UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant ¨
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| x | Definitive Proxy Statement | |||
| ¨ | Definitive Additional Materials | |||
| ¨ | Soliciting Material Pursuant to §240.14a-12 | |||
RENAISSANCERE HOLDINGS LTD. | ||||
| (Name of Registrant as Specified In Its Charter) | ||||
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RENAISSANCERE HOLDINGS LTD.
Renaissance House
12 Crow Lane
Pembroke HM 19 Bermuda
April 12, 2012
Dear Shareholder:
You are cordially invited to attend the 2012 Annual General Meeting of Shareholders of RenaissanceRe Holdings Ltd. to be held on May 22, 2012, at 9:00 a.m., Atlantic Daylight Time, at Renaissance House, 12 Crow Lane, Pembroke, Bermuda.
The Proxy Statement provides you with detailed information regarding the business to be considered at the meeting. Please read it carefully.
Pursuant to rules promulgated by the Securities and Exchange Commission, we are providing access to our proxy materials principally by notifying you of the availability and location at which you can access our proxy materials on the Internet. We believe this allows us to efficiently provide our shareholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual General Meeting.
Your vote is important to us regardless of the size of your holding. To ensure your shares are represented at the meeting, whether or not you plan to attend the meeting in person, we urge you to vote your shares as soon as possible. Voting instructions can be found in the Q&A section of the Proxy Statement.
Thank you for your continued support of RenaissanceRe.
Sincerely,
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| Ralph B. Levy Chairman of the Board of Directors |
Neill A. Currie President and Chief Executive Officer |
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
to be Held on May 22, 2012
Notice is hereby given that our 2012 Annual General Meeting of Shareholders (the “Annual Meeting”) will be held at Renaissance House, 12 Crow Lane, Pembroke, Bermuda on May 22, 2012, at 9:00 a.m., Atlantic Daylight Time, for the following purposes:
| 1. | To elect three Class II directors to serve until our 2015 Annual Meeting; |
| 2. | To conduct a non-binding advisory vote to approve the compensation of our named executive officers (collectively, the “Named Executive Officers”); and |
| 3. | To appoint the firm of Ernst & Young Ltd., an independent registered public accounting firm, to serve as our auditors for the 2012 fiscal year until our 2013 Annual Meeting, and to refer the determination of the auditors’ remuneration to the Board of Directors. |
At the Annual Meeting, shareholders will receive the report of our independent auditors and our financial statements for the year ended December 31, 2011, and may also be asked to consider and take action with respect to such other matters as may properly come before the Annual Meeting.
The Board of Directors has fixed the close of business on March 26, 2012 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting.
By order of the Board of Directors,
Stephen H. Weinstein
Corporate Secretary
RENAISSANCERE HOLDINGS LTD.
Renaissance House
12 Crow Lane
Pembroke HM 19 Bermuda
ANNUAL GENERAL MEETING OF SHAREHOLDERS
May 22, 2012
GENERAL INFORMATION
| Q: | Why am I receiving these materials? |
| A: | You are receiving these materials because you were a shareholder of RenaissanceRe Holdings Ltd. (“RenaissanceRe” or the “Company”) as of March 26, 2012 (the “Record Date”), and are entitled to attend and vote at the Annual Meeting to be held at Renaissance House, 12 Crow Lane, Pembroke, Bermuda on May 22, 2012, at 9:00 a.m., Atlantic Daylight Time, or any postponement or adjournment thereof. |
This proxy statement (the “Proxy Statement”) summarizes the information you need to know to vote at the Annual Meeting. The Notice Regarding the Availability of Proxy Materials (the “Notice”), the Proxy Statement, the Notice of Annual Meeting, and the proxy card are first being made available to shareholders on or about April 12, 2012. We have made available with this Proxy Statement our Annual Report to Shareholders, although the Annual Report should not be deemed to be part of the Proxy Statement.
| Q: | Why did I receive a notice in the mail regarding the Internet availability of proxy materials? |
| A: | Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC” or the “Commission”) and applicable Bermuda law, we are providing access to our proxy materials over the Internet. Accordingly, we are sending the Notice to holders of our common shares, par value $1.00 per share (the “Common Shares”). All shareholders will have the ability to access the proxy materials on a website referred to in the Notice or request to receive a printed set of the proxy materials, as described below. |
| Q: | How can I get electronic access to the proxy materials? |
| A: | The Notice provides you with instructions regarding how to: |
| • | Access (for viewing and/or printing purposes) our proxy materials for the Annual Meeting on the Internet; and |
| • | Instruct us to send our future proxy materials to you electronically by email. |
If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
| Q: | How can I receive a printed copy of the proxy materials? |
| A: | The Notice provides you with instructions regarding how to: |
| • | Request a printed copy of our proxy materials for the Annual Meeting; and |
| • | Instruct us to send printed copies of our future proxy materials to you by mail. |
If you choose to receive future proxy materials by mail, your election to receive proxy materials by mail will remain in effect until you terminate it.
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| Q: | What will I be voting on at the Annual Meeting? |
| A: | You will be voting on three items (collectively, the “Proposals”): |
| 1. | To elect three Class II directors to serve until our 2015 Annual Meeting (the “Board Nominees Proposal”); |
| 2. | To conduct a non-binding advisory vote to approve the compensation of our Named Executive Officers (the “Say on Pay Proposal”); and |
| 3. | To appoint the firm of Ernst & Young Ltd., an independent registered public accounting firm, to serve as our auditors for the 2012 fiscal year until our 2013 Annual Meeting, and to refer the determination of the auditors’ remuneration to the Board of Directors (the “Board”) (collectively, the “Auditors Proposal”). |
Shareholders may also be asked to consider and take action with respect to such other matters as may properly come before the Annual Meeting.
| Q: | What are the voting recommendations of the Board? |
| A: | The Board recommends the following votes: |
| 1. | “FOR” the Board Nominees Proposal |
| 2. | “FOR” the Say on Pay Proposal |
| 3. | “FOR” the Auditors Proposal |
| Q: | Who is entitled to vote? |
| A: | The Board has set March 26, 2012 as the record date for the Annual Meeting. If you were the beneficial owner of Common Shares held in street name, or a shareholder of record with respect to our Common Shares at the close of business on the Record Date, you are entitled to notice of, and may vote at, the Annual Meeting. The Common Shares are our only class of equity securities outstanding and entitled to vote at the Annual Meeting. |
| Q: | What is the quorum requirement? |
| A: | As of March 26, 2012, 51,765,197 Common Shares were issued and outstanding. The presence of two persons in person and throughout the meeting representing, in person or by proxy, more than 50% of the Common Shares outstanding and entitled to vote on the matters to be considered at the Annual Meeting is required to constitute a quorum for the transaction of business at the Annual Meeting. |
| Q: | Who is soliciting my proxy? |
| A: | Your proxy is being solicited by the Board. MacKenzie Partners is acting as the solicitation agent on behalf of the Board. See “Who pays the costs of soliciting proxies?” below. The persons named in the proxy card have been designated as proxies by the Board. Such persons designated as proxies are officers of RenaissanceRe. |
| Q: | Who pays the costs of soliciting proxies? |
| A: | We will bear the cost of solicitation of proxies. We have engaged the firm of MacKenzie Partners to assist in the solicitation of proxies for a fee of $15,000, plus the reimbursement of certain expenses. Further solicitation may be made by our directors, officers, and employees personally, by telephone, Internet, or otherwise, but such persons will not be specifically compensated for such services. We may also solicit, |
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| through bankers, brokers, or other persons, proxies from beneficial holders of the Common Shares. Upon request, we will reimburse brokers, dealers, banks, or similar entities for reasonable expenses incurred in forwarding copies of the proxy materials relating to the Annual Meeting to the beneficial owners of Common Shares which such persons hold of record. |
| Q: | What is the difference between holding Common Shares as a shareholder of record and as a beneficial owner of Common Shares held in street name? |
| A: | Shareholder of Record. If your Common Shares are registered directly in your name with our transfer agent, BNY Mellon Shareowner Services, you are considered the shareholder of record with respect to those shares, and the Notice was sent directly to you by Broadridge Financial Solutions, Inc., the Company’s tabulation agent and Inspector of Election. |
| Beneficial Owner of Common Shares Held in Street Name. If your Common Shares are held in an account at a brokerage firm, bank, broker-dealer, or similar organization, then you are the beneficial owner of Common Shares held in street name, and the Notice should have been forwarded to you by that organization. The organization holding your account is considered the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner of Common Shares held in street name, you have the right to direct that organization on how to vote the Common Shares held in your account. |
| Q: | If I am a shareholder of record of Common Shares, how do I vote? |
| A: | If you are a shareholder of record, you may vote in person at the Annual Meeting, in which case we will give you a ballot when you arrive. |
If you do not wish to vote in person or if you will not be attending the Annual Meeting, you may vote by proxy in accordance with the following instructions:
| • | You may vote by proxy over the Internet by following the instructions provided in the Notice; or |
| • | If you requested printed copies of the proxy materials by mail, you must either: |
| 1. | fill out the enclosed proxy card, date and sign it, and return it in the enclosed postage paid envelope; or |
| 2. | vote by Internet (instructions are on the proxy card). |
| Q: | If I am a beneficial owner of Common Shares held in street name, how do I vote? |
| A: | If you are a beneficial owner of Common Shares held in street name and you wish to vote in person at the Annual Meeting, you must obtain and produce at the Annual Meeting a valid proxy from the organization that holds your shares along with valid identification. We will give you a ballot when you arrive. |
If you do not wish to vote in person or you will not be attending the Annual Meeting, you have the right to direct your brokerage firm, bank, broker-dealer, or similar organization on how to vote the Common Shares held in your account. Please refer to the voting instructions provided by such organization for directions as to how to vote the Common Shares that you beneficially own.
| Q: | What does it mean if I receive more than one Notice or set of printed proxy materials? |
| A: | Generally, it means that you hold Common Shares registered in more than one account. To ensure that all of your shares are voted, please vote in the manner described above with respect to each Notice or in the proxy card accompanying the proxy materials. |
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| Q: | What happens if I do not give specific voting instructions? |
| A: | Shareholder of Record. If you are a shareholder of record and you: |
| • | Indicate when voting on the Internet that you wish to vote as recommended by our Board; or |
| • | If you sign and return a proxy card without giving specific voting instructions, then the proxies will vote your shares in the manner recommended by our Board on all matters presented in the Proxy Statement and as the proxies may determine in their discretion with respect to any other matters properly presented for a vote at the meeting. Abstentions will be counted for purposes of determining whether a quorum is present but will not otherwise be counted. |
Beneficial Owner of Common Shares Held in Street Name. If you are a beneficial owner of Common Shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter at least ten (10) days before the Annual Meeting, the organization that holds your shares will inform our Inspector of Election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.” When our Inspector of Election tabulates the votes for any particular non-routine matter, broker non-votes (like abstentions) will be counted for purposes of determining whether a quorum is present, but will not otherwise be counted. We encourage you to provide voting instructions to the organization that holds your shares by carefully following the instructions provided by that organization.
| Q: | Which Proposals are considered “routine” or “non-routine”? |
| A: | Proposal 1 (Board Nominees Proposal) and Proposal 2 (Say on Pay Proposal) are non-routine matters. Proposal 3 (Auditors Proposal) is a routine matter. |
| Q: | May I change my vote after I have submitted a proxy or otherwise instructed how my shares are to be voted? |
| A: | Yes. You may change your vote or revoke your proxy at any time before your proxy is voted at the Annual Meeting. You may vote again on a later date by following the same procedures by which you submitted your original vote, or by attending the meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the meeting or specifically request in writing that your prior proxy be revoked. Your latest vote or proxy, however submitted, will be counted. If you wish to change your vote or revoke your proxy, you must do so in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the vote is taken. |
| Q: | Am I entitled to appraisal rights? |
| A: | The Board has not proposed for consideration at the Annual Meeting any transaction for which the laws of Bermuda grant appraisal rights to shareholders. |
| Q: | How does the voting take place at the Annual Meeting? |
| A: | The nominees for election as directors at the Annual Meeting who receive the highest number of “FOR” votes will be elected as directors up to the maximum number of directors (3) to be chosen at the Annual Meeting. This is called plurality voting. The rules of the New York Stock Exchange (“NYSE”) do not permit your bank, broker or other nominee to vote your shares on proposals that are not considered routine. When a proposal is not a routine matter and your bank, broker or other nominee has not received your |
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| voting instructions with respect to that proposal, your bank, broker or other nominee cannot vote your shares on that proposal. This is called a broker non-vote. Your bank, broker or other nominee may not vote your shares with respect to (i) the Board Nominees Proposal or (ii) the Say on Pay Proposal in the absence of your specific instructions as to how to vote with respect to each of these matters because, under the rules of the NYSE, these matters are considered to be non-routine matters. For routine matters unless your proxy indicates otherwise, the persons named as your proxies will vote your shares according to the recommendation of the Board. All Proposals require the affirmative “FOR” vote of a majority of the votes cast at the Annual Meeting. The vote on the Say on Pay Proposal is not binding on the Board or the Company. A hand vote will be taken unless a poll is requested pursuant to the Bye-laws. |
| Q: | How many votes do I have? |
| A: | Each of our Common Shares entitles its holder to one vote on each matter that is voted upon at the Annual Meeting or any adjournments thereof, subject to certain provisions of our Bye-laws that reduce the total voting power of any shareholder owning, directly or indirectly, beneficially or otherwise, as described in our Bye-laws, more than 9.9% of the Common Shares to not more than 9.9% of the total voting power of our capital stock unless otherwise waived at the discretion of the Board. In addition, the Board may limit a shareholder’s voting rights where the Board deems it necessary to do so to avoid adverse tax, legal, or regulatory consequences. |
The reduction of such voting power may have the effect of increasing another shareholder’s voting power to more than 9.9%, thereby requiring a corresponding reduction in such other shareholder’s voting power.
Because the applicability of the voting power reduction provisions to any particular shareholder depends on facts and circumstances that may be known only to the shareholder or related persons, we request that any holder of Common Shares with reason to believe that it is a shareholder whose Common Shares carry more than 9.9% of the voting power of RenaissanceRe contact us promptly so that we may determine whether the voting power of such holder’s Common Shares should be reduced. The Board is empowered to require any shareholder to provide information as to that shareholder’s beneficial ownership of Common Shares, the names of persons having beneficial ownership of the shareholder’s Common Shares, relationships with other shareholders or any other facts the directors may consider relevant to the determination of the number of Common Shares attributable to any person. The Board may disregard the votes attached to Common Shares of any holder who fails to respond to such a request or who, in its judgment, submits incomplete or inaccurate information. The Board retains the discretion to make such final adjustments that it considers fair and reasonable in all circumstances as to the aggregate number of votes attaching to the Common Shares of any shareholder to ensure that no shareholder’s voting power is more than 9.9% of the total voting power of our capital stock at any time.
These restrictions may be waived by the Board in its sole discretion. To date, the Board has never granted such a waiver.
| Q: | What else will happen at the Annual Meeting? |
| A: | At the Annual Meeting, the only other item currently on the agenda is for the shareholders to receive the report of our independent auditors and our financial statements for the year ended December 31, 2011. |
| Q: | Where can I find the voting results of the Annual Meeting? |
| A: | The preliminary voting results will be announced at the Annual Meeting. The final voting results will be tallied by our Inspector of Election and published on a Form 8-K filed within four business days following the Annual Meeting. |
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| Q: | How can I communicate with RenaissanceRe’s Board? |
| A: | Our Board encourages any shareholder or other interested party who is interested in communicating directly with the Board, any committee of the Board, or our non-management directors as a group to do so by addressing the communication in care of our Corporate Secretary with a request to forward the communication to the intended recipient. Any such communications properly addressed to the Corporate Secretary will be forwarded to the intended recipient unopened. Shareholders can send communications electronically by clicking on “secretary@renre.com” under “Contact Us—Legal or Corporate Information” at our website located at www.renre.com or by mail to: RenaissanceRe Holdings Ltd., P.O. Box HM 2527, Hamilton HM GX, Bermuda, Attn: Secretary. |
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DIRECTORS AND EXECUTIVE OFFICERS OF RENAISSANCERE
The table below sets forth the names, ages, and titles of the directors, nominees for director, and executive officers of RenaissanceRe as of March 26, 2012. The executive officers provide functional oversight of the Company’s business units and has primary responsibility for setting Company policy and decision-making authority. The executive officers consist of the Chief Executive Officer, the Chief Financial Officer, the Chief Administrative Officer, the Global Chief Underwriting Officer, the General Counsel, the Chief Risk Officer, and the Chief Accounting Officer.
| Name |
Age | Position | ||
| Ralph B. Levy |
66 | Non-Executive Chairman of the Board of Directors | ||
| Neill A. Currie |
59 | President, Chief Executive Officer and Director | ||
| Peter C. Durhager |
41 | Executive Vice President and Chief Administrative Officer of RenaissanceRe and President of RenaissanceRe Services Ltd. | ||
| Jeffrey D. Kelly |
58 | Executive Vice President and Chief Financial Officer | ||
| Kevin J. O’Donnell |
45 | Executive Vice President and Global Chief Underwriting Officer | ||
| Ian D. Branagan |
44 | Senior Vice President and Chief Risk Officer | ||
| Stephen H. Weinstein |
43 | Senior Vice President, General Counsel, Chief Compliance Officer, and Secretary | ||
| Mark A. Wilcox |
44 | Senior Vice President, Chief Accounting Officer and Corporate Controller | ||
| David C. Bushnell |
57 | Director | ||
| Thomas A. Cooper |
75 | Director | ||
| James L. Gibbons |
48 | Director | ||
| Jean D. Hamilton |
65 | Director | ||
| Henry Klehm III |
53 | Director | ||
| W. James MacGinnitie |
73 | Director | ||
| Anthony M. Santomero |
65 | Director | ||
| Nicholas L. Trivisonno |
64 | Director | ||
| Edward J. Zore |
66 | Director |
Ralph B. Levy has served as one of our directors since August 2007 and as Non-Executive Chairman of the Board since May 2011. Mr. Levy is a Class III director. In January 2012, Mr. Levy joined JAMS as an Atlanta office arbitration and mediation neutral panel member. In 2011, Mr. Levy retired from his position as a Senior Partner in the Atlanta headquarters office of the law firm King & Spalding LLP, which he joined in 1974 and where he served as Managing Partner from 1993 to 1999. Mr. Levy is a former chairman (2004 to 2006) and continues to serve as a member of the Board of Directors of the Attorneys’ Liability Assurance Society (Bermuda) Ltd., a Bermuda-based mutual insurance company which reinsures professional liability and management liability coverages written by its U.S. subsidiary, Attorneys’ Liability Assurance Society, Inc., on whose Board of Directors Mr. Levy also serves. Mr. Levy served as a military trial lawyer and judge in the U.S. Navy Judge Advocates General’s Corp from 1971 to 1974.
Neill A. Currie has served as our Chief Executive Officer and as a director since November 2005. Mr. Currie has served as President since January 1, 2008. Mr. Currie is a Class II director. Mr. Currie was a co-founder of RenaissanceRe in 1993 and served as a Senior Vice President until he retired from the Company in 1997. He re-joined RenaissanceRe in July 2005 as an Executive Vice President, and was responsible for our specialty reinsurance business prior to assuming the role of Chief Executive Officer. Mr. Currie served as a director of Platinum Underwriters Holdings, Ltd. from May 2003 until July 2005. Prior to co-founding RenaissanceRe in 1993, Mr. Currie was Chief Executive Officer of G.J. Sullivan Co.—Atlanta, a private domestic reinsurance broker. From 1982 through 1992, Mr. Currie served as Senior Vice President at R/I and G.L. Hodson, predecessors to Willis Group Holdings Ltd.
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Peter C. Durhager, Executive Vice President and Chief Administrative Officer, has served with us since June 2003 and as President of RenaissanceRe Services Ltd. since March 2004. Mr. Durhager is responsible for RenaissanceRe’s Global Shared Services division, including Human Resources & Organizational Development, Marketing, Operations, Information Technology, and Administration. Prior to his employment at RenaissanceRe, Mr. Durhager was a co-founder and Vice Chairman, President and Chief Operating Officer of Promisant Holdings Ltd. from January 2000 to February 2003. Prior to that, Mr. Durhager was Chairman and CEO of Logic Communications Ltd. from January 1996 until December 1999. From 1997 to 1999, he served as President and CEO of Millennium International Limited, a Bermuda-based internet and advanced data communications services company.
Jeffrey D. Kelly has served as our Executive Vice President and Chief Financial Officer since July 2009. Prior to joining RenaissanceRe, Mr. Kelly served as Chief Financial Officer of National City Corporation from 2000 until his retirement from National City Corporation in 2008. Mr. Kelly had also served in the additional post of Vice Chairman of National City Corporation from 2004. Mr. Kelly also served as a member of the Board of Directors of The Progressive Corporation, where he served as Chairman of the Investment and Capital Committee, from 2000 until his resignation in August 2009.
Kevin J. O’Donnell has served as our Executive Vice President and Global Chief Underwriting Officer since January 2010, prior to which he had served as our Senior Vice President—Reinsurance since November 1999 and as the President of Renaissance Reinsurance Ltd. since November 2005. Previously, Mr. O’Donnell served as a Vice President of RenaissanceRe from February 1998 and as Assistant Vice President—Underwriting from 1996. From 1995 to 1996, Mr. O’Donnell was Vice President of Centre Financial Products Ltd. From 1993 to 1995, Mr. O’Donnell was an underwriter in SCOR US’s Alternative Markets operations.
Ian D. Branagan, Senior Vice President, has served as our Chief Risk Officer since February 2009 and as the Head of Group Risk Modeling since 2005. Mr. Branagan joined the Company in 1998 to open the Company’s Dublin office, later relocating to Bermuda with additional responsibilities for underwriting risk and modeling across the Company’s (re)insurance operations. From August 1996 to December 1998, Mr. Branagan led the international activities of Applied Insurance Research Inc. (“AIR”), which included the development and marketing of AIR’s catastrophe models and tools. Prior to joining AIR, Mr. Branagan worked in the London market at DP Mann Limited, developing pricing and risk analytics from November 1992 to August 1996.
Stephen H. Weinstein, Senior Vice President since August 2005, has served with us as General Counsel and Secretary since joining RenaissanceRe in January 2002 and as Chief Compliance Officer since January 2004. From January 2002 to August 2005, Mr. Weinstein also served as a Vice President of RenaissanceRe. Prior to joining RenaissanceRe, Mr. Weinstein specialized in corporate law as an attorney at Willkie Farr & Gallagher LLP.
Mark A. Wilcox has served as our Senior Vice President and Chief Accounting Officer since March 2006 and as our Corporate Controller since April 2005. Prior to this, Mr. Wilcox served as our Vice President and Internal Auditor from August 2003. Prior to joining RenaissanceRe, Mr. Wilcox worked for PricewaterhouseCoopers LLP from 1997 until 2003, where he was Senior Manager of Audit and Business Advisory Services within the firm’s Insurance Practice. From 1991 through 1995, Mr. Wilcox worked in commercial banking for Bank of America Corporation (formerly NCNB). Mr. Wilcox is a Certified Public Accountant and a Chartered Financial Analyst.
David C. Bushnell has served as one of our directors since May 2008. Mr. Bushnell is a Class I director. Mr. Bushnell has served as the principal of Bushnell Consulting, a financial services consulting firm, since January 2008. Mr. Bushnell retired from Citigroup Inc. (“Citigroup”) in December 2007, after 22 years of service. Mr. Bushnell served as the Senior Risk Officer of Citigroup from 2003 through December 2007 and as Chief Administrative Officer from September 2007 through December 2007. Following his retirement from Citigroup, Mr. Bushnell served as a consultant to Citigroup until December 31, 2008. Previously, Mr. Bushnell
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worked for Salomon Smith Barney Inc. (later acquired by Citigroup) and its predecessors in a variety of positions, including as a managing director and Chief Risk Officer. In September 2011, Mr. Bushnell was appointed Chief Risk Officer of Cordia Bancorp, a privately held bank holding company. In May 2011, Mr. Bushnell was appointed to the Board of Directors of Bank of Virginia, a publicly held company which is majority owned by Cordia Bancorp.
Thomas A. Cooper has served as one of our directors since August 1996. Mr. Cooper is a Class II director. Mr. Cooper has served as Chairman and Chief Executive Officer of TAC Associates, a privately held investment company, since August 1996. From August 1993 until August 1996, Mr. Cooper served as Chairman and Chief Executive Officer of Chase Federal Bank FSB. From June 1992 until July 1993, Mr. Cooper served as principal of TAC Associates. From April 1990 until May 1992, Mr. Cooper served as Chairman and Chief Executive Officer of Goldome FSB. Mr. Cooper previously served on the Board of Directors of The BISYS Group, Inc. from 1997 to 2007 and on the Board of Directors of Wheeling Island Gaming from 2003 to 2007.
James L. Gibbons has served as one of our directors since May 2008. Mr. Gibbons is a Class I director. Mr. Gibbons is a Bermudian citizen who is Chairman of CAPITAL G Bank Limited, a Bermuda-based financial services organization, as well as President of Bermuda Air Conditioning Limited. Mr. Gibbons also serves as a director of Harbour Trust Limited and is the Treasurer of Edmund Gibbons Limited. Formerly, Mr. Gibbons served as President and Chief Executive Officer of CAPITAL G Limited, a Bermuda-based financial services organization, from 1999 to 2010. In addition, Mr. Gibbons served as a Director of Gibbons Management Services Limited from 1986 to 1989, and as Managing Director of Gibbons Deposit Company Limited from 1989 to 1999. Mr. Gibbons worked as a registered representative at Prudential Bache Securities from 1985 to 1986.
Jean D. Hamilton has served as one of our directors since June 2005. Ms. Hamilton is a Class I director. Ms. Hamilton is an independent consultant/private investor and a Member of the Brock Capital Group LLC. Previously, she was Executive Vice President of Prudential Financial, Inc., serving as Chief Executive Officer of Prudential Institutional from November 1998 through November 2002. From 1988 through 1998, she held various positions with Prudential Financial, Inc., including President of the Prudential Diversified Group and President of the Prudential Capital Group. From 1971 to 1988, she held several positions with The First National Bank of Chicago, including Senior Vice President and Head of the Northeastern Corporate Banking Department. She is currently a Trustee of First Eagle Funds and First Eagle Variable Funds.
Henry Klehm III has served as one of our directors since May 2006. Mr. Klehm is a Class III director. In February 2008, Mr. Klehm joined the law firm Jones Day as a partner in the firm’s Securities Litigation & SEC Enforcement Practice. From July 2002 to October 2007, Mr. Klehm served as Global Head of Compliance for Deutsche Bank, AG. Prior to joining Deutsche Bank, AG, Mr. Klehm served as Chief Regulatory Officer and Deputy General Counsel at Prudential Financial from July 1999 through July 2002. Mr. Klehm joined the SEC in 1989, serving in various positions, including as Senior Associate Director of the Northeast Regional Office from 1996 until June 1999.
W. James MacGinnitie has served as one of our directors since February 2000 and was the Non-Executive Chairman of the Board from November 2005 to May 2011. Mr. MacGinnitie is a Class II director. Mr. MacGinnitie is an independent actuary and consultant. He served as Senior Vice President and Chief Financial Officer of CNA Financial from September 1997 to September 1999. From May 1994 until September 1997, Mr. MacGinnitie was a partner of Ernst & Young and National Director of its actuarial services. From 1975 until 1994, he was a principal in Tillinghast, primarily responsible for its property-casualty actuarial consulting services. Mr. MacGinnitie is a Fellow of both the Casualty Actuarial Society and the Society of Actuaries, and has served as President of both organizations as well as of the American Academy of Actuaries and the International Actuarial Association. Mr. MacGinnitie served on the board of directors of Trustmark Mutual Holding Company (“Trustmark”) from 2000 until his retirement from the Trustmark board in June 2010.
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Anthony M. Santomero has served as one of our directors since May 2008. Mr. Santomero is a Class I director. Mr. Santomero served as Senior Advisor at McKinsey & Company from July 2006 to January 2008. From July 2000 to April 2006, Mr. Santomero was President and Chief Executive Officer of the Federal Reserve Bank of Philadelphia. From 1972 to 2000, Mr. Santomero was the Richard K. Mellon Professor of Finance at the University of Pennsylvania’s Wharton School and held various positions there, including Director of the Financial Institutions Center and Deputy Dean. Mr. Santomero serves on the boards of Penn Mutual Life Insurance Company, Citigroup and Citibank, N.A and Columbia Funds. In addition, Mr. Santomero formerly served on the board of B of A Fund Series Trust, part of the Bank of America Funds platform until 2011.
Nicholas L. Trivisonno has served as one of our directors since May 2004. Mr. Trivisonno is a Class III director. Mr. Trivisonno was Chairman and Chief Executive Officer of ACNielsen Corporation from January 1996 through March 2001. From September 1995 through November 1996, he was Executive Vice President and Chief Financial Officer of Dun & Bradstreet Corporation. Previously, he had held several positions at GTE Corporation from November 1988 until July 1995, including Group President, Executive Vice President, Strategic Planning, Senior Vice President Finance, and Vice President and Controller. Mr. Trivisonno began his career as a certified public accountant with Arthur Andersen & Co. in 1968, became a partner in 1979 and was appointed a managing partner in 1986.
Edward J. Zore has served as one of our directors since August 2010. Mr. Zore is a Class III director. Mr. Zore served in a variety of capacities at The Northwestern Mutual Life Insurance Company, principally as Chairman (2009 to 2010), as Chief Executive Officer (2001 to 2010), and as President (2000 to 2009). He currently serves on the Northwestern Mutual Board of Trustees. Mr. Zore joined the Northwestern Mutual investment department in 1969, and also served as the company’s Executive Vice President, Chief Financial Officer, Chief Investment Officer, and as a director of Northwestern Mutual Series Fund, Inc. He is a member of the Board of Directors of Manpower, Inc., and chairs its Audit Committee. Previously, Mr. Zore served as a director of Mason Street Funds from 2000 to 2007.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS, MANAGEMENT AND DIRECTORS
The following table sets forth information as of March 26, 2012 (unless otherwise noted) with respect to the beneficial ownership of Common Shares and the applicable voting rights attached to such share ownership in accordance with the Bye-laws by (i) each person known by us to own beneficially 5% or more of the outstanding Common Shares; (ii) our Chief Executive Officer, our Chief Financial Officer, and each of the three remaining most highly compensated executive officers during the 2011 fiscal year (collectively, the “Named Executive Officers”); (iii) each of our directors; and (iv) all of our executive officers and directors as a group. The total number of Common Shares outstanding as of March 26, 2012, was 51,765,197.
| Name and Address of Beneficial Owner(1) |
Number of Common Shares |
Percentage of Class(2) |
||||||
| BlackRock, Inc.(3) |
3,725,940 | 7.2 | % | |||||
| 40 East 52nd Street |
||||||||
| New York, NY 10022 |
||||||||
| FMR LLC(4) |
3,457,942 | 6.7 | % | |||||
| 82 Devonshire Street |
||||||||
| Boston, Massachusetts 02109 |
||||||||
| Orbis Investment Management Limited(5) |
3,344,231 | 6.5 | % | |||||
| Orbis House |
||||||||
| 25 Front Street |
||||||||
| Hamilton, Bermuda HM11 |
||||||||
| TimesSquare Capital Management, LLC(6) |
3,331,700 | 6.4 | % | |||||
| 1177 Avenue of the Americas, 39th Floor |
||||||||
| New York, NY 10036 |
||||||||
| Franklin Resources, Inc.(7) |
2,822,325 | 5.5 | % | |||||
| One Franklin Parkway |
||||||||
| San Mateo, CA 94403-1906 |
||||||||
| Neill A. Currie(8) |
1,308,586 | 2.5 | % | |||||
| Peter C. Durhager(9) |
280,651 | * | ||||||
| Jeffrey D. Kelly(10) |
88,343 | * | ||||||
| Kevin J. O’Donnell(11) |
617,985 | 1.2 | % | |||||
| Stephen H. Weinstein(12) |
296,182 | * | ||||||
| David C. Bushnell(13) |
9,419 | * | ||||||
| Thomas A. Cooper(14) |
91,575 | * | ||||||
| James L. Gibbons(15) |
9,419 | * | ||||||
| Jean D. Hamilton(16) |
15,595 | * | ||||||
| Henry Klehm III(17) |
12,454 | * | ||||||
| Ralph B. Levy(18) |
13,335 | * | ||||||
| W. James MacGinnitie(19) |
24,645 | * | ||||||
| Anthony M. Santomero(20) |
9,419 | * | ||||||
| Nicholas L. Trivisonno(21) |
27,160 | * | ||||||
| Edward J. Zore(22) |
4,100 | * | ||||||
| All of our executive officers and directors (17 persons) |
3,088,521 | 6.0 | % | |||||
| * | Less than 1% |
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| (1) | Pursuant to the regulations promulgated by the SEC, shares are deemed to be “beneficially owned” by a person if such person directly or indirectly has or shares the power to vote or dispose of such shares whether or not such person has any pecuniary interest in such shares or the right to acquire the power to vote or dispose of such shares within 60 days, including any right to acquire through the exercise of any option, warrant or right. |
| (2) | The percent of class shown was based on the shares of Common Stock reported on the Schedule 13G or Schedule13G/A and the total number of shares outstanding as of December 31, 2011. The difference in the total number of shares outstanding on December 31, 2011 and March 26, 2012 does not materially affect the percentage of ownership of the class. |
| (3) | According to a Statement on Schedule 13G filed with the Commission on February 9, 2012 by BlackRock, Inc. (“BlackRock”), BlackRock is the beneficial owner of 3,725,940 Common Shares. BlackRock has the sole power to vote or to direct the voting of 3,725,940 Common Shares and sole power to dispose of or to direct the disposition of 3,725,940 Common Shares. |
| (4) | According to a Statement on Schedule 13G/A filed with the Commission on February 14, 2012 by FMR LLC, Fidelity Management & Research Company (“Fidelity”), a wholly owned subsidiary of FMR LLC, is the beneficial owner of 3,457,942 Common Shares as a result of acting as investment adviser to various investment companies. Edward C. Johnson 3d (Chairman of FMR LLC) and FMR LLC, through its control of Fidelity, and the Fidelity funds each has the sole power to dispose of the 3,457,942 Common Shares owned by the Fidelity funds. Neither FMR LLC nor Edward C. Johnson 3d has the sole power to vote or direct the voting of the shares owned directly by the Fidelity funds, which power resides with the funds’ Board of Trustees. Fidelity carries out the voting of the shares under written guidelines established by its funds’ Boards of Trustees. According to this Schedule 13G/A, members of the family of Edward C. Johnson 3d, Chairman of FMR LLC, are the predominant owners, directly or through trusts, of Series B shares of common stock of FMR LLC, representing 49% of the voting power of FMR LLC. Members of the Johnson family and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B shares will be voted in accordance with the majority vote of Series B shares. Accordingly, through their ownership of voting common stock and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. |
| (5) | This information is based on a Schedule 13G/A filed with the Commission on April 4, 2012 by Orbis Investment Management Limited (“OIML”), Orbis Asset Management Limited (“OAML”) and Orbis Investment Management (U.S.), LLC, whose principal address is 600 Montgomery Street, Suite 3800, San Francisco, CA 94111 (“OIMUS”). According to the Schedule 13G/A, OIML is the beneficial owner of 3,306,713 Common Shares, OAML is the beneficial owner of 7,017 Common Shares and OIMUS is the beneficial owner of 30,491 Common Shares. The Schedule 13G/A reported that OIML, OAML and OIMUS may be deemed to constitute a group for the purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). OIML, OAML and OIMUS, collectively, have the sole power to vote or to direct the voting of 3,344,221 Common Shares and sole power to dispose of or to direct the disposition of 3,344,221 Common Shares. However, other people have the right to receive and the power to direct the receipt of dividends from, or the proceeds from the sale of the (i) 3,306,713 Common Shares beneficially owned by OIML, (ii) 7,107 Common Shares owned by OAML and (iii) 30,491 Common Shares owned by OIMUS. |
| (6) | According to a Statement on Schedule 13G/A filed with the Commission on February 8, 2012 by TimesSquare Capital Management, LLC (“TimesSquare”), TimesSquare is the beneficial owner of 3,331,700 Common Shares. TimesSquare has the sole power to vote or to direct the voting of 2,412,600 Common Shares and sole power to dispose of or to direct the disposition of 3,331,700 Common Shares. |
| (7) | This information is based on a Schedule 13G/A filed by Franklin Resources, Inc. (“FRI”) with the Commission on February 9, 2012. In the Schedule 13G/A, FRI reported that, with respect to the Common Shares, the shares shown in the table above were beneficially owned by one or more open or closed-end investment companies or other managed accounts that are investment management clients of investment managers that are direct and indirect subsidiaries of FRI. The Schedule 13G/A reported that the investment management subsidiaries of FRI have investment and/or voting power over the securities owned by their investment management clients. Accordingly, such subsidiaries may be deemed to be the beneficial owner of the shares shown in the table. The Schedule 13G/A reported that Charles B. Johnson and Rupert H. Johnson, Jr. (the “FRI Principal Stockholders”) (each of whom has the same business address as FRI) each own in excess of 10% of the outstanding common stock of FRI and are the principal stockholders of FRI and may be deemed to be the beneficial owners of securities held by persons and entities for whom or for which the investment management subsidiaries of FRI provide investment management services. Templeton Global Advisors Limited, a subsidiary of FRI, has the sole power to vote or to direct the voting of 2,640,310 Common Shares and the sole power to dispose of or to direct the disposition of 2,695,770 Common Shares. The FRI Principal Stockholders and the investment management subsidiaries of FRI disclaim any pecuniary interest or beneficial ownership in the shares shown in the table above and indicate that they are of the view that they are not acting as a “group” for purposes of the Exchange Act. |
| (8) | Includes 637,892 Common Shares issuable upon the exercise of options under the 2001 Stock Incentive Plan (the “2001 Plan”) that are vested and presently exercisable and no Common Shares issuable upon the exercise of options that vest within 60 days. Mr. Currie also holds options to acquire 300,000 Common Shares granted under the RenaissanceRe Holdings Ltd. 2004 Stock Option Incentive Plan (the “2004 Plan”), that are currently vested and presently exercisable, and no options to acquire Common Shares granted under the 2001 Plan that are currently unvested. Also includes 113,735 restricted Common Shares that have not vested (“Restricted Shares”) and 129,366 Performance Shares (as described below) under the 2010 Performance-Based Equity Incentive Plan (the “Performance Share Plan”) that have not yet vested. |
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| (9) | Includes 141,075 Common Shares issuable upon the exercise of options under the 2001 Plan that are vested and presently exercisable and no Common Shares issuable upon the exercise of options that vest within 60 days. Mr. Durhager also holds options to acquire 42,500 Common Shares granted under the 2004 Plan, that are currently vested and presently exercisable, and no options to acquire Common Shares granted under the 2001 Plan that are currently unvested. Also includes 39,098 Restricted Shares and 26,127 Performance Shares that have not yet vested. |
| (10) | Includes 48,973 Restricted Shares and 26,827 Performance Shares that have not vested. Mr. Kelly holds no options to purchase Common Shares. |
| (11) | Includes 203,767 Common Shares issuable upon the exercise of options under the 2001 Plan that are vested and presently exercisable and no Common Shares issuable upon the exercise of options that vest within 60 days. Mr. O’Donnell also holds options to acquire 250,000 Common Shares granted under the 2004 Plan, that are currently vested and presently exercisable, and no options to acquire Common Shares under the 2001 Plan, that are currently unvested. Also includes 59,342 Restricted Shares, and 37,928 Performance Shares that have not yet vested. Also includes 1,079 shares held by a limited partnership for the benefit of Mr. O’Donnell’s family. |
| (12) | Includes 183,586 Common Shares issuable upon the exercise of options under the 2001 Plan that are vested and presently exercisable. Also includes 33,502 Restricted Shares and 19,856 Performance Shares that have not yet vested. Mr. Weinstein has no options to acquire Common Shares granted under the 2001 Plan that are currently unvested. Also includes 5,946 Common Shares held by trusts for the benefit of Mr. Weinstein’s minor children. |
| (13) | Includes 3,298 Restricted Shares granted in payment of directors’ fees under the RenaissanceRe Holdings Ltd. Amended and Restated Non-Employee Director Stock Plan, as amended (the “Director Stock Plan”), that have not vested. |
| (14) | Includes 3,298 Restricted Shares granted in payment of directors’ fees under the Director Stock Plan that have not vested. |
| (15) | Includes 3,298 Restricted Shares granted in payment of directors’ fees under the Director Stock Plan that have not vested. |
| (16) | Includes 3,298 Restricted Shares granted in payment of directors’ fees under the Director Stock Plan that have not vested. |
| (17) | Includes 3,298 Restricted Shares granted in payment of directors’ fees under the Director Stock Plan that have not vested. |
| (18) | Includes 5,386 Restricted Shares granted in payment of directors’ fees under the Director Stock Plan that have not vested. |
| (19) | Includes 4,509 Restricted Shares granted in payment of directors’ fees under the Director Stock Plan that have not vested. |
| (20) | Includes 3,298 Restricted Shares granted in payment of directors’ fees under the Director Stock Plan that have not vested. |
| (21) | Includes 3,298 Restricted Shares granted in payment of directors’ fees under the Director Stock Plan that have not vested, 6,566 Common Shares issuable upon the exercise of options under the Director Stock Plan that are vested and presently exercisable and no Common Shares issuable upon the exercise of options that vest within 60 days. |
| (22) | Includes 3,244 Restricted Shares granted in payment of directors’ fees under the Director Stock Plan that have not vested. |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policies and Procedures Dealing with the Review, Approval and Ratification of Related Party Transactions
We have adopted a written policy with respect to the review, approval, and ratification of transactions with related persons. The policy covers, among other things, related party transactions between us and any of our executive officers, directors, nominees for director, any of their immediate family members or any other related persons as defined in Item 404 of Regulation S-K. Related party transactions covered by this policy are reviewed to determine whether the transaction is in the best interests of the Company and our shareholders. The transactions described below include transactions we have entered into with parties that are, or could be deemed to be, related to us.
Housing and Lease Arrangements
RenaissanceRe provides housing reimbursement with respect to the Bermuda residence of each Named Executive Officer and certain other officers, a practice that is consistent with Bermuda market practice, which housing expense is included in the compensation paid to each such Named Executive Officer. See “Compensation Discussion and Analysis—Principal Components of Compensation—Other Benefits and Perquisites; Limitations and Changes.” From time to time, RenaissanceRe entered into long-term leases for properties in Bermuda, which we subleased to certain officers (or due in part to the inefficiency of the Bermuda real estate market we have held a property in connection with, or in anticipation of, recruiting efforts), including certain of our executive officers. During 2011, RenaissanceRe was the lessee on the lease for the Bermuda residence of Mr. O’Donnell. RenaissanceRe is no longer the lessee on the lease of the Bermuda residence of any of its officers.
Charitable Donations
We provide support to various charitable organizations in the Bermuda community that meet certain guidelines, including organizations that support insurance industry education and training, crime prevention, substance abuse prevention, affordable housing, and educational assistance. As part of our efforts, we match donations made by our officers and other employees to enumerated Bermuda charities at a ratio of up to 4:1 generally up to a maximum matching contribution for each employee of $10,000 per year. We make direct charitable contributions, in addition to the employee matching program, as well. Certain of our executive officers and directors, and spouses of certain of these persons, serve and have served as officers or trustees of some of these organizations; however, we did not contribute more than $120,000 to any one charity in the 2011 fiscal year for which any of these individuals served as an officer or trustee.
In 2011, RenaissanceRe also made a commitment to contribute $1.0 million to the Bermuda Hospitals Charitable Trust (the “BHCT”) in connection with the King Edward VII Memorial Hospital (“KEMH”) redevelopment project. KEMH is the only hospital, and substantially the principal health care facility, in Bermuda, and accordingly is used by all residents of Bermuda, including every Bermuda-based employee of RenaissanceRe. The BHCT is an independent body which accepts and manages donor contributions on behalf of KEMH. Mr. Gibbons serves on the Campaign Steering Committee of the BHCT, an ad hoc, informal committee of local businessmen and women, which works to raise public awareness of the KEMH redevelopment project and provides support for fundraising activities. Neither Mr. Gibbons nor any employee of RenaissanceRe currently serves as a director, officer or trustee of the BHCT, KEMH or the Bermuda Hospitals Board, which oversees the operations of KEMH. The $1.0 million commitment is due and payable upon the completion of the KEMH redevelopment project, which is scheduled for completion in 2014.
Relationship with BlackRock
BlackRock reported beneficial ownership interest of more than 5% of our Common Shares as of December 31, 2011. Affiliates of BlackRock currently provide investment management, risk analytics and investment accounting services to RenaissanceRe and its subsidiaries. During 2011, we incurred $2.4 million in fees relating to these services.
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Co-investments
From time to time, certain officers of RenaissanceRe have made investments in investment funds in which RenaissanceRe has also invested. None of these officers receives any compensation in connection with such investments or exercises any management discretion over any such investment fund.
Currie Agreement Relating to Use of Company Aircraft
The Company and Mr. Currie are parties to an agreement regarding the use of aircraft interest (the “Aircraft Agreement”), dated as of November 17, 2009. The aircraft is operated on behalf of the Company under a NetJets Aviation Inc. fractional interest program (the “RenRe Aircraft Interest”). During 2011, Mr. Currie was permitted to use the RenRe Aircraft Interest for his personal use under his employment agreement with the Company subject to an agreed-upon cap (the “Cap”) allowing 24 round trips per year for Mr. Currie’s business commute and 25 hours per year for other personal travel. The Aircraft Agreement contemplated that Mr. Currie would fund and maintain a Company account with certain cash amounts to cover costs incurred by the Company for instances in which Mr. Currie uses the RenRe Aircraft Interest for personal use in excess of the Cap. In respect of such arrangement, Mr. Currie paid amounts equal to an aggregate of $181,760 in respect of such use of the RenRe Aircraft Interest during 2011 in accordance with the terms of the Aircraft Agreement.
On February 21, 2012, the Company entered into a memorandum of agreement (the “Memorandum”) with Mr. Currie, amending the Aircraft Agreement. The Memorandum provides, among other things, that (i) Mr. Currie will no longer be entitled to the 25 hours of Company-funded personal use of the Company’s aircraft that were provided to him previously in accordance with the Company’s policies in addition to his contractually contemplated business commute, as specified in the Aircraft Agreement and (ii) to the extent that Mr. Currie wishes to use the Company’s aircraft in addition to such business commute, Mr. Currie agrees to pay for such use in advance of any such trip at the fully loaded variable rate (which rate represents the Company’s “aggregate incremental cost” of such use within the meaning of Regulation S-K and the rules and other guidance of the Commission).
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CORPORATE GOVERNANCE
Our Commitment to Corporate Governance
Our Board and management have a strong commitment to effective corporate governance. We believe we have in place a comprehensive corporate governance framework for our operations which, among other things, takes into account the requirements of the Sarbanes-Oxley Act of 2002, the SEC, the New York Stock Exchange (“NYSE”) and the recently enacted Dodd-Frank Act. The key components of this framework are set forth in the following documents:
| • | our Bye-laws; |
| • | our Guidelines on Significant Corporate Governance Issues (“Corporate Governance Guidelines”); |
| • | our Code of Ethics and Conduct; |
| • | our Audit Committee Charter; and |
| • | our Compensation/Governance Committee Charter. |
A copy of each of these documents is published on our website under “Investor Information—Corporate Governance” at www.renre.com, except our Bye-Laws, which are filed with the SEC and can be found on the SEC website at www.sec.gov. Each of these documents is available in print to any shareholder upon request. The Board regularly reviews corporate governance developments and modifies its Corporate Governance Guidelines, committee charters, and key practices as the Board believes to be warranted and, based on the foregoing, in 2011 the Company amended its Audit Committee Charter and Compensation/Governance Committee Charter, and reviewed and updated its Code of Ethics and Conduct.
Director Independence
Our Board is composed of eleven directors, ten of whom are independent. For a director to be considered independent, the Board must determine that the director does not have any direct or indirect material relationship with RenaissanceRe. The Board has established guidelines to assist it in determining director independence, which conform to, and which we believe are more exacting than, the independence requirements in the NYSE listing standards. In addition to applying these guidelines, which are set forth in our Corporate Governance Guidelines, the Board will consider all relevant facts and circumstances known or reported to it in making an independence determination.
In February 2012, the Compensation/Governance Committee (the “Compensation Committee”) conducted a review of the independence of each of our current directors. During this review, the Board considered, among other things, transactions and relationships between each director or any member of their immediate family and RenaissanceRe or its subsidiaries and affiliates and relationships between directors (or nominees) or their affiliates and members of RenaissanceRe’s senior management or their affiliates. As a result of this review, the Board affirmatively determined that Ms. Hamilton and each of Messrs. Bushnell, Cooper, Gibbons, Klehm, Levy, MacGinnitie, Santomero, Trivisonno and Zore are “independent” directors for purposes of compliance with the NYSE listing standards and SEC rules adopted to implement provisions of the Sarbanes-Oxley Act of 2002 (“Independent Directors”). Mr. Currie is not considered an Independent Director because of his employment as an executive officer of RenaissanceRe.
In particular, in the course of the Board’s determination regarding the independence of each non-management director, the Board considered in respect of Mr. Bushnell, the fact of Mr. Bushnell’s prior employment with Citigroup (see Mr. Bushnell’s biography under “Directors and Executive Officers of RenaissanceRe”); and in respect of Mr. Santomero, the fact of Mr. Santomero’s service as a director of Citigroup and Citigroup’s current and prior financial relationships with RenaissanceRe, including as underwriter for certain
16
offerings of RenaissanceRe. In addition to the foregoing, Jones Day, the law firm at which Mr. Klehm is currently a partner, has provided legal services to Mr. Bushnell relating to his former employment at Citigroup Inc. The Company is not a party to these legal proceedings.
Director Qualifications and Director Nominee Considerations
Our Corporate Governance Guidelines contain Board membership criteria that apply to nominees for a position on our Board. Pursuant to these criteria, our Compensation Committee takes a holistic approach in identifying and considering potential director nominees and in evaluating the current composition of our Board. In general, the Compensation Committee focuses primarily on the composition and competencies of our Board as a whole, how the traits possessed by individual director nominees complement one another, the ability of the current and proposed members to operate collegially and effectively, and the intersection of these factors with the Company’s current strategy, operational plans and oversight requirements. Accordingly, when evaluating individual director nominees within this framework, the factors that our Compensation Committee considers include:
| • | the personal and professional ethics, integrity and values of the candidate; |
| • | the independence of the candidate under legal, regulatory and other applicable standards, including the ability of the candidate to represent all of our shareholders without any conflicting relationship with any particular constituency; |
| • | the professional experience and industry expertise of the candidate and whether it will add to or complement that of the existing Board, in light of the Company’s evolving strategic and operational plans over time; |
| • | the compatibility of the candidate with the existing Board; |
| • | the ability and willingness of the candidate to devote sufficient time to carrying out his or her Board duties and responsibilities in respect of RenaissanceRe fully and effectively; |
| • | the commitment of the candidate to serve on our Board for a potentially extended period of time, given the benefits our Board ascribes to continuity and a breadth of experience with our strategies and risk management processes, and with a view toward effective oversight of management’s efforts to ensure the safety and soundness of our Company in light of the market cycles and earnings volatility that characterize our industry, as well as other matters; |
| • | as summarized in more detail below, consideration is given to maintaining a diversity of skills, experience, and viewpoints represented on the Board as a whole; and |
| • | such other attributes of the candidate, our business and strategic conditions and external factors as our Compensation Committee deems appropriate at such time and from time to time. |
Our Compensation Committee has the discretion to weight these factors as it deems appropriate. The importance of these factors may vary from candidate to candidate, and in respect of our evolving circumstances.
Board Diversity
As described above, the Company’s Corporate Governance Guidelines provide that the Company has not established specific criteria for directors but believes that candidates should show evidence of leadership in their particular field, have broad experience and the ability to exercise sound business judgment. The Compensation Committee, which carries out the Board’s director selection, recruitment and nomination obligations, evaluates and discusses diversity at the committee and at the Board level, considering, as contemplated by the Corporate Governance Guidelines, the diversity, skills, and experience of candidates in the context of the needs of the Board as a whole. In assessing the performance of current directors, and in selecting directors, the Board generally seeks a combination of qualities and experience that will contribute to the exercise of the duties of the
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Board, in light of the evolving strategic direction and needs of the Company. This consideration includes a broad evaluation of diversity of skills, experience, and viewpoints represented on the Board as a whole, and is undertaken by the Compensation Committee no less frequently than annually and at appropriate intervals.
Board Leadership Structure
The Board has currently implemented a leadership structure that separates the role of the Chief Executive Officer and the Chairman of the Board. The Board has determined that having an independent director serve as Non-Executive Chairman of the Board is in the best interest of shareholders at this time. The Company believes that this structure currently assists the Independent Directors in the oversight of the Company and facilitates participation of the Independent Directors in setting agendas and establishing priorities and procedures for the work of the Board.
Risk Oversight
The Company considers enterprise-wide risk management (“ERM”) to be a key strategic objective, managed by the senior executive team under the oversight of the Board, and implemented by personnel from across the organization. The Company believes that its ERM processes and practices help to identify potential events that may affect the Company; to quantify, evaluate and manage the risks to which it is exposed; and to provide reasonable assurance regarding the achievement of corporate objectives. We believe that the Company’s commitment to and investment in effective ERM can represent a significant competitive advantage, and is essential to the Company’s corporate strategy and goal of achieving long-term growth in tangible book value per share plus the change in accumulated dividends for shareholders. The Company’s efforts to identify and monitor business environment risk and operational risk is coordinated by senior personnel including the Chief Financial Officer, the General Counsel and Chief Compliance Officer, and the Chief Administrative Officer, each of whom reports directly to the Chief Executive Officer, the Chief Risk Officer who reports directly to the Chief Financial Officer, as well as other senior personnel such as the Corporate Controller and Chief Accounting Officer and the Head of Internal Audit.
The Board is actively involved in the oversight of risks that could affect the Company. Among other things, the members of the Board have regular, direct access to the senior executives named above, as well as other officers responsible for the operational and control functions of the Company. While the Board primarily delegates its risk management to its committees, as disclosed in the descriptions of each of the committees below and as contemplated in the charters of each of the committees, the Board regularly reviews the coordination of its oversight of Company risk.
Under the oversight of our Board and its committees, our risk management practices help us to identify potential events that may affect us, to quantify, evaluate and manage the risks to which we are exposed, and to provide reasonable assurance regarding the achievement of our objectives. As a result, we believe our ERM assists our efforts to minimize the likelihood of suffering financial outcomes in excess of the ranges which we have estimated in respect of specific investments, underwriting decisions, or other operating or business activities. We also seek, as a component of our ERM, to minimize the likelihood of the occurrence, or to reduce the severity, of a range of operational risks to which we are exposed, including operational risks that may not give rise to an immediate financial loss but would potential impair our strategy, tactical plans, operating platform, or reputation. We believe that ERM is essential to our corporate strategy and our goal of achieving long-term growth in tangible book value per share plus the change in accumulated dividends for shareholders, and that effective board oversight enhances the quality of our risk management as well as facilitating sound corporate governance.
Our committees regularly receive and discuss materials from each of the other committees, including, but not limited to, the Audit and the Investment and Risk Management Committees, which the Company believes enables the directors to be cognizant of the various risks across the Company. Each committee performs a
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comprehensive annual self-assessment as part of the Board’s overall governance effectiveness review and assessment, which accordingly reflects the committees’ evaluation of our corporate risk management practices and, if applicable, the identification of potential new oversight needs in light of changes in our strategy, operations or business environment. Each committee has broad powers to ensure that it has the resources to satisfy its duties under its charter. Periodically, in an effort to enhance the flow of information and exchange of ideas across the committees, a committee will open its normal course proceedings to an audit by members of each other committee. Each committee also has access to outside advisors as well as management.
In conjunction with ERM, as well as our strategic and operational planning, we regularly review senior executive compensation and our firm-wide compensation programs and policies, in an ongoing effort to seek to eliminate or mitigate potential risks arising from such programs and policies, and to ensure that our compensation structure, elements and incentives are not reasonably likely to have a material adverse effect on the Company. We seek to design our compensation plans, including our incentive compensation programs, to incorporate a range of components that we believe help to mitigate potential risks while rewarding employees for pursuing our strategic and financial objectives through appropriate risk taking, risk management, and prudent tactical and strategic decision making. Senior executives from our risk, compliance, administrative, and finance functions, as well as the Board’s outside compensation consultant, are involved in this review process, which is conducted under the oversight of our Compensation Committee. In respect of 2011 and the compensation programs in place for 2012, based in part on the information and analyses provided by management and its own advisors, the Compensation Committee concluded that the Company’s compensation programs are not reasonably likely to have a material adverse effect on the Company. Among the features of our compensation programs considered in this review were the following:
| • | Company-wide Basis for Incentive Compensation Determinations. The annual and long-term incentive compensation of our Named Executive Officers and our executive officers more broadly are principally determined based on our overall corporate performance and the attainment of individual performance goals, rather than on the short-term financial performance of a particular business unit, legal entity, segment, or other division of the Company. |
| • | Alignment of Shareholder and Executive Interests. The majority of our long-term incentive awards to our executive officers are delivered in the form of Restricted Shares, vesting over a four-year period, including Performance Shares, as described immediately below. Moreover, as described in more detail below, we have adopted share ownership guidelines which apply to each executive officer and director. |
| • | Tangible Performance Metrics Based Upon Corporate Performance. As described in more detail below, a meaningful component of the compensation of each Named Executive Officer and each other executive officer (described below under “Compensation Committee”) consists of restricted Common Shares granted under our Performance Share Plan, as to which vesting is contingent upon the attainment of specific Company-wide performance measures as well as the completion of service periods (“Performance Shares”), as established by our Compensation Committee in its sole discretion. |
| • | Balanced Compensation Elements. Our compensation program for executive officers is designed to provide a balanced mix of salary, annual incentive compensation, and long-term incentive compensation, the realization of which depends in turn upon the attainment of a range of performance. The Compensation Committee believes that the mix of types of compensation delivered by the Company is not overly weighted toward a single form of compensation, or inappropriately designed to overly encourage short-term financial results or unbalanced operational execution, and instead promotes both the pursuit of long-term financial performance, prudent risk management and stewardship of our capital. |
| • | Long-Term Focus. We aspire to be the best underwriter in the world of high-severity, low-frequency risks. We seek to produce long-term growth in tangible book value per Common Share plus accumulated dividends for our shareholders, and we anticipate that individual periods may be marked by substantial volatility. Accordingly, we believe that our senior-most executives should have an |
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| increasing proportion of their compensation in the form of long-term equity incentives that vest over a period of years to reflect the contributions of these executive officers to our longer-term results and to foster their alignment with long-term shareholders. |
Our Compensation Committee, which consists exclusively of Independent Directors, reviews our compensation programs for consistency with our risk management practices and helps to ensure that our programs align our executives and employees with the long-term interests of shareholders and seeks to ensure the safety and soundness of our Company over the market cycles and earnings volatility that characterizes our industry. For more detailed information regarding the composition of our compensation programs, see “Compensation Discussion and Analysis—Principal Components of Compensation” below.
Code of Ethics and Conduct
All directors, officers, and employees of RenaissanceRe are expected to act at all times in accordance with the policies comprising RenaissanceRe’s Code of Ethics and Conduct. In 2011, as in prior years, each director affirmed his or her current and continuing compliance with our Code. In addition to the web address below, our code is also available in print to any shareholder upon request. Amendments to the code related to certain matters will be published on the RenaissanceRe website as required under SEC rules, at www.renre.com under “Investor Information—Corporate Governance.”
Communicating Concerns to Directors
The Audit Committee, on behalf of itself and our other non-management directors, has established procedures to enable employees or other parties who may have a concern about RenaissanceRe’s conduct or policies, to communicate that concern.
Our employees are encouraged and expected to report any conduct they believe in good faith to be an actual or apparent violation of our Code of Ethics and Conduct. In addition, as required under the Sarbanes-Oxley Act of 2002, the Audit Committee has established procedures pertaining to receiving, retaining, and treating complaints received regarding accounting, internal accounting controls, or auditing matters, and with respect to the confidential, anonymous submission by Company employees of concerns regarding, among other things, questionable accounting or auditing matters.
Such communications may be confidential or anonymous, and may be e-mailed, submitted in writing, or reported by phone through various internal and external mechanisms as provided on the Company’s internal website. Additional procedures by which internal communications may be made are provided to each employee. Our Code of Ethics and Conduct prohibits any employee or director from retaliating or taking any adverse action against anyone for raising or helping to resolve an integrity concern.
Meetings of Directors
During 2011, the Board conducted four regularly scheduled meetings, each of which was attended by all of the members of the Board. The Audit Committee, the Compensation Committee and the Investment and Risk Management Committee each met four times in 2011. The Transaction Committee and the Offerings Committee, which meet on an as-needed basis, did not meet in 2011. The Audit Committee conducted four informational calls in connection with the review of our quarterly earnings releases and periodic filings. All incumbent directors attended 100% of the aggregate of all Board meetings and meetings of the committees on which they served during 2011. In addition, the Board or its committees conducted certain informational calls relating to various matters. The Company does not pay directors’ fees in respect of informational calls.
Our non-management directors meet separately from Mr. Currie, our sole management director, in executive sessions each quarter. In 2011, Mr. MacGinnitie, who served as the Non-Executive Chairman of the Board for
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the February and May Board meetings, acted as the chair of the executive sessions in connection with those meetings. Thereafter, in connection with the August and November Board meetings, Mr. Levy, who was subsequently appointed as the Non-Executive Chairman of the Board, acted as the chair of the executive sessions of the Board.
The members of the Board are expected to attend the Company’s annual general meetings. Our annual general meetings are required by our Bye-laws to be held outside of the United States and have to date always been held in Bermuda. All of our directors attended the 2011 Annual Meeting.
Audit Committee
The Audit Committee presently consists of Messrs. Gibbons, Klehm, and Zore. The Board has determined that each member of the Audit Committee meets the independence standards of the Commission and the NYSE, respectively. The Board has also determined that each of Messrs. Gibbons, Klehm, and Zore is financially literate and has accounting or related financial management expertise as required by NYSE rules and satisfies the criteria of an “audit committee financial expert” under the Commission’s rules.
The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to, among other things: (i) the integrity of our financial statements; (ii) our compliance with legal and regulatory requirements; (iii) our independent auditors’ qualifications and independence; and (iv) the performance of our internal audit function and external independent auditors.
The Audit Committee reviews and discusses our annual and quarterly financial statements, press releases, and other financial information and the top-line revenue estimates we provide to analysts, investors, and rating agencies, with both management and the independent auditors. The Audit Committee also reviews the effect of regulatory and accounting initiatives on our financial statements with management, the internal auditor, and the external independent auditors.
In addition, the Audit Committee provides an avenue for communication between our independent auditors, financial management, and the Board. The Audit Committee has the sole authority to appoint, compensate, retain and conduct oversight of the work of our independent auditors, and to approve any proposed non-audit work to be conducted by these auditors. The Audit Committee is required to obtain, at least annually, a report from our independent auditors describing the auditors’ quality control procedures, issues arising from the results of implementing such procedures, the resolution or proposed resolution of any such issues, and any relationships between the auditors and us.
Furthermore, the Audit Committee is responsible for the Board-level oversight of our management-based Controls and Compliance Committee (the “Controls Committee”). The Controls Committee is responsible for implementing and reviewing policies, procedures, and practices relating to accounting, financial reporting, internal controls, regulatory, legal, compliance, and related matters, for ensuring our compliance with applicable laws, regulations, and other relevant standards and for reviewing and approving structured or complex transactions and products that may pose accounting, regulatory, financial reporting, compliance, legal, reputation, tax, or other risks to the Company. The Controls Committee reports regularly to the Audit Committee.
The Audit Committee has adopted a written charter, which is reviewed and reassessed annually. As noted above, the Audit Committee Charter is available on our website at www.renre.com under “Investor Information—Corporate Governance” and is available in print upon request to any shareholder.
Our Chief Financial Officer, Chief Accounting Officer, General Counsel, and Head of Internal Audit participate in the Audit Committee’s meetings. However, executive sessions of the Audit Committee are held in conjunction with each committee meeting throughout the year, including sessions in which the committee meets with the independent registered public accounting firm and independent actuaries, as well as individual members of management including the Head of Internal Audit.
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Pursuant to the Audit Committee Charter and applicable rules of the NYSE, our Audit Committee performs an annual self-assessment. In respect of 2011, the Audit Committee concluded that, in all material respects, it had fulfilled its responsibilities and satisfied the requirements of the Audit Committee Charter and applicable laws and regulations.
Compensation Committee
The Compensation Committee presently consists of Ms. Hamilton and Messrs. MacGinnitie and Trivisonno. The Compensation Committee has responsibility for executive officer and director compensation (as well as compensation for the head of our internal audit function), corporate governance matters, and the nomination and evaluation of directors. It has the authority to establish compensation policies and programs, to administer all employee and Board stock-based compensation plans, and to approve stock options, Restricted Shares, Performance Shares, and similar share-based grants under our stock incentive plans. As summarized above, the Compensation Committee reviews our compensation programs for consistency with our risk management practices and to help us ensure that our compensation programs align our executives and employees with the long-term interests of shareholders and with seeking to ensure the safety and soundness of our Company over the market cycles and earnings volatility that characterize our industry. The Board has determined that all members of the Compensation Committee meet the independence standards of Rule 16b-3 of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the NYSE.
The Compensation Committee has the authority to retain and terminate outside advisors, including compensation consultants and counsel, to assist it with its responsibilities, including its evaluation of our compensation plans and programs, and the actual and proposed compensation for executive officers and directors. The Compensation Committee also has the authority to approve any such consultant’s fees and the other terms of such retention, which is at RenaissanceRe’s expense. The Compensation Committee’s current utilization of outside compensation consultants on executive compensation matters is summarized below under “Compensation Discussion and Analysis—Governance and Compensation Process—The Use of Third-Party Advisors.”
On behalf of the Board, our Compensation Committee collaborates with our Chief Executive Officer in the development and monitoring of our programs for emergency and long-term executive succession. The Compensation Committee generally reviews these matters with our Chief Executive Officer quarterly. Individuals who are identified as having potential for senior executive positions are identified to the Compensation Committee, in part utilizing the results of the Company’s internal review and feedback processes. The careers of such persons are monitored to ensure that over time they have appropriate exposure both to the Board and to our businesses. These individuals interact with our Board in various ways, including through participation in Board meetings and other Board-related activities and meetings with individual directors. The Compensation Committee regularly briefs the full Board on these matters.
Pursuant to applicable NYSE rules, the Board has accorded to the Compensation Committee the responsibility to consider the effectiveness and composition of the Board, and to nominate candidates for election by our shareholders, and to fill vacancies on the Board that emerge from time to time. From time to time in prior years, and including in 2011, the Compensation Committee engaged executive recruiters to identify potential nominees for director and to provide related services such as background checks and other due diligence.
In connection with its consideration of potential nominees for election by shareholders, the Compensation Committee will consider nominees to the Board recommended by no fewer than twenty shareholders holding in the aggregate not less than 10% of RenaissanceRe’s outstanding paid-up share capital. Any such recommendation must be sent to the Secretary of RenaissanceRe not less than 60 days prior to the scheduled date of the annual meeting and must set forth for each nominee: (i) the name, age, business address, and residence address of the nominee; (ii) the principal occupation or employment of the nominee; (iii) the class or series and number of shares of capital stock of RenaissanceRe that are owned beneficially or of record by the nominee; and
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(iv) any other information relating to the nominee that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (“Proxy Filings”). The written notice must also include the following information with regard to the shareholders giving the notice:
(1) the name and record address of such shareholders; (2) the class or series and number of shares of capital stock of RenaissanceRe which are owned beneficially or of record by such shareholders; (3) a description of all arrangements or understandings between such shareholders and each proposed nominee and any other person (including his or her name and address) pursuant to which the nomination(s) are to be made by such shareholders; (4) a representation that such shareholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (5) any other information relating to such shareholder that would be required to be disclosed in a Proxy Filing. Such notice must be accompanied by a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected. The Compensation Committee may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.
Assuming that the shareholders suggesting a nomination follow the procedure outlined above, in considering whether to recommend any candidate for inclusion in the Board’s slate of recommended director nominees, the Compensation Committee will evaluate those candidates by following substantially the same process, and applying substantially the same criteria, as for candidates submitted by Board members or by other persons. These criteria typically include the candidate’s integrity, business acumen, leadership qualities, experience in the reinsurance, insurance, and risk-bearing industries and other industries in which RenaissanceRe may participate, independence, judgment, mindset, vision, record of accomplishment, ability to work with others, and potential conflicts of interest. The Compensation Committee does not assign specific weight to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. Our Board believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge, and abilities that will allow the Board to fulfill its responsibilities. To that end, the Board considers, among other factors, the diversity of candidates for directors. See “Director Qualifications and Director Nominee Considerations” and “Board Diversity.”
The Compensation Committee has adopted a written charter, which is reviewed and reassessed annually. The Compensation Committee Charter is available on our website at www.renre.com under “Investor Information—Corporate Governance” and is available in print upon request to any shareholder.
Pursuant to the Compensation Committee Charter and applicable NYSE rules, our Compensation Committee performs an annual self-assessment. In respect of 2011, the Compensation Committee concluded that, in all material respects, it had fulfilled its responsibilities and satisfied the requirements of the Compensation Committee Charter and applicable laws and regulations.
Our Chief Executive Officer, Chief Administrative Officer, and General Counsel participate in the Compensation Committee’s meetings. The committee meets regularly in executive session at each of its meetings without members of management present. Our Chief Executive Officer provides the committee with strategic context regarding our products, underwriting and operational risks, strategy and performance, and shareholder value-creation over time, as well as advising the committee on matters such as the alignment of our incentive plan performance measures with our overall strategy, and the impact of the design of our equity incentive awards on our ability to attract, motivate, and retain highly talented executive officers. The Chief Executive Officer also makes recommendations to the committee regarding compensation for current or proposed executive officers, who are supervised by our Chief Executive Officer, including his evaluation of the performance of our Named Executive Officers (other than the Chief Executive Officer), who are currently the senior members of our executive management team. Our Chief Administrative Officer, among other things, provides the committee with internal and external analyses regarding the structure and competitiveness of our compensation programs and the details of the design and operation of our various compensation and incentive plans, and provides the committee with detailed reviews of the estimated and actual results for the performance measures impacting estimated and
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actual payments to the executive officers. Our General Counsel is available at meetings to provide input on the Board’s and the committee’s governance and legal obligations, and to provide analyses of obligations for developments relating to the legal and regulatory environment applicable to us. Moreover, attendance by the Chief Executive Officer and other members of management facilitates management’s review of the Proxy Statement in order to determine that the Compensation Discussion and Analysis included in this Proxy Statement is accurate for purposes of the executive officer certification required by the Sarbanes-Oxley Act of 2002.
Investment and Risk Management Committee
The Investment and Risk Management Committee of the Board presently consists of Messrs. Bushnell, Cooper, and Santomero. The primary purposes of the Investment and Risk Management Committee, as outlined in its charter, are to assist the Board with oversight of the Company’s (a) investment activities and (b) financial risk management. Our Chief Financial Officer, Chief Risk Officer, Chief Investment Officer, and the President of RenaissanceRe Ventures Ltd., among other members of management from time to time, participate in the Investment and Risk Management Committee’s meetings. However, the committee regularly meets in executive session without members of management present.
With respect to investment activities, among other things, the Investment and Risk Management Committee (i) advises the Board regarding the Company’s investment-related activities, including its investment guidelines and benchmarks, specific investment transactions, investment manager review and investment performance; (ii) oversees the development of, maintenance of, and compliance with appropriate investment strategies, guidelines and objectives, including asset allocation, and ensures adequate procedures are in place to monitor adherence to the Company’s investment guidelines; (iii) oversees the means and process by which the Company discharges its fiduciary duties with respect to investment matters to minority investors in the Company’s joint venture entities; and (iv) oversees the strategic asset allocations of our investment portfolio.
With respect to financial risk management, among other things, the Investment and Risk Management Committee (i) assists the Board in assessing and providing oversight to management relating to the identification and evaluation of the Company’s financial, non-operational risks, which is closely coordinated with the Audit Committee; (ii) oversees the establishment and maintenance of regular reporting systems from management to the Investment and Risk Management Committee with respect to current and projected financial, non-operational risks, and assesses the adequacy of management’s risk assessments and the appropriateness of any significant judgments made by management in such assessments; (iii) regularly inquires of management about significant financial, non-operational risks or exposures and assesses the steps management has taken or plans to take to minimize, offset or tolerate such risks; (iv) reviews and reports to the Board, as appropriate, risks in the Company’s liability portfolios; (v) reviews the process and systems by which the Company manages its third party credit exposures; and (vi) oversees our corporate risk management, including the financial risk associated with the insurance and reinsurance we write.
The Investment and Risk Management Committee has adopted a written charter, which is reviewed and reassessed annually. The committee also conducts an annual self-evaluation of its performance including its effectiveness and compliance with the committee’s charter. In respect of 2011, the Investment and Risk Management Committee concluded that, in all material respects, it had fulfilled its responsibilities and satisfied the requirements of the Investment and Risk Management Committee Charter.
Transaction Committee
The Transaction Committee of the Board presently consists of Messrs. Cooper, Currie, Gibbons, and Levy. The Transaction Committee has the authority of the Board to consider and approve, on behalf of the full Board, certain strategic investments and other possible transactions. The Transaction Committee meets on an as-needed basis and did not meet in 2011.
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Offerings Committee
The Offerings Committee of the Board presently consists of Messrs. Currie, Gibbons, and Levy. The Offerings Committee has the authority to consider and approve, on behalf of the full Board, transactions pursuant to RenaissanceRe’s shelf registration program, including setting the terms, amount and price of any such offering. The Offerings Committee meets on an as-needed basis and did not meet in 2011.
Role of the Non-Executive Chairman
Mr. Levy currently serves as the Non-Executive Chairman of the Board. In addition to chairing each meeting of the Board, Mr. Levy’s role as Non-Executive Chairman includes: (i) the authority to call meetings of the Board; (ii) setting the agendas for the Board meetings and executive sessions to ensure that the Board members receive the information necessary to fulfill the Board’s primary responsibilities; (iii) chairing executive sessions of the Independent Directors; (iv) briefing the Chief Executive Officer on issues arising in the executive sessions, as appropriate; (v) facilitating discussion among the Independent Directors on key issues and concerns outside of a Board meeting and serving as a non-exclusive conduit to the Chief Executive Officer of the views, concerns, and issues of the Independent Directors; (vi) interviewing candidates for directorship; and (vii) together or in coordination with Mr. Currie, representing the organization in external interactions with certain of the Company’s stakeholders and employees.
Mr. Levy does not serve as a per se member of the Audit Committee, the Compensation Committee or the Investment and Risk Management Committee, but rather attends such meetings and other functions of the committees on an ex officio basis as the facts and circumstances warrant. As noted, Mr. Levy serves as a member of the Transaction Committee and Offerings Committee of the Board, which meet on an as-needed basis.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the Exchange Act, our directors and executive officers, and any persons holding more than 10% of the outstanding Common Shares, are required to report their initial ownership of Common Shares and any subsequent changes in that ownership to the Commission. Specific filing dates for these reports have been established by the Commission, and we are required to disclose in this Proxy Statement any failure by such persons to file these reports in a timely manner during the 2011 fiscal year. Based upon our review of copies of such reports furnished to us, we believe that during the 2011 fiscal year our executive officers and directors and the holders of more than 10% of the outstanding Common Shares complied with all reporting requirements of Section 16(a) under the Exchange Act.
Director Share Ownership Guidelines
Our non-Executive directors receive the majority of their directors’ compensation in RenaissanceRe equity, and are required to maintain certain ownership levels of Common Shares during their service. The number of shares that must be held is that number which is equivalent to a five times multiple of the current annual cash retainer applicable to the director (or such lesser amount as the director may have been granted to date). See “Director Compensation—Director Equity Ownership Policy” for more information on our share ownership guidelines. For information on the Independent Directors’ share ownership, see “Security Ownership of Certain Beneficial Owners, Management and Directors.” In addition, our Independent Directors and executive officers are subject to our insider trading policy, which prohibits transactions in our securities outside of “window” periods (except pursuant to previously adopted, approved Rule 10b5-1 plans), including “short sales” on RenaissanceRe stock, or the purchase or sale of options, puts, calls, straddles, equity swaps, or other derivative securities that are directly linked to RenaissanceRe equity. Our Compensation Committee retains discretion to waive non-compliance with our director equity ownership policy in light of an individual director’s particular facts and circumstances from time to time.
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Compensation Committee Interlocks and Insider Participation
No director who served on the Compensation Committee during fiscal year 2011 was, during fiscal year 2011, an officer or employee of the Company or was formerly an officer of the Company, or had any relationship requiring disclosure by the Company as a related party transaction under Item 404 of Regulation S-K. No executive officer of the Company served on any board of directors or compensation committee of any other company for which any of the Company’s directors served as an executive officer at any time during fiscal year 2011.
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AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the Commission, nor shall such information or report be incorporated by reference into any future filing by us under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing.
The Audit Committee oversees RenaissanceRe’s financial reporting process on behalf of the Board. Management has the primary responsibility for establishing and maintaining adequate internal financial controls, for preparing our financial statements and for the public reporting process. Ernst & Young Ltd., our independent auditors for 2011, is responsible for expressing opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles in the United States and on the effectiveness of the Company’s internal control over financial reporting.
The Audit Committee is responsible for the appointment, compensation, retention, and oversight of the work of Ernst & Young Ltd., our independent auditors, for the purpose of preparing or issuing an audit report. In fulfilling its oversight responsibilities, the Audit Committee reviewed (i) management’s assessment of the effectiveness of RenaissanceRe’s internal control over financial reporting and Ernst & Young Ltd.’s evaluation of RenaissanceRe’s internal control over financial reporting and (ii) the audited financial statements in RenaissanceRe’s Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Audit Committee reviewed and discussed with Ernst & Young Ltd. the matters that are required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1 AU Section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T, including their judgments as to the quality, not just the acceptability, of our accounting principles, the reasonableness of significant judgments, all critical accounting policies and practices to be used, material alternative accounting treatments within generally accepted accounting principles discussed with management, and other material written communications between Ernst & Young Ltd. and management. In addition, the Audit Committee has discussed with Ernst & Young Ltd. its independence from both management and RenaissanceRe and has received the written disclosures and the letter from the independent auditors required by Public Company Accounting Oversight Board’s Rule 3526.
The Audit Committee discussed with Ernst & Young Ltd. the overall scope and plans for their audit. The Audit Committee met with the independent auditors, with and without management present, to discuss the results of their examination, their evaluations of RenaissanceRe’s internal controls, and the overall quality of our financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2011, for filing with the Commission. The Audit Committee, pursuant to its pre-approval policies and procedures, and the Board have also recommended, subject to shareholder approval, the selection of RenaissanceRe’s independent auditors for the 2012 fiscal year.
Henry Klehm III, Chair
James L. Gibbons
Edward J. Zore
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COMPENSATION COMMITTEE REPORT
We have reviewed and discussed with management the Compensation Discussion and Analysis to be included in this Proxy Statement. Based on the reviews and discussions referred to below, we recommend to the Board of Directors that the Compensation Discussion and Analysis appearing below be included in the Proxy Statement and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, by reference. This report is provided by the following independent directors, who constitute the Compensation Committee:
Jean D. Hamilton, Chair
W. James MacGinnitie
Nicholas L. Trivisonno
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COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE SUMMARY
2011 Performance and Key Compensation Determinations
We aspire to be the best underwriter in the world of high-severity, low-frequency risks, and to build shareholder value by serving clients over market cycles. In 2011, there were a number of significant catastrophes that adversely impacted our financial results, which were also impacted by continuing weakness in global investment markets. Earthquakes in New Zealand and Japan, windstorms and tornadoes in the U.S., and flooding in Australia and Thailand drove worldwide insured catastrophe losses to the second highest level in history, giving rise to the second operating loss in the Company’s history. RenaissanceRe successfully managed through these global catastrophes within our risk parameters, growing our market value, maintaining our book value, and strengthening our position as a leader in customer service. Our management team and our Board assess 2011 as year of strong execution and operating performance, which supported strong shareholder returns in the context of a challenging year for insured catastrophic events. Among other things, we:
| • | Achieved total shareholder return of 17.85%, 3rd highest among our 14-company peer group |
| • | Maintained our high claims-paying and financial strength agency ratings and achieved stable book value notwithstanding the record level of insured global catastrophic loss |
| • | Delivered on our commitment to industry-leading client service and claims payment |
| • | Closed the sale of our admitted U.S. insurance businesses on time and according to plan, furthering our focus on those businesses in which we believe we are strongest and enjoy distinctive capabilities that provide the best value to our customers and afford us the potential to achieve superior shareholder returns over time |
| • | Successfully raised capital in our managed risk business, including new investors in our flagship joint venture DaVinci Re, reducing our current equity stake and bolstering our ability to offer long-term capacity to our global clients |
| • | Continued, where premium adequacy permitted, growing our global underwriting platform through the build-out of our Lloyd’s syndicate and development of our specialty reinsurance and international catastrophe businesses |
| • | Successfully implemented projects relating to our investment platform, suite of risk management tools, expense management, U.S. federal and state government engagement, and other strategic goals established by the Committee and the full Board |
For 2011, based on our pay-for-performance philosophy, key compensation determinations included:
| • | Causing a substantial majority of compensation to our Chief Executive Officer (“CEO”) and our other Named Executive Officers (“NEOs”) to be performance-based, variable in terms of timing and form of receipt, or “at risk” due to a risk of forfeiture, or a combination of the above, all of which will be referred to herein as “at risk” unless the context requires otherwise |
| • | Eliminating U.S. federal income tax gross-ups on perquisites for our CEO and each other current NEO, effective May 2011 |
In 2012, the Committee has also implemented the following actions:
| • | Granting 25% of our CEO’s long-term equity incentive awards during the 2012 annual grant cycle in the form of Performance Shares, similar to our other NEOs |
| • | Eliminating, effective February 2012, non–business related travel on our corporate aircraft for our CEO, other than in respect of his business commute to his sole office location in Bermuda, which is limited to twenty-four round-trip commutes per year |
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Compensation Philosophy
Over time and in light of our business strategy, we have developed a compensation philosophy that is consistent with our risk-management practices and that helps to ensure that our compensation programs align our executives and employees with the long-term interests of our shareholders. Our compensation philosophy seeks to reinforce and reward long-term value-creation by motivating our NEOs through pay practices based substantially on the overall success of the Company. Furthermore, our compensation philosophy seeks to ensure the safety and soundness of our Company over the market cycles and earnings volatility that characterize our industry. The key principles of our executive compensation philosophy are as follows:
| • | Aligning shareholder and executive interests through significant share ownership and retention requirements |
| • | Fostering performance-based compensation by holding a significant portion of pay “at risk” through our performance-based annual incentive bonus and long-term equity program, under which the vesting of awards depends on both shareholder-aligned performance attainment and service requirements |
| • | Encouraging a team structure and rewarding team success that has a positive impact on business results |
| • | Managing our compensation programs within the risk profile of our business plan |
The Link Between Performance and Pay
2011 Compensation Determinations
As discussed in more detail below, despite our strategic and operational successes in 2011, our NEO compensation decreased from 2010, principally reflecting the impact of our reduced attainment of the financial performance metrics upon which our performance-based annual incentive bonus plan is dependent. During 2011, we took the following key actions with respect to compensation:
| • | Establishing our annual performance bonus factor at 84% of target, compared to a five-year historical average of 137% |
| • | Providing target Performance Share grants equaling 25% of each NEO’s total long-term incentive award, other than our CEO |
| • | The CEO did not receive a Performance Share award due to his one-time Performance Share grant in 2010, which reflected 67% of his total 2010 award. |
| • | As noted, the CEO received Performance Shares in 2012 as a component of his annual long-term equity incentive grant, as did each other NEO. |
| • | Over a two-year period, our CEO received approximately 50% of his total long-term incentive award in Performance Shares. |
| • | Vesting the 2011 tranche of our Performance Shares significantly above target at 207.1% (175% for our CEO, due to a lower potential maximum), reflecting our strong total shareholder return compared to our peer group |
| • | Structuring 82% of our CEO’s compensation and 77%, on average, of our other NEOs’ compensation to be “at risk” |
| • | Eliminating U.S. federal income tax gross-ups on perquisites for our CEO and each other current NEO, effective May 2011 |
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Consistent with our pay program structure and philosophy, 2011 total compensation for our NEOs decreased significantly compared to 2010. For Mr. Currie, our CEO, a large portion of his 53% reduction is due to the absence of the one-time performance-based award granted in 2010 in connection with his 2009 contract extension and restatement. If the one-time award is excluded from his 2010 total compensation, his pay decreased approximately 18% in 2011. For our other NEOs, pay decreased, on average, 14%, principally reflecting the reduced attainment in 2011 of the financial performance metrics upon which our performance-based annual incentive bonus plan depends. The graph below illustrates the year-over-year reduction in total compensation for each executive.
Pay and Performance over the Long Term
We believe that the most material measures of the long-term success of our business are total shareholder return and increased book value per share. These measures are particularly important to our shareholders and for our industry. To that end, the Compensation Committee commissioned a third-party independent review of the alignment between historic pay and performance for our NEOs.
Total cash and total direct compensation and financial performance across key financial measures were compared on a relative basis to our peer group (discussed in more detail below in “The Market for Talent”) to determine whether the Company’s performance was aligned with the realizable pay delivered to our executives. For purposes of this analysis, realizable pay is defined as base salary, actual performance-based annual incentive bonus paid, and the current value of long-term incentives granted during the relevant period. This analysis was conducted over both 1-year and 3-year periods for all NEOs as well as a 5-year period for our CEO.
Overall, the review confirmed that there was strong alignment over all three time periods, with the strongest alignment in the longer-term perspectives. In all three cases, both our performance and our NEOs’ realizable pay were highly correlated, particularly as related to our peer group. The following graphs illustrate the alignment of our CEO’s 5-year realizable pay with total shareholder return and book value per share, each as compared to peers.
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Advisory Vote on Compensation
Consistent with the shareholder resolution on the frequency of the vote to approve executive compensation, the Compensation Committee has determined to submit an advisory vote on an annual basis.
At our 2011 Annual General Meeting, our Say-on-Pay proposal resulted in a favorable vote from approximately 77% of shareholders. Over subsequent periods, the Compensation Committee evaluated this outcome, as well as the communications received from proxy advisory firms and other stakeholders. RenaissanceRe communicates regularly with our shareholders and seeks to consider shareholder feedback thoughtfully in making determinations regarding our pay programs. This feedback is considered in conjunction with our company’s culture, compensation philosophy, and business needs. In addition, we reached out to our largest institutional shareholders and engaged them in discussions regarding our executive compensation program, and as a result of these discussions, the Compensation Committee has taken the following actions in respect of our NEOs:
| • | Eliminating for the CEO and each other current NEO the tax “gross-up” payments for United States federal income tax liabilities for perquisites provided by the Company, effective May 2011 |
| • | Eliminating, effective February 2012, non–business related travel on our corporate aircraft for our CEO, other than for his business commute to his sole office location in Bermuda, which is limited to twenty-four round-trip commutes per year |
In addition, the Compensation Committee continued to actively monitor our equity-based grant practices and potential for shareholder dilution, in light of prior advisory actions and shareholder and investor communications. Among other things, when considering its 2011 determinations in respect of equity-based compensation, the Compensation Committee and the Board were mindful of the Company’s prior equity grant practices, the currently outstanding awards of Restricted Shares, options, and premium options, and the impact on shareholder dilution of these instruments and of contemplated grants. Among other things, the Board received analyses of the impact on certain dilution and share plan utilization models used by certain institutional shareholders of the Company and by certain third parties who issue proxy voting recommendations. We have believed, and continue to believe, that our equity-oriented compensation philosophy supports and suits our goal of creating long-term value for our shareholders, of fostering an ownership culture that promotes our overall compensation philosophy and encourages long-term performance, retention, and shareholder value-creation, and of exposing our employees to economic diminishment when our share performance lags. We will also continue to be cognizant of dilution measures and investor dilution parameters in assessing our equity compensation needs.
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Recommendation on Say-on-Pay Vote
In light of the Company’s accomplishments described above, our strong pay-for-performance alignment in both the short-term and the long-term, responsiveness to shareholder feedback, and the Compensation Committee’s determination that our NEO compensation is not reasonably likely to have a material adverse effect on the Company (as described in more detail below under “Compensation and Risk Management”), the Compensation Committee recommends that our shareholders vote favorably on this year’s resolution to approve 2011 NEO compensation.
OUR EXECUTIVE COMPENSATION PROGRAM AND PHILOSOPHY
We believe that our compensation design framework, outlined below, holds our NEOs accountable for annual and long-term performance, properly manages compensation-related risk-taking within the parameters of our philosophy, and supports the guiding principles that drive our overall pay philosophy. The table below describes the components of our pay program and how each singularly and collectively supports that philosophy.
| Compensation Component |
Primary Purpose of |
Philosophy Behind Providing Compensation Component | ||
| Total Direct Compensation | ||||
| Salary | Provides a fixed component of compensation that reflects expertise and scope of responsibilities | • Provides a base component of total compensation
• Provides objective, market-driven, and competitive pay
• Represents a relatively lower contribution in total compensation as seniority increases | ||
| Performance-Based Annual Incentive Bonus |
Provides “at risk” pay that reflects annual company performance and performance against strategic accomplishments | • Aligns NEOs’ and shareholders’ interests
• Fosters the achievement of financial metrics important to shareholders
• Reinforces the importance of pre-established strategic accomplishments
• Rewards team success | ||
| Long-Term Equity-Based Incentives |
Provides “at risk” pay with a long-term focus, subject to both performance- and time-based vesting mechanics | • Aligns NEOs’ and shareholders’ interests
• Reflects long-term performance
• Retains talent through long-term wealth-creation
• Holds executives to significant equity ownership requirements | ||
| Other Compensation | ||||
| Other Benefits and Perquisite Program |
Reflects the Bermuda location of our corporate headquarters and expatriate relocation needs as well as specific local market and competitive practices | • Encourages relocation of talented executives to our strategic Bermuda headquarters location
• Provides a strong retention element | ||
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Although the Compensation Committee has determined not to mandate a specific allocation among the components of pay, it is the Compensation Committee’s policy that a majority of total direct compensation paid to our NEOs be “at risk,” with a substantial portion subject to the achievement of performance objectives as well as service-based criteria. The following charts illustrate the relative weighting of fixed and “at risk” compensation for our NEOs.
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THE MARKET FOR TALENT
We believe that our success depends in large part upon our ability to attract and retain our senior executive officers. Our culture, which we believe to be distinctive and inherent to our strategy, is team-focused and designed to reward team performance. We seek to recruit and retain senior executives who possess a number of specific personal and professional qualities that will make contributions to the ongoing success of the Company. We believe that our requirement that executives possess such criteria limits our available talent pool and makes it critical we retain our key talent. We are subject to competition to recruit our senior executives and other key employees, exacerbated by the industry-leading returns that we have generated since our inception, our reputation for innovation, and the strong relationships we seek to foster with clients, brokers, capital providers, regulators, and rating agencies. This competition for talent has increased during recent years as a result of, among other things, non-traditional entrants in our industry such as investment banks and hedge funds, the growth of insurance and reinsurance companies in Bermuda, and the current competition to serve customers and capitalize on potential opportunities in our markets arising out of the recent financial market dislocations.
In order to ensure that our compensation programs reflect competitive practices and dynamics in our industry, as well as to maintain competitive compensation program designs and levels, the Compensation Committee utilizes market data and compensation ranges of our peer group. In addition, we compare our performance to our peer group for purposes of determining compensation levels under both our performance-based annual incentive bonus and long-term equity incentive programs.
Our Compensation Committee reviews and assesses regularly the membership of the peer group to ensure continued applicability. The peer group is developed by the Company and the Compensation Committee’s independent advisor and reviewed and approved by the Compensation Committee. Our peer group has been selected by our Compensation Committee to reflect those companies with businesses that are relatively similar to ours and that are in relatively similar jurisdictions to ours and from which we seek to attract qualified executives. We recognize that there are external advisory groups that may use different criteria and that may consider our peer group to consist primarily of U.S. insurers that may be more closely related to the business models of our recently sold admitted U.S. insurance business as compared with our core reinsurance operations.
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For 2011, our peer group consisted of the following fourteen companies, which were unchanged from 2010.
| Allied World Assurance Company Holdings, AG | Flagstone Reinsurance Holdings, S.A. | |
| Alterra Capital Holdings Limited | Montpelier Re Holdings Ltd. | |
| Arch Capital Group Ltd. | PartnerRe Ltd. | |
| Aspen Insurance Holdings Limited | Platinum Underwriters Holdings Ltd. | |
| Axis Capital Holdings Limited | Sirius (formerly White Mountains Insurance Group) | |
| Endurance Specialty Holdings Ltd. | Transatlantic Holdings Inc.1 | |
| Everest Re Group, Ltd. | Validus Holdings Ltd. |
We also compete for talent with non-traditional companies, including hedge funds and investment firms such as D.E. Shaw & Co., L.P., Nephila Capital Ltd., Aeolus Re Ltd., S.A.C. Capital Advisors, L.P. (SAC Re), and Third Point LLC (Third Point Re), as well as larger firms such as ACE Ltd. and XL Group. Although we do not include these firms in our peer group, we try to monitor their practices based on available information and to be cognizant of competitive pressures from these market entrants in our program design and determinations.
PRINCIPAL COMPONENTS OF COMPENSATION
Salary
Salaries for our NEOs are based on several factors, including (i) the scope of job responsibilities, (ii) experience, (iii) expertise, (iv) performance, (v) our internal salary grade structure, which contemplates level and location (for all employees other than our CEO), and (vi) competitive market compensation.
The table below shows the aggregate actual salary increases for each of our executives for fiscal year 2011 as compared to 2010. Final salary increases for fiscal year 2011 (or for Mr. Currie, April 2011) were made effective in May 2011. For Mr. Currie, there was only a slight increase for 2011, reflecting normal market movement for executive pay. With regard to our other NEOs, salary increases reflect significant increases in scope and level of responsibility as a result of internal restructuring and organizational realignment following the sale of the Company’s admitted U.S. insurance operations, the Compensation Committee’s strong view of individual goal attainment, professional development, and individual contributions to the Company in connection with our team-based management structure.
| Name |
2010 Base Salary |
2011 Base Salary |
Percent Change (2010 to 2011) |
|||||||||
| Neill A. Currie |
$ | 1,030,000 | $ | 1,055,800 | 2.5 | % | ||||||
| Peter C. Durhager |
$ | 450,000 | $ | 479,500 | 6.6 | % | ||||||
| Jeffrey D. Kelly |
$ | 540,800 | $ | 591,250 | 9.3 | % | ||||||
| Kevin J. O’Donnell |
$ | 650,000 | $ | 750,000 | 15.4 | % | ||||||
| Stephen H. Weinstein |
$ | 400,000 | $ | 463,500 | 15.9 | % | ||||||
Performance-Based Annual Incentive Bonus
As noted above, our compensation program is weighted heavily toward “at risk” pay that reflects the Company’s overall financial success and the achievement of our key strategic drivers that contribute to long-term shareholder value creation. An important component of our “at risk” pay program is our performance-based annual incentive bonus, which has depends on our attainment of certain financial measures, and strategic and operating accomplishments in respect of the relevant year. In accordance with SEC reporting rules, amounts paid pursuant to our annual incentive bonus program are classified in the Summary Compensation Table and other tabular disclosure below as “non-equity incentive plan compensation.”
| 1 | Transatlantic Holdings Inc., which was a member of our peer group with respect to 2011 compensation determinations, was acquired by Alleghany Corporation in March 2012. |
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Due to the volatility of our industry and thus our financial results as well as the importance of achieving the key drivers of our long-term strategy, the Compensation Committee and management believe that pure quantitative results should be a primary measure of executive performance, but not the sole measure. In light of this, the Compensation Committee determines performance-based annual incentive bonuses considering both results against financial objectives and the Compensation Committee’s view of our attainment of strategic accomplishments. For determining performance-based annual incentive bonuses in 2011, consistent with prior years, financial objectives were given a weighting of 67%, and strategic accomplishments were given a weighting of 33%. All of the factors chosen by the committee to calculate performance-based annual incentive bonuses are considered by the committee to be principal drivers in the creation of total shareholder return and the overall success of our business.
At its first regular quarterly meeting of a given year, our Compensation Committee reviews the performance of the Company for the immediately prior year to establish an overall “business performance factor.” The business performance factor may range from 0 to 1.50 (or 0% to 150% of target) in any given year. This factor is then multiplied by each employee’s target bonus amount to determine the actual bonus award of our employees companywide, including our NEOs. The business performance factor equals the aggregate sum of the outcomes for each performance criterion, calculated as the percentage achievement multiplied by its relative weight (as illustrated in the table below). For fiscal year 2011, the Compensation Committee established an overall business performance factor of 0.84 (or 84% of target), based on our actual performance achievements.
Once determined, the business performance factor is applied to all Company employees irrespective of segment, unit, or function, which we believe fosters relative internal pay equity and aligns employees with overall corporate results in a manner consistent with our team-based compensation philosophy and organizational culture. An executive’s performance-based actual bonus amount may be adjusted by the Compensation Committee up or down in order to reflect special circumstances. For 2011, the business performance factor was applied to the NEOs’ target bonuses without adjustment.
The table below shows the key performance metrics that the Compensation Committee considered in establishing the overall business performance factor for 2011. These metrics are representative of the Company’s current strategy and align with the various components of the Company’s compensation philosophy, which, when taken together, are designed to effectively and appropriately motivate our employees and provide for alignment with our long-term corporate objectives.
The resulting scores on all measures are illustrated in the table below.
| Metric |
Baseline for Measurement |
Actual Performance |
Raw Business Performance Factor Components |
Weighting | Weighted Business Performance Factor Components | |||||
| Operating Return on Equity |
Actual vs. Peer Average |
(5.3%) | 0.48 | 33 1/3% | 0.16 | |||||
| Operating Earnings Per Share |
Actual vs. Budget | $(3.22) | 0.00 | 16 2/3% | 0.00 | |||||
| Gross Written Premiums (in thousands of U.S. dollars) |
Actual vs. Budget | $1,434,976 | 1.28 | 16 2/3% | 0.21 | |||||
| Strategic Accomplishments |
Pre-Established Goals | 1.4x | 1.40 | 33 1/3% | 0.47 | |||||
| Business Performance Factor |
0.84 |
The majority of the measures in the performance-based annual incentive bonus are purely financial and determined by comparing actual results to goals established in the beginning of the year. As illustrated in the table above, the factor for the strategic portion of the business performance factor was set at 1.40, reflecting the importance of the strategic accomplishments summarized in the Executive Summary section above. The 5-year
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average of the factor applied to the strategic portion of the business performance factor is 1.44. The primary strategic accomplishments that were considered by the Compensation Committee in assessing the overall business performance factor included the items set forth below:
| • | Closing the sale of our admitted U.S. insurance businesses on time and according to plan, furthering our focus on those businesses in which we believe we are strongest and enjoy distinctive capabilities that provide the best value to our customers and afford us the potential to achieve superior shareholder returns over time |
| • | Successfully raising capital in our managed risk business, including new investors in our flagship joint venture DaVinci Re, reducing our current equity stake and bolstering our ability to offer long-term capacity to our global clients |
| • | Continuing, where premium adequacy permitted, the growth of our global underwriting platform through the build-out of our Lloyd’s syndicate and development of our specialty reinsurance and international catastrophe businesses |
| • | Successfully implementing projects relating to our investment platform, our suite of risk management tools, expense management, government engagement, and other strategic goals established by the Committee and the full Board |
In assessing performance against strategic accomplishments, the Compensation Committee undertakes a rigorous process by which goals are established at the beginning of the year and tracked throughout the year. At the end of year, performance against the strategic accomplishments is assessed by the Compensation Committee with significant input from the head of the Audit Committee, the head of the Investment and Risk Management Committee, and the Non-Executive Chairman of the Board.
Our current compensation structure for NEOs establishes a target bonus amount as a percentage of the executive’s Bonus Basis, which is shown in the table below. In prior years, the Bonus Basis was a target salary derived from our internal salary grade structure. During 2011, we completed the implementation of a company-wide policy to base bonuses on actual, rather than target salaries. During a two-year transition period, to avoid penalizing employees whose actual salaries are below target, the Bonus Basis is the higher of actual and target salary, with the exception of Mr. Weinstein, whose bonus is based on actual salary as a result of a promotion to a higher grade level and corresponding Target Bonus percentage. The following table provides our target bonuses for each NEO and the basis for determining that bonus.
| 2011 Target Bonus(1) | ||||||||||||||||
| Name |
2011 Base Salary | Bonus Basis | Percent of Bonus Basis | Dollar Value | ||||||||||||
| Neill A. Currie |
$ | 1,055,800 | $ | 1,055,800 | 165 | % | $ | 1,742,070 | ||||||||
| Peter C. Durhager |
$ | 479,500 | $ | 554,400 | 110 | % | $ | 609,840 | ||||||||
| Jeffrey D. Kelly |
$ | 591,250 | $ | 591,250 | 110 | % | $ | 650,375 | ||||||||
| Kevin J. O’Donnell |
$ | 750,000 | $ | 750,000 | 125 | % | $ | 937,500 | ||||||||
| Stephen H. Weinstein |
$ | 463,500 | $ | 463,500 | 110 | % | $ | 509,850 | ||||||||
| (1) | Unless otherwise indicated, the term “Bonus” as used in the tables incorporated herein refers to cash bonus paid pursuant to the performance-based annual incentive bonus plan. |
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The following table compares actual 2011 bonus payments to 2010 payments. We believe that the reduction, resulting primarily from year-over-year reductions in the attainment of the performance metrics that make up the “business performance factor,” reflects our commitment to pay for performance.
| Name |
2011 Target Bonus |
Actual 2011 Bonus | Actual 2010 Bonus |
Percent Change From 2010 |
||||||||||||||||
| Business Performance Factor |
Dollar Value | |||||||||||||||||||
| Neill A. Currie |
$ | 1,742,070 | 0.84 | $ | 1,463,339 | $ | 2,613,105 | (44 | %) | |||||||||||
| Peter C. Durhager |
$ | 609,840 | 0.84 | $ | 512,266 | $ | 914,760 | (44 | %) | |||||||||||
| Jeffrey D. Kelly |
$ | 650,375 | 0.84 | $ | 546,315 | $ | 914,760 | (40 | %) | |||||||||||
| Kevin J. O’Donnell |
$ | 937,500 | 0.84 | $ | 787,500 | $ | 1,385,820 | (43 | %) | |||||||||||
| Stephen H. Weinstein |
$ | 509,850 | 0.84 | $ | 428,274 | $ | 633,450 | (32 | %) | |||||||||||
Long-Term Equity-Based Incentive
Whereas our annual cash bonuses represent immediate recognition of the prior year’s corporate performance, we believe that our equity incentive awards link the compensation of our NEOs directly to the attainment of corporate performance over the long term. These awards make up a significant component of total direct compensation, which we believe supports and strengthens our pay-for-performance philosophy and aligns with our goal of creating long-term value for our shareholders.
In 2011, we granted to our NEOs (with the exception of Mr. Currie), a blend of long-term equity awards, 25% of which were subject to performance vesting as well as continued service requirements, and 75% of which were subject solely to service requirements. In light of Mr. Currie’s special Performance Share award provided in 2010 and discussed further below, he did not receive a Performance Share award in 2011. For 2012, the Compensation Committee has included Performance Shares as a 25% component of Mr. Currie’s equity award similar to our other NEOs. We believe that a blend of awards encourages long-term performance, retention, and shareholder value-creation and supports an ownership culture.
Target long-term incentive award values for 2011 are determined using a percentage of LTI Basis, which is based on the executive’s target salary as of April 1, 2011, and shown in the table below. The long-term incentive award for the Chief Executive Officer is determined as a percentage of actual salary, which equals the target salary. For 2012, the LTI Basis will be the same as the Bonus Basis.
| Name |
Base Salary at April 1, 2011 |
LTI Basis | 2011 Target Equity Award Level |
Award Allocation | ||||||||||||||||||||
| Percent of LTI Basis |
Dollar Value | Performance Shares* |
Restricted Stock |
|||||||||||||||||||||
| Neill A. Currie |
$ | 1,055,800 | $ | 1,055,800 | 300 | % | $ | 3,167,400 | — | $ | 3,167,354 | |||||||||||||
| Peter C. Durhager |
$ | 461,250 | $ | 554,400 | 215 | % | $ | 1,191,960 | $ | 297,945 | $ | 893,967 | ||||||||||||
| Jeffrey D. Kelly |
$ | 554,320 | $ | 554,400 | 215 | % | $ | 1,191,960 | $ | 297,945 | $ | 893,967 | ||||||||||||
| Kevin J. O’Donnell |
$ | 666,250 | $ | 739,100 | 230 | % | $ | 1,699,930 | $ | 424,936 | $ | 1,274,940 | ||||||||||||
| Stephen H. Weinstein |
$ | 410,000 | $ | 422,300 | 200 | % | $ | 844,600 | $ | 211,144 | $ | 633,431 | ||||||||||||
| * | The values of the Performance Shares represented above may differ from those disclosed in the Summary Compensation Table, which are based on the aggregate accounting expense to be taken with respect to applicable SEC disclosure rules. |
Performance Share Plan Mechanics. As in 2010, the Compensation Committee determined that grants of Performance Shares made in 2011 will vest based upon the Company’s total shareholder return relative to our peer group over a three-year period. The performance-based vesting level of one third of the award is determined at the end of each year of the performance period, and all “earned” shares remain subject to a service-based vesting requirement through the end of the full three-year period. For the Performance Shares granted during 2010, there was interim transitional service-based vesting of earned shares as of the end of 2011.
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The total shareholder return hurdles and corresponding vesting levels for both the 2010 and 2011 award cycles (other than to our CEO, as described below) are set forth in the following table:
| Hurdle |
Total Shareholder Return Relative to Peers |
Vesting Level (as Percent of Target) | ||
| Threshold |
35th Percentile | 0% | ||
| Target |
50th Percentile | 100% | ||
| Maximum |
100th Percentile | 250% |
Vesting at intermediate performance levels is based upon a linear interpolation between threshold and target (6.67% of target for each percentile increase in performance), or between target and maximum (3% of target for each percentile increase in performance), as applicable. To accommodate the potential attainment of the maximum performance, we issue unvested Performance Shares at the maximum level of payout (250% of target). If less than maximum performance is attained, a proportionate number of shares will not vest and will be forfeited.
Pursuant to the terms of the Performance Share Plan, the Compensation Committee may consider downward adjustments in conjunction with any vesting of Performance Shares but may not effect upward adjustments. For information regarding treatment of Performance Shares upon a termination or a change in control, see “Potential Payments Upon a Termination or Change in Control” below.
Performance Share Vesting Through 2011. At the end of fiscal year 2011, the attainment of total shareholder return relative to our peer group was measured for the second tranche of the Performance Shares granted during 2010 and the first tranche of the Performance Shares granted during 2011. The following table and graph illustrate actual performance through 2011 for Performance Shares granted in 2010 and 2011, based on our total shareholder return relative to the established peer group.
| Year of Grant |
Percent of Tranche Vested (as Percent of Target) |
|||||||||||||||
| 2010 | 2011 | 2012 | 2013 | |||||||||||||
| 2010 |
164.2 | % | 207.1 | % | TBD | — | ||||||||||
| 2011 |
— | 207.1 | % | TBD | TBD | |||||||||||
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Equity Grant Practices. Other than with respect to special awards that the Compensation Committee may determine to grant from time to time to reflect special achievements, new hires, or retention needs, the Compensation Committee makes determinations with respect to long-term incentive awards at its February meeting each year. It is our current practice for approved grants to be awarded on March 1st (or the next succeeding business day). The date of grant for new-hire equity awards will generally be the third business day following the release date of the Company’s next subsequent quarterly financial results following the new hire’s actual start date. Grants of time-vested Restricted Shares typically vest in four equal annual installments subject to continued service with the Company.
Dividends. Dividends are generally payable currently with respect to time-vested Restricted Shares. In connection with a grant of Performance Shares, the grantee will receive the right to any accrued dividends declared and paid on unvested shares, to be paid without interest at the same time as the underlying shares vest. Dividends accrued and unpaid on forfeited Performance Shares, however, will be forfeited.
Special Awards: 2010 CEO Performance Share Award. In February 2010, Mr. Currie was granted a special Performance Share award in connection with the restatement and extension of his employment agreement in February 2009. Similar to the Performance Share awards granted to the other NEOs during the annual grant cycle and as described above, Mr. Currie’s special award is subject to vesting based on total shareholder return relative to our peer group over a four-year period. For Mr. Currie, this award represented approximately 67% of his total equity grant in fiscal year 2010 (based on target performance), the remainder of which was granted in the form of time-vested Restricted Shares. Mr. Currie’s special Performance Share award is subject to the total shareholder return hurdles and corresponding vesting levels set forth in the following table:
| Hurdle |
Total Shareholder Return Relative to Peers |
Vesting Level (as Percent of Target) | ||
| Threshold |
35th Percentile | 0% | ||
| Target |
50th Percentile | 100% | ||
| Maximum |
75th Percentile | 175% |
The Company’s total shareholder return relative to our peer group in 2010 and 2011 resulted in a vesting level, as a percentage of target, equal to 164.2% for the 2010 vesting tranche and 175% for the 2011 vesting tranche. Unlike the Performance Shares granted to the other NEOs, Mr. Currie is not entitled to any dividends or other payments on unvested Performance Shares granted in connection with this special award.
In 2012 and future years, Mr. Currie will participate in the Performance Share program described above for our other NEOs.
Equity Ownership and Retention Requirements. In keeping with our overall compensation philosophy, our NEOs are subject to a robust equity ownership policy, which is designed to maintain equity ownership at levels high enough to assure our shareholders of our executives’ commitment to long-term value creation. Under our guidelines, our executives are required to maintain a level of our equity with a value equal to a multiple of salary as follows:
| • | 7.5 times actual salary for our CEO |
| • | 4.5 times target salary by grade for our other NEOs |
Equity ownership is calculated by including the value of Common Shares owned outright, Restricted Shares, target number of Performance Shares, and the spread value of vested “in-the-money” options (excluding premium options granted under the 2004 Plan). Until and unless ownership requirements are satisfied, an NEO is not permitted to sell any of the equity granted to him.
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As of December 31, 2011, all of our NEOs had satisfied their ownership requirements. The table below shows the current holdings for our NEOs as of December 31, 2011.
| Equity Ownership at Fiscal Year-End | ||||||||||||
| Name |
Multiple of Target Salary* |
Dollar Value | Years of Service | |||||||||
| Neill A. Currie |
39.2 | $ | 41,392,591 | 10.4 | ||||||||
| Peter C. Durhager |
15.4 | $ | 8,515,891 | 8.6 | ||||||||
| Jeffrey D. Kelly |
8.3 | $ | 4,575,912 | 2.5 | ||||||||
| Kevin J. O’Donnell |
19.9 | $ | 14,731,297 | 15.1 | ||||||||
| Stephen H. Weinstein |
30.6 | $ | 12,918,933 | 9.9 | ||||||||
| * | Mr. Currie’s share ownership multiple is a function of actual salary, which is equal to his target salary. |
Our Compensation Committee retains the discretion to approve transactions outside of the guidelines in light of an individual’s facts and circumstances; however, to date, we have not done so in respect of an NEO.
Insider Trading Policies
Our employees, including our NEOs and directors, are subject to our insider trading policy, which prohibits:
| • | transactions in our securities outside of “window” periods (except pursuant to previously adopted, approved Rule 10b5-1 plans), |
| • | employees and directors and their designees from directly hedging the market value of any RenaissanceRe securities, and |
| • | employees and directors and designees from engaging in “short sales” of RenaissanceRe securities. |
Other Benefits and Perquisites; Limitations and Changes
Our NEOs participate in a perquisite and benefit program that, in conjunction with the other components of our compensation program, seeks to accomplish the goal of attracting and retaining key talent to our Bermuda headquarters. Given the unique challenges of the Bermuda market, including travel to and from the island and the cost of living and maintaining a residence, we provide benefits and perquisites that are consistent with others operating in this market.
For 2011 and 2012, the Compensation Committee has determined to make the following changes to this program:
2011
| • | Eliminating NEO Federal Income Tax Gross-Ups: Effective May 2011, we eliminated tax gross-ups related to specific benefits for our CEO and each other current NEO, notwithstanding the adverse tax treatment imposed on executives living in a location such as Bermuda. Our perquisite program prior to May 2011 included reimbursements designed to avoid any tax-related disincentives resulting from U.S. taxation. These tax reimbursements were previously provided on perquisites, other than in connection with personal use of corporate aircraft. |
2012
| • | Discontinuing Company-Paid CEO Personal Use of Corporate Aircraft: Starting in 2009, Mr. Currie’s personal use of the Company’s corporate aircraft was limited to twenty-four round trips per calendar year in |
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| respect of his business commute to his sole office location in Bermuda, and an additional twenty-five hours per year in respect of personal, non–business related travel. In 2012, Mr. Currie will no longer receive twenty-five hours per year for personal, non–business related travel, and will instead pay the variable cost per hour for personal usage. |
CHANGE IN CONTROL AND POST-TERMINATION PAYMENTS
Upon qualifying terminations of employment as well as upon a change in control, the NEOs may be entitled to receive certain vesting of equity-based awards pursuant to the terms of our equity compensation plans and their respective employment agreements, and upon certain qualifying terminations of employment, the NEOs may be entitled to receive certain other severance payments and benefits pursuant to the terms of their respective employment agreements (which payments and benefits may be enhanced if such a termination occurs in connection with a change in control). The Compensation Committee views other post-termination payments primarily as consideration for certain restrictive covenants applicable to our executives following certain terminations, which we believe are essential to the protection of the Company’s business, in particular given the specialized market in which the Company competes. In addition, the Compensation Committee believes that both the change in control and post-termination payments and benefits are necessary components of a competitive compensation program.
For additional information regarding the terms of these provisions and the potential benefits payable thereunder, see “Potential Payments Upon a Termination or Change in Control” below.
ADJUSTMENT OR RECOVERY OF COMPENSATION DUE TO EXECUTIVE MISCONDUCT
If our Board were to determine that an executive officer has engaged in fraudulent or intentional misconduct, our Board would take action to remedy the misconduct, prevent its recurrence, and impose discipline as appropriate in light of the facts and circumstances, including, without limitation, (i) termination of employment, (ii) initiating an action for breach of fiduciary duty, and (iii) if the misconduct resulted in a significant restatement of the Company’s financial results, seeking reimbursement of any portion of performance-based or incentive compensation paid or awarded to the executive that was greater than would have been paid or awarded if calculated based upon the restated financial results. These remedies would be in addition to, and not in lieu of, any actions that might be imposed by law enforcement agencies, regulators, or other authorities. The Company also has a right to set off against certain amounts owing to the executive officers should they engage in certain activities that are detrimental to the Company.
The employment agreement between Mr. Currie and the Company provides that, among other things, Mr. Currie’s incentive compensation (including both cash bonuses and equity awards) that is determined to have been earned based upon financial statements that were subsequently restated may be clawed back, or forfeited if unpaid, to the extent that such compensation would not have been earned based upon the restated financials. If the related restatement is determined to have been due to Mr. Currie’s misconduct, the clawback would apply to such compensation paid within 60 months following the Company’s first filing with the SEC containing the financial statement that was restated. For restatements not determined to have been due to Mr. Currie’s misconduct, the Company’s clawback rights shall apply only to such compensation paid within 24 months following the first SEC filing containing the financial statement that was restated. In addition, the Company’s clawback rights also apply to gains realized on sales of securities in the 12 months following the first SEC filing containing a financial statement that is ultimately restated due to Mr. Currie’s misconduct.
42
COMPENSATION AND RISK MANAGEMENT
In conjunction with our risk management practices, as well as our strategic and operational planning, management of the Company reviews regularly senior executive compensation and our firm-wide compensation programs and policies in an ongoing effort to manage within the risk profile of our business plan. Senior executives from our risk, legal and compliance, administrative, finance, and audit functions, as well as the Board’s outside compensation consultants, are involved in this review process, which is conducted under the oversight of the Compensation Committee. Through this review and its regular interface with the Risk Management Committee, the Compensation Committee has concluded that our compensation structure, elements, and incentives for fiscal year 2011 are not reasonably likely to have a material adverse effect on the Company, due in part to the following:
| • | Our Company culture has historically stressed that only appropriate risks should be undertaken, and that risks should not be undertaken merely to grow revenue or profits. |
| • | Our mix of pay elements and blend of equity are appropriately balanced between fixed and “at risk,” short- and long-term, and performance- and time-based compensation. |
| • | Awards are based on a variety of performance factors to mitigate the risks associated with a focus on one or two single metrics. |
| • | Our performance goals are focused on both internal operational performance and external relative comparison to our peers. |
| • | The Compensation Committee has the final approval authority for executive awards. |
| • | Our officers are held to robust stock ownership requirements. |
| • | Awards are subject to adjustment or recovery based on executive misconduct. |
| • | We maintain our high financial and risk management ratings. |
| • | Employees and directors and their designees are not permitted to directly hedge the market value of any RenaissanceRe securities. Furthermore, employees and directors and designees are also prohibited from engaging in “short sales” of RenaissanceRe securities. It is the Board’s view that such activities are against the interest of the Company’s shareholders and could cause significant repercussions to the Company and its shareholders if allowed. |
GOVERNANCE AND COMPENSATION PROCESS
Our Compensation Committee consists of directors who meet the independence requirements of the New York Stock Exchange and, subject where applicable to ratification by the Board, retains the final authority with respect to our compensation, benefit, and perquisite programs. The Compensation Committee meets at least quarterly and reviews regularly our compensation philosophy and programs. Compensation Committee meetings may include other members of the Board (including our non-Executive Chairman of the Board, who serves as an ex officio member), members of management, and third-party advisors. A portion of each meeting is spent in executive session in which no members of management are present. Neither the non-Executive Chairman of the Board nor any other non-members may vote on Compensation Committee matters.
In connection with its annual compensation determination process, the Compensation Committee engages in an annual performance assessment of each NEO, focusing on each executive’s contribution during the fiscal year, and if applicable, the level of achievement of any specific individual goals. With respect to NEOs other than himself, Mr. Currie presents the Compensation Committee with his assessment of each executive’s relative performance with respect to the above-mentioned categories for such fiscal year.
Annual compensation determinations are made generally during the first calendar quarter of each year, after our audited year-end financial information and third-party information (including reports from our compensation
43
consultants) have been provided to our Compensation Committee and after compensation recommendations have been submitted by Mr. Currie for our other NEOs. Decisions made by the Compensation Committee during the regular first quarter meeting include performance-based annual incentive bonus determinations in respect of the prior fiscal year as well as equity award grants and any salary adjustments to take effect for the then-current year.
The Use of Third-Party Advisors
Pursuant to its charter, our Compensation Committee has the authority to retain and to terminate any compensation consultant to assist with the Compensation Committee’s evaluation of executive compensation. Our Compensation Committee has retained consultants in the past for the purposes of, among other things, obtaining market intelligence on compensation trends, views and recommendations with respect to our compensation programs, and analyses and recommendations with respect to the amount or form of senior executive and director compensation.
During 2011, the Compensation Committee continued its retention of Mercer (US) Inc. (“Mercer”). Neither any member of management nor any member of the Compensation Committee has any contractual or pecuniary arrangement with Mercer. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., other subsidiaries of which acted as a broker or agent with respect to 22% of our gross premiums written in 2011. During 2011, each of Mercer and Oliver Wyman Group, another wholly owned subsidiary of Marsh & McLennan Companies, Inc., and an affiliate of Mercer, performed compensation advisory and other services on behalf of the Compensation Committee and the Company. We incurred fees in 2011 in respect of these engagements totaling $351,598 for compensation advisory and related services; $281,964 was paid in 2011, and $69,634 was paid in 2012. We incurred fees in 2011 in respect of all other services totaling $1,675,489; $1,540,550 was paid in 2011, and $134,939 was paid in 2012. The Compensation Committee approved fees for all other services. The Compensation Committee regularly reviews and discusses Mercer’s independence and is satisfied that the advice they provide is independent of the work of their subsidiaries. In order to enhance this position, the Compensation Committee will seek other third-party opinions.
The Compensation Committee also retained Towers Watson in the fourth quarter of 2011 to provide a critical review of the current state of the Company’s compensation programs and insights on the continued evolution of our compensation programs in light of changing dynamics in the area of executive compensation, competitive factors, and the company’s strategy. Neither any member of management nor any member of the Compensation Committee has any contractual or pecuniary arrangement with Towers Watson. During 2011, Tillinghast, an affiliate of Towers Watson, provided other non-consulting services to the Company, including certain actuarial services. We incurred fees in 2011 in respect of these engagements totaling $24,050 for compensation advisory and related services, which was paid in 2012. We incurred fees in 2011 in respect of all other services totaling $412,552.
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SUMMARY COMPENSATION TABLE
The following table sets forth compensation for our NEOs in fiscal years 2009, 2010, and 2011.
| Name and Principal Position(1) |
Year | Salary ($) |
Bonus(2)
($) |
Stock Awards(3) ($) |
Non-Equity Incentive Plan Compensation(2) ($) |
All Other Compensation(4) ($) |
Total ($) |
|||||||||||||||||||||
| Neill A. Currie President and Chief Executive Officer |
|
2011 2010 2009 |
|
|
1,049,350 1,022,500 952,800 |
|
|
— 2,613,105 2,549,250 |
|
|
3,167,354 9,304,754 2,999,984 |
|
|
1,463,339 — — |
|
|
1,022,767 1,459,470 1,079,664 |
|
|
6,702,810 14,399,829 7,581,698 |
| |||||||
| Peter C. Durhager Executive Vice President and Chief Administrative Officer |
|
2011 2010 |
|
|
470,604 422,700 |
|
|
— 914,760 |
|
|
1,252,992 1,216,373 |
|
|
512,266 — |
|
|
434,143 342,616 |
|
|
2,670,005 2,896,449 |
| |||||||
| Jeffrey D. Kelly Executive Vice President and Chief Financial Officer |
|
2011 2010 2009 |
|
|
575,560 536,850 256,442 |
|
|
— 914,760 892,320 |
|
|
1,252,992 1,516,354 1,799,979 |
|
|
546,315 — — |
|
|
509,014 443,193 162,127 |
|
|
2,883,881 3,411,157 3,110,868 |
| |||||||
| Kevin J. O’Donnell Executive Vice President and Global Chief Underwriting Officer |
|
2011 2010 2009 |
|
|
718,021 618,750 518,750 |
|
|
— 1,385,820 1,351,875 |
|
|
1,786,996 1,734,893 2,628,723 |
|
|
787,500 — — |
|
|
700,768 703,573 554,532 |
|
|
3,993,285 4,443,036 5,053,880 |
| |||||||
| Stephen H. Weinstein Senior Vice President, General Counsel, Secretary, and Chief Compliance Officer |
|
2011 2010 |
|
|
443,166 385,200 |
|
|
— 633,450 |
|
|
887,860 1,362,044 |
|
|
428,274 — |
|
|
568,158 635,837 |
|
|
2,327,458 3,016,531 |
| |||||||
| (1) | This column reflects each Named Executive Officer’s principal position as of the date of this Proxy Statement. |
| (2) | The amounts shown in these columns constitute the performance-based annual incentive bonuses paid to each Named Executive Officer based on the Compensation Committee’s evaluation at its first quarterly meeting of each year of the Company’s and each such officer’s performance in the immediately preceding year. The figures listed relate to performance for the year listed but are paid in the following year. For example, the figures for 2011 relate to performance for the year ended December 31, 2011, but were paid in March 2012. In light of the rigorous and formulaic application of the performance metrics for the determination of our performance-based annual incentive bonuses for 2011, as described in more detail above under “Compensation Discussion and Analysis—Principal Components of Compensation—Performance-Based Annual Incentive Bonus,” SEC rules require disclosure of these amounts for 2011 as “Non-Equity Incentive Plan Compensation,” not “Bonus” compensation. For more information on the target and maximum bonus opportunities for our Named Executive Officers pursuant to our performance-based annual incentive bonus program, see the Grants of Plan-Based Awards table below. |
| (3) | This column represents the aggregate grant date fair value of stock awards granted to our Named Executive Officers in each of 2009, 2010, and 2011, determined under FASB ASC Topic 718, Compensation—Stock Compensation. The value of the Performance Shares is determined by a Monte Carlo simulation model that calculates a fair value per vesting tranche, which is applied to the target number of Performance Shares per tranche on the grant date. A more detailed discussion of our Performance Share program may be found above under “Compensation Discussion and Analysis—Principal Components of Compensation—Long-Term Equity-Based Incentive.” For information on the valuation assumptions with respect to awards made during 2011, refer to RenaissanceRe’s Stock Incentive Compensation and Employee Benefit Plans at Note 16 in its financial statements for 2011, as included in its Annual Report on Form 10-K for 2011, as filed with the SEC. The amounts above reflect the grant date fair value for these awards, excluding the accounting effect of any estimate of future service-based forfeitures and do not necessarily correspond to the actual value that might be realized by the Named Executive Officers. |
| (4) | See the All Other Compensation Table and the Other Benefits Table provided below for more information and analysis of the amounts included in the All Other Compensation column for 2011. |
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ALL OTHER COMPENSATION TABLE
| Name |
Year | Tax Gross-Up Through April 2011(1) ($) |
Company 401(k)/ Pension Matching Contribution(2) ($) |
Value of Life Insurance Premiums(3) ($) |
Prepaid Non- Compete Consideration(4) ($) |
Other Benefits(5) ($) |
Total
Other Compensation(2) ($) |
|||||||||||||||||||||
| Neill A. Currie |
2011 | 113,866 | 14,700 | 5,760 | 60,000 | 828,441 | 1,022,767 | |||||||||||||||||||||
| Peter C. Durhager |
2011 | 3,486 | 14,700 | 5,238 | 109,200 | 301,519 | 434,143 | |||||||||||||||||||||
| Jeffrey D. Kelly |
2011 | 76,433 | 14,700 | 5,760 | — | 412,121 | 509,014 | |||||||||||||||||||||
| Kevin J. O’Donnell |
2011 | 73,884 | 14,700 | 5,760 | 156,250 | 450,174 | 700,768 | |||||||||||||||||||||
| Stephen H. Weinstein |
2011 | 99,799 | 14,700 | 3,984 | 59,200 | 390,475 | 568,158 | |||||||||||||||||||||
| (1) | This column reflects tax gross-ups paid to our expatriate personnel, including our Named Executive Officers, principally in respect of expatriate perquisites including personal travel (other than personal travel using the Company’s corporate aircraft), business-related spousal travel, club dues, automobile expenses, and tax advice, as well as a gross-up for taxes incurred upon reimbursement by the Company for state taxes paid by the Company in connection with the executive’s U.S. workdays. These tax gross-up arrangements were eliminated as of May 2011. See “Compensation Discussion and Analysis—Principal Components of Compensation—Other Benefits and Perquisites; Limitations and Changes” above. |
| (2) | This column reports Company matching contributions to our Named Executive Officers under our 401(k) plan for Messrs. Currie, Kelly, O’Donnell, and Weinstein and under the Bermuda National Pension Scheme for Mr. Durhager. |
| (3) | This column reports the value of premiums paid on behalf of our Named Executive Officers with respect to life insurance coverage. The death benefit under the life insurance coverage is equal to four times the Named Executive Officers’ annual salary up to a maximum of $2.0 million. |
| (4) | The amounts in this table represent a prepayment of severance benefits to which the Named Executive Officers are entitled pursuant to their employment agreements and do not represent extra-contractual or additional payments not otherwise due. The amount is calculated as the incremental change in the salary as of December 31, 2010, from the salary as of December 31, 2009. Such amounts are subject to clawback in the event of a future termination for cause or a violation of the restrictive covenants contained in the executives’ employment agreements. For additional information on the amounts disclosed in this column, please see the discussion below under “Potential Payments Upon a Termination or Change in Control—Severance Payments and Benefits.” |
| (5) | See the Other Benefits Table below for additional information. |
OTHER BENEFITS TABLE
| Name |
Year | Personal Travel(1) ($) |
Housing Benefits(2) ($) |
Club Dues(3) ($) |
Other Benefits(4) ($) |
Total
Other Personal Benefits(2) ($) |
||||||||||||||||||
| Neill A. Currie |
2011 | 536,617 | 263,437 | 4,000 | 24,387 | 828,441 | ||||||||||||||||||
| Peter C. Durhager |
2011 | 134,764 | 144,000 | 2,000 | 20,755 | 301,519 | ||||||||||||||||||
| Jeffrey D. Kelly |
2011 | 135,505 | 239,437 | 8,190 | 28,989 | 412,121 | ||||||||||||||||||
| Kevin J. O’Donnell |
2011 | 147,037 | 269,437 | 4,100 | 29,600 | 450,174 | ||||||||||||||||||
| Stephen H. Weinstein |
2011 | 156,100 | 203,437 | — | 30,938 | 390,475 | ||||||||||||||||||
| (1) | Personal travel includes costs for commercial travel for the Named Executive Officer and such person’s immediate family members as well as use of the corporate aircraft, and in the case of Mr. Currie, includes, in respect of Mr. Currie’s commuting costs to his sole office location in Bermuda, $406,352, and in respect of personal, non-business-related travel, $117,716. The amount shown in the column for Mr. Currie is net of an aggregate amount of $181,760 paid to the Company by Mr. Currie in accordance with the terms of his agreement relating to the use of the Company aircraft which contemplates pre-funding of certain amounts by Mr. Currie for such use. With respect to personal use of the corporate aircraft, amounts in this column reflect incremental variable operating costs, which include fuel, landing and handling fees, crew lodging and meal allowances, and catering. For more information on travel benefits provided to the Company’s senior executive officers, please see “Compensation Discussion and Analysis—Principal Components of Compensation—Other Benefits and Perquisites; Limitations and Changes” above. Per Company policy, all expatriate employees based in Bermuda, including Messrs. Kelly, O’Donnell, and Weinstein, are provided four round trips on “home leave” per year for themselves and each member of their respective families, consistent with Bermuda market practice. Although Mr. Durhager, as a citizen of Bermuda, is not afforded the benefit of “home leave” trips, he is, however, provided use of the corporate aircraft from time to time consistent with the aircraft usage policy applicable to the other Named Executive Officers. |
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| (2) | This column reports the amount of housing-related benefits we provided with respect to the Bermuda residence of each Named Executive Officer, principally consisting of housing lease costs. |
| (3) | This column represents club memberships for Named Executive Officers. |
| (4) | Other benefits includes financial, tax, and legal planning expenses, company automobile expenses reimbursed by the Company, and Company matching on charitable donations. |
GRANTS OF PLAN-BASED AWARDS TABLE
The following table sets forth information concerning grants of plan-based awards to the Named Executive Officers during the calendar year ended December 31, 2011.
| Name |
Grant Date(1) | Approval Date(1) |
Plan | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) |
Estimated Future Payouts Under Equity Incentive Plan Awards(3) |
All Other Stock Awards: Number of Shares of Stock or Units(4) (#) |
Closing Price on Grant Date(5) ($/Sh) |
Grant Date Fair Value of Stock and Option Awards(6) ($) |
||||||||||||||||||||||||||||||
| Target ($) |
Maximum ($) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||||||||||||
| Neill A. Currie |
03/01/2011 | 2/22/2011 | 2001 Plan | — | — | — | — | 47,838 | 66.21 | 3,167,354 | ||||||||||||||||||||||||||||
| Annual Cash Bonus |
1,742,070 | 2,613,105 | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Peter C. Durhager |
03/01/2011 | 2/22/2011 | Performance Share Plan |
— | — | 4,500 | 11,251 | — | 66.21 | 359,025 | ||||||||||||||||||||||||||||
| 03/01/2011 | 2/22/2011 | 2001 Plan | — | — | — | — | 13,502 | 66.21 | 893,967 | |||||||||||||||||||||||||||||
| Annual Cash Bonus |
609,840 | 914,760 | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Jeffrey D. Kelly |
03/01/2011 | 2/22/2011 | Performance Share Plan |
— | — | 4,500 | 11,251 | — | 66.21 | 359,025 | ||||||||||||||||||||||||||||
| 03/01/2011 | 2/22/2011 | 2001 Plan | — | — | — | — | 13,502 | 66.21 | 893,967 | |||||||||||||||||||||||||||||
| Annual Cash Bonus |
650,375 | 975,563 | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Kevin J. O’Donnell |
03/01/2011 | 2/22/2011 | Performance Share Plan |
— | — | 6,418 | 16,046 | — | 66.21 | 512,056 | ||||||||||||||||||||||||||||
| 03/01/2011 | 2/22/2011 | 2001 Plan | — | — | — | — | 19,256 | 66.21 | 1,274,940 | |||||||||||||||||||||||||||||
| Annual Cash Bonus |
937,500 | 1,406,250 | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Stephen H. Weinstein |
03/01/2011 | 2/22/2011 | Performance Share Plan |
— | — | 3,189 | 7,972 | — | 66.21 | 254,429 | ||||||||||||||||||||||||||||
| 03/01/2011 | 2/22/2011 | 2001 Plan | — | — | — | — | 9,567 | 66.21 | 633,431 | |||||||||||||||||||||||||||||
| Annual Cash Bonus |
509,850 | 764,775 | — | — | — | — | — | |||||||||||||||||||||||||||||||
| (1) | On February 22, 2011, the Compensation Committee approved its equity compensation determinations for every Named Executive Officer, including Restricted Shares and Performance Shares. In accordance with the Company’s customary policy, equity awards were granted on the first business day in March. |
| (2) | These columns represent the potential performance-based annual incentive bonuses that could have been earned by the Named Executive Officers in respect of 2011 performance assuming target and maximum achievement of the applicable performance metrics. See the discussion above under “Compensation Discussion and Analysis—Principal Components of Compensation—Performance-Based Annual Incentive Bonus” for a more detailed description of our performance-based annual incentive bonus program. |
| (3) | These columns represent the number of Performance Shares that vest at target and maximum achievement of the performance metrics applicable to such awards. There is no threshold number of shares that may vest. Dividends declared by the Company’s Board and paid to holders of the Common Shares are reserved and payable to holders of Performance Shares, if at all, at such time as the Performance Shares vest. See the discussion above under “Compensation Discussion and Analysis—Principal Components of Compensation—Long-Term Equity-Based Incentive” for a more detailed description of the Performance Share program. |
47
| (4) | All of the grants in this column vest ratably over four years on the anniversaries of the grant date. Dividends declared by the Company’s Board and paid to holders of the Common Shares are payable to holders of Restricted Shares, including our Named Executive Officers and directors. |
| (5) | The number of Restricted Shares and target number of Performance Shares awarded was computed by dividing, as of the grant date, the approved grant value by the closing market price of the Common Shares on the date of grant. See the discussion above under “Compensation Discussion and Analysis—Principal Components of Compensation—Long-Term Equity-Based Incentive” for a more detailed description of the Company’s equity grant practices. |
| (6) | This column represents the aggregate grant date fair value of stock awards granted to our Named Executive Officers in 2011, determined under FASB ASC Topic 718, Compensation—Stock Compensation. The value of the Performance Shares is determined by a Monte Carlo simulation model that calculates a fair value per vesting tranche, which is applied to the target number of Performance Shares per tranche on the grant date. For information on the valuation assumptions with respect to awards made, refer to RenaissanceRe’s Stock Incentive Compensation and Employee Benefit Plans at Note 16 in its financial statements for 2011, as included in its Annual Report on Form 10-K for 2011, as filed with the SEC. The amounts above reflect the grant date fair value for these awards, excluding the accounting effect of any estimate of future serviced-based forfeitures, and do not necessarily correspond to the actual value that might be recognized by the Named Executive Officers. |
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
2011 Performance Share Grants
In accordance with Item 402 of Regulation S-K, the value of the Performance Shares disclosed in the Stock Awards column of the Summary Compensation Table above is determined by a Monte Carlo simulation model that calculates a fair value per vesting tranche, which is applied to the target number of Performance Shares per tranche on the grant date. Such amounts reflect the value of the awards at the grant date based upon the probable outcome of the performance conditions and are consistent with our estimate of the aggregate compensation cost to be recognized over the vesting period determined in accordance with FASB ASC Topic 718, Compensation—Stock Compensation. The following table shows the value of the Named Executive Officers’ 2011 Performance Share awards on the date of grant assuming both target and maximum achievement of the applicable performance goals, based on a closing price of our Common Shares of $66.21 on the date of grant. The table also demonstrates that performance at or below the threshold 35th percentile will result in forfeiture of the given award, where target performance is based upon attainment of total shareholder return for the given measurement period at the 50th percentile among the Company’s peers as described herein. In light of his special Performance Share Award in 2010, which was designed to motivate and retain Mr. Currie over a multi-year period, Mr. Currie did not receive any award of Performance Shares during 2011.
| Named Executive Officer |
Award at or below 35th Percentile ($) |
Target Award ($) |
Maximum Award ($) |
|||||||
| Neill A. Currie |
— | — | — | |||||||
| Peter C. Durhager |
— | 297,945 | 744,929 | |||||||
| Jeffrey D. Kelly |
— | 297,945 | 744,929 | |||||||
| Kevin J. O’Donnell |
— | 424,936 | 1,062,406 | |||||||
| Stephen H. Weinstein |
— | 211,144 | 527,826 | |||||||
As described above under “Compensation Discussion and Analysis—Principal Components of Compensation—Long-Term Equity-Based Incentive,” the Performance Shares granted in 2011 vest over a period of three years, in substantially equal vesting tranches, based upon the Company’s total shareholder return relative to the Company’s peer group in such years, as determined by the Compensation Committee.
Employment Agreements
We have entered into employment agreements with each of our Named Executive Officers, which entitle the officers to salary, annual bonus opportunity, participation in our perquisites and benefits programs, and severance payments and benefits upon certain qualifying terminations of employment (as discussed in further detail below
48
under the caption “Potential Payments Upon a Termination or a Change in Control”). Each executive’s employment agreement, other than our Chief Executive Officer’s, runs for year-to-year terms that extend automatically absent thirty days’ notice by either party of such party’s intent not to renew the term.
CEO Agreement. Mr. Currie’s employment agreement, through February 2014, contains specific features that further the Company’s overall compensation philosophy and objectives, including performance-based vesting of certain of his equity incentives and retirement features that are intended to continue to motivate Mr. Currie during his period of continued service to the Company.
Mr. Currie’s employment agreement generally provides for a salary of not less than $1,000,000 and a target annual cash bonus equal to 165% of salary. The severance provisions applicable upon certain qualifying terminations of employment remain substantially the same as in Mr. Currie’s prior agreement and in the other Named Executive Officer’s agreements, except that the period during which Mr. Currie may exercise his outstanding stock options may be extended for up to five years following the date of termination, based upon the applicable circumstance of termination. (For more information on the payments and benefits provided by Mr. Currie’s employment agreement, see the section below captioned “Potential Payments Upon a Termination or Change in Control.”) In addition, Mr. Currie’s employment agreement provides for lapsing, at the time Mr. Currie became retirement eligible (i.e., the date on which the sum of Mr. Currie’s age and total years of service with the Company equals 65), of service-based vesting conditions applicable to Restricted Shares then held by Mr. Currie for at least one year, provided that, other than to satisfy tax obligations relating to such vesting, Mr. Currie will generally remain restricted from selling or otherwise transferring any such vested shares until the date on which they would have vested based on his continued service. Any unvested stock options that Mr. Currie has held for at least one year upon his actual retirement will continue to vest in the ordinary course as if Mr. Currie remained employed through the applicable vesting period. Mr. Currie is currently retirement eligible.
49
OPTION EXERCISES AND STOCK VESTED TABLE
The following table sets forth information concerning option exercises by, and the vesting of Restricted Shares and Performance Shares, and vesting and settlement of cash-settled restricted stock units, held by, our Named Executive Officers during 2011.
| Option Awards | Stock Awards | |||||||||||||||
| Name |
Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) |
||||||||||||
| Neill A. Currie |
— | — | 78,614 | 5,317,313 | ||||||||||||
| Peter C. Durhager |
— | — | 18,956 | 1,279,603 | ||||||||||||
| Jeffrey D. Kelly |
— | — | 15,532 | 1,061,457 | ||||||||||||
| — | — | 1,344 | (1) | 88,986 | ||||||||||||
| Kevin J. O’Donnell |
84,298 | 1,611,249 | 28,586 | 1,928,002 | ||||||||||||
| Stephen H. Weinstein |
— | — | 20,353 | 1,365,479 | ||||||||||||
| — | — | 2,240 | (1) | 148,310 | ||||||||||||
| (1) | Represents the number of Common Shares underlying cash-settled restricted stock units granted under the 2010 Restricted Stock Unit Plan, which vested in 2011 and settled in cash equal to the value of such Common Shares on the vesting date. |
EQUITY COMPENSATION PLAN INFORMATION
The information set forth in the table below is as of December 31, 2011.
| Plan category |
(a) Number of securities to be issued upon exercise of outstanding options, warrants, and rights |
(b) Weighted-average exercise price of outstanding options, warrants, and rights |
(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(2) |
|||||||||
| Equity compensation plans approved by shareholders(1) |
1,973,307 | $ | 47.33 | 2,748,227 | ||||||||
| Equity compensation plans not approved by shareholders |
— | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
1,973,307 | $ | 47.33 | 2,748,227 | ||||||||
| (1) | Plans previously approved by the shareholders include the 2001 Plan, the 2004 Plan, the Director Stock Plan, the Performance Share Plan, and the 2010 Employee Stock Purchase Plan. |
| (2) | As of December 31, 2011, there were options outstanding to purchase a total of 1,973,307 Common Shares, which represent 3.8% of the number of Common Shares outstanding. |
50
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
The following table sets forth the outstanding equity awards held by our Named Executive Officers as of December 31, 2011.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
| Name |
Number of Securities Underlying Unexercised Options Exercisable (#) |
Number of Securities Underlying Unexercised Options Unexercisable(1) (#) |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested(3) ($) |
Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested(4)(11) (#) |
Equity Incentive Plan Awards: Market Value of Unearned Shares That Have Not Vested(3)(11) ($) |
||||||||||||||||||||||||
| Neill A. Currie |
300,000 | (2) | — | 73.06 | 7/5/2015 | 34,067 | (5) | 2,533,563 | 152,630 | 11,351,093 | ||||||||||||||||||||||
| 439,452 | — | 42.66 | 3/21/2016 | 41,532 | (6) | 3,088,735 | — | — | ||||||||||||||||||||||||
| 76,271 | — | 51.13 | 3/1/2017 | 47,838 | (10) | 3,557,712 | — | — | ||||||||||||||||||||||||
| 91,627 | 30,542 | 53.86 | 3/3/2018 | — | — | — | — | |||||||||||||||||||||||||
| Peter C. Durhager |
9,878 | — | 53.96 | 3/12/2014 | 17,033 | (5) | 1,266,744 | 19,932 | 1,482,343 | |||||||||||||||||||||||
| 42,500 | (2) | 74.24 | 8/31/2014 | 11,720 | (6) | 871,616 | — | — | ||||||||||||||||||||||||
| 5,654 | — | 49.10 | 3/21/2015 | 1,440 | (7) | 107,093 | — | — | ||||||||||||||||||||||||
| 34,035 | — | 37.51 | 11/4/2015 | 13,502 | (10) | 1,004,144 | — | — | ||||||||||||||||||||||||
| 30,466 | — | 42.66 | 3/21/2016 | — | — | — | — | |||||||||||||||||||||||||
| 29,877 | — | 51.13 | 3/1/2017 | — | — | — | — | |||||||||||||||||||||||||
| 23,374 | 7,791 | 53.86 | 3/3/2018 | — | — | — | — | |||||||||||||||||||||||||
| Jeffrey D. Kelly |
— | — | — | — | 11,720 | (6) | 871,616 | 19,932 | 1,482,343 | |||||||||||||||||||||||
| — | — | — | — | 17,550 | (8) | 1,305,194 | — | — | ||||||||||||||||||||||||
| — | — | — | — | 4,032 | (9) | 299,860 | — | — | ||||||||||||||||||||||||
| — | — | — | — | 13,502 | (10) | 1,004,144 | — | — | ||||||||||||||||||||||||
| Kevin J. O’Donnell |
7,412 | — | 52.90 | 3/3/2014 | 29,851 | (5) | 2,220,019 | 28,428 | 2,114,190 | |||||||||||||||||||||||
| 250,000 | (2) | — | 74.24 | 8/31/2014 | 16,716 | (6) | 1,243,169 | — | — | |||||||||||||||||||||||
| 56,433 | — | 44.30 | 1/3/2016 | 2,291 | (7) | 170,382 | — | — | ||||||||||||||||||||||||
| 67,281 | — | 42.66 | 3/21/2016 | 19,256 | (10) | 1,432,069 | — | — | ||||||||||||||||||||||||
| 23,082 | — | 51.13 | 3/1/2017 | — | — | — | — | |||||||||||||||||||||||||
| 37,170 | 12,389 | 53.86 | 3/3/2018 | — | — | — | — | |||||||||||||||||||||||||
| Stephen H. Weinstein |
12,000 | — | 39.07 | 11/19/2012 | 20,440 | (5) | 1,520,123 | 14,124 | 1,050,402 | |||||||||||||||||||||||
| 8,232 | — | 45.43 | 5/16/2013 | 8,306 | (6) | 617,717 | — | — | ||||||||||||||||||||||||
| 8,708 | — | 53.96 | 3/12/2014 | 1,440 | (7) | 107,093 | — | — | ||||||||||||||||||||||||
| 8,239 | — | 49.10 | 3/21/2015 | 6,720 | (9) | 499,766 | — | — | ||||||||||||||||||||||||
| 34,035 | — | 37.51 | 11/4/2015 | 9,567 | (10) | 711,498 | — | — | ||||||||||||||||||||||||
| 29,160 | — | 42.66 | 3/21/2016 | — | — | — | — | |||||||||||||||||||||||||
| 52,047 | — | 51.13 | 3/1/2017 | — | — | — | — | |||||||||||||||||||||||||
| 23,374 | 7,791 | 53.86 | 3/3/2018 | — | — | — | — | |||||||||||||||||||||||||
| (1) | All options were granted under the Company’s 2001 Plan apart from those described in footnote (2). Each option award has a 10-year term and vests in four equal installments (at a rate of 25% per year) from the date of grant. Vesting dates for each option award can be calculated accordingly. |
| (2) | All of these options were granted under our 2004 Plan, have a 10-year term, and cliff vested 100% on the fifth anniversary of the date of grant. Our Compensation Committee terminated the 2004 Plan in August 2007 because it determined that this plan was no longer consistent with our compensation philosophy and objectives; however, all outstanding grants at the time of termination remain outstanding. |
| (3) | These amounts were determined based on closing price of the Common Shares of $74.37 on December 30, 2011, the final business day of calendar year 2011, and include unvested shares earned under Performance Share Plan for completed performance periods. |
| (4) | These amounts represent Performance Shares held by each Named Executive Officer as of December 31, 2011, which remain subject to performance-based vesting conditions in subsequent years pursuant to the Performance Share Plan. Such amounts represent the maximum number of shares that may vest if the maximum performance-based vesting conditions are achieved. If threshold performance conditions are not achieved, all Performance Shares will be forfeited. For a detailed discussion on each of the Named Executive Officers’ Target and Maximum Awards under the 2010 Performance Share Plan, please see our discussion above under “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table.” In addition, please see the discussion above under “Compensation Discussion and Analysis—Principal Components of Compensation—Long-Term Equity-Based Incentive” for a more detailed description of the Performance Share program. |
51
| (5) | These amounts represent Restricted Shares granted under the 2001 Plan, which vest in substantially equal installments on March 2, 2012, and 2013. |
| (6) | These amounts represent Restricted Shares granted under the 2001 Plan, which vest in substantially equal installments on March 1, 2012, 2013, and 2014. |
| (7) | These amounts represent Restricted Shares granted under the 2001 Plan, which vest on March 3, 2012. |
| (8) | These amounts represent Restricted Shares granted under the 2001 Plan, which vest in substantially equal installments on August 3, 2012, and 2013. |
| (9) | These amounts represent cash-settled restricted stock units granted under the 2010 Restricted Stock Unit Plan, which vest and settle in cash equal to the value of Common Shares underlying the restricted stock units in substantially equal installments on March 2, 2012, 2013, and 2014. |
| (10) | These amounts represent Restricted Shares granted under the 2001 Plan, which vest in substantially equal installments on March 1, 2012, 2013, 2014, and 2015. |
| (11) | The target number and market value of the of unearned shares of the Equity Incentive Plan Awards for each of the Named Executive Officers at December 31, 2011, is as follows: |
| Name |
Target Number of Unearned Shares of the Equity Incentive Plan Awards |
Market Value of Target Number of Unearned Shares of the Equity Incentive Plan Awards |
||||||
| Neill A. Currie |
87,217 | $ | 6,486,328 | |||||
| Peter C. Durhager |
7,972 | $ | 592,878 | |||||
| Jeffrey D. Kelly |
7,972 | $ | 592,878 | |||||
| Kevin J. O’Donnell |
11,371 | $ | 845,661 | |||||
| Stephen H. Weinstein |
5,650 | $ | 420,191 | |||||
Potential Payments Upon a Termination or Change in Control
Severance Payments and Benefits. In connection with the employment agreements as described above and as in effect on December 31, 2011, our Named Executive Officers would have been entitled to certain payments and benefits upon certain qualifying terminations of their employment relationships with us during 2011. A Named Executive Officer’s employment relationship may be terminated for any of the following reasons: (i) the executive’s death or disability, (ii) by us with or without cause (as defined in the applicable executive’s agreement), (iii) by the executive with or without good reason (as defined in the applicable executive’s agreement), and (iv) after expiration of the term of employment following notice of non-extension by us or by the executive. No benefits are payable upon a termination by us for cause.
Upon a Named Executive Officer’s termination of employment during the year ended December 31, 2011 (other than a termination by us for cause), and subject to the execution of a mutual general release of claims (if requested by us), the executive would have become entitled to a combination of the following benefits, as illustrated in the Severance Benefits Components Table below:
| 1. | an amount equal to a percent (the “Percent”) of salary, to be paid in installments over the 12-month period following the termination of employment (or, for Mr. Currie, in a lump sum within 10 days of termination); |
| 2. | an amount equal to the Percent of the greater of (x) the target bonus and (y) the actual bonus for the year of termination, to be paid in substantially equal installments during the 12-month period following the termination of employment (or, for Mr. Currie, in a lump sum within 10 days of termination); |
| 3. | subject to the executive’s compliance with non-competition and other post-termination obligations, a lump-sum payment equal to a percent (the “Lump Sum Percent”) of salary to be paid at the end of the 12-month period following the termination of employment (or, for Mr. Currie, the 18-month period following the termination of employment); |
52
| 4. | subject to the executive’s compliance with non-competition and other post-termination obligations, a lump-sum payment equal to the Lump Sum Percent of the greater of (x) the target bonus and (y) the actual bonus for the year of termination, to be paid at the end of the 12-month period following the termination of employment (or, for Mr. Currie, the 18-month period following the termination of employment); |
| 5. | a pro-rata amount of the target bonus based on the number of days elapsed from the commencement of the year of termination through and including the date of termination; |
| 6. | continuation of benefits during the 12-month period following the termination of employment (or, for Mr. Currie, the 18-month period following the termination of employment); and |
| 7. | vesting of certain equity awards granted under the Company’s stock incentive plans. |
The Percent and Lump Sum Percent are 150% and 50%, respectively, for Mr. Currie; 75% and 25%, respectively, for Messrs. Kelly, Durhager, and Weinstein; and 93.75% and 31.25%, respectively, for Mr. O’Donnell. In the event that a qualifying termination (i.e. a termination by the Company without cause or a termination by the executive for good reason) occurs within 12 months following a change in control, the Percent and Lump Sum Percent are 150% and 50%, respectively, for each of the Named Executive Officers. In the event that such a qualifying termination occurs in connection with a change in control, the benefits payable to Mr. Currie pursuant to his employment agreement will be reduced if such reduction will result in a greater after-tax benefit to him due to the operation of the excess parachute payment excise tax provisions of the Code.
Section 457A of the Code was enacted in connection with the passage of the United States Emergency Economic Stabilization Act of 2008 and generally requires a taxpayer to include in gross income any deferred compensation attributable to services performed after 2008 and payable by, among others, certain non-U.S. corporations (such as the Company), at the time the taxpayer’s rights to the compensation are no longer conditioned upon the future performance of substantial services. Limited grandfather relief applies with respect to deferred compensation attributable to services performed before 2009, with such amounts generally required to be taken into income no later than 2017. The portion of each Named Executive Officer’s (other than Mr. Kelly’s, who was hired after the enactment of Section 457A of the Code) contractually provided severance benefits described above in clauses (i) (Percent of salary) and (iii) (Lump Sum Percent of salary), which we view as consideration for the restrictive covenants contained in the employment agreements (referred to herein as “non-compete consideration”), is subject to Section 457A of the Code as a result of our Bermuda headquarters location. In light of Section 457A of the Code, the Compensation Committee determined to amend the executives’ employment agreements to preserve the economics agreed to by each executive and the Company upon the original execution of the employment agreements, while providing for compliance with Section 457A of the Code. As amended, the agreements provide for yearly pre-payments, commencing in 2010, of any increases in the non-compete consideration to which an executive would become entitled upon a future termination of employment in respect of any salary increase after 2008. These pre-payments will be subject to the same clawback and forfeiture provisions as the non-compete consideration. Additionally, these amendments provide for a Company right to set off against other amounts owing to the executives should they engage in certain activities that are detrimental to the Company after the payment of any pre-payments. As a result of these pre-payments, the portion of the severance benefits representing non-compete consideration eligible for the grandfather relief under Section 457A of the Code (the “vested non-compete consideration”) that will ultimately be paid upon a termination of employment will be frozen at the level of the executive’s salary as of December 31, 2008. If an executive’s employment (other than Mr. Kelly’s) has not otherwise terminated prior to December 31, 2017, the vested non-compete consideration (i.e., an amount equal to the executive’s base salary in effect on December 31, 2008) will instead be paid to the executive on such date, and such vested non-compete consideration shall no longer be payable upon any subsequent termination of employment (although yearly payments representing any future increases in salary will continue until the executive’s ultimate termination of employment). If an executive’s employment (other than Mr. Kelly’s) is terminated after December 31, 2017, he will not be entitled to either of the severance benefits described in clauses (i) and (iii) above.
53
SEVERANCE BENEFITS COMPONENTS TABLE
| By Us Without Cause |
By Executive for Good Reason |
Death(1) | Disability | By Executive Without Good Reason(2) |
Our Non- Extension of Agreement |
Executive’s Non-Extension of Agreement(2) |
||||||||||||||||||||||
| (i) Percent of Salary |
× | × | × | × | × | × | ||||||||||||||||||||||
| (ii) Percent of Bonus |
× | × | × | |||||||||||||||||||||||||
| (iii) Lump Sum Percent of Salary |
× | × | × | × | × | × | ||||||||||||||||||||||
| (iv) Lump Sum Percent of Bonus |
× | × | × | |||||||||||||||||||||||||
| (v) Pro-rata Bonus |
× | × | × | × | × | |||||||||||||||||||||||
| (vi) Continuation of Benefits |
× | × | × | |||||||||||||||||||||||||
| (vii) Vesting of Awards |
× | (3) | × | (3) | × | × | × | (3) | ||||||||||||||||||||
| (1) | In addition to the benefits above and as noted in connection with the Summary Compensation Table above, the Company pays premiums on behalf of our Named Executive Officers with respect to life insurance coverage under the Company’s health and benefits plan, with a death benefit that can equal four times the Named Executive Officer’s annual salary up to a maximum of $2.0 million. |
| (2) | With respect to Mr. Kelly only, such benefits will be provided only to the extent the Company elects to extend the non-competition covenant for up to 12 months beyond the termination date. |
| (3) | Accelerated vesting applies to all time-vested awards. See “Treatment of Equity Awards Upon a Termination of Employment or Change in Control” below for a discussion relating to the accelerated vesting of performance-based awards. |
The estimated payments and benefits provided upon each type of termination or upon a change in control are summarized in the Potential Payments Upon a Termination or Change in Control Table below as if the termination or change in control, as applicable, had occurred on December 31, 2011, and using the closing price of our Common Shares of $74.37 on December 30, 2011, the last business day of calendar year 2011. In addition, because the estimated payments are calculated by assuming a termination on December 31, 2011, the pro-rata bonus amounts in the Potential Payments Upon a Termination or Change in Control Table below reflect an accrual for a full calendar year. Actual amounts payable following a termination or change in control could differ from the amounts shown, perhaps significantly, and would depend on the particular facts and circumstances pertaining at the time.
Under the Named Executive Officers’ employment agreements as of December 31, 2011, during the term of employment and for the 12-month period following any termination of employment (or, for Mr. Currie, the 18-month period following the termination of employment), each executive is subject to non-competition and non-interference covenants; provided that for Mr. Kelly only, the non-competition covenant will extend beyond a termination without good reason or due to an employee non-renewal only to the extent that the Company elects to pay Mr. Kelly the Percent and Lump Sum Percent of salary (or prorated portion thereof for an extension for a period less than 12 months). Generally, the non-competition covenant prevents the executive from engaging in activities competitive with our business or the business of our affiliates, and the non-interference covenant prevents the executive from soliciting or hiring our employees or those of our affiliates or service providers and from inducing any of our customers, suppliers, licensees, or other business relations or those of our affiliates, to cease doing business with, or reduce the amount of business conducted with, us or our affiliates, or in any other manner interfering with our relationship with such parties. The Named Executive Officers’ employment agreements also contain standard confidentiality and assignment of inventions provisions as well as indemnification protection generally to the fullest extent permitted by Bermuda law, except in certain limited circumstances.
54
Treatment of Equity Awards Upon a Termination of Employment or Change in Control
Pursuant to the Named Executive Officers’ employment agreements as in effect on December 31, 2011, all time-vested equity awards would have vested in full upon the executive’s death, a termination due to the executive’s disability, a voluntary termination by the executive for good reason, an involuntary termination without cause, or a Company non-renewal, in each case on or prior to December 31, 2011. All options and awards outstanding also vest upon a change in control pursuant to the terms of such plans.
In addition, upon the date on which the sum of a Named Executive Officer’s age and years of service (each measured on a daily basis) equals 65 (subject to a minimum of five years of service), all time-vested Restricted Shares and restricted stock units then held by him for at least one year will vest in full, provided that no such shares may be sold (other than to satisfy tax withholding in connection with such accelerated vesting) until the end of the original vesting period, and all Performance Shares then held by him for at least one year (but not dividends accrued with respect to such shares), other than Mr. Currie’s special retention equity award, will no longer be subject to continued service-based vesting, and will remain outstanding through the applicable performance period without regard for any subsequent termination of employment and will vest based on the actual level of attainment of the applicable performance goals. Such waiver of the service vesting condition notwithstanding, all Performance Shares that remain subject to continued performance following an executive’s retirement-eligibility date will be forfeited upon a subsequent termination for “cause” or violation of the restrictive covenants set forth in his employment agreement. To the extent that an executive subsequently retires on or after his retirement-eligibility date, all stock options then held by him for at least one year will continue to vest as if the executive remained employed and will remain outstanding for up to two years (or in the case of Mr. Currie, five years) from the date of retirement or, if later, the date of vesting. To the extent that Mr. Currie remains a member of the Board following his retirement, such service on the Board will count as continued employment for vesting purposes in respect of all then unvested awards of Restricted Shares and restricted stock units then held by him (other than his retention equity grant described below), and such awards shall vest in full upon his subsequent death or disability, or if the Board requests that he resign from service.
The following table sets forth the treatment of Performance Shares (including Mr. Currie’s special retention equity grant) upon certain termination events and a change in control. Other than as set forth in the table, Performance Shares that remain unvested as of any termination of employment will be forfeited.
| Death; Disability; By Us |
Retirement |
Change in Control | ||||
| Shares as to which the Performance Period Has Ended | Full vesting and waiver of remaining service condition | Full vesting and waiver of remaining service condition | Full vesting and waiver of remaining service condition | |||
| Shares Remaining Subject to Performance Vesting | Immediate pro-rata vesting, assuming target-level achievement of the applicable performance goals | Pro-rata vesting at the end of the applicable performance period, based on actual results | Immediate full vesting assuming target performance or, if greater, based on pro-forma performance over the entire performance period extrapolated from the performance run rate through the end of the fiscal year preceding the change in control | |||
55
POTENTIAL PAYMENTS UPON A TERMINATION OR CHANGE IN CONTROL
The information set forth in the table below is as of December 31, 2011, and therefore includes the accelerated vesting of certain awards that have vested following year-end and prior to the date of this proxy statement.
| Name |
Benefit |
Before Change in Control Termination w/o Cause or for Good Reason ($) |
After Change in Control Termination w/o Cause or for Good Reason ($) |
Executive Resignation Without Good Reason ($) |
Death ($) |
Disability ($) |
Change in Control ($) |
|||||||||||||||||||
| Neill A. Currie |
Salary(2) |
1,622,400 | 1,622,400 | 1,622,400 | — | 1,622,400 | — | |||||||||||||||||||
| Bonus |
5,226,210 | 5,226,210 | — | 1,742,070 | 1,742,070 | — | ||||||||||||||||||||
| Accelerated Vesting of Awards(3)(4)(6) |
15,669,236 | — | (5) | — | 15,669,236 | 15,669,236 | 23,640,300 | |||||||||||||||||||
| Life Insurance |
— | — | — | 2,000,000 | — | — | ||||||||||||||||||||
| Continuation of Health Benefits |
24,612 | 24,612 | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total: |
24,542,458 | 6,873,222 | 1,622,400 | 19,411,306 | 19,033,706 | 23,640,300 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Peter C. Durhager |
Salary(2) |
324,500 | 649,000 | 324,500 | — | 324,500 | — | |||||||||||||||||||
| Bonus |
1,219,680 | 1,829,520 | — | 609,840 | 609,840 | — | ||||||||||||||||||||
| Accelerated Vesting of Awards(3)(6) |
4,056,930 | — | (5) | — | 4,056,930 | 4,056,930 | 4,644,584 | |||||||||||||||||||
| Life Insurance |
— | — | — | 1,918,000 | — | — | ||||||||||||||||||||
| Continuation of Health Benefits |
21,293 | 21,293 | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total: |
5,622,403 | 2,499,813 | 324,500 | 6,584,770 | 4,991,270 | 4,644,584 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Jeffrey D. Kelly |
Salary(2) |
591,250 | 1,182,500 | 591,250 | — | 591,250 | — | |||||||||||||||||||
| Bonus |
1,219,680 | 1,829,520 | — | 609,840 | 609,840 | — | ||||||||||||||||||||
| Accelerated Vesting of Awards(3)(6) |
4,128,353 | — | (5) | — | 4,128,353 | 4,128,353 | 4,414,454 | |||||||||||||||||||
| Life Insurance |
— | — | — | 2,000,000 | — | — | ||||||||||||||||||||
| Continuation of Health Benefits |
16,408 | 16,408 | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total: |
5,955,691 | 3,028,428 | 591,250 | 6,738,193 | 5,329,443 | 4,414,454 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Kevin J. O’Donnell |
Salary(2) |
625,000 | 1,000,000 | 625,000 | — | 625,000 | — | |||||||||||||||||||
| Bonus |
2,109,375 | 2,812,500 | — | 937,500 | 937,500 | — | ||||||||||||||||||||
| Accelerated Vesting of Awards(3)(6) |
6,243,486 | — | (5) | — | 6,243,486 | 6,243,486 | 8,425,239 | |||||||||||||||||||
| Life Insurance |
— | — | — | 2,000,000 | — | — | ||||||||||||||||||||
| Continuation of Health Benefits |
21,293 | 21,293 | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total: |
8,999,154 | 3,833,793 | 625,000 | 9,180,986 | 7,805,986 | 8,425,239 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Stephen H. Weinstein |
Salary(2) |
324,500 | 649,000 | 324,500 | — | 324,500 | — | |||||||||||||||||||
| Bonus |
1,019,700 | 1,529,550 | — | 509,850 | 509,850 | — | ||||||||||||||||||||
| Accelerated Vesting of Awards(3)(6) |
4,074,779 | — | (5) | — | 4,074,779 | 4,074,779 | 4,277,586 | |||||||||||||||||||
| Life Insurance |
— | — | — | 1,854,000 | — | — | ||||||||||||||||||||
| Continuation of Health Benefits |
21,293 | 21,293 | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total: |
5,440,272 | 2,199,843 | 324,500 | 6,438,629 | 4,909,129 | 4,277,586 | ||||||||||||||||||||
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56
| (1) | Other than the vesting of certain equity awards under the terms of our equity incentive plans and employment agreements as quantified in the “Change in Control” column, none of our Named Executive Officers is entitled to any additional compensation solely as a result of the occurrence of a change in control. |
| (2) | Consistent with the termination provisions of the Named Executive Officers’ employment agreements, amounts shown under “Salary” are based on multiples (as set forth in each of the Named Executive Officers’ respective employment agreement) of the salaries for the Named Executive Officers in effect as of December 31, 2008 (or for Mr. Kelly, December 31, 2011). Please see the narrative discussion above for more detail on the payment and benefits to which the Named Executive Officer would be entitled upon a termination of employment. |
| (3) | Please see the narrative discussion above under “Treatment of Equity Awards Upon a Termination of Employment or Change in Control” for more detail. |
The amount shown for Accelerated Vesting of Awards represents the sum of—
| (i) | Restricted Share awards that had not yet vested at December 31, 2011, valued at the closing market of $74.37 per share value on December 30, 2011, the final business day of calendar year 2011; |
| (ii) | The spread value of in-the-money stock options at December 31, 2011, which is calculated as the number of in-the-money value of stock options multiplied by the difference between $74.37 per share and the relevant exercise price of the underlying option; |
| (iii) | Cash-settled restricted stock units that had not yet vested at December 31, 2011, valued at $74.37 per share; and |
| (iv) | Equity awards granted pursuant to the Performance Share Plan valued at the closing market value of $74.37 per share on December 30, 2011, the final business day of calendar year 2011, as set forth in the table in the “Treatment of Equity Awards Upon a Termination of Employment or Change in Control” section above. |
| (4) | In accordance with Mr. Currie’s employment agreement (as described above), service-based awards of Restricted Shares held for at least one year upon Mr. Currie’s first attaining retirement eligibility fully vested at that time; however, shares in excess of those used to pay taxes cannot be sold until the regular vesting date. Awards of Restricted Shares and restricted stock units granted to Mr. Currie after his first attaining retirement eligibility or not held by him for at least one year at that time will continue to vest on their normal schedule during any period of Board service by Mr. Currie following actual retirement; provided that if Mr. Currie retires from the Board at the request of the Board, dies, or leaves the Board due to disability, all such awards which are then unvested immediately vest, and if Mr. Currie otherwise resigns from the Board, all such awards which are then unvested are immediately forfeited. Except with respect to options granted prior to February 22, 2006, which have a more favorable treatment upon retirement, unvested options held by Mr. Currie upon retirement shall continue to vest as if he remained employed thereafter through the applicable vesting date(s) and shall remain outstanding until the earliest of (x) exercise, (y) the expiration of the original term, and (z) the day prior to the fifth anniversary of his retirement. |
| (5) | Please see the column titled “Change in Control” for the value attributable to accelerated vesting of equity awards upon a change in control under the terms of our equity incentive plans and employment agreements, which would be realized by the executives regardless of whether they suffered a termination of employment in connection with such change in control. |
| (6) | For each of the NEOs, if the termination or change in control event were to have occurred on April 1, 2012, instead of December 31, 2011, the value of the accelerated vesting of awards would be as follows, based on the NEOs’ unvested equity balances and our per-share market value of $75.89: |
| Name |
Before Change in Control Termination w/o Cause or for Good Reason, Death, and Disability |
Change in Control | ||
| Neill A. Currie |
$11,066,356 | $20,414,790 | ||
| Peter C. Durhager |
$ 3,396,457 | $ 4,605,466 | ||
| Jeffrey D. Kelly |
$ 4,350,318 | $ 5,241,722 | ||
| Kevin J. O’Donnell |
$ 5,116,428 | $ 8,368,303 | ||
| Stephen H. Weinstein |
$ 3,187,911 | $ 3,844,360 |
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DIRECTOR COMPENSATION TABLE
The following table sets forth information concerning director compensation paid during 2011.
| Name(1) |
Fees Earned or Paid in Cash(2) ($) |
Stock Awards(3) ($) |
Total ($) |
|||||||||
| David C. Bushnell |
72,000 | 109,975 | 181,975 | |||||||||
| Thomas A. Cooper |
82,000 | 109,975 | 191,975 | |||||||||
| James L. Gibbons |
72,000 | 109,975 | 181,975 | |||||||||
| Jean D. Hamilton |
82,000 | 109,975 | 191,975 | |||||||||
| Henry Klehm III |
102,000 | 109,975 | 211,975 | |||||||||
| Ralph B. Levy |
111,000 | 164,995 | 275,995 | |||||||||
| W. James MacGinnitie |
108,000 | 164,995 | 272,995 | |||||||||
| Anthony M. Santomero |
72,000 | 109,975 | 181,975 | |||||||||
| Nicholas L. Trivisonno |
72,000 | 109,975 | 181,975 | |||||||||
| Edward J. Zore |
72,000 | 109,975 | 181,975 | |||||||||
| (1) | Information for Mr. Currie, who served on the Board in 2011, is not included in this table because executive officers do not receive additional compensation for services rendered as a member of our Board. Information regarding Mr. Currie’s compensation is set forth herein under the headings “Compensation Discussion and Analysis” and “Summary Compensation Table.” |
| (2) | Amounts shown reflect annual retainer and meeting fees earned or paid in respect of full Board meetings and standalone committee meetings attended, as described below. |
| (3) | This column represents the aggregate grant date fair value of awards granted to our directors in 2011, determined under FASB ASC Topic 718, Compensation—Stock Compensation. For information on the valuation assumptions with respect to awards made, refer to RenaissanceRe’s Stock Incentive Compensation and Employee Benefit Plans at Note 16 in its financial statements for 2011, as included in its Annual Report on Form 10-K for 2011, as filed with the SEC. The amounts above reflect the grant date fair value for these awards, excluding the accounting effect of any estimate of future forfeitures, and do not necessarily correspond to the actual value that might be recognized by the directors. Each of Messrs. Bushnell, Cooper, Gibbons, Klehm, Santomero, Trivisonno, and Zore, and Ms. Hamilton, received 1,661 Restricted Shares, while Messrs. Levy and MacGinnitie each received 2,492 Restricted Shares, in each case vesting ratably over 3 years on each anniversary of the grant date. Messrs. Bushnell, Cooper, Gibbons, Klehm, and Santomero and Ms. Hamilton each have 3,732 unvested Restricted Shares as of December 31, 2011. Mr. Levy has 4,563 unvested Restricted Shares as of December 31, 2011. Mr. MacGinnitie has 6,634 unvested Restricted Shares as of December 31, 2011. Mr. Zore has 2,264 unvested Restricted Shares as of December 31, 2011. Mr. Trivisonno has 6,566 options outstanding and 3,732 unvested Restricted Shares as of December 31, 2011. |
Director Compensation
Cash Retainer and Meeting Fees. During 2011, each of the Independent Directors (with the exception of Mr. Levy and Mr. MacGinnitie) received a grant of Restricted Shares valued at $109,975. In addition, each such Independent Director, except Messrs. Cooper, Klehm, Levy, and MacGinnitie, and Ms. Hamilton each received a cash annual retainer for 2011 equal to $60,000 and a per-meeting cash fee of $3,000. While there is no separate committee fee for committee meetings held in conjunction with a meeting of the full Board, directors who attend a committee meeting held on a stand-alone basis receive a cash fee of $3,000 for attendance at such meeting. Due to their additional responsibilities Mr. MacGinnitie and Mr. Levy each received an annual retainer of $90,000; per-meeting fee of $6,000 in their capacity as Non-Executive Chairman; per-meeting fee of $3,000 for meetings attended where they were not serving in the capacity of Non-Executive Chairman; and a Restricted Share grant of $164,995. Mr. Klehm received an annual retainer of $90,000 (one and one-half times the value of the annual retainer) due to his additional responsibilities as Audit Committee Chair. In addition, Mr. Cooper and Ms. Hamilton each received an annual retainer of $70,000 in relation to their additional responsibilities as Investment and Risk Management Committee Chair and Compensation Committee Chair, respectively. The Company does not pay directors’ fees in respect of informational calls.
Additionally, we reimburse all directors for expenses incurred in connection with service on the Board, including reimbursement of expenses incurred in connection with attending educational seminars. Further, the
58
non-Executive Chairman is reimbursed for expenses incurred in connection with attendance at certain industry events and functions. Generally, spousal travel on our corporate aircraft in connection with a business-related trip of a director is permitted, with spousal travel added to the director’s reported U.S. federal income, as applicable, based on the standard industry fare level valuation method. There is no incremental cost to the Company for providing this benefit.
Equity Awards. As with our Named Executive Officers, it is the philosophy of our Compensation Committee to weight directors’ compensation heavily in equity-based awards in order to align the interests of the directors with the long-term interests of our shareholders. In addition to annual grants, the Director Stock Plan also authorizes our Compensation Committee to make grants to Independent Directors to address special circumstances, such as when one or more Independent Directors are called upon to provide services to us in excess of the level of services required of our Independent Directors generally. No such discretion was exercised during 2011. Our Compensation Committee may also exercise discretionary authority to make awards to any Independent Director who is first elected to our Board.
Grants of Restricted Shares to Independent Directors generally vest over a three-year term. Currently issued but unvested Restricted Shares generally accelerate and vest on a director’s separation from service on the Board unless a director is requested to depart the Board for cause, in which case such unvested Restricted Shares are forfeited.
Since 2004, the practice of our Compensation Committee has been to refrain from granting stock options to Independent Directors. Existing awards of stock options would be required to be exercised within 30 days following the termination of any director’s service, or would expire and be forfeited.
Director Equity Ownership Policy. We maintain an equity ownership policy under which our Independent Directors are expected to maintain ownership levels of Common Shares having a value equal to five times the then-current annual retainer. Until and unless ownership requirements are satisfied, an Independent Director is not permitted to sell any of the equity granted to such individual. We believe that this policy further aligns the interests of our Independent Directors with those of our shareholders, and we expect to continue this policy in the future. Our Compensation Committee retains discretion to waive non-compliance with this policy in light of an individual director’s particular facts and circumstances from time to time.
59
PROPOSAL 1: ELECTION OF DIRECTORS
Our Bye-laws provide that our Board designates the number of directors constituting the Board, and that there should be at least eight and no more than eleven members. Currently, that number has been fixed by the Board at eleven. The Board consists of three classes, with directors of one class elected each year, for terms extending to the annual general meeting of shareholders held in the third year following the year of their election.
Board of Directors Criteria
As described more fully above under “Corporate Governance—Director Qualifications and Director Nominee Considerations,” our Board regularly reviews the biographical backgrounds, particular skills and experience of its current members and potential nominees, as applicable, in connection with the ongoing evaluation of the composition of the Board. Our Corporate Governance Guidelines do not establish specific criteria for individual directors, and rather summarize the long-held belief of the Board that a myriad and diverse set of skills, experience and backgrounds amongst the various members of the Board are key components to a well functioning Board and organization. The biographies above of each nominee and each continuing director contain information regarding the person’s service as a director on our Board, his or her business experience, director positions at other companies held currently or at any time during the last five years, and aspects of each person’s applicable respective qualifications and experience.
The names of the three persons who have been nominated to stand for election at the 2012 Annual Meeting and the remaining directors whose terms are continuing until the 2013 or 2014 Annual Meetings are as follows:
NOMINEES
Class II Directors
(whose terms (if elected) expire in 2015):
| Name |
Age | |||
| Thomas A. Cooper |
75 | |||
| Neill A. Currie |
59 | |||
| W. James MacGinnitie |
73 | |||
CONTINUING DIRECTORS
Class III Directors
(whose terms expire in 2013):
| Name |
Age | |||
| Henry Klehm III |
53 | |||
| Ralph B. Levy |
66 | |||
| Nicholas L. Trivisonno |
64 | |||
| Edward J. Zore |
66 | |||
60
Class I Directors
(whose terms expire in 2014):
| Name |
Age | |||
| David C. Bushnell |
57 | |||
| James L. Gibbons |
48 | |||
| Jean D. Hamilton |
65 | |||
| Anthony M. Santomero |
65 | |||
Recommendation and Vote
The nominees for election as directors at the Annual Meeting who receive the highest number of “FOR” votes will be elected as directors up to the maximum number of directors (3) to be chosen at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE THEIR SHARES FOR THE ELECTION OF MR. COOPER, MR. CURRIE AND MR. MACGINNITIE.
61
PROPOSAL 2: APPROVAL OF THE COMPENSATION OF THE COMPANY’S
NAMED EXECUTIVE OFFICERS
In accordance with Section 14A of the Exchange Act, we are submitting to our shareholders this advisory vote relating to the compensation of our Named Executive Officers as disclosed above in this Proxy Statement, which gives shareholders another mechanism to convey their views about our compensation programs and policies. We are asking our shareholders to indicate their support for our Named Executive Officer compensation as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views regarding our Named Executive Officers’ compensation. Although your vote on executive compensation is not binding on the Board or the Company, the Board values the views of the Company’s shareholders. The Board and the Compensation Committee will review the results of the vote and take them into consideration in addressing future compensation policies and decisions. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies, and practices described in this Proxy Statement. The following resolutions will be submitted for a shareholder vote at our 2012 Annual Meeting:
“RESOLVED, that the shareholders of the Company approve, on an advisory basis, the compensation of the Company’s Named Executive Officers listed in the 2011 Summary Compensation Table included in the Proxy Statement for the 2012 Annual Meeting, as such compensation is disclosed pursuant to Item 402 of Regulation S-K in the Proxy Statement under the section titled “Compensation Discussion and Analysis,” as well as the compensation tables and other narrative executive compensation disclosures thereafter.”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE THEIR SHARES FOR THE APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
62
PROPOSAL 3: APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM AND TO REFER TO THE DETERMINATION OF THE
AUDITORS’ REMUNERATION TO THE BOARD OF DIRECTORS
Upon recommendation of the Audit Committee, the Board proposes that the shareholders appoint the firm of Ernst & Young Ltd., an independent registered public accounting firm, to serve as our auditors for the 2012 fiscal year until the 2013 Annual Meeting. Ernst & Young Ltd. served as our independent auditors for the 2011 fiscal year. A representative of Ernst & Young Ltd. will attend the Annual Meeting and will be available to respond to questions and may make a statement if he or she so desires. Shareholders at the Annual Meeting will also be asked to vote to refer the determination of the auditors’ remuneration to the Board.
Fees billed to us by Ernst & Young Ltd. during the 2011 and 2010 fiscal years:
Audit Fees
Audit Fees billed to us by Ernst & Young Ltd. during our 2011 and 2010 fiscal years for (a) the audit of our annual financial statements, (b) review of our quarterly financial statements, (c) statutory audits and (d) assistance with and review of documents filed with the SEC (including comfort letters and consents) totaled $3,142,458 and $3,696,021, respectively.
Audit-Related Fees
Audit-Related Fees billed to us by Ernst & Young Ltd. totaled $92,750 and $89,100, respectively, during our 2011 and 2010 fiscal years. Fees billed in both 2011 and 2010 were principally derived from audits of our employee benefits plans.
Tax Fees
Fees billed to us by Ernst & Young Ltd. during our 2011 and 2010 fiscal years for all tax-related services rendered to us totaled $nil for each year.
All Other Fees
Ernst & Young Ltd. did not perform any other services during our 2011 or 2010 fiscal years.
The Audit Committee must pre-approve all audit services and permitted non-audit services performed for RenaissanceRe by our auditors, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior to the completion of the audit. All engagements of Ernst & Young Ltd. to provide audit and audit-related services to RenaissanceRe during 2011 were pre-approved by the Audit Committee.
The Audit Committee may form and delegate authority to subcommittees, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting.
As noted above, the Audit Committee is responsible for managing our relationship with our independent auditors. The Audit Committee has the sole authority to hire and employ our auditors, subject to approval and ratification by the shareholders. The Audit Committee regularly reviews the auditors’ work plan, bills, and work product. Accordingly, it is our policy that all proposed engagements by our current audit firm must be approved in advance by the Audit Committee.
63
Recommendation and Vote
Approval of our Auditors Proposal requires the affirmative vote of a majority of the voting rights attached to the Common Shares present, in person or by proxy, at the Annual Meeting, and entitled to vote thereon.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPOINTMENT OF ERNST & YOUNG LTD. AS INDEPENDENT AUDITORS FOR THE 2012 FISCAL YEAR, AND TO REFER THE DETERMINATION OF THE AUDITORS’ REMUNERATION TO THE BOARD OF DIRECTORS.
64
ADDITIONAL INFORMATION
Other Action at the Annual Meeting
Our Annual Report to Shareholders for the year ended December 31, 2011, including financial statements for the year ended December 31, 2011, and the auditors’ report thereon, has been made available to all shareholders. The financial statements and auditors’ report will be formally presented at the Annual Meeting, but no shareholder action is required thereon.
As of the date of this Proxy Statement, we have no knowledge of any business, other than that which we have described herein, that will be presented for consideration at the Annual Meeting. In the event any other business is properly presented at the Annual Meeting, it is intended that the persons named in the accompanying proxy will have authority to vote such proxy in accordance with their judgment on such business.
Shareholder Proposals for 2013 Annual Meeting of Shareholders
Shareholder proposals must be received in writing by the Secretary of RenaissanceRe no later than December 13, 2012, and must comply with the requirements of the Commission and our Bye-laws in order to be considered for inclusion in our proxy statement and proxy card relating to the Annual Meeting to be held in 2013. Such proposals should be directed to the attention of the Secretary, RenaissanceRe Holdings Ltd., P.O. Box HM 2527, Hamilton, HMGX, Bermuda. Shareholders who intend to nominate persons for election as directors at our general meetings must comply with the advance notice procedures and other provisions set forth in our Bye-laws in order for such nominations to be properly brought before that general meeting. These provisions require, among other things, that written notice from not less than 20 shareholders holding in the aggregate not less than 10% of the outstanding paid-up share capital of RenaissanceRe be received by the Secretary of RenaissanceRe not less than 60 days prior to the general meeting.
If a shareholder proposal is introduced at the 2013 Annual Meeting of shareholders without any discussion of the proposal in our proxy statement, and the shareholder does not notify us on or before February 26, 2013, as required by SEC Rule 14a-4(c)(1) of the intent to raise such proposal at the annual general meeting of shareholders, then proxies received by us for the 2013 Annual Meeting will be voted by the persons named as such proxies in their discretion with respect to such proposal. Notice of any such proposal is to be sent to the above address.
Householding of Annual Meeting Materials
The SEC has enacted a rule that allows multiple investors residing at the same address the convenience of receiving a single copy of annual reports, proxy statements, prospectuses and other disclosure documents if they consent to do so. This is known as “Householding.” We will allow Householding only upon certain conditions. Some of those conditions are:
| • | You agree to, or do not object to, the Householding of your materials; and |
| • | You have the same last name and exact address as another investor(s). |
If these conditions are met, and SEC regulations allow, your household will receive a single copy of annual reports, proxy statements, prospectuses and other disclosure documents.
65
You may revoke a prior Householding consent at any time by contacting Broadridge Financial Solutions, Inc., either by calling toll-free at (800) 542-1061, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York, 11717. We will remove you from the Householding program within 30 days of receipt of your response, following which you will receive an individual copy of our disclosure document. Shareholders sharing an address and wishing to receive a single set of reports may do so by contacting their banks or brokers, if they are beneficial holders, or by contacting Broadridge at the address set forth above if they are record holders.
66
|
RENAISSANCERE HOLDINGS LTD. 12 CROW LANE PEMBROKE HM19, BERMUDA |
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on Monday, May 21, 2012. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | |
|
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 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. | ||
|
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. |
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | KEEP THIS PORTION FOR YOUR RECORDS | |||||||
| DETACH AND RETURN THIS PORTION ONLY | ||||||||
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| ||||||||
| For All |
Withhold All |
For All Except |
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | |||||||||||||||||||||||||||||
| The Board of Directors recommends you vote FOR the following: |
||||||||||||||||||||||||||||||||
| 1. | Election of Directors Nominees |
¨ | ¨ | ¨ |
|
|||||||||||||||||||||||||||
| 01 | Thomas A. Cooper 02 Neill A. Currie 03 W. James MacGinnitie | |||||||||||||||||||||||||||||||
| The Board of Directors recommends you vote FOR proposals 2. and 3. | For | Against | Abstain | |||||||||||||||||||||||||||||
| 2. | The approval, by a non-binding advisory vote, of the compensation of the Named Executive Officers of RenaissanceRe Holdings Ltd. | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||||
| 3. | To appoint the firm of Ernst & Young Ltd., an independent registered public accounting firm, to serve as our auditors for the 2012 fiscal year until our 2013 Annual General Meeting, and to refer the determination of the auditors’ remuneration to the Board of Directors. |
¨ | ¨ | ¨ | ||||||||||||||||||||||||||||
| NOTE: PLEASE VOTE, DATE AND SIGN THIS PROXY BELOW AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. Please be sure to sign and date this Proxy. | ||||||||||||||||||||||||||||||||
| Yes | No | |||||||||||||||||||||||||||||||
| Please indicate if you plan to attend this meeting | ¨ | ¨ | ||||||||||||||||||||||||||||||
| Please sign your name or names exactly as it appears on the share certificate(s). When signing as attorney, executor, administrator, trustee, guardian or corporate executor, please give your full title as such. For joint accounts, all co-owners should sign. | ||||||||||||||||||||||||||||||||
| Signature [PLEASE SIGN WITHIN BOX]
|
Date
|
Signature (Joint Owners)
|
Date
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| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report, Notice & Proxy Statement is/ are available at www.proxyvote.com.
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RENAISSANCERE HOLDINGS LTD.
This Proxy is solicited on behalf of RenaissanceRe Holdings Ltd. in connection with its Annual General Meeting of Shareholders to be held on May 22, 2012 |
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| The undersigned shareholder of RenaissanceRe Holdings Ltd. (the “Company”) hereby appoints Jeffrey D. Kelly, Mark A. Wilcox and Stephen H. Weinstein, and each of them, as proxies, each with the power to appoint his substitute, and authorizes them to represent and vote as designated in this Proxy, all of the Common Shares, $1.00 par value each per share (the “Common Shares”), of the Company held of record by the undersigned shareholder on March 26, 2012 at the Annual General Meeting of Shareholders of the Company to be held on May 22, 2012 (the “Annual Meeting”), and at any adjournment or postponement thereof, with all powers which the undersigned would possess if personally present, with respect to the matters listed on this Proxy. In their discretion, the proxies, and each of them, are authorized to vote such Common Shares upon such other business as may properly come before the Annual Meeting. |
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| THE SUBMISSION OF THIS PROXY, IF PROPERLY EXECUTED, REVOKES ALL PRIOR PROXIES. |
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| IF THIS PROXY IS EXECUTED AND RETURNED BUT NO INDICATION IS MADE AS TO WHAT ACTION IS TO BE TAKEN, IT WILL BE DEEMED TO CONSTITUTE A VOTE IN FAVOR OF EACH OF THE PROPOSALS SET FORTH ON THIS PROXY. |
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(Continued and to be marked, dated and signed on the other side) |
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