and shall be entitled to such extent to attend and vote as a Director at any such meeting at which the Director appointing him is not personally present and generally at such meeting to exercise and discharge all the functions, powers and duties of his appointor as a Director and for the purposes of the proceedings at such meeting the provisions of these Bye-Laws shall apply as if he were a Director save that as an alternate for more than one Director his voting rights shall be cumulative.
(2) An Alternate Director shall only be a Director for the purposes of the Act and shall only be subject to the provisions of the Act insofar as they relate to the duties and obligations of a Director when performing the functions of the Director for whom he is appointed in the alternative and shall alone be responsible to the Company for his acts and defaults and shall not be deemed to be the agent of or for the Director appointing him. An Alternate Director shall be entitled to contract and be interested in and benefit from contracts or arrangements or transactions and to be repaid expenses and to be indemnified by the Company to the same extent, as the case may be, as if he were a Director but he shall not be entitled to receive from the Company any fee in his capacity as an Alternate Director except only such part, if any, of the remuneration otherwise payable to his appointor as such appointor may by Notice to the Company from time to time direct.
(3) Every Person acting as an Alternate Director shall have one vote for each Director for whom he acts as alternate (in addition to his own vote if he is also a Director). If his appointor is for the time being unavailable or unable to act, the signature of an Alternate Director to any resolution in writing of the Board or a committee of the Board of which his appointor is a member shall, unless the Notice of his appointment provides to the contrary, be as effective as the signature of his appointor.
(4) An Alternate Director shall ipso facto cease to be an Alternate Director if his appointor ceases for any reason to be a Director, however, such Alternate Director or any other Person may be re-appointed by the Directors to serve as an Alternate Director provided always that, if at any meeting any Director retires but is re-elected at the same meeting, any appointment of such Alternate Director pursuant to these Bye-Laws which was in force immediately before his retirement shall remain in force as though he had not retired.
DIRECTORS' COMPENSATION
24. The amount, if any, of Directors' fees, retainers, awards of shares and options, or other remuneration shall from time to time be determined by the Board. In addition, each Director shall be paid his reasonable traveling, hotel and incidental expenses in attending and returning from meetings of the Board or committees appointed by the Board, or any Annual General Meeting or Special General Meeting of the Members, and shall be paid all expenses properly and reasonably incurred by him in the conduct of the Company's business or in the discharge of his duties as a Director. Any question as to the reasonableness of expenses as provided herein shall be a matter to be determined by the Board. Any Director who by request, goes or resides abroad for any purposes of the Company is required or who performs services which in the opinion of the Board go beyond the ordinary duties ofentitled to vote at a Director may be paid such extra remuneration (whether by way of salary or otherwise) as the Board may determine, and such extra remuneration shall be in addition to any remuneration provided for by or pursuant to any other Bye-Law.
DIRECTORS' AND OFFICERS' INTERESTS
25. (1) A Director may:
Notwithstanding anything contained in these Bye-Laws to the contrary, any Director may exercise or cause to be exercised the voting powers conferred by the shares in any other company held or owned by the Company, or exercisable by him as director of such other company in such manner in all respects as he may determine (including the exercise thereof in favor of any resolution appointing himself as a director, manager or other officer of such company, or voting or providing for the payment of remuneration to the director, managing director, joint managing director, deputy managing director, executive director, manager or other officers of such other company) and any Director may vote in favor of the exercise of such voting rights in the manner aforesaid notwithstanding that he may be, or about to be, appointed a director, manager or other officer of such a company, and that as such he is or may become interested in the exercise of such voting rights in the manner aforesaid.
(2) Subject to the Act and to these Bye-Laws, no Director or Officer or proposed Director or Officer shall be disqualified by his office from contracting with the Company or any Subsidiary, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatever, nor shall any such contract or any other contract or arrangement in which any Director or Officer is in any way interested be liable to be avoided, nor shall any Director or Officer so contracting or being so interested be liable to account to the Company or the Members for any remuneration, profit or other benefits realized by any such contract or arrangement by reason of such Director or Officer holding that office or of the fiduciary relationship thereby established, provided that such Director or Officer shall disclose the nature of his interest in any contract or arrangement in which he is interested in accordance with these Bye-Laws.
(3) A Director or Officer who to his knowledge is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with the Company shall declare the nature of his interest at the first opportunity at the meeting of the Board at which the question of entering into the contract or arrangement is first considered, if he knows his interest then exists, or in any other case at the first meeting of the Board after he knows that he is or has become so interested.
(4) For the purposes of the preceding paragraph, a Director shall furnish Notice to the Board to the effect that: (a) he is a member or officer of a specified company or firm and is to be regarded as interested in any contract or arrangement which may after the date of the Notice be made with that company or firm; or (b) he is to be regarded as interested in any contract or arrangement which may after the date of the Notice be made with a specified Person who is connected with him; and such Notice shall be deemed to be a sufficient declaration of interest under these Bye-Laws in relation to any such contract or arrangement, provided that no such Notice shall be effective unless either it is given at a meeting of the Board or the Director or Officer takes reasonable steps to secure that it is brought up and read at the next Board meeting after it is given.
directGENERAL POWERS OF THE BOARD OF DIRECTORSnon-U.S.
26. (1) The business of the Company shall be managed and conducted by the Board, which may exercise all powers of the Company (whether relating to the management of the business of the Company or otherwise) which are not by the Act or by these Bye-Laws required to be exercised by the Members. No regulations made by the Company in a General Meeting shall invalidate any prior act of the Board which would have been valid if such regulations had not been made.
The general powers given by this Bye-Law shall not be limited or restricted by any special authority or power given to the Board by any other Bye-Law.
(2) Any Person contracting or dealing with the Company in the ordinary course of business shall be entitled to rely on any written or oral contract or agreement or deed, document or instrument entered into or executed as the case may be by any Officer acting on behalf of the Company and the same shall be deemed to be validly entered into or executed by the Company as the case may be and shall, subject to applicable law, be binding on the Company;provided, however, that no such contract or agreement or deed, document or instrument may be executed on the Company's behalf within the United States unless specifically authorized by resolution of the Board.
(3) Without prejudice to the general powers conferred by these Bye-Laws it is hereby expressly declared that the Board shall have the following powers, namely:
(4) The Board may by power of attorney appoint in writing any company, firm or Person or body of Persons, whether nominated directly or indirectly by the Board, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board under these Bye-Laws) and for such period and subject to such conditions as it may determine, and any such power of attorney may contain such provisions for the protection and convenience of Persons dealing with any such attorney as the Board may determine, and may also authorize any such attorney to sub-delegate all or any of the powers, authorities and discretions vested in him. Such attorney or attorneys may, if so authorized in writing, execute any, instrument or other documents with the same effect as the execution of the Company.
PROCEEDINGS OF THE BOARD OF DIRECTORS
27. (1) The Board may meet for the conduct of business, adjourn and otherwise regulate its meetings as it considers appropriate. Actions to be taken at any meeting shall be determined by a majority of votes cast, provided a quorum is present.
(2) A meeting of the Board may be convened by the Secretary on request of the President or by any two (2) Directors, provided that no business shall be transacted at a Board meeting unless not less than seven (7) Clear Days' Notice of the meeting shall be given to each Director with reasonable details of the business to be transacted and provided further that any Director may by Notice to the Company agree that no Notice needs, or any shorter Notice specified in a Notice may, be given to him. The Secretary shall convene a meeting of the Board, of which Notice may be given in writing or by telephone or in such other manner as the Board may from time to time determine, whenever he shall be required so hereunder. Any Director may waive Notice of any meeting either prospectively or retrospectively.
��(3) The quorum necessary for the transaction of the business of the Board may be fixed by the Board and, unless so fixed at any other number, shall be a majority of the Directors. An Alternate Director shall be counted in a quorum in the case of the absence of a Director for whom he is the alternate provided that he shall not be counted more than once for the purpose of determining whether or not a quorum is present.
(4) Directors may participate in any meeting of the Board by means of a conference telephone or other communications equipment through which all Persons participating in the meeting can communicate with each other simultaneously and instantaneously and, for the purpose of counting a quorum, such participation shall constitute presence at a Meeting as if those participating were present in person.
(5) Any Director who ceases to be a Director at a Board meeting may continue to be present and to act as a Director and be counted in the quorum until the termination of such Board meeting if no other Director objects and if otherwise a quorum of Directors would not be present.
(6) The continuing Directors or a sole continuing Director may act notwithstanding any vacancy in the Board but, if and so long as the number of Directors is reduced below the minimum number fixed by or in accordance with these
Bye-Laws, the continuing Directors or Director, notwithstanding that the number of Directors is below the number fixed by or in accordance with these Bye-Laws as the quorum or that there is only one continuing Director, may act for the purpose of filling vacancies in the Board or of summoning General Meetings of the Company but not for any other purpose.
(7) The Board may elect a Chairman and a Deputy Chairman of its meetings and determine the period for which they are respectively to hold such office. If no Chairman or Deputy Chairman is elected, or if at any meeting neither the Chairman nor any Deputy Chairman is present within five (5) minutes after the time appointed for holding the same, the Directors present may choose one of their number to be Acting Chairman of the meeting.
(8) A meeting of the Board at which a quorum is present shall be competent to exercise all the powers, authorities and discretions for the time being vested in or exercisable by the Board.
(9) The Board may delegate any of its powers, authorities and discretions to committees (including, but not limited to, an Executive Committee, an Audit Committee, a Nominating Committee, a Human Resources Committee, and an Investment Committee), consisting of Directors or Officers or other persons as it may determine, and they may, from time to time, revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to Persons or purposes. Any committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations which may be imposed on it by the Board.
(10) All acts done by any such committee in conformity with such regulations, and in fulfillment of the purposes for which it was appointed, but not otherwise, shall have like force and effect as if done by the Board, and the Board shall have power to remunerate the members of any such committee, and charge such remuneration to the current expenses of the Company.
(11) The meetings and proceedings of any committee consisting of two (2) or more members shall be governed by the provisions contained in these Bye-Laws for regulating the meetings and proceedings of the Board so far as the same are applicable and are not superseded by any regulations imposed by the Board under the preceding paragraph.
(12) A resolution in writing signed by all the Directors (provided that such number is sufficient to constitute a quorum and further provided that a copy of such resolution has been given or the contents thereof communicated to all the Directors for the time being entitled to receive Notices of Board meetings in the same manner as Notices of meetings are required to be given by these Bye-Laws) shall be as valid and effectual as if a resolution had been passed at a meeting of the Board duly convened and held provided that (i) any such resolution shall be valid only if the Board determines necessary the signature of the last Director to sign is affixed outside the United States, and (ii) the Board may declare such resolution to be invalid if the Board determines that the use of a resolution in writing would result in a non-de minimis adverse tax, regulatory or legal consequence to the Company, any subsidiary of the Company, or any direct or indirect holder of shares or its affiliates. Such resolution may be contained in one document or in several documents in like form each signed by one or morethe Board shall refer the subject matter of the Directors and for this purpose a facsimile signature of a Director shall be treated as valid.
(13) All acts bona fide done by the Board or by any committee or by any Person acting as a Director or member of a committee, shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any member or the Board or such committee or Person acting as aforesaid or that they or any of them were disqualified or had vacated office, be as valid as if every such Person had been duly appointed and was qualified and had continued to be a Director or member of such committee.
OFFICERS
28. (1) The Officers of the Company who may or may not be Directors may be appointed by the Board from time to time, all of whom shall be deemed to be Officers for the purposes of the Act and these Bye-Laws.
(2) The Officers shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Board or another Officer from time to time.
(3) The authority of any Officer of the Company so long as such Officer shall be physically present in the United States, shall be limited to maintaining an oversight and review of and providing recommendations and informationvote to the Board, but not to any third party, regarding the affairs of the Company pertaining to any of its Subsidiaries incorporated in the United States and otherwise to enable the Company to fulfill its role as the holder of shares of such Subsidiaries. Such Officer while physically present in the United States shall have no authority (i) to negotiate or conclude contracts in
the name of the Company (or any of its Subsidiaries not incorporated in the United States) or otherwise bind the Company (or any of its Subsidiaries not incorporated in the United States), or (ii) to conduct or manage any activities of the Company (or any of its Subsidiaries not incorporated in the United States), or (iii) to act in any way which might result in the Company (or any of its Subsidiaries not incorporated in the United States) being considered to be engaged in a trade or business in the United States within the meaning of the Code. Any purported action or contract done or made by such Officer or any other duly appointed Officer of the Company in violation of the provisions hereof shall be null and void ab initio and the Company or any of its Subsidiaries shall in no way be bound or affected by any such action or contract done or made in violation hereof.
(4) The Directors shall, as soon as may be after each appointment or election of Directors, elect the Officers of the Company, and a Chairman and a Deputy Chairman of the Board of Directors.
(5) The Officers shall receive such remuneration as the Directors may from time to time determine.
(6) The Company may in accordance with the Act appoint a resident representative ordinarily resident in Bermuda and the resident representative shall maintain an office in Bermuda and comply with the provisions of the Act. The Company shall provide the resident representative with such documents and information as the resident representative may require in order to be able to comply with the provisions of the Act. The resident representative shall be entitled to have Notice of, attend and be heard at all meetings of the Board or meetings of the Members.
(7) The Secretary, or an Assistant Secretary, shall attend all meetings of the Members and of the Board (and its committees) and shall keep correct minutes of such meetings and enter the same in the proper books provided for the purpose. The Secretary shall perform such other duties as are prescribed by the Act or these Bye-Laws or as may be prescribed by the Board.
(8) The Chairman or the Deputy Chairman of the Board of Directors, as the case may be, shall act as chairman at all meetings of the Members and of the Directors at which he is present. In the absence of both the Chairman and the Deputy Chairman, a chairman shall be appointed or elected by those present at the meeting.
(9) The Officers of the Company shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Directors or another Officer from time to time.
(10) Any provision of the Act or of these Bye-Laws requiring or authorizing a thing to be done by or to a Director and the Secretary shall not be satisfied by its being done by or to the same Person acting both as Director and as or in place of the Secretary.
REGISTER OF DIRECTORS AND OFFICERS
29. (1) The Board shall cause to be kept in one or more books at its Office a Register of Directors and Officers and shall enter therein the particulars required by the Act.
(2) The Register of Directors and Officers shall be open to inspection at the Office of the Company on every business day, subjecta poll (subject to such reasonable restrictions asBye-Law 20) and seek authority from the Board may impose, so that not less than two (2) hours in each business day be allowed for inspection.
MINUTES
30. The Board shall cause Minutes to be duly entered in books providedMembers for the purpose: (i) of all elections and appointments of Officers; (ii)Company’s corporate representative or proxy to vote in favour of the names of the Directors present at each meeting of the Directors and of any committee appointedresolution proposed by the Board; and (iii) of all resolutions and proceedings of each General Meeting of the Members, meetings of the Board and meetings of committees of the Board.
subsidiarySEAL
31. (1) The Board may authorise the production of a Seal and one or more duplicate seals, which shall consist of a circular device with the name of the Company around the outer margin thereof and the country and year of registration in Bermuda across the centre thereof.
(2) Any document required to be under seal or executed as a deed on behalf of the Company may be:
(3) The Board shall provide for the custody of every Seal. A Seal shall only be used by authority of the Board or of a committee constituted by the Board. Subject to these Bye-Laws, any instrument to which a Seal is affixed shall be attested by the signature of:
thisDESTRUCTION OF DOCUMENTSBye-law
32. The Company shall be entitled to destroy the following documents at the following times:
and it shall conclusively be presumed in favor of the Company that every entry in the Register purporting to be made on the basis of any such documents so destroyed was duly and properly made and every share certificate so destroyed was a valid certificate duly and properly canceled and that every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and that every other document destroyed hereunder was a valid and effective document in accordance with the recorded particulars thereof in the books or records of the Company; provided, however, that: (1) the foregoing provisions of this Bye-Law shall apply only toin the destruction of a document in good faith and without Notice to the Companyevent that the preservationvoting rights of such document was relevant to a claim; (2) nothing contained in this Bye-Law shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than as aforesaid or in any case where the conditions of proviso (1) above are not fulfilled; and (3) references in this Bye-Law to the destruction of any document include references to its disposal in any manner.
DIVIDENDS AND OTHER DISTRIBUTIONS
33. (1) Subject to the Act, the Board may from time to time declare dividends in any currency or property to be paid to the Members. The Board may also make a distribution to the Members out of any contributed surplus (as ascertained in accordance with the Act).
(2) No dividend shall be paid or other distribution made out of contributed surplus if to do so would render the Company unable to pay its liabilities as they become due or the realizable value of its assets would thereby become less than the aggregate of its liabilities and its issued share capital and share premium accounts.
(3) Except in so far as the rights attaching to, or the terms of issue of, any share otherwise provide:
(4) The Board may from time to time pay to the Members such interim dividends as appear to the Board to be justified by the profits of the Company and in particular (but without prejudice to the generality of the foregoing) if at any time the share capital of the Company is divided into different classes, the Board may pay such interim dividends in
respect of those shares in the capital of the Company which confer on the holders thereof deferred or non-preferential rights as well as in respect of those shares which confer on the holders thereof preferential rights with regard to dividends and provided that the Board acts bona fide the Board shall not incur any responsibility to the holders of shares conferring any preference for any damage that they may suffer by reason of the payment of an interim dividend on any shares having deferred or non-preferential rights and may also pay any fixed dividend which is payable on any shares of the Company quarterly or on any other dates, whenever such profits, in the opinion of the Board, justifies such payment.
(5) The Board may deduct from any dividend or other monies payable to a Member by the Company on or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise.
(6) No dividend or other monies payable by the Company on or in respect of any share shall bear interest against the Company.
(7) Any dividend, interest or other sum payable in cash to the holder of shares may be paid by check or warrant sent through the mail addressed to the holderare, at his registered address or, in the case of joint holders, addressed to the holder whose name stands first in the Register in respect of the shares at his address as appearing in the Register or addressed to such Person and at such address as the holder or joint holders may in writing direct. Every such check or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the Register in respect of such shares, and shall be sent at his or their risk and payment of the check or warrant by the bank on which it is drawn shall constitute a good discharge to the Company notwithstanding that it may subsequently appear that the same has been stolen or that any endorsement thereon has been forged. Any one of two or more joint holders may give effectual receipts for any dividends or other monies payable or property distributable in respect of the shares held by such joint holders.
(8) All dividends or bonuses unclaimed for one (1) year after having been declared may be invested or otherwise made use of by the Board for the benefit of the Company until claimed. Any dividend or bonuses unclaimed after a period of six (6) years from the date of declaration shall be forfeited and shall revert to the Company. The payment by the Board of any unclaimed dividend or other sums payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect thereof.
(9) Whenever the Board has resolved that a dividend be declared or paid, the Board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind and in particular of paid up shares, debentures or warrants to subscribe securities of the Company or any other company, or in any one or more of such ways, and where any difficulty arises in regard to the distribution the Board may settle the same as it thinks expedient, and in particular may issue certificates in respect of fractions of shares, disregard fractional entitlements or round the same up or down, and may fix the value for distribution of such specific assets, or any part thereof, and may determine that cash payments shall be made to any Members upon the basis of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to the Board and may appoint any Person to sign any requisite instruments of transfer and other documents on behalf of the Persons entitled to the dividend, and such appointment shall be effective and binding on the Members. The Board may resolve that no such assets shall be made available to Members with registered addresses in any particular territory or territories where, in the absence of a registration statement or other special formalities, such distribution of assets would or might, in the opinion of the Board, be unlawful or impracticable and in such event the only entitlement of the Members aforesaid shall be to receive cash payments as aforesaid. Members affected as a result of the foregoing sentence shall not be or be deemed to be a separate class of Members for any purpose whatsoever.
(10) Whenever the Board has resolved that a dividend be declared or paid on any class of the share capital of the Company, the Board may further resolve either:
forms of election and specify the procedureadjustment pursuant to be followed and the place at which and the latest date and time by which duly completed forms of election must be delivered in order to be effective;
(12) The Board may resolve in respect of any particular dividend of the Company that notwithstanding the provisions of paragraph (10) of this Bye-Law such dividend may be satisfied whollyCompany’s shares in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.
(13) The Board may on any occasion determine that rights of election and the allotment of shares under paragraph (10) of this Bye-Law shall not be made available or made to any Members with registered addresses in any territory where, in the absence of a registration statement or other special formalities, the circulation of an offer of such rights of election or the allotment of shares would or might, in the opinion of the Board, be unlawful or impracticable, and in such event the provisions aforesaid shall be read and construed subject to such determination. Members affected as a result of the foregoing sentence shall not be or be deemed to be a separate class of Members for any purpose whatsoever.
(14) Any resolution declaring a dividend on shares of any class may specify that the same shall be payable or distributable to the Persons registered as the holders of such shares at the close of business on a particular date, notwithstanding that it may be a date prior to that on which the resolution is passed, and thereupon the dividend shall be payable or distributable to them in accordance with their respective holdings so registered, but without prejudice to the rights inter se in respect of such dividend of transferors and transferees of any such shares. The provisions of this Bye-Law shall, as the case may be, apply to bonuses, capitalization issues, distributions of realized capital profits or offers or grants made by the Company to the Members.
(15) Before declaring any dividend, the Board may set aside out of the profits of the Company such sums as it determines as reserves which shall, at the discretion of the Board, be applicable for any purpose to which the profits of the Company may be properly applied and pending such application may, also at such discretion, either be employed in the business of the Company or be invested in such investments as the Board may from time to time determine and so that it shall not be necessary to keep any investments constituting the reserve or reserves separate or distinct from any other investments of the Company. The Board may also, without placing the same to reserves, carry forward any profits which it may think prudent not to distribute.
CAPITALIZATION
34. (1) The Board may resolve to capitalize any part of the amount for the time being standing to the credit of any reserve account or to the credit of the profit and loss account or otherwise available for distribution by applying such sum in paying up (i) unissued shares, debentures or other obligations to be allotted or distributed fully paidsubsidiary pro rata to the Members or any class of Members or (ii) in full or partly paid shares of those Members who would have been entitled to such sums if they were distributed by way of dividend or other distribution. In addition,votes received at the Board may, subject to the Act, resolve to capitalize any part of the amount for the time being standing to the credit of the Company's share premium account by applying such sum in paying up unissued shares to be issued to the Members, or class of Members, as fully paid bonus shares.
(2) The Board may settle, as it considers appropriate, any difficulty arising in regard to any distribution under the preceding paragraph and in particular may issue certificates in respect of fractions of shares or authorize any Person to sell and transfer any fractions or may resolve that the distribution should be as nearly as may be practicable in the correct proportion but not exactly so or may ignore fractions altogether, and may determine that cash payments shall be made to any Members in order to adjust the rights of all parties, as may seem expedient to the Board. The Board may appoint any Person to sign on behalf of the Persons entitled to participate in the distribution any contract necessary or desirable for giving effect thereto and such appointment shall be effective and binding upon the Members.
ACCOUNTING RECORDS
35. (1) The Board shall cause true accounts to be kept of the sums of money received and expended by the Company, and the matters in respect of which such receipts and expenditures take place, and of the property, assets, credits and liabilitiesgeneral meeting of the Company, with votes for or against the directing resolution being taken, respectively, as an instruction for the Company’s corporate representative or proxy to vote the appropriate proportion of its shares for and the appropriate proportion of all other matters requiredits shares against the resolution proposed by the Act or necessary to give a true and fair view of the Company's affairs and to explain its transactions.
(2) The accounting records shall be kept at the Office or, subject to the Act, at such other place or places as the Board decides outside of the United States and shall always be open to inspection by the Directors of the Company. No Member (other than a Director of the Company) shall have any right of inspecting any accounting record or book or document of the Company except as conferred by law or authorized by the Board or the Company in a General Meeting.
(3) Subject to the Act, a printed copy of the balance sheet and profit and loss account, including every document required by law to be annexed thereto, made up to the end of the applicable financial year and containing a summary of the assets and liabilities of the Company under convenient headings and a statement of income and expenditures, together with a copy of the Auditors' report, shall be sent to each Person entitled thereto at least twenty-one (21) days before the date of the Annual General Meeting and laid before the Company at such meeting in accordance with the requirements of the Act provided that this Bye-Law shall not require a copy of those documents to be sent to any Person of whose address the Company is not aware or to more than one of the joint holders of any shares or debentures.
AUDIT
36. (1) Subject to the Act, at the Annual General Meeting or at a subsequent Special General Meeting in each year, the Members shall appoint an Auditor to audit the accounts of the Company and such Auditor shall hold office until the Members appoint another Auditor. Such Auditor may be a Member but no Director or Officer or employee of the Company shall, during his continuance in office, be eligible to act as an Auditor of the Company.
(2) Subject to the Act, a Person, other than a retiring Auditor, shall not be capable of being appointed Auditor at an Annual General Meeting unless Notice of an intention to nominate that Person to the office of Auditor has been given not less than fourteen (14) days before the Annual General Meeting and furthermore, the Company shall send a copy of any such Notice to the retiring Auditor.
(3) The Members, by a resolution passed by at least two-thirds of the votes cast at a General Meeting of which notice specifying the intention to pass such resolution was given, may remove the Auditor at any time before the expiration of his term of office and shall by Ordinary Resolution at that meeting appoint another Auditor in his stead for the remainder of his term, provided that, not less than twenty-one (21) days before the date of the meeting, notice in writing of the proposed resolution is given to the incumbent auditor and to the auditor proposed to be appointed.
(4) Subject to the Act, the accounts of the Company shall be audited at least once in every year.
(5) The remuneration of the Auditor shall be fixed by the Company in a General Meeting or in such manner as the Members may determine.
(6) If the office of Auditor becomes vacant by the resignation or death of the Auditor, or by his becoming incapable of acting by reason of illness or other disability at a time when his services are required, the Directors shall as soon as practicable convene a Special General Meeting to fill the vacancy.
(7) The statement of income and expenditures and the balance sheet provided for by these Bye-Laws shall be examined by the Auditor and compared by him with the books, accounts and vouchers relating thereto; and he shall make a written report thereon stating whether such statement and balance sheet are drawn up so as to present fairly the financial position of the Company and the results of its operations for the period under review and, in case information shall have been called for from Directors or Officers of the Company, whether the same has been furnished and has been satisfactory. The financial statements of the Company shall be audited by the Auditor in accordance with generally accepted auditing standards. The Auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the Auditor shall be submitted to the Members in a General Meeting. The generally accepted auditing standards referred to herein may be those of a country or jurisdiction other than Bermuda. If so, the financial statements and the report of the Auditor should disclose this fact and name such country or jurisdiction.
(8) The Auditor shall at all reasonable times have access to all books kept by the Company and to all accounts and vouchers relating thereto; and he may call on the Directors or Officers of the Company for any information in their possession relating to the books or affairs of the Company.
GIVING NOTICE AND ACCESS
37. (1) Notice may be given by the Company to a Member:
(2) Any notice required to be given to a Member shall, with respect to any shares held jointly by two or more persons, be given to whichever of such persons is named first in the Register of Members and notice so given shall be sufficient notice to all the holders of such shares.
(3) Any notice delivered in accordance with Bye-Law 37(1) (a), (b) or (c) shall be deemed to have been served at the time when the same would be delivered in the ordinary course of transmission and, in proving such service, it shall be sufficient to prove that the notice was properly addressed and prepaid, if posted, and the time when it was posted, delivered to the courier, or transmitted by electronic means. Any notice delivered in accordance with Bye-Law 37(1)(d) shall be deemed to have been delivered at the time when the requirements of the Act in that regard have been met.
WINDING UP
38. (1)subsidiary. The Board shall have powerauthority to resolve any ambiguity.
(2)Bye-Law or Articles of Association of Certain Subsidiaries. The Board in its discretion shall require that the name and on behalfBye-Law or Articles of Association or similar organizational documents of each subsidiary of the Company, to presentorganized under the laws of a petitionjurisdiction outside the United States of America, other than anynon-U.S. subsidiary that is a direct or indirect subsidiary of a U.S. Person, shall contain provisions substantially similar to the court for the Company to be wound up.
(2) A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.
(3) If thethisBye-Law20A23 and 24. The Company shall be wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolutionenter into agreements, as and any other sanction required by the Act, divide among the Members in specie or kind the whole or any part of the assets of the Company and whether or not the assets shall consist of properties of one kind or shall consist of properties to be divided as aforesaid of different kinds, and may for such purpose set such value as he deems fair upon any one or more class or classes of property and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of the Members as the liquidator with the like authority shall determine, and the liquidation of the Company may be closed and the Company dissolved, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
39. (1) The Directors and Officers (such term to include, for the purposes of this Bye-Law, any individual appointed to any committee by the Board) for the time being acting in relation to any of the affairs of the Company and the liquidator or trustees (if any) for the time being acting in relation to any of the affairs of the Company and every one of them, and their heirs, executors and administrators, shall be indemnified and held harmless out of the assets of the Company from and against all actions, costs, charges, losses, damages and expenses which they or any of them, their heirs, executors or administrators, shall or may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of their duty, or supposed duty, or in their respective offices or trusts, and none of them shall be answerable for the acts, receipts, neglects or defaults of the others of them or for joining in any receipts for the sake of conformity, or for any bankers or other Persons with whom any monies or effects belonging to the Company shall or may be delivered or deposited for safe custody, or for insufficiency or deficiency of any security upon which any monies of or belonging to the Company shall be deposited or invested, or for any other loss, misfortune or damage which may happen in the execution of their respective offices or trusts, or in relation thereto, provided that this indemnity shall not extend to any matter in respect of any fraud or dishonesty which may attach to any of said individuals.
(2) Each Member and the Company agree to waive any claim or right of action he or it might have, whether individually or by or in the right of the Company, against any Director or Officer on account of any action taken by such Director or Officer, or the failure of such Director or Officer to take any action, in the performance of his duties, or supposed duties, with or for the Company; provided that such waiver shall not extend to any matter in respect of any fraud or dishonesty which may attach to such Director or Officer. Any repeal or modification of this Bye-Law shall not adversely affect any right or protection of a Director or Officer of the Company existing immediately prior to such repeal or modification.
(3) Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding as authorizedwhen determined by the Board, in the specific case upon receipt of an undertaking by or on behalf of the Director, Officer, liquidator or trustee to repaywith each such amount unless it
shall ultimately be determined that the individual is entitled to be indemnified by the Company as authorized in these Bye-Laws or otherwise pursuantsubsidiary, only if and to the laws of Bermuda.extent reasonably necessary and permitted under applicable law, to effectuate or implement thisBye-Law.
AMENDMENT OF BYE-LAWS
40. Any amendment to these Bye-Laws or to the Company's Memorandum of Association shall be approved by the Board and decided on by an Ordinary Resolution of the Members.
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ARGO GROUP INTERNATIONAL HOLDINGS, LTD. ATTN: 110 PITTS BAY ROAD PEMBROKE | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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E94513-P35771 KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
ARGO GROUP INTERNATIONAL HOLDINGS, LTD. | ||||||||||||||||||||||||
The Board of Directors recommends you vote FOR | For | Against | Abstain | |||||||||||||||||||||
1. | Amend the Amended and | ☐ | ☐ | ☐ | ||||||||||||||||||||
2. | Election of Directors (if Proposal 1 is approved by the shareholders, to elect each of the 11 director nominees named below, or, if Proposal 1 is not approved, to elect (i) Thomas A. Bradley, Anthony P. Latham and | 2i. | Al-Noor Ramji | For ☐ | Against ☐ | Abstain ☐ | ||||||||||||||||||
2j. | Kevin J. Rehnberg | ☐ | ☐ | ☐ | ||||||||||||||||||||
2a. | Bernard C. Bailey | ☐ | ☐ | ☐ | 2k. | John H. Tonelli | ☐ | ☐ | ☐ | |||||||||||||||
2b. | Thomas A. Bradley | ☐ | ☐ | ☐ | 3. | Approve, on an advisory, non-binding basis, the compensation of our Named Executive | ☐ | ☐ | ☐ | |||||||||||||||
2c. | Fred R. Donner | ☐ | ☐ | ☐ | 4. | Approve Ernst & Young LLP | ☐ | ☐ | ☐ | |||||||||||||||
2d. | Anthony P. Latham | ☐ | ☐ | ☐ | ||||||||||||||||||||
2e. | Dymphna A. Lehane | ☐ | ☐ | ☐ | 5. | Amend the Bye-Laws to provide a range in the size of | ☐ | ☐ | ☐ | |||||||||||||||
2f. | Samuel G. Liss | ☐ | ☐ | ☐ | 6. | Amend the | ☐ | ☐ | ☐ | |||||||||||||||
2g. | Carol A. McFate | ☐ | ☐ | ☐ | ||||||||||||||||||||
2h. | Kathleen A. Nealon | ☐ | ☐ | ☐ | ||||||||||||||||||||
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Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
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E94514-P35771
PRELIMINARY-SUBJECT TO COMPLETION - DATED MARCH 6, 2020
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Argo Group International Holdings, Ltd. (“Argo Group”) hereby appoints Kevin J. Rehnberg and Craig S. Comeaux, with power of substitution, to serve as proxies, and each of them, with the full power of substitution to each, as the true and lawful attorneys, agents and proxyholders of the undersigned, and hereby authorizes them to represent and vote as specified herein, all shares of Common Stock held of record by the undersigned at the close of business on March 2, 2020, the record date for the Annual General Meeting of Shareholders of the Company to be held at the Company’s offices located at 110 Pitts Bay Road, Pembroke, Bermuda on April 16, 2020 at 9:00 A.M. local time and at any adjournments or postponements thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED. IN THE ABSENCE OF ANY DIRECTION, THE SHARES WILL BE VOTED “FOR” ITEMS 1, 3, 4, 5 AND 6, “FOR” EACH DIRECTOR NOMINEE IN ITEM 2 AND IN THE DISCRETION OF THE PROXYHOLDERS ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL GENERAL MEETING. THE DIRECTORS RECOMMEND VOTES ON THE REVERSE SIDE.
Continued and to be signed on reverse side