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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.
)
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þ |
Filed by the Registrant |
o |
Filed by a Party other than the Registrant |
Check the appropriate box: |
o |
Preliminary Proxy Statement |
o |
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2)) |
þ |
Definitive Proxy Statement |
o |
Definitive Additional Materials |
o |
Soliciting Material Under Rule 14a-12 |
Palomar Holdings, Inc.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
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Payment of Filing Fee (Check the appropriate box): |
þ |
No fee required. |
o |
Fee paid previously with preliminary materials. |
o |
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
Letter to Stockholders |
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Palomar Holdings, Inc.
7979 Ivanhoe Avenue, Suite 500
La Jolla, California 92037 |
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Dear Stockholder:
I am pleased to invite you to attend the
2023 Annual Meeting of Stockholders (the “Annual Meeting”) of Palomar Holdings, Inc. (“Palomar”), which will be
held at the Palomar offices, located at 7979 Ivanhoe Avenue, Suite 500, La Jolla, California 92037 on May 25, 2023, at 9:00 a.m. Pacific
Time. Doors open at 8:30 a.m. Pacific Time.
At the Annual Meeting, we will ask you to
consider the following proposals:
• | To elect as
Class I directors the two nominees named in this proxy statement to serve until the 2026 Annual Meeting of Stockholders or until their
successors are duly elected and qualified. |
• | To approve,
on a non-binding advisory basis, the compensation of our Named Executive Officers as described in the proxy statement. |
• | To ratify the
appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2023. |
• | To transact
such other business that may properly come before the Annual Meeting or any postponements or adjournments thereof. |
Stockholders of record as of April 3, 2023,
may vote at the Annual Meeting or any postponement or adjournment of the meeting.
We are pleased to announce
that we are taking advantage of U.S. Securities and Exchange Commission rules that allow companies to furnish proxy materials to their
stockholders over the Internet. We believe that this process will allow us to provide our stockholders with the information they need
in a timely manner, reduce the environmental impact of printing and distributing our proxy materials and lower our costs.
YOUR VOTE IS IMPORTANT. Whether
or not you plan to attend the Annual Meeting of Stockholders, we urge you to submit your vote via the Internet, telephone or, if you requested
a printed copy of the proxy materials, via mail. Whether or not you attend the Annual Meeting, it is important that your shares be represented
and voted at the meeting. Therefore, I urge you to promptly vote and submit
your proxy via the Internet, by phone, or, if you requested a printed copy of the proxy materials, by signing, dating and returning the
enclosed proxy card in the enclosed envelope. If you decide to attend the Annual Meeting, you will be able to vote in person, even if
you have previously submitted your proxy.
On behalf of the Board of Directors, I would
like to express our appreciation of your interest in Palomar.
Sincerely,
Mac Armstrong
Chairman of the Board and Chief Executive
Officer
La Jolla, California
April 13, 2023
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Palomar 2023
Proxy
Statement |
PLMR.com 2 |
Board
Responsiveness
to Shareholders
Since our IPO in 2019, our Board has prioritized
maintaining a constructive relationship with our shareholders. Following our 2022 advisory say-on-pay vote, our Compensation Committee
Chair led a comprehensive shareholder outreach campaign to solicit feedback on executive compensation, corporate governance, and environmental,
social and corporate governance (“ESG”) matters. This feedback provided vital input on the design of and modifications made
to our compensation programs, ESG matters, and governance practices for 2023.
In 2022, we reached out to fifteen (15)
shareholders owning approximately 68% of our total shares outstanding. Eleven (11) shareholders owning approximately 40% of our
total shares outstanding accepted our invitation to engage with our Board and executive management team and provided constructive
feedback. Our Lead Independent Director and Compensation Committee Chair, Richard Taketa, led each of these shareholder
meetings.
In response to shareholder feedback,
we have committed to not issuing supplemental equity grants outside of our core compensation program without first engaging with shareholders.
Offered Engagement with owners of approximately 68% of our total shares outstanding |
Held
Individualized meetings with owners of approximately 40% of our total shares outstanding |
Our Compensation Committee Chair and Lead Independent Director attended 100% of these shareholder meetings |
The feedback we received from shareholders
during our 2022/2023 outreach campaign along with the actions we took in response to this feedback are summarized below:
Feedback Category |
Topic |
What
Shareholders Expressed |
What
We Did |
Executive
Compensation |
Supplemental
Long-Term
Incentive
(“LTI”) Grants |
Shareholders understood the rationale behind our supplemental executive LTI grants, but they expressed a preference for LTI awards to be limited to the annual compensation construct |
We committed to no longer issue supplemental stock grants to executives without prior engagement with shareholders, and we clarified that our vehicle for granting equity is our annual LTI program |
|
LTI Mix |
Shareholders indicated a preference for performance-based equity to comprise at least 50% of our LTI mix |
We
increased the weighting of performance stock units (“PSUs”) in our LTI mix from 20% in 2022 to 50% in 2023 |
|
PSU Measurement
Period |
Shareholders expressed a preference for a multi-year measurement period for our PSU performance metrics |
We increased the measurement period for PSUs tied to adjusted ROE (70% of total target units granted) from 1 year to 3 years |
|
Incentive
Compensation
Disclosure |
Shareholders
encouraged us to provide enhanced disclosures around our short-term incentive (“STI”) and long-term incentive
(“LTI”) payout calculations |
We included enhanced disclosures of our 2022 bonus and 2022 PSU payouts in this year’s proxy, and we have committed to include enhanced disclosures in all future proxy filings |
|
CEO
Pay Relative to Other Named Executive Officer (“NEO”) Pay |
Shareholders expressed concern about the level of CEO pay relative to our other NEOs |
We explained that 2021 was an anomaly due to supplemental stock grants (which we have since discontinued unless we engage with shareholders first), and we illustrated that our 2022 and future CEO pay relative to our other NEO pay is within market norms |
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CEO
Salary Increase |
Shareholders inquired about our CEOs 2021 salary increase |
We
explained that the rationale behind our CEO’s 2021 salary increase was to align
base pay with the median of our peer group, and we advised that no salary increase was made to CEO base pay for 2022
or 2023 |
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Palomar 2023
Proxy
Statement |
PLMR.com 3 |
Board
Responsiveness
to Shareholders
ESG |
Use of ESG as a
Performance Metric |
Shareholders commended our robust ESG disclosures, and they inquired about the potential incorporation of ESG as an incentive compensation metric |
We
committed to maintaining robust and industry-leading ESG disclosures, including the publication of our 2022
Sustainability & Citizenship Report, and we incorporated ESG into the individual management by objectives (“MBOs”)
for three of our NEOs, including our CEO |
Corporate
Governance |
Stock Ownership
Requirements |
Shareholders commented that they prefer to see a 5x salary multiple for our CEO and that the stock ownership requirements apply to all executive officers |
We increased the CEO stock ownership requirement to 5x salary, and we further expanded the scope of our stock ownership policy to apply to our entire executive management team |
Board Structure and
Shareholder Voting
Rights |
Shareholders
expressed a preference for a declassified Board and elimination of supermajority voting requirements |
We received shareholder approval for a 5-year sunset of our classified Board structure and supermajority voting requirements |
|
Compensation
Clawback |
Shareholders inquired about our clawback policy in light of pending new SEC requirements |
We
are in the process of updating our clawback policy to fully comply with the pending new SEC regulations |
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Palomar 2023
Proxy
Statement |
PLMR.com 4 |
Notice
of Annual Meeting of Stockholders
Time and Date |
May
25, 2023, at 9:00 a.m. Pacific Time |
Place |
Our principal executive offices located at
7979 Ivanhoe Avenue, Suite 500, La Jolla, California
92037. |
Items of Business |
•
To elect as Class I directors the two
nominees named in this proxy statement to serve until the 2026 Annual Meeting of stockholders or until their successors are duly elected
and qualified.
•
To approve, on a non-binding advisory
basis, the compensation of our Named Executive Officers as described in the proxy statement.
•
To ratify the appointment of Ernst &
Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2023.
•
To transact such other business that
may properly come before the Annual Meeting or any postponements or adjournments thereof. |
Record Date |
April 3, 2023 (the “Record Date”). Only stockholders of record at the close of business on the Record Date are entitled to receive notice of, and to vote at, the Annual Meeting. |
Annual Report |
You may access our Annual Report on Form 10-K for the year ended December 31, 2022, and our proxy solicitation materials by visiting www.investorvote.com/PLMR. |
Proxy Voting |
YOUR
VOTE IS IMPORTANT. Please
vote your shares at your earliest convenience. This will ensure the presence of a quorum at the meeting. Promptly voting your shares
via the Internet, by telephone, or, if you requested a printed copy of the proxy materials, by signing, dating, and returning the
enclosed proxy card, will save the expenses and extra work of additional solicitation. |
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By
order of the Board of Directors,
Mac Armstrong
Chairman of the
Board and Chief Executive Officer
La Jolla, California
April 13, 2023 |
|
This
notice of our Annual Meeting of Stockholders and the accompanying proxy statement and
form of proxy are being distributed and made
available on or about April 13, 2023. |
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Palomar 2023
Proxy
Statement |
PLMR.com 5 |
Proxy Summary
This summary highlights certain information
contained elsewhere in our proxy statement. You should read the entire proxy statement carefully before voting. Please see the Glossary
at the end of this proxy statement for a list of certain defined terms used throughout this proxy statement.
Stockholders will be asked to vote on the
following matters at the 2023 Annual Meeting:
Proposal |
Board
Recommendation |
Page |
1. |
Election Of Directors |
FOR
each Director Nominee |
35 |
2.
|
Advisory Vote to Approve Named Executive Officer
Compensation (“Say-On-Pay-Vote”) |
FOR |
36 |
3. |
Ratification
of Appointment of Independent Registered Public Accounting Firm |
FOR |
37 |
Director Nominees
Name |
Age |
Director
Since |
Independent |
Nominating
and
Corporate
Governance
Committee |
Audit
Committee |
Compensation
Committee |
Environmental,
Social and
Corporate
Governance
Committee |
Enterprise
Risk
Management
Committee |
Daryl
Bradley |
67 |
2020 |
|
|
l |
|
l |
l |
Robert
E. Dowdell |
77 |
2019 |
|
l |
l |
|
|
l |
Mac
Armstrong |
48 |
2014 |
|
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|
|
l |
|
Martha
Notaras |
62 |
2020 |
|
|
|
l |
l |
l |
Catriona
M. Fallon |
52 |
2019 |
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l |
l |
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|
Daina
Middleton |
57 |
2021 |
|
|
l |
l |
l |
|
Richard
H. Taketa |
51 |
2019 |
|
l |
|
l |
|
|
l Chair
l Member
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 6 |
Table of Contents
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 7 |
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 8 |
Proxy Statement
For 2023 Annual Meeting of Stockholders
To Be Held at 9:00 a.m. Pacific Time
on May 25, 2023
This proxy statement and the enclosed form
of proxy are furnished in connection with the solicitation of proxies by the Board of Directors (or the “Board”) of Palomar
Holdings, Inc. (the “Company” or “Palomar”) for use at its 2023 Annual Meeting of stockholders (the “Annual
Meeting”), and any postponements, adjournments, or continuations thereof. The Annual Meeting will be held on May 25, 2023, at 9:00
a.m. Pacific Time, at our principal executive offices located at 7979 Ivanhoe Avenue, Suite 500 La Jolla, California 92037.
Questions and Answers about the Annual
Meeting
The information provided in the “question
and answer” format below addresses certain frequently asked questions but is not intended to be a summary of all matters contained
in this proxy statement. Please read the entire proxy statement carefully before voting your shares.
What is a proxy?
A proxy is your legal designation of another
person to vote the stock you own. The person you designate is your “proxy,” and you give the proxy authority to vote your
shares by voting by telephone or over the Internet, or, if you requested a printed copy of the proxy materials, by submitting the enclosed
proxy card. We have designated our Chairman and Chief Executive Officer, Mac Armstrong, to serve as proxy for the Annual Meeting.
Why did I receive a notice regarding
the availability of proxy materials on the Internet instead of a full set of proxy materials?
Under rules adopted by the U.S. Securities
and Exchange Commission (the “SEC”), we have elected to furnish our proxy materials to our stockholders primarily via the
Internet, instead of mailing printed copies of the proxy materials to each stockholder. On or about April 13, 2023, we expect to mail
to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to
access our proxy materials and our Annual Report on Form 10-K for the year ended December 31, 2022 via the Internet and how to vote your
proxy. If you received the Notice, you will not automatically receive a printed copy of our proxy materials in the mail. If you would
like to receive a printed copy, please follow the instructions provided in the Notice.
Why am I receiving these materials?
The Board of Palomar is making available these
proxy materials to you in connection with the Board’s solicitation of proxies for use at Palomar’s Annual Meeting, which will
take place on May 25, 2023. Stockholders are invited to attend the Annual Meeting and are requested to vote on the proposals described
in this proxy statement.
What information is contained in these materials?
The information included in this proxy statement
relates to the proposals to be voted on at the Annual Meeting, the voting process, the compensation of our most highly paid executive
officers and our directors, and certain other required information. Palomar’s 2022 Annual Report on Form 10-K, which includes our
audited consolidated financial statements, is also furnished with this proxy statement.
What proposals will be voted on at the Annual
Meeting?
The proposals scheduled to be voted on
at the Annual Meeting include:
• | the election of two Class
I directors to hold office until the 2026 Annual Meeting of stockholders or until their successors are duly elected and qualified; |
• | a proposal to approve, on
a non-binding advisory basis, of the compensation of our Named Executive Officers as described in this proxy statement (“Say-on-Pay-Vote”); |
• | a proposal to ratify the appointment
of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2023; and |
• | any other business that may
properly come before the Annual Meeting. |
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|
Palomar 2023
Proxy
Statement |
PLMR.com 9 |
Proxy Statement
At the time this proxy
statement was filed with the SEC, our management and Board were not aware of any other matters to be presented at the Annual Meeting other
than those set forth in this proxy statement and in the notice accompanying this proxy statement.
How does our Board recommend that I vote?
Our Board recommends that you vote:
• | FOR the election of the directors
nominated by our Board and named in this proxy statement as Class I directors to serve for three-year terms; |
• | FOR the approval, on a non-binding
advisory basis, of the compensation of our Named Executive Officers as described in this proxy statement; and |
• | FOR the ratification of the
appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2023. |
Who is entitled to vote at the Annual Meeting?
Holders of our common stock at the close of
business on April 3, 2023, the record date for the Annual Meeting (the “Record Date”), are entitled to notice of and to vote
at the Annual Meeting. Each stockholder is entitled to one vote for each share of our common stock held as of the Record Date. As of the
Record Date, there were 24,934,176 shares of common stock outstanding and entitled to vote. Stockholders are not permitted to cumulate
votes with respect to the election of directors. The shares you are entitled to vote include shares that are (1) held of record directly
in your name, and (2) held for you as the beneficial owner through a stockbroker, bank or other nominee.
What is the difference between holding shares
as a stockholder of record and as a beneficial owner?
Stockholder of Record: Shares Registered
in Your Name. If, at the close of business on the Record Date, your shares were registered directly in your name with Computershare
Trust Company, N.A., our transfer agent, then you are considered the stockholder of record with respect to those shares. As the stockholder
of record, you have the right to grant your voting proxy directly to the individual listed on the form of proxy card or to vote in person
at the Annual Meeting.
Beneficial Owners: Shares Registered
in the Name of a Broker, Bank or Other Nominee. If, at the close of business on the Record Date, your shares were held, not in your name,
but rather in a stock brokerage account or by a bank or other nominee on your behalf, then you are considered the beneficial owner of
shares held in “street name.” As the beneficial owner, you have the right to direct your broker, bank or other nominee how
to vote your shares by following the voting instructions your broker, bank or other nominee provides. If you do not provide your broker,
bank or other nominee with instructions on how to vote your shares, your broker, bank or other nominee may, in its discretion, vote your
shares with respect to routine matters but may not vote your shares with respect to any non-routine matters. Please see “What
if I do not specify how my shares are to be voted?” for additional information.
How can I contact Palomar’s transfer
agent?
Contact our transfer agent by either writing
to Computershare Investor Services, P.O. Box 505000, Louisville, KY 40233-5000 by telephoning (800) 736-3001 or (781) 575-3100, or via
its Investor Center at www.computershare.com/investor.
Do I have to do anything in advance if I
plan to attend the Annual Meeting in person?
Stockholder of Record: Shares Registered
in Your Name. If you were a stockholder of record at the close of business on the Record Date, you do not need to do anything in advance
to attend and/or vote your shares in person at the Annual Meeting, but you will need to present government-issued photo identification
for entrance to the Annual Meeting.
Beneficial Owners: Shares Registered in
the Name of a Broker, Bank or Other Nominee. If you were a beneficial owner at the close of business on the Record Date, you may not
vote your shares in person at the Annual Meeting unless you obtain a “legal proxy” from your broker, bank or other nominee
who is the stockholder of record with respect to your shares. You may still attend the Annual Meeting even if you do not have a legal
proxy. For entrance to the Annual Meeting, you will need to provide proof of beneficial ownership as of the Record Date, such as the notice
or voting instructions you received from your broker, bank or other nominee or a brokerage statement reflecting your ownership of shares
as of the Record Date, and present government-issued photo identification.
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 10 |
Proxy Statement
Please note that no cameras, recording
equipment, large bags, briefcases, or packages will be permitted in the Annual Meeting.
Will the Annual Meeting be webcast?
We do not expect to webcast the Annual
Meeting.
How do I vote and what are the voting deadlines?
Stockholder of Record: Shares Registered
in Your Name. If you are a stockholder of record, you can vote in one of the following ways:
• | You may vote via the Internet
or by telephone. If you are a stockholder of record, you may vote by following the telephone or Internet voting instructions on the Notice. |
• | If you requested a printed
copy of the proxy materials, you may vote by mail. Please complete, date and sign the proxy card that accompanies this proxy statement
and promptly mail it to the tabulation agent in the enclosed postage-paid envelope. If you are a stockholder of record and you return
your signed proxy card but do not indicate your voting preferences, the person named in the proxy card will vote the shares represented
by your proxy card as recommended by our Board. |
• | You may vote in person. If
you plan to attend the Annual Meeting, you may vote by completing and submitting a ballot, which will be provided at the Annual Meeting. |
Please note that the Internet and telephone
voting facilities will close at 11:59 PM Pacific Time on May 24, 2023.
Beneficial Owners: Shares Registered
in the Name of a Broker, Bank or Other Nominee. If you are the beneficial owner of shares held of record by a broker, bank, or other
nominee, you will receive voting instructions from your broker, bank or other nominee. You must follow the voting instructions provided
by your broker, bank, or other nominee in order to instruct your broker, bank or other nominee how to vote your shares. The availability
of Internet and telephone voting options will depend on the voting process of your broker, bank, or other nominee. As discussed above,
if you are a beneficial owner, you may not vote your shares in person at the Annual Meeting unless you obtain a legal proxy from your
broker, bank or other nominee.
Can I change my vote or revoke my proxy?
Stockholder of Record: Shares Registered
in Your Name. If you are a stockholder of record, you may revoke your proxy or change your proxy instructions at any time before your
proxy is voted at the Annual Meeting by:
• | entering a new vote by Internet
or telephone; |
• | if you requested a printed
copy of the proxy materials, by signing and returning a new proxy card with a later date; |
• | delivering a written revocation
to our Secretary at Palomar Holdings, Inc., 7979 Ivanhoe Avenue, Suite 500, La Jolla, California 92037; or |
• | attending the Annual Meeting
and voting in person. |
Beneficial Owners:
Shares Registered in the Name of a Broker, Bank or Other Nominee. If you are the beneficial owner of your shares, you must contact
the broker, bank or other nominee holding your shares and follow their instructions to change your vote or revoke your proxy.
Is there a list of stockholders entitled
to vote at the Annual Meeting?
The names of stockholders of record entitled
to vote at the Annual Meeting will be available at the Annual Meeting and for ten days prior to the meeting for any purpose germane to
the meeting, between the hours of 9:00 a.m. and 4:30 p.m. Pacific Time, at our corporate headquarters at 7979 Ivanhoe Avenue, Suite 500,
La Jolla, California 92037, by contacting our corporate secretary.
What is the effect of giving a proxy?
Proxies are solicited by and on behalf of
our Board. The person named in the proxy has been designated as proxy holder by our Board. The shares represented by the proxy will be
voted at the Annual Meeting in accordance with the instructions of the stockholder. If no specific instructions are given, however, the
shares will be voted in accordance with the recommendations of our Board. If any matters not described in this proxy statement are properly
presented at the Annual Meeting, the proxy holder will use his own judgment to determine how to vote your shares. If the Annual
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Proxy
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Proxy Statement
Meeting is postponed or adjourned, the
proxy holder can vote your shares on the new meeting date, unless you have properly revoked your proxy, as described above.
What if I do not specify how my shares are
to be voted?
Stockholder of Record: Shares Registered
in Your Name. If you are a stockholder of record and you submit a proxy, but you do not provide voting instructions, your shares will
be voted:
• | FOR the election of the directors
nominated by our Board and named in this proxy statement as Class I directors to serve for three-year terms (Proposal No. 1); |
• | FOR the approval, on a non-binding
advisory basis, of the compensation of our Named Executive Officers as described in this proxy statement (“Say-on-Pay-Vote“)
(Proposal No. 2); |
• | FOR the ratification of the
appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2023
(Proposal No. 3); and |
• | in the discretion of the named
proxy holder regarding any other matters properly presented for a vote at the Annual Meeting. |
Beneficial Owners: Shares Registered in the
Name of a Broker, Bank or Other Nominee. If you are a beneficial owner and you do not provide your broker, bank or other nominee
that holds your shares with voting instructions, then your broker, bank or other nominee will determine if it has discretion to vote
on each matter. Brokers do not have discretion to vote on non-routine matters. Proposal No. 1 (election of directors) and Proposal
No. 2 (Say-on-Pay-Vote) are non-routine matters, while Proposal No. 3 (ratification of appointment of independent registered public
accounting firm) is a routine matter. As a result, if you do not provide voting instructions to your broker, bank or other nominee,
then your broker, bank or other nominee may not vote your shares with respect to Proposals No. 1 or 2, which would result in
“broker non-votes,” but may, in its discretion, vote your shares with respect to Proposal No. 3. For additional
information regarding broker non-votes, see “What are the effects of abstentions and broker non-votes?”
below.
What is a quorum?
A quorum is the minimum number of shares
required to be present at the Annual Meeting for the meeting to be properly held under our bylaws and Delaware law. A majority of the
issued and outstanding shares of capital stock and entitled to vote generally in the election of directors, present in person or by proxy,
constitutes a quorum for the transaction of business at the Annual Meeting. As noted above, as of the Record Date, there were a total
of 24,934,176 shares of common stock outstanding, which means that 12,467,089 shares of common stock must be represented in person or
by proxy at the Annual Meeting to have a quorum. If there is no quorum, a majority of the shares present at the Annual Meeting may adjourn
the meeting to a later date.
What are the effects of abstentions and broker
non-votes?
An abstention represents a stockholder’s
affirmative choice to decline to vote on a proposal. If a stockholder indicates that it wishes to abstain from voting its shares, or if
a broker, bank or other nominee holding its customers’ shares of record causes abstentions to be recorded for shares, these shares
will be considered present but will not be treated as votes cast at the Annual Meeting. As a result, abstentions will not be treated as votes cast and
will have no effect in cases where approval of the proposal requires the affirmative majority of votes cast (e.g., Proposal No. 2). Because
the outcome of Proposal No. 1 (election of directors) will be determined by a plurality vote, abstentions will have no impact on the outcome
of such proposal as long as a quorum exists. A broker non-vote occurs when a broker, bank or other nominee holding shares for a beneficial
owner does not vote on a particular proposal because the broker, bank or other nominee does not have discretionary voting power with respect
to such proposal and has not received voting instructions from the beneficial owner of the shares. Broker non-votes will be counted for
purposes of calculating whether a quorum is present at the Annual Meeting but will not be counted for purposes of determining the number
of votes cast. Therefore, a broker non-vote will make a quorum more readily attainable but will not otherwise affect the outcome of the
vote on any proposal.
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Proxy Statement
What is the voting requirement to approve
each of the proposals?
|
|
|
Proposal |
Vote
Required |
Discretionary
Voting Allowed? |
Election
of directors |
Plurality of the votes cast by stockholders
entitled to vote at the meeting |
No |
Advisory
Vote on Executive
Compensation (“Say-on-Pay”) |
Majority of the votes cast by stockholders entitled to vote at the meeting |
No |
Ratification
of appointment
of Ernst & Young LLP |
Majority of the votes cast by stockholders entitled to vote at the meeting |
Yes |
Proposal No. 1: Election of two nominees
for Class I directors named in this proxy statement to hold office until our 2026 Annual Meeting of stockholders or until their successors
are duly elected and qualified.
The election of the directors requires a
plurality vote of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote thereon to be
approved. “Plurality” means that the nominees who receive the largest number of votes cast “FOR” are elected as
directors. You may (i) vote FOR all nominees, (ii) WITHHOLD your vote as to all nominees, or (iii) vote FOR all nominees except for those
specific nominees from whom you WITHHOLD your vote. Any shares not voted FOR a particular nominee (whether as a result of voting withheld
or a broker non-vote) will not be counted in such nominees’ favor and will have no effect on the outcome of the election. If you
WITHHOLD your vote as to all nominees, you will be deemed to have abstained from voting on Proposal No. 1, and such abstention will have
no effect on the outcome of the proposal.
Proposal No. 2: Approval, on a non-binding
advisory basis, of the compensation of our Named Executive Officers as described in this proxy statement.
The proposal to approve, on a non-binding
advisory basis, the compensation of our Named Executive Officers as set forth in this proxy statement requires the vote of a majority
of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote thereon to be approved. You
may vote FOR, AGAINST or ABSTAIN. If you ABSTAIN from voting on Proposal No. 2, the abstention will have the same effect as a vote AGAINST
the proposal. Broker non-votes will not be considered votes cast on this proposal, and, therefore, will have no effect
on the vote for this proposal.
Proposal No. 3: Ratification of the appointment
of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2023.
The ratification of the appointment of Ernst
& Young LLP requires an affirmative vote of a majority of the shares of our common stock present in person or by proxy at the Annual
Meeting and entitled to vote thereon to be approved. You may vote FOR, AGAINST or ABSTAIN. If you ABSTAIN from voting on Proposal No.
3, the abstention will have the same effect as a vote AGAINST the proposal. Broker non-votes will have no effect on the outcome of this
proposal.
Who will count the votes?
A representative of our mailing agent,
Computershare Trust Company, N.A., will tabulate the votes and Chris Uchida, our Chief Financial Officer, will act as inspector of elections.
How are proxies solicited for the Annual
Meeting and who is paying for such solicitation?
Our Board is soliciting proxies for use
at the Annual Meeting by means of the proxy materials. We will bear the entire cost of proxy solicitation, including the preparation,
assembly, printing, mailing and distribution of the proxy materials. Copies of solicitation materials will also be made available upon
request to brokers, banks and other nominees to forward to the beneficial owners of the shares held of record by such brokers, banks or
other nominees. The original solicitation of proxies may be supplemented by solicitation by telephone, electronic communication, or other
means by
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Proxy Statement
our directors, officers,
employees or agents. No additional compensation will be paid to these individuals for any such services, although we may reimburse such
individuals for their reasonable out-of-pocket expenses in connection with such solicitation.
Is my vote confidential?
Proxy instructions, ballots and voting
tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed
either within Palomar or to third parties, except as necessary to meet applicable legal requirements, to allow for the tabulation of votes
and certification of the vote, or to facilitate a successful proxy solicitation.
I share an address with another stockholder,
and we received only one paper copy of the Notice. How may I obtain an additional copy of the Notice?
We have adopted an SEC-approved procedure
called “householding,” under which we can deliver a single copy of the Notice to multiple stockholders who share the same
address unless we received contrary instructions from one or more of the stockholders. This procedure reduces our printing and mailing
costs. Upon written or oral request, we will promptly deliver a separate copy of the Notice, and if applicable, the proxy materials, to
any stockholder at a shared address to which we delivered a single copy of any of these documents. To receive a separate copy, or, if
you are receiving multiple copies, to request that we only send a single copy of next year’s Notice, you may contact us as follows:
|
Palomar
Holdings, Inc. |
|
Attention:
Corporate Secretary |
|
7979
Ivanhoe Avenue, Suite 500 |
|
La
Jolla, California 92037 |
|
(619)
567-5290 |
Stockholders who hold shares in street name
may contact their brokerage firm, bank, broker-dealer or other nominee to request information about householding.
How can I find out the results of the voting
at the Annual Meeting?
Preliminary voting results will be announced
at the Annual Meeting. In addition, final voting results will be published in a Current Report on Form 8-K (“Form 8-K”) that
we expect to file with the SEC within four business days after the Annual Meeting. If final voting results are not available to us at
that time, we intend to file a Form 8-K with the SEC to publish preliminary results and, within four business days after the final results
are known to us, file an amendment to the Form 8-K to publish the final results.
What is the deadline to propose actions
for consideration at next year’s Annual Meeting of stockholders or to nominate individuals to serve as directors?
Stockholder Proposals
Stockholders may present proper proposals
for inclusion in our proxy statement and for consideration at the next Annual Meeting of stockholders by submitting their proposals in
writing to our Secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for our
2024 Annual Meeting of stockholders, our Secretary must receive the written proposal at our principal executive offices not later than
December 16, 2022. In addition, stockholder proposals must comply with the requirements of Rule 14a-8 under the Securities Exchange Act
of 1934, as amended, or the Exchange Act, regarding the inclusion of stockholder proposals in company-sponsored proxy materials.
Stockholder proposals should be addressed to: |
Palomar Holdings, Inc. |
|
Attention: Secretary |
|
7979 Ivanhoe Avenue, Suite 500 |
|
La Jolla, California 92037 |
Our bylaws also establish an advance notice
procedure for stockholders who wish to present a proposal before an Annual Meeting of stockholders but do not intend for the proposal
to be included in our proxy statement. Our bylaws provide that the only business that may be conducted at an Annual Meeting is business
that is (i) specified in our proxy materials with respect to such meeting, (ii) otherwise properly brought before the Annual Meeting by
or at the direction of our Board, or (iii) properly brought before the Annual Meeting by a stockholder of record entitled to vote at the
Annual
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Proxy Statement
Meeting who has delivered timely written
notice to our Secretary, which notice must contain the information specified in our bylaws. To be timely for our 2024 Annual Meeting of
stockholders, our Secretary must receive the written notice at our principal executive offices:
• | not earlier than January 26,
2024; and |
• | not later than February 25,
2024. |
In the event that we hold our 2024 Annual
Meeting of stockholders more than 30 days before or more than 70 days after the first anniversary of the date of the Annual Meeting, then
notice of a stockholder proposal that is not intended to be included in our proxy statement must be received no earlier than the close
of business on the 120th day before such Annual Meeting and no later than the close of business on the later of the following two dates:
• | the 90th day prior to such Annual
Meeting; or |
• | the 10th day following the day
on which public announcement of the date of such Annual Meeting is first made. |
If a stockholder who has notified us of
his, her or its intention to present a proposal at an Annual Meeting does not appear to present his, her or its proposal at such Annual
Meeting, we are not required to present the proposal for a vote at such Annual Meeting.
Nomination of Director Candidates
You may propose director candidates for
consideration by our Nominating and Corporate Governance Committee. Any such recommendations should include the nominee’s name and
qualifications for membership on our Board and should be directed to our Secretary at the address set forth above. For additional information
regarding stockholder recommendations for director candidates, see “Board of Directors and Corporate Governance — Stockholder
Recommendations for Nominations to the Board.”
In addition, our bylaws permit stockholders
to nominate directors for election at an Annual Meeting of stockholders. To nominate a director, the stockholder must provide the information
required by our bylaws. In addition, the stockholder must give timely notice to our Secretary in accordance with our bylaws, which, in
general, require that the notice be received by our Secretary within the time period described above under “Stockholder Proposals”
for stockholder proposals that are not intended to be included in a proxy statement.
Availability of Bylaws
A copy of our bylaws may be obtained by
accessing our public filings on the SEC’s website at www.sec.gov. You may also contact our Secretary at our principal executive
office for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director
candidates.
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Board of Directors and Corporate Governance
Our business affairs are managed under
the direction of our Board, which is currently comprised of seven members, six of which are “independent” under Nasdaq listing
standards.
The Board is nominating two nominees for
election as Class I directors. Our Board is divided into three classes with staggered three-year terms. At each Annual Meeting of stockholders,
a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring. Last year, we amended
our Certificate of Incorporation to provide that our directors will be elected for one-year terms, beginning with our 2027 Annual Meeting.
Our Board of Directors has nominated Daryl Bradley and Robert E. Dowdell for election at the Annual Meeting, each to serve as Class I
directors until the 2026 Annual Meeting of stockholders or until their successors are duly elected and qualified.
Our commitment to diversity extends to
our Board of Directors, where more than 70% of our directors are either women or members of an underrepresented ethnic minority group.
The following charts set forth the ages,
ethnic diversity, gender diversity, skills, and independence status of our Board as of April 3, 2023.
Board Composition
We
have thoughtfully constructed our Board to advance our strategy.
|
Mac |
Richard |
Daryl |
Robert |
Catriona |
Daina |
Martha |
|
|
Skills |
Armstrong |
Taketa |
Bradley |
Dowdell |
Fallon |
Middleton |
Notaras |
|
|
Accounting and Finance |
l |
l |
|
l |
l |
l |
l |
|
|
Corporate Governance |
l |
l |
l |
l |
l |
l |
l |
|
86%
Independent |
Cybersecurity Oversight |
|
|
l |
l |
l |
|
l |
|
Environmental Policy Management |
|
l |
l |
|
|
|
|
|
|
Human Capital Management |
l |
l |
l |
l |
|
l |
|
|
43%
Women
29%
Members of
Underrepresented
Communities
|
Insurance and Financial Services |
l |
l |
l |
l |
l |
|
l |
|
Investment and Capital Management |
l |
l |
l |
l |
l |
|
l |
|
Leadership |
l |
l |
l |
l |
l |
l |
l |
|
Marketing and Brand Management |
l |
|
|
l |
|
l |
|
|
Risk Management and Reinsurance |
l |
l |
l |
l |
|
|
|
|
58.9
Average Board
Age |
Technology |
|
l |
|
l |
l |
l |
l |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diversity |
|
|
|
|
|
|
|
|
|
Male |
l |
l |
l |
l |
|
|
|
|
2.7
Average Board
Tenure
|
Female |
|
|
|
|
l |
l |
l |
|
Members of Underrepresented Communities |
|
l |
l |
|
|
|
|
|
White |
l |
|
|
l |
l |
l |
l |
|
The lack of a dot for a particular item does not mean that the director does not possess that skill or experience. We look to each director to be knowledgeable in these areas; however, the dot indicates that the item is a particularly prominent qualification or characteristic that the director brings to the Board |
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PLMR.com 16 |
Board of Directors and Corporate Governance
DIVERSE LEADERSHIP IN KEY ROLES |
|
|
|
|
Richard Taketa
Chair of
Compensation
Committee |
Catriona Fallon
Chair of Audit
Committee |
Martha Notaras
Chair of
Environmental, Social
and Governance
(ESG) Committee |
Daryl Bradley
Chair of Enterprise
Risk Management
Committee |
The table below details certain information
for each of the nominees, the non-continuing directors whose terms expire at the Annual Meeting and the directors whose terms do not expire
at the Annual Meeting.
Name |
Class |
Age |
Position |
Director
Since |
Current
Term
Expires |
Expiration
of Term
For Which
Nominated |
Nominees for Director |
Daryl
Bradley(2)(4)(5) |
I |
67 |
Director(I) |
2020 |
2023 |
2026 |
Robert
E. Dowdell(1)(2)(5) |
I |
77 |
Director(I) |
2019 |
2023 |
2026 |
Continuing Directors |
Mac
Armstrong(4) |
III |
48 |
Chief
Executive Officer,
Director and
Chairman(N) |
2014 |
2025 |
— |
Catriona
M. Fallon(1)(2) |
II |
52 |
Director(I) |
2019 |
2024 |
— |
Daina
Middleton(2)(3)(4) |
II |
57 |
Director(I) |
2021 |
2024 |
— |
Martha
Notaras(3)(4)(5) |
III |
62 |
Director(I) |
2020 |
2025 |
— |
Richard
H. Taketa(1)(3) |
II |
51 |
Director(I) |
2019 |
2024 |
— |
I = Independent
N = Not independent
(1) | Member of our Nominating and Corporate Governance
Committee. |
(2) | Member of our Audit Committee. |
(3) | Member of our Compensation Committee. |
(4) | Member of our Environmental, Social and Corporate
Governance Committee. |
(5) | Member of our Enterprise Risk Management Committee. |
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Proxy
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PLMR.com 17 |
Board of Directors and Corporate Governance
Classified Board Structure
We currently have a classified Board.
Following our 2022 Annual Meeting of Stockholders, we amended and restated our Certificate of Incorporation to declassify the Board beginning
with the 2027 Annual Meeting of Stockholders. This change provides for the annual election of all directors phased-in over a three-year
period. With this change to our Certificate of Incorporation:
• | the nominees elected at the
2027 Annual Meeting (and at each subsequent Annual Meeting) will be elected for one-year terms; |
• | beginning with the 2028 Annual
Meeting of Stockholders, a majority of the directors will be elected annually; and |
• | following the 2029 Annual Meeting
of Stockholders, the entire Board will be elected annually. |
Corporate Governance Highlights
We regularly review our Board and corporate
governance practices to ensure accountability and enhance boardroom effectiveness.
BOARD PRACTICES |
|
|
|
|
|
Annual
Board evaluations |
|
|
|
|
|
|
|
|
6 of
7 Directors are independent |
|
|
|
|
|
|
|
|
5 of
7 Directors are women or members of underrepresented communities |
|
|
|
|
|
|
|
|
Bi-annual
updates on information security matters with Board |
|
|
|
|
|
|
|
|
Quarterly
executive sessions held without management present |
|
|
|
|
CORPORATE GOVERNANCE PRACTICES |
|
|
|
|
|
Independent
Lead Director with significant responsibilities |
|
|
|
|
|
|
|
|
Annual
Board elections in 2027 (phased approach) |
|
|
|
|
|
|
|
|
Majority
vote standard in 2027 |
|
|
|
|
|
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Proxy
Statement |
PLMR.com 18 |
Board of Directors and Corporate Governance
Nominees for Director
Class I Directors for a term expiring
at our 2026 Annual Meeting of stockholders
Age: 67
Director since 2020
Committees:
Audit Committee
Environmental,
Social and
Corporate Governance
Committee
Enterprise Risk
Management Committee |
Daryl Bradley
We believe Mr. Bradley is qualified
to serve on our Board because his management experience in the insurance and reinsurance industry brings valuable industry knowledge and
practical experience to our Board.
Mr. Bradley has served as a member
of our Board of Directors since May 2020 and on the Board of Directors of our insurance subsidiaries since June 2020. He currently serves
on the board of Coverys Insurance Co, the fifth largest provider of medical liability insurance in the country. From 1995 to 2018, Mr.
Bradley held various roles at Everest Reinsurance Company, a reinsurance and insurance company, most recently serving as Executive Vice
President and Head of International Insurance from February 2015 to January 2018 and, prior to that, as Executive Vice President and President
of Insurance Operations, Chairman of Everest Insurance Company of Canada, and President and Board member of all of Everest’s statutory
primary insurance companies from August 2007 to February 2015. Prior to joining Everest, Mr. Bradley served several roles at Continental
Insurance Corporation from 1992 to 1995 and Fireman’s Fund Insurance Company from 1982 to 1992. Mr. Bradley earned his B.A. in Political
Science from the University of Chicago. |
Age: 77
Director since 2019
Committees:
Nominating and Corporate
Governance
Committee
Audit Committee
Enterprise Risk
Management Committee |
Robert E. Dowdell
We believe Mr. Dowdell is qualified
to serve on our Board due to his more than 30 years of leadership and management experience in various insurance servicing firms and other
institutions, as well as previous Corporate Controller and Audit Committee responsibilities for both public and private firms.
Mr. Dowdell has served as a
member of our Board of Directors since March 2019 and on the Board of Directors of our insurance subsidiaries since October 2018.
Mr. Dowdell founded Career Education Corporation and served as its Chief Executive Officer and President from September 2006 to
March 2007, as a Board Member from 1994 until 2008, and its Chairman of the Board from 2004 until March 2008. Previously, Mr.
Dowdell served as Chief Executive Officer of Marshall & Swift/Boeckh, LLC, President of National Education Centers, Corporate
Controller of National Education Corp and Chamberlain Manufacturing Corp, and as an Audit Manager at PricewaterhouseCoopers LLP. Mr.
Dowdell is a Certified Public Accountant in California and Illinois. Mr. Dowdell currently serves on the Boards of a number of
private companies. Mr. Dowdell earned his B.B.A. and M.B.A. from the University of Notre Dame. |
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Board of Directors and Corporate Governance
Continuing Directors
Class III Directors with a term expiring
at our 2025 Annual Meeting of stockholders
Age: 48
Director since 2014
Committees:
Environmental, Social and
Corporate
Governance
Committee |
Mac Armstrong
We believe Mr. Armstrong is qualified
to serve on our Board of Directors due to his extensive experience leading insurance companies and his industry knowledge.
Mr. Armstrong has served as our Chief
Executive Officer and a Director since February 2014 and Chairman of our Board of Directors since June 2020. Prior to joining our Company,
Mr. Armstrong served as the President of Arrowhead General Insurance Agency, which he joined in June 2009, previously holding the positions
of Chief Financial Officer and Chief Operating Officer. Mr. Armstrong led the sale of Arrowhead to Brown & Brown, Inc. in January
2012. Mr. Armstrong’s prior experience includes Spectrum Equity Investors, a private equity investment firm where he led the insurance
investing practice and Alex. Brown & Sons/ BT Alex. Brown Inc., an investment bank acquired by Deutsche Bank. Mr. Armstrong earned
an A.B. from Princeton University. Mr. Armstrong is a member of the Board of Advisors of Cloverlay Investment Management LLC, a private
equity investment firm and a member of the Board of Trustees of the Bishop’s School. |
Age: 62
Director since 2020
Committees:
Compensation Committee
Environmental,
Social and
Corporate Governance
Committee
Enterprise Risk
Management Committee |
Martha Notaras
We believe Ms. Notaras is qualified
to serve on our Board due to her extensive experience working with emerging private and public companies.
Ms. Notaras has served as a
member of our Board of Directors since February 2020. Ms. Notaras is General Partner at Brewer Lane Ventures, investing in early
stage insurtech and fintech companies. Ms. Notaras serves on the Boards of Cowbell Cyber, an artificial intelligence-driven cyber
managing general agent; Lynk, which uses artificial intelligence to deliver its knowledge as a service platform; Cape Analytics,
which delivers highly accurate property data derived from imagery via machine learning; and proptech special purpose acquisition
company Jaguar Global Growth Corporation I (NASDAQ: JGGCU). Prior to joining Brewer Lane Ventures, Ms. Notaras was Partner at XL
Innovate, investing in early stage insurtechs, including Lemonade, which went public in 2020. Previously, Ms. Notaras ran corporate
development for the business analytics division of the Daily Mail, where she acquired 20 companies, including insurtech pioneer Risk
Management Solutions. Ms. Notaras has served as Board Director for many early and growth stage companies focusing on fintech,
insurtech, proptech, edtech and digital media. Ms. Notaras’s prior experience includes investment banking at Merrill Lynch and
commercial banking at Credit Suisse. Ms. Notaras earned her A.B. Cum Laude from Princeton University and her MBA from Harvard
Business School, where she was a Baker Scholar, awarded for graduating in the top five percent of the class. |
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Board of Directors and Corporate Governance
Class II Directors with a term expiring
at our 2024 Annual Meeting of stockholders
Age: 52
Director since 2019
Committees:
Nominating and Corporate
Governance
Committee
Audit Committee |
Catriona M. Fallon
We believe that Ms. Fallon’s
experiences as a senior finance executive, including as the Chief Financial Officer of other publicly traded technology companies, qualifies
her to serve on our Board of Directors.
Ms. Fallon has served as a
member of our Board of Directors since May 2019, bringing more than twenty years of strategic finance expertise and leadership
experience. She also serves on the Board of Directors for Arlo Technologies, Inc., a smart home technology company based in
Carlsbad, CA (NASDAQ: ARLO), and General Fusion, a Canadian company which is pursuing the fastest and most practical path to
commercial fusion energy. Ms. Fallon previously served on the Board of Directors of Cray Inc. (NASDAQ: CRAY), until its acquisition
by Hewlett Packard Enterprise. Ms. Fallon is an Executive Advisor and Investor, helping Companies achieve outpaced performance. She
has served as CFO for several technology companies, including Aktana, a software and services company; Hitachi Vantara – a
multi-billion-dollar digital solutions subsidiary of Hitachi, Ltd.; Silver Spring Networks where she helped to execute the sale of
the company to Itron; and Marin Software, a company providing software as a service to optimize online advertising. Ms. Fallon has
held leadership positions across a variety of technology companies including Cognizant Technology Solutions and Hewlett-Packard. She
has also served as an equity analyst at Citigroup Investment Research and has held roles with Piper Jaffray & Company, and
McKinsey & Company. Ms. Fallon holds an M.B.A. from Harvard Business School, and a B.A. in Economics from UCLA. |
Age: 57
Director since 2021
Committees:
Audit Committee
Compensation
Committee
Environmental, Social and
Corporate Governance
Committee |
Daina Middleton
We believe Ms. Middleton is qualified
to serve on our Board due to her deep expertise in digital marketing earned through executive roles at several leading companies.
Ms. Middleton has served as a member
of our Board of Directors since July 2021. Ms. Middleton is the Chief Strategy Officer of PrismWork, a leadership and culture consultancy
and former Chief Executive Officer of Britelite Immersive, an experiential creative technology company that builds immersive and interactive
client experiences, which sold to a strategic in November 2021. Previously, she served as the CEO of Ansira, an independent marketing
technology and services company focused on customer relationship development, and prior to that held top-level management positions with
Twitter, Performics, which is a global performance marketing solutions firm, and Hewlett-Packard where her tenure there included managing
revenue marketing where she led the global sales marketing team that drove a 40% growth in revenue. During her nearly 30-year career,
Ms. Middleton has also consulted broadly across industries to assist companies to manage global teams, optimize digital marketing and
nurture company culture. She currently serves on the board of Marin Software, a public company and Level, a PE-backed marketing services
company. She is also an advisor for several early-stage startup companies. Ms. Middleton received a BA degree in Technical Journalism
from Oregon State University where she serves as a member of OSU’s School of Arts & Communication Advisory Council. |
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Board of Directors and Corporate Governance
Age: 51
Director since 2019
Committees:
Nominating and Corporate
Governance
Committee
Compensation Committee |
Richard H. Taketa
We believe Mr. Taketa is qualified
to serve on our Board due to his executive and insurance industry experience, as well as his experience as a director of numerous private
companies.
Mr. Taketa has served as a
member of our Board of Directors since March 2019 and on the Board of Directors of our insurance subsidiaries since October 2018.
Mr. Taketa serves as President of Taketa Capital Corporation, where he has worked since September 2018. Previously, Mr. Taketa
served as Chief Executive Officer and President of York Risk Services Group, Inc., from January 2014 through September 2018,
previously holding the positions of Chief Operating Officer, Chief Strategy Officer, and President at numerous York divisions and
subsidiaries since 2006. Prior to joining York, Mr. Taketa served as the Chief Executive Officer of Southern California Risk
Management Associates and an associate at DLA Piper LLP. In addition, Mr. Taketa serves on the Board of Directors of Veritone, Inc.
(NASDAQ: VERI), and several private companies. Mr. Taketa earned his B.A. in Economics from Colgate University and his J.D. from
Stanford Law School. |
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Board of Directors and Corporate Governance
Director Independence
Our Board has undertaken a review of the
independence of each current director and determined that Mss. Fallon, Middleton, and Notaras and Messrs. Bradley, Dowdell, and Taketa,
representing six of our seven Directors, are “Independent” as defined under the rules of Nasdaq, and are Non-Employee Directors
as defined in Rule 16b-3 of the Exchange Act.
Our Board also determined that Ms. Fallon
(Chairperson), Mr. Bradley, Mr. Dowdell and Ms. Middleton, who currently comprise our Audit Committee, satisfy the listing standards
of Nasdaq and the SEC for service on our Audit Committee. Our Board also determined that Mr. Taketa (Chairperson), Ms. Middleton,
and Ms. Notaras, who currently serve on our Compensation Committee, satisfy the independence standards for compensation committees
established by SEC rules and the listing standards of Nasdaq. The Board has also determined that Mr. Dowdell (Chairperson), Ms.
Fallon and Mr. Taketa, who currently serve on our Nominating and Corporate Governance Committee, satisfy the independence standards
for nominating committees established by applicable SEC rules and the listing standards of Nasdaq.
In evaluating the independence of Mss.
Fallon, Middleton, and Notaras and Messrs. Bradley, Dowdell, and Taketa, the Board considered their current and historical employment,
any compensation we have given to them, any transactions we have with them, their beneficial ownership of our capital stock, their ability
to exert control over us, all other material relationships they have had with us and the same facts with respect to their immediate family.
The Board also considered all other relevant facts and circumstances known to it in making this independence determination.
Board Leadership Structure
Our Board of Directors recognizes that
one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide effective oversight of
management. Our bylaws and corporate governance guidelines provide our Board of Directors with flexibility to combine or separate the
positions of Chairman of the Board and Chief Executive Officer. Our Board of Directors currently believes that our existing leadership
structure, under which Mac Armstrong serves as our Chief Executive Officer and as our Chairman of the Board and Richard Taketa serves
as our Lead Independent Director, is effective.
Board Meetings and Committees
During 2022, our Board held five meetings
(including regularly scheduled and special meetings), and each Director attended more than 75% of the aggregate of (i) the total number
of meetings of our Board held during the period for which he or she served as a Director and (ii) the total number of meetings held by
all Committees of our Board on which he or she served during the periods that he or she served.
It is the policy of our Board to regularly
have separate meeting times for Independent Directors without management. Although we do not have a formal policy regarding attendance
by members of our Board at Annual Meetings of stockholders, we encourage, but do not require, our directors to attend.
Our Board currently has an Audit Committee,
a Compensation Committee, a Nominating and Corporate Governance Committee, an Environmental, Social and Corporate Governance Committee
and a Enterprise Risk Management Committee. Each committee has the composition and responsibilities described below.
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Board of Directors and Corporate Governance
Board Role in Risk Oversight
• | The Board and its committees
take an active role in overseeing management of risks facing the business; |
• | The Board regularly reviews
information regarding our operational, financial, legal and strategic risks; |
• | Management oversees day-to-day
risk management activities and provides the full Board with quarterly updates on significant risks. |
Audit Committee |
|
Reviews and discusses with management the Company’s major financial risk exposures as well as risk management policies |
Compensation Committee |
|
Monitors and assesses risks associated with the Company’s compensation strategy and policies |
Nominating and Corporate
Governance Committee |
|
Oversees management of risk associated with Board organization, membership and structure, CEO succession planning, and corporate governance |
Environmental, Social and
Governance Committee |
|
Oversees reporting and disclosures with respect to ESG matters that may affect the business, operations, performance or public image of the Company |
Enterprise Risk
Management Committee |
|
Assists in setting the Company’s general strategy with respect to enterprise risk management and cybersecurity, and to consider and recommend policies and practices that conform with the strategy |
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Board of Directors and Corporate Governance
Audit Committee
The members of our Audit Committee are
Catriona M. Fallon (Chairperson), Daryl Bradley, Robert E. Dowdell and Daina Middleton. All members of our Audit Committee meet the requirements
for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq Marketplace Rules. Our Board of Directors
has determined that Catriona M. Fallon is an Audit Committee financial expert as defined under the applicable rules of the SEC and has
the requisite financial sophistication as defined under the applicable rules and regulations of the Nasdaq Stock Market. The Audit Committee
oversees our corporate accounting and financial reporting process. Among other matters, the Audit Committee:
• | appoints our independent registered
public accounting firm; |
• | evaluates the independent registered
public accounting firm’s qualifications, independence and performance; |
• | determines the engagement of
the independent registered public accounting firm; |
• | reviews and approves the scope
of the annual audit and the audit fee; |
• | discusses with management and
the independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements; |
• | review (a) the internal control
report prepared by management, including management’s assessment of the effectiveness of the Company’s internal control over
financial reporting and (b) the Company’s independent auditor’s attestation, and report, on the assessment made by management,
in each case, as and when required by Section 404 of the Sarbanes-Oxley Act of 2002. Discuss with management, the internal audit group,
and the independent auditor any changes in internal control over financial reporting disclosed or considered for disclosure in the Company’s
periodic filings with the SEC. Review with management and the Company’s independent auditor any reports or disclosure submitted
by management to the Committee as contemplated by the certifications required under Section 302 of the Sarbanes-Oxley Act of 2002; |
• | reviews related party transactions; |
• | approves the retention of the
independent registered public accounting firm to perform any proposed permissible non-audit services; |
• | monitors the rotation of partners
of the independent registered public accounting firm on our engagement team in accordance with requirements established by the SEC; |
• | is responsible for reviewing
our financial statements and our management’s discussion and analysis of financial condition and results of operations to be included
in our annual and quarterly reports to be filed with the SEC; |
• | reviews our critical accounting
policies and estimates; |
• | is responsible for establishing
procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting
controls or auditing matters and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable
accounting or auditing matters. Adopt, as necessary, appropriate remedial measures or actions with respect to such complaints or concerns;
and |
• | reviews the Audit Committee
charter and the committee’s performance at least annually. |
Our Audit Committee operates under a written
charter that satisfies the applicable rules and regulations of the SEC and the listing requirements of Nasdaq. A copy of the charter of
our Audit Committee is available on our website at www.plmr.com in the Governance section of our Investors webpage. During 2022, our Audit
Committee held six meetings.
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Board of Directors and Corporate Governance
Compensation Committee
Our Compensation Committee consists of Mr.
Taketa (Chairperson), Ms. Middleton and Ms. Notaras. Our Compensation Committee reviews and recommends policies relating to compensation
and benefits of our officers and employees. Among other matters, the Compensation Committee:
• | reviews and recommends corporate
goals and objectives relevant to compensation of our Chief Executive Officer and other executive officers; |
• | evaluates the performance of
these officers in light of those goals and objectives and recommends to our Board of Directors the compensation of these officers based
on such evaluations; |
• | recommends to our Board of
Directors the issuance of stock options and other awards under our stock plans; and |
• | reviews and evaluates, at least
annually, the performance of the Compensation Committee and its members, including compliance by the Compensation Committee with its charter. |
Our Compensation Committee
operates under a written charter that satisfies the listing standards of Nasdaq. A copy of the charter of our Compensation Committee is
available on our website at www.plmr.com in the Governance section of our Investors webpage. The Compensation Committee held four meetings
during 2022.
Compensation Committee Interlocks and Insider
Participation
None of the members of our Compensation
Committee during the last fiscal year (which includes Mr. Taketa (Chairperson), Ms. Middleton and Ms. Notaras) is or has at any time been
an officer or employee of ours. None of our Executive Officers currently serves or in the past year has served as a member of the Board
or Compensation Committee of any entity that has one or more executive officers serving on our Board or Compensation Committee.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee
consists of Mr. Dowdell (Chairperson), Ms. Fallon and Mr. Taketa. The principal duties and responsibilities of the Nominating and Corporate
Governance Committee are as follows:
• | to identify candidates qualified
to become directors, consistent with criteria approved by our Board of Directors; |
• | to recommend to our Board of
Directors nominees for election as directors at the next Annual Meeting of stockholders or a special meeting of stockholders at which
directors are to be elected, as well as to recommend directors to serve on the other committees of the Board of Directors; |
• | to recommend to our Board of
Directors candidates to fill vacancies and newly created directorships on the Board; |
• | to identify best practices
and recommend corporate governance principles, including giving proper attention and making effective responses to stockholder concerns
regarding corporate governance; |
• | to develop and recommend to
our Board of Directors guidelines setting forth corporate governance principles; |
• | to develop and recommend to
our Board of Directors a chief executive officer succession plan; and |
• | to oversee the evaluation of
our Board of Directors and senior management. |
Our Nominating and Corporate Governance Committee
operates under a written charter that satisfies the listing standards of Nasdaq. A copy of the charter of our Nominating and Corporate
Governance Committee is available on our website at www.plmr.com in the Governance section of our Investors webpage. The Nominating and
Corporate Governance Committee held four meetings during 2022.
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Board of Directors and Corporate Governance
Environmental, Social and Corporate
Governance Committee
Our Environmental, Social and
Corporate Governance (“ESG”) Committee consists of Ms. Notaras (Chairperson), Mr. Armstrong, Mr. Bradley and Ms.
Middleton. The principal duties and responsibilities of the ESG Committee are as follows:
• | to assist in setting the Company’s
general strategy with respect to environmental, health and safety, corporate social responsibility, corporate governance, sustainability,
and other public policy matters relevant to the Company (collectively, “ESG matters”), and to consider and recommend policies,
practices, and disclosures that conform with the strategy; |
• | to oversee the Company’s
reporting and disclosure with respect to ESG matters; |
• | to assist in overseeing internal
and external communications regarding the Company’s position or approach to ESG matters; |
• | to consider current and emerging
ESG matters that may affect the business, operations, performance or public image of the Company or are otherwise pertinent to the Company
and its stakeholders, and to make recommendations on how the Company’s policies, practices and disclosures can adjust to or address
current trends; |
• | to make periodic visits, as
individual members or as a committee, to operational locations in order to become familiar with the nature of the operations and review
relevant objectives, procedures and performance with respect to ESG matters; |
• | to put systems in place, as
deemed necessary and appropriate, to monitor ESG matters; |
• | to advise the Company on stockholder
proposals and other significant stakeholder concerns relating to ESG matters; |
• | to assist with additional internal
departments, and outside consultants as applicable, to drive timely and relevant disclosures of ESG matters; |
• | to review and assess its charter
annually and recommend to the Board any proposed changes for approval; and |
• | to perform such other duties,
tasks, and responsibilities relevant to the purpose of the ESG Committee as may from time to time be requested. |
Our ESG Committee operates under a written
charter, a copy of which is available on our website at www.plmr.com in the Governance section of our Investors webpage. There were four
meetings held by the ESG Committee during 2022.
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Board of Directors and Corporate Governance
Commitment to ESG
OVERVIEW |
• Our commitment to Environmental, Social and Governance (“ESG”) matters are fundamental to our business strategy and mission. |
• Continue to take steps to reduce our carbon footprint, preserve our natural resources through responsible power and water management and communicate our support for a more sustainable American future. |
• As we grow, Palomar will continue to be a values-driven workplace that integrates ESG aspects into our strategy, operations as well as capital allocation and investment decisions. |
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Board of Directors and Corporate Governance
ESG
PUBLICATIONS
AND REPORTING
FRAMEWORKS |
|
Dedicated ESG Section of Website |
|
Explicit Board-level Oversight of ESG |
|
Formal ESG Disclosures |
|
Stand-alone Annual ESG Report |
|
No ESG related Shareholder Proposals |
|
Alignment with Select ESG Reporting Frameworks |
Sustainability & Citizenship Report
In March 2023, we published our third annual
Sustainability & Citizenship Report. This report reinforces our commitment to maintain a compassionate workplace by exceeding traditional
ESG standards and outlines meaningful steps the Company has taken to address a range of issues, including climate change, diversity, equity
and inclusion, and corporate governance. A copy of our 2022 Sustainability & Corporate Citizenship Report can be found on our ESG
portal at http://www.plmr.com/esg under the “Palomar ESG Resources” section.
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Board of Directors and Corporate Governance
A few highlights from the report are as
follows:
• | Completed first third-party
assessment of the Company’s carbon footprint; |
• | Implemented further data disclosures
of workforce and board diversity (forty percent of the Company’s team members represent identified members of underrepresented communities); |
• | Commenced initiative to garner
diverse partnerships with the Big “I” and National African American Insurance Association as an effort to further promote
insurance agent and broker diversity; |
• | Continued partnership with
Team Rubicon, a veteran-led humanitarian organization that serves global communities before, during and after disasters and crises; and |
• | Commitment that no less than
2% of the company’s investment portfolio be comprised of ‘green’ investments. |
Diversity and Inclusion
We are committed to increasing diversity
within our Company. We believe that diversity yields greater creativity and productivity, helps us serve our customers and partners more
effectively, and ultimately returns greater value to our shareholders and to the communities in which we do business. We set diversity
goals in our annual Sustainability & Citizenship report. In 2022, 40% of our team members identify as a member of an ethnic minority
group, compared to 39% in 2021, and 50% of our senior executive team identifies as a member of a minority group. Our commitment to Diversity
and Inclusion follows:
DIVERSITY – We are not all the
same. Palomar celebrates our differences, and we identify opportunities for increased innovation and collaboration amongst diverse teams
with diverse perspectives.
INCLUSION – Palomar appreciates
and takes pride in the active involvement of every team member’s unique contribution within a culture that harmonizes our differences.
Our team members understand their important contribution to the greater good and understand that what they do makes a difference, both
for the company, and in the larger communities we serve.
COMMUNITY & ENGAGEMENT – Palomar’s
commitment to diversity, equality and inclusion extends into the communities where we conduct business. We believe that every organization,
regardless of size or scope, can make a meaningful difference on issues of community welfare, justice, and equality. Through our social,
personal, and professional networks, we champion our values and actions. We partner with like-minded organizations to drive action and
positive change.
EQUALITY – Palomar promotes
a work environment where individuals are treated fairly, respectfully and have equal access to resources and opportunities for growth.
We encourage our teammates to share ideas and collaborate to remove organizational boundaries, solve problems, and drive company growth.
Addressing Climate Change
We recognize that climate change is perhaps
the most complex risk facing society today. As a specialty insurance company writing earthquake, wind, hail, hurricane and flood coverage,
climate change directly impacts our business and insureds. In our corporate reporting on climate change, we apply and adopt the recommendations
of the Task Force on Climate-Related Financial Disclosures (“TCFD”). The TCFD’s four-pillar framework provides needed
guidance on how climate-committed companies such as how can disclose and address risks and opportunities in the changing climate.
Enterprise Risk Management Committee
Our Board formed the Enterprise Risk Management
(“ERM”) Committee in February 2023. Our ERM Committee consists of Mr. Bradley (Chairperson), Mr. Dowdell, and Ms. Notaras.
The principal duties and responsibilities of the ERM Committee are as follows:
• | to assist in setting the Company’s
general strategy with respect to enterprise risk management and cybersecurity, and to consider and recommend policies and practices that
conform with the strategy; |
• | to assist in overseeing internal
and external material communications regarding the Company’s position or approach to enterprise risk management and cybersecurity; |
• | to consider
current and emerging enterprise risks that may affect the performance or public image of the Company or are otherwise pertinent to the
Company and its stakeholders, and to make recommendations on how the Company’s policies and practices can adjust to or address current
macro trends; |
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Board of Directors and Corporate Governance
• | to consider current and emerging
ERM matters that may affect the business, operations, performance or public image of the Company or are otherwise pertinent to the Company
and its stakeholders, and to make recommendations on how the Company’s policies, practices and disclosures can adjust to or address
current trends; |
• | to monitor the interrelationships
of the Company’s risk profile; |
• | to assess and monitor the Company’s
risk management framework employed to manage enterprise risks and cybersecurity; |
• | to advise the Company on stockholder
proposals and other significant stakeholder concerns relating to enterprise risk management and cybersecurity; |
• | to review and assess its charter
annually and recommend to the Board any proposed changes for approval; and |
• | to perform such other duties,
tasks, and responsibilities relevant to the purpose of the ERM Committee as may from time to time be requested. |
Our ERM Committee operates under a written
charter, a copy of which is available on our website at www.plmr.com in the Governance section of our Investors webpage. There were no
meetings held by the ERM Committee during 2022.
Core Pillars of ERM
RISK MODELING |
REINSURANCE |
ORGANIZATIONAL |
In-depth
portfolio analysis, analyzing exceedance probability curves with various capacity allocation exercises and deterministic
modeling |
Oversee approach to catastrophe reinsurance |
Conversion of the ERM Sub-Committee to a formal three director committee reporting to the Board |
Increased
analytics to support the Actuarial and Catastrophe Modeling |
Year-round active planning and execution |
Monitor measurable outcomes against established benchmarks |
Identifying and Evaluating Nominees for
Director
The Nominating and Corporate Governance
Committee use the following procedures to identify and evaluate any individual recommended or offered for nomination to the Board:
• | The Nominating and Corporate
Governance Committee will consider candidates recommended by stockholders in the same manner as candidates recommended to the Nominating
and Corporate Governance Committee from other sources. |
• | In its evaluation of director
candidates, including the members of the Board eligible for re-election, the Nominating and Corporate Governance Committee will consider
the following: |
| — | any specific minimum qualifications
that it believes must be met by a nominee for a position on the Board; |
| — | any specific qualities or skills
that it believes are necessary for one or more of the Board members to possess; and |
| — | the desired qualifications,
expertise, experience, and characteristics of Board members, with the goal of developing an experienced and highly qualified Board. |
For Board membership, the criteria considered
includes independence, diversity of experience, demonstrated leadership, and the ability to exercise sound judgment. The backgrounds and
qualifications of the directors considered as a group should provide a significant breadth of experience, knowledge and abilities that
shall assist the Board in fulfilling its responsibilities. Although there is no specific policy regarding diversity in identifying director
nominees, both the Nominating and Corporate Governance Committee and the Board seek the talents and backgrounds that would be most helpful
to us in selecting director nominees. In particular, the Nominating and Corporate Governance Committee, when recommending director candidates
to the full Board of Directors for nomination, may consider whether a director candidate, if elected, assists in achieving a mix of Board
of Directors members that represents a diversity of background and experience.
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Board of Directors and Corporate Governance
Stockholder Recommendations for Nominations
to the Board
A stockholder that wishes to recommend
a candidate for consideration by the Nominating and Corporate Governance Committee as a potential candidate for director must direct the
recommendation in writing to Palomar Holdings, Inc., 7979 Ivanhoe Avenue, Suite 500, La Jolla, California 92037, Attention: Secretary,
and must include the candidate’s name, home and business contact information, detailed biographical data, relevant qualifications,
class and number of shares of our capital stock that are held by the nominee, a signed letter from the candidate confirming willingness
to serve, information regarding any relationships between us and the candidate and evidence of the recommending stockholder’s ownership
of our stock. Such recommendation must also include a statement from the recommending stockholder in support of the candidate, particularly
within the context of the criteria for board membership, including issues of character, integrity, judgment, and diversity of experience,
independence, area of expertise, corporate experience, potential conflicts of interest, other commitments and the like and personal references.
Our Board will consider the recommendation but will not be obligated to take any further action with respect to the recommendation.
Communications with the Board of Directors
In cases where stockholders and other interested
parties wish to communicate directly with our non-management directors, messages can be sent to our Secretary, at Palomar Holdings, Inc.,
7979 Ivanhoe Avenue, Suite 500, La Jolla, California 92037, Attention: Secretary. Our Secretary monitors these communications and will
provide a summary of all received messages to the Board at each regularly scheduled meeting of the Board. Our Board generally meets on
a quarterly basis. Where the nature of a communication warrants, our Secretary may determine, in his or her judgment, to obtain the more
immediate attention of the appropriate Committee of the Board or non-management director, of independent advisors or of Company management,
as our Secretary considers appropriate.
Our Secretary may decide in the exercise
of his or her judgment whether a response to any stockholder or interested party communication is necessary.
This procedure for stockholder and other
interested party communications with the non-management directors is administered by the Company’s Nominating and Corporate Governance
Committee. This procedure does not apply to:
(a) | communications
to non-management directors from officers or directors of the Company who are stockholders, |
(b) | stockholder
proposals submitted pursuant to Rule 14a-8 under the Securities and Exchange Act of 1934,
as amended, or |
(c) | communications
to the Audit Committee pursuant to the Complaint Procedures for Accounting and Auditing Matters. |
Corporate Governance Guidelines and Code
of Conduct and Ethics
Our Board has adopted Corporate Governance
Guidelines. These principles address items such as the qualifications and responsibilities of our directors and director candidates and
corporate governance policies and standards applicable to us in general. In addition, our Board has adopted a Code of Conduct and Ethics
that applies to all of our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer, and other
executive and senior officers. The full text of our Corporate Governance Guidelines and our Code of Conduct and Ethics is posted on our
website at www.plmr.com in the Governance section of our Investors webpage. We intend to post any amendments to our Code of Conduct and
Ethics, and any waivers of our Code of Conduct and Ethics for directors and executive officers, on the same website within four business
days of such amendment or waiver.
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Board of Directors and Corporate Governance
Board Oversight of Risk
Although management is responsible for the
day-to-day management of the risks our company faces, our Board and its committees take an active role in overseeing management of our
risks and have the ultimate responsibility for the oversight of risk management. The Board regularly reviews information regarding our
operational, financial, legal, and strategic risks. Specifically, senior management attends quarterly meetings of the Board, provides
presentations on operations including significant risks, and is available to address any questions or concerns raised by our Board.
In addition, our five Committees assist the
Board in fulfilling its oversight responsibilities regarding risk. The Audit Committee coordinates the Board of Director’s oversight
of our internal control over financial reporting, disclosure controls and procedures, related party transactions and code of conduct and
corporate governance guidelines and management will regularly report to the Audit Committee on these areas. The Compensation Committee
assists the Board of Directors in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation
policies and programs as well as succession planning as it relates to our Chief Executive Officer. The Nominating and Corporate Governance
Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to the management of risks associated
with board organization, membership and structure, succession planning for our directors and corporate governance. The Environmental,
Social and Corporate Governance Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to
the management of risks associated with environmental, health and safety, corporate social responsibility, corporate governance, sustainability,
and other public matters relevant to the Company. The Enterprise Risk Management Committee assists the Board of Directors in fulfilling
its oversight responsibilities with respect to the management of risks associated with enterprise risk management, cybersecurity and other
major exposures facing the Company. When any of the committees receives a report related to material risk oversight, the chairman of the
relevant committee will report on the discussion to the full Board of Directors.
Delinquent Section 16(a) Reports
To our knowledge, based solely on our
review of the copies of such reports furnished to us and written representations to us, we believe that for fiscal 2022, all filing requirements
applicable to the Company’s officers, directors and greater than 10% beneficial owners pursuant to Section 16(a) of the Exchange
Act, were complied with, other than one Form 4 filed late for Chris Uchida. This form 4 was filed on March 29, 2022 related to stock sold
on March 16, 2022 and was filed late due to an administrative error.
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Board of Directors and Corporate Governance
Director Compensation
We adopted a formal non-employee director
compensation program effective January 1, 2021. The purpose of this compensation program is to attract and retain independent, qualified
candidates to serve on the Board by providing competitive compensation and aligning the interest of our non-employee directors with those
of our stockholders through long-term equity incentives. The Board makes all director compensation determinations after considering the
recommendations of the Nominating and Corporate Governance Committee and the Compensation Committee. The Compensation Committee reviews
director compensation annually, assisted periodically by its independent compensation consultant (most recently by PricewaterhouseCoopers
LLP (“PwC”) in July 2020).
In setting director compensation, we consider
various factors including market comparison studies and trends, the responsibilities of directors generally, including committee chairs,
and the significant amount of time that directors expend in fulfilling their duties. In establishing the non-employee director compensation
recommendations, the Compensation Committee utilized a balance of cash and equity. Directors who also serve as employees of the Company
do not receive additional compensation for service as directors. Elements of 2022 Director Compensation were as follows:
• | Annual board member service retainer
payable in quarterly cash installments; |
• | Annual committee chair cash
retainer (in lieu of annual committee member service retainer) payable in quarterly cash installments; |
• | Annual committee member service
retainer payable in quarterly cash installments; |
• | Annual equity retainer payable
in Restricted Stock Units (“RSUs”) in connection with our Annual Meeting with a 1-year cliff vesting schedule; |
• | Equity incentives payable to
new directors in RSUs with a 1-year cliff vesting schedule; |
• | Annual professional development
program reimbursement up to a specified amount; and |
• | Reimbursement of reasonable
out of pocket expenses incurred by the director in connection with attending board and committee meetings. |
The following table sets forth information
regarding compensation earned by our Non-Employee Directors for service on our Board of Directors and the board of directors of our subsidiaries
during the year ended December 31, 2022. Directors who are also our employees receive no additional compensation for their service as
a director. Thus, Mr. Armstrong’s compensation as a Named Executive Officer is discussed in the section “Executive Compensation-Compensation
Discussion & Analysis.”
2022 Director Compensation Table
Name |
Fees
Earned or
Paid in Cash
($)(1) |
Stock
Awards
($)(2) |
All Other
Compensation
($) |
Total
($) |
Daryl Bradley |
90,000 |
59,956 |
— |
149,956 |
Robert Dowdell |
87,500 |
59,956 |
— |
147,456 |
Catriona Fallon |
97,500 |
59,956 |
— |
157,456 |
Daina Middleton |
90,000 |
59,956 |
— |
149,956 |
Martha Notaras |
85,000 |
59,956 |
— |
144,956 |
Richard Taketa |
107,500 |
59,956 |
— |
167,456 |
(1) | Amounts in this column reflect compensation
earned in 2022 for service as a member of our Board and as a member of the board of directors of our subsidiaries. |
(2) | In accordance with SEC rules, amounts in
this column reflect the aggregate grant date fair value of restricted stock units (RSUs), as computed in accordance with FASB ASC Topic
718. Assumptions used in the calculation of these amounts are included in Note 12 to our financial statements included in our Annual Report
on Form 10-K for the year ended December 31, 2022. These amounts do not reflect the actual economic value that will be realized by our
non-employee directors upon the vesting of such equity awards or the sale of the common stock underlying such awards. |
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Proposal No. 1
Election of Directors
Under our governing documents, our Board has
the power to set the number of directors from time to time by resolution. We currently have seven authorized directors serving on our
Board, of which six directors are “Independent” as defined under Nasdaq listing standards. In accordance with our certificate
of incorporation, our Board is divided into three classes with staggered three-year terms. Any increase or decrease in the number of directors
will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our directors. This
classification of our Board may have the effect of delaying or preventing changes in control of our company. In 2022, we amended and restated
our certificate of incorporation to provide that our directors will be elected for one-year terms beginning with our 2027 Annual Meeting
of stockholders.
At the Annual Meeting, two Class I directors
will be elected for three-year terms. Based upon the recommendation of our Nominating and Corporate Governance Committee, our Board has
nominated Daryl Bradley and Robert E. Dowdell to stand for re-election by our stockholders, in each case for a three-year term expiring
at our 2026 Annual Meeting of stockholders or until his or her successor is duly elected and qualified.
Nominees for Director
Our Nominating and Corporate Governance Committee
has recommended, and our Board has approved, Daryl Bradley and Robert E. Dowdell as nominees for election as Class I directors at the
Annual Meeting.
If elected, Daryl Bradley and Robert E.
Dowdell will serve as Class I directors until the 2026 Annual Meeting of stockholders or until their successors are duly elected and qualified.
For information concerning the nominees, please see the section titled “Board of Directors and Corporate Governance.”
If you are a stockholder of record and you
sign your proxy card or vote over the Internet or by telephone but do not give instructions with respect to the voting of directors, your
shares will be voted FOR the election of Messrs. Bradley and Dowdell. We expect that Messrs. Bradley and Dowdell will accept such nomination;
however, in the event that a nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will
be voted for any nominee who shall be designated by our Board to fill such vacancy. If you are a beneficial owner of shares of our common
stock and you do not give voting instructions to your broker, bank, or other nominee, then your broker, bank or other nominee will leave
your shares unvoted on this matter.
Vote Required
The election of the Class I directors requires
a plurality of the votes cast by stockholders entitled to vote at the meeting thereon to be approved. Abstentions and broker non-votes
will have no effect on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE ELECTION OF THE DIRECTORS NOMINATED BY OUR BOARD OF DIRECTORS AND NAMED IN THIS PROXY STATEMENT AS CLASS I DIRECTORS
TO SERVE FOR THREE-YEAR TERMS.
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Proposal No. 2
Advisory Vote to Approve Named
Executive Officer
Compensation (“Say-On-Pay-Vote”)
We are asking our stockholders to approve,
on a non-binding advisory basis, the compensation of our Named Executive Officers (which consist of our Chief Executive Officer and our
next five highest paid executives) as described in detail in the section of this Proxy Statement titled “Executive Compensation.”
We urge stockholders to carefully read the “2022 Summary Compensation Table” and related compensation tables that follow
it.
Our executive compensation program utilizes a
pay for performance approach. Our executive compensation program is designed to deliver compensation in accordance with Company
performance with a large percentage of compensation at risk through long-term equity awards and annual cash incentive awards. These
awards are “at risk” and linked to Company performance, consistent with our belief that a significant amount of
executive compensation should be in the form of equity and that an even greater percentage of compensation should be tied to
performance for executives who bear higher levels of responsibility for our performance. Approximately 72% of our CEO’s 2022
total direct compensation and approximately 53% of the average 2022 total direct compensation of our other Named Executive Officers,
was at-risk, consisting of annual bonus, stock options, PSUs and RSUs. Additionally, the Compensation Committee engages with an
independent global executive compensation consulting firm, PwC, to advise the Committee on matters related to executive
compensation.
Our Board and the Compensation Committee
believe that the compensation policies and procedures described in this Proxy Statement are effective in achieving our compensation objectives.
Therefore, in accordance with Section 14A of the Exchange Act, we ask our stockholders to approve, on a non-binding advisory basis, the
compensation of the Named Executive Offices, as described in “Executive Compensation- Compensation Discussion and Analysis”,
the 2022 Summary Compensation Table and the related compensation tables notes in this Proxy Statement for our 2023 Annual Meeting
of the Stockholders.
Vote Required
The approval of the Named Executive Officers
compensation requires the affirmative majority of votes cast. Abstentions and broker non-votes will have no effect on the vote for this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS, AS DESCRIBED IN THIS PROXY STATEMENT.
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Proposal
No. 3
Ratification of Appointment of Independent
Registered Public Accounting Firm
Ratification
of Appointment
At
the Annual Meeting, stockholders are being asked to ratify the appointment of Ernst & Young LLP as our independent registered
public accounting firm for our fiscal year ending December 31, 2023. Stockholder ratification of the appointment of Ernst &
Young LLP is not required by our bylaws or other applicable legal requirements. However, our Board is submitting the appointment
of Ernst & Young LLP to our stockholders for ratification as a matter of good corporate governance. In the event that this
appointment is not ratified by the affirmative vote of a majority of the shares present in person or by proxy at the Annual Meeting
and entitled to vote, such appointment will be reconsidered by our Audit Committee. Even if the appointment is ratified, our Audit
Committee, in its sole discretion, may appoint another independent registered public accounting firm at any time during our fiscal
year ending December 31, 2023, if our Audit Committee believes that such a change would be in the best interests of Palomar and
its stockholders. If the appointment is not ratified by our stockholders, the Audit Committee may reconsider whether it should
appoint another independent registered public accounting firm. A representative of Ernst & Young LLP is expected to be present
at the Annual Meeting, will have an opportunity to make a statement if he or she wishes to do so, and is expected to be available
to respond to appropriate questions from stockholders.
Fees
Paid to the Independent Registered Public Accounting Firm
The
following table presents fees for professional audit services and other services rendered to us by Ernst & Young LLP for our
fiscal years ended December 31, 2022 and 2021.
|
2022 |
2021 |
Audit
Fees(1) |
$1,835,000 |
$1,759,025 |
Audit-Related
Fees(2) |
45,000 |
42,000 |
Tax
Fees(3) |
— |
105,000 |
All
Other Fees(4) |
— |
3,850 |
Total
Fees |
$1,880,000 |
$1,909,875 |
(1) | “Audit
Fees” consist of fees for professional services rendered in connection with the
audit of our annual financial statements, review of our quarterly financial statements,
and services that are normally provided by Ernst & Young LLP in connection with statutory
and regulatory filings or engagements. |
(2) | “Audit-Related
Fees” consist of fees billed for professional services for assurance and related
services that are reasonably related to the performance of the audit or review of our
consolidated financial statements and are not reported under “Audit Fees.” |
(3) | “Tax
Fees” consist of fees for professional services rendered by Ernst & Young LLP
for tax compliance, tax advice and tax planning. |
(4) | “All
Other Fees” consist of fees billed for products and services other than the services
reported in Audit Fees, Audit-Related Fees, and Tax Fees. |
Auditor
Independence
In
2022, there were no other professional services provided by Ernst & Young LLP that would have required our Audit Committee
to consider their compatibility with maintaining the independence of Ernst & Young LLP.
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Proxy
Statement |
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Proposal
No. 3
Ratification of Appointment of Independent
Registered Public Accounting Firm
Audit
Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Our
Audit Committee has established a policy governing our use of the services of our independent registered public accounting firm.
Under the policy, our Audit Committee is required to pre-approve all audit and permissible non-audit services performed by our
independent registered public accounting firm to ensure that the provision of such services does not impair such accounting firm’s
independence. All fees paid to Ernst & Young LLP for our fiscal years ended December 31, 2022 and 2021 were pre-approved by
our Audit Committee.
Vote
Required
The
ratification of the appointment of Ernst & Young LLP requires the affirmative majority of votes cast. Abstentions and broker
non-votes will have no effect.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR OUR FISCAL YEAR ENDING DECEMBER 31, 2023.
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Proxy
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Audit
Committee Report
The
information contained in the following Audit Committee Report shall not be deemed to be soliciting material or to be filed with
the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Palomar Holdings,
Inc., or the Company, specifically incorporates it by reference in such filing.
The
Audit Committee serves as the representative of the Board with respect to its oversight of:
| • | our
accounting and financial reporting processes and the audit of our financial statements; |
| • | the
integrity of our financial statements; |
| • | our
compliance with legal and regulatory requirements and efficacy of and compliance with
our corporate policies; |
| • | inquiring
about significant risks, reviewing our policies for risk assessment and risk management,
and assessing the steps management has taken to control these risks; and |
| • | the
independent registered public accounting firm’s appointment, qualifications, and
independence. |
The
Audit Committee also reviews the performance of our independent registered public accounting firm, Ernst & Young LLP, in the
annual audit of our financial statements and in assignments unrelated to the audit and reviews the independent registered public
accounting firm’s fees.
The
members of the Audit Committee are currently Catriona M. Fallon (Chairperson), Daryl Bradley, Robert E. Dowdell and Daina Middleton.
Each of the members of the Audit Committee is an “independent director” as currently defined in the applicable Nasdaq
and U.S. Securities and Exchange Commission (“SEC”) rules. The Board of Directors has also determined that Ms. Fallon
is an “Audit Committee financial expert” as described in applicable rules and regulations of the SEC.
The
Audit Committee provides our Board such information and materials as it may deem necessary to make our Board aware of financial
matters requiring the attention of our Board. The Audit Committee reviews our financial disclosures and meets privately, outside
the presence of our management, with our independent registered public accounting firm. In fulfilling its oversight responsibilities,
the Audit Committee reviewed and discussed the audited financial statements in our 2022 Annual Report with management, including
a discussion of the quality and substance of the accounting principles, the reasonableness of significant judgments made in connection
with the audited financial statements, and the clarity of disclosures in the financial statements. The Audit Committee reports
on these meetings to our Board.
The
Audit Committee has reviewed and discussed the Company’s audited consolidated financial statements with management and Ernst
& Young LLP, the Company’s independent registered public accounting firm. The Audit Committee has discussed with Ernst
& Young LLP the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 1301 (Communications
with Audit Committees).
The
Audit Committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by the applicable
requirements of the Public Company Accounting Oversight Board regarding Ernst & Young LLP’s communications with the
Audit Committee concerning independence and has discussed with Ernst & Young LLP its independence.
Based
on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the Company’s
audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2022 for filing with the Securities and Exchange Commission. The Audit Committee also has selected Ernst & Young
LLP as the independent registered public accounting firm for fiscal year 2023. The Board recommends that stockholders ratify this
selection at the Annual Meeting.
Respectfully
submitted by the members of the Audit Committee of the Board of Directors:
Catriona
M. Fallon (Chair)
Daryl
Bradley
Robert
E. Dowdell
Daina
Middleton
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Proxy
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PLMR.com 39 |
Executive
Officers
The
following table identifies certain information about our executive officers as of April 3, 2023. Each executive officer serves
at the discretion of our Board and holds office until their successors are duly elected and qualified or until their earlier resignation
or removal. There are no family relationships among any of our directors or executive officers.
Name |
Age |
Position |
Mac
Armstrong |
48 |
Chairman
of the Board and Chief Executive Officer |
Chris
Uchida |
49 |
Chief
Financial Officer |
Jon
Christianson |
43 |
President |
Jon
Knutzen |
51 |
Chief
Risk Officer |
Michelle
Johnson |
47 |
Chief
Talent & Diversity Officer |
Angela
Grant |
54 |
Chief
Legal Officer and Corporate Secretary |
|
|
|
|
|
Mac
Armstrong
Mr.
Armstrong has served as our Chief Executive Officer and a Director since February 2014 and Chairman of our Board of Directors
since June 2020. Prior to joining our company, Mr. Armstrong served as the President of Arrowhead General Insurance Agency, which
he joined in June 2009, previously holding the positions of Chief Financial Officer and Chief Operating Officer. Mr. Armstrong
led the sale of Arrowhead to Brown & Brown, Inc. in January 2012. Mr. Armstrong’s prior experience includes Spectrum
Equity Investors, a private equity investment firm where he led the insurance investing practice and Alex. Brown & Sons/ BT
Alex. Brown Inc., an investment bank acquired by Deutsche Bank. Mr. Armstrong earned an A.B. from Princeton University. Mr. Armstrong
is a member of the Board of Advisors of Cloverlay Investment Management LLC, a private equity investment firm and a member of
the Board of Trustees of the Bishop’s School.
|
|
|
|
|
|
Chris
Uchida
Mr.
Uchida has served as our Chief Financial Officer since September 2017 and our Corporate Secretary from March 2019 to February
2021. Mr. Uchida previously served as our Senior Vice President, Operations since June 2015. Prior to joining our company, Mr.
Uchida served as the Executive Vice President and Chief Accounting Officer at Arrowhead, which he joined in October 2004. Prior
to joining Arrowhead, he was a Tax Manager at PricewaterhouseCoopers LLP. Mr. Uchida earned a B.S. and M.S. from San Diego State
University and is a California Certified Public Accountant.
|
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Palomar 2023
Proxy
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Executive
Officers
|
|
|
|
|
Jon
Christianson
Mr.
Christianson has served as our President since April 2022. Prior to that he served as our Chief Underwriting Officer from August
2020 to April 2022, and as our Chief Operating Officer since joining our company in February 2014 to September 2020. Prior to
joining our company, Mr. Christianson served as a Vice President of Holborn Corporation from April 2010 to December 2013. Mr.
Christianson started his career with John B. Collins Associates in Minneapolis in 2002, where he serviced both casualty and property
business. Mr. Christianson earned a B.A. in Economics from St. Olaf College.
|
|
|
|
|
|
Jon
Knutzen
Mr.
Knutzen has served as our Chief Risk Officer since joining Palomar in April 2019. Prior to joining our Company, Mr. Knutzen was
a Partner at TigerRisk Partners from May 2017 to April 2019 where he led the firm’s Property Specialty and Reinsurance Solutions
Practice. Prior to this position, Mr. Knutzen was an Executive Vice President at BMS Intermediaries from September 2016 to March
2017 and a Partner at Advocate Reinsurance Partners (acquired by BMS Intermediaries) from March 2015 to September 2016. Prior
to this position, Mr. Knutzen served as Property Specialty Practice leader at TigerRisk from April 2013 to March 2015. Prior to
TigerRisk, Mr. Knutzen held various leadership positions with reinsurance intermediaries Holborn Corporation, Guy Carpenter, and
John B Collins Associates. Mr. Knutzen earned a B.S. from South Dakota State University.
|
|
|
|
|
|
Michelle
Johnson
Mrs.
Johnson has served as our Chief Talent & Diversity Officer since January 2021. Previously, she served as our Senior Vice President,
People and Talent from December 2019 to January 2021. Prior to joining our Company, Mrs. Johnson served as Senior Director, Global
HR, Operations and Services for Panasonic Avionics from 2018 through 2019. Prior to joining Panasonic, Mrs. Johnson served at
AMN Healthcare as Assistant Vice President, Sales Operations from 2016 until 2018 and as Senior Director, HR from 2008 to 2016.
Prior to AMN, Ms. Johnson ran her own consulting firm MJ TalentResources. Mrs. Johnson earned a B.A. in Liberal Studies from Cal
State University Long Beach.
|
|
|
|
|
|
Angela
Grant
Ms.
Grant has served as our Chief Legal Officer since November 2020 and our Corporate Secretary since February 2021. Prior to joining
our Company, Ms. Grant served as Chief Legal and Innovation Officer at CSE Insurance Group (“CSE”) from January 2019
to November 2020. Prior to joining CSE, Ms. Grant was Head of Compliance & Legal at Hippo Insurance from April 2017 to January
2019. In addition to her legal and compliance background, past leadership roles at Esurance, Kemper, and GEICO burnished her credentials
in building compliant business models, mergers and acquisitions, corporate governance, and strategy. Ms. Grant earned a J.D. from
Texas A&M University School of Law and a B.B.A. in Business Administration from University of North Texas.
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Palomar 2023
Proxy
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PLMR.com 41 |
Executive
Officer Diversity
Diversity |
Mac
Armstrong |
Chris
Uchida |
Jon
Christianson |
Jon
Knutzen |
Angela
Grant |
Michelle
Johnson |
Male |
l |
l |
l |
l |
|
|
Female |
|
|
|
|
l |
l |
Members
of Underrepresented Community |
|
l |
|
|
l |
|
White |
l |
|
l |
l |
|
l |
Compensation
Discussion and Analysis
This
Compensation Discussion and Analysis (“CD&A”) provides information on the goals and objectives of our executive
compensation program including Palomar’s total rewards philosophy, which focuses on rewarding team members for their central
role in our continued growth and success. While the principles underlying this philosophy extend to all levels of the organization,
this CD&A primarily covers the compensation provided to our named executive officers (“NEOs”). For 2022, our NEOs
included the following:
| • | Mac
Armstrong, Chairman and Chief Executive Officer |
| • | Chris
Uchida, Chief Financial Officer |
| • | Jon
Christianson, President |
| • | Jon
Knutzen, Chief Risk Officer |
| • | Angela
Grant, Chief Legal Officer |
| • | Michelle
Johnson, Chief Talent & Diversity Officer |
| • | Heath
Fisher, Former President (retired in April 2022) |
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Palomar 2023
Proxy
Statement |
PLMR.com 42 |
Compensation
Discussion and Analysis
Executive
Summary
Responding
to the 2022 Say-On-Pay Advisory Vote
We
provide shareholders the opportunity annually to vote to approve our executive compensation program on an advisory basis. At our
2022 annual shareholder meeting, approximately 22% of our shareholders voted in support of our advisory vote on executive compensation.
Our Compensation Committee was disappointed that more shareholders did not support the say-on-pay resolution. Given this outcome,
the importance we place on being responsive to shareholder feedback and maintaining a constructive relationship with our stockholders,
we conducted a comprehensive shareholder outreach campaign. The campaign allowed us to understand our fellow shareholders’
perspectives on our executive compensation practices and programs to inform the best path forward.
As
a result of this shareholder engagement and as described in our proxy materials, multiple enhancements requested by shareholders
were made by our Compensation Committee to our executive compensation programs in direct response to shareholder concerns and
in order to strengthen the link between management and shareholder interests.
Shareholder
Engagement: We Reached Out to Shareholders Representing 68% of our Total Shares Outstanding and We Addressed Key Shareholder Concerns
Who
We Contacted
| • | We
contacted 15 shareholders representing 68% of our total shares outstanding and invited
them to meet with members of our Board of Directors and executive management team to
discuss their viewpoints on executive compensation, governance, and ESG related matters. |
| • | We
held 14 meetings with 11 shareholders who collectively own approximately 40% of our total
shares outstanding. We solicitated their feedback on our compensation, governance and
ESG programs and practices. |
| • | In
the first quarter of 2023, we reengaged with our largest shareholder to review the modifications
we implemented to our 2023 executive compensation programs. |
Palomar
Representatives Who Participated in Shareholder Meetings
| • | Richard
Taketa, our Lead Independent Director and our Compensation Committee Chair, led each
of these shareholder meetings. |
| • | Executive
leaders from Palomar’s people and talent, legal, and investor relations teams also
participated in all our shareholder meetings. |
Additionally,
we conducted briefing calls with proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis to better understand
their feedback on our 2021 executive compensation program and their overall approach to proxy analysis.
Key
Shareholder Feedback
Overall,
our shareholders are supportive of the core design of our executive compensation programs, as the majority of our executive compensation
pay mix is in the form of at-risk compensation, and our Annual Incentive Plan (“AIP”) and performance-based equity
awards (“PSUs”) are tied to key financial and operating metrics that directly drive shareholder value.
However,
our shareholders did express concern about our use of one-time supplemental equity grants to select NEOs. While they understood
the rationale behind our 2021 one-time supplemental equity grants and appreciate that the majority of those grants were performance-based
and are presently underwater due to the rigorous stock appreciation hurdles, shareholders relayed a preference for equity grants
to be issued within the parameters of our annual compensation construct. Certain shareholders also expressed a preference for
increased use of performance-based equity in our Long-Term Incentive (“LTI”) mix and the incorporation of a longer-term
measurement period for our PSU awards.
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Palomar 2023
Proxy
Statement |
PLMR.com 43 |
Compensation
Discussion and Analysis
Shareholder
Feedback Responses and Actions
As
we highly value the perspective and insight of our shareholders, our Compensation Committee evaluated the feedback received from
our shareholder outreach efforts and adopted several changes to our executive compensation and corporate governance practices.
The feedback we received and the changes incorporated in response thereto for our 2023 executive compensation programs are reflected
below.
Shareholder
Concern |
Concern
Level |
What
We Did to Address Shareholder Feedback |
Supplemental
retention awards to NEOs |
High |
We
committed to not issue any supplemental equity grants to executive officers without first
engaging shareholders. We clarified that our vehicle for granting equity is our annual
LTI program |
Insufficient
performance-based equity in LTI mix |
High |
Effective
2023, we eliminated stock options from the LTI mix, and we increased the weighting of
PSUs from 20% of the total mix to 50% for all NEOs, with RSUs comprising the remaining
balance |
Use
of 1-year performance period for PSUs |
High |
For
the ROE component that comprises 70% of our target PSUs, we increased the performance
period from one year to three years |
Insufficient
disclosures around STI and LTI mechanics |
Moderate |
We
have included enhanced disclosures in this year’s CD&A detailing the full mechanics
and payout calculations underlying our 2022 AIP (page 53) and 2022 LTI (page 55), and
we have committed to including enhanced disclosures in subsequent proxy filings |
Significant
CEO pay differential vs. other NEO pay |
Moderate |
2021
Chief Executive Officer (“CEO”) pay vs. our other NEO pay was skewed due
to a one-time supplemental stock grant, which we addressed above by committing that there
will be no supplemental retention awards in the future without prior shareholder engagement.
We included enhanced disclosures illustrating our CEO’s 2022 target pay vs. our
other NEO target pay (page 51), which shows the proportion of our CEO pay vs. other NEO
pay is in-line with market norms |
Material
year-over-year increase in CEO base salary |
Low |
Our
CEO voluntarily agreed to forego a base salary increase for 2022 and 2023. His current
base salary is below the median of our peer group |
No
ESG metrics in our incentive compensation plans |
Low |
For
2022 and 2023, 50% of our NEOs have ESG objectives in their individual MBOs under our
annual incentive plan, including our CEO |
No
relative metrics in LTI |
Low |
We
evaluated the potential use of a relative metric for our PSU grants, but we elected against
implementing such a metric for 2023 to remain competitive with our peers, as less than
25% of our peer group presently incorporates a relative metric in their LTI program.
We also believe adding a relative total shareholder return (“RTSR”) metric
or modifier to our performance incentives can lead to unintended results due to our stock
volatility. We will continue to monitor market trends within our competitive environment
and will further evaluate this topic in future years |
Additional
Governance Changes
We
additionally discussed corporate governance matters with shareholders, and we instituted a series of changes to align with governance
best practices. These changes are as follows:
| • | Increased
our CEO stock ownership requirement from 4x to 5x of base salary, and we expanded the
stock ownership policy to apply to all executive officers; |
| • | Institutionalized
a five-year sunset to (i) declassify our Board and (ii) remove certain supermajority
voting requirements; |
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Proxy
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Compensation
Discussion and Analysis
| • | Augmented
our 2023 proxy disclosure for transparency purposes to include our entire executive officer
team as NEOs, which is above the SEC requirement of only including the CEO, CFO and next
three highest-paid officers; and |
| • | Enhancing
our compensation clawback to comply with the newly released SEC requirements that are
anticipated to be adopted by the listing exchanges prior to the end of 2023. |
We
believe the above changes and enhanced disclosure respond to the views expressed by our shareholders and are consistent with our
overall compensation objectives. Additional details regarding our extensive responsiveness to shareholder feedback is set forth
in the “2023 Compensation Program Overview” starting on page 58.
Business
Overview and Summary of 2022 Financial Results
We
are a specialty insurance company that provides property and casualty insurance products to individuals and businesses. Founded
in 2014, we have significantly grown our business and have generated attractive returns. We have organically increased gross written
premiums from $16.6 million in our first year of operations to $881.9 million for the year ended December 31, 2022, which reflects
a compound annual growth rate of approximately 64%. We have also been profitable since 2016 and our net income growth since 2016
reflects a compound annual growth rate of 41%.
The
below points highlight our fiscal year 2022 performance:
| • | Gross
written premiums increased by 64.8% to $881.9 million compared to $535.2 million in 2021 |
| • | Net
income of $52.2 million, compared to $45.8 million in 2021 |
| • | Adjusted
net income(1) of $71.3 million, compared to $52.4 million in 2021 |
| • | Total
loss ratio of 24.9%, compared to 17.7% in 2021 |
| • | Combined
ratio of 80.4%, compared to 80.0% in 2021 |
| • | Adjusted
combined ratio(1) of 75.6%, compared to 76.1% in 2021 |
| • | Return
on equity of 13.4%, compared to 12.1% in 2021 |
| • | Adjusted
return on equity(1) of 18.3%, compared to 13.8% in 2021 |
| (1) | This
is a Non-GAAP Financial Measure; see Reconciliation of Non-GAAP Financial Measures in Part
II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022. |
Historical
Shareholder Returns
The
below table compares the cumulative total shareholder return of an investment in our common stock compared to the Nasdaq Insurance
Index and our 2022 peer group for the period from April 17, 2019 (the date our common stock began trading on Nasdaq) through December
31, 2022.
|
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Compensation
Discussion and Analysis
We
believe our balanced, well-structured executive compensation programs that are fundamentally rooted in a pay-for-performance
philosophy have aided in focusing management behavior on achieving rigorous performance objectives that directly contribute to
long-term shareholder value creation.
Compensation
Philosophy, Process and Objectives
We
have adopted a pay-for-performance compensation philosophy through which we seek to provide a competitive total rewards package
aimed at attracting, retaining, and incentivizing a high-performing executive team and geared toward the future growth and success
of the Company. We continuously refine our pay-for-performance practices to ensure we align our compensation offerings with the
interests of our stockholders. At the beginning of a fiscal period, our Compensation Committee sets Company and individual performance
targets which determine the target opportunity with respect to annual cash incentive and LTI equity awards that our executives
will receive. If our Company performance exceeds the pre-established targets, our executives will earn additional cash-based and
equity compensation. Conversely, if Company performance falls below pre-established goals, that generally will result in payment
of below target compensation.
Our
overall total rewards philosophy has five Guiding Principles:
Role
of the Compensation Committee
Our
Compensation Committee is responsible for evaluating and approving the overall executive officer compensation philosophy and programs.
All members of our Compensation Committee are independent as required by Nasdaq and are “non-employee directors” as
defined by Rule 16b-3 under the Securities Exchange Act of 1934. Our Compensation Committee’s responsibilities include,
among other things, the following:
| • | reviewing
and approving Company goals and objectives relevant to our CEO’s compensation,
evaluating our CEO’s performance considering those goals and objectives, and approving
the CEO’s compensation level based on this evaluation; |
| • | determining
and approving the compensation of all executive officers, including our NEOs; |
|
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Compensation
Discussion and Analysis
| • | reviewing
and making recommendations to the Board regarding the adoption or amendment of incentive
compensation and equity-based plans; |
| • | administering
the Company’s incentive compensation and equity-based plans, including designation
of employees to whom awards will be granted, the amount of the award or equity to be
granted, and the terms and conditions applicable to each award; |
| • | reviewing
and approving the Company’s non-equity-based benefit plans; |
| • | reviewing
and discussing with management the Company’s compensation policies and practices
to produce our Compensation Committee report included in this proxy statement; |
| • | determining
stock ownership guidelines for the CEO and other executive officers and monitoring compliance
with such guidelines; |
| • | reviewing
the Company’s incentive compensation arrangements to determine whether they encourage
excessive risk-taking; |
| • | reviewing
annually all director compensation and benefits for service on the Board and committees
of the Board and recommending any changes to the Board as necessary; and |
| • | performing
such general oversight functions related to Company compensation inherent to the responsibilities
designated in our Compensation Committee’s charter or set forth in resolutions
of our Board. |
The
Compensation Committee also has the authority and responsibility for selecting its independent compensation consultant, whose
input and recommendations the Compensation Committee relies upon significantly. The independent compensation consultant provides
input on the design and approval of the peer group for benchmarking executive compensation.
Additionally,
following our 2022 say-on-pay advisory vote, our Compensation Committee Chair led our shareholder outreach campaign. We contacted
15 shareholders representing 68% of our total shares outstanding and invited them to meet with members of our Board of Directors
and executive management team to discuss their viewpoints on executive compensation, governance, and ESG related matters. We held
14 meetings with 11 shareholders who collectively own approximately 40% of our total shares outstanding, and solicitated their
feedback on our compensation, governance and ESG programs and practices. Our Compensation Committee Chair led 100% of these meetings.
Role
of Management
Although
the Compensation Committee has the responsibility to approve compensation for our NEOs, management also plays a role in the executive
compensation process. Specifically, our CEO is involved in the design and implementation of our executive compensation program
as it applies to his direct reports. He is typically present at Compensation Committee meetings, except that he is not present
when the Compensation Committee deliberates or votes on his compensation arrangements in executive session. Our CEO reviews the
individual performance of each executive officer annually and makes recommendations to our Compensation Committee regarding their
compensation arrangements.
Role
of the Independent Compensation Committee Consultant
Our
Compensation Committee has the authority, in its sole discretion, to retain and terminate compensation consultants, outside legal
counsel and other advisors as it deems necessary to fulfill its duties and responsibilities under its charter. Since 2021, the
Compensation Committee has engaged PricewaterhouseCoopers (“PwC”) as its independent compensation consultant to support
our executive and Board compensation offerings. PwC typically provides the Compensation Committee with advice and guidance on
the following topic areas (although some of these areas may not always be provided annually):
| • | the
assessment of the Company’s executive compensation programs and practices; |
| • | the
evaluation of long-term incentive compensation practices and annual and long-term incentive
plan design; |
| • | the
evaluation and selection of a compensation benchmarking comparator peer group; |
| • | market
benchmarking data around executive and director pay levels and design; and |
| • | the
competitiveness of the executive officers’ elements of compensation and post-employment
benefits contained in executive employment agreements. |
|
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Compensation
Discussion and Analysis
PwC
has attended certain Compensation Committee meetings and attends executive sessions when requested by the Chairperson of the Compensation
Committee. The Compensation Committee has reviewed the independence of PwC considering SEC rules and Nasdaq listing standards
regarding compensation consultants and has concluded that the work of PwC for the Compensation Committee does not raise any conflict
of interest.
Peer
Group Benchmarking Analysis
To
ensure that our executive compensation program is competitive and allows us to meet our objective of attracting, retaining, and
motivating a high-performing executive team, the Compensation Committee, with assistance from PwC, has established a peer group
to benchmark executive compensation data and practices. For 2022 benchmarking purposes, our peer group consisted of the following
13 public companies, which are insurance companies deemed to be of similar size and scope when considering Palomar’s weighted
positioning of market capitalization, gross written premiums and revenue:
Amerisafe,
Inc. |
James
River Group Holdings, Ltd. |
Protective
Insurance Corp. |
FedNat
Holding Co. |
Kinsale
Capital Group, Inc. |
RLI
Corp. |
Goosehead
Insurance, Inc. |
Mercury
General Corp. |
Safety
Insurance Group, Inc. |
HCI
Group, Inc. |
NI
Holdings, Inc. |
United
Insurance Holdings Corp. |
Heritage
Insurance Holdings, Inc. |
The
Compensation Committee has benchmarked our executive compensation against these companies for purposes of establishing our 2022
compensation program and reviewed the overall peer compensation information to understand how our NEO’s total compensation
compares to competitive norms.
To
ensure our peer group continues to remain representative of the competitive landscape in which we operate and is appropriate from
a size standpoint, our Compensation Committee, with the assistance of PwC, annually reviews the peer group and makes adjustments
if appropriate. For 2023 benchmarking purposes, after conducting a review of the prevailing competitive market with the assistance
of PwC, the Compensation Committee modified the peer group to consist of the below 18 public companies. As part of the process
of determining the benchmarking peer group for 2023, we again considered Palomar’s weighted positioning of market capitalization,
gross written premiums and revenue to ensure we maintain an appropriate comparator group from a size standpoint.
Amerisafe,
Inc. |
Hallmark
Financial Services |
Lemonade,
Inc. |
Argo
Group |
HCI
Group |
NI
Holdings |
Atlantic
American |
Heritage
Insurance |
ProAssurance
Corp. |
Donegal
Group |
Hippo
Holdings |
RLI
Corp. |
Global
Indemnity |
James
River Group |
Safety
Insurance Group |
Goosehead
Insurance |
Kinsale
Capital Group |
Universal
Insurance Holdings |
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Compensation
Discussion and Analysis
Compensation
Elements Used to Achieve Compensation Philosophy and Objectives
The
Compensation Committee annually determines our pay mix with guidance from its independent consultant PwC and a review of prevailing
market norms and trends. We design the mix of our pay elements to foster and promote our pay-for-performance culture, to support
our strategic priorities of growth and to attract, retain and motivate our executives. The elements of our 2022 compensation mix
and rationale for using and determining each are set forth as follows:
|
Element |
Key
Characteristics |
Why
We Pay
This Element |
How
We
Determine Amount |
Key
Design Features |
Fixed
(Not at
Risk) |
Base
Salary |
Representing
the sole fixed compensation component of our pay mix, payable in cash and reviewed annually
and adjusted when appropriate. |
Provide
stable and competitive base pay to facilitate the attraction and retention of a high-performing executive team. |
Individual
performance, experience, job scope, and compensation benchmarking. |
• We
generally set base salaries near the median of market, though pay may vary depending
on the value and supply/ demand dynamics of the position |
Variable
(At Risk) |
Annual
Incentive Plan
(“AIP”) |
Variable
compensation component capped at a maximum level (150% of target for 2022) payable in
cash based on performance against annually established Company metrics and individual
performance. |
Motivate
and reward the successful achievement of pre-determined Company financial objectives and individual performance. |
Target
opportunity is based on job scope and competitive benchmarking. Payouts are based on
company and individual performance against rigorous objectives. |
• Company
metrics (80%):
—40%
adjusted net income (“ANI”)
—40%
ANI pre-catastrophe losses
• Individual
management by objectives (20%) |
LTI
(“Long-
Term
Incentives”)–
Performance Stock Units
(“PSUs”)1 |
PSUs
represents a right to receive shares based on Company financial performance. For 2022,
the performance period was one year, but the earned PSUs are subject to a required three-year
service period of before vesting. |
PSUs,
RSUs and Stock Options align the interests of executives with long-term stockholder value creation under our five guiding principles
and serve to attract and retain talent. |
Awards
based on the individual’s ability to impact future results, job scope, individual
performance, and review of competitive pay practices. |
• Based
wholly on Company performance:
—70%
adjusted return on equity (“ROE”)
—30%
gross written premiums (“GWP”)
• Effective
with the 2023 PSUs, units tied to ROE have a three-year measurement period. |
LTI
-
Restricted
Stock Units (“RSUs”)1 |
RSUs
represents a right to receive shares that vest ratably on each of the first three anniversaries
of the grant date, subject to the individual’s continued service. |
• Value
of RSUs tracks PLMR’s stock price over the vesting period, which fosters long-term
alignment of management and shareholder interests. |
LTI
- Stock Options1 |
Nonqualified
stock options to purchase shares in the future based on the market price when awarded.
Expire
in ten years and vest ratably over three years, subject to the individual’s continued service. |
• Strike
price always set at market price
• For
executives to recognize value from options, PLMR’s stock price must appreciate from the grant date level. |
| (1) | Effective
2023, in response to shareholder feedback, we modified our LTI mix and removed stock
options from the mix, increased PSUs from 20% to 50% of the mix, and reduced the allocation
of RSUs from 60% to 50%. |
|
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Compensation
Discussion and Analysis
2022
Compensation Program Overview
Our
2022 executive compensation program was established in the first quarter of 2022 prior to our May 2022 advisory say-on-pay vote
and our subsequent shareholder outreach campaign. Changes we made to our compensation programs in response to shareholder feedback,
as detailed in the “Executive Summary” section of our CD&A on pages 43-49 above, are reflected in our 2023 compensation
program.
2022
Target Compensation and Pay Mix
Our
Compensation Committee establishes target total compensation opportunities for our executives at the beginning of each year. Consistent
with our pay-for-performance philosophy, the majority of each executive’s pay mix is in the form of at-risk compensation.
Executives have the opportunity to earn above-target pay if they deliver company and individual performance at levels above target,
and conversely their earned pay will be below target in cases where performance achievement is below target, thereby ensuring
we pay for performance. For 2022, the target total compensation opportunities for NEOs was as follows:
Executive |
Base
Salary ($) |
Target
Bonus % |
Target
Bonus ($) |
Target
LTI
($)(1)(2) |
Total
Target Comp
($) |
Mac
Armstrong |
$850,000 |
100% |
$850,000 |
$1,275,000 |
$2,975,000 |
Christopher
Uchida |
425,000 |
60% |
255,000 |
255,000 |
935,000 |
Jon
Christianson |
400,000 |
60% |
240,000 |
240,000 |
880,000 |
Jonathan
Knutzen |
350,000 |
60% |
210,000 |
210,000 |
770,000 |
Angela
Grant |
335,000 |
50% |
167,500 |
167,500 |
670,000 |
Michelle
Johnson |
310,000 |
50% |
155,000 |
155,000 |
620,000 |
| (1) | For
2022, LTI mix was (i) 60% RSUs, (ii) 20% PSUs and (iii) 20% stock options. In response
to our May 2022 advisory say-on-pay vote and subsequent shareholder outreach efforts,
we modified our LTI mix for 2023 to remove stock options from the mix, decreased the
RSU allocation to 50%, and increased the allocation of performance-based equity in the
form of PSUs from 20% to 50% of overall the mix. |
| (2) | Ms.
Grant and Mrs. Johnson received one-time supplemental grants in January 2022 based on
a pay equity review conducted by the Compensation Committee. These grants were issued
prior to our 2022 advisory say-on-pay vote and subsequent shareholder outreach campaign.
In response to the aforementioned May 2022 advisory say-on-pay vote and shareholder outreach,
we committed to cease issuing supplemental equity grants to executive officers without
first engaging with shareholders. |
|
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Compensation
Discussion and Analysis
Our
target pay mix for 2022 for our CEO and average all other NEOs was as follows:
| (1) | “2022”
Other NEOs Average Target Compensation” excludes supplemental recognition equity
grants awarded to Ms. Grant and Mrs. Johnson in 2022. These awards are described in detail
in the “2022 Executive Recognition Grants” section of the CD&A beginning
on page 42. These grants were issued prior to our May 2022 advisory say-on-pay vote and
subsequent shareholder outreach campaign. In response to shareholder feedback, we committed
to no longer issue supplemental equity grants outside our core compensation program without
engaging with shareholders first. |
|
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Compensation
Discussion and Analysis
Compensation
Decisions Related to 2022
Base
Salaries
We
believe it is important to pay our executives a competitive base salary to provide them a predictable level of income. Each NEO’s
annual base salary is subject to periodic review by the Compensation Committee. In establishing base salaries, we consider several
factors, including market data for similar positions as provided by PwC, the duties and responsibilities of the position, and
the performance of the executive. NEOs do not receive automatic merit increases to their base salaries. Rather, in-line with our
pay-for-performance culture, the base salaries of our NEOs are reviewed annually by the Committee to determine whether an adjustment
is warranted.
For
2022, base salaries for our Named Executive Officers were as follows:
Name |
2022
Base
Salary |
2021
Base
Salary |
%
Increase |
Mac
Armstrong |
$850,000 |
$850,000 |
0.0% |
Christopher
Uchida |
425,000 |
415,000 |
2.4% |
Jon
Christianson |
400,000 |
375,000 |
6.7% |
Jonathan
Knutzen |
350,000 |
300,000 |
16.7% |
Angela
Grant |
335,000 |
300,000 |
11.7% |
Michelle
Johnson |
310,000 |
280,000 |
10.7% |
Our
Compensation Committee and CEO determined that no increase would be made to the CEO’s salary for 2022.
Our
other NEOs received base salary increases ranging from approximately 2% to 17% based on a review of their role, performance, promotions
and our peer group benchmarking data as provided by PwC. Their increases were generally aimed at better aligning their base salaries
with market median levels. PwC’s benchmarking analysis found that Mr. Knutzen and Ms. Grant and Mrs. Johnson were particularly
below market from a salary standpoint, and their increases for 2022 were intended to bring them closer to market median.
Annual
Incentive Plan
A
second key component in our compensation framework is our AIP, which is our annual cash bonus program. Our AIP has the potential
to reward our NEOs for the achievement of rigorous financial, strategic, and operational performance over an annual period. Each
NEO was eligible to participate in our AIP for 2022, which was capped at a maximum payout of 150% of target for the year. The
Compensation Committee oversees the AIP, evaluates the individual performance component, and approves the bonus payments of each
NEO. Bonus awards are payable in cash by no later than March 15th of the year following the performance year.
Guided
by our pay-for-performance philosophy, the table below summarizes the performance metrics used to determine the 2022 annual cash
incentives, the weighting of each metric, and the threshold, target, and maximum payout hurdles:
2022
Metrics |
Weighting |
Threshold
($ in millions) |
Target
($ in millions) |
Maximum
($ in millions) |
Adjusted
Net Income (“ANI”)(1) |
40% |
$68.0 |
$80.0 |
$100.0 |
ANI
Before Catastrophe Losses(2) |
40% |
$65.5 |
$77.0 |
$ 96.3 |
Management
by Objectives (MBOs) |
20% |
Not
Applicable |
Not
Applicable |
Not
Applicable |
| (1) | ANI
is a metric we use to evaluate our financial performance and is a key metric by which
external stakeholders evaluate our performance. See Reconciliation of Non-GAAP Financial
Measures in Part II, Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations of our Annual Report on Form 10-K for the year ended
December 31, 2022, for a reconciliation of ANI to Net Income calculated in accordance
with GAAP. |
| (2) | ANI
before catastrophe losses is a metric we use on an internal basis that allows us to evaluate
our financial performance without the volatility caused by catastrophe losses. |
|
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Compensation
Discussion and Analysis
Our
company financial performance objectives are set at 85% of target for Threshold to 125% of target for Maximum, thereby requiring
significant outperformance to attain the plan Maximum. Payouts under the 2022 AIP range from 50% at Threshold to 150% at Maximum,
with no bonuses earned for performance below Threshold.
Adjusted
Net Income and Adjusted Net Income Before Catastrophe Losses
Adjusted
Net Income (ANI), both gross and net of catastrophe losses, represents a key earnings measure by which our shareholders and the
investor community evaluate our performance. We believe that sustained ANI performance will translate to long-term shareholder
value creation, and accordingly, our Compensation Committee allocated a 40% weighting to both ANI and ANI before catastrophe losses.
Based
on our 2022 financial results, our ANI and ANI before catastrophe losses correlated to the following payout percentages:
Metric |
Threshold
(50%) |
Target
(100%) |
Max
(150%) |
Actual
Result |
Payout
as a
%
of Target |
ANI
($ in millions) |
$68.0 |
$80.0 |
$100.0 |
$71.3 |
64.8% |
ANI
Before Catastrophe Losses ($ in millions) |
$65.5 |
$77.0 |
$ 96.3 |
$85.1 |
121.5% |
Due
primarily to catastrophe losses from Hurricane Ian, our ANI results were below target; however, our ANI before catastrophe losses
was above target due to otherwise strong results on underwriting and investing performance.
Management
by Objectives (“MBO”)
While
the majority of our AIP is based on Company financial measures that directly contribute to long-term shareholder value creation,
our Compensation Committee also believes it is important to hold our executive officers accountable for performance and objectives
tied directly to their roles and areas of responsibility. Accordingly, we have included a 20% allocation under our AIP to MBOs,
to reward individual performance where appropriate. For 2022, the objectives below serve as a framework to broadly assess NEO’s
strategic accomplishments and should not be interpreted as an exhaustive list of achievements.
Objective: |
Mac
Armstrong |
Chris
Uchida |
Jon
Christianson |
Jon
Knutzen |
Angela
Grant |
Michelle
Johnson |
PLMR
2X |
l |
l |
l |
l |
l |
l |
Reinsurance |
l |
|
l |
l |
|
|
Expanding
Partnerships |
l |
l |
l |
|
|
|
ESG |
l |
|
|
|
l |
l |
Organization
& Development |
|
l |
|
l |
l |
l |
Financial/Investor
Relations |
|
l |
|
|
|
|
Board
Relations |
l |
|
|
l |
l |
l |
Analytics |
|
|
l |
l |
l |
|
|
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Compensation
Discussion and Analysis
Following
the end of the year, our Compensation Committee reviewed our CEO’s performance relative to his MBOs, and further reviewed,
with input from our CEO, our other NEOs’ performance relative to their MBOs. The Committee concluded that all our NEOs achieved
their target MBOs, and accordingly, our Compensation Committee approved a 100% target payout for the MBO component of our 2022
AIP.
Aggregate
2022 AIP Payouts
Based
on Company performance under the ANI and ANI before catastrophe losses metrics and individual performance under the MBO metric,
we achieved a weighted average aggregate payout under our 2022 AIP of 94.5% of target, calculated as follows:
Metric |
Weighting |
Payout
as a
%
of Target |
Weighted
Average
Payout |
ANI |
40% |
64.8% |
25.9% |
ANI
before catastrophe losses |
40% |
121.5% |
48.6% |
MBOs |
20% |
100.0% |
20.0% |
Total
Payout as a % of Target |
|
|
94.5% |
Accordingly,
2022 bonus payouts for our NEOs were calculated as follows:
Executive |
2022
Target Bonus
($)(1) |
Earned
Payout % |
2022
Bonus Payout
($) |
Mac
Armstrong |
$850,000 |
94.5% |
$803,406 |
Christopher
Uchida |
254,500 |
94.5% |
240,549 |
Jon
Christianson |
238,750 |
94.5% |
225,662 |
Jonathan
Knutzen |
207,500 |
94.5% |
196,126 |
Angela
Grant |
158,993 |
94.5% |
150,278 |
Michelle
Johnson |
153,750 |
94.5% |
145,322 |
| (1) | Actual
bonus targets and payouts are calculated based on actual salary earned during the year,
which is impacted by the timing of salary increases. Target view of total compensation
illustrated in the “2022 Target Compensation and Pay Mix” section of this
proxy on page 50 is based on annualized salaries, and thus target bonus amounts differ
from above. |
Long-Term
Equity Compensation
The
third component in our compensation program is the utilization of long-term equity incentives, or LTI compensation, which comprises
a key part of our NEOs’ compensation packages. Moreover, to foster an ownership culture throughout our organization and
promote internal equity across our company, we issue LTI to all our team members, including our hourly personnel.
Our
LTI compensation program focuses the efforts of our NEOs and other executive officers on the achievement of long-term objectives
and aligns the long-term financial interests of our executive officers with those of our stockholders. The value of awards granted
under the LTI program is dependent on our future stock performance and gives our NEOs incentives to take actions to drive sustained,
long-term shareholder value creation.
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Compensation
Discussion and Analysis
LTI
equity awards are typically issued to our NEOs and other team members on an annual basis and are based on a predetermined target
percentage of the NEO’s annual salary. All our 2022 LTI grants vest over three years, ensuring long-term alignment of management
and shareholder interests.
For
2022, the LTI mix for our NEOs was as follows:
(1) | We
have since modified our LTI mix beginning for 2023 in response to shareholder feedback.
For 2023, we increased the PSU allocation from 20% to 50%, eliminated stock options from
the mix and reduced the RSU allocation from 60% to 50%. |
| |
Based
on our 2022 LTI mix, we granted the following LTI awards to our NEOs for 2022:
Executive |
Base
Salary |
Total
Target
2022 LTI |
LTI
$ Value in
PSUs (20%)(2) |
LTI
$ Value in
RSUs (60%)(2) |
LTI
$ Value in
Stock Options
(20%)(2) |
Mac
Armstrong |
$850,000 |
$1,275,000 |
$255,000 |
$765,000 |
$255,000 |
Christopher
Uchida |
425,000 |
255,000 |
51,000 |
153,000 |
51,000 |
Jon
Christianson |
400,000 |
240,000 |
48,000 |
144,000 |
48,000 |
Jonathan
Knutzen |
350,000 |
210,000 |
42,000 |
126,000 |
42,000 |
Angela
Grant(1) |
310,000 |
155,000 |
31,000 |
93,000 |
31,000 |
Michelle
Johnson |
310,000 |
155,000 |
31,000 |
93,000 |
31,000 |
(1) | Ms.
Grant’s 2022 LTI grants were issued prior to her base salary increase to $335,000.
Accordingly, the 2022 LTI grants were calculated off her then salary of $310,000 upon
grant. |
(2) | In
response to our May 2022 advisory say-on-pay vote and subsequent shareholder outreach
efforts, we modified our LTI mix for 2023 to remove stock options from the mix and increase
the allocation of performance-based equity in the form of PSUs from 20% to 50% of the
mix, with RSUs dropping from 60% to 50%. |
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Compensation
Discussion and Analysis
Performance
Attainment Under 2022 PSU Grants
Consistent
with our historical equity compensation grant practices, our 2022 LTI awards, including the 2022 PSUs, were issued in the first quarter
of 2022 on January 26, 2022. Accordingly, our 2022 PSUs largely had the same structure as our 2021 PSUs. Performance for the 2022 PSU
grants was measured based on the following company metrics:
| • | 70%
based on adjusted ROE1; and |
| • | 30%
subject to GWP objectives. |
Adjusted
ROE serves as a measure of our capital efficiency, while GWP represents an important top-line metric that shareholders use to evaluate
our ability to grow the business.
The
specific threshold, target and maximum level adjusted ROE and GWP objectives for our 2022 PSUs, along with our actual performance for
2022, were as follows:
Metric |
Weighting |
Threshold
(50%) |
Target
(100%) |
Max
(200%) |
Actual
PLMR
Result |
Payout
as a
% of Target |
Adjusted
ROE |
70% |
9.0% |
12.0% |
15.0% |
18.3% |
200.0% |
GWP
($ in millions) |
30% |
$676.0 |
$751.0 |
$826.0 |
$881.9 |
200.0% |
Total
Payout |
|
|
|
|
|
200.0% |
During
2022, our adjusted ROE improved to 18.3% from 13.8% due to stronger underwriting and investing results. Our GWP also increased
by approximately 65% due to strong growth across multiple lines of business including our core earthquake line, our inland marine
line and newer lines such as fronting and casualty.
As
our 2022 PSUs were granted prior to the May 2022 advisory say-on-pay vote and our shareholder outreach campaign, they were issued
under our historical construct where performance was measured over a one-year period, with two subsequent years of cliff vesting,
resulting in a total three-year vesting period. The total number of units which our NEOs earned under our 2022, and which are
still subject to two additional years of vesting through the end of 2024, were as follows:
Executive |
2022
Target
PSUs Granted
(#) |
Earned
Performance
Multiple |
2022
Earned
PSUs (#) |
Mac
Armstrong |
5,397 |
200.0% |
10,794 |
Christopher
Uchida |
1,079 |
200.0% |
2,158 |
Jon
Christianson |
1,016 |
200.0% |
2,032 |
Jonathan
Knutzen |
889 |
200.0% |
1,778 |
Angela
Grant |
656 |
200.0% |
1,312 |
Michelle
Johnson |
656 |
200.0% |
1,312 |
Although
the performance objectives for the 2022 PSUs have been attained, the additional two years of cliff vesting entails that the earned
units will continue to fluctuate in value based on changes in Palomar’s stock price through the vesting date, ensuring continued
shoulder-to-shoulder alignment of management and shareholder interests for the full three-year vesting period of the grants.
(1) | This
is a Non-GAAP Financial Measure; see Reconciliation of Non-GAAP Financial Measures in
Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations of our Annual Report on Form 10-K for the year ended December 31,
2022. |
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 56 |
Compensation
Discussion and Analysis
2022
Supplemental Executive Grants
To
better foster internal pay equity amongst our executive team, the Compensation Committee undertook a pay equity assessment and,
on January 26, 2022, they approved the issuance of one-time supplemental grants to Ms. Grant and Mrs. Johnson in light of the
results of this study and their continued strong performance. The grants were issued in accordance with our 2022 LTI mix with
all awards subject to a three-year vesting period.
The
table below shows a summary of the 2022 Supplemental Executive Grants:
Executive |
Total
2022
Supplemental LTI
Grant ($) |
LTI
$ Value in PSUs
(20%) |
LTI
$ Value in RSUs
(60%) |
LTI
$ Value in Stock
Options (20%) |
Angela
Grant |
$310,000 |
$62,000 |
$186,000 |
$62,000 |
Michelle
Johnson |
310,000 |
62,000 |
186,000 |
62,000 |
As
these awards to Ms. Grant and Mrs. Johnson were granted in January 2022, their issuance preceded our May 2022 advisory say-on-pay
vote and shareholder outreach campaign. During our extensive discussions with stockholders that occurred later in 2022 and in
2023, our shareholders relayed to us that while they understand the rationale behind supplemental equity grants, they prefer for
executive stock awards to generally be limited to grants issued under the annual compensation program construct. Accordingly,
prospectively we have committed to no longer issue any supplemental equity grants to our officers without engaging with shareholders
first.
2022
Retirement of Heath Fisher
In
September 2021, Mr. Fisher notified the Company of his intention to retire from his position as President effective April 1, 2022.
Accordingly, upon retirement, Mr. Fisher ceased participating in our executive compensation programs. In line with our practice
of not providing any supplemental retirement compensation or other considerations to executives or team members, Mr. Fisher did
not receive any severance or other payments upon his retirement. All his unvested equity awards were immediately forfeited upon
his termination date, and apart from Mr. Fisher’s statutory eligibility to participate, wholly at his own cost, in eighteen
months of COBRA continuation of health and welfare benefits, no termination considerations were provided by the Company to Mr.
Fisher.
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 57 |
Compensation
Discussion and Analysis
2023
Compensation Program Overview
As
discussed in the Executive Summary on pages 43 above, following our May 2022 advisory say-on-pay vote where 22% of shareholders
voted to approve our say-on-pay resolution, we conducted a shareholder outreach campaign to meet with as many stockholders as
possible to solicit their feedback on executive compensation, corporate governance and ESG matters. We highly value our shareholder’s
viewpoints, and we made it a priority to engage, listen and be responsive to their feedback by addressing their concerns:
Process
Highlights of Palomar’s 2022/2023 Shareholder Outreach Campaign |
| • | We
contacted fifteen (15) shareholders representing 68% of our total shares outstanding |
| • | We
held fourteen (14) meetings with eleven (11) shareholders who collectively own approximately
40% of our total shares outstanding and solicited their feedback on executive compensation,
corporate governance and ESG related matters |
| • | Our
Compensation Committee Chair led all the shareholder meetings |
| • | We
did a comprehensive review of our ISS and Glass Lewis 2022 proxy reports, and we held briefing
calls with both firms to better understand their approach to proxy analysis and their prior
feedback on our executive compensation program |
| • | We
implemented material modifications to our executive compensation and governance programs
(summarized on page 3) in direct response to shareholder feedback |
| • | We
reengaged with our largest shareholder for a second time in 2023 to review the modifications
we made to our 2023 executive compensation programs |
We
believe our 2022/2023 shareholder outreach campaign was successful, as it resulted in several key changes to our 2023 executive
compensation program that directly addressed shareholder feedback and concerns. We are committed to continuing our outreach and
dialogue with our largest shareholders at least annually.
Base
Salaries
In
line with our pay-for-performance philosophy, base salaries have and continue to represent a minority portion of each NEOs’
target compensation mix. During our conversations with stockholders, select shareholders commented on our CEO’s January
2021 salary increase. While the increase was made as part of our then continuing transition from our prior private equity compensation
structure to public company market norms, for 2023 our Compensation Committee and CEO again agreed that no increase would be made
to the CEO’s salary for a second consecutive year as part of our response to shareholder feedback.
2023
salaries for our NEOs are as follows:
Executive |
2023
Base Salary ($) |
2022
Base Salary ($) |
%
Increase |
Mac
Armstrong |
$850,000 |
$850,000 |
0.0% |
Christopher
Uchida |
450,000 |
425,000 |
5.9% |
Jon
Christianson |
425,000 |
400,000 |
6.3% |
Jonathan
Knutzen |
380,000 |
350,000 |
8.6% |
Angela
Grant |
355,000 |
335,000 |
6.0% |
Michelle
Johnson |
345,000 |
310,000 |
11.3% |
Our
other NEOs received base salary adjustments for 2023 based on a review of their performance, promotions and market compensation
data provided by PwC, with the intent to maintain their salaries near the median of our peer group. Our CEO’s base salary
is presently below our peer group median.
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 58 |
Compensation
Discussion and Analysis
2023
AIP
During
our stockholder outreach campaign, our shareholders expressed strong support for the structure of our AIP. Their feedback was
that our bonus plan has an appropriate blend of Company financial metrics and individual performance requirements, and that the
use of ANI and ANI before catastrophe losses as the Company financial metrics represent core measures for which management should
be held accountable.
One
area of concern around our AIP that shareholders relayed to us was their preference for us to include enhanced disclosures regarding
Palomar’s performance against the plan metrics and a detailed breakout of the calculation behind executive bonus payouts.
Accordingly, we included enhanced disclosures for our 2022 AIP payouts on pages 54-55, and we will include such enhanced disclosures
around 2023 AIP payouts in the 2024 proxy and all future proxy filings.
As
our shareholders were supportive of our core AIP structure, the Compensation Committee approved our 2023 AIP to predominantly
be based on the same metrics as the prior year, with the slight modification of transitioning to pre-tax ANI and ANI before catastrophe
losses to better gauge management’s performance against factors they can directly influence. In addition, in line with our
objective to measure management’s performance against factors they can directly influence, we’ve removed the impact
of mark-to-market accounting requirements for our investment returns from our calculation of ANI. For 2023, our AIP is subject
to the following performance objectives:
Metric |
Weighting |
Threshold |
Target |
Max |
Pre-Tax
ANI ($ in millions) |
40% |
$92.1 |
$108.3 |
$135.4 |
Pre-Tax
ANI Before Catastrophe Losses ($ in millions) |
40% |
$96.9 |
$114.0 |
$142.5 |
Individual
MBOs(1) |
20% |
N/A |
N/A |
N/A |
(1) | Our
discussions with shareholders also included dialogue on evaluating inclusion of ESG metrics
in our incentive plans. For 2023, three of our NEOs (including our CEO Mr. Armstrong,
along with Ms. Grant and Mrs. Johnson) have ESG objectives included in their MBOs. We
will continue to further evaluate the use of ESG as an incentive plan metric where appropriate. |
2023
Long-Term Equity Compensation
A
fundamental component of our compensation offerings has been and will continue to be long-term equity-incentive grants, not only
for our NEOs but for all Palomar team members, as we grant stock awards across our organization as part of our effort to foster
an ownership culture. As such, a significant portion of our conversations with shareholders, as well as commentary from ISS and
Glass Lewis, focused on improvements that could be made to our LTI program. Key feedback we received on our LTI, along with action
steps we undertook to address shareholder feedback, is as follows:
Shareholder
Feedback on Our LTI |
Modifications
Made to Our LTI (Effective 2023) |
Consideration
to increase the allocation of performance-based equity in LTI mix |
We
increased the allocation of our PSUs from 20% to 50% of our LTI mix, eliminated the use stock options, and reduced the RSU allocation
to 50% |
Transition
to multi-year measurement period for PSUs |
We
extended the performance measurement period for the ROE component that comprises 70% of our target PSUs from 1 year to 3 years (PSUs
tied to GWP will continue to have a one-year measurement period, as the year-over-year variability in key drivers of GWP, such as
availability and cost of reinsurance, makes it extremely challenging to establish realistic GWP hurdles multiple years in advance) |
Enhance
disclosures around PSU performance metrics and individual payout calculations |
We
have included enhanced disclosures in this year’s CD&A detailing the mechanics and payout calculations underlying our 2022
PSUs (page 56), and we will continue to include such enhanced disclosures in subsequent proxies |
Supplemental
retention awards to NEOs |
We
have made a commitment to no longer issue supplemental equity grants to executive officers without first engaging shareholders, and
we have clarified that our vehicle for granting equity is our annual LTI program |
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 59 |
Compensation
Discussion and Analysis
2023
LTI Mix
Based
on the changes we adopted for 2023, our 2023 LTI mix for our NEOs reflects a significant increase in the allocation of performance-based
stock awards, as follows:
All
our 2023 grants continue to have a three-year vesting period to foster long-term alignment of management and shareholder interests.
2023
PSUs
Our
2023 PSUs are based (i) 70% on Adjusted ROE and (ii) 30% on GWP, as our shareholders were supportive of these metrics given they
are key drivers of our long-term shareholder value creation strategy. The specific financial objectives for our 2023 PSUs are
as follows:
Metric |
Weighting |
Performance
Period |
Vesting
Period |
Threshold |
Target |
Max |
Adjusted
ROE |
70% |
3
years |
3
years |
9.0% |
12.0% |
15.0% |
GWP
($ in millions) |
30% |
1
year |
3
years |
$935.0 |
$1,100.0 |
$1,270.0 |
Though
our core metrics and metric weightings remained consistent with the prior year grants, we did implement several key modifications
to our 2023 PSUs to address shareholder feedback. The majority portion of the PSUs tied to Adjusted ROE (70%) will now have a
three-year measurement period. The minority portion of the PSUs tied to GWP will continue to have a one-year measurement period,
as the year-over-year variability in key drivers of GWP, such as availability and cost of reinsurance, makes it extremely challenging
to establish realistic GWP hurdles multiple years in advance.
Additionally,
as previously noted, our 2023 PSUs now comprise 50% of our 2023 LTI mix (previously had a 20% allocation) as part of our efforts
to increase the proportion of our LTI mix that is performance-based.
No
2023 Supplemental Equity Grants
We
have not issued, nor do we intend to issue, any supplemental equity grants to our executive officers in 2023 or in future years.
In response to shareholder feedback, we have prospectively committed not to issue supplemental stock grants to executives without
engaging with shareholders first.
We
look forward to additional shareholder feedback in the future.
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 60 |
Compensation
Discussion and Analysis
Compensation
Policies and Other Information
Our
executive compensation policies and practices are designed to reinforce our pay-for-performance philosophy and align with sound
governance principles. Listed below are highlights of our executive compensation policies and practices:
WHAT
WE DO |
|
|
WHAT
WE DON’T DO |
|
|
Pay-for-performance
philosophy where the significant majority of our executives’ compensation is at-risk |
|
|
|
No
overlapping performance metrics used in our short- and long-term incentive plans |
|
|
Fully
independent directors on the Compensation Committee |
|
|
|
No
supplemental equity grants to executives without first engaging with shareholders |
|
|
Independent
compensation consultant engaged by the Compensation Committee |
|
|
|
No
supplemental retirement or pension benefit plans for our executive officers |
|
|
Performance-based
cash and equity incentives based on company performance goals and individual performance that directly ties to shareholder
value creation |
|
|
|
No
excessive executive perquisites |
|
|
Equity
award vesting periods of three or more years |
|
|
|
No
tax gross-ups for change in control related payments |
|
|
Conduct
an annual risk assessment of our compensation programs and risk mitigation practices |
|
|
|
No
short sales, hedging, or pledging of Palomar stock nor transactions involving derivatives of our common stock |
|
|
Review
our equity compensation dilution, burn rate and cost on a quarterly basis |
|
|
|
No
“single trigger” change in control payments and benefits |
|
|
Clawback
policy on cash and equity incentive compensation |
|
|
|
No
repricing of underwater stock options without shareholder approval |
|
|
Stock
ownership guidelines for CEO and other executive officers (increased CEO ownership requirement
from 4x to 5x base salary and expanded the policy to apply to all officers) |
|
|
|
|
|
Clawback
Policy
We
have a Clawback Policy pursuant to which we may seek the recovery of cash performance-based incentive compensation paid by us
as well as performance-based equity awards. The Clawback Policy applies to our NEOs and other executive officers as determined
by the Board. Generally, circumstances surrounding any recoupments sought under this policy include financial restatements and
other triggering events as determined by the Compensation Committee.
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 61 |
Compensation
Discussion and Analysis
On
October 26, 2022, the SEC adopted final rules implementing the incentive-based compensation recovery provisions of the Dodd-Frank
Act. The final rules direct the stock exchanges to establish listing standards requiring listed companies to develop and implement
a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive
officers and to satisfy related disclosure obligations. We intend to timely amend and restate our clawback policy to reflect these
new requirements when they become effective.
Anti-Hedging
and Anti-Pledging Policy; Stock Trading Practices
We
maintain an Insider Trading Policy that, among other things, prohibits our executive officers, directors, and other key team members
from trading during quarterly and special blackout periods. Included in the Insider Trading Policy is a robust anti-hedging and
anti-pledging policy under which our executive officers and directors are strictly prohibited from engaging in short-term or speculative
transactions involving Palomar securities, such as publicly traded options, short sales, puts and calls, hedging, pledging and
other monetization transactions, nor are they allowed to hold Palomar securities in a margin account or engage in any other hedging
or pledging activities.
Stock
Ownership Guidelines
In
early 2021, we had adopted Executive Stock Ownership Guidelines for our CEO and President to ensure alignment of these executives’
interests with those of our stockholders. Our stock ownership requirements are set as a multiple of base salary using the fair
market value of the Company’s common stock on the date of annual evaluation.
As
part of our comprehensive response to our 2022 advisory say-on-pay vote and feedback relayed to us by shareholders during our
outreach campaign, we increased our CEO ownership multiple from 4x to 5x base salary to align with prevailing market best practices.
We additionally expanded the Stock Ownership Guidelines to apply to all executive officers. Accordingly, our stock ownership salary
multiples are currently set as follows:
Position |
Salary
Multiple |
Chief
Executive Officer |
5x |
All
Other Executive Officers |
2x |
Executives
subject to these Stock Ownership Guidelines have five (5) years after first becoming subject to these guidelines to achieve the
required ownership level. Executive officers are required to hold a specific number of shares, net of taxes, until stock ownership
guidelines are met. Stock ownership includes vested shares held directly or indirectly, outstanding time-based stock options that
are “in-the-money,” unvested time-based RSUs and shares purchased via the ESPP. Performance awards are not counted
toward the ownership requirement until the performance criteria is met. Underwater stock options are also not counted toward the
ownership requirement. The Compensation Committee intends to review the stock ownership progress of executives subject to these
Stock Ownership Guidelines on an annual basis. While not required yet, each of our NEOs subject to these Stock Ownership Guidelines
currently meet their ownership requirement.
Equity
Awards Granting Practices
In
2022, we granted annual equity awards under our LTI program during the first quarter of the fiscal year, and subsequently granted
equity awards on a monthly basis for eligible new hires, promotions, and discretionary purposes, subject to approval of the Compensation
Committee. Equity grants to non-employee directors are discussed in further detail under the section “2022 Director Compensation”.
The
grant date for all awards to eligible recipients, including executive officers and other key team members, is determined by the
Compensation Committee at its meeting to approve such awards. For stock options, which we no longer grant effective 2023 as part
of our effort to increase the proportion of performance-based stock grants in the LTI mix in response to shareholder feedback,
the exercise price is always the closing price of our common stock on the grant date. This procedure along with a pre-established
grant cycle provides assurance that the grant dates are not being manipulated to result in a price that is favorable to us or
our executive officers and other key team members. The vesting schedule of the respective awards will be subject to our standard
award agreements, which may be amended from time to time. Any vesting terms outside of our standard award agreements must be approved
by the Compensation Committee.
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 62 |
Compensation
Discussion and Analysis
Impact
of Accounting and Tax Requirements of Compensation
Deductibility
of Executive Compensation
Section
162(m) of the Internal Revenue Code limits deductibility of compensation in excess of $1 million paid to certain executives. The
Compensation Committee intends to maximize the tax deductibility of compensation paid to our executive officers where possible.
However, the Compensation Committee also realizes that to attract and retain individuals with superior talent, it may decide to
pay compensation to our executive officers that is not deductible due to Section 162(m).
Section
409A Tax Considerations
We
consider the tax impact when designing or deciding to amend our compensation programs, including compliance with the requirements
of Section 409A of the Internal Revenue Code, which can impose additional taxes on participants in certain arrangements involving
deferred compensation and Sections 280G and 4999 of the Internal Revenue Code that affect the deductibility of, and impose certain
additional excise taxes on, certain payments that are made upon or in connection with a change of control.
Accounting
for Stock-Based Compensation
We
follow ASC Topic 718 for our stock-based awards. ASC Topic 718 requires companies to measure the compensation expense for all
share-based payment awards made to team members and directors, including stock options, restricted stock unit awards and performance
units, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes
and reported in the compensation tables below. ASC Topic 718 also requires companies to recognize the compensation cost of their
stock-based compensation awards in their income statements over the period that a NEO is required to render service in exchange
for the option or other award.
For
performance awards, when granted, stock-based compensation expense recognized may be adjusted over the performance period based
on interim estimates of performance against pre-determined performance goals.
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 63 |
Compensation
Discussion and Analysis
Compensation
Risk Assessment
The
Compensation Committee annually conducts a risk assessment of our compensation programs to determine whether the program encourages
unnecessary or excessive risk taking and do not result in potential adverse impact to the Company, financially or otherwise. Our
Compensation Committee has reviewed the policies and guidelines underlying our executive compensation determinations and concluded
that the following factors promote the creation of long-term value and thereby discourage behavior that leads to excessive or
unnecessary risk:
| • | individual
cash incentives are made within the boundaries of approved fixed maximum awards as applicable
to each executive officer; |
| • | the
performance metrics under our short-term incentive program are distinct and separate
from the metrics under our long-term incentive program, thereby ensuring there is no
duplicative compensation opportunity for attainment of the same performance metric; |
| • | the
members of our Compensation Committee who approve final bonus recommendations are independent; |
| • | executive
officers receive the majority of their total direct compensation in the form of at-risk
incentives (both annual cash bonus opportunity and long-term stock compensation subject
to multi-year vesting) to align the interests of our executive officers with long-term
value creation for our stockholders; |
| • | we
maintain a robust clawback policy (which we are in process of updating to comply with
the new pending SEC requirements) that allows for the recovery of incentive cash or stock
compensation paid or payable to executives in the event of a restatement or other triggering
event; and |
| • | executive
officers are subject to robust stock ownership guidelines, further ensuring their long-term
wealth is tied to long-term Company performance. |
Based
on our review, we have determined our compensation programs and practices are not reasonably likely to have a material adverse
effect on the Company and do not promote unnecessary or excessive risk taking.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed with management this Compensation Discussion and Analysis. Based on that review
and discussion, the Compensation Committee recommended to the Board of Directors of the Company that the Compensation Discussion
and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and this Proxy
Statement.
Respectfully
submitted by the members of the Compensation Committee of the Board of Directors:
Richard
H. Taketa (Chair)
Daina
Middleton
Martha
Notaras
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 64 |
Executive
Compensation Tables
SUMMARY
COMPENSATION TABLE
Name |
Year |
Salary
($) |
Stock
Awards
($)(1) |
Option
Awards
($)(2) |
Non-Equity
Incentive Plan
Compensation
($)(3) |
All
Other
Compensation
($)(4) |
Total
($) |
Mac
Armstrong
Chief Executive Officer and
Chairman of the Board |
2022 |
850,000 |
1,069,353 |
268,418 |
803,406 |
9,150 |
3,000,327 |
2021 |
846,094 |
17,116,007 |
480,201 |
795,248 |
8,700 |
19,246,249 |
2020 |
598,438 |
359,980 |
90,674 |
— |
14,520 |
1,063,612 |
Christopher
Uchida
Chief Financial Officer |
2022 |
424,167 |
213,821 |
53,668 |
240,549 |
9,150 |
941,355 |
2021 |
413,594 |
5,184,481 |
50,227 |
233,243 |
8,700 |
5,890,245 |
2020 |
325,000 |
116,959 |
29,460 |
75,000 |
8,550 |
554,969 |
Jon
Christianson(5)
President Chief Underwriting Officer |
2022 |
397,917 |
201,290 |
50,518 |
225,662 |
9,150 |
884,536 |
2021 |
375,000 |
3,504,035 |
45,378 |
211,302 |
8,700 |
4,144,102 |
2020 |
355,000 |
127,744 |
313,673 |
85,200 |
8,550 |
890,167 |
Jonathan
Knutzen(6)
Chief Risk Officer |
2022 |
345,833 |
176,129 |
44,198 |
196,126 |
9,150 |
771,436 |
2021 |
300,000 |
2,138,697 |
36,292 |
169,183 |
8,700 |
2,652,872 |
Angela
Grant(7)
Chief Legal Officer |
2022 |
317,986 |
389,950 |
97,866 |
150,278 |
9,150 |
965,230 |
|
|
|
|
|
|
|
Michelle
Johnson(8)
Chief Talent & Diversity Officer |
2022 |
307,500 |
389,950 |
97,866 |
145,322 |
9,150 |
949,788 |
|
|
|
|
|
|
|
Heath
Fisher(9)
Former President |
2022 |
124,727 |
— |
— |
— |
10,363 |
135,089 |
2021 |
464,219 |
300,265 |
130,788 |
349,057 |
14,400 |
1,258,729 |
2020 |
415,000 |
149,316 |
37,611 |
— |
14,250 |
616,177 |
(1) | Amounts
in this column reflect the grant date value of RSUs and PSUs as calculated per accounting
rules. These amounts do not reflect the actual economic value or gain that will be realized
by our Named Executive Officers relating to these awards. The amount of value realized
by our executives may be significantly different than this figure depending on our future
stock price performance. Assumptions used in the calculation of these amounts are included
in Note 12 to our financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2022. With respect to our 2022 PSU grants, the value shown
in the table above reflects the grant date fair value based on the probable outcome of
the performance milestones associated with such awards. The grant date fair value of
each such award if all applicable performance milestones associated with such awards
were achieved in full is $534,627 for Mr. Armstrong, $106,886 for Mr. Uchida, $100,645
for Mr. Christianson, $88,064 for Mr. Knutzen, $194,950 for Ms. Grant and $194,950 for
Mrs. Johnson. 2022 amounts include supplemental stock grants for Ms. Grant and Mrs. Johnson,
and 2021 amounts include supplemental stock grants for Messrs. Armstrong, Uchida, Christianson
and Knutzen. As described in our CD&A, we have since committed to no longer issue
supplemental stock grants to our executive officers without engaging with shareholders
first. |
(2) | Amounts
in this column reflect the grant date value of stock options as calculated per accounting
rules. These amounts do not reflect the actual economic value or gain that will be realized
by our Named Executive Officers relating to these awards. The amount of value realized
by our executives may be significantly different than this figure depending on our future
stock price performance. Assumptions used in the calculation of these amounts are included
in Note 12 to our financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2022. |
(3) | The
amounts in this column represent total performance-based bonuses earned for service rendered
during the applicable under our executive bonus plans for such year. All such amounts
were paid subsequent to the respective year end. |
(4) | The
amounts shown represent $9,150 in 401(k) plan employer contributions for Messrs. Armstrong,
Uchida, Christianson, Knutzen and Fisher, and Ms. Grant and Mrs. Johnson. For Mr. Fisher,
amount also includes $1,663 in car allowance. Upon Mr. Fisher’s retirement, we
no longer provide car allowances to any executive officer. |
(5) | Mr.
Christianson was promoted to President upon the retirement of our former President, Mr.
Fisher. Prior to his promotion to President, Mr. Christianson served as our Chief Underwriting
Officer. |
(6) | Mr.
Knutzen joined the Company in April 2019. In accordance with SEC rules, as Mr. Knutzen
was not a Named Executive Officer in 2020, compensation information for this period is
not required to be disclosed. |
(7) | In
accordance with SEC rules, as Ms. Grant was not a Named Executive Officer in 2021 and
2020, and compensation information for those periods is not required to be disclosed. |
(8) | In
accordance with SEC rules, as Mrs. Johnson was not a Named Executive Officer in 2021
and 2020, and compensation information for those periods is not required to be disclosed. |
(9) | Mr.
Fisher retired effective April 1, 2022. |
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 65 |
Executive
Compensation Tables
2022
GRANT OF PLAN-BASED AWARDS TABLE
The following
table sets forth information regarding grants of plan-based awards to our Named Executive Officers during the fiscal year ended December
31, 2022.
|
|
|
Estimated
Future
Payouts
Under
Non-Equity
Incentive Plan Awards(1) |
|
Estimated
Future Payouts
Under Equity Incentive Plan
Awards(2) |
All
Other
Stock
Awards:
Number
of Shares
of Stock |
All
Other
Option
Awards:
Number of
Securities
Underlying |
Exercise
or Base
Price of
Option |
Grant
Date Fair
Value of
Stock
and
Option |
|
Grant |
Award |
Threshold |
Target |
Maximum |
|
Threshold |
Target |
Maximum |
or
Units |
Options |
Awards |
Awards |
Name |
Date |
Type |
($) |
($) |
($) |
|
(#) |
(#) |
(#) |
(#)(3) |
(#)(4) |
($) |
($)(5) |
Mac |
|
Cash |
425,000 |
850,000 |
1,275,000 |
|
|
|
|
|
|
|
|
Armstrong |
1/26/2022 |
Stock
Option |
|
|
|
|
|
|
|
|
13,464 |
49.53 |
268,418 |
|
1/26/2022 |
PSU |
|
|
|
|
2,699 |
5,397 |
10,794 |
|
|
|
267,313 |
|
1/26/2022 |
RSU |
|
|
|
|
|
|
|
16,193 |
|
|
802,039 |
Christopher |
|
Cash |
127,500 |
255,000 |
382,500 |
|
|
|
|
|
|
|
|
Uchida |
1/26/2022 |
Stock
Option |
|
|
|
|
|
|
|
|
2,692 |
49.53 |
53,668 |
|
1/26/2022 |
PSU |
|
|
|
|
540 |
1,079 |
2,158 |
|
|
|
53,443 |
|
1/26/2022 |
RSU |
|
|
|
|
|
|
|
3,238 |
|
|
160,378 |
Jon |
|
Cash |
120,000 |
240,000 |
360,000 |
|
|
|
|
|
|
|
|
Christianson |
1/26/2022 |
Stock
Option |
|
|
|
|
|
|
|
|
2,534 |
49.53 |
50,518 |
|
1/26/2022 |
PSU |
|
|
|
|
508 |
1,016 |
2,032 |
|
|
|
50,322 |
|
1/26/2022 |
RSU |
|
|
|
|
|
|
|
3,048 |
|
|
150,967 |
Jonathan |
|
Cash |
105,000 |
210,000 |
315,000 |
|
|
|
|
|
|
|
|
Knutzen |
1/26/2022 |
Stock
Option |
|
|
|
|
|
|
|
|
2,217 |
49.53 |
44,198 |
|
1/26/2022 |
PSU |
|
|
|
|
445 |
889 |
1,778 |
|
|
|
44,032 |
|
1/26/2022 |
RSU |
|
|
|
|
|
|
|
2,667 |
|
|
132,097 |
Angela |
|
Cash |
83,750 |
167,500 |
251,250 |
|
|
|
|
|
|
|
|
Grant |
1/26/2022 |
Stock
Option |
|
|
|
|
|
|
|
|
1,636 |
49.53 |
32,615 |
|
1/26/2022 |
PSU |
|
|
|
|
328 |
656 |
1,312 |
|
|
|
32,492 |
|
1/26/2022 |
RSU |
|
|
|
|
|
|
|
1,968 |
|
|
97,475 |
|
1/26/2022 |
Stock
Option |
|
|
|
|
|
|
|
|
3,273 |
49.53 |
65,251 |
|
1/26/2022 |
PSU |
|
|
|
|
656 |
1,312 |
2,624 |
|
|
|
64,983 |
|
1/26/2022 |
RSU |
|
|
|
|
|
|
|
3,937 |
|
|
195,000 |
Michelle |
|
Cash |
77,500 |
155,000 |
232,500 |
|
|
|
|
|
|
|
|
Johnson |
1/26/2022 |
Stock
Option |
|
|
|
|
|
|
|
|
1,636 |
49.53 |
32,615 |
|
1/26/2022 |
PSU |
|
|
|
|
328 |
656 |
1,312 |
|
|
|
32,492 |
|
1/26/2022 |
RSU |
|
|
|
|
|
|
|
1,968 |
|
|
97,475 |
|
1/26/2022 |
Stock
Option |
|
|
|
|
|
|
|
|
3,273 |
49.53 |
65,251 |
|
1/26/2022 |
PSU |
|
|
|
|
656 |
1,312 |
2,624 |
|
|
|
64,983 |
|
1/26/2022 |
RSU |
|
|
|
|
|
|
|
3,937 |
|
|
195,000 |
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 66 |
Executive
Compensation Tables
(1) | Reflects
amount of annual cash incentive plan awards threshold, target, and maximum potential payouts.
Amounts actually paid are reported above in the Summary Compensation table. |
(2) | Reflects
the threshold, target, and maximum potential payouts pursuant to the PSUs granted under the
LTI plan in 2022. The actual payout depends on performance relative to predetermined targets
of the Company’s Gross Written Premiums and Adjusted Return on Equity as set by the
Compensation Committee. The PSU’s performance period is the fiscal year of the grant.
At the end of the performance period, the actual results will be measured against the predetermined
targets to determine the number of PSUs to be earned as compensation. The earned PSUs are
then subject to a required service period of approximately three years from the grant date
before vesting and being issued as common stock. The actual results resulted in a future
payout of 200% of target. |
(3) | Represents
grants of RSUs granted under the LTI plan in 2022 that vest as follows: one-third (1/3) shall
vest on the first-year anniversary of the date of the grant; an additional one-third (1/3)
shall vest on the second-year anniversary of the date of the grant; and the final one-third
(1/3) shall vest on the third-year anniversary of the date of grant, subject to continued
service with us. |
(4) | Amounts
in this column represents grants of stock options under the LTI plan that vest as follows:
twenty-five percent (25%) shall vest on the first-year anniversary of the date of the grant
and the remaining shall vest in equal monthly installments over the subsequent twenty-four
(24) month period subject to continued service with us. |
(5) | Amounts
in this column reflect the grant date value of stock options, RSUs, and PSUs, as calculated
per accounting rules. These amounts do not reflect the actual economic value or gain that
will be realized by our Named Executive Officers relating to these awards. The amount of
value realized by our executives may be significantly different than this figure depending
on our future stock price performance. Assumptions used in the calculation of these amounts
are included in Note 12 to our financial statements included in our Annual Report on Form
10-K for the year ended December 31, 2022. |
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 67 |
Executive
Compensation Tables
2022
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following
table presents certain information concerning equity awards held by our Named Executive Officers as of December 31, 2022.
Name |
Grant
Date |
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable |
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable |
Option
Exercise
Price
($) |
Option
Expiration
Date |
Number
of
Shares or
Units of
Stock That
Have Not
Vested
(#)(3) |
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(4) |
Mac
Armstrong |
4/16/2019 |
206,310 |
— |
15.00 |
4/16/2029 |
— |
— |
|
9/8/2020 |
2,047 |
1,591(1) |
98.95 |
9/8/2030 |
1,213 |
54,779 |
|
1/27/2021 |
5,984 |
4,093(2) |
97.87 |
1/27/2031 |
9,870 |
445,729 |
|
2/1/2021 |
4,500 |
3,500(2) |
106.60 |
2/1/2031 |
— |
— |
|
7/15/2021(5) |
|
— |
— |
— |
325,000 |
8,582,594 |
|
1/26/2022 |
|
13,464(2) |
49.53 |
1/26/2032 |
26,987 |
1,218,733 |
Christopher
Uchida |
4/16/2019 |
19,156 |
— |
15.00 |
4/16/2029 |
— |
— |
|
9/8/2020 |
665 |
517(1) |
98.95 |
9/8/2030 |
394 |
17,793 |
|
1/27/2021 |
1,169 |
799(2) |
97.87 |
1/27/2031 |
1,926 |
86,978 |
|
11/18/2021(5) |
|
— |
— |
— |
81,294 |
1,950,362 |
|
1/26/2022 |
|
2,692(2) |
49.53 |
1/26/2032 |
5,396 |
243,683 |
Jon
Christianson |
4/16/2019 |
40,937 |
— |
15.00 |
4/16/2029 |
— |
— |
|
7/30/2020 |
7,779 |
5,096(1) |
87.51 |
7/30/2030 |
— |
— |
|
9/8/2020 |
726 |
565(1) |
98.95 |
9/8/2030 |
430 |
19,419 |
|
1/27/2021 |
1,056 |
722(2) |
97.87 |
1/27/2031 |
1,741 |
78,624 |
|
11/18/2021(5) |
|
— |
— |
|
54,196 |
1,300,231 |
|
1/26/2022 |
|
2,534(2) |
49.53 |
1/26/2032 |
5,080 |
229,413 |
Jonathan
Knutzen |
4/16/2019 |
64,920 |
5,902(1) |
15.00 |
4/16/2029 |
— |
— |
|
9/8/2020 |
614 |
477(1) |
98.95 |
9/8/2030 |
364 |
16,438 |
|
1/27/2021 |
845 |
577(2) |
97.87 |
1/27/2031 |
1,392 |
62,863 |
|
11/18/2021(5) |
|
— |
— |
|
32,517 |
780,124 |
|
1/26/2022 |
|
2,217(2) |
49.53 |
1/26/2032 |
4,445 |
200,736 |
Angela
Grant |
11/30/2020 |
3,577 |
3,290(1) |
66.10 |
11/30/2030 |
— |
— |
|
1/27/2021 |
563 |
385(2) |
97.87 |
1/27/2031 |
928 |
41,908 |
|
1/26/2022 |
|
1,636(2) |
49.53 |
1/26/2032 |
3,280 |
148,125 |
|
1/26/2022(5) |
|
3,273(2) |
49.53 |
1/26/2032 |
6,561 |
296,295 |
Michelle
Johnson |
12/2/2019 |
10,000 |
5,000(1) |
52.97 |
12/2/2029 |
— |
— |
|
9/8/2020 |
409 |
318(1) |
98.95 |
9/8/2030 |
242 |
10,929 |
|
1/27/2021 |
526 |
359(2) |
97.87 |
1/27/2031 |
864 |
39,018 |
|
1/26/2022 |
|
1,636(2) |
49.53 |
1/26/2032 |
3,280 |
148,125 |
|
1/26/2022(5) |
|
3,273(2) |
49.53 |
1/26/2032 |
6,561 |
296,295 |
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 68 |
Executive
Compensation Tables
(1) | Twenty-five
percent of the shares subject to the option vest and become exercisable on the first-year
anniversary of the grant date and the remaining option shares will vest and become exercisable
in thirty-six (36) equal monthly installments thereafter. |
(2) | Twenty-five
percent of the shares subject to the option vest and become exercisable on the first-year
anniversary of the grant date and the remaining option shares will vest and become exercisable
in twenty-four (24) equal monthly installments thereafter. |
(3) | Represents
RSUs and PSUs issued under our LTI plan. For RSUs, one-third (1/3) of the shares subject
to the RSUs shall vest on the first-year anniversary of the grant date; an additional one-third
(1/3) shall vest on the second-year anniversary of the grant date; and the final one-third
(1/3) shall vest on the third-year anniversary of the grant date. The PSUs are subject to
a service before vesting. The number of PSUs represents the number of PSUs that will be issued
based on actual performance relative to the preestablished targets. |
(4) | Represents
the market value of the RSUs and PSUs outstanding based on the closing price of our common
stock as reported on the Nasdaq Global Select Market of $45.16 per share on December 31,
2022 (with the exception of the 2021 supplemental PSU grants as described in footnote 5).
Since these awards have not yet vested, the ultimate value or gain our executives receive
from these awards may be significantly different than this number depending on our future
stock price performance. |
(5) | Represents
RSUs and PSUs issued pursuant to the 2021 and 2022 Supplemental Executive Stock Grants. With
respect to the 2021 supplemental PSU grants, as these require the achievement of rigorous
stock price appreciation hurdles to vest, the grants were valued using a Monte Carlo valuation
model as of December 31, 2022. The PSUs granted to Mr. Armstrong on July 15, 2021, were determined
to have a fair market value of $18.07 per unit, and the PSUs granted to Messrs. Uchida, Christianson
and Knutzen on November 18, 2021 were determined to have a fair market value of $14.87 per
unit as of December 31, 2022. If the probability factor determined under the Monte Carlo
model was excluded and the target number of units was valued purely at the December 31, 2022
stock price, the target market value of the supplemental PSUs outstanding held by Messrs.
Armstrong, Uchida, Christianson and Knutzen would be $14,677,000, $3,671,237, $2,447,497,
and $1,468,479, respectively. |
2022
OPTION EXERCISES AND STOCK VESTED TABLE
|
Option
Awards |
|
Stock
Awards |
Name |
Number
of
Shares
Acquired on
Exercise (#) |
Value
Realized on
Exercise ($)(1) |
|
Number
of
Shares
Acquired on
Vesting |
Value
Realized
on
Vesting ($)(2) |
Mac
Armstrong |
— |
— |
|
28,842 |
1,633,707 |
Christopher
Uchida |
5,000 |
299,290 |
|
7,025 |
461,015 |
Jon
Christianson |
— |
— |
|
4,974 |
327,839 |
Jonathan
Knutzen |
— |
— |
|
3,182 |
210,270 |
Angela
Grant |
— |
— |
|
247 |
12,098 |
Michelle
Johnson |
— |
— |
|
474 |
32,244 |
Heath
Fisher |
100,311 |
4,324,330 |
|
767 |
37,568 |
| (1) | The
value realized on exercise is determined by multiplying (a) the number of options exercised
by (b) the excess of the market price of our common stock on the exercise date over the exercise
price of the option. Mr. Fisher retired from Palomar effective April 1, 2022. In accordance
with our stock option award agreements, Mr. Fisher’s unvested stock options at the
time of his retirement were immediately forfeited, and he had 90 days from his termination
date to exercise his vested options. His 2022 value realized on exercise amount represents
vested stock options that he exercised during this 90-day period after termination. |
| (2) | The
value realized on vesting is determined by multiplying (a) the number of stock awards by
(b) the market price of our common stock on the vesting date. |
|
|
Palomar 2023
Proxy
Statement |
PLMR.com 69 |
Executive
Compensation Tables
Potential
Payments Upon Termination or Change of Control
Post-termination
benefits for our Named Executive Officers are established pursuant to the terms of their individual employment agreements and equity
awards. In the event of a change in control (“CIC”) as described in the 2019 Plan, the acquiring or successor entity may
assume or continue all or any awards outstanding under the 2019 Plan or substitute substantially equivalent awards. All of our employment
agreements contain double trigger CIC provisions, requiring that an executive’s employment is terminated in connection with the
CIC in order to be eligible for termination payments.
The following
table sets forth the amounts payable to each of our Named Executive Officers based on (a) the acceleration of unvested equity awards
upon a double trigger in connection with a CIC of the Company, and (b) an assumed termination of employment outside of a CIC, in all
instances assuming a December 31, 2022 termination date. For equity related amounts, the market price refers to the closing price of
our common stock which was $45.16 per share as reported on the Nasdaq Global Select Market as of December 31, 2022. The amounts that
would be paid upon a NEO’s actual termination of employment can only be determined at the time of such termination, based on the
facts and circumstances then prevailing.
Name |
Cash Severance ($)(1) |
Non-Equity Incentive Pay ($)(2) |
Stock Options ($)(3) |
PSUs ($)(3) |
RSUs ($)(3) |
Continuation of Medical Benefits ($)(4) |
Total ($) |
|
|
Mac
Armstrong |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
Reason: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
without Cause or for Good Reason |
1,700,000 |
|
1,700,000 |
|
— |
|
— |
|
1,546,324 |
|
28,047 |
|
4,974,370 |
|
Qualifying
Termination in Connection with a CIC |
1,700,000 |
|
1,700,000 |
|
— |
|
695,690 |
|
5,539,551 |
|
28,047 |
|
9,663,288 |
|
Death
or Disability |
1,700,000 |
|
1,700,000 |
|
— |
|
— |
|
|
|
28,047 |
|
3,428,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
Uchida |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
Reason: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
without Cause or for Good Reason |
425,000 |
|
— |
|
— |
|
— |
|
— |
|
8,116 |
|
433,116 |
|
Qualifying
Termination in Connection with a CIC |
425,000 |
|
— |
|
— |
|
138,054 |
|
1,315,737 |
|
8,116 |
|
1,886,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jon
Christianson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
Reason: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
without Cause or for Good Reason |
400,000 |
|
— |
|
— |
|
— |
|
— |
|
21,940 |
|
421,940 |
|
Qualifying
Termination in Connection with a CIC |
400,000 |
|
— |
|
— |
|
128,480 |
|
935,851 |
|
21,940 |
|
1,486,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan
Knutzen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
Reason: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
without Cause or for Good Reason |
350,000 |
|
— |
|
— |
|
— |
|
— |
|
947 |
|
350,947 |
|
Qualifying
Termination in Connection with a CIC |
350,000 |
|
— |
|
178,004 |
|
109,648 |
|
612,505 |
|
947 |
|
1,251,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Angela
Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
Reason: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
without Cause or for Good Reason |
167,500 |
|
— |
|
— |
|
— |
|
— |
|
6,621 |
|
174,121 |
|
Qualifying
Termination in Connection with a CIC |
167,500 |
|
— |
|
— |
|
197,304 |
|
289,024 |
|
6,621 |
|
660,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michelle
Johnson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
Reason: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
without Cause or for Good Reason |
155,000 |
|
— |
|
— |
|
— |
|
— |
|
10,873 |
|
165,873 |
|
Qualifying
Termination in Connection with a CIC |
155,000 |
|
— |
|
— |
|
195,949 |
|
298,417 |
|
10,873 |
|
660,239 |
|
|
|
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Statement |
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Executive
Compensation Tables
| (1) | Amounts
reported represent the value of benefits payable to each Named Executive Officer as follows:
Messrs. Uchida. Christianson, and Knutzen: 12 months of their respective current base salaries.
Ms. Grant and Mrs. Johnson: 6 months of their respective current base salaries. Amount reported
represents the value of benefits payable to Mr. Armstrong: 200% of 12 months of his current
base salary. |
| (2) | Amount
reported represents the value of benefits payable to Mr. Armstrong: 200% of 12 months of
his target bonus. |
| (3) | Amounts
reported reflect the value attributable to the immediate acceleration of unvested equity
awards upon a CIC event coupled with a qualifying termination. Amount is determined by multiplying
(a) the number of unvested options that would automatically become fully vested, by (b) the
excess of the market price of our common stock on the CIC date over the exercise price of
the option plus (c) the number of unvested RSUs and PSUs that would automatically become
fully vested multiplied by (d) the closing price of our common stock on the CIC date. |
| (4) | For
Messrs. Uchida, Christianson, and Knutzen amounts reported represent the value of 12 months
of continued health and welfare benefits payable to each Named Executive Officer per the
terms of their respective employment agreements. For Ms. Grant and Mrs. Johnson, amounts
reported represent the value of 6 months of continued health and welfare benefits payable
to each Named Executive Officer per the terms of their respective employment agreements.
For Mr. Armstrong, amount reported represents the value of 24 months of continued health
and welfare benefits payable per the terms of his employment agreement. |
Employment
Agreements for Executive Officers
We
have entered into employment agreements with Messrs. Armstrong, Uchida, Fisher, Christianson and Knutzen, and Ms. Grant and Mrs.
Johnson, setting forth the terms of the officer’s employment with us. The material terms of employment with our Named
Executive Officers are described below.
Mac
Armstrong4
On
July 15, 2021, we entered into a new employment agreement with Mac Armstrong, the Company’s Chief Executive Officer and Chair of
the Board that extends his current employment term through December 31, 2025, with ability to renew for additional one (1) year terms
thereafter. Pursuant to the terms of the agreement, Mr. Armstrong will continue to receive a base salary of $850,000 per year, less applicable
withholdings, and he will be eligible to earn an annual target bonus of 100% of his base salary, with a maximum bonus of up to 250% of
his base salary, upon achievement of performance objectives to be determined by the Board in its sole discretion. Mr. Armstrong is also
eligible to participate in the employee benefit plans sponsored by us of general applicability to other employees. In connection with
entering into the employment agreement, Mr. Armstrong received a grant of 125,000 restricted stock units(1). The shares subject
to these restricted stock units will vest as follows, subject to Mr. Armstrong’s continued service through each applicable vesting
date: 25,000 of the shares will vest on each of the first, second and third anniversary of the date of grant and the remainder shall
vest in equal quarterly installments thereafter over a two-year period. Mr. Armstrong also received a grant of 225,000 performance stock
units (the “PSUs”). The shares subject to these PSUs will be earned upon the achievement of pre-defined stock price milestones.
The PSUs that become Earned Units will vest upon continued service as an employee through December 31, 2025, and as an employee and/or
director through the fifth anniversary of the grant date. In addition, the employment agreement provides that during the period Mr. Armstrong
is employed by us (including calendar year 2021), Mr. Armstrong is eligible to receive annual long-term incentive compensation equity
awards under the equity incentive plan with a target value on the applicable grant date of 150% of Mr. Armstrong’s base salary,
as calculated based on the grant date fair value of such equity awards as used by us for financial reporting purposes.
The employment
agreement also provides benefits in connection with a termination of Mr. Armstrong’s employment under specified circumstances.
Under the terms of the employment agreement, if we terminate Mr. Armstrong’s employment other than for “cause” or Mr.
Armstrong terminates his employment for “good reason,” Mr. Armstrong will be entitled to receive, subject to his timely execution
and non-revocation of a separation agreement and release of claims in a form reasonably satisfactory to us and his continued adherence
to the non-solicitation provision of the employment agreement, (i) a lump sum severance payment equal to 200% of the sum of (x) his then-current
base salary, as then in effect, plus (y) his target bonus for the fiscal year in which the termination occurs; (ii) reimbursements for
Mr. Armstrong’s and his eligible dependents’ COBRA premiums for up to 24 months; and (iii) acceleration of his then unvested
equity awards (other than performance stock units previously granted) that would have vested during the 12 month period following separation
had Mr. Armstrong remained employed. In addition, the PSUs described above will vest with respect to any shares that would have been
earned and vested during the 12-month period following termination had Mr. Armstrong remained employed. If we terminate Mr. Armstrong’s
employment other than for cause,
(4) |
The
grants Mr. Armstrong received as part of his employment agreement are the 2021 Executive Retention Grants referenced in the previous
section. |
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Executive
Compensation Tables
death, or
disability, or Mr. Armstrong terminates his employment for good reason, in either case, within three months prior to or 18 months following
a Change of Control (as defined in the employment agreement), Mr. Armstrong will be entitled to receive accelerated vesting as to 100%
of Mr. Armstrong’s then-outstanding equity awards (other than the PSUs) and all or a portion of the unvested PSUs shall vest in
accordance with the terms of the award agreements. The employment agreement also provides benefits in connection with a termination of
Mr. Armstrong’s employment under specified circumstances.
Messrs.
Uchida, Fisher, Christianson and Knutzen, Ms. Grant and Mrs. Johnson
On July 13,
2021, our Compensation Committee approved a new form of employment agreement (the “Form Agreement”), to be entered into by
Messrs. Uchida, Fisher, Christianson and Knutzen and Ms. Grant and Mrs. Johnson. The Form Agreement provides, among other things, the
executive’s annual base salary and target bonus amount, each subject to review and adjustment by the Compensation Committee. The
Form Agreement also provides benefits in connection with a termination of the executive’s employment under specified circumstances.
Under the terms of the Form Agreement, if we terminate the executive’s employment other than for “cause” or the executive
terminates his or her employment for “good reason”(each as defined in the Form Agreement), the executive will be entitled
to receive, subject to his or her timely execution and non-revocation of a separation agreement and release of claims in a form reasonably
satisfactory to us and his or her continued adherence to the non-solicitation provision of the Form Agreement, (i) severance payments
in an amount equal to his or her then-current base salary for a period of 12 months (6 months in the case of Ms. Grant and Mrs. Johnson)
payable in accordance with our regularly scheduled payroll; and (ii) reimbursements for the executive’s and his or her eligible
dependents’ COBRA premiums for up to 12 months (6 months in the case of Ms. Grant and Mrs. Johnson (such payments under (i) and
(ii), the “Severance Pay”). In addition, if we terminate the executive without cause or the executive resigns for good reason
within 12 months following a change in control (as defined in the Form Agreement), the executive is entitled to receive the Severance
Pay and, in the event the executive’s outstanding equity is assumed or continued following the change in control, the acceleration
of his or her then unvested equity awards. The Form Agreement also includes a non-solicitation provision prohibiting the executive from
soliciting for employment or as a consultant for 12 months following separation of employment any employee or consultant of the Company,
including those engaged within the twelve months prior to executive’s termination.
Retirement
Plan and Other Benefits
We maintain
a retirement savings plan, or 401(k) Plan, for the benefit of our eligible team members, including our Named Executive Officers. Our
401(k) Plan is intended to qualify under Section 401 of the Internal Revenue Code. In general, all team members are eligible to participate
in the plan on the date they are hired. Each participant in the 401(k) Plan may contribute up to the statutory limit of his or her pre-tax
compensation. We contribute the lesser of 3% of the team member’s compensation or the maximum amount allowed under statutory law.
Under the plan, each team member is fully vested in his or her deferred salary contributions as well as the 3% company contributions.
The 401(k) Plan employer contributions provided to our Named Executive Officers are reflected in the “Executive Compensation
– 2022 Summary Compensation Table” section under the “All Other Compensation” column heading.
We also maintain
an employee stock purchase plan (“ESPP”), where team members can purchase our stock at a discount via payroll withholdings.
The ESPP is administered through team member participation in discrete offering periods. During each discrete offering period, team member
funds are withheld, and the stock purchase occurs upon the conclusion of the offering period. All of our team members are eligible to
participate in broad-based and comprehensive employee benefit programs, including medical, dental, vision and group term life insurance
and long-term disability. Our Named Executive Officers are eligible to participate in these plans generally on the same basis as our
other team members.
|
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Compensation Tables
Changes
to Stock Ownership Guidelines
As discussed
above in the Compensation Discussion & Analysis section, during 2022, in response to shareholder feedback we received from our shareholder
outreach campaign, we updated our Stock Ownership Guidelines to increase the required ownership multiple for our CEO. Additionally, we
expanded the stock ownership guidelines to apply to all executive officers. Accordingly, our current Stock Ownership Guidelines for executive
officers and Directors are as follows:
Position |
Salary
or Cash Retainer Multiple |
Chief
Executive Officer |
5x |
All
other NEOs |
2x |
Directors |
2x |
Executives
and directors subject to these Stock Ownership Guidelines have five (5) years after first becoming subject to these guidelines to achieve
the required ownership level. Executive officers are required to hold a specific number of shares, net of taxes, until stock ownership
guidelines are met. Stock ownership includes vested shares held directly or indirectly, outstanding time-based stock options that are
“in-the-money,” unvested time-based RSUs and shares purchased via the ESPP. Performance awards are not counted toward the
ownership requirement until the performance criteria is met. Underwater stock options are also not counted toward the ownership requirement.
The Compensation Committee intends to review the stock ownership progress of executives subject to these Stock Ownership Guidelines on
an annual basis.
CEO
Pay Ratio Disclosure
Summary
SEC rules
and the Dodd Frank Act require disclosure of the ratio of our CEO’s annual total compensation to the annual total compensation
of our median team member.
We
calculated this ratio in a manner consistent with Item 402(u) of Regulation S-K. For 2022, the annual compensation of our median
team member was $133,295 and was calculated by totaling all applicable elements of compensation. Our CEO’s 2022 Compensation
was $3,000,327, which represents the total compensation reported for Mr. Armstrong in the “2022 Summary Compensation
Table.” Based on these calculations, the ratio of the annual total compensation of Mr. Armstrong to the annual compensation of
our median team member was 23 to 1.
For purposes
of the 2022 pay ratio calculation as described above, we determined the median team member by evaluating all team member base pay levels
as of December 31, 2022. We then calculated median team member total compensation by using the same methodology utilized to determine
CEO pay for the Summary Compensation Table in accordance with SEC rules, which includes earned bonus payout, grant date value of LTI
and company 401(k) contributions.
The assumptions
used in the calculation of our estimated pay ratio are specific to our company and our team member population; therefore, our pay ratio
may not be comparable to the pay ratios of other companies.
Pay
vs. Performance Comparison
As discussed
in the CD&A above, our Compensation Committee has implemented an executive compensation program rooted in a pay-for-performance philosophy
that is designed to link a substantial portion of our NEOs’ realizable compensation to the achievement of Palomar’s financial,
operational, and strategic objectives, and further to align management’s interest with those of shareholders. The following represents
our pay-for-performance table for the 2020-2022 period, calculated in accordance with SEC regulations.
|
|
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Compensation Tables
|
(1) |
(2) |
(1) |
(2) (3) |
(4) |
(4) |
|
(5) |
|
|
|
|
|
Value of $100 Investment |
|
|
Year |
Summary
Compensation
Table
Total
for CEO
($)(1) |
Compensation
Actually
Paid to CEO
($)(2) |
Average
Summary
Compensation
Table
Total for
Non-CEO
NEOs ($)(1) |
Compensation
Actually
Paid to
Non-CEO
NEOs
($)(2)(3) |
PLMR
Total
Shareholder
Return
($)(4) |
Comparator
Group Total
Shareholder
Return
($)(4) |
Net
Income
(in $000s)
($) |
Company
Selected
Metric:
Adjusted
Return on
Equity(5) |
2022 |
3,000,327 |
(1,497,733) |
774,572 |
519,793 |
71.90 |
66.11 |
51,170 |
18.3% |
2021 |
19,246,249 |
16,982,053 |
3,486,487 |
2,279,277 |
73.34 |
115.70 |
45,847 |
13.8% |
2020 |
1,063,612 |
5,720,732 |
686,310 |
1,683,012 |
183.44 |
100.42 |
6,257 |
3.0% |
| (1) | Represents
the dollar amounts of total compensation reported for our CEO, Mr. Armstrong, and the average
dollar amounts of total compensation reported for our non-CEO NEOs in the Summary Compensation
Table for the fiscal years 2022, 2021 and 2020, respectively. For 2022, our non-CEO NEOs
were Chris Uchida, Jon Christianson, Jon Knutzen, Angela Grant, Michelle Johnson and Heath
Fisher. For 2021, our non-CEO NEOs were Chris Uchida, Jon Christianson, Jon Knutzen and Heath
Fisher. For 2020, our non-CEO NEOs were Chris Uchida, Jon Christianson, Heath Fisher, and
Bill Bold. |
| (2) | Represents
the dollar amounts of “compensation actually paid” computed in accordance with
SEC requirements. The amounts do not reflect actual compensation paid to our CEO or other
NEOs during the applicable year, but instead also include (i) the year-end value of stock
awards granted during the reported year and (ii) change in value of stock awards that were
unvested at the end of the prior year (measured through the earlier of the vest date or through
the end of the reported fiscal year). |
| (3) | Represents
the dollar amounts of total compensation reported for our other NEOs in the Summary Compensation
Table. The non-CEO NEOs for the fiscal years 2022, 2021 and 2020, respectively, represent
the actual NEOs reported in the proxy for the applicable reporting year, inclusive of any
year-over-year changes in the NEO population. |
| (4) | Represents
the cumulative total shareholder return of Palomar and the NASDAQ Insurance Index (the “Index”),
assuming $100 was invested in PLMR and the Index on January 1, 2020. |
| (5) | Adjusted
ROE is a key metric that shareholders use to evaluate our performance and capital efficiency.
Adjusted ROE is a Non-GAAP Financial Measure; see Reconciliation of Non-GAAP Financial Measures
in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022. |
To calculate the
amounts in the “Compensation Actually Paid to CEO” column in the table above, the following represents the deductions and
additions to our CEO’s total compensation as reported in the Summary Compensation Table:
Year |
Summary
Compensation
Table Total for
CEO ($) |
Reported
Value
of Equity
Awards for
CEO ($)(1) |
Equity
Award
Adjustments
for CEO ($)(2) |
Compensation
Actually Paid to
CEO ($) |
2022 |
3,000,327 |
(1,337,771) |
(3,160,289) |
(1,497,733) |
2021 |
19,246,249 |
(17,596,208) |
15,332,012 |
16,982,053 |
2020 |
1,063,612 |
(450,654) |
5,107,774 |
5,720,732 |
| (1) | Reflects
grant date value of stock and option awards for our CEO, as reported in the SCT for each
applicable year. |
| (2) | Represents
the year-over-year change in the fair value of stock and option awards to our CEO, as itemized
below. |
|
|
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Executive
Compensation Tables
Fair
Value of Equity Awards for CEO: |
2022
($) |
2021
($) |
2020
($) |
As
of year-end for awards granted during the year |
1,493,399 |
15,448,189 |
386,901 |
Y-o-Y
increase/(decrease) of unvested awards from prior years |
(4,442,989) |
(63,849) |
1,521,374 |
Increase/(decrease)
from prior fiscal year-end of awards vested during the year |
(210,699) |
(52,335) |
3,199,498 |
Total
Equity Award Adjustments |
(3,160,289) |
15,332,012 |
5,107,774 |
To calculate
the amounts in the “Compensation Actually Paid to Non-CEO NEOs” column in the table above, the following represents the deductions
and additions to our non-CEO NEO’s total compensation as reported in the Summary Compensation Table:
Year |
Average
Summary
Compensation
Table
Total for Non-CEO
NEOs
($) |
Average
Reported Value
of Equity
Awards for
Non-CEO NEOs
($)(1) |
Average
Equity Award
Adjustments for
Non-CEO NEOs
($)(2) |
Average
Compensation
Actually Paid to
Non-CEO NEOs
($) |
2022 |
774,572 |
(142,938) |
(111,842) |
519,793 |
2021 |
3,486,487 |
(2,847,541) |
1,640,330 |
2,279,277 |
2020 |
686,310 |
(397,849) |
1,394,551 |
1,683,012 |
| (1) | Reflects
grant date value of stock and option awards for our non-CEO NEOs, as reported in the SCT
for each applicable year. |
| (2) | Represents
the year-over-year change in the fair value of stock and option awards to our non-CEO NEOs,
as itemized below. |
Fair
Value of Equity Awards for Non-CEO NEOs: |
2022
($) |
2021
($) |
2020
($) |
As
of year-end for awards granted during the year |
319,133 |
1,871,865 |
470,453 |
Y-o-Y
increase/(decrease) of unvested awards from prior years |
(424,595) |
(185,648) |
297,807 |
Increase/(decrease)
from prior fiscal year-end of awards vested during the year |
(6,379) |
(45,886) |
626,291 |
Total
Equity Award Adjustments |
(111,842) |
1,640,330 |
1,394,551 |
|
|
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Executive
Compensation Tables
Pay-for-Performance
Alignment
The
following table identifies the four most important financial performance measures used by our Compensation Committee to link the “compensation
actually paid” (CAP) to our CEO and other NEOs in 2022 to company performance, calculated in accordance with SEC regulations.
The role of each of these performance measures on our NEOs’ compensation is discussed in the CD&A above.
|
Financial
Performance Metrics(1) |
|
|
Adjusted Net Income |
|
|
Pre-Cat Adjusted Net Income |
|
|
Gross Written Premiums |
|
|
Adjusted ROE |
|
| (1) | Adjusted Net Income (ANI), Pre-Catastrophe ANI and Adjusted ROE are non-GAAP financial measure; see Reconciliation of Non-GAAP Financial Measures in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022. |
The following charts
reflect our CAP to our NEOs over the three-year period ended December 31, 2022, as compared to trends in Palomar’s TSR, net income
and adjusted ROE over this period. The TSR chart additionally illustrates Palomar’s TSR relative to the NASDAQ Insurance Index
over this period.
| (1) | Adjusted Net Income (ANI), Pre-Catastrophe ANI and Adjusted ROE are non-GAAP financial measure; see Reconciliation of Non-GAAP Financial Measures in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022. |
|
|
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Executive
Compensation Tables
CAP
vs. Net Income
|
|
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Statement |
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Executive
Compensation Tables
Equity
The following
table provides information as of December 31, 2022 with respect to shares of our common stock that may be issued under our existing equity
compensation plans.
Plan Category |
Number
of Securities
to be Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights |
Weighted
Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights(1) |
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in
Column (a)) |
Equity compensation plans approved by stockholders(2) |
1,537,946(3) |
33.85 |
3,502,437(4) |
Equity compensation plans not approved by stockholders |
— |
— |
— |
Total |
1,537,946 |
33.85 |
3,502,437 |
| (1) | The
weighted average exercise price is calculated based solely on outstanding stock options. |
| (2) | Includes
the following plans: 2019 Equity Incentive Plan (“2019 Plan”) and 2019 Employee
Stock Purchase Plan (“ESPP”). |
| (3) | This
number includes 882,892 stock options outstanding, 271,951 RSUs outstanding and 383,103 PSUs
outstanding granted under our 2019 Plan. |
| (4) | This
number includes 2,594,587 shares available for issuance under our 2019 Plan and 907,850 shares
available for sale under our ESPP. The 2019 Plan provides for an automatic increase on January
1, 2020 and each subsequent anniversary through 2029, equal to the least of (i) 3% of the
number of shares of common stock issued and outstanding on the immediately preceding December
31; and (ii) an amount determined by our Board. The ESPP provides for annual increases in
the number of shares available for sale under the ESPP on January 1, 2020 and each subsequent
anniversary through 2029, equal to the least of: 240,000 shares; or (ii) such other amount
as may be determined by our Board. |
|
|
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Proxy
Statement |
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Security
Ownership of Certain Beneficial Owners
And Management
The following
table sets forth certain information with respect to the beneficial ownership of our common stock as of April 3, 2023 for:
| • | each
of our directors and our nominees for director; |
| • | each
of our Named Executive Officers; |
| • | all
of our current directors, director nominees, current executive officers, and Named Executive
Officers as a group; and |
| • | each
person or group who beneficially owned more than 5% of our common stock. |
We have determined
beneficial ownership in accordance with the rules of the SEC and the information is not necessarily indicative of beneficial ownership
for any other purpose. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting
and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable.
We have based
our calculation of the percentage of beneficial ownership on 24,934,176 shares of our common stock outstanding as of April 3, 2023. We
have deemed shares of our common stock subject to stock options that are currently exercisable or exercisable within 60 days of April
3, 2023 and RSUs scheduled to vest within 60 days of April 3, 2023 to be outstanding and to be beneficially owned by the person holding
such equity awards for the purpose of computing the percentage ownership of that person. We did not deem these shares outstanding, however,
for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address of each beneficial
owner listed in the table below is c/o 7979 Ivanhoe Avenue, Suite 500, La Jolla, California 92037.
Name |
Total
Shares
Beneficially
Owned |
Beneficial
Ownership |
5%
Stockholders: |
Blackrock,
Inc.(1)
55
East 52nd Street
New York, NY 10055 |
3,868,622 |
15.3% |
The
Vanguard Group(2)
100 Vanguard Blvd.
Malvern,
PA 19355 |
2,276,208 |
9.0% |
Amundi
and Amundi Asset Management(3)
90-93 boulevard Pasteur
75015
Paris, France |
914 |
0.00% |
|
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Proxy
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Security
Ownership of Certain Beneficial Owners
And Management
Directors,
Director
Nominees and Named
Executive Officers |
Shares
Held
Directly |
Shares
Held
Indirectly |
Stock
Options
Exercisable
Within 60 days |
RSUs
Scheduled
to
Vest Within
60 days |
Total
Shares
Beneficially
Owned |
Beneficial
Ownership |
Daryl
Bradley |
1,467 |
— |
1,223 |
963 |
3,653 |
* |
Robert
Dowdell |
3,434 |
46,385(4) |
— |
963 |
50,782 |
* |
Catriona
Fallon |
2,232 |
— |
4,262 |
963 |
7,457 |
* |
Daina
Middleton |
1,955 |
— |
— |
963 |
2,918 |
* |
Martha
Notaras |
3,229 |
— |
1,722 |
963 |
5,914 |
* |
Richard
H. Taketa |
39,185 |
— |
— |
963 |
40,148 |
* |
Mac
Armstrong |
17,761 |
569,388(5) |
229,466 |
— |
816,615 |
3.2% |
Christopher
Uchida |
24,173 |
— |
19,771 |
— |
43,944 |
* |
Jon
Christianson |
85,380 |
— |
54,064 |
— |
139,444 |
* |
Jon
Knutzen |
10,487 |
— |
75,195 |
— |
85,682 |
* |
Angela
Grant |
265 |
— |
7,497 |
— |
7,762 |
* |
Michelle
Johnson |
815 |
— |
16,716 |
— |
17,531 |
* |
All
executive officers, directors, and director nominees as a group
(12 persons) |
190,383 |
615,773 |
409,916 |
5,778 |
1,221,850 |
4.8% |
*
less than 1%
| (1) | Based
solely on the most recently available Schedule 13G/A filed with the SEC on January 23, 2023.
Blackrock, Inc. reported beneficial ownership on behalf of iShares Core S&P Small-Cap
ETF of 3,868,622 shares with sole voting power of 3,839,903 shares and sole dispositive power
of 3,868,622 shares. |
| (2) | Based
solely on the most recently available Schedule 13G filed with the SEC on February 9, 2023.
The Vanguard Group reported beneficial ownership of 2,276,208 shares with shared voting power
of 41,357 shares, sole dispositive power of 2,211,287 shares and shared dispositive power
of 64,921 shares. |
| (3) | Based
solely on the most recently available Schedule 13G filed with the SEC on February 10, 2023.
Amundi is a majority-owned affiliate of Credit Agricole S.A., a French bank. Amundi Asset
Management is a wholly owned subsidiary of Amundi. Amundi and Amundi Asset Management reported
beneficial ownership of 914 shares with shared voting power of 914 shares and shared dispositive
power of 914 shares. |
| (4) | Amount
represents shares of common stock held by RGD Partners LP. Mr. Dowdell has no pecuniary interest
in the shares held by RGD Partners LP. |
| (5) | Amount
represents shares of common stock held by the Armstrong Family Trust. Mr. Armstrong is co-Trustee
of the Armstrong Family Trust and may be deemed to have beneficial ownership of the shares
held by this entity. |
|
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Palomar 2023
Proxy
Statement |
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Related
Person Transactions
The following
is a description of transactions since the beginning of our last fiscal year to which we have been a party, in which the amount involved
exceeds or will exceed $120,000 and in which any of our directors, executive officers or holders of more than 5% of our capital stock,
or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.
Mac Armstrong’s
brother, Jake Armstrong, serves as SVP, Operations. For fiscal year 2022, Jake Armstrong earned/ received: i) base salary of $240,000,
ii) an annual cash incentive bonus of $73,000, iii) long-term equity incentives in the form of stock options, RSUs, and PSUs with a combined
grant date fair value of $151,000 and iv) $9,100 in 401(k) plan employer contributions.
Indemnification
Agreements and Directors’ and Officers’ Liability Insurance
We have entered
into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us to
indemnify each director and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses
such as attorneys’ fees, judgments, penalties fines and settlement amounts incurred by the director or executive officer in any
action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director
or executive officer.
Policies
and Procedures for Related Party Transactions
Our Board
of Directors has adopted a written related person transaction policy setting forth the policies and procedures for the review and approval
or ratification of related person transactions. This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K under
the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships
in which we were or are to be a participant, where the amount involved exceeds $120,000 and a related person had or will have a direct
or indirect material interest, including, without limitation, purchases of goods or services by or from the related person or entities
in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person.
In reviewing and approving any such transactions, our Audit Committee is tasked to consider all relevant facts and circumstances, including,
but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction
with an unrelated third party and the extent of the related person’s interest in the transaction. All the transactions described
in this section occurred prior to the adoption of this policy.
Other
Matters
Available
Information
Our financial
statements for our fiscal year ended December 31, 2022 are included in our Annual Report on Form 10-K. This proxy statement and our annual
report are posted on the Investors section of our website at https://ir.plmr.com/ financials/sec-filings and are available from the SEC
at its website at www.sec.gov. You may also obtain a copy of our annual report without charge by sending a written request to Palomar
Holdings, Inc., Attention: Investor Relations, 7979 Ivanhoe Avenue, Suite 500, La Jolla, California 92037.
Company
Website
We maintain
a website at www.plmr.com. Information contained on, or that can be accessed through, our website is not intended to be incorporated
by reference into this proxy statement, and references to our website address in this proxy statement are inactive textual references
only.
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Proposals
of Stockholders for 2024 Annual Meeting
Stockholders who
wish to present proposals for inclusion in the proxy materials to be distributed in connection with next year’s Annual Meeting
must submit their proposals so that they are received at Palomar’s principal executive offices no later than the close of business
(5:00 p.m. Pacific Time) on December 16, 2023. Pursuant to the rules promulgated by the SEC, simply submitting a proposal does not guarantee
that it will be included.
In order to
be properly brought before the 2024 Annual Meeting of stockholders, a stockholder’s notice of a matter the stockholder wishes to
present, or the person or persons the stockholder wishes to nominate as a director, must be delivered to the Secretary of Palomar at
its principal executive offices not less than 90 nor more than 120 days before the first anniversary of the date of the preceding year’s
Annual Meeting. As a result, any notice given by a stockholder pursuant to these provisions of our Bylaws must be received no earlier
than January 26, 2024, and no later than the close of business (5:00 p.m. Pacific Time) on February 25, 2024, unless our 2024 Annual
Meeting date occurs more than 30 days before or 70 days after May 25, 2024. In that case, we must receive proposals not earlier than
the close of business on the 120th day prior to the date of the 2024 Annual Meeting and not later than the close of business on the later
of the 90th day prior to the date of the Annual Meeting or the 10th day following the day on which we first make a public announcement
of the date of the meeting.
To be in
proper form, a stockholder’s notice must include the specified information concerning the proposal or nominee as described in our
Bylaws. A stockholder who wishes to submit a proposal or nomination is encouraged to seek independent counsel about our Bylaw and SEC
requirements. Palomar will not consider any proposal or nomination that is not timely or otherwise does not meet the Bylaw and SEC requirements
for submitting a proposal or nomination.
To comply with
the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s
nominees in connection with our 2024 annual meeting must provide notice that sets forth the information required by Rule 14a-19 under
the Exchange Act no later than March 26, 2024.
Notices of intention
to present proposals at the 2024 Annual Meeting of stockholders must be addressed to: Palomar, Inc., Attention: Secretary, 7979 Ivanhoe
Avenue, Suite 500, La Jolla, California 92037. We reserve the right to reject, rule out of order, or take other appropriate action with
respect to any proposal that does not comply with these and other applicable requirements.
The Board does
not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented at the Annual Meeting,
the person named on the form of proxy card will have discretion to vote the shares of common stock they represent in accordance with
their own judgment on such matters.
It is important
that your shares of common stock be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore,
urged to vote over the Internet or by telephone as instructed on the Notice, or if you requested a printed copy of the proxy materials,
execute and return, at your earliest convenience, the enclosed proxy card.
THE BOARD
OF DIRECTORS
La Jolla, California
April 13, 2023
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Palomar 2023
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FPO card 1
FPO card 2
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