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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant þ
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Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12 |
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ProAssurance Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy statement, if Other Than the Registrant)
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TABLE OF CONTENTS
PROASSURANCE
CORPORATION
100 Brookwood Place
Birmingham, Alabama 35209
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
to be held May 19, 2010
To our Stockholders:
The Annual Meeting of Stockholders of ProAssurance Corporation
(ProAssurance) will be held at 10:00 a.m.,
local time, on Wednesday, May 19, 2010, on the
5th floor of the headquarters of ProAssurance, located at
100 Brookwood Place, Birmingham, Alabama 35209, for the
following purposes:
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(1)
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To elect three (3) directors of ProAssurance, as
Class III directors, to serve until the 2013 annual meeting
and until their successors are elected and qualified;
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(2)
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To ratify the appointment of Ernst & Young LLP as
independent auditors; and
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(3)
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To transact such other business as may properly come before the
annual meeting or any adjournment or postponement thereof.
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The Board of Directors has set March 26, 2010, as the
record date for the annual meeting. You will only be entitled to
notice of, and to vote at, the annual meeting if you are a
holder of record of shares of ProAssurances Common Stock
at the close of business on the record date. The stock transfer
books will not be closed.
We may adjourn the annual meeting without notice other than
announcement at the meeting or adjournments thereof, and any
business for which notice is hereby given may be transacted at
any such adjournment.
We have provided details concerning those matters to come before
the annual meeting in the accompanying proxy statement. Whether
you plan to attend the annual meeting or not, please sign, date
and return the enclosed proxy card in the envelope provided.
Returning your proxy card does not deprive you of your right to
attend the annual meeting and to vote your shares in person.
A copy of ProAssurances Annual Report to the Stockholders
for the year ended December 31, 2009, is enclosed, and is
also available in the Investor Relations section of
our website at www.ProAssurance.com. We hope you will find it
informative.
By order of the Board of Directors,
Jeffrey P. Lisenby
Secretary
April 1, 2010
PROASSURANCE
CORPORATION
100 Brookwood Place
Birmingham, Alabama 35209
PROXY
STATEMENT
Annual meeting of Stockholders
to be held May 19, 2010
INTRODUCTION
We are furnishing this proxy statement and proxy card to the
stockholders of ProAssurance Corporation, which we sometimes
refer to as ProAssurance, on behalf of
ProAssurances Board of Directors on or about April 9,
2010. Our Board of Directors is soliciting your proxy to vote
your shares at the annual meeting of ProAssurances
stockholders to be held at 10:00 a.m., local time, on
Wednesday, May 19, 2010, on the 5th floor of our
headquarters located at 100 Brookwood Place, Birmingham, Alabama
35209, or at any adjournment or postponement thereof.
What is a
proxy?
A proxy is a person or persons whom you designate to vote your
stock. If you designate someone as your proxy in a written
document, that document is called a proxy card.
Who pays
for the proxy solicitation?
ProAssurance will pay the expenses of the preparation of proxy
materials and the solicitation of proxies for the annual
meeting. Certain of our directors, officers or employees may
solicit your proxy and they will receive no additional
compensation for such solicitation. We will reimburse brokers
and other nominees for costs incurred by them in mailing proxy
materials to beneficial owners in accordance with applicable
rules.
What is
the purpose of the annual meeting?
As outlined in the meeting notice, at the annual meeting the
stockholders will be asked to elect three (3) members to
the Board of Directors of ProAssurance, as Class III
directors, to serve until the 2013 annual meeting, and to ratify
the appointment of Ernst & Young LLP as independent
auditors.
How does
the Board of Directors recommend that I vote?
The Board of Directors recommends a vote FOR electing all
nominees for director (Proposal 1) and FOR ratifying
the appointment of Ernst & Young LLP as our
independent auditors (Proposal 2).
What is
the record date and what does it mean?
The Board of Directors set March 26, 2010 as the record
date for the annual meeting. You are entitled to notice of and
to vote at the annual meeting if you own shares as of the close
of business on our record date.
How many
shares are entitled to vote at the annual meeting?
At the close of business on the record date there were
34,340,312 outstanding shares of our common stock, par value
$0.01 per share (Common Stock), of which we hold
1,811,356 shares as treasury shares that cannot be voted at
the meeting. You are entitled to one vote in person or by proxy
on all matters properly to come before the annual meeting for
each share of our Common Stock that you own on the record date.
What
constitutes a quorum?
The presence, in person or by proxy, of the holders of one-third
of the shares of Common Stock entitled to vote at the meeting
will constitute a quorum to conduct business at the annual
meeting. Proxies received but marked as abstentions and
broker non-votes (which occur where shares held by
brokers or nominees for beneficial owners are not voted on a
matter) will be included in the calculation of the number of
shares considered to be present at the meeting.
How do I
vote?
If you are a record owner of our Common Stock you may vote your
shares on matters properly presented at the annual meeting in
any of four ways:
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by signing and returning the enclosed proxy card in the enclosed
envelope; or
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by voting on the Internet in accordance with instructions on the
proxy card; or
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by using a touchtone telephone and following the instructions on
the enclosed proxy card; or
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by attending the meeting and voting in person.
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If you properly cast your vote, and your vote is not
subsequently revoked, your vote will be voted in accordance with
your instructions. Stockholders voting via the internet and by
telephone should understand that there may be costs associated
with voting in these manners, such as usage charges from
internet access providers and telephone companies, which must be
borne by the stockholder.
How do I
vote if my shares are in street name?
If you hold shares in street name (that is, through
a bank, broker or other nominee), your shares must be voted in
accordance with instructions provided by the nominee. If your
shares are held in the name of a nominee and you would like to
attend the annual meeting and vote in person, you may contact
the person in whose name your shares are registered and obtain a
proxy from that person and bring it to the annual meeting.
How do I
know if I hold my shares in street name?
If your shares are held in a brokerage account or by a bank or
other nominee, you are considered the beneficial owner of those
shares, and your shares are considered held in street
name? However, if your shares are registered directly in
your name with BNYMellon, our transfer agent, you are considered
the stockholder of record of those shares.
How do I
vote on the Internet?
You can cast your proxy vote at www.proxyvote.com, regardless of
how you hold your shares. You will need to have the Control
Number from your proxy notice or proxy card available.
Will my
vote on the Internet be secure and accurate?
The internet and telephone voting procedures are designed to
authenticate stockholders identities, to allow
stockholders to give their voting instructions and to confirm
that stockholders instructions have been recorded
properly. We have been advised that the internet and telephone
voting procedures that have been made available to you are
consistent with the requirements of applicable law.
What is
the deadline for voting?
Votes not cast at the meeting must be received by
11:59 p.m., Birmingham, Alabama time, on May 18, 2010.
Submitting your vote via the internet or by telephone will not
affect your right to vote in person should you decide to attend
the annual meeting.
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Can I
revoke my proxy?
Yes. You may revoke your proxy prior to the annual meeting by
either (i) submitting to ProAssurance a properly executed
proxy and bearing a later date, (ii) by voting by telephone
or Internet at a later date or in person at the meeting, or
(iii) by giving written notice of revocation to the
Secretary of ProAssurance. The mailing address of ProAssurance
is P.O. Box 590009, Birmingham, Alabama
35259-0009,
and the street address is 100 Brookwood Place, Birmingham,
Alabama 35209.
Are the
materials for the annual meeting available on the
internet?
Yes. The materials for ProAssurances 2010 Annual Meeting
of Stockholders (the 2009 Annual Report to the Stockholders,
which includes our Annual Report on
Form 10-K
for the year ended December 31, 2009, Proxy Statement and
Proxy Card) are available on the internet at www.proxyvote.com.
Our proxy statement and proxy card for the 2010 Annual Meeting
and our 2009 Annual Report also will be available through the
Investor Relations section of our website at
www.ProAssurance.com until at least May 19, 2011. Our
Annual Report to the Stockholders and Annual Report on
Form 10-K,
and other materials on our website are not proxy soliciting
materials.
How do I
receive a printed copy of the materials for the annual
meeting?
You may obtain a printed copy of this Proxy Statement, our 2009
Annual Report to the Stockholders and 2009 Annual Report on
Form 10-K
(including the financial statements and financial statement
schedules) without charge by contacting Frank B. ONeil at
the address shown above, or by telephone at
(205) 877-4400
or
(800) 282-6242,
or by e-mail
at Investor@ProAssurance.com. You may also request a copy
through www.proxyvote.com using your Control Number.
How do I
receive additional information or documents regarding
ProAssurance?
Our Board of Directors has adopted a Policy Regarding
Determination of Director Independence, including categorical
standards to assist in determining independence, and has adopted
charters for our Audit Committee, Compensation Committee, and
Nominating/Corporate Governance Committee, as well as Corporate
Governance Principles and our Code of Ethics and Conduct. All of
these documents and policies are available in the Corporate
Governance section of our website, www.ProAssurance.com. Printed
copies of our committee charters, Corporate Governance
Principles, Code of Ethics and Conduct, and the Policy Regarding
Determination of Director Independence may be obtained by
contacting Frank B. ONeil, Senior Vice President,
ProAssurance Corporation, either by mail at
P.O. Box 590009, Birmingham, Alabama
35259-0009,
or by telephone at
(205) 877-4400
or
(800) 282-6242
or by e-mail
at Investor@ProAssurance.com.
SOLICITATION
BY BOARD OF DIRECTORS
Our Board of Directors is soliciting your proxy to vote at the
2010 Annual Meeting. In addition to the solicitation of proxies
by mail and the internet, solicitation may be made by certain of
our directors, officers or employees telephonically,
electronically or by other means of communication.
PROPOSAL 1
ELECTION OF DIRECTORS
At the annual meeting, you will be asked to elect the following
persons as Class III directors to hold office for terms
ending at the annual meeting of stockholders to be held in 2013:
Victor T. Adamo, Esq., CPCU (Age 62) has
served as a director and President of ProAssurance since it
began operation in June 2001. Prior to June 2001, Mr. Adamo
served as an officer of our insurance subsidiary, ProAssurance
Casualty Company (formerly, ProNational Insurance Company)
(1985-2001),
and as a director and president and chief executive officer of
its former holding company, Professionals Group, Inc.
(1996-2001).
Prior to joining ProAssurance Casualty Company, Mr. Adamo
was in private legal practice from 1975 to 1985.
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William J. Listwan, M.D. (Age 67) has
served as a director of ProAssurance since September 2006.
Dr. Listwan was a member of the Board of Directors of
ProAssurance Wisconsin Insurance Company, formerly Physicians
Insurance Company of Wisconsin, Inc. (PRA Wisconsin)
from its organization in 1986 until its merger with ProAssurance
in August 2006. Dr. Listwan practiced Internal Medicine
with the Aurora Health Center (formerly General Clinic) in West
Bend, Wisconsin, from July 1974 to April 2006. He currently
holds an appointment as Assistant Clinical Professor of Medicine
and formerly was a member of the Board of Trustees at the
Medical College of Wisconsin. Dr. Listwan also served as
the President of Wisconsin Medical Society and was a member of
its Board of Directors for ten years. He holds a Certificate of
Director Education from the NACD Corporate Directors Institute.
W. Stancil Starnes, Esq. (Age 61) was
elected to the Board of Directors on September 5, 2007 and
serves as its Chairman. Mr. Starnes was appointed as Chief
Executive Officer (CEO) of ProAssurance on July 2, 2007.
Mr. Starnes served as the senior and managing partner of
the law firm of Starnes & Atchison LLP in Birmingham,
Alabama, where he was extensively involved with ProAssurance and
its predecessors in the defense of medical liability claims for
over 25 years. He withdrew from the firm in October 2006 to
serve as President, Corporate Planning and Administration of
Brasfield & Gorrie, Inc., a commercial construction
firm based in Birmingham, Alabama, where he served until May
2007. Mr. Starnes currently serves as a director of
Infinity Property and Casualty Corporation, a public
insurance holding company based in Birmingham, Alabama, where he
serves on the audit, compensation and executive committees. He
served as a director of Alabama National Bancorporation, a
public bank holding company based in Birmingham, Alabama, until
its sale to RBC Centura Banks, Inc. on February 25, 2008,
and he served on its nominating and corporate governance
committee.
The persons named in the boards proxy card have advised us
that, unless a contrary direction is indicated on your proxy
card, they intend to vote the shares appointing them as proxies
in favor of the named nominees. If the nominees should be unable
to serve, and the Board of Directors knows of no reason to
anticipate that this will occur, the persons named in the proxy
card will vote for such other person or persons as may be
recommended by our Nominating/Corporate Governance Committee and
designated by the Board of Directors, or the Board of Directors
may decide not to elect an additional person as a director. The
persons named in the proxy card will have no authority to vote
for the election of any person other than the nominees or their
substitutes in the election of directors.
All of the nominees currently are members of our Board of
Directors, and all nominees have been approved, recommended and
nominated for re-election to the Board of Directors by our
Nominating/Corporate Governance Committee and by our Board of
Directors in accordance with our Corporate Governance Principles.
Directors will be elected by a plurality of the votes cast in
person or by proxy at the annual meeting. With respect to the
election of directors, you may vote for all of the nominees or
withhold authority to vote for any or all of the nominees.
Because directors are elected by a plurality of the votes cast,
votes to withhold authority with respect to one or more nominees
and broker non-votes will have no effect on the outcome of the
election. If you do not give instructions to your proxy, your
shares represented by that proxy will be voted FOR the election
of each director nominee nominated by the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE NOMINEES NOMINATED FOR
ELECTION AS DIRECTORS BY THE BOARD OF DIRECTORS.
Board of
Directors
Our Certificate of Incorporation provides that our Board of
Directors is comprised of at least three and not more than
twenty-four directors, as determined by the Board of Directors.
The Certificate of Incorporation requires that our directors be
divided into three classes as nearly equal as possible and that
the directors serve staggered terms of three years. The
remaining directors may fill any vacancies on the Board of
Directors resulting from the death, resignation or removal of a
director or from any increase in the number of directors. A
director elected by the directors to fill a vacancy on the Board
of Directors holds office until the next election of the class
of directors for which such director has been chosen.
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The Board of Directors has nominated Victor T. Adamo, Esq.,
CPCU, William J. Listwan, M.D. and W. Stancil
Starnes, Esq. for election to the Board of Directors at the
2010 Annual Meeting as Class III directors as set forth
under the caption Proposal 1 Election of
Directors. Information regarding the nominees is set forth
above and information regarding the directors continuing in
office is set forth below, all of which was confirmed by them
for inclusion in this proxy statement. Information regarding
stock ownership by the nominees and continuing directors is set
forth in the table under the caption Beneficial Ownership
of Our Common Stock included elsewhere in this proxy
statement.
Class I
Directors Continuing in Office Term Expiring in
2011
Lucian F. Bloodworth (Age 69) has served as a
director of ProAssurance since August 22, 2002.
Mr. Bloodworth has been the chairman of Cain Manufacturing,
a manufacturer of specialty parts for air distribution and
roofing based in Birmingham, Alabama since 1988. Prior to that
time he was a senior executive for life insurance subsidiaries
of Protective Life Corporation and for National Bank of
Commerce. Mr. Bloodworth has been a fellow of the Society
of Actuaries and a member of the American Academy of Actuaries.
Robert E. Flowers, M.D. (Age 60) has
served as a director of ProAssurance since it began operation in
June 2001. Prior to June 2001, Dr. Flowers served as a
director of our insurance subsidiary, ProAssurance Indemnity
Company, Inc. (formerly, The Medical Assurance Company, Inc.)
from 1985 to 2001, and as a director of its former holding
company, Medical Assurance, Inc.
(1995-2001).
Dr. Flowers practiced as a physician with Gynecology
Associates of Dothan P.C., Dothan, Alabama, prior to his
retirement in 2001.
Ann F. Putallaz, Ph.D. (Age 64) has served
as a director of ProAssurance since June 2001. Prior to 2001,
Ms. Putallaz served as a director of Professionals Group,
Inc.
(1996-2001),
and its vice chairman
(1999-2001).
For the past five years, Ms. Putallaz has been Director of
Data and Communication Services of Munder Capital Management, an
investment advisor to The Munder Funds, an open end investment
company registered under the Investment Company Act of 1940.
Drayton Nabers, Jr., Esq.
(Age 69) served as a director of ProAssurance from
February 2002 until he resigned effective December 31,
2002, to serve as Finance Director of the State of Alabama.
Mr. Nabers served as Finance Director until June 2004, when
he was appointed Chief Justice of the Alabama Supreme Court. He
left the Court in 2006, and Mr. Nabers was elected to serve
again as a director of ProAssurance at the 2008 Annual Meeting.
He is currently in private practice with the law firm of
Maynard, Cooper & Gale, PC in Birmingham, Alabama.
Mr. Nabers was a senior executive officer of Protective
Life Corporation, a public insurance holding company based in
Birmingham, Alabama, from 1979 until his retirement as its
Chairman and Chief Executive Officer in 2001. He is currently a
director of Infinity Property and Casualty Corporation, where he
serves as Chairman of the nominating and corporate governance
committee, and is a member of the investment and executive
committees.
Class II
Directors Continuing in Office Term Expiring in
2012
Jerry D. Brant, D.P.M. (Age 71) has served as a
director of ProAssurance since May 2009. We elected
Dr. Brant as a director following our purchase of Podiatry
Insurance Company of America (PICA) in accordance with the terms
of our Stock Purchase Agreement with PICA dated October 28,
2008. Dr. Brant was one of the founders and is the
President and Chief Executive Officer of PICA and a member of
its Board of Directors. Dr. Brant helped guide PICAs
evolution into a national provider of professional liability
insurance to podiatrists and other medical professionals.
Dr. Brant practiced Podiatry in Illinois for thirty years
before retiring in 1997 to assume full time duties with PICA.
John J. McMahon, Jr., Esq.
(Age 67) has served as a director of ProAssurance
since February 22, 2002. Mr. McMahon is chairman of
Ligon Industries, a manufacturer of waste water treatment
equipment, aluminum castings and hydraulic cylinders. He served
as chairman of the executive committee of McWane, Inc. in
Birmingham, Alabama, from 1999 until December 31, 2005.
Mr. McMahon currently serves as a director of Protective
Life Corporation and formerly served as a director of Alabama
National Bancorporation and John H. Harland Company.
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William H. Woodhams, M.D. (Age 72) has
served as a director of ProAssurance since it began operation in
June 2001. Prior to June 2001, Dr. Woodhams served as a
director of one of our principal insurance subsidiaries,
ProAssurance Casualty Company (formerly, ProNational Insurance
Company) from 1980 to 2001, and served as a director of its
former holding company, Professionals Group, Inc. from 1996 to
2001 and chairman of its board from 1999 to 2001.
Dr. Woodhams has been in private practice in Kalamazoo,
Michigan, as a family practice physician since 1964.
Wilfred W.
Yeargan, Jr., M.D. (Age 70) has
served as a director of ProAssurance since 2002.
Dr. Yeargan has practiced in Tuscaloosa, Alabama, as an
ophthalmologist for over thirty years.
Independent
Directors
As required by the New York Stock Exchange Corporate Governance
Listing Standards, our Board of Directors has determined that a
majority of the directors on the board are
independent directors. In compliance with the
corporate governance requirements of Sarbanes-Oxley Act of 2002
and the applicable rules of the New York Stock Exchange, or
NYSE, our Board of Directors has adopted criteria for use in
determining the independence of our directors. The independence
criteria were amended at the December 2009 meeting of the Board
of Directors to address changes in the corporate governance
requirements of the NYSE. A complete description of the criteria
adopted by our Board of Directors in determining the
independence of our directors is available in the Corporate
Governance section of our website at www.ProAssurance.com.
Our Board of Directors has determined that the following
directors satisfy the independence criteria described above, and
therefore constitute independent directors:
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Lucian F. Bloodworth
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Drayton Nabers, Jr.
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Robert E. Flowers, M.D.
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Ann F. Putallaz
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William J. Listwan, M.D.
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William H. Woodhams, M.D.
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John J. McMahon, Jr.
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Wilfred W. Yeargan, Jr., M.D.
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Certain of the directors have relationships with the Company
that fall within the categories of transactions addressed in the
Independence Criteria. The Board considered the relationships in
considering the independence of the subject directors. A
discussion of these relationships follows under each of the
relevant categories of the Independence Criteria.
Our Independence Criteria provide that a director cannot be
independent if he or she has been employed by, or received
compensation (other than director compensation) of more than
$120,000 from, ProAssurance or any of its subsidiaries in any of
the last three years. Our independent physician directors
(namely, Drs Flowers, Woodhams and Yeargan) received fees for
service on the claims and underwriting committees of our
subsidiaries, and Dr. Listwan received compensation through
an affiliate as a consultant to ProAssurance. Our physician
directors are encouraged to serve on the claims and underwriting
committees of our insurance subsidiaries. The directors serve on
these committees in an advisory capacity with other local
physicians, most of whom are not directors of ProAssurance. It
is not a full time commitment to any of the physicians, and the
fees are designed to compensate them for taking time away from
their practices in order to serve on the committees. In 2004,
our Board determined that fees for services on the claims and
underwriting committees do not constitute director compensation
because these are not committees of the Board.
Drs. Flowers, Woodhams and Yeargan do not receive any
non-director
compensation other than fees for service on the claims and
underwriting committees, and such fees have not exceeded
$100,000 per annum in any of the last three years. Based on the
foregoing, the Board determined that Drs. Flowers, Woodhams
and Yeargan meet the Independence Criteria and that the receipt
of compensation for service on the underwriting and claims
committees does not impair their independence. Further, the
Board, at its December meeting, established the Professional
Liaison Committee as a standing committee of the Board and
appointed each of the independent physicians to the committee to
continue to serve as a liaison between the Board and the
underwriting and claims committees and the local physician
communities in their capacities as directors.
We have engaged Dr. Listwan as a consultant under a
Consulting and Confidentiality Agreement which provides that
Dr. Listwan will provide consulting services to
ProAssurance in consideration of an annual retainer of $44,000.
At its meeting on December 2, 2009, the Board of Directors
reviewed this consulting arrangement and
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determined that Dr. Listwan satisfies the current
independence criteria for directors because:
(i) Dr. Listwan is not an employee of ProAssurance or
any of its subsidiaries based on the Boards review of the
terms of Dr. Listwans engagement as a consultant and
its consideration of Internal Revenue Service regulations
defining employees and independent contractors for purposes of
FICA (Federal Insurance Contributions Act) withholding, and the
factors used by our Human Resources Department to determine
whether a service provider receives a statement on
Form W-2
(an employee) or Form 1099 (independent contractor) with
respect to its compensation for services; and (ii) the
compensation payable to Dr. Listwan for services as a
consultant would not exceed the limitation on compensation under
the NYSE corporate governance rules and ProAssurances
current independence criteria.
Our Independence Criteria provide that a director cannot be
independent if such director or a member of his or her family
has purchased, or if such director has served as an executive
officer, partner or controlling shareholder of a company that
has purchased, insurance from any of our insurance subsidiaries
in any of the last three years and paid more than $1,000,000 in
premiums in any of those years. Four directors have purchased
medical malpractice insurance from the Company either directly
or indirectly through their respective practice entities during
the last three years (Drs. Flowers, Listwan, Woodhams and
Yeargan). In addition, two of the directors have members of
their immediate families who are physicians and are insured by
the Company. Our physician directors and the physician members
of a directors family acquire the insurance in the
ordinary course of business at rates that are consistent with
our filed rates and customary underwriting practices. The
premiums paid with respect to the individual physicians or the
practice entities do not exceed the $1,000,000 premium
limitation set forth in the Independent Criteria. Our Board has
consistently found that it is customary and appropriate for our
physician directors to obtain their professional liability
insurance from our insurance subsidiaries and that the purchase
of insurance from our subsidiaries will not impair the
independence of a director so long as the premiums paid are less
than the $1,000,000 limitation in the Independence Criteria.
Qualification
of Directors
The Nominating/Corporate Governance Committee and Board of
Directors are responsible for determining the appropriate
composition of our Board and for the selection of individual
candidates. Our Corporate Governance Principles do not establish
any specific minimum qualifications or skills that an individual
candidate must possess. Rather, the Corporate Governance
Principles direct our Nominating/Corporate Governance Committee
to take into account all factors it considers appropriate,
including a candidates reputation for ethical business
dealings, knowledge, skill, experience, expertise, and the
extent to which the candidate would fill a present need in the
composition of the Board.
We have recruited Directors that we believe bring to our Board
of Directors a diverse set of qualifications related to our
business and its products. More specifically:
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Our primary product is professional liability insurance for
healthcare providers. We believe that it is important to have on
our Board healthcare professionals who are, or have been,
consumers of our insurance products and who understand the
business and professional needs of our customers.
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Our primary subsidiaries are regulated insurance companies. We
believe that it is important to have on our Board persons with
experience in the operation of regulated insurance companies.
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We have a significant business enterprise in the financial
services sector. We believe that it is important to have on our
Board persons with business experience, including financial
services and the governance of publicly traded companies.
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We also believe that it is important that our Board reflect the
core values that guide us in fulfilling our Treated
Fairly commitment, which are: integrity, respect, doctor
involvement, collaboration, communication, and enthusiasm.
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The following discussion addresses the experience,
qualifications, attributes and skills that have led us to the
conclusion that our director nominees and our current directors
should serve on our Board.
Healthcare Providers: Our Board has five
physician-directors: Robert Flowers, M.D.,
William Listwan, M.D., William Woodhams, M.D. and
Wilfred Yeargan, M.D. who are independent directors; and
Dr. Jerry Brant D.P.M.
7
who is a management director. Each of these physician directors
are board certified in different medical specialties and has
actively practiced medicine for over 30 years (with the
exception of Dr. Flowers who retired from his obstetric and
gynecology practice in Dothan, Alabama after more than
20 years). Drs. Brant (certified in podiatric
medicine) and Listwan (certified in internal medicine) have held
significant leadership positions in national and state medical
organizations. Dr. Listwan, who has practiced internal
medicine in Wisconsin for over 30 years, served as a board
member and president of the Wisconsin Medical Society and is
currently on the faculty of the Medical College of Wisconsin in
Milwaukee. Dr Brant served as a board member and president of
both the American Podiatric Medical Association and the Illinois
Podiatric Medical Association where he practiced podiatric
medicine for 30 years prior to becoming the fulltime CEO of
PICA. Dr. Woodhams (family practice certification) and Dr
Yeargan (ophthalmology certification) have both practiced in
their specialties for over 35 years and have been active in
their respective local specialty medical societies.
The presence of our independent
physician-directors
reflects our commitment to local market presence and to our
physician heritage. Drs. Flowers and Yeargan have served on
our regional claims committee in Alabama for over twenty years.
Dr. Woodhams served on the board and claims committee of
our Michigan predecessor from 1980 until its merger with
ProAssurance in 2001 and also served on the board and claims
committee of our Indiana predecessor for over 10 years
prior to our acquisition of that company. Dr. Listwan
served on the board and claims committee of our Wisconsin
predecessor from 1980 until its merger with ProAssurance in
2006. Each of these physicians continued to serve on his
respective regional claims committee until we created our
Professional Liaison Committee in December 2009. Members of that
committee regularly attend regional claims committee meetings
and assist the Board of Directors in understanding professional
liability and risk management issues affecting and of concern to
physicians and other healthcare professionals in our
professional liability insurance markets.
In addition to our physician directors, our CEO, W. Stancil
Starnes, represented practicing physicians in the defense of
medical malpractice claims for over thirty years.
Mr. Starnes brings to the Board a deep understanding of the
legal and professional issues involved in resolving claims and
how best to deliver the claims defense that is the key component
of our insurance products.
Insurance Company Operations: We have
five directors who have significant experience as operating
executives of regulated insurance companies, two of whom are
independent.
Mr. Starnes has served as our Chief Executive Officer since
July 2007 and it has been our practice for our CEO to serve on
our Board of Directors. Mr. Adamo has served as president
of ProAssurance since Medical Assurance, Inc and Professionals
Group, Inc were consolidated into ProAssurance in June 2001.
Prior to that time Mr. Adamo served as CEO and in other
senior executive officer positions of ProNational Insurance
Company (now known as ProAssurance Casualty Company) for
21 years. Mr. Adamo currently serves on the board of
the Physician Insurers Association of America, an industry
association of doctor founded medical professional liability
companies. Dr. Brant has served as an executive officer of
PICA since its founding in 1980 and became its fulltime CEO in
1997.
Mr. Nabers, served as a senior executive officer of
Protective Life Corporation from 1979 until his retirement as
its chairman and CEO in 2001. Protective Life Corporation is an
insurance holding company whose principal subsidiaries are
engaged in the life insurance business. During his tenure at
Protective, Mr. Nabers served on the board of the American
Council of Life Insurers from 1994 to 2001 and its chairman in
2000. Mr. Bloodworth is an actuary and served as a senior
executive of insurance subsidiaries of Protective Life
Corporation from 1972 until 1983, serving as president of
American Foundation Life Insurance Company from 1979 to 1983.
During this time, Mr. Bloodworth was a Fellow of the
Society of Actuaries and member of the American Academy of
Actuaries and a Chartered Life Underwriter.
Other Business and Financial
Services: We have three independent directors
who bring diverse business experience to the Board.
Following his tenure as president of American Foundation Life,
Mr. Bloodworth was a senior executive for National Bank of
Commerce and since 1988 has been the CEO of a manufacturing
company. As an actuary, Mr. Bloodworth, who serves on our
Audit Committee, contributes to the ability of the Board to
assess the risks
8
relating to the provision for losses and loss adjustment
expenses for claims which is our largest balance sheet liability.
Ms. Putallaz, who obtained a PhD in economics in 1974, has
served in various capacities for firms engaged in the investment
management business since 1983. Prior to that time she was a
lecturer and research assistant in the Economics Department of
the University of Michigan. Ms. Putallaz, who serves on our
Audit Committee, brings her knowledge and expertise to the
financial and investment aspects of ProAssurance.
Mr. McMahons career has focused on the leadership of
business enterprises including McWane Cast Iron Pipe Company, a
privately held manufacturer of cast iron pipe, and Ligon
Industries, a manufacturer of waste treatment equipment,
aluminum castings and hydraulic cylinders. His leadership
ability is reflected by his election to serve as a Trustee of
the University of Alabama, director of UAB Health Systems, and
trustee of Birmingham Southern College.
Additional Qualifications: In selecting
individual candidates, ProAssurance also has considered other
relevant experience of our directors including:
Practice of Law: A background in law is of
significant value in understanding the legal issues impacting
ProAssurance as a publicly traded company and as a holding
company for regulated insurance companies. Messrs. Adamo,
McMahon, Nabers, and Starnes all had experience in the private
practice of law prior to entering their business careers, and
Mr. Nabers also served as the Chief Justice of the Alabama
Supreme Court from 2004 until 2006.
Public Company Experience: Apart from
ProAssurance and its predecessor companies,
Messrs. McMahon, Nabers and Starnes have all served as
members of the Board of Directors of one or more publicly traded
companies, and each has gained valuable experience through
leadership of, and service on, various standing committees of
each Board on which they have served.
Qualification to Serve on the Audit
Committee: Members of the audit committee of
publicly traded companies are required to be independent and to
possess specific financial qualifications. Members of an audit
committee are expected to be financially literate,
and one member is expected to be qualified to be an audit
committee financial expert. In selecting directors, we
consider the candidates ability to serve on the Audit
Committee. All members of our Audit Committee have been found to
be independent by our Board of Directors under SEC rules and
NYSE guidelines. Mr. Bloodworth and Ms. Putallaz meet
the financial literacy requirements as a result of their
training, employment with financial institutions, and general
financial expertise. Mr. Nabers has been designated as our
audit committee financial expert based upon his expertise and
his experience as an executive officer of Protective Life
Corporation and as Finance Director of the State of Alabama.
Diversity: Our Board of Directors is committed
to diversity on the Board and within the Company. We believe our
directors provide diversity in business experience and
geographic representation. As vacancies arise on our Board,
diversity will be a factor in the selection of a new director.
Board
Leadership
Our Board of Directors has determined that is in our best
interest for Mr. Starnes to serve as our Chairman of the
Board and our Chief Executive Officer. Our Board believes it is
in our best interest to have one individual to lead our company
and to establish its strategic goals and objectives under the
supervision and direction of the Board of Directors. Our Board
also believes that having Mr. Starnes serve as our Chairman
and CEO facilitates his ability to establish priorities for our
Board and management in achieving such goals and objectives.
We have not formally established the position of lead director.
Our Corporate Governance Principles require our non-management
directors to hold executive sessions at which management,
including the CEO, is not present. The Corporate Governance
Principles further provide that the executive sessions of
non-management directors are to be held on a regularly scheduled
basis, not less frequently than two times each year, and that at
least one of the executive sessions will be attended by
independent directors only. The non-management directors select
an independent director to preside at each executive session. At
the annual meeting in May 2009, the independent
9
directors selected Dr. Yeargan as the independent director
to preside at the executive sessions. During 2009, our
independent directors held an executive session after each
quarterly Board meeting.
Risk
Oversight
As an insurance holding company, our business is principally
conducted by insurance subsidiaries that are subject to
insurance laws and regulations in their respective domiciliary
states and in the states in which they do business. State
insurance regulatory regimes are intended to protect
policyholders by vesting in the insurance regulator
administrative and supervisory authority to address risks
relating to the solvency of insurers and their ability to pay
claims as well as to the marketing of insurance products and
rates charged for such products. The insurance regulations
identify key business risks associated with the insurance
business and provide guidance as to the management of these risks
We have taken steps to catalogue and identify these and
additional risks for purposes of enterprise risk management
(ERM). We expect our CEO to be in charge of risk oversight. We
have also established a management based ERM Committee
coordinated by our President and comprised of persons
responsible for our key risk areas, including adequacy of loss
reserves; defense of claims and the litigation process; the
quality of investments supporting our reserves and capital;
compliance with regulatory and financial reporting requirements;
and concentration in the medical professional liability
insurance business. Our CEO and ERM Committee are responsible
for identifying material risks associated with these and other
risk areas and for establishing and monitoring risk management
solutions that address levels of risk appetite and risk
tolerance that are recommended by the committee and reviewed by
the Board.
The Board of Directors is responsible for ensuring that our ERM
process is in place and functioning. The Board has divided
primary ERM oversight responsibility between the Audit Committee
and the Nominating/Corporate Governance Committee as follows:
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The Audit Committee has the primary oversight responsibility for
risks relating to financial reporting and compliance. We have
established lines of communication between the Audit Committee
and our independent auditor, internal auditor and management
that enable the Audit Committee to perform its oversight
function.
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The Nominating/Corporate Governance Committee has the primary
responsibility for oversight of those risks covered by the ERM
process that are not the responsibility of the Audit Committee.
The Nominating/Corporate Governance Committee will review the
ERM process established by managements ERM Committee and
monitors the functioning of the process. It also will review
recommendations of our ERM Committee as to materiality
thresholds for risks covered in the ERM process and as to the
levels of risk appetite and risk tolerance with respect to
covered risks.
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Meetings
and Committees of the Board of Directors
Our Board of Directors held four meetings during 2009. Our
Bylaws establish four standing committees of the Board of
Directors: the Nominating/Corporate Governance Committee, the
Compensation Committee, the Audit Committee and the Executive
Committee, each of which is described below. Each of our
incumbent directors attended at least 75% of the meetings of the
Board of Directors and the committees of the board on which he
or she served during 2009 (in each case, which were held during
the period for which he or she was a director). In December 2009
all of our directors attended eight hours of board education
accredited by Risk Metrics Group (formerly Institutional
Shareholder Services).
Neither our Board of Directors nor our Nominating/Corporate
Governance Committee has implemented a formal policy regarding
director attendance at annual meetings of our stockholders.
However, our Board of Directors typically holds its annual
meeting directly following the annual stockholders
meeting, and it is customary for our directors to attend the
annual stockholders meeting. All of our then thirteen
directors attended the annual meeting of our stockholders held
on May 20, 2009.
10
Nominating/Corporate
Governance Committee
Our Nominating/Corporate Governance Committee currently consists
of three independent directors, and operates pursuant to a
written charter, which is available in the Corporate Governance
section of our website, www.ProAssurance.com. The primary
purposes of the Nominating/Corporate Governance Committee are to:
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identify individuals qualified to become directors and recommend
to the Board of Directors for its consideration the candidates
for all directorships to be filled by the Board of Directors or
to be elected by the stockholders;
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advise the Board of Directors with respect to the board
composition, procedures and committees;
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develop and recommend to the Board of Directors a set of
corporate governance principles applicable to ProAssurance;
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oversee the evaluation of the Board of Directors and the
evaluation of ProAssurances management;
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oversee the risks covered by ProAssurances ERM process
that are not the responsibility of the Audit Committee; and
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otherwise take a leadership role in shaping the corporate
governance of ProAssurance.
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The Nominating/Corporate Governance Committee is empowered to
engage a third party search firm to assist in identifying and
evaluating director candidates. However, the committee did not
hire any search firm during 2009 and, accordingly, paid no fees
to any such company.
Under our Corporate Governance Principles, the
Nominating/Corporate Governance Committee will consider a
nominee proposed by a stockholder for a vacancy on our board
when such nomination has been submitted in accordance with the
provisions contained in our Bylaws, which are described under
the caption Stockholder Proposals in this proxy
statement. A vacancy does not exist where:
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the Board of Directors desires to re-nominate an incumbent
director for an additional term and, the director consents to
stand for re-election and to serve on our Board of Directors if
elected; or
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the Nominating/Corporate Governance Committee has recommended to
our Board of Directors a candidate to fill a vacancy and, prior
to the receipt of a properly submitted stockholder nomination,
such nominee has agreed to stand for election and serve on our
board if elected.
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Our Board of Directors may, at any time, elect not to fill a
vacancy arising on the Board. The Board of Directors may elect
to not recommend a director candidate nominated by a stockholder
even if such director candidate is the only candidate submitted
to the Nominating/Corporate Governance Committee to fill a
vacancy.
The Nominating/Corporate Governance Committee is responsible for
determining the appropriate composition of our Board and for the
selection of individual candidates consistent with such
determination. Our Corporate Governance Principles do not
establish any specific requirements of minimum qualifications or
skills that an individual candidate must possess other than the
maximum age requirements described in the Corporate Governance
Principles. Rather, the Corporate Governance Principles direct
our Nominating/Corporate Governance Committee to take into
account all factors it considers appropriate, including a
candidates reputation for ethical business dealings,
knowledge, skill, experience, expertise, and the extent to which
the candidate would fill a present need in the composition of
the Board.
Subject to the qualifications described above, our
Nominating/Corporate Governance Committee will consider a
director candidate nominated by a stockholder in the same manner
as candidates brought before the Nominating/Corporate Governance
Committee from other sources. Generally, the
Nominating/Corporate Governance Committee initially evaluates a
prospective nominee on the basis of his or her résumé
and other background information that has been made available to
the Nominating/Corporate Governance Committee. A member of the
Nominating/Corporate Governance Committee will contact for
further review those candidates who the committee believes are
qualified, who may fulfill a specific board need, and who the
committee believes would otherwise best make a contribution to
the Board. If, after further discussions with the candidate and
other further review and consideration
11
as necessary, the Nominating/Corporate Governance Committee
believes that it has identified a qualified candidate, it will
make a recommendation to the Board.
The charter of the Nominating/Corporate Governance Committee
provides for at least three members, each of whom must be an
independent director. The current members of our
Nominating/Corporate Governance Committee are John J.
McMahon, Jr. (Chairman), Lucian F. Bloodworth and William
H. Woodhams. Our Board of Directors has found that each member
of our Nominating/Corporate Governance Committee is
independent within the meaning of the rules of the
NYSE.
During 2009, our Nominating/Corporate Governance Committee met
two times.
Compensation
Committee
Our Compensation Committee currently consists of three
independent directors, and operates pursuant to a written
charter, which is available in the Corporate Governance section
of our website, www.ProAssurance.com. The primary purposes of
the Compensation Committee are to:
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represent and assist the Board of Directors in discharging its
oversight responsibility relating to compensation matters,
including determining the compensation arrangements for the
chief executive officer and reporting its determination to the
Board of Directors for ratification by a majority of independent
directors; and
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review and discuss with management the disclosure under the
caption Compensation Discussion and Analysis and
prepare the report of the Compensation Committee with respect to
such disclosure, each of which is to be included in our annual
proxy statement.
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The charter of the Compensation Committee charges the committee
with the responsibility to determine and approve, subject to
ratification by a majority of independent directors, the
CEOs compensation level based on the committees
evaluation of the CEOs performance in light of the
corporate goals and objectives relevant to the CEOs
compensation as approved by the committee. The charter also
charges the Compensation Committee with the responsibility to,
among other duties, review the competitiveness of the non-CEO
executive compensation programs of ProAssurance; approve change
of control agreements or severance plans for executive officers
of ProAssurance; and make recommendations for director
compensation to our Board of Directors. The charter further
provides that the Compensation Committee has the exclusive
authority to retain outside compensation consultants and
advisors as it deems appropriate to fulfill its responsibilities.
The current practice of the Compensation Committee is to retain
an outside consultant to gather data from peer companies and to
use such data as a point of reference when reviewing
ProAssurances compensation practices. The Compensation
Committee, with the assistance of ProAssurances management
and its consultant, identifies the peer companies to be used in
the compensation analysis. The peer companies are insurance
organizations that are competitors with ProAssurance in terms of
direct business, senior executive talent, and market
capitalization.
After reviewing peer companies data, the compensation
consultant provides a report to the committee that describes
market practices with regard to executive compensation and
identifies any gaps between the market and ProAssurances
executive compensation practices. In addition, from time to time
the Compensation Committee retains a compensation consultant to
provide a review and analysis of particular aspects of
ProAssurances compensation program, and reports of these
studies are also considered by the committee in making its
recommendations. The Compensation Committee customarily makes
its compensation recommendations to our Board of Directors at
its regularly scheduled meeting in the first quarter of each
year.
ProAssurances senior management makes no recommendations
with respect to compensation of the CEO. The Compensation
Committee is exclusively responsible for making compensation
recommendations for adoption by the Board of Directors as to
changes in base salary for the CEO and the number and type of
long-term incentive compensation awards to be granted to the
CEO. The Compensation Committee also approves the annual
incentive award guidelines for non-equity incentive compensation
to be paid to the CEO. All decisions of the Compensation
Committee with respect to the CEO compensation are subject to
ratification by a majority of the independent directors under
the committees charter.
12
In accordance with its charter, the Compensation Committee also
makes recommendations as to compensation of our directors. In
2008, the Compensation Committee engaged a compensation
consultant to provide a review of the compensation of our Board
of Directors and make recommendations for changes in the
compensation of directors for their service on the Board of
Directors and for their service on the various committees. These
recommendations were considered by our Board of Directors at its
meeting in the first quarter of 2009.
The Compensation Committee administers the ProAssurance
Corporation 2008 Annual Incentive Compensation Plan and the
ProAssurance Corporation 2008 Equity Incentive Plan, as well as
the ProAssurance Corporation Incentive Compensation Stock Plan,
and the ProAssurance Corporation 2004 Equity Incentive Plan with
respect to awards granted prior to the effectiveness of the
ProAssurance Corporation 2008 Equity Incentive Plan.
During 2009, our Compensation Committee met two times. The
charter of the Compensation Committee provides for at least
three members, each of whom must be an independent director. The
current members of the Compensation Committee are Wilfred W.
Yeargan, Jr. (Chairman), Robert E. Flowers and John J.
McMahon, Jr. Dr. William J. Listwan served on the
Compensation Committee until his resignation in December 2009.
Our Board of Directors has determined that each member of the
Compensation Committee is independent within the
meaning of the rules of the NYSE and, as required by the
Compensation Committee charter, no member of the Compensation
Committee has any interlocking relationships required to be
disclosed under federal securities laws.
This years report of the Compensation Committee is on
page 28 of this proxy statement.
Audit
Committee
Our Audit Committee consists of three independent directors, and
operates pursuant to a written charter that is available in the
Corporate Governance section of our website,
www.ProAssurance.com. The primary purposes of our Audit
Committee are to represent and assist the Board of Directors in
discharging its oversight responsibility relating to:
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the accounting, reporting, and financial practices of
ProAssurance and its subsidiaries, including the integrity of
our financial statements;
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the surveillance of our administration and financial controls
and compliance with legal and regulatory requirements;
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the outside auditors qualifications and independence;
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ProAssurances policies on risk assessment and risk
management with respect to financial reporting issues; and
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the performance of our internal auditors.
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The Audit Committee also prepares the Report of the Audit
Committee, included on page 17 of this proxy statement as
required by the SEC rules.
Our Audit Committee is responsible for carrying out all of the
duties and responsibilities required for audit committees under
the Securities Exchange Act of 1934, as amended, or the Exchange
Act, and the corporate governance rules of the NYSE for listed
companies. A description of the specific duties and
responsibilities of our Audit Committee can be found in its
charter. Our Audit Committee and Board of Directors have
established a procedure which establishes a confidential means
for complaints or concerns with respect to accounting, internal
controls and auditing matters to be submitted to the committee,
which is described under the caption titled Other
Matters Policies on Reporting of Concerns Regarding
Accounting and Other Matters and Communicating with
Directors in this proxy statement.
The charter of the Audit Committee provides for at least three
members, each of whom must be an independent director. Drayton
Nabers, Jr. is the Chairman, and Lucian F. Bloodworth and
Ann F. Putallaz are the other members of our Audit Committee.
Our Nominating/Corporate Governance Committee and our Board of
Directors have determined that each member of the Audit
Committee is independent within the meaning of the
rules of both the SEC and NYSE; that each member of the Audit
Committee is financially literate as such qualification is
defined under the rules of the NYSE; and that Drayton
Nabers, Jr., based upon his education and extensive
experience in
13
connection with the preparation of financial statements and
knowledge of GAAP, including his leadership roles at Protective
Life Corporation and as the former Finance Director of the State
of Alabama, is an audit committee financial expert
within the meaning of the rules of the SEC. No member of the
Audit Committee is presently serving on the audit committee of
another company.
During 2009, the Audit Committee held eight meetings.
Executive
Committee
Our Executive Committee has the authority during intervals
between the meetings of the Board of Directors to exercise all
powers and authority of the Board of Directors in the management
of our business and affairs, except that the Executive Committee
may not:
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alter or repeal any resolution adopted by the Board of Directors
that by its terms is not subject to amendment or repeal by the
Executive Committee or any resolution relating to the
establishment or membership of the Executive Committee;
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act with respect to matters required to be passed upon by the
full board, the independent directors, or by a committee
comprised of independent directors; or
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act on any matter which has been delegated to the Audit
Committee, the Nominating/Corporate Governance Committee or the
Compensation Committee in their respective charters.
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The Bylaws provide that the Executive Committee have at least
three members including the Chairman of the Board. The members
of the Executive Committee are W. Stancil Starnes (Chairman),
Victor T. Adamo, and Wilfred W. Yeargan, Jr. The Executive
Committee did not meet in 2009.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee has selected Ernst & Young LLP as
our auditors for the current fiscal year ending
December 31, 2010. Although ratification of the
stockholders is not required for selection of independent
auditors under Delaware law or our Bylaws, the Board of
Directors believes it is appropriate to seek stockholder
ratification of the selection of Ernst & Young LLP as
independent auditor.
Ernst & Young LLP served as the independent auditor of
ProAssurance for the year ended December 31, 2009.
Representatives of Ernst & Young will be present at
the 2010 Annual Meeting and will have an opportunity to make a
statement if they so desire and will be available to respond to
appropriate questions.
Fees
for 2009 and 2008
The table below sets forth the aggregate fees paid by
ProAssurance for audit, audit-related, tax and other services
provided by Ernst & Young LLP to ProAssurance during
each of the last two years.
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2009
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2008
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Audit fees
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$
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1,241,706
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$
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1,162,724
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Audit-related fees
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0
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0
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Tax fees
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0
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0
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All other fees
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0
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6,000
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Total
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$
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1,241,706
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$
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1,168,724
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The other fees in 2008 related to non-audit online services
provided by Ernst & Young LLP for research on
accounting matters. The Audit Committee does not believe that
these services are prohibited non-audit services. The Audit
Committee further believes that provision of these services does
not impair the independence of the auditor.
All fees paid to Ernst & Young LLP in 2009 which
required the pre-approval of the Audit Committee were approved
in accordance with our pre-approval policies and procedures
described below.
14
Pre-Approval
Policies and Procedures
Under the Sarbanes-Oxley Act of 2002, the audit committee of the
board of directors is responsible for the appointment,
compensation and oversight of the work of the independent
auditor. As part of this responsibility, the audit committee is
required to pre-approve the audit and non-audit services
performed by the independent auditor in order to assure that
they do not impair the auditors independence. To implement
these provisions of the Sarbanes-Oxley Act of 2002, the SEC has
issued rules specifying the types of services that an
independent auditor may not provide to its audit client and
governing the audit committees administration of the
engagement of the independent auditor. Our Audit Committee has
adopted an Audit and Non-Audit Service Pre-Approval Policy,
which sets forth the procedures and the conditions pursuant to
which services proposed to be performed by our independent
auditor may be pre-approved.
For pre-approval of non-audit services, our Audit Committee will
consider whether services are consistent with the SECs
rules on auditor independence. Our Audit Committee will also
consider whether the independent auditor is able to provide
effective and efficient service, for reasons such as its
familiarity with our business, people, culture, accounting
systems, risk profile and other factors, and whether the
services will enhance our ability to manage or control risk or
improve audit quality. Our Audit Committee is also mindful of
the relationship between fees for audit and non-audit services
in deciding whether to pre-approve any such services. All such
factors will be considered as a whole, and no one factor should
necessarily be determinative.
Our Audit Committee determines from time to time the eligible
services that may be provided to ProAssurance by our independent
auditors in accordance with the requirements and guidance of the
SEC and the NYSE, or other exchanges or market systems on which
our stock is traded. The Audit Committee also determines whether
such services fit in the categories of Audit Services, Audit
Related Services, Tax Services and other Permitted Non-Audit
Services as described below and as the description of such
services may be modified under subsequent guidance and
interpretation of the regulatory and self-regulatory
organizations applicable to ProAssurance, including without
limitation, the SEC and the NYSE. The independent auditor may
not provide any non-audit services that are prohibited under the
provisions of Section 10A of the Exchange Act and the rules
and regulations promulgated thereunder.
Audit Services. Audit services in the annual
audit engagement include the annual financial statement audit
(including required quarterly reviews), subsidiary audits,
equity investment audits and other procedures required to be
performed by the independent auditor in order for the
independent auditor to form an opinion on our consolidated
financial statements. These other procedures include information
systems and procedural reviews and testing performed in order to
understand and place reliance on the systems of internal control
and consultations relating to the annual audit or quarterly
review. Audit services also include the engagement for the
independent auditors report on the effectiveness of
internal controls for financial reporting. In addition to the
audit services included in the annual audit engagement, the
Audit Committee may approve other audit services. Other audit
services are those services that only the independent auditor
can reasonably provide and include statutory audits or financial
audits for our subsidiaries or affiliates, services associated
with inclusion of acquired companies in our financial
statements, and services associated with SEC registration
statements, periodic reports and other documents we file with
the SEC or other documents issued in connection with a
securities offering.
Audit-Related Services. Audit-related services
are assurance and related services that are reasonably related
to the performance of the audit or review of our financial
statements or that are traditionally performed by the
independent auditor. Because our Audit Committee believes that
the provision of audit-related services does not impair the
independence of the auditor and is consistent with SEC rules on
auditor independence, the Audit Committee may grant pre-approval
to audit-related services. Audit-related services include, among
others: due diligence services pertaining to potential business
acquisitions/dispositions; accounting consultations relating to
accounting, financial reporting or disclosure matters not
classified as audit services; assistance with
understanding and implementing new accounting and financial
reporting guidance from rule-making authorities; financial
audits of employee benefit plans; agreed upon or expanded audit
procedures related to accounting
and/or
billing records required to respond or comply with financial,
accounting or regulatory reporting matters; and assistance with
internal control reporting requirements.
15
Tax Services. Our Audit Committee believes
that the independent auditor can provide tax services to
ProAssurance such as tax compliance, tax planning and tax advice
without impairing the auditors independence, and the SEC
has stated that the independent auditor may provide such
services. Hence, our Audit Committee believes it may grant
pre-approval to those tax services that:
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have historically been provided by the independent auditor;
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the Audit Committee believes would not impair the independence
of the auditor; and
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are consistent with SEC rules on auditor independence.
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The Audit Committee will not permit the retention of the
independent auditor in connection with a transaction initially
recommended by the independent auditor, the sole business
purpose of which may be tax avoidance and the tax treatment of
which may not be supported in the Internal Revenue Code of 1986,
as amended, which we refer to as the Code, and related
regulations. The Audit Committee will consult with the chief
accounting officer or outside counsel to determine that tax
planning and reporting advice is consistent with this policy.
Other Non-Audit Services. Our Audit Committee
believes, based on the SECs rules prohibiting the
independent auditor from providing specific non-audit services,
that certain types of non-audit services are permitted.
Accordingly, the Audit Committee believes it may grant
pre-approval for those permissible non-audit services that it
believes are routine and recurring services, would not impair
the independence of the auditor, and are consistent with the
SECs rules on auditor independence. Our Audit Committee
may not pre-approve any of the SECs prohibited non-audit
services.
Annual Audit Engagement. Our Audit Committee
appoints the independent auditor of ProAssurance and
pre-approves the services to be provided in connection with the
preparation or issuance of the annual audit report or related
work. The annual audit services are set forth in an engagement
letter prepared by the independent auditor which is submitted to
the Audit Committee for approval. The engagement letter provides
that the independent auditor reports directly to the Audit
Committee. Any audit services within the scope of the engagement
letter are deemed to have been pre-approved by our Audit
Committee.
Pre-Approval of Other Audit and Non-Audit
Services. Other audit services, audit-related
services, tax services, and other non-audit services may be
pre-approved by our Audit Committee in accordance with the
following procedure either on a specific
case-by-case
basis as services are needed or on a pre-approval basis for
services that are expected to be needed. Our Audit Committee may
delegate to one or more designated members of the Audit
Committee, who are independent directors of the Board of
Directors, the authority to grant pre-approval of these services
to be performed by the independent auditors. The member to whom
such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee
at its next scheduled meeting.
Our management may submit requests for pre-approval of eligible
services by the independent auditor from time to time to our
Audit Committee or to the member or members of the committee to
whom pre-approval authority has been delegated. The request for
approval must be sufficiently detailed as to the particular
services to be provided so that the Audit Committee knows
precisely what services it is being asked to pre-approve and so
that it can make a well reasoned assessment of the impact of the
service on the auditors independence. Budgeted amounts or
fee levels for services to be provided by the independent
auditor must be submitted with the request for pre-approval.
Requests for pre-approval of services by the independent auditor
must include a joint statement of the independent auditor and
our chief accounting officer as to whether, in their view, the
request or application is consistent with the SECs rules
on auditor independence.
Our Audit Committee will be informed not less frequently than
quarterly of the services rendered by the independent auditor.
Our chief accounting officer will be responsible for tracking
all independent auditors fees against the budget for such
services and report at least quarterly to the Audit Committee.
The Audit Committee Charter designates our internal auditor to
monitor the performance of all services provided by
ProAssurances independent auditor and to determine whether
such services are in compliance with this policy. Our internal
auditor reports to the Audit Committee on a periodic basis on
the results of its monitoring. Both our internal auditor and
management will immediately report to the chairman of the Audit
Committee any breach of
16
this policy that comes to the attention of the internal auditor
or any member of management. The Audit Committee will also
review our internal auditors annual internal audit plan to
determine that the plan provides for monitoring of the
independent auditors services.
Vote
Required
The ratification of Ernst & Young LLP as
ProAssurances independent auditor for 2010 will require
the affirmative vote of a majority of the shares voting on the
matter at the 2010 Annual Meeting without regard to broker
non-votes or abstentions. If you vote your shares without
instructions to your proxy on this proposal, your shares will be
voted FOR the ratification of the selection of
Ernst &Young LLP. In the event that the selection of
Ernst & Young LLP as independent auditor for 2010 is
not approved by the affirmative vote of a majority of the shares
voting on the matter, the Board of Directors will request the
Audit Committee to reconsider its selection of independent
auditors for the year ending December 31, 2010.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE RATIFICATION OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITOR OF
PROASSURANCE FOR 2010.
REPORT
OF THE AUDIT COMMITTEE
The Audit Committee is comprised of three independent directors
and operates pursuant to a written charter. The charter is
available in the Corporate Governance section of our website at
www.ProAssurance.com. During 2009, the Audit Committee held
eight meetings. In conjunction with some of these meetings, the
Audit Committee met in executive sessions and met in private
sessions with our independent auditors, our internal auditors,
our chief executive officer, chief financial officer, and our
outside corporate counsel.
Our management is responsible for the preparation, presentation
and integrity of ProAssurances financial statements,
accounting and financial reporting principles and the
establishment and effectiveness of internal controls and
procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent
auditors are responsible for performing an independent audit of
ProAssurances financial statements in accordance with
generally accepted auditing standards and expressing an opinion
as to their conformity with generally accepted accounting
principles. The independent auditors are also required to review
the adequacy and effectiveness of ProAssurances internal
controls on financial reporting. The Audit Committee is directly
responsible in its capacity as a committee of the board for the
appointment, compensation and oversight of the work of the
independent auditor. The independent auditor reports directly to
the Audit Committee.
In performing its oversight role, the Audit Committee has
considered and discussed the audited financial statements with
management and with Ernst & Young LLP, our independent
auditors. The Audit Committee also has discussed with the
independent auditors the matters required to be discussed by
auditing standards and guidelines established by the SEC and the
Sarbanes Oxley Act. The independent auditors are required to
provide the Audit Committee with certain information regarding
the scope and results of their audit of ProAssurances
financial statements, including information with respect to the
following, if applicable: (i) the auditors
responsibility under standards of the Public Company Accounting
Oversight Board (United States) (the PCAOB);
(ii) judgment about the quality and acceptability of
accounting principles; (iii) critical accounting policies;
(iv) sensitive accounting estimates; (v) any
significant audit adjustments; (vi) unrecorded audit
differences considered by management to be immaterial;
(vii) disagreements with management;
(viii) consultations with other accountants;
(ix) difficulties encountered with management in performing
the audit; (x) the adoption of or change in an accounting
policy; (xi) methods of accounting for significant unusual
transactions and for controversial or emerging areas;
(xii) risks of fraud and illegal acts;
(xiii) pre-approval of services to be performed by the
independent auditor; (xiv) material alternative accounting
treatments discussed with management; (xv) other material
written communications to management; (xvi) significant
deficiencies and material weaknesses identified during audit of
internal control, if any; (xvii) internal quality control
procedures of the independent auditor; (xviii) material
issues raised in quality control reviews of the independent
auditor within the last five years and corrective actions taken;
and (xix) relationships between ProAssurance and the
independent auditor.
17
The Audit Committee has received from Ernst & Young
LLP a letter providing the disclosures required by PCAOB
Rule 3526, Communications with Audit Committees Concerning
Independence, with respect to any relationships between
Ernst & Young LLP and ProAssurance that in their
professional judgment may reasonably be thought to bear on
independence. Ernst & Young LLP has discussed its
independence with us, and has confirmed in such letter that, in
its professional judgment, it is independent of ProAssurance
within the meaning of federal securities laws and in compliance
with PCAOB Rule 3520.
All audit and non-audit services performed by the independent
auditors must be pre-approved by the Audit Committee or a member
thereof. The Audit Committee approved the audit services
rendered by our independent auditors during ProAssurances
most recent fiscal year. No non-audit services were performed in
2009.
Members of the Audit Committee rely, without independent
verification, on the information provided to them and on the
representations made by management and the independent auditors.
Accordingly, the Audit Committees oversight does not
provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting
principles or appropriate internal controls and procedures
designed to assure compliance with accounting standards and
applicable laws and regulations.
Based on the reports and discussions described in this report,
and subject to the limitations on the role and responsibilities
of the Audit Committee referred to above and in the charter, the
Audit Committee recommended to the Board of Directors that the
audited financial statements of ProAssurance for 2009 be
included in its Annual Report on
Form 10-K
for the year ended December 31, 2009, prior to the filing
of such report with the SEC.
Audit Committee:
Drayton Nabers, Jr., Chairman
Lucian F. Bloodworth
Ann F. Putallaz
March 31, 2010
OTHER
MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
We have no present knowledge of any other matters to be
presented at the annual meeting. If any other matters should
properly come before the annual meeting, or any adjournment or
postponement thereof, it is the intention of the persons named
in the accompanying Proxy to vote such Proxy in accordance with
their best judgment.
BENEFICIAL
OWNERSHIP OF OUR COMMON STOCK
Owners of
More than 5% of Our Common Stock
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Amount & Nature
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of Beneficial
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Percent
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Stockholders
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Ownership
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of Class
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BlackRock,
Inc.(1)
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2,757,320
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8.51
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%
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40 East
52nd
Street
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New York, New York 10022
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T. Rowe Price Associates,
Inc.(2)
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2,376,094
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7.3
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%
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100 East Pratt Street Baltimore, Maryland 21202
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Royce & Associates
LLC(3)
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1,971,603
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6.08
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%
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745 Fifth Avenue
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New York, New York 10151
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(1) |
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In a Schedule 13G filed with the SEC, BlackRock, Inc., a
parent holding company, disclosed that as of December 31,
2009, it had sole voting power and sole dispositive power with
respect to 2,757,320 shares of Common Stock. |
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(2) |
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In a Schedule 13G filed with the SEC, T. Rowe Price
Associates, Inc., an investment adviser, disclosed that as of
December 31, 2009, it had sole voting power with respect to
727,500 shares of Common Stock and sole dispositive power
with respect to 2,376,094 shares of Common Stock. |
18
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(3) |
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In a Schedule 13G filed with the SEC, Royce &
Associates LLC, an investment adviser, disclosed that as of
December 31, 2009, it had sole voting power and sole
dispositive power with respect to 1,971,603 shares of
Common Stock. |
Ownership
by Our Directors and Executive Officers
Our Board of Directors has adopted stock ownership targets for
our directors and executive officers to further align their
interests with our stockholders. The target for independent
directors is a level of stock ownership that is five times their
annual cash compensation as directors. The level of stock
ownership for executive officers varies by position and their
stock ownership targets are as follows: five times base salary
for our Chief Executive Officer; three times base salary for our
President; and two times base salary for other executive
officers of ProAssurance. Directors and executive officers are
encouraged to achieve these levels within the first five years
of service.
The following table sets forth, as of March 26, 2010,
information regarding the ownership of Common Stock by:
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our executive officers named in the Summary Compensation
Table under Executive Compensation which we refer to as
the Named Executive Officers;
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our directors; and
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all of our directors and officers as a group.
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Amount & Nature
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of Beneficial
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Percent
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Stockholders
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Ownership(1)
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of Class
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Directors
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Victor T.
Adamo(2)(3)
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110,843
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*
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Jerry D.
Brant(3)
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4,593
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*
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Lucian F.
Bloodworth(3)
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8,382
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*
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Robert E.
Flowers(3)
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32,593
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*
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William J.
Listwan(3)
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11,024
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*
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John J. McMahon,
Jr.(3)
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9,294
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*
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Drayton Nabers,
Jr.(3)
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6,003
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*
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W. Stancil
Starnes(2)(3)
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141,323
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*
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Ann F.
Putallaz(3)
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17,349
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*
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William H.
Woodhams(3)
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26,339
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*
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Wilfred W.
Yeargan(3)(4)
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8,681
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*
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Other Named Executive Officers
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Edward L. Rand,
Jr.(2)(3)
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75,874
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*
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Howard H.
Friedman(2)(3)(5)
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172,517
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*
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All Directors and Officers as a Group (16 Persons)
(2)(3)
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774,147
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2.1
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%
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* |
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Less than 1%. |
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(1) |
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Except as otherwise indicated, the persons named in the above
table have sole voting power and investment power with respect
to all shares of Common Stock shown as beneficially owned by
them. The information as to beneficial ownership of Common Stock
has been furnished by the respective persons listed in the above
table. The information excludes stock options, restricted stock
units and performance shares granted to executive officers,
except for the number of shares that may be acquired pursuant to
unexercised options on or before May 31, 2010 as indicated
in note 2. |
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(2) |
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Includes 419,800 shares that may be acquired by all
officers and directors as a group upon exercise of stock options
on or before May 31, 2010. Of this amount the named
officers and directors hold options for the following number of
shares: Mr. Starnes 108,000 shares;
Mr. Adamo 64,500 shares;
Mr. Rand |
19
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57,500 shares; and Mr. Friedman
137,500 shares. Also includes 3,345 shares
beneficially held for the account of all officers and directors
as a group on ProAssurances Retirement Plan. |
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(3) |
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Includes 5,062 shares subject to forfeiture by all officers
and directors as a group under ProAssurances Stock
Ownership Plan. Of this amount the named executive officers and
directors hold the following: 350 shares in the account of
each of Messrs. Adamo, Rand, Friedman, Bloodworth, Flowers,
Listwan, McMahon, Yeargan and Ms. Putallaz, 239 shares
in the account of Dr. Woodhams, and 237 shares in the
account of each of Mr. Starnes and Mr. Nabers, and
149 shares in the account of Dr. Brant. |
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(4) |
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Includes 300 shares held by Yeargan Family Investment
Partnership, LLC. |
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(5) |
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Includes 178 shares held in an individual retirement
account for Mr. Friedmans spouse. |
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The following discussion will address our compensation practices
with respect to our Chief Executive Officer and the other
executive officers named in the Summary Compensation Table on
page 29 of this proxy statement, which we refer to as our
executives in the discussion. This will be the first
year that Jerry D. Brant has been included as one of our
executives in the table. Dr. Brant is the chief executive
officer of PICA, which we acquired on April 1, 2009. We
agreed to continue PICAs annual incentive program for its
senior management in 2009 consistent with PICAs past
practice. For 2010 and subsequent years, we have elected to have
a separate annual incentive compensation program for PICA and to
include PICAs senior management in our long term incentive
compensation, in each case using performance measures primarily
based on PICAs performance. For that reason, our
compensation practice for Dr. Brant and other PICA senior
executives will be separately discussed under the caption
PICA Compensation.
Overview
We seek to offer competitive compensation that is designed to
attract and retain qualified and motivated individuals and
reward them based on performance. Our executive compensation
includes three elements: base salary, annual incentive awards
and long-term incentive awards. With the assistance of an
outside consultant we use compensation information from a group
of peer companies as a point of reference in reviewing our
executive compensation. We use the peer group information to
evaluate market practices with respect to the types and levels
of compensation used by the peer group as well as the percentage
that each element of executive compensation bears to total
compensation.
We emphasize incentive compensation that rewards executives for
performance and places the majority of their potential
compensation at risk. The amount of an executives
incentive compensation (annual incentive and long-term
compensation) at risk relative to their base salary is intended
to be significant and in 2009 ranged from 68% of total potential
compensation for our CEO to 61% of total potential compensation
for our other executives. This reflects our objective to reward
performance and to link those rewards to our strategic business
objectives.
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Our annual incentive compensation is intended to maximize the
efficiency and effectiveness of our operations by providing
compensation based on annual corporate performance measures for
all executives; compensation is also based on individual
performance measures for executives other than the Chief
Executive Officer and the President.
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Our long-term incentive compensation for executives is focused
on long-term corporate growth, principally reflected as the
increase in book value per share and in the market value of our
shares.
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Historically, we have placed greater emphasis on long-term
incentive compensation as the predominant element of our
executives at risk incentive compensation. Beginning in
2009, we have made two significant changes in our long-term
compensation for our executives. We have reduced the
compensation potential of the
long-term
incentive compensation element and correspondingly increased the
compensation potential for annual incentive compensation. The
shift is designed to bring our compensation packages for
executives more in line with market practices and to place the
executive compensation more at risk relative to the achievement
of specific annual
20
corporate performance criteria. We have also substituted grants
of restricted stock units for stock options as a component of
our long-term incentive compensation for executives. We believe
that the restricted stock units, which will be granted in
connection with awards of performance shares, will be more
effective than stock options because restricted stock units have
both an upside and downside potential thereby better aligning
the financial interests of executives with our stockholders and
because the three year vesting requirement in the restricted
stock units will promote the retention of our key executives.
The only exception to this change is that retirement eligible
executives will receive performance shares rather than
restricted stock units to simplify our tax treatment. These
shifts are designed to be cost neutral and are not intended to
increase executive compensation cost other than usual and
customary increases.
Compensation
Review Process
To aid in our evaluation of the reasonableness of our senior
executive compensation and the competitiveness of such
compensation with market practices, we use compensation data
from a group of peer companies with respect to base salaries,
annual incentive compensation and long-term incentive
compensation payable to senior level executives. We use this
information for the purpose of evaluating the reasonableness of
our senior executive compensation and the competitiveness of
such compensation with market practices. However, we do not
attempt to benchmark our compensation to the peer group. The
peer companies are publicly traded insurance companies that
include: medical professional liability insurance companies that
are in direct competition with ProAssurance and specialty
insurance companies that are generally of equivalent size in
terms of total assets, market capitalization and revenues. The
peer group used in 2009 included the following companies:
Medical Professional Liability Insurance
Companies. American Physicians Capital, Inc. and FPIC
Insurance Group, Inc.
Specialty Insurance Companies. Alleghany
Corporation; ARCH Capital Group Ltd.; Argonaut Group, Inc.; CNA
Surety Corporation; Erie Indemnity Company; Harleysville Group
Inc.; HCC Insurance Holding, Inc.; Horace Mann Educators
Corporation; Infinity Property & Casualty Corporation;
Markel Corporation; Mercury General Corporation; Montpelier Re
Holding Ltd.; The Commerce Group, Inc.; Platinum Underwriters
Holdings, Ltd. Philadelphia Consolidated Holding Corp;
Protective Life Corporation; RLI Corp.; Selective Insurance
Group, Inc.; State Auto Financial Corporation; W. R. Berkley
Corporation; and Zenith National Insurance Corp.
For 2010 compensation, the Compensation Committee added two new
specialty insurers to the peer group, Allied World Assurance Co.
Holdings, Ltd. and Meadowbrook Insurance Group to replace
Philadelphia Consolidated Holding Corp (which was acquired in
2008) and Protective Life Corporation (which is a life
insurer that was eliminated when the Committee decided to drop
local insurance companies as a category in the peer group).
Our Compensation Committee retained Total Compensation Solutions
(TCS) to assist the Committee in the evaluation of
our executive compensation for the current year and the years
covered in the Summary Compensation Table. With assistance of
our senior management, TCS identified the list of peer
companies, reviewed the list of companies for appropriateness,
and compiled compensation data of the peer companies with
respect to base salaries, annual incentive compensation, and
long-term incentive compensation. TCS evaluated each element of
our executive compensation in comparison to the compensation
information compiled from the peer companies.
In its capacity as compensation consultant for 2009 and 2010
compensation, TCS provided us a compilation of financial data
regarding the peer companies. The medical professional liability
insurers in the peer group were smaller than ProAssurance in
terms of total assets and market capitalization. The specialty
insurers included in the peer companies had total assets ranging
from $1.6 billion to $16.1 billion at the end of 2008
as compared to ProAssurances year-end total assets of
$4.3 billion, and they had a market capitalization ranging
from $0.4 billion to $5.0 billion at the end of 2008
as compared to ProAssurances year-end market
capitalization of $1.8 billion.
Although we do not benchmark our compensation to the peer group,
we believe that the peer companies are appropriate for comparing
the reasonableness and competitiveness of our compensation
levels for senior executives. Most of the peer companies had
positive operating income for the year ended December 31,
2008, and improved their performance in the first three quarters
of 2009. The median revenues for all of the peer companies
21
were $989 million as compared to ProAssurances
revenue of $567 million for the year ended
December 31, 2008, and $827 million as compared to
ProAssurances revenue of $488 million for the nine
months ended September 30, 2009. The median operating
income for the peer companies was $66 million as compared
to $255 million for ProAssurance for the year ended
December 31, 2008, and $91 million as compared to
$194 million for ProAssurance for the nine months ended
September 30, 2009.
Our senior management provides the Compensation Committee
information for use in developing its determinations on
executive compensation in the following respects:
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calculation of the incentive compensation payable to each of the
senior executives in accordance with the performance criteria in
the annual incentive award guidelines as approved by the
Compensation Committee for that year;
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analysis of the performance criteria in the annual incentive
award guidelines for the current year in light of current
corporate goals;
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review and analysis of the performance criteria for performance
shares to be granted as long-term compensation in the current
year in view of the long-term corporate goals and objectives;
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calculation of the results of performance criteria and
corresponding awards under maturing performance shares;
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estimate of the value of equity compensation under Statement of
Financial Accounting Standards No. 123R
(SFAS 123R); and
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analysis of the form and mix of the compensation elements
included in our executive compensation.
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Our senior management makes no recommendations with respect to
compensation of the CEO. The Compensation Committee is
exclusively responsible for making compensation recommendations
as to changes in base salary for the CEO, the opportunity for
payment of annual incentive compensation and the long-term
incentive compensation to be granted to the CEO. All
recommendations of the Compensation Committee with respect to
the CEO compensation, which are subject to approval by the
independent directors under the committees charter, were
unanimously approved by the independent directors on our Board
of Directors for the current year and all years reflected in the
Summary Compensation Table.
Our CEO, with the assistance of the President, recommends to our
Compensation Committee the appropriate changes in compensation
for executive officers (other than the CEO) within the
compensation framework established by the Compensation
Committee. The CEO and President have access to the compensation
consultants reports when making these recommendations. The
Compensation Committee reviews these recommendations at a
committee meeting usually held in February after the financial
results of the prior year are reasonably certain. The
Compensation Committee receives the recommendations of the CEO
together with supporting material, and reviews this information
along with the report of the compensation consultant. After
analysis of the information, the Compensation Committee makes
its decisions which are transmitted to the full board through
the minutes of the Compensation Committee. The Compensation
Committee accepted the recommendations of the CEO for the
current year and all years covered in the Summary Compensation
Table.
Chief
Executive Officer
W. Stancil Starnes succeeded A. Derrill Crowe, M.D. as CEO
in July 2007. The Summary Compensation Table
reflects the compensation paid to Mr. Starnes during his
employment with us beginning May 1, 2007 under an
Employment Agreement that established his initial base salary at
a minimum rate of $750,000 per year for 2007 and 2008.
Mr. Starnes was granted 100,000 options effective upon his
assuming the position of CEO on July 2, 2007. Also
pursuant to the Employment Agreement, Mr. Starnes received
annual incentive awards of $539,567 and $780,000 in 2007 and
2008, respectively, in accordance with a guaranty in his
employment agreement that his annual incentive award for 2007
and 2008 would not be less than his base salary for the
applicable year. In establishing the economic terms of the
Employment Agreement, the Compensation Committee and Board of
Directors considered several factors including: the compensation
then being paid to Dr. Crowe as CEO which had been reviewed
in February 2007 as a part of the 2007 executive compensation
review; the compensation level of
22
Mr. Starnes at the employment that he resigned to accept
the CEO position at ProAssurance; the responsibilities and
duties of the CEO of ProAssurance; and the overall executive
compensation structure at ProAssurance.
The employment agreement provides that Mr. Starnes will be
paid a base salary to be fixed annually by the Board of
Directors; that he will be eligible for annual incentive
compensation based on corporate objectives consistent with the
criteria established for our other executives; and that he will
be granted long term incentive compensation having a value on
each date of grant of not less than $500,000. The Compensation
Committee and the independent directors approved 2009 and 2010
compensation for Mr. Starnes consistent with the terms of
his employment agreement and such compensation is described in
the following discussion.
Base
Salary
Base salary for our executives is established and adjusted
according to the following criteria: areas of responsibility,
experience, annual rate of inflation and individual performance.
In 2009, the base salary paid to our executives was less than
40% of total direct compensation (the sum of base salary paid,
annual incentive awards paid, and the value of long-term
incentive compensation grants for financial reporting purposes).
For 2010, the Compensation Committee increased
Mr. Starnes base compensation by 3% to $827,502 and
increased the base compensation of the other executives by 3% of
their current base salary. The increases in base salary for 2010
are consistent with past practice in terms of the ratio of base
salary to total direct compensation.
Annual
Incentive Compensation
Our annual incentive compensation program for executives
proceeds from and assumes a base salary that is competitive in
the market. Annual incentive compensation is intended to
maximize the efficiency and effectiveness of our operations by
providing significant at risk compensation
opportunities for our executives and other selected key
employees.
Annual incentive award targets are established during the first
quarter for the current year and are expressed as a percentage
of base salary. The Compensation Committee establishes
guidelines for annual incentive compensation for executives and
other key employees of ProAssurance. The Compensation Committee
with the assistance of its consultant considers whether the
ProAssurance guidelines are consistent with the performance
measures used by the peer companies and the likelihood that the
guidelines may cause executives to assume material risks in
order to achieve their performance measures. Annual incentive
awards for executives have been primarily based on corporate
performance. For executives other than the CEO and President,
individual performance is also considered. The Compensation
Committee assigns a goal and a relative weight for each of the
performance criteria in order to determine whether and to what
extent the executive receives an award. Annual incentive awards
are subject to increase or decrease to the extent actual
performance is greater or less than the target guidelines and
within the respective guidelines established by the Compensation
Committee. The Committee uses the guidelines to determine the
annual incentive award for our CEO. Our CEO recommends annual
incentive awards for the other executives pursuant to the
guidelines and subject to the review and modification by the
Committee.
In 2009, the Compensation Committee implemented two significant
changes to the method for computing annual incentive
compensation for executives. The Committee approved changes that
will provide executives the opportunity to earn a greater
percentage of their total direct compensation as annual
incentive compensation. This was achieved by increasing the
maximum percentage of base compensation that will be paid to an
executive if performance measures are achieved so that the
CEOs percentage increased from 100% to 125% of base salary
and the percentages for the other executives increased from a
range of 60% to 70% to a range of 85% to 95% of their base
salaries. In making these changes in the annual incentive award
guidelines, the Compensation Committee determined that the goals
and incentives are reasonable and consistent with past practice,
related to the sound financial management of ProAssurance and do
not involve unnecessary or excessive risk that would threaten
the value of ProAssurance.
The Committee also approved changing ProAssurances
corporate performance measures for 2009 by eliminating operating
income and increasing the weighting of our combined ratio as a
performance measure. The Compensation Committee also added
policyholder retention as a performance measure. The reasons for
these changes include the following: (i) operating income
is a financial measure that is based in part on investment
23
income (excluding realized investment gains and losses) and the
use of investment income may create a risk that management will
select less conservative investments to achieve a target that is
difficult to project in the current environment; (ii) the
combined ratio is a traditional measure of bottom
line economic success for a property and casualty
insurance company that does not directly equate to forecasting
earnings if publicly disclosed; and (iii) a retention goal
is an appropriate top line measure that focuses on
retaining policyholders that are already a part of ProAssurance
and generating revenues for the company.
The 2009 changes in ProAssurances annual incentive
compensation will be carried forward into 2010. A summary of the
weighted percentage for each performance criteria and the
performance guidelines in 2009 and 2010 follows:
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Stock
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Combined Ratio
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Retention
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Indiv. Goals/
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Performance
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Performance
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Goal
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Evaluation
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CEO/President
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20
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%
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60
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%
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20
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%
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N/A
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Other executives
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20
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%
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40
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%
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20
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%
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20
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%
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Stock Performance Stock performance is
benchmarked against the SNL Property/Casualty Insurance Index
for publicly traded property and casualty insurance companies,
which is the peer group index used in our prior proxy
statements. Our stock performance must exceed the index by a
certain percentage goal at the end of the applicable year in
order to receive the full weighted percentage for the stock
performance criteria. No credit is given if our stock
performance is less than the index. Less than full credit is
given if our stock performance exceeds the index but is less
than the percentage goal above the index. If our stock
performance exceeds the index by more than the percentage goal,
a maximum of up to 120% of the weighted percentage may be earned.
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Combined Ratio Performance Our combined ratio
(the sum of our loss ratio and expense ratio based on our GAAP
annual income statement) must achieve or exceed the goals as
established each year by the Compensation Committee. No credit
is given if the ratio does not meet the threshold ratio; less
than the full weighted percentage is given if the ratio is
between the threshold ratio and the target ratio; and if the
ratio is better than the target ratio, a maximum of up to 150%
of the weighted percentage may be earned.
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Retention Goal The retention goal focuses on
the overall retention rate of physician insureds. Our focus on
this element is on the long-term need to maintain a loyal
policyholder base for our largest segment of business. No credit
is given if the ratio does not meet the threshold ratio; less
than the full weighted percentage is given if the ratio is
between the threshold ratio and the target ratio; and if the
ratio is better than the target ratio, a maximum of up to 130%
of the weighted percentage may be earned.
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Individual Performance This element involves
a subjective evaluation of individual performance, which is
principally based on the evaluation and recommendation of the
CEO. We believe the subjective individual performance criteria
is an appropriate measurement of incentive compensation for
executives (other than the CEO and President) because it allows
a significant percentage of the recommended annual incentive
compensation to be based on a general assessment of the
executives quality of performance, leadership
effectiveness, and contribution to the success of the enterprise
regardless of corporate performance. The incentive compensation
for the CEO and the President are based exclusively on corporate
performance because the Compensation Committee believes that
corporate performance is the most appropriate measurement for
these positions.
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For 2009 the annual incentive compensation paid to our CEO was
an amount equal to 125% of his base salary. Annual incentive
compensation paid to our other executives ranged from 85 to 95%
of their base salary in 2009. The target goals for each of
ProAssurances performance criteria, as well as a
comparison of the actual result, for 2009 are set forth under
the table titled Grants of Plan-Based Awards in this
proxy statement.
In 2008, our stockholders approved the ProAssurance Corporation
2008 Annual Incentive Compensation Plan. The 2008 Annual
Incentive Compensation Plan was designed to permit annual
incentive awards made in the future to qualify as performance
based compensation under Code Section 162(m). Under Code
Section 162(m), no federal income tax deduction is allowed
for annual compensation in excess of $1 million paid to the
chief executive officer and other executives named in the
Summary Compensation Table included in our proxy
statement unless the
24
excess compensation is considered performance based
compensation. Annual incentive compensation awards for years
after 2009 will be paid under the 2008 Annual Incentive Plan.
This will allow us to qualify annual incentive compensation as
performance based compensation under Code section 162(m).
Long-term
Incentive Compensation
Our long-term incentive compensation is intended to align the
interests of our executives with the interests of our
stockholders by rewarding long-term corporate performance and
increases in share value. Stock options granted under
stockholder-approved equity incentive plans were the exclusive
long-term incentive compensation provided to our executives in
years prior to 2006. Beginning in 2006, we have used a
combination of options and performance shares available under
the stockholder-approved 2004 Equity Incentive Plan. In 2009,
the Committee elected to continue to grant performance shares
and to grant restricted stock units (RSUs) in place of options.
The long term incentive compensation granted in 2009 consists of
two-thirds performance shares and one-third RSUs for each
executive with the number of units of each depending upon the
executives position in the organization. For 2010, we
continued to grant RSUs and performance shares in the same ratio
to our executives who are not retirement eligible but we
modified the grant structure to discontinue RSUs for executives
who are retirement eligible (age 60 and over) during the
term of the grant. This decision was made since the RSUs, as
awarded by ProAssurance, do not provide for a partial payment in
the event of retirement, whereas the performance shares do allow
for a partial payment if the performance goals established at
the time of the grant are achieved on an interim basis.
We believe that the performance shares and RSUs align our
executives with the stockholders by providing equity
compensation based on our long-term objective of growth in
stockholder value. The performance shares will reward executives
if corporate value is enhanced through achievement of either the
Total Return or the Economic Value Added
as performance measures, as discussed further below. Further,
the RSUs will enhance executive retention as executives will
have an incentive to remain employed during the vesting period
to obtain the RSUs even if the stock price declines.
We also believe an effective long-term incentive compensation
program is necessary to attract and retain well qualified and
experienced executives and other key employees. In establishing
the amount of our annual grants of long-term incentive
compensation, we consider past practice, recommendations of the
compensation consultant and the value of the award (including
the value attributable to the award for financial reporting
purposes). We monitor the level of awards based on the findings
of our compensation consultant, and we believe that our
long-term incentive opportunities are appropriate when compared
to awards made available to executives at our peer companies.
Our practice has been to make long-term incentive grants to our
current executives and other key employees at the first meeting
of the Compensation Committee in each fiscal year which is
usually held in February after the financial results of the
prior year are reasonably certain. Where a market price is
required, long-term grants (which include options) are priced on
a date after our financial results for the prior year have been
released. We believe that pricing the grants at this time is
most appropriate since the market is then in possession of our
earnings and any other material information. We occasionally
make long-term grants at other meetings of the Board of
Directors, for example, when we retain new senior level
executives.
Performance shares are based on pre-established performance
criteria that must be obtained over a period of three years.
Each executive is granted a target and maximum award expressed
as a number of shares of our Common Stock. Performance shares
will be paid to ProAssurance executives if at the end of the
three year measurement period either of the following
performance criteria is achieved:
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Total Return Total return measures our
stocks performance in comparison to the SNL
Property/Casualty Insurance Index, which is the index we have
used to compare our performance to other public insurance
companies. If performance is equal to the index, 75% of Target
Award is earned; if our stock performance is 10% greater than
the index, 100% of Target Award is achieved; and, if our stock
performance is 20% greater than the index, then 125% of Target
Award is achieved. If our stock performance is less than the
index, no performance shares are awarded under this measure.
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25
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Economic Value Added Economic value added
measures the compound annual growth rate, or CAGR, in book value
per common share (excluding SFAS 115 adjustments for
unrealized gains and losses). If CAGR is equal to at least 10%,
the target award is earned. If CAGR is equal to at least 7.5%,
75% of the target award is earned and if CAGR is equal to 15% or
more, 125% of the target award is earned. If CAGR is less than
7.5%, no performance shares are awarded pursuant to this measure.
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Performance shares will be paid to executives if the
Compensation Committee finds that either of the performance
measures is met in the measurement period. Performance shares
for results falling between the stated goals are interpolated.
If an executive terminates employment prior to the expiration of
the performance period by reason of death, disability, or
retirement or by reason of certain major changes in our
operations, a pro rata portion of the performance shares may be
paid if the Committee finds that the performance criteria had
been satisfied at the end of the year preceding termination of
employment. Upon a change of control of ProAssurance,
performance shares are payable to executives at the target level.
We began awarding RSUs in 2009. Each RSU is equal to one share
of Common Stock and is subject to a three year restricted
period. RSUs vest after three years from the date of grant if
the grantee remains continuously employed with ProAssurance or a
subsidiary unless sooner vested upon termination by reason of
death, disability, or good reason.
In 2008, our stockholders approved the ProAssurance Corporation
2008 Equity Incentive Plan which replaced the 2004 Equity
Incentive Plan. Beginning in 2009, long-term incentive
compensation awards will be granted under the 2008 plan. The
2008 Equity Incentive Plan was designed so that options and
performance shares granted to executives may qualify as
performance based compensation under Code Section 162(m).
RSUs will not qualify as performance based compensation under
Code Section 162(m).
Other
Compensation
Executive perquisites are not intended to be a material element
of compensation for executives. Our executives participate in
our qualified retirement plan on terms generally available to
our employees. In addition, we have adopted a non-qualified
deferred compensation plan for executives and other highly
compensated employees that provides for a matching contribution
with respect to deferrals by employees whose base compensation
exceeds the compensation limit established by the Code for
qualified retirement plans. The matching contributions are
comparable to the employer contributions to our qualified
retirement plan within the compensation limits under the Code.
Post-Termination
and Change of Control Compensation
We offer executives severance compensation in the event we
terminate the executive without cause or the executive
terminates his or her employment for good reason. The severance
agreements are intended to aid in recruitment and retention of
qualified executives. We believe our severance benefits for
executives are appropriate and do not present a risk to our
company.
We believe that severance protection, particularly in the
context of a change of control transaction, plays a valuable
role in attracting and retaining key executives. Although we
occasionally elect to engage our senior executives under
employment agreements, our general approach has been to avoid
employment agreements and to rely on severance agreements to
define the terms of severance when an executive is involuntarily
terminated without cause or elects to terminate for good reason.
In change of control situations, severance agreements provide
key executives with a level of comfort that allows them to
devote their energies to the completion of the transaction for
the benefit of the stockholders. In other situations, severance
agreements facilitate changes in management by providing for a
clean departure of terminated executives with a pre-negotiated
set of benefits that are acceptable to all parties.
We have provided for severance benefits in the employment
agreement with Mr. Starnes and in severance agreements with
other key executives (including our other named executive
officers) in the amounts reflected in the table on page 38
of this proxy statement. The terms of the severance agreements
with executives generally provide for severance compensation in
an amount equal to the executives base salary and average
annual incentive
26
compensation if we terminate the executive without cause or the
executive resigns for good reason. However, an executive will be
entitled to twice that amount if the executive is terminated for
cause or resigns for good reason within two years after the
occurrence of a change of control. The severance agreements
retain the double trigger for the payment of the
increased benefits, e.g. a change of control must occur and the
executive must be terminated without cause or must terminate for
good reason after the change of control. A specific description
of the severance agreement for the other executive officers is
contained in Payments on Termination and Change of
Control.
The employment agreement with Mr. Starnes was the result of
arms length negotiations prior to his employment. The severance
benefits under his employment agreement differ from the other
executives severance agreements in two respects: the
severance compensation is payable in an amount equal to his
annual base salary for the remainder of the term of his
employment (currently 60 months); and the severance
compensation is payable to him in lump sum upon a change of
control.
All executives are required to sign a general release of claims
as a condition to the receipt of severance benefits, and the
employment and severance agreements include a covenant not to
compete with our insurance subsidiaries. Severance compensation
is paid in monthly installments during the life of the covenant
and is subject to forfeiture upon a breach of the covenant.
We are required to reimburse an executive for the excise tax
that is payable by the executive if the severance benefits paid
after a change of control are deemed to be excess
parachute payments under Code Section 280G. Although
the severance benefits payable after a change of control for our
executives (other than Dr. Brant) are substantially below
the threshold of three times annual compensation, the
calculation of severance benefits for purposes of Code
Section 280G includes the value of benefits accelerated on
a change of control under other compensation arrangements.
Because the applicability of Code Section 280G has varied
among the executives based on the amount of outstanding equity
compensation grants and the rate of exercise of those benefits,
the inclusion of the 280G reimbursement provision was considered
appropriate to avoid the unintended reduction in severance
benefits as a result of the acceleration of benefits on the
occurrence of a change of control transaction.
PICA
Compensation
We acquired PICA on April 1, 2009 through a cash sponsored
demutualization of PICA that was approved by the Illinois
Director of Insurance. In connection with our acquisition of
PICA, we entered into an employment agreement with
Dr. Brant to serve as the Chief Executive Officer of PICA
for a term of three years. We agreed to pay Dr. Brant an
initial base salary of $477,539, which represented his then
current base salary plus the monetized value of the automobile
allowance and club dues previously paid by PICA.
Dr. Brants salary is subject to a minimum four
percent annual increase beginning in 2010.
Our employment agreement with Dr. Brant replaced his then
existing employment agreement with PICA and addressed other
compensation arrangements that were in effect with PICA prior to
the acquisition. Under the terms of his employment agreement, we
paid Dr. Brant an initial retention bonus of $400,000 and
we caused PICA to pay him $150,000 to satisfy its obligation to
retain Dr. Brant as a consultant and director after his
retirement. We also agreed to assume PICAs fully funded
obligation to pay Dr. Brant retirement benefits in the
amount of $600,000 and to allow Dr. Brant to continue to
participate in PICAs Deferred Compensation Plan in 2009.
The PICA Deferred Compensation Plan required PICA to contribute
11.5% of Dr. Brants base salary to the plan in 2009.
For 2010 and subsequent years, Dr. Brant will not be
eligible to receive any further contributions under the PICA
Deferred Compensation Plan but he will be eligible to receive
matching contributions under ProAssurances Executive
Nonqualified Excess Plan.
In the Stock Purchase Agreement between ProAssurance and PICA,
we agreed that PICA senior executives, including Dr. Brant,
would be paid under the 2009 annual incentive plan adopted by
PICA prior to the acquisition. Under the 2009 PICA incentive
plan, Dr. Brant had the potential to earn 50% of his base
salary as incentive compensation. The performance measures under
the PICA plan were based on retention (measured on premiums and
number of insureds of PICAs insurance operations) as well
as the achievement of certain strategic goals that are difficult
to measure on an objective standard. For 2009, Dr. Brant
was entitled to approximately 46% of his base salary using the
performance measures of the PICA plan. Our Compensation
Committee elected to increase his
27
annual incentive award to 50% of his base salary in recognition
of his assistance with the post-merger transition of PICAs
business.
For 2010, our Compensation Committee has approved the
continuation of the PICA annual incentive plan using performance
measures and potential incentive compensation levels generally
consistent with past practice. Dr. Brant continues to be
eligible for up to 50% of his base salary as annual incentive
compensation under the PICA plan. In addition, Dr. Brant
will participate in ProAssurances Annual Incentive
Compensation Plan in 2010. His participation will be limited to
the stock performance measure under the plan which will increase
his potential for annual incentive compensation in 2010 to 70%
of base salary.
In 2009, no PICA executives received any awards of long term
compensation from either PICA or ProAssurance. Beginning in
2010, selected members of PICAs senior management,
including Dr. Brant, are eligible to participate in
ProAssurances long term incentive compensation.
Dr. Brant and certain other PICA senior executives were
granted performance shares in 2010 under the ProAssurance 2008
Equity Incentive Plan. The performance shares will be paid to
eligible executives of PICA if at the end of the three year
measurement period either of the following performance measures
is satisfied during the performance period: (i) the stock
price performance criteria used by ProAssurance for performance
shares granted to its executives or (ii) a performance
criteria based on the combined ratio of PICA. If the PICA
weighted average statutory combined ratio during the three year
performance period is not above 102%, then 75% of the Target
Award is earned; if the combined ratio is 98%, then 100% of the
Target Award is earned; and if the combined ratio is 92% or
below, then 125% of the Target Award is earned.
We agreed to provide for severance benefits in
Dr. Brants employment agreement. If Dr. Brant is
entitled to severance benefits upon his termination of
employment in the three year term of his employment agreement,
he is entitled to his base salary for the remainder of the term,
plus a sum equal to three times his base salary. If
Dr. Brant is employed at the end of the initial term of his
employment agreement, we have agreed to enter into a severance
agreement for an additional term of three years which will
provide severance benefits in an amount equal to his base salary
over the remainder of the term.
Report of
Our Compensation Committee
The Compensation Committee has reviewed and discussed the above
Compensation Discussion and Analysis with our management, and
based on such review and discussions, the Compensation Committee
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this proxy statement.
The Compensation Committee:
Wilfred W. Yeargan, Jr. Chairman
Robert E. Flowers, M.D.
John J. McMahon, Jr.
March 31, 2010
Compensation
Committee Interlocks and Insider Participation
No executive officer of ProAssurance served as a member of the
Compensation Committee (or other board committee performing
equivalent functions or, in the absence of such committee, the
entire board) of another entity, one of whose executive officers
served on the compensation committee of ProAssurance. No
executive officer of ProAssurance served as a director of
another entity, one of whose executive officers served on the
compensation committee of ProAssurance.
28
Compensation
of Executive Officers
The following table sets forth a summary of the compensation
paid or accrued by ProAssurance and its subsidiaries during the
last fiscal year with respect to ProAssurances principal
executive officer, principal financial officer and the three
other most highly compensated persons considered to be executive
officers or their equivalent. The individuals required to be
included in the table are referred to as the Named
Executive Officers.
Summary
Compensation Table
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Change in
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Pension
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Value and
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Nonqualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Salary
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Bonus
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Awards
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Awards
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Compensation(4)
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Earnings
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Compensation
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Total
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Name and Principal Position
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Year
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|
($)
|
|
(3)($)
|
|
(5)(6)($)
|
|
(7)($)
|
|
($)
|
|
($)
|
|
(8)($)
|
|
($)
|
|
W. Stancil Starnes
|
|
|
2009
|
|
|
|
798,000
|
|
|
|
|
|
|
|
578,400
|
|
|
|
|
|
|
|
1,004,250
|
|
|
|
|
|
|
|
142,259
|
|
|
|
2,522,909
|
|
Chief Executive
Officer(1)
|
|
|
2008
|
|
|
|
773,077
|
|
|
|
|
|
|
|
367,830
|
|
|
|
329,840
|
|
|
|
780,000
|
|
|
|
|
|
|
|
142,353
|
|
|
|
2,393,100
|
|
|
|
|
2007
|
|
|
|
501,923
|
|
|
|
|
|
|
|
|
|
|
|
1,764,311
|
|
|
|
539,567
|
|
|
|
|
|
|
|
47,229
|
|
|
|
2,853,031
|
|
Edward L. Rand, Jr.
|
|
|
2009
|
|
|
|
414,346
|
|
|
|
|
|
|
|
304,365
|
|
|
|
|
|
|
|
354,578
|
|
|
|
|
|
|
|
56,497
|
|
|
|
1,129,786
|
|
Chief Financial Officer and
|
|
|
2008
|
|
|
|
402,692
|
|
|
|
25,000
|
|
|
|
232,348
|
|
|
|
206,150
|
|
|
|
243,000
|
|
|
|
|
|
|
|
56,502
|
|
|
|
1,165,692
|
|
Senior Vice President
|
|
|
2007
|
|
|
|
391,077
|
|
|
|
|
|
|
|
220,672
|
|
|
|
222,575
|
|
|
|
215,000
|
|
|
|
|
|
|
|
55,360
|
|
|
|
1,104,684
|
|
Victor T. Adamo,
|
|
|
2009
|
|
|
|
526,885
|
|
|
|
|
|
|
|
363,750
|
|
|
|
|
|
|
|
503,927
|
|
|
|
|
|
|
|
66,844
|
|
|
|
1,461,406
|
|
President(1)
|
|
|
2008
|
|
|
|
511,539
|
|
|
|
|
|
|
|
277,400
|
|
|
|
247,380
|
|
|
|
360,500
|
|
|
|
|
|
|
|
75,578
|
|
|
|
1,472,397
|
|
|
|
|
2007
|
|
|
|
498,846
|
|
|
|
|
|
|
|
263,400
|
|
|
|
267,090
|
|
|
|
398,825
|
|
|
|
|
|
|
|
80,979
|
|
|
|
1,509,140
|
|
Howard H. Friedman
|
|
|
2009
|
|
|
|
445,038
|
|
|
|
|
|
|
|
304,365
|
|
|
|
|
|
|
|
380,843
|
|
|
|
|
|
|
|
58,507
|
|
|
|
1,188,753
|
|
Senior Vice President
|
|
|
2008
|
|
|
|
433,015
|
|
|
|
25,000
|
|
|
|
232,348
|
|
|
|
206,150
|
|
|
|
261,000
|
|
|
|
|
|
|
|
65,323
|
|
|
|
1,222,836
|
|
|
|
|
2007
|
|
|
|
422,615
|
|
|
|
|
|
|
|
220,672
|
|
|
|
222,575
|
|
|
|
231,125
|
|
|
|
|
|
|
|
71,335
|
|
|
|
1,168,322
|
|
Jerry D.
Brant(1)(2)
|
|
|
2009
|
|
|
|
358,155
|
|
|
|
549,991
|
|
|
|
1,992
|
|
|
|
|
|
|
|
238,986
|
|
|
|
|
|
|
|
78,766
|
|
|
|
1,227,890
|
|
President of PICA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Management directors of ProAssurance do not receive any
additional compensation, whether cash, stock or otherwise, in
their capacity as directors. |
|
(2) |
|
Dr. Brant was employed by ProAssurance on April 1,
2009. |
|
(3) |
|
The bonus compensation paid to Messrs. Rand and Friedman in
2008 reflects discretionary bonus payments paid in addition to
incentive compensation earned under the Annual Incentive Award
Guidelines described in Note 4 below. The bonus
compensation paid to Dr. Brant reflects the retention bonus
paid to him upon the closing of the PICA acquisition pursuant to
the terms of his employment agreement. Dr. Brant received
4,221 shares of our common stock valued at $47.38 per share
and $200,000 in cash. In addition, ProAssurance agreed to the
payment of $150,000 in full satisfaction of PICAs
obligation to retain Dr. Brant as a consultant and director
after his retirement. |
|
(4) |
|
The Non-Equity Incentive Plan Compensation reflects the amount
paid under the Annual Incentive Award Guidelines for 2009, 2008,
and 2007. The bonus and non-equity incentive plan compensation
payable to Named Executive Officers is denominated in dollars
and is payable in cash and Common Stock. The shares of Common
Stock are issued as stock awards under the ProAssurance 2004
Equity Incentive Plan (2007) and the 2008 Equity Incentive
Plan (2008 and 2009) and are valued on the closing price of
a share on the NYSE on the date of the award $53.32
on February 26, 2010, $47.70 on February 26, 2009 and
$54.28 on February 28, 2008. The non-equity incentive plan
compensation includes the following number of shares of Common
Stock for the Named Executive Officers:
Mr. Starnes 7,600 shares in 2009,
8,175 shares in 2008 and 4,625 shares in 2007;
Mr. Rand 2,700 shares in 2009,
2,245 shares in 2008 and 1,845 shares in 2007;
Mr. Adamo 3,800 shares in 2009,
3,020 shares in 2008, and 3,420 shares in 2007; and
Mr. Friedman 2,900 shares in 2009,
2,395 shares in 2008, and 1,985 shares in 2007. |
|
(5) |
|
The shares acquired with grant proceeds under the Amended and
Restated ProAssurance Corporation Stock Ownership Plan are
treated as stock awards in the Summary Compensation Table. The
Stock Ownership Plan provides for employee contributions and
matching grants from ProAssurance that are used to purchase
shares of ProAssurances Common Stock in the open market
for the account of participating employees prior to vesting. The
amounts reflected in the table include $6,000 as the value of
the matching grant to each of the named |
29
|
|
|
|
|
executive officers as of the date of grant in 2009, 2008 and
2007 except that Mr. Starnes did not receive a matching
grant in 2007 and Dr. Brant received a matching grant of
$1,992 in 2009. For information on the grants made under this
plan in 2009, see the Grants of Plan-Based Awards
table. |
|
(6) |
|
The performance shares are also treated as stock awards in the
Summary Compensation Table. The performance shares granted are
earned if one of the two criteria is achieved during the period
ending three years after the award is granted. The value of
performance shares represents the value as of the date of grant
in 2009, 2008 and 2007 for the shares expected to be earned
based on their closing market price on the date of grant ($47.70
on February 26, 2009, $54.28 on February 28, 2008 and
$51.48 on March 7, 2007) as follows:
Mr. Starnes $381,600 in 2009, $361,830 in 2008;
Mr. Rand $198,909 in 2009, $226,348 in 2008 and
$214,672 in 2007; Mr. Adamo - $238,500 in 2009, $271,400 in
2008 and $257,400 in 2007; and Mr. Friedman
$198,909 in 2009, $226,348 in 2008 and $214,672 in 2007. The
amounts do not correspond to actual value that will be
recognized by the Named Executive Officers, which depends on the
achievement of the specified performance criteria over the
performance period and the market value of a share of
ProAssurance Common Stock at the end of the performance period.
The performance criteria are discussed in the Compensation
Discussion and Analysis beginning on page 25 of this proxy
statement. |
|
(7) |
|
The table reflects the value of the options as of the date of
grant for options granted as incentive compensation in 2007.
Pursuant to SEC rules, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions and include the fair value of all vested and unvested
options granted. For information on the valuation assumptions
with respect to the calculation of the value of the options
granted in 2007, we refer you to Note 12 Stock
Options and Share-Based Payments in the Notes to the
consolidated financial statements included in
ProAssurances
Form 10-K
for the year ended December 31, 2009. These amounts do not
correspond to the actual value that will be recognized by the
Named Executive Officer due to changes in market price and
timing of exercise. |
|
(8) |
|
Other compensation in 2009 includes the amounts set fort in the
following table: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
Qualified
|
|
Compensation Plan
|
|
Bonus and Service
|
|
|
|
|
Retirement Plan ($)
|
|
($)
|
|
Awards ($)
|
|
Perquisites ($)
|
|
W. Stancil Starnes
|
|
|
24,500
|
|
|
|
55,000
|
|
|
|
|
|
|
|
62,759
|
|
Edward L. Rand, Jr.
|
|
|
24,500
|
|
|
|
16,935
|
|
|
|
1,655
|
|
|
|
13,407
|
|
Victor T. Adamo
|
|
|
24,500
|
|
|
|
28,188
|
|
|
|
|
|
|
|
14,156
|
|
Howard H. Friedman
|
|
|
24,500
|
|
|
|
20,004
|
|
|
|
|
|
|
|
14,003
|
|
Jerry D. Brant
|
|
|
|
|
|
|
49,047
|
|
|
|
|
|
|
|
29,719
|
|
Perquisites include group health, life and disability insurance,
individual life and disability policies, and personal use of the
corporate aircraft. The perquisites include $49,150 for
Mr. Starnes for personal use of the corporate aircraft as
the aggregate incremental cost for his personal use. The
compensation attributable to personal use was computed by
multiplying the number of hours the airplane was used for their
personal benefit by the amount of the variable expenses incurred
in the use of the airplane per flight hour. The variable
expenses per flight hour was calculated by dividing the total
flight hours during each year into the sum of the variable
expenses incurred (e.g., fuel, airport charges, travel and
lodging expense for the crew during such year) and the tax
effect resulting from the nondeductibility of these expenses. As
was the case in 2007 and 2008, the cost of the loss of the tax
deduction was spread over the personal use hours instead of all
hours of usage in 2009.
30
GRANTS OF
PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
All
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Other
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards.
|
|
Awards:
|
|
Exercise
|
|
Value
|
|
|
|
|
Estimated Possible Payouts
|
|
Estimated Future Payments
|
|
Number of
|
|
Number of
|
|
or Base
|
|
of Stock
|
|
|
|
|
Under Non-Equity Incentive
|
|
Under Equity Incentive Plan
|
|
Shares of
|
|
Securities
|
|
Price of
|
|
and
|
|
|
|
|
Plan
Awards.(2)
|
|
Awards(3)
|
|
Stock
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
or Units
|
|
Options
|
|
Awards
|
|
Awards
|
Name
|
|
Date(1)
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)(4)
|
|
(#)
|
|
($/Sh)
|
|
($)
|
|
W. Stancil Starnes
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
1,004,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
8,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
381,600
|
|
|
|
|
3/1/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
190,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward L. Rand, Jr.
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
354,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,130
|
|
|
|
4,170
|
|
|
|
5,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198,909
|
|
|
|
|
3/1/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,085
|
|
|
|
|
|
|
|
|
|
|
|
99,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victor T. Adamo
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
503,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
5,000
|
|
|
|
6,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
238,500
|
|
|
|
|
3/1/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
|
119,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard H. Friedman
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
380,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,130
|
|
|
|
4,170
|
|
|
|
5,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198,909
|
|
|
|
|
3/1/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
|
2/26/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,085
|
|
|
|
|
|
|
|
|
|
|
|
99,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry D. Brant
|
|
|
9/1/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
1,992
|
|
|
|
|
(1) |
|
Except for shares purchased with matching grants under the Stock
Ownership Plan as described in Note (4), all awards were
recommended by the Compensation Committee at its meeting on
February 23, 2009, with a specified grant date of
February 26, 2009 (the date that the window for trading in
ProAssurance Common Stock opened after the prior year-end
earnings were released). As required by the Compensation
Committee Charter, the independent directors ratified the
recommendation for the awards granted to the CEO at the meeting
of the Board of Directors on March 4, 2009, at which the
independent directors also ratified the recommendations for the
awards granted to the other Named Executive Officers. |
|
(2) |
|
The Compensation Committee uses certain performance criteria as
a guideline in making its recommendations for annual incentive
compensation. Each element of the performance criteria has a
minimum achievement level. No incentive compensation is payable
with respect to a performance criteria if a minimum is not
achieved. The non-equity incentive plan awards are discussed in
more detail beginning on page 32 of this proxy statement. |
|
(3) |
|
The award of performance shares are subject to the satisfaction
of performance criteria and the grant date fair value of
performance shares reflects the value of the shares expected to
be earned if the performance criteria for the target level is
met. The performance share awards are discussed in more detail
beginning on page 33 of their proxy statement. |
|
(4) |
|
The stock awards include shares purchased with matching grants
under the Stock Ownership Plan and restricted stock units (RSUs)
granted under the 2008 Equity Incentive Plan. The awards under
the Stock Ownership Plan are discussed in more detail beginning
on page 32 of this proxy statement and the RSU awards under
the 2008 Equity Incentive Plan are discussed in more detail
beginning on page 33 of this proxy statement. |
We have awarded equity compensation to our Named Executive
Officers under the ProAssurance Corporation 2004 Equity
Incentive Plan, the ProAssurance Corporation 2008 Equity
Incentive Plan, and the ProAssurance Corporation Stock Ownership
Plan dated December 1, 2002, as amended and restated
September 9, 2009 (the Stock Ownership Plan).
The 2004 Equity Incentive Plan was designed to further our
long-term growth profitability by offering proprietary interests
in the company to those key officers, employees, consultants and
directors who will be largely responsible for such growth, and
to enhance our ability to retain such persons through long-term
incentive compensation in the form of proprietary interests in
ProAssurance. We originally reserved 2,500,000 shares of
Common Stock reserved for awards under the 2004 Equity Incentive
Plan. The Compensation
31
Committee has the authority to make the following types of
equity-based awards under the 2004 Equity Incentive Plan:
(1) performance shares; (2) stock options;
(3) stock appreciation rights; (4) restricted stock;
(5) restricted units; and (6) other stock based
awards. No participant could receive awards for more than
250,000 shares of our Common Stock (or their equivalent) in
any year under the 2004 Equity Incentive Plan.
The 2008 Equity Incentive Plan was approved by our stockholders
at the 2008 annual meeting to replace the 2004 Equity Incentive
Plan. In accordance with the Compensation Committees
determination, no new awards were granted under the 2004 Equity
Incentive Plan after December 31, 2008. The 2008 Equity
Incentive Plan has terms and conditions similar to those of the
2004 Equity Incentive Plan. We reserved 2,000,000 shares of
Common Stock under the 2008 Equity Incentive Plan, subject to
adjustment to reflect any increase or decrease in the number of
Common Stock shares outstanding resulting from: stock split or
stock dividend on the shares; a recapitalization or
reclassification of the shares; or a merger or consolidation. No
participant may receive awards for more than 200,000 shares
of our Common Stock (or their equivalent) in any year under the
2008 Equity Incentive Plan. The Compensation Committee has the
authority to make the same types of equity-based awards as under
the 2004 Equity Incentive Plan, as listed above.
The Stock Ownership Plan is a stock purchase plan that allows
all of our employees and directors who have completed six months
or more of service to contribute funds through periodic payroll
deductions, or through a single lump sum deposit, for the
purchase of shares of our Common Stock in ordinary brokerage
transactions in the open market. Under the terms of our stock
ownership plan, we make matching contributions in an amount
equal to 100% of the first $2,000 contributed by a participating
employee during a calendar year and 50% of the next $8,000
contributed by a participating employee in such calendar year.
Employees may receive a matching contribution if previously
owned shares are contributed to the plan in lieu of cash. The
proceeds from our matching contributions are used to purchase
shares of our Common Stock in the open market. The shares
purchased with our matching contributions are held for the
account of each participant. Shares purchased with matching
contributions vest after three years unless the participant
terminates employment by reason of his or her disability, death
or retirement or there is a change of control of
ProAssurance, in which case the vesting would be accelerated.
Non-Equity Incentive Plan Awards. The
Non-Equity Incentive Plan Awards reflect the right to receive
incentive compensation for 2009 under the ProAssurance
Corporation 2008 Annual Incentive Compensation Plan under the
guidelines recommended by the Compensation Committee and
ratified by the Board of Directors at its meeting on
March 4, 2009. Incentive awards are expressed as a
percentage of base salary. The Named Executive Officers, except
for Dr. Brant, are eligible to receive the following
percentage of their respective base salaries as their targeted
incentive compensation for 2009: Mr. Starnes
125%; Mr. Adamo 95%; Mr. Rand
85%; Mr. Friedman 85%. Annual incentive awards
are based on corporate performance and individual performance,
and each of the criteria are assigned a percentage share of the
annual incentive compensation under Executive
Compensation Annual Incentive Compensation
beginning on page 24 of this proxy statement. A threshold
and a target are established for each performance criteria. The
Compensation Committee uses these performance criteria as
guidelines in determining the amount of annual incentive
compensation to be paid to the Named Executive Officers. If the
threshold is met but the target is not achieved for any of the
performance criteria, the Compensation Committee may reduce the
incentive compensation below the targeted amount; conversely, if
the target for any of the performance criteria is exceeded, the
Compensation Committee may increase the incentive compensation
up to a maximum pre-established percentage of base salary. The
target goals for each of the performance criteria in 2009 and
the credit given for each of the corporate performance criteria
are set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2009
|
|
2009
|
Performance Criteria
|
|
Target
|
|
Annual
|
|
Credit
|
|
Stock Performance (Percentage above Index)
|
|
|
25
|
%
|
|
|
1.76
|
%
|
|
|
|
|
Retention
|
|
|
85
|
%
|
|
|
89
|
%
|
|
|
24.8
|
%
|
Combined Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO and President
|
|
|
96
|
%
|
|
|
63
|
%
|
|
|
90
|
%
|
Other Senior Executives
|
|
|
96
|
%
|
|
|
63
|
%
|
|
|
60
|
%
|
The annual incentive compensation paid to the Named Executive
Officers in 2010 for 2009 is reflected in the Summary
Compensation Table. The annual incentive compensation comprised
the following percentages of base
32
salary of the senior executive officers: Starnes
125%; Rand 85%; Adamo 95%;
Friedman 85%. The percentages reflect the individual
component for Messrs. Rand and Friedman. We used the shares
of Common Stock reserved for issuance under our 2008 Equity
Incentive Plan to fund the stock portion of our annual incentive
payments.
Dr. Brant received annual incentive compensation for 2009
under PICAs annual incentive plan that was established
prior to our acquisition of PICA in April 2009. The 2009 annual
incentive compensation for Dr. Brant is reflected in the
Summary Compensation Table and is described under
Executive Compensation PICA Compensation
beginning on page 27 of this proxy statement.
Equity Incentive Plan Awards. The Compensation
Committee has granted performance shares to the Named Executive
Officers and our senior executives. The performance shares are
included in the table as Estimated Future Payments under
Equity Incentive Plan Awards.
A performance share is the equivalent of one share of Common
Stock which becomes vested and nonforfeitable upon the
attainment of performance objectives established by the
Compensation Committee. The Compensation Committee establishes
the performance objectives and the length of the performance
period to attain such objectives at the time a performance share
is awarded. The Compensation Committee may prescribe different
conditions for different participants, but the performance
objectives for performance shares awarded to a participant must
relate to at least one of the objective criteria listed in the
plan. Such criteria may be based on the performance of
ProAssurance or a subsidiary or a business segment (either alone
or on a comparative basis relative to other companies. The
Compensation Committee determines whether the performance
objectives for performance shares have been attained at the end
of each participants performance period, or if one or more
interim periods are authorized by the Compensation Committee, at
the end of an interim period within the relevant performance
period. If the Compensation Committee determines that such
performance objectives have been obtained, the participant will
be entitled to receive payment for each performance share in an
amount equal to the value of one share of our Common Stock on
the date of payment. In 2009, the Board of Directors, on the
recommendation of the Compensation Committee, granted
performance shares to the Named Executive Officers, except
Dr. Brant who was not eligible on the date of grant. The
performance criteria are described in the discussion under
Executive Compensation Long-Term Incentive
Compensation on page 25 of this proxy statement. The
performance shares are payable if any of the performance
criteria are met in the three year period ending
December 31, 2011.
All Other Stock Awards. The shares reflected
in the table under All Other Stock Awards include shares
purchased with matching grants under the Stock Ownership Plan
and restricted stock units (RSUs) granted under the 2008 Equity
Incentive Plan. The RSUs are denominated in shares of stock but
no shares of common stock are actually issued to a participant
at the time the RSUs are granted. The RSUs are payable in cash
and shares of stock when they are vested. RSUs vest if a grantee
remains continuously employed for a period of three years from
date of grant unless sooner accelerated upon termination of
employment by reason of death, disability or good reason.
All Other Option Awards. The Board of
Directors has granted stock options to the Named Executive
Officers and other key employees of ProAssurance and its
subsidiaries under the 2004 Equity Incentive Plan. The exercise
price for each option must not be less than 100% of the market
value of a share of our Common Stock on the date of grant. Under
the terms of the 2004 Equity Incentive Plan the stock options
become exercisable in five equal annual installments or at such
other time(s) as may be specified by the Compensation Committee
at the time of grant.
33
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
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|
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|
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|
|
|
|
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|
|
|
Incentive
|
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|
|
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|
Equity
|
|
Plan
|
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|
|
|
|
Incentive
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Market
|
|
|
Option
Awards(1)
|
|
|
|
|
|
Awards
|
|
or Payout
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Unearned
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
Number
|
|
Value of
|
|
Shares,
|
|
Shares
|
|
|
|
|
|
|
Awards
|
|
|
|
|
|
of Shares
|
|
Shares or
|
|
Units or
|
|
Units or
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
or Units
|
|
Units of
|
|
Other
|
|
Other
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
of Stock
|
|
Stock
|
|
Rights
|
|
Rights
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
That
|
|
That
|
|
That
|
|
That
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
Have
|
|
Have
|
|
Have
|
|
Have
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Option
|
|
Not
|
|
Not
|
|
Not
|
|
Not
|
|
|
(#)
|
|
(#)
|
|
Options
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)(2)
|
|
($)
|
|
(#)(3)
|
|
($)
|
|
W. Stancil Starnes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/6/08 -8,333
|
|
|
|
447,565
|
|
|
|
7/2/07 - 100,000
|
|
|
|
|
|
|
|
|
56.15
|
|
|
|
7/2/17
|
|
|
|
3/1/08 - 112
|
|
|
|
6,016
|
|
|
|
2/26/09 - 10,000
|
|
|
|
537,100
|
|
|
|
2/28/08 - 8,000
|
|
2/28/08 - 12,000
|
|
|
|
|
|
|
54.28
|
|
|
|
9/1/18
|
|
|
|
3/1/09 - 126
|
|
|
|
6,767
|
|
|
|
2/26/09 - 4,000
|
|
|
|
214,840
|
|
Edward L. Rand, Jr.
|
|
11/9/04 - 10,000
|
|
|
|
|
|
|
|
|
36.46
|
|
|
|
11/9/14
|
|
|
|
3/1/07 - 117
|
|
|
|
6,284
|
|
|
|
3/7/07 - 5,210
|
|
|
|
279,829
|
|
|
|
3/9/05 - 25,000
|
|
|
|
|
|
|
|
|
41.15
|
|
|
|
3/9/15
|
|
|
|
3/1/08 - 112
|
|
|
|
6,016
|
|
|
|
3/6/08 - 5,210
|
|
|
|
279,829
|
|
|
|
3/8/06 - 10,000
|
|
3/8/06 - 2,500
|
|
|
|
|
|
|
51.38
|
|
|
|
3/8/16
|
|
|
|
3/2/09 - 126
|
|
|
|
6,767
|
|
|
|
2/26/09 - 5,210
|
|
|
|
279,829
|
|
|
|
3/7/07 - 7,500
|
|
3/7/07 - 5,000
|
|
|
|
|
|
|
51.48
|
|
|
|
3/7/17
|
|
|
|
|
|
|
|
|
|
|
|
2/26/09 - 2,085
|
|
|
|
111,985
|
|
|
|
2/28/08 - 5,000
|
|
2/28/08 - 7,500
|
|
|
|
|
|
|
54.28
|
|
|
|
9/1/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victor T. Adamo
|
|
3/9/05 -- 37,500
|
|
|
|
|
|
|
|
|
41.15
|
|
|
|
3/9/15
|
|
|
|
3/1/07 - 117
|
|
|
|
6,284
|
|
|
|
3/7/07 - 6,250
|
|
|
|
335,688
|
|
|
|
3/8/06 - 12,000
|
|
3/8/06 - 3,000
|
|
|
|
|
|
|
51.38
|
|
|
|
3/8/16
|
|
|
|
3/1/08 - 112
|
|
|
|
6,015
|
|
|
|
3/6/08 - 6,250
|
|
|
|
335, 688
|
|
|
|
3/7/07 - 9,000
|
|
3/7/07 - 6,000
|
|
|
|
|
|
|
51.48
|
|
|
|
3/7/17
|
|
|
|
3/2/09 - 126
|
|
|
|
6,767
|
|
|
|
2/26/09 - 6,250
|
|
|
|
335,688
|
|
|
|
2/28/08 - 6,000
|
|
2/28/08 - 9,000
|
|
|
|
|
|
|
54.28
|
|
|
|
9/1/18
|
|
|
|
|
|
|
|
|
|
|
|
2/26/09 - 2,500
|
|
|
|
134,275
|
|
Howard H. Friedman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/7/07 -5,210
|
|
|
|
279,829
|
|
|
|
1/15/02 - 40,000
|
|
|
|
|
|
|
|
|
16.80
|
|
|
|
1/15/12
|
|
|
|
3/1/07 - 117
|
|
|
|
6,284
|
|
|
|
3/6/08 - 5,210
|
|
|
|
279,829
|
|
|
|
3/3/03 - 25,000
|
|
|
|
|
|
|
|
|
22.00
|
|
|
|
3/3/13
|
|
|
|
3/1/08 - 112
|
|
|
|
6,016
|
|
|
|
2/26/09 - 5,210
|
|
|
|
279,829
|
|
|
|
3/10/04 - 25,000
|
|
|
|
|
|
|
|
|
33.28
|
|
|
|
3/10/14
|
|
|
|
3/2/09 - 126
|
|
|
|
6,767
|
|
|
|
2/26/09 - 2,085
|
|
|
|
111,985
|
|
|
|
3/9/05 - 25,000
|
|
|
|
|
|
|
|
|
41.15
|
|
|
|
3/9/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/8/06 - 10,000
|
|
3/8/06 - 2,500
|
|
|
|
|
|
|
51.38
|
|
|
|
3/8/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/7/07 - 7,500
|
|
3/7/07 - 5,000
|
|
|
|
|
|
|
51.48
|
|
|
|
3/7/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/08 - 5,000
|
|
2/28/08 - 7,500
|
|
|
|
|
|
|
54.28
|
|
|
|
9/1/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry D. Brant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/1/09
|
|
|
|
38
|
|
|
|
2,041
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Table reflects date of grant for each option award. Option
Awards granted prior to 2005 were granted under the ProAssurance
Corporation Incentive Compensation Stock Plan adopted in 1995.
Option Awards granted in or after 2005 were granted under the
2004 Equity Incentive Plan. Except for the fully vested options
granted to Mr. Starnes in connection with his employment,
the options vest over five years commencing six months after
date of grant at the rate of 20% per year and terminate ten
years after the date of grant. |
|
(2) |
|
The Stock Awards not vested reflect the number of shares
purchased with matching contributions made by ProAssurance under
the terms of the Stock Ownership Plan and the number of
restricted stock units granted under the 2008 Equity Incentive
Plan. |
|
|
|
|
|
The matching contributions under the Stock Ownership Plan are
made in March of each year and are applied to the purchase of
shares of our Common Stock in the open market. The date of
purchase is reflected as the date of grant. The shares fully
vest three years after the date of grant if the plan participant
is employed by ProAssurance or a subsidiary during such three
year period. Vesting of the shares is accelerated upon the
death, disability or retirement of plan participant or upon a
change of control of ProAssurance. |
|
|
|
The restricted stock units or RSUs are denominated in shares of
common stock but no shares are issued on date of grant. Each RSU
is payable in cash and shares of common stock in an amount equal
to the market value of a share of common stock on the date of
vesting. RSUs vest three years after the date of grant if the
grantee is continuously employed by ProAssurance or a subsidiary
unless vesting is accelerated upon termination of employment by
reason of death, disability or good reason or upon a change of
control of ProAssurance. |
34
|
|
|
(3) |
|
The Equity Incentive Plan Awards reflect the performance shares
granted to the Named Executive Officers under the 2004 Equity
Incentive Plan and 2008 Equity Incentive Plan. The performance
shares vest if ProAssurance achieves performance criteria
discussed under Executive Compensation
Long-Term Incentive Compensation on page 25 of this
proxy statement during the three year period commencing on the
date of grant. The number of unearned performance shares assumes
the Named Executive Officer will earn the maximum number of
performance shares |
OPTION
EXERCISES AND STOCK VESTED
(During Last Completed Fiscal Year)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards(1)
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
Stock
Awards(2)
|
|
|
Acquired on
|
|
Value Realized on
|
|
Number of Shares
|
|
Value Realized on
|
|
|
Exercise
|
|
Exercise
|
|
Acquired on Vesting
|
|
Vesting
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
W. Stancil Starnes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward L. Rand, Jr.
|
|
|
|
|
|
|
|
|
|
|
5,326
|
|
|
|
253,932
|
|
Victor T. Adamo
|
|
|
|
|
|
|
|
|
|
|
6,364
|
|
|
|
303,445
|
|
Howard H. Friedman
|
|
|
10,000
|
|
|
|
362,500
|
|
|
|
5,326
|
|
|
|
253,932
|
|
Jerry D. Brant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The value realized on exercise of options reflects the
difference between the exercise price for the shares of our
Common Stock purchased on the exercise of an outstanding option
and the market price of such shares of Common Stock based on the
closing price of a share of our Common Stock on the NYSE on the
date of exercise. Options surrendered in cashless
exercises are valued in this table as if they were exercised and
sold on the date of exercise. |
|
(2) |
|
The shares acquired on vesting are shares of our Common Stock
that have been purchased with ProAssurances matching
contributions under the Stock Ownership Plan and performance
shares previously granted under the 2004 Equity Incentive Plan
that vested upon satisfaction of the performance criteria at the
end of the three year performance period. The value realized
reflects the market price of the vested shares on the date of
vesting. |
NON-QUALIFIED
DEFERRED COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions in
|
|
Contributions in
|
|
Earnings
|
|
Withdrawals/
|
|
Balance
|
|
|
2009
|
|
2009
|
|
in Last FY
|
|
Distributions
|
|
at Last FYE
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
W. Stancil Starnes
|
|
|
55,000
|
|
|
|
55,000
|
|
|
|
40,007
|
|
|
|
|
|
|
|
150,007
|
|
Edward L. Rand, Jr.
|
|
|
26,000
|
|
|
|
11,516
|
|
|
|
37,969
|
|
|
|
|
|
|
|
189,083
|
|
Victor T. Adamo
|
|
|
126,100
|
|
|
|
9,284
|
|
|
|
96,828
|
|
|
|
|
|
|
|
525,404
|
|
Howard H. Friedman
|
|
|
78,000
|
|
|
|
4,811
|
|
|
|
78,008
|
|
|
|
|
|
|
|
387,501
|
|
Jerry D. Brant
|
|
|
13,530
|
|
|
|
49,047
|
|
|
|
57,640
|
|
|
|
|
|
|
|
541.321
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
25,149
|
|
|
|
|
|
|
|
749,619
|
|
|
|
|
(1) |
|
Dr. Brant was eligible to participate in two nonqualified
deferred compensation plans at PICA prior to our acquisition of
PICA. All prior contributions to the plans by PICA were fully
vested at the time of our acquisition of PICA. We agreed that
PICA could make contributions for Dr. Brant and other PICA
directors and officers under its Nonqualified Supplemental
Deferred Compensation Plan for 2009 and that we would continue
this plan in effect but not make any further contributions to
the plan after 2009. Contributions made by PICA and credited to
the account of Dr. Brant in 2009 are fully vested and
payable to him upon separation of employment for any reason. |
Effective January 1, 2005, we adopted the Executive
Nonqualified Excess Plan of ProAssurance Group, or the deferred
compensation plan, for the benefit of eligible employees and
directors. The employees eligible to participate in the plan are
vice presidents and above of ProAssurance and any other
employees whose annual
35
compensation exceeds $95,000 (adjusted for future cost of living
increases made to the similar dollar limit that applies to the
definition of highly compensated employee found in
the Internal Revenue Code).
Under the deferred compensation plan, an eligible employee may
elect to defer up to 75% of his or her base salary. A director
may elect to defer up to 100% of his or her director fees or
other cash compensation. Effective January 1, 2006, we
amended our deferred compensation plan to provide for additional
matching employer contributions on behalf of employees whose
base compensation exceeds our qualified plans compensation
limit. For these employees, we match salary reductions in an
amount up to 10% of the amount by which their base compensation
exceeds the compensation limit.
Deferred amounts are contributed to the deferred compensation
plan and contributions are credited with deemed investment
earnings as if they were invested in one or more designated
mutual funds pursuant to an investment election made by the
participants as of the date of deferral. Deferred amounts are
actually invested in the designated mutual fund and held in a
trust until distribution. Distributions under the plan are made
upon termination of employment or service, death, disability, or
upon a change of control. Distributions are made in a lump sum
or annual installments over a period not exceeding 10 years
as elected by the participant. A separate distribution election
can be made with respect to each years deferrals and
matching contributions.
Employment
and Severance Agreements
The Board of Directors elected W. Stancil Starnes to succeed A.
Derrill Crowe as CEO effective July 1, 2007. In connection
with his employment as CEO, we entered into an employment
agreement with Mr. Starnes effective May 1, 2007,
which provided for the following:
|
|
|
|
|
a term of five years that extends automatically for an
additional term of five years on each July 1 until July 1,
2013 (at which time the term will not be extended and will
expire on July 1, 2018);
|
|
|
|
a minimum base salary of $750,000 subject to annual increases at
the discretion of the Board of Directors;
|
|
|
|
annual incentive compensation equal to 100% of base salary for
2007 (pro rata) and at least 100% of base salary for 2008;
annual incentive compensation after 2008 is based entirely on
performance criteria established by the Board of Directors
consistent with the criteria for other senior executive officers;
|
|
|
|
one-time grant of options to purchase 100,000 shares of
Common Stock at an exercise price equal to 100% of the market
value on the effective date of July 2, 2007;
|
|
|
|
annual grant of equity compensation having an aggregate value of
at least $500,000 based on the method ProAssurance uses to
calculate compensation expense with respect to such awards for
financial reporting purposes;
|
|
|
|
perquisites consistent with those currently provided to the
prior CEO, including without limitation, up to 50 hours of
personal use on the corporate airplane; and
|
|
|
|
severance payments upon a termination of employment and payments
upon a change of control as discussed in more detail under the
caption Payments on Termination and Change of
Control.
|
At the closing of our acquisition of PICA on April 2, 2009,
we entered into an employment agreement with Jerry D. Brant to
continue his employment as the Chief Executive Officer of PICA.
Dr. Brant is a Named Executive Officer and a director of
ProAssurance. The terms of his employment agreement are
described under Executive Compensation PICA
Compensation beginning on page 27 of this proxy
statement.
Payments
on Termination and Change of Control
The employment agreements with Mr. Starnes and
Dr. Brant provide for severance benefits under certain
circumstances. We have also entered into a Release and Severance
Compensation Agreement (a Severance Agreement) with
each of Messrs. Adamo, Rand, Friedman and several other key
executives. In addition, ProAssurance is required to enter into
a Severance Agreement with Dr. Brant for a term of three
years upon the expiration of the three year term of his
employment agreement.
36
Named
Executive Officers and Directors Covered Under Severance
Agreements.
We have entered into Severance Agreements with
Messrs. Adamo, Friedman and Rand that provide severance
benefits if we terminate their employment without cause or if
they voluntarily resign for good reason. They may
assert good reason for, among other reasons, a material
reduction in compensation or position and change in location of
employment. In addition the termination of the Severance
Agreements prior to the executive reaching 65 years of age
will constitute good reason.
Absent a change of control transaction, each of
Messrs. Rand and Friedman is entitled to severance
compensation in an amount equal to the sum of his annual base
salary and his average annual incentive compensation (generally
calculated as the average of the prior three years).
Mr. Adamo is entitled to severance compensation in an
amount equal to two times the sum of his annual base salary and
his average annual incentive compensation.
The Severance Agreements for Messrs. Friedman and Rand and
other senior executives were revised effective January 1,
2008 to provide additional severance benefits after a change of
control. Each of them will receive severance compensation in an
amount equal to two times the sum of his annual base salary and
his average annual incentive compensation and reimbursement for
the continuation of health benefits for up to eighteen months
upon satisfaction of the following double trigger
requirements:
|
|
|
|
|
a change of control of ProAssurance occurs; and
|
|
|
|
we or our successor terminate the executives employment
without cause or the executive resigns for good reason, in
either case within two years after the change of control.
|
The Severance Agreement with Mr. Adamo includes a modified
single trigger that permits Mr. Adamo, until
December 31, 2010, to unilaterally elect to terminate his
employment for any reason, including a change of control, and
receive severance benefits. Subsequent to December 31,
2010, Mr. Adamos agreement functions in the same
manner as described for Messrs. Friedman and Rand, except
that his agreement provides for severance compensation at two
times the sum of base salary and average annual incentive
compensation and for no increase in the amount of severance
compensation after a change of control.
Officers
and Directors Covered by Employment Agreements.
Mr. Starnes is entitled to severance compensation in an
amount equal to his current base salary for the remaining term
of his employment agreement if we terminate his employment
without cause or if he resigns for good reason.
Mr. Starnes five year term automatically renews until
2013, at which time the termination date is fixed in 2018.
Dr. Brant is entitled to severance compensation in an
amount equal to the sum of his annual base salary for the
remainder of the term plus three times his annual base salary
if, during the term of his employment agreement, we terminate
Dr. Brant without cause or Dr. Brant terminates his
employment for good reason. If Dr. Brant terminates his
employment due to health reasons during the term of his
employment agreement, he will receive severance compensation
equal to his annual base salary. Good reason includes demotion,
relocation, and material reduction in base salary or incentive
compensation opportunities.
Each of the employment agreements with Mr. Starnes and
Dr. Brant provide for a single trigger for the payment of
severance benefits on a change of control. Each employment
agreement automatically terminates upon the occurrence of a
change of control and provides for the payment of an amount
equal to the severance compensation that would be due if the
executive had resigned for good reason upon the change of
control transaction.
The Severance Agreement to be entered into with Dr. Brant
also includes a single trigger that will permit Dr. Brant
to unilaterally elect to terminate employment for any reason,
including a change of control, and receive severance benefits.
If Dr. Brant elects to terminate his employment or if
ProAssurance terminates him without cause, Dr. Brant will
be entitled to severance compensation in an amount equal to his
then current base salary for the remainder of the three year
term of his Severance Agreement.
37
Provisions
Applicable to Employment Agreements and Severance
Agreements.
The terms of employment agreements with Messrs. Starnes and
Brant, the Severance Agreements with the other Named Executive
Officers, and the Severance Agreement to be entered into with
Dr. Brant, require us to reimburse them if they are
required to pay the excise tax imposed on change of control
benefits deemed to be excess parachute payments
under Section 280G of the Internal Revenue Code. If the
payments made to an executive by reason of a change of control
are deemed to be excess parachute payments and are subject to
the excise tax imposed by Code Section 4999, we will pay
the executive such amount as will allow the executive to be
fully reimbursed for all payments incurred by reason of the
imposition of the excise tax and for all income taxes
attributable to such reimbursement.
The employment agreements and the Severance Agreements require a
terminated executive to release us from all claims relating to
his employment as a condition to the provision of severance
benefits. These agreements also include a covenant that
obligates the executive not to compete with us for a period
after termination that is equal in duration to the number of
months of base salary payable to the executive as severance
compensation (exceptions are three year periods for
Messrs. Starnes and Brant under their employment agreements
and Mr. Adamo under his severance agreement). The severance
compensation is payable in equal monthly installments over a
period that is at least equal in duration to the duration of the
covenant not to compete. If an executive violates the covenant
not to compete, ProAssurance may terminate future installment
payments of severance compensation. Payment of severance
compensation to Messrs. Starnes and Brant is accelerated
and payable in lump sum upon a change of control under their
employment agreements.
The following table sets forth the amounts payable to the Named
Executive Officers upon termination of their employment by
reason of retirement, death or disability, and involuntary
termination (termination by ProAssurance without cause and by
the executive for good reason) and upon a change of control. The
table assumes payment as if the termination of employment or
change of control occurred on December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Death or
|
|
|
Involuntary
|
|
|
After Change
|
|
|
Change
|
|
|
|
Retirement
|
|
|
Disability
|
|
|
Termination(1)
|
|
|
of
Control(1)
|
|
|
of Control
|
|
|
W. Stancil Starnes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance-Annual Salary
|
|
|
|
|
|
|
|
|
|
|
3,615,300
|
|
|
|
3,615,300
|
|
|
|
3,615,300
|
|
Cash Severance-Average Annual Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation
Vesting(2)
|
|
|
1,764,311
|
|
|
|
1,764,311
|
|
|
|
1,764,311
|
|
|
|
1,764,311
|
|
|
|
1,764,311
|
|
Deferred
Compensation(3)
|
|
|
143,248
|
|
|
|
143,248
|
|
|
|
143,248
|
|
|
|
143,248
|
|
|
|
143,248
|
|
Medical Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,857,082
|
|
|
|
1,857,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
1,907,559
|
|
|
|
1,907,559
|
|
|
|
5,522,859
|
|
|
|
7,379,941
|
|
|
|
7,379,941
|
|
Edward L. Rand, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance-Annual Salary
|
|
|
|
|
|
|
|
|
|
|
417,500
|
|
|
|
835,000
|
|
|
|
|
|
Cash Severance-Average Annual Incentive
|
|
|
|
|
|
|
|
|
|
|
279,193
|
|
|
|
558,535
|
|
|
|
|
|
Equity Compensation
Vesting(2)
|
|
|
386,983
|
|
|
|
386,983
|
|
|
|
386,983
|
|
|
|
386,983
|
|
|
|
386,983
|
|
Deferred
Compensation(3)
|
|
|
67,083
|
|
|
|
67,083
|
|
|
|
67,083
|
|
|
|
67,083
|
|
|
|
67,083
|
|
Medical Benefits
|
|
|
|
|
|
|
|
|
|
|
18,054
|
|
|
|
18,054
|
|
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
280G Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
928,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
454,066
|
|
|
|
454,066
|
|
|
|
1,178,813
|
|
|
|
2,804,303
|
|
|
|
454,066
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Death or
|
|
|
Involuntary
|
|
|
After Change
|
|
|
Change
|
|
|
|
Retirement
|
|
|
Disability
|
|
|
Termination(1)
|
|
|
of
Control(1)
|
|
|
of Control
|
|
|
Victor T.
Adamo(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance-Annual Salary
|
|
|
|
|
|
|
|
|
|
|
1,060,900
|
|
|
|
1,060,900
|
|
|
|
1,060,900
|
|
Cash Severance-Average Annual Incentive
|
|
|
|
|
|
|
|
|
|
|
842,168
|
|
|
|
842,168
|
|
|
|
842,168
|
|
Equity Compensation
Vesting(2)
|
|
|
420,952
|
|
|
|
420,952
|
|
|
|
420,952
|
|
|
|
420,952
|
|
|
|
420,952
|
|
Deferred
Compensation(3)
|
|
|
121,204
|
|
|
|
121,204
|
|
|
|
121,204
|
|
|
|
121,204
|
|
|
|
121,204
|
|
Medical Benefits
|
|
|
|
|
|
|
|
|
|
|
18,054
|
|
|
|
18,054
|
|
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
280G Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
542,156
|
|
|
|
542,156
|
|
|
|
2,473,278
|
|
|
|
2,473,278
|
|
|
|
2,455,224
|
|
Howard H. Friedman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance-Annual Salary
|
|
|
|
|
|
|
|
|
|
|
448,050
|
|
|
|
896,100
|
|
|
|
|
|
Cash Severance-Average Annual Incentive
|
|
|
|
|
|
|
|
|
|
|
299,323
|
|
|
|
598,645
|
|
|
|
|
|
Equity Compensation
Vesting(2)
|
|
|
386,983
|
|
|
|
386,983
|
|
|
|
386,983
|
|
|
|
386,983
|
|
|
|
386,983
|
|
Deferred
Compensation(3)
|
|
|
82,819
|
|
|
|
82,819
|
|
|
|
82,819
|
|
|
|
82,819
|
|
|
|
82,819
|
|
Medical Benefits
|
|
|
|
|
|
|
|
|
|
|
18,054
|
|
|
|
18,054
|
|
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
280G Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
892,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
469,802
|
|
|
|
469,802
|
|
|
|
1,245,229
|
|
|
|
2,884,859
|
|
|
|
469,802
|
|
Dr. Jerry Brant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance-Annual Salary
|
|
|
|
|
|
|
|
|
|
|
2,423,958
|
|
|
|
2,423,958
|
|
|
|
2,423,958
|
|
Cash Severance-Average Annual Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation Vesting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Compensation(3)
|
|
|
1,290,940
|
|
|
|
1,290,940
|
|
|
|
1,290,940
|
|
|
|
1,290,940
|
|
|
|
1,290,940
|
|
Medical Benefits
|
|
|
|
|
|
|
|
|
|
|
18,054
|
|
|
|
18,054
|
|
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
1,290,940
|
|
|
|
1,290,940
|
|
|
|
3,732,952
|
|
|
|
3,732,952
|
|
|
|
3,714,898
|
|
|
|
|
(1) |
|
Involuntary termination of employment does not include
termination of employment of the executive when we terminate for
cause or when the executive terminates without good reason. On
any such event, no cash severance compensation will be paid to
the executive and all unvested options, grant shares and
performance shares will be forfeited. The executive will receive
all of his account in the Deferred Compensation Plan. |
|
(2) |
|
The value of the acceleration of equity compensation benefits is
calculated to reflect our accounting expense for the unvested
stock options, performance shares and stock awards that have not
been earned for financial reporting purposes. The value of the
unvested awards is based on the market value of a share of
Common Stock of $53.71 based on the closing price on the NYSE on
December 31, 2009. |
|
(3) |
|
Reflects only the employer contributions that we contributed for
the account of the executive under the Deferred Compensation
Plan and all earnings (losses) that have accrued on the
executives account, except that the amount for
Dr. Brant includes amounts that he contributed to
PICAs plan prior to our acquisition of PICA. The other
executives will also be entitled to return of those amounts
contributed to the plan as a deferral of executives then
current compensation. The amount in the table excludes benefits
that are payable upon retirement under our qualified retirement
plan. |
|
(4) |
|
Mr. Adamos Severance Agreement includes a modified
single trigger that permits Mr. Adamo, until
December 31, 2010, to unilaterally elect to terminate his
employment for any reason, including a change of control, and
receive severance benefits. |
39
DIRECTOR
COMPENSATION
(During Last Completed Fiscal Year)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
Earned
|
|
|
|
|
|
Non-Equity
|
|
Nonqualified
|
|
|
|
|
|
|
or Paid
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Deferred
|
|
All Other
|
|
|
|
|
in Cash
|
|
Awards(1)
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Earnings
|
|
($)
|
|
($)
|
|
Lucian F. Bloodworth
|
|
|
52,000
|
|
|
|
61,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,991
|
|
Robert E. Flowers
|
|
|
38,000
|
|
|
|
61,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(4)
|
|
|
105,991
|
|
William J. Listwan
|
|
|
38,000
|
|
|
|
61,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,000
|
(2)
|
|
|
143,991
|
|
John J. McMahon, Jr.
|
|
|
39,000
|
|
|
|
61,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,991
|
|
Drayton Nabers, Jr.
|
|
|
54,000
|
|
|
|
61,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,991
|
|
John P. North,
Jr.(3)
|
|
|
21,000
|
|
|
|
61,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
(3)
|
|
|
117,991
|
|
Ann F. Putallaz
|
|
|
50,000
|
|
|
|
61,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111,991
|
|
William H. Woodhams
|
|
|
38,000
|
|
|
|
61,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
(4)
|
|
|
101,991
|
|
Wilfred W. Yeargan, Jr.
|
|
|
38,000
|
|
|
|
61,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(4)
|
|
|
105,991
|
|
|
|
|
(1) |
|
Includes 1,297 shares of Common Stock granted to the
directors on May 20, 2009 as stock awards under the 2008
Equity Incentive Plan. The closing price of a share of Common
Stock on the NYSE on the date of grant was $43.17. Also includes
126 shares for each of the directors purchased with
matching contributions under the Amended and Restated Employee
Stock Ownership Plan on March 2, 2009. |
|
(2) |
|
ProAssurance has engaged Dr. Listwan to provide consulting
services to ProAssurance and PRA Wisconsin in consideration of
an annual retainer of $44,000. |
|
(3) |
|
Mr. Norths term of office as director of ProAssurance
effective May 20, 2009. ProAssurance has engaged
Mr. North to provide consulting services in consideration
of a monthly retainer of $5,000. |
|
(4) |
|
Fees paid for attendance at regional claims committee meetings. |
The annual retainer for non-management directors is $28,000. In
addition to this annual retainer, the Chairman of the Audit
Committee receives an annual retainer of $14,000 and the other
members of the Audit Committee receive an annual retainer of
$8,000. Independent directors also receive meeting fees in the
amount of $2,000 for each day the director attends a board
meeting, and $1,000 for attendance at committee meetings that
are not held on the same day as board meetings. Directors
continue to be eligible to participate in the Stock Ownership
Plan.
Drs. Flowers, Woodhams and Yeargan received fees for attendance
at regional claims committee meetings that are reflected in the
table as Other Compensation. They will no longer
receive compensation as members of these claims committees as a
result of their appointment to the Professional Liaison
Committee established in December 2009 as a standing committee
of the Board. It is anticipated that they will receive
compensation as directors for service on the new Board committee
in an amount comparable to the amount reflected in the table as
Other Compensation.
Our Board of Directors has adopted the ProAssurance Corporation
Director Deferred Stock Compensation Plan to facilitate director
stock compensation approved by the Compensation Committee. The
plan provides that the Compensation Committee will meet before
the annual meeting each year to consider whether or not to
provide stock compensation to independent directors. If granted
by the Compensation Committee, the stock compensation is payable
in whole shares of our Common Stock with a total value not to
exceed the amount fixed by the Compensation Committee. The award
is calculated using the NYSE closing price of a share of our
Common Stock on the date of our annual meeting. Effective with
the annual meeting in 2009, the Board increased the dollar value
of the stock award from $50,000 to $56,000. Shares for 2009 and
future years will be payable from the shares reserved for
issuance under the 2008 Equity Incentive Plan. Under the terms
of the Director Deferred Stock Compensation Plan, our Directors
may elect either to receive the shares of Common Stock currently
or to defer the receipt of the shares until their service as a
director has ended.
Management directors do not receive any additional cash or stock
compensation for their service as directors.
40
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our directors and executive officers, and
persons who own more than 10% of a registered class of our
equity securities, to file reports of ownership of, and
transactions in, our equity securities with the SEC, which are
called Section 16 Reports. Such directors, executive
officers and 10% stockholders are also required to furnish us
with copies of all Section 16 Reports they file. Purchases
and sales of our equity securities by such persons are published
on our website at www.ProAssurance.com.
Based on a review of the copies of such Section 16 Reports
we received, and on written representations from our reporting
persons, we believe that all Section 16(a) filing
requirements applicable to our directors, executive officers and
10% stockholders were complied with during fiscal year 2009.
TRANSACTIONS
WITH RELATED PERSONS
Our Code of Ethics and Conduct addresses conflicts of interest
that arise when an employee or member of his or her family
receives a personal benefit in a transaction involving
ProAssurance or a subsidiary. Generally, employees are required
to report any situation involving an actual or potential
conflict of interest to ProAssurance for a determination of
whether it involves a permissible conflict of interest. The Code
of Ethics and Conduct provides specific guidance as to the
following situations:
|
|
|
|
|
Employees are prohibited from (i) taking for themselves
personally opportunities that are discovered through the use of
ProAssurances information or position, (ii) using
ProAssurances property, information or position for
personal gain, and (iii) competing with ProAssurance.
|
|
|
|
If ProAssurance or a subsidiary does business or considers doing
business with a company in which an employee or member of his or
her family is employed or has a material financial or other
interest, the employee must disclose the interest to his or her
supervisor if he or she is aware of the proposed business
relationship and refrain from participating in the approval
process.
|
|
|
|
If an employee participates in religious, charitable,
educational or civic activities, good judgment must be exercised
to abstain from involvement in activities which would present a
conflict of interest or interfere with responsibilities to or
the reputation of ProAssurance.
|
ProAssurance adopted written policies and procedures for the
review, approval or ratification of personal travel on corporate
aircraft effective December 1, 2006. Pursuant to
ProAssurances policies and procedures for the approval of
personal travel on corporate aircraft, which we refer to in this
proxy statement as the Policies and Procedures for Personal Use
of Aircraft, senior executive officers, directors and such other
employees of ProAssurance or its subsidiaries as may be
designated by the Chief Executive Officer may use the corporate
aircraft for personal travel if the aircraft is not otherwise
required for business-related travel, upon reasonable notice to
the Chief Executive Officer. As used in the Policies and
Procedures for Personal Use of Aircraft, personal travel
includes travel for entertainment, amusement or recreational
purposes as described in Internal Revenue Service Notice
2005-45.
The Compensation Committee of the Board of Directors will
establish, after reviewing the cost of the personal travel, the
number of flight hours for which the Chief Executive Officer may
use the corporate aircraft for personal travel in the succeeding
twelve month period without further approval of the Committee.
The Compensation Committee has established the number of
aggregate flight hours for which all other authorized users may
use the corporate aircraft for personal travel during the
succeeding twelve months with the approval of the Chief
Executive Officer as follows: 50 flight hours each for personal
travel by the Chief Executive Officer and 20 flight hours for
personal travel by other authorized users in the aggregate. The
Chief Executive Officer must get the prior approval of the
Compensation Committee before approving any personal travel
which exceeds the aggregate limit. The Compensation Committee
may delegate to any of its members the authority to approve
requests for personal travel in excess of established limits.
Both the Compensation Committee and the Chief Executive Officer
are responsible for applying the Policies and Procedures for
Personal Use of Aircraft.
In April 1, 2009, ProAssurance acquired all of the stock of
PICA through a cash sponsored demutualization of PICA that was
approved by the Illinois Director of Insurance. ProAssurance
purchased all of the stock created in the demutualization for
$135 million in cash. Dr. Jerry Brant was the chief
executive officer and a director of PICA. ProAssurance employed
Dr. Brant as President of PICA for a term of three years
following the transaction. His
41
employment agreement and the compensation payable to
Dr. Brant are described under Executive
Compensation in this proxy statement. The transaction was
the result of arms length negotiations because it occurred
before Dr. Brants election to the Board of Directors
of ProAssurance and he had no other relationship to ProAssurance
at that time.
PROPOSALS OF
STOCKHOLDERS
Stockholder
Nominations for Directors
Our Bylaws require that a stockholder who desires to nominate
directors at an annual meeting of stockholders must give us
written notice of his or her intent not later than December 1 in
the year preceding the annual meeting or such other date as may
be established by our Board of Directors for a particular annual
meeting by written notice to the stockholders. The
stockholders notice must set forth:
|
|
|
|
|
the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated;
|
|
|
|
a representation that the stockholder is a holder of record at
the time of such notice and intends to be a holder of record on
the record date for such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons
specified in the notice;
|
|
|
|
a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
or nominations are to be made by the stockholder;
|
|
|
|
such other information regarding each nominee proposed by such
stockholder as would have been required to be included in a
proxy statement filed pursuant to the proxy rules of the SEC had
the Board of Directors solicited proxies for the election of
such nominee at the meeting; and
|
|
|
|
the consent of each nominee to serve as a director of
ProAssurance if so elected.
|
Stockholder
Proposals for our 2011 Annual meeting
If you wish to present proposals for inclusion in the proxy
materials to be distributed by us in connection with our 2011
annual meeting, you must submit your proposal in proper form (in
accordance with the SEC
Rule 14a-8),
to our secretary on or before December 10, 2010, in order
for the proposal to be considered for inclusion in the proxy
statement for the 2011 annual meeting of
stockholders.1
Simply submitting a proposal does not guarantee its inclusion,
as the rules of the SEC make clear. The stockholders
notice must set forth:
|
|
|
|
|
a brief description of the business desired to be brought before
the meeting and the reasons for considering such matter or
matters at the meeting;
|
|
|
|
the name and address of the stockholder who intends to propose
such matter or matters;
|
|
|
|
a representation that the stockholder has been a holder of
record of stock of ProAssurance entitled to vote at such meeting
for a period of one year and intends to hold such shares through
the date of the meeting and appear in person or by proxy at such
meeting to propose such matter or matters;
|
|
|
|
any material interest of the stockholder in such matter or
matters; and
|
|
|
|
a description of all understandings or relationships between the
stockholder and any other person(s) (naming such persons) with
respect to the capital stock of ProAssurance as to the matter
specified in the notice.
|
The notice and any accompanying statement may not exceed 500
words. Stockholders are not permitted to submit proposals for
consideration at special meetings.
1 Our
Bylaws require any stockholder who desires to propose any
business at the annual meeting of stockholders (other than the
election of directors) to give us written notice not later than
December 1 in the year preceding the annual meeting at which the
proposal is to be considered or such other date as may be
established by the Board of Directors for a particular annual
meeting by written notice to the stockholders or in a report or
proxy statement filed with the SEC. This date is superceded, as
set forth above.
42
OTHER
MATTERS
Policies
on Reporting of Concerns Regarding Accounting and Other Matters
and on Communicating with Directors
We have adopted policies on reporting of concerns regarding
accounting and other matters and on communicating with our
directors. Any person, whether or not an employee, who has a
concern about the conduct of ProAssurance or any of our people,
including with respect to our accounting, internal accounting
controls or auditing issues, may, in a confidential or anonymous
manner, communicate that concern to the members of the Audit
Committee by using any of the methods described in the Corporate
Governance section on our website at www.ProAssurance.com.
Additionally, any person may communicate directly with our
independent directors by sending an
e-mail to
IndependentDirector@ProAssurance.com. Further information on the
procedure for these communications is available in the Corporate
Governance section of our website at www.ProAssurance.com.
Important
Notice Regarding Delivery of Stockholder Documents
Beneficial owners of Common Stock who share a single address may
receive only one copy of the Notice of Internet Availability or
the Proxy Materials, as the case may be, unless their broker,
bank, trustee or nominee has received contrary instructions from
any beneficial owner at that address. This practice, known as
householding, is designed to reduce printing and
mailing costs. If any beneficial shareholder(s) sharing a single
address wish to discontinue householding and receive a separate
copy of the Notice of Internet Availability or the Proxy
Materials, as the case may be, they may contact Broadridge,
either by calling
(800) 542-1061,
or by writing to Broadridge, Householding Department, 51
Mercedes Way, Edgewood, New York 11717.
A majority of brokerage firms have instituted householding. If
your family has multiple holdings in ProAssurance that are held
in street name with a broker, you may have received householding
notification directly from your broker. If so, please contact
your broker directly if you have any questions, if you require
additional copies of the proxy statement or annual report, if
you are currently receiving multiple copies of the proxy
statement and annual report and which to receive only a single
copy, or if you wish to revoke your decision to household and
thereby receive multiple statements and reports.
Incorporation
by Reference
To the extent that this proxy statement is incorporated by
reference into any other filing by ProAssurance under the
Securities Act of 1933, as amended, or the Exchange Act, the
sections of this proxy statement titled Report of the
Compensation Committee, and Report of the Audit
Committee (to the extent permitted by the rules of the
SEC), as well as the exhibits to this proxy statement, will not
be deemed incorporated, unless specifically provided otherwise
in such filing.
43
VOTE BY INTERNET www.proxyvote.com You may use the Internet to transmit your voting
instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Please have your proxy card in hand when you access the
web site and follow the instructions to obtain your records and to create an electronic voting
instruction form. PROASSURANCE CORPORATION 100 BROOKWOOD PLACE Electronic Delivery of Future PROXY
MATERIALS BIRMINGHAM, AL 35209 If you would like to reduce the costs incurred by our company in
mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and
annual reports electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet 1 Investor Address Line 1 and, when
prompted, indicate that you agree to receive or access proxy materials Investor Address Line 2
electronically in future years. Investor Address Line 3 1 1 OF Investor Address Line 4 VOTE BY
PHONE 1-800-690-6903 Investor Address Line 5 Use any touch-tone telephone to transmit your voting
instructions up until 11:59 John Sample P.M. Eastern Time the day before the cut-off date or
meeting date. Please have 1234 ANYWHERE STREET 2 your proxy card in hand when you call and then
follow the instructions. ANY CITY, ON A1A 1A1 VOTE BY MAIL Mark, sign and date your proxy card and
return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717. CONTROL # 000000000000 NAME THE COMPANY NAME INC.
- COMMON SHARES 123,456,789,012.12345 THE COMPANY NAME INC. CLASS A 123,456,789,012.12345 THE
COMPANY NAME INC. CLASS B 123,456,789,012.12345 THE COMPANY NAME INC. CLASS C
123,456,789,012.12345 THE COMPANY NAME INC. CLASS D 123,456,789,012.12345 THE COMPANY NAME INC. -
CLASS E 123,456,789,012.12345 THE COMPANY NAME INC. CLASS F 123,456,789,012.12345 THE COMPANY
NAME INC. 401 K 123,456,789,012.12345 PAGE 1 OF 2 x TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK
INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY
CARD IS VALID ONLY WHEN SIGNED AND DATED. For Withhold For All To withhold authority to vote for
any All All Except individual nominee(s), mark For All Except and write the number(s) of the The
Board of Directors recommends that you nominee(s) on the line below. 02 vote FOR the following: 0 0
0 1. Election of Directors 0000000000 Nominees 01 Victor T. Adamo, Esq. 02 William J. Listwan, MD
03 W. Stancil Starnes, Esq The Board of Directors recommends you vote FOR the following
proposal(s): For Against Abstain 2 To ratify the appointment of Ernst & Young LLP as independent
auditors 0 0 0 NOTE: If this proxy is properly executed, the shares of ProAssurance Corporation
common stock represented by this proxy will be voted as directed by the undersigned. If no
direction is made, the shares will be vote FOR the election as directors of all nominees listed
herein and FOR the ratification of the appointment of Ernst & Young LLP as independent auditors.
Such other business as may properly come before the meeting or any adjournment thereof. Investor
Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor
Address Line 5 Please sign exactly as your name(s) appear(s) hereon. When signing as John Sample
attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners
should each sign personally. All holders must 1234 ANYWHERE STREET sign. If a corporation or
partnership, please sign in full corporate or ANY CITY, ON A1A 1A1 partnership name, by authorized
officer. SHARES CUSIP # JOB # SEQUENCE # Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint
Owners) Date |
ProAssurance Corporation 100 Brookwood Place Birmingham, AL 35209-6811 Important Notice
Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement,
Annual Report is/ are available at www.proxyvote.com . PROASSURANCE CORPORATION This proxy is
solicited by the Board of Directors Annual Meeting of Shareholders 5/19/2010 10:00 AM CT The
undersigned stockholder of ProAssurance Corporation, or the Company, acknowledges receipt of the
Notice of the Annual Meeting of Shareholders and Proxy Statement, each dated April 1, 2010, and the
undersigned revokes all prior proxies and appoints Howard H. Friedman and Frank B. ONeil, and each
of them, as attorneys and proxies for the undersigned to vote all shares of common stock of the
Company which the undersigned would be entitled to vote at the Annual Meeting of Shareholders to be
held on the fifth floor of the headquarters of the Company, 100 Brookwood Place, Birmingham, AL
35209, at 10:00 a.m., Central Time, on Wednesday, May 19, 2010, or at any adjournment, continuation
or postponement thereof, and instructs said proxies to vote as indicated on the reverse.
R2.09.05.010 _2 0000060908 Continued and to be signed on reverse side |