DEF 14A
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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 20,
2009
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 20, 2009, on the
5th floor of the headquarters of ProAssurance, located at
100 Brookwood Place, Birmingham, AL 35209, for the following
purposes:
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(1)
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To elect four (4) directors of ProAssurance, as
Class II directors, to serve until the 2012 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 31, 2009, 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, 2008, 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 9, 2009
100
Brookwood Place
Birmingham, Alabama 35209
PROXY STATEMENT
Annual meeting of Stockholders
to be held May 20, 2009
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,
2009. 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 20, 2009, on the 5th floor of our
headquarters located at 100 Brookwood Place, Birmingham, AL
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 four (4) members to the
Board of Directors of ProAssurance, as Class II directors,
to serve until the 2012 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 31, 2009 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
33,083,968 outstanding shares of our common stock, par value
$0.01 per share (Common Stock). 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 should cast your proxy vote at www.proxyvote.com, regardless
of how you hold your shares. Be sure 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 19, 2009.
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, AL
35259-0009,
and the street address is 100 Brookwood Place, Birmingham, AL
35209.
Are the
materials for the annual meeting available on the
internet?
Yes. The materials for ProAssurances 2009 Annual Meeting
of Stockholders (the 2008 Annual Report to the Stockholders,
which includes our Annual Report on
Form 10-K
for the year ended December 31, 2008, Proxy Statement and
Proxy Card) are available on the internet. You may view these
documents at www.proxyvote.com. Our proxy statement and proxy
card for the 2009 Annual Meeting and our 2008 Annual Report will
be also available through the Investor Relations
section of our website at www.ProAssurance.com until at least
May 20, 2010. 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 our 2008 Annual Report to the
Stockholders and 2008 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 our
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
2009 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 II directors to hold office for terms
ending at the annual meeting of stockholders to be held in 2012:
Jerry D. Brant, D.P.M. (Age 70) is the
President and Chief Executive Officer of the Podiatry Insurance
Company of America (PICA) and a member of its Board of
Directors. Dr. Brant was one of PICAs founders in
1980 and has helped guide its 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. He served as the President of the
American Podiatric Medical Association in 1984 and 1985.
John J. McMahon, Jr., Esq.
(Age 66) 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
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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 also serves
as a director of Protective Life Corporation.
William H. Woodhams, M.D. (Age 71) 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 is a board certified family practice physician
and has been in private practice in Kalamazoo, Michigan since
1964.
Wilfred W. Yeargan, Jr., M.D.
(Age 69) has served as a director of ProAssurance
since 2002. Dr. Yeargan is a board certified
ophthalmologist who has practiced in Tuscaloosa, Alabama for
over thirty years.
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.
Except for Dr. Brant, 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. Pursuant to the Stock Purchase Agreement
between ProAssurance and PICA, dated October 28, 2008, we
have agreed to nominate Dr. Brant for election as a
director of ProAssurance at the next annual meeting occurring
after the completion of ProAssurances purchase of
PICAs stock, which was on April 1, 2009.
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.
The Board of Directors has nominated Jerry D. Brant, D.P.M.,
John J. McMahon, Jr., Esq., William H.
Woodhams, M.D., and Wilfred W. Yeargan, Jr., M.D.
for election to the Board of Directors at the 2009 Annual
Meeting as Class II directors as set forth under the
caption Proposal 1 Election of
Directors. Set forth below is information regarding the
nominees and the directors continuing in office, 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.
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Class III
Directors Continuing in Office Term
2010
Victor T. Adamo, Esq., CPCU (Age 61) 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.
William J. Listwan, M.D. (Age 66) 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) (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 at the
Medical College of Wisconsin.
W. Stancil Starnes, Esq. (Age 60) 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 Corporation.
Class I
Directors Continuing in Office Term Expiring in
2011
Lucian F. Bloodworth (Age 68) has served as a
director of ProAssurance since August 22, 2002.
Mr. Bloodworth is the chairman of Cain Manufacturing, a
manufacturer of specialty parts for air distribution and roofing
based in Birmingham, Alabama. 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 59) 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 63) 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 68) 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 is currently in private practice
with the law firm of Maynard, Cooper & Gale, PC in
Birmingham, Alabama. Mr. Nabers was the chief executive
officer of Protective Life Corporation, an insurance holding
company based in Birmingham, Alabama, from 1979 to 2001.
Mr. Nabers was elected to serve again as a director of
ProAssurance at the 2008 Annual Meeting. He is also currently a
director of Infinity Corporation.
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 a policy that a
director will be presumed to be independent if he or she
satisfies certain specified criteria. A complete description of
the criteria adopted by our
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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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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 3, 2008, the Board of Directors
reviewed this consulting arrangement and determined that
Dr. Listwan satisfies the current independence criteria for
directors because:
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Dr. Listwan was not an employee of PRA Wisconsin and his
relationship with PRA Wisconsin prior to the merger with
ProAssurance would have satisfied ProAssurances
independence criteria if PRA Wisconsin had been a subsidiary of
ProAssurance;
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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
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The compensation payable to Dr. Listwan as a consultant
would not exceed the limitation on compensation under the NYSE
corporate governance rules and ProAssurances current
independence criteria.
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Meetings
and Committees of the Board of Directors
Our Board of Directors held five meetings during 2008. 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 2008 (in each case, which were held during
the period for which he or she was a director).
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 21, 2008.
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; and
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otherwise take a leadership role in shaping the corporate
governance of ProAssurance.
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The Nominating and 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 2008 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 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 2008, our Nominating/Corporate Governance Committee met
one time.
7
Compensation
Committee
Our Compensation Committee currently consists of four
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 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 the 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.
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.
8
During 2008 our Compensation Committee met four 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, William J.
Listwan and John J. McMahon, Jr. 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 24 of this proxy statement.
Audit
Committee
Our Audit Committee consists of four 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; 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 13 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. John P.
North, Jr. is the Chairman, and Lucian F. Bloodworth,
Drayton Nabers, Jr. 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 NYSE; that each member of the Audit Committee is financially
literate as such qualification is defined under the rules of the
NYSE; and that John P. North, Jr., based upon his education
and extensive experience in public accounting, including his
leadership roles at Coopers and Lybrand, 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 2008, the Audit Committee held five meetings.
9
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 2008.
Non-Management
Directors Meetings
Our Corporate Governance Principles require our non-management
directors to hold executive sessions at which management,
including the chief executive officer, is not present, on a
regularly scheduled basis and not less than two times per year.
The Corporate Governance Principles further provide that the
non-management directors on the board will select one of the
non-management directors to preside at each executive session.
At the annual meeting in May 2008, the non-management directors
selected John P. North, Jr. as the non-management director
to preside at each meeting, but did not designate him as a
lead director. The schedule for the executive
sessions and selection of Mr. North as the director to
preside at those meetings are each subject to change by the
non-management directors. During 2008, our non-management
directors held an executive session after three of the regularly
scheduled Board meetings.
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, 2009. 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, 2008.
Representatives of Ernst & Young will be present at
the 2009 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 2008 and 2007
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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2008
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2007
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Audit fees
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$
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1,162,724
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$
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1,126,623
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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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6,000
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6,000
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Total
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$
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1,168,724
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$
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1,132,623
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The other fees in 2008 and 2007 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
10
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 2008 which
required the pre-approval of the Audit Committee were approved
in accordance with our pre-approval policies and procedures
described below.
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 Services 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 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;
11
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.
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 herein 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.
12
The Audit Committee has designated 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 will report 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 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 2009 will require
the affirmative vote of a majority of the shares voting on the
matter at the 2009 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 2009 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, 2009.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE RATIFICATION OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITOR OF
PROASSURANCE FOR 2009.
REPORT
OF THE AUDIT COMMITTEE
The Audit Committee is comprised of four 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 2008, the Audit Committee held five
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 CEO,
our CFO, 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
Statement on Accounting Standards (SAS)
No. 114, Auditors Communications with those Charged
with Governance, as currently in effect. SAS No. 114
requires the independent auditors 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:
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the auditors responsibility under standards of the Public
Company Accounting Oversight Board (United States), or the
PCAOB;
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critical accounting policies, including a discussion of the
quality and acceptability of the policies;
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sensitive accounting estimates;
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any significant audit adjustments;
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unrecorded audit differences considered by management to be
immaterial;
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13
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any disagreements with management;
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consultations with other accountants;
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any difficulties encountered with management in performing the
audit;
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the adoption of or change in an accounting principle;
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methods of accounting for significant unusual transactions and
for controversial or emerging areas;
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representations requested from management; and
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an overview of the planned scope and timing of the audit.
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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.
In addition to the disclosures and discussions mandated by SAS
No 114 and PCAOB Rule 3526, the Audit Committee discussed
with Ernst & Young LLP risks of fraud and illegal acts
as required by SAS No. 99 and other matters required to be
communicated to the Committee by our independent auditor under
the requirements of the PCAOB, SEC and NYSE, including without
limitation, information with respect to the following, if
applicable:
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pre-approval of services to be performed by the independent
auditor;
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material alternative accounting treatments discussed with
management;
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other material written communications to management;
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significant deficiencies and material weaknesses identified
during audit of internal control;
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internal quality control procedures of the independent auditor;
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material issues raised in quality control reviews of the
independent auditor within the last five years and corrective
actions taken; and
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relationships between ProAssurance and the independent auditor.
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All non-audit services performed by the independent auditors
must be specifically pre-approved by the Audit Committee or a
member thereof. The Audit Committee approved the non-audit
services rendered by our independent auditors during
ProAssurances most recent fiscal year as required by
Section 10A(i) of the Exchange Act and Rule 2.01(c)(7)
of
Regulation S-X
and considered whether the approved non-audit services are
compatible with maintaining the independence of such auditors.
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
14
the Board of Directors that the audited financial statements of
ProAssurance for 2008 be included in its Annual Report on
Form 10-K
for the year ended December 31, 2008, prior to the filing
of such report with the SEC.
Audit Committee:
John P. North, Jr., Chairman
Lucian F. Bloodworth
Drayton Nabers, Jr.
Ann F. Putallaz
April 3, 2009
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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T. Rowe Price Associates,
Inc.(1)
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2,451,994
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7.3
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%
|
100 East Pratt Street
Baltimore, Maryland 21202
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Barclays Global Investors,
NA(2)
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2,175,910
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|
6.49
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%
|
Barclays Global Fund Advisors
Barclays Global Investors, Ltd.
400 Howard Street
San Francisco, California 94105
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Royce & Associates
LLC (3)
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1,917,673
|
|
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5.72
|
%
|
1414 Avenue of the Americas
New York, New York 10019
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(1) |
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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, 2008, it had sole voting power with respect to
786,300 shares of Common Stock and sole dispositive power
with respect to 2,451,994 shares of Common Stock. |
|
(2) |
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The above named persons collectively filed a Schedule 13G
with Barclays Global Investors Japan Trust and Banking Company
Limited, Barclays Global Investors Japan Limited, Barclays
Global Investors Canada Limited, Barclays Global Investors
Australia Limited, and Barclays Global Investors (Deutschland)
AG, in which they disclaimed membership in a group. The
Schedule 13G as filed with the SEC disclosed that as of
December 31, 2008, Barclays Global Investors NA, a bank,
had sole voting power with respect to 607,502 shares of
Common Stock and sole dispositive power with respect to
722,351 shares of Common Stock; Barclays Global
Fund Advisors, an investment advisor, had sole voting power
with respect to 1,049,764 shares of Common Stock and sole
dispositive power with respect to 1,431,166 shares of
Common Stock; and Barclays Global Investors Ltd., a bank located
at Murray House, 1 Royal Mint Court, London, EC3N 4HH, had sole
dispositive power with respect to 22,393 shares of Common
Stock. |
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(3) |
|
In a Schedule 13G filed with the SEC, Royce &
Associates LLC, an investment adviser, disclosed that as of
December 31, 2008, it had sole voting power and sole
dispositive power with respect to 1,971,673 shares of
Common Stock. |
15
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 non-management
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 31, 2009,
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 and 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, Esq., CPCU
(2)(3)
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98,134
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*
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Lucian F. Bloodworth
(3)
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6.973
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*
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Robert E. Flowers, M.D.
(3)
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30,999
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*
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William J. Listwan, M.D.
(3)
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9,615
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*
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John J. McMahon, Jr.
(3)
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7,701
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*
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Drayton Nabers, Jr.
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4,329
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*
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W. Stancil Starnes
(2)
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129,426
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*
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John P. North
(3)
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7,084
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*
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Ann F. Putallaz
(3)
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15,756
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*
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William H. Woodhams, M.D.
(3)
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24,041
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*
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Wilfred W. Yeargan, M.D.
(3)(4)
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11,088
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*
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Other Named Executive Officers
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Edward L. Rand, Jr., C.P.A.
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55,413
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*
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Howard H. Friedman
(5)
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156,622
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*
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Darryl K. Thomas
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75,704
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*
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All Directors and Officers as a Group (14 Persons)
(2)(3)
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684,482
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2.0
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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 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, 2009 as indicated in note 2. |
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(2) |
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Includes 374,087 shares that may be acquired by all
officers and directors as a group upon exercise of stock options
on or before May 31, 2009. Of this amount the named
officers and directors hold options for the following number of
shares: Mr. Starnes 104,000 shares;
Mr. Adamo 48,000 shares;
Mr. Rand 43,000 shares;
Mr. Friedman 135,000 shares; and
Mr. Thomas 27,500 shares. Also includes
3,345 shares beneficially held for the account of all
officers and directors as a group in ProAssurances
Retirement Plan, of which 1,320 shares are held for the
account of Mr. Thomas. |
16
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(3) |
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Includes 6,595 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: 470 shares in the account of
each of Messrs. Adamo, Rand, Friedman, Thomas, Bloodworth,
Flowers, McMahon, North, Yeargan and Ms. Putallaz,
353 shares in the account of Dr. Woodhams,
238 shares in the accounts of Mr. Starnes and
Dr. Listwan and 126 shares in the account of
Mr. Nabers. |
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(4) |
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Includes 300 shares held by Yeargan Family Investment
Partnership, LLC; 4,812 shares due to Dr. Yeargan
under provisions of the Medical Assurance, Inc. Deferred
Compensation Plan. These shares were awarded to Dr. Yeargan
for service prior to becoming a director of ProAssurance. |
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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
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. For purposes of this discussion, the term
executive refers to our Chief Executive Officer and
each of the other executive officers named in the Summary
Compensation Table on page 25 of this proxy statement.
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 incentive
compensation) at risk relative to their base salary is intended
to be significant and in each case is intended to be at least
60% of total potential compensation for the executive. 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
current 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 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 implemented two significant changes in our long-term
incentive compensation for 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 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. These shifts
are designed to be cost neutral and are not intended to increase
executive compensation cost beyond usual and customary increases.
17
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; specialty insurance
companies that are generally of equivalent size in terms of
total assets, market capitalization and revenues; and insurance
companies that compete for executive talent in the general
vicinity in which ProAssurances executive offices are
located. The peer group included the following companies
in our evaluation of 2008 compensation:
Medical Professional Liability Insurance Companies.
American Physicians Capital, Inc., FPIC Insurance Group, Inc.
and SCPIE Holdings, 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., Philadelphia Consolidated
Holding Corp.; Platinum Underwriters Holdings, Ltd.; RLI Corp.;
Selective Insurance Group, Inc.; State Auto Financial
Corporation; W. R. Berkley Corporation; and Zenith National
Insurance Corp.
Local Insurance Companies. Protective Life Corporation
and Alfa Corporation.
For 2009 compensation, the peer group remained substantially the
same with the only change being the elimination of companies
that were acquired (SCPIE Holding, Inc., The Commerce Group,
Inc. and Alfa Corporation) and the addition of one new specialty
insurer, Navigators Group. The Local Insurance Companies
category originally included Protective Life Corporation and two
additional locally based companies that no longer exist as
publicly traded entities. The Compensation Committee has
determined to drop the Local Insurance Companies category from
future peer groups.
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
ProAssurances executive compensation in comparison to the
compensation information compiled from the peer companies.
In its capacity as compensation consultant for 2008 and 2009
compensation, TCS provided ProAssurance a compilation of
financial data regarding the peer companies for the most recent
calendar year and for the nine months period of the prior year.
All of the medical professional liability insurers were smaller
than ProAssurance in terms of total assets and market
capitalization. According to the data provided by TCS, the
specialty insurers included in the peer companies had total
assets at year end ranging from $1.4 billion to
$15.6 billion in 2006 and from $1.5 billion to
$16.8 billion in 2007 as compared to ProAssurances
total assets of $4.3 billion and $4.4 billion,
respectively, and they had a market capitalization ranging from
$0.5 billion to $3.6 billion in 2006 and from
$0.6 billion to $4.9 billion in 2007 as compared to
ProAssurances market capitalization of $1.1 billion
and $1.8 billion, respectively.
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 its compensation
levels for senior executives. All of the peer companies had
positive operating income for the years ended December 31,
2006 and 2007 based on TCSs data. The median revenues for
all of the peer companies were $835 million as compared to
ProAssurances revenue of $538 million for the nine
months ended September 30, 2007, and $872 million as
compared to ProAssurances revenue of $431 million for
the nine months ended September 30, 2008. The median
operating
18
income for the peer companies was $206 million as compared
to $172 million for ProAssurance for the nine months ended
September 30, 2007, and $64 million as compared to
$136 million for ProAssurance for the nine months ended
September 30, 2008.
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 and objectives;
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review and analysis of the performance criteria for performance
shares to be granted as long-term incentive 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; and
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estimate of the value of equity compensation under Statement of
Financial Accounting Standards No. 123R (SFAS 123R).
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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 TCSs
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
TCS. 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. Mr. Starnes received base salary during
2007 of $501,923. This amount reflects his employment with us
beginning May 1, 2007 under an Employment Agreement that
established his initial base salary at the rate of $750,000 per
year. Also pursuant to the Employment Agreement,
Mr. Starnes received a 2007 annual incentive award of
$539,567 and a guaranty that his annual incentive award for 2008
would not be less than the amount equal to the base salary paid
to him in 2008. Mr. Starnes was also granted 100,000
options effective upon his assuming the position of CEO on
July 2, 2007. In establishing the economic terms of the
Employment Agreement, the Compensation Committee and Board of
Directors considered several factors including: the compensation
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 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.
19
Beginning in 2008, the employment agreement provides that
Mr. Starnes will be paid a base salary (subject to a
minimum of $750,000 in 2008); that he will be eligible for
annual incentive compensation based on corporate objectives
consistent with the criteria established for our other
executives (subject to a minimum amount equal to 100% of his
base salary in 2008); and that he will be granted long-term
incentive compensation having a value on each date of grant of
not less than $500,000. In 2008, the Compensation Committee and
the independent directors approved compensation for
Mr. Starnes consistent with the terms of his employment
agreement.
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 2008, the base salary paid to our executives was
approximately 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 2009, the Compensation Committee increased
Mr. Starnes base compensation by 3% to $803,400 and
increased the base compensation of the other executives by 3%.
The increases in base salary for 2009 are consistent with past
practice.
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. 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.
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 target 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.
During the years covered in the Summary Compensation Table, the
Compensation Committee used stock performance, operating income,
and the combined ratio as the corporate performance measures.
The CEO was eligible to receive an incentive award of up to 100%
of his base salary and other named executive officers were
entitled to receive incentive awards ranging from 60% to 70% of
their base salaries if guidelines were achieved. In 2008, the
committee approved certain changes to the weighting of the
performance criteria in the annual incentive award guidelines to
put more emphasis on operating income for all executives and to
place more emphasis on objective goals and less emphasis on the
subjective individual evaluation of those executives whose
performance criteria include individual performance.
For 2009, the Compensation Committee implemented two significant
changes to the method for computing annual incentive
compensation for executives. As mentioned above, the committee
approved changes that will allow executives the opportunity to
earn a greater percentage of their total direct compensation as
annual incentive compensation. This will be achieved by
increasing the maximum percentage of base compensation that will
be paid to an executive if the performance measures are achieved
by an additional 25% so that the CEOs percentage will
increase from 100% to 125% of base salary and the percentages
for the other executives will increase 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.
20
The Compensation Committee also approved changing the corporate
performance measures for 2009 by eliminating operating income
and increasing the weighting of our combined ratio as
performance measures. 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
income (excluding realized investment gains and losses) which
has become difficult to project in the current investment
markets; (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 a profit for the company. A
summary of the weighted percentage for each performance criteria
and the performance guidelines in 2008 and 2009 follows:
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Stock
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Operating
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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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Income
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Performance
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Goal
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Evaluation
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2008
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2009
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2008
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2009
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2008
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2009
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2008
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2009
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2008
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2009
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CEO/President
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20
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%
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20
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%
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50
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%
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N/A
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30
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%
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60
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%
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N/A
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20
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%
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N/A
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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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20
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%
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35
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%
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N/A
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25
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%
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40
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%
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N/A
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20
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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. No credit is given if our stock performance is less
than the index. Our stock performance must exceed the index by
the percentage target at the end of the applicable year in order
to receive the full weighted percentage for the stock
performance criteria. Less than full credit is given if our
stock performance exceeds the index but is less than the
percentage target above the index. If our stock performance
exceeds the target by more than the specified percentage, a
maximum of up to 120% of the weighted percentage may be earned.
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Operating Income (2008) The operating income
criteria was benchmarked against the diluted average income per
share for the applicable year. Operating income is a non-GAAP
financial measure that computes our net income (loss) without
regard to realized capital gains and losses and guarantee fund
assessments. The targeted net operating income per share for
this performance element is established each year by the
Compensation Committee based on corporate goals and objectives
for the current year. No credit is given if our operating income
per share does not meet a specified threshold. Less than the
full weighted percentage is given if the increase in operating
income is between the threshold amount and target. If our
operating income is above the target, a maximum of up to 150% of
the weighted percentage may be earned. The Compensation
Committee may, in its discretion, take into consideration the
effect of mergers, stock issuances and changes in accounting
when evaluating this element.
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Combined Ratio Performance Our combined ratio
(the 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 130%
of the weighted percentage may be earned (150% in 2009).
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Retention Goal (2009) 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. For
2009, no credit is given if the percentage does not meet the
threshold percentage; less than the full weighted percentage is
given if the percentage is between the threshold percentage and
the target percentage; and if the ratio is better than the
target percentage, 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
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21
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effectiveness, and contribution to the success of the enterprise
regardless of corporate performance. The incentive compensation
for the CEO and President are based exclusively on corporate
performance because the Compensation Committee believes that
corporate performance is the most appropriate measurement for
these positions.
|
For 2008, the targets for operating income and combined ratio
were set at a level that was expected to result in achievement
of a long-term average return on equity (ROE) of 12% to 14% in
accordance with our current strategic goals for corporate
growth. The stock performance element, while not directly
related to ROE, provides a basis for a comparison of our
performance with peer companies.
For 2008 the annual incentive compensation paid to our CEO was
an amount equal to 100% of his base salary as required by his
employment agreement. Annual incentive compensation paid to our
other executives ranged from 60 to 70% of their base salary in
2008. The target goals for each of the corporate performance
measures were exceeded in 2008. The target goals for each of the
corporate performance criteria, as well as a comparison of the
actual result, for 2008 are set forth under the table titled
Grants of Plan-Based Awards in this proxy statement.
The target goals for each of the corporate performance measures
in 2009 are as follows: 25% above the SNL Property/Casualty
Insurance Index (stock performance); 98% combined ratio; and 85%
retention rate.
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 excess compensation is considered
performance based compensation. Annual incentive compensation
awards for years after 2008 will be paid under the 2008 Annual
Incentive Plan. This will allow us to pay annual incentive
compensation at a level that is more in line with the peer group
findings of TCS and shift more weight in our incentive
compensation to short term incentives, as outlined above,
without being subject to the limitations imposed by 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. In 2009, the
committee elected to continue to grant performance shares and to
grant restricted stock units (RSUs) in place of options. The
proportion will be 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. We believe that the combination of performance
shares and RSUs will continue to 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 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). In 2009, the Compensation Committee reduced the
percentage of compensation allocated to long-term incentive
compensation by 25%. 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 over the last five years 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
22
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 that the
window for trading in our Common Stock re-opens after the prior
year end earnings 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 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.
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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.
|
We will begin awarding RSUs in 2009. Each RSU will be equal to
one share of Common Stock and will be subject to a three year
restricted period. RSUs will vest generally after three years
from the date of grant if the grantee remains continuously
employed with ProAssurance or a subsidiary.
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 structured so that performance
shares and stock options granted to executives will 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 that severance protection, particularly in the
context of a change of control transaction, plays a valuable
role in attracting and retaining key executives. Our general
approach has been to avoid employment agreements (for executive
officers other than the CEO) 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.
23
We have provided for severance benefits in our employment
agreements with our CEO and in severance agreements with other
key executives (including our other named executive officers) in
the amounts reflected in the table on page 35 of this proxy
statement. The terms of the severance agreements with executives
other than our CEO generally provide for severance compensation
in an amount equal to the executives base salary and
average annual incentive 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 without 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. 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 the executives 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 if an executive breaches the covenant.
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.
We are required to reimburse an executive (including the CEO)
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 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.
We believe the level of our severance benefits for executives is
appropriate. We are familiar with the level of severance
benefits that were made available to executives of professional
liability insurance companies that we have acquired, such as
NCRIC Corporation and ProAssurance Wisconsin Insurance Company,
and are generally familiar with the levels of severance benefits
offered to executives by other insurance companies in our
industry. As part of the NCRIC Corporation transaction in 2005,
the Insurance Commissioner of the District of Columbia required
us to provide a survey demonstrating the reasonableness of NCRIC
Corporations change of control and severance benefits as a
condition to the approval of the transaction. The survey was
performed by TCS, and it supported our belief that our severance
benefits are reasonable with respect to industry standards.
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.
William J. Listwan, M.D.
John J. McMahon, Jr.
March 22, 2009
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,
24
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.
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(3)
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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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($)
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(3)($)
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(4)(5)($)
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(6)($)
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($)
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($)
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(7)($)
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($)
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W. Stancil Starnes
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2008
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773,077
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155,255
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329,840
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780,000
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142,353
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2,174,525
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Chief Executive
Officer(1)(2)
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2007
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501,923
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1,764,311
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539,567
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47,229
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2,853,030
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Edward L. Rand, Jr.
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2008
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402,692
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25,000
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331,358
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299,283
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243,000
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56,502
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1,357,835
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Chief Financial Officer and
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2007
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391,077
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146,643
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272,004
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215,000
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55,360
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1,078,084
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Senior Vice President
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2006
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373,846
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24,000
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90,941
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221,394
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191,000
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104,623
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1,005,804
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Victor T. Adamo,
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2008
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511,539
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396,515
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247,380
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360,500
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75,578
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1,591,512
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President(1)
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2007
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498,846
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177,433
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553,290
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398,825
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80,979
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1,709,373
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2006
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493,846
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113,042
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618,105
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350,138
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67,240
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1,642,371
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Howard H. Friedman
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2008
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433,015
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25,000
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331,690
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335,523
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261,000
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65,323
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1,451,551
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Chief Underwriting Officer and
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2007
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422,615
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148,975
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350,544
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231,125
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71,335
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1,224,594
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Actuary and Senior Vice President
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2006
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405,384
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95,273
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334,784
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198,875
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56,774
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1,091,090
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Darryl K. Thomas
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2008
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390,384
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24,000
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331,690
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261,273
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237,000
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65,640
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1,309,986
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Chief Claims Officer and
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2007
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369,231
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148,975
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255,144
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209,625
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47,978
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1,030,953
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Senior Vice President
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2006
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338,462
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95,273
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221,959
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193,500
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47,347
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896,541
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(1) |
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Management directors of ProAssurance do not receive any
additional compensation, whether cash, stock or otherwise, in
their capacity as directors. |
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(2) |
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Mr. Starnes was employed by ProAssurance on May 1,
2007, and succeeded A. Derrill Crowe, M.D. as the Chief
Executive Officer of ProAssurance on July 2, 2007. |
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(3) |
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The bonus compensation reflects a discretionary bonus paid to
Named Executive Officers for services that exceeded the amount
he earned pursuant to the Annual Incentive Award Guidelines for
the applicable years. The Non-Equity Incentive Plan Compensation
reflects the amount paid under the Annual Incentive Award
Guidelines for 2008, 2007 and 2006. 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 (2006 and
2007) and the 2008 Equity Incentive Plan (2008) and
are valued on the closing price of a share on the NYSE on the
date of the award $47.70 on February 26, 2009;
$54.28 on February 28, 2008 and $51.28 on March 7,
2007. The bonus and non-equity incentive plan compensation
includes the following number of shares of Common Stock for the
Named Executive Officers: Mr. Starnes
8,175 shares in 2008 and 4,625 shares in 2007;
Mr. Rand 2,245 shares in 2008,
1,845 shares in 2007 and 1,942 shares in 2006;
Mr. Adamo 3,020 shares in 2008,
3,420 shares in 2007 and 3,163 shares in 2006;
Mr. Friedman 2,395 shares in 2008,
1,985 shares in 2007 and 1,796 shares in 2006; and
Mr. Thomas 2,185 shares in 2008,
1,800 shares in 2007 and 1,748 shares in 2006. |
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(4) |
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The shares acquired with grant proceeds under 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 represents the expense incurred
in 2008, 2007 and 2006 in accordance with |
25
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SFAS 123R for the matching grants made to the Named
Executive Officers in 2008, 2007 and 2006 and prior years as
follows: Mr. Starnes $6,000 in 2008;
Mr. Rand $5,668 in 2008, $3,668 in 2007 and
$1,668 in 2006; Mr. Adamo $6,000 in 2008 and
$6,000 in each of 2007 and 2006; Mr. Friedman
$6,000 in each of 2008, 2007 and 2006; and
Mr. Thomas $6,000 in each of 2008, 2007 and
2006. For information on the grants made under this plan in
2008, see the Grants of Plan-Based Awards table. |
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(5) |
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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 expense incurred in 2008, 2007
and 2006 in accordance with SFAS 123R for the shares
expected to be earned based on their closing market price on the
date of grant ($54.28 on February 28, 2008, $51.48 on
March 7, 2007 and $51.38 on March 8, 2006) as
follows: Mr. Starnes $149,255 in 2008;
Mr. Rand $325,690 in 2008, $142,975 in 2007 and
$89,273 in 2006; Mr. Adamo $390,515 in 2008,
$171,433 in 2007 and $107,042 in 2006;
Mr. Friedman $325,690 in 2008, $142,975 in 2007
and $89,273 in 2006; and Mr. Thomas $325,690 in
2008, $142,975 in 2007 and $89,273 in 2006. These amounts
reflect ProAssurances accounting expense for performance
shares and 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 on page 17 of this proxy statement.
For a description of the assumptions used in the calculation of
the value of the performance shares, we refer you to
Note 13 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, 2008. |
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(6) |
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The table reflects the expense incurred in 2008, 2007 and 2006
in accordance with SFAS 123R for options granted as
incentive compensation in 2008, 2007 and 2006 and prior years.
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 to Messrs. Starnes and Adamo because they
are eligible for retirement. For information on the valuation
assumptions with respect to the calculation of the options
expensed in 2008, 2007 and 2006, we refer you to
Note 13 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, 2008. For information on
options granted in 2008, see the Grants of Plan-Based
Awards table. These amounts reflect ProAssurances
accounting expense for these options and do not correspond to
the actual value that will be recognized by the Named Executive
Officer. |
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(7) |
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Other compensation in 2008 includes the amounts set forth in the
following table: |
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Nonqualified
|
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Deferred
|
|
|
|
|
|
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Qualified
|
|
Compensation Plan
|
|
Bonus and Service
|
|
|
|
|
Retirement Plan ($)
|
|
($)
|
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Awards ($)
|
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Perquisites ($)
|
|
W. Stancil Starnes
|
|
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23,000
|
|
|
|
59,840
|
|
|
|
325
|
|
|
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59,188
|
|
Edward L. Rand, Jr.
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23,000
|
|
|
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19,901
|
|
|
|
325
|
|
|
|
13,277
|
|
Victor T. Adamo
|
|
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23,000
|
|
|
|
38,196
|
|
|
|
325
|
|
|
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14,057
|
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Howard H. Friedman
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23,000
|
|
|
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28,134
|
|
|
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2,914
|
|
|
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13,865
|
|
Darryl K. Thomas
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23,000
|
|
|
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28,571
|
|
|
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325
|
|
|
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13,744
|
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Perquisites include group health, life and disability insurance,
individual life and disability policies, and personal use of the
corporate aircraft. The perquisites include $47,666 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 his
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 2006 and 2007, the cost of the loss of the tax
deduction was spread over the personal use hours instead of all
hours of usage in 2008.
26
GRANTS OF
PLAN-BASED AWARDS
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All
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All
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Other
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Other
|
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Option
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Stock
|
|
Awards:
|
|
Exercise
|
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|
|
|
Estimated Possible Payouts
|
|
Estimated Future Payments
|
|
Awards:
|
|
Number of
|
|
or Base
|
|
|
|
|
Under Non-Equity Incentive
|
|
Under Equity Incentive Plan
|
|
Number of
|
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Securities
|
|
Price of
|
|
|
|
|
Plan
Awards(2)
|
|
Awards
|
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Shares of
|
|
Underlying
|
|
Option
|
|
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Grant
|
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Threshold
|
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Target
|
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Maximum
|
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Threshold
|
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Target
|
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Maximum
|
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Stock or
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|
Options
|
|
Awards
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Name
|
|
Date(1)
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
Units (#)
|
|
(#)
|
|
($/Sh)
|
|
W. Stancil Starnes
|
|
|
2/28/08
|
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|
|
|
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|
|
780,000
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|
|
|
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|
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|
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2/28/08
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
5,000
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|
|
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6,666
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|
|
|
8,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/3/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
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20,000
|
|
|
|
54.28
|
|
Edward L. Rand, Jr.
|
|
|
2/28/08
|
|
|
|
|
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|
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|
|
243,000
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,130
|
|
|
|
4,170
|
|
|
|
5,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/3/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
54.28
|
|
Victor T. Adamo
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
|
360,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
5,000
|
|
|
|
6,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/3/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
54.28
|
|
Howard H. Friedman
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
|
261,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,130
|
|
|
|
4,170
|
|
|
|
5,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/3/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
54.28
|
|
Darryl K. Thomas
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
|
237,00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,130
|
|
|
|
4,170
|
|
|
|
5,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/3/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
2/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
54.28
|
|
|
|
|
(1) |
|
All awards were recommended by the Compensation Committee at its
meeting on February 21, 2008, with a specified grant date
of February 28, 2008 (the date that the window for trading
in our 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 12, 2008, 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 28 of this proxy statement. |
We have awarded equity compensation to our Named Executive
Officers under two different plans: the ProAssurance Corporation
2004 Equity Incentive Plan and the ProAssurance Corporation
Amended and Restated 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. This number is 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 250,000 shares of our Common Stock (or their
equivalent) in any year under the 2004 Equity Incentive Plan.
The Compensation 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.
27
The 2008 Equity Incentive Plan was approved by our stockholders
at the 2008 annual meeting to replace the 2004 Equity Incentive
Plan. The Compensation Committee has determined that no new
awards will be 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.
Non-Equity Incentive Plan Awards. The amounts
in this column reflect the incentive compensation payable to the
Named Executive Officers under the 2008 Annual Incentive Award
Guidelines as recommended by the Compensation Committee and
ratified by the Board of Directors at its meeting on
March 12, 2008. Incentive awards are expressed as a
percentage of base salary. The Named Executive Officers were
eligible to receive the following percentages of their
respective base salaries as their targeted incentive
compensation for 2008: Mr. Starnes 100%;
Mr. Adamo 70%; Mr. Rand 60%;
Mr. Friedman 60%; and
Mr. Thomas 60%. Annual incentive awards are
based on corporate performance and individual performance (other
than Messrs. Starnes and Adamo) and each of the criteria
are assigned a percentage share of the annual incentive
compensation as described under Executive
Compensation Annual Incentive Compensation
beginning on page 20 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 2008 and
the credit given for each of the corporate performance criteria
are set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
Performance Criteria
|
|
Target
|
|
|
Actual
|
|
|
Credit
|
|
|
Stock Performance (Percentage above Index)
|
|
|
25
|
%
|
|
|
45
|
%
|
|
|
120
|
%
|
Operating
Income (1)
(diluted weighted average income per share)
|
|
$
|
4.35
|
|
|
$
|
6.07
|
|
|
|
150
|
%
|
Combined Ratio
|
|
|
98
|
%
|
|
|
68
|
%
|
|
|
130
|
%
|
|
|
|
(1) |
|
Operating Income is a Non-GAAP financial measure
that is widely used in our industry to evaluate the performance
of underwriting operations. Operating Income thus excludes the
after-tax effects of realized investment gains or losses,
guaranty fund assessments and the results of accounting changes,
and we believe presents a more appropriate view of the
performance of our insurance operations. While we believe
disclosure of certain Non-GAAP information is appropriate, you
should not consider this information without also considering
the information we present in accordance with GAAP, which
includes the effect of net realized investment losses incurred
in 2008. The table on the following page is a reconciliation of
Net Income to Operating Income. |
28
Reconciliation
of Net Income to Operating Income (in thousands)
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008
|
|
Net Income
|
|
$
|
177,725
|
|
Adjustments, net of tax effects:
|
|
|
|
|
Add:
|
|
|
|
|
Net Realized Investment Losses
|
|
|
33,093
|
|
Guaranty Fund Assessments
|
|
|
|
|
Subtract:
|
|
|
|
|
Net Realized Investment Gains
|
|
|
|
|
Guaranty Fund Recoupments
|
|
|
867
|
|
Debt Retirement Gain
|
|
|
2,971
|
|
|
|
|
|
|
Operating Earnings
|
|
$
|
206,980
|
|
|
|
|
|
|
Per diluted common share:
|
|
|
|
|
Net Income
|
|
$
|
5.22
|
|
Effect of adjustments
|
|
$
|
0.85
|
|
|
|
|
|
|
Operating Income per diluted common share
|
|
$
|
6.07
|
|
|
|
|
|
|
The annual incentive compensation paid to the Named Executive
Officers in 2009 for 2008 is reflected in the Summary
Compensation Table. The annual incentive compensation comprised
the following percentages of base salary of the senior executive
officers: Starnes 100%; Rand 60%;
Adamo 70%; Friedman 60%; and
Mr. Thomas 60%. We used the shares of Common
Stock reserved for issuance under our 2008 Equity Incentive Plan
to fund the stock portion of our 2008 annual incentive payments.
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 following criteria which 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): (1) income per share;
(2) return on equity; (3) economic value added;
(4) total return; (5) sales or revenues; or
(6) other reasonable bases. 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 2008, the Board of Directors, on the recommendation
of the Compensation Committee, granted performance shares to the
Named Executive Officers. The performance criteria are described
in the discussion under Executive Compensation
Long-Term Incentive Compensation on page 22 of this
proxy statement. The performance shares are payable if either of
the following performance criteria are met in the three year
period ending December 31, 2010.
All Other Stock Awards. The ProAssurance
Corporation Amended and Restated Stock Ownership Plan, or 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
29
open market. Under the terms of our stock ownership plan, we
make matching contributions match 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.
The shares purchased with our contributions for Named Executive
Officers in 2008 are reflected in the table under Other
Stock Awards: Number of Shares or Units.
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.
At the February 21, 2008 meeting, the Compensation
Committee recommended that options be granted to the Named
Executive Officers as of February 28, 2008 (being the date
that the window for trading in ProAssurance Common Stock
re-opened after the year-end 2007 earnings release) and the
Board of Directors ratified the recommendation. These options
vest and become exercisable at the rate of 20% per year
commencing six months after the date of grant. Unvested options
accelerate and become exercisable upon termination of employment
by reason of death or retirement and upon a change of control.
The options granted to the Named Executive Officers are
reflected in the table as All Other Option Awards: Number
of Securities Underlying Options.
30
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
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Securities
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Securities
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Securities
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of Stock
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Stock
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Rights
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Rights
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Underlying
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Underlying
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Underlying
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That
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That
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That
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That
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Unexercised
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Unexercised
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Unexercised
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Option
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Have
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Have
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Have
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Have
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Options
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Options
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Unearned
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Exercise
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Option
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Not
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Not
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Not
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Not
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(#)
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(#)
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Options
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Price
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Expiration
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Vested
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Vested
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Vested
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Vested
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Name
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Exercisable
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Unexercisable
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(#)
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($)
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Date
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(#)(2)
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($)
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(#)(3)
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($)
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W. Stancil Starnes
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7/2/07 - 100,000
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56.15
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7/2/17
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2/28/08 - 4,000
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2/28/08 - 16,000
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54.28
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9/1/18
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3/1/08 - 112
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5,911
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3/6/08 - 8,333
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439,816
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Edward L. Rand, Jr.
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11/9/04 - 8,000
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11/9/04 - 2,000
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36.46
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11/9/14
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3/9/05 - 20,000
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3/9/05 - 5,000
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41.15
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3/9/15
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3/8/06 - 7,500
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3/8/06 - 5,000
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51.38
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3/8/16
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3/1/06 - 114
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6,017
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3/8/06 - 5,210
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274,984
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3/7/07 - 5,000
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3/7/07 - 7,500
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51.48
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3/7/17
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3/1/07 - 117
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6,175
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3/7/07 - 5,210
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274,984
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2/89/08 - 2,500
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2/28/08 - 10,000
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54.28
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9/1/18
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3/1/08 - 112
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5,911
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3/6/08 - 5,210
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274,984
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Victor T. Adamo
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3/9/05 - 30,000
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3/9/05 - 7,500
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41.15
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3/9/15
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3/8/06 - 9,000
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3/8/06 - 6,000
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51.38
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3/8/16
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3/1/06 - 114
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6,017
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3/8/06 - 6,250
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329,875
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3/7/07 - 6,000
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3/7/07 - 9,000
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51.48
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3/7/17
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3/1/07 - 117
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6,175
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3/7/07 - 6,250
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329,875
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2/28/08 - 3,000
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2/28/08 - 12,000
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54.28
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9/1/2018
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3/1/08 - 112
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5,911
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3/6/08 - 6,250
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329,875
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Howard H. Friedman
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1/15/02 - 50,000
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16.80
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1/15/12
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3/3/03 - 25,000
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22.00
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3/3/13
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3/10/04 - 25,000
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33.28
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3/10/14
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3/9/05 - 20,000
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3/9/05 - 5,000
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41.15
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3/9/15
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3/8/06 - 7,500
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3/8/06 - 5,000
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51.38
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3/8/16
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3/1/06 - 114
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6,017
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3/8/06 - 5,210
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274,984
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3/7/07 - 5,000
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3/7/07 - 7,500
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51.48
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3/7/17
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3/1/07 - 117
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6,175
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3/7/07 - 5,210
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274,984
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2/28/08 - 2,500
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2/28/08 - 10,000
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|
|
|
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54.28
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|
|
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9/1/2018
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3/1/08 - 112
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5,911
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3/6/08 - 5,210
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274,984
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|
Darryl K. Thomas
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3/3/03 - 2,500
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|
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22.00
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3/3/13
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/10/04 - 5,000
|
|
|
|
|
|
|
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|
33.28
|
|
|
|
3/10/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/9/05 - 5,000
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|
3/9/05 - 2,500
|
|
|
|
|
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|
41.15
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|
|
|
3/9/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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3/8/06 - 7,500
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3/8/06 - 5,000
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|
|
|
|
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51.38
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|
|
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3/8/16
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|
|
|
3/1/06 - 114
|
|
|
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6,017
|
|
|
|
3/8/06 - 5,210
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|
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274,984
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|
|
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3/7/07 - 5,000
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|
3/7/07 - 7,500
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|
|
|
|
|
|
51.48
|
|
|
|
3/7/17
|
|
|
|
3/1/07 - 117
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|
|
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6,175
|
|
|
|
3/7/07 - 5,210
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|
|
|
274,984
|
|
|
|
2/28/08 - 2,500
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|
2/28/08 - 10,000
|
|
|
|
|
|
|
54.28
|
|
|
|
9/1/2018
|
|
|
|
3/1/08 - 112
|
|
|
|
5,911
|
|
|
|
3/6/08 - 5,210
|
|
|
|
274,984
|
|
|
|
|
(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
ProAssurance Corporation 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 Amended and Restated Employee Stock Ownership
Plan. The matching contributions 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. |
|
(3) |
|
The Equity Incentive Plan Awards reflect the performance shares
granted to the Named Executive Officers under the 2004 Equity
Incentive Plan. The performance shares vest if ProAssurance
achieves performance criteria discussed under Executive
Compensation Long-Term Incentive Compensation
on page 22 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. |
31
OPTION
EXERCISES AND STOCK VESTED
(During Last Completed Fiscal Year)
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|
|
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|
|
|
|
|
|
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|
Option
Awards(1)
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|
|
|
|
|
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|
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victor T. Adamo
|
|
|
37,500
|
|
|
|
779,925
|
|
|
|
143
|
|
|
|
7,480
|
|
Howard H. Friedman
|
|
|
|
|
|
|
|
|
|
|
143
|
|
|
|
7,480
|
|
Darryl K. Thomas
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|
|
|
|
|
|
|
|
|
|
143
|
|
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|
7,480
|
|
|
|
|
(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 the shares of our Common
Stock that have been purchased with ProAssurances matching
contributions under the Amended and Restated Employee Stock
Ownership Plan. The value realized reflects the market price of
the vested shares on the third anniversary of the purchase of
the shares under the plan. |
NON-QUALIFIED
DEFERRED COMPENSATION
|
|
|
|
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|
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|
Executive
|
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|
Registrant
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
Earnings
|
|
|
Withdrawals/
|
|
|
Balance
|
|
|
|
2008
|
|
|
2008
|
|
|
in Last FY
|
|
|
Distributions
|
|
|
at Last FYE
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
W. Stancil Starnes
|
|
|
55,000
|
|
|
|
59,840
|
|
|
|
(11,599
|
)
|
|
|
|
|
|
|
103,241
|
|
Edward L. Rand, Jr.
|
|
|
27,000
|
|
|
|
19,911
|
|
|
|
(46,266
|
)
|
|
|
|
|
|
|
113,598
|
|
Victor T. Adamo
|
|
|
103,100
|
|
|
|
38,196
|
|
|
|
(101,788
|
)
|
|
|
|
|
|
|
293,192
|
|
Howard H. Friedman
|
|
|
80,500
|
|
|
|
28,134
|
|
|
|
(96,293
|
)
|
|
|
|
|
|
|
226,682
|
|
Darryl K. Thomas
|
|
|
128,846
|
|
|
|
28,571
|
|
|
|
(34,731
|
)
|
|
|
|
|
|
|
364,912
|
|
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 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
participant 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.
32
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 will be 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 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.
|
Payments
on Termination and Change of Control
We have also entered into a Release and Severance Compensation
Agreement (a Severance Agreement) with each of
Messrs. Adamo, Rand, Friedman, Thomas and several other key
executives. The employment agreement with Mr. Starnes
provides for severance benefits under certain circumstances.
Named
Executive Officers Covered Under Severance Agreements.
We have entered into Severance Agreements with Messrs Adamo,
Friedman, Rand and Thomas that provides if we terminate their
employment without cause or if they voluntarily resign for
good reason, they are eligible to receive severance
benefits. 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, Friedman and Thomas 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, Rand and
Thomas 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:
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|
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|
|
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.
|
33
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, Rand and Thomas,
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.
Named
Executive Officers Covered by Employment Agreements.
Mr. Starnes is entitled to his current base salary for the
remaining term of his employment agreement should we terminate
his employment without cause or should he resign for good
reason. Mr. Starnes five year term automatically
renews until 2013, at which time the termination date is fixed
in 2018. Good reason includes demotion, relocation, and material
reduction in base salary or incentive compensation opportunities.
The employment agreement with Mr. Starnes provides for a
single trigger for the payment of severance benefits on a change
of control. His 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 to him if he had resigned for good reason upon the
change of control transaction. Mr. Starnes employment
agreement does not provide for additional severance benefits.
Provisions
Applicable to Employment Agreements and Severance
Agreements.
The employment agreement with Mr. Starnes and the Severance
Agreements with the other Named Executive Officers 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 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 agreement and the Severance Agreements with the
Named Executive Officers 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 Adamo). 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 Mr. Starnes is accelerated and payable in
lump sum upon a change of control under his employment agreement.
34
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, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Death or
|
|
|
Involuntary
|
|
|
After Change
|
|
|
Change
|
|
|
|
Retirement
|
|
|
Disability
|
|
|
Termination
|
|
|
of
Control(1)
|
|
|
of Control
|
|
|
W. Stancil Starnes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
3,510,000
|
|
|
|
3,510,000
|
|
|
|
3,510,000
|
|
Equity Compensation
Vesting(2)
|
|
|
479,095
|
|
|
|
479,095
|
|
|
|
479,095
|
|
|
|
479,095
|
|
|
|
479,095
|
|
Deferred
Compensation(3)
|
|
|
48,241
|
|
|
|
48,241
|
|
|
|
48,241
|
|
|
|
48,241
|
|
|
|
48,241
|
|
Medical Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280 Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,754,402
|
|
|
|
1,754,402
|
|
TOTAL
|
|
|
527,336
|
|
|
|
527,336
|
|
|
|
4,402,336
|
|
|
|
5,791,738
|
|
|
|
5,791,738
|
|
Edward L. Rand, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
636,667
|
|
|
|
1,275,333
|
|
|
|
|
|
Equity Compensation
Vesting(2)
|
|
|
397,878
|
|
|
|
397,878
|
|
|
|
397,878
|
|
|
|
397,878
|
|
|
|
397,878
|
|
Deferred
Compensation(3)
|
|
|
17,598
|
|
|
|
17,598
|
|
|
|
17,598
|
|
|
|
17,598
|
|
|
|
17,598
|
|
Medical Benefits
|
|
|
|
|
|
|
|
|
|
|
18,054
|
|
|
|
18,054
|
|
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
280 Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,004,472
|
|
|
|
|
|
TOTAL
|
|
|
415,476
|
|
|
|
415,476
|
|
|
|
1,081,197
|
|
|
|
2,723,335
|
|
|
|
415,476
|
|
Victor T.
Adamo(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
1,739,642
|
|
|
|
1,739,642
|
|
|
|
1,739,642
|
|
Equity Compensation
Vesting(2)
|
|
|
272,234
|
|
|
|
272,234
|
|
|
|
272,234
|
|
|
|
272,234
|
|
|
|
272,234
|
|
Deferred
Compensation(3)
|
|
|
15,092
|
|
|
|
15,092
|
|
|
|
15,092
|
|
|
|
15,092
|
|
|
|
15,092
|
|
Medical Benefits
|
|
|
|
|
|
|
|
|
|
|
18,054
|
|
|
|
18,054
|
|
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10,000
|
|
280 Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
287,326
|
|
|
|
287,326
|
|
|
|
2,055,022
|
|
|
|
2,055,022
|
|
|
|
2,036,968
|
|
Howard H. Friedman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
673,667
|
|
|
|
1,347,333
|
|
|
|
|
|
Equity Compensation
Vesting(2)
|
|
|
365,238
|
|
|
|
365,238
|
|
|
|
365,238
|
|
|
|
365,238
|
|
|
|
365,238
|
|
Deferred
Compensation(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Benefits
|
|
|
|
|
|
|
|
|
|
|
18,054
|
|
|
|
18,054
|
|
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
280 Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,024,463
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
1,066,958
|
|
|
|
2,765,087
|
|
|
|
365,238
|
|
Darryl K. Thomas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
616,375
|
|
|
|
1,232,750
|
|
|
|
|
|
Equity Compensation
Vesting(2)
|
|
|
336,163
|
|
|
|
336,163
|
|
|
|
336,163
|
|
|
|
336,163
|
|
|
|
336,163
|
|
Deferred
Compensation(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Benefits
|
|
|
|
|
|
|
|
|
|
|
18,054
|
|
|
|
18,054
|
|
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
280 Gross Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
336,163
|
|
|
|
336,163
|
|
|
|
980,592
|
|
|
|
1,596,967
|
|
|
|
336,163
|
|
35
|
|
|
(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 $52.78 based on the closing price on the NYSE on
December 31, 2008. |
|
(3) |
|
Reflects only the employer contributions that we contributed for
the account of the executive under the Deferred Compensation
Plan and all earnings (losses) that have accrued on the
executives account. The executive will also be entitled to
return of those amounts contributed to the plan as a deferral of
executives then current compensation. The amount in the
table excludes benefits that are payable upon retirement under
our qualified retirement plan. |
|
(4) |
|
Mr. Adamos Severance Agreement includes a modified
single trigger that permits Mr. Adamo, until
December 31, 2010, to unilaterally elect to terminate his
employment for any reason, including a change of control, and
receive severance benefits. |
DIRECTOR
COMPENSATION
(During Last Completed Fiscal Year)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Deferred
|
|
|
All Other
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Awards(1)
|
|
|
Awards(1)
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Earnings
|
|
|
($)
|
|
|
($)
|
|
|
Lucian F. Bloodworth
|
|
|
53,000
|
|
|
|
55,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,978
|
|
Paul R.
Butrus(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
314,382
|
(3)
|
|
|
412,655
|
|
A. Derrill
Crowe(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
731,997
|
(4)
|
|
|
1,124,854
|
|
Robert E. Flowers
|
|
|
40,000
|
|
|
|
55,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,978
|
|
William J. Listwan
|
|
|
41,000
|
|
|
|
55,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,644
|
(5)
|
|
|
96,978
|
|
John J. McMahon, Jr.
|
|
|
40,000
|
|
|
|
55,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,978
|
|
Drayton Nabers, Jr.
|
|
|
45,667
|
|
|
|
49,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,645
|
|
John P. North, Jr.
|
|
|
56,000
|
|
|
|
55,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111,978
|
|
Ann F. Putallaz
|
|
|
48,000
|
|
|
|
55,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,978
|
|
William H. Woodhams
|
|
|
40,000
|
|
|
|
55,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,978
|
|
Wilfred W. Yeargan, Jr.
|
|
|
40,000
|
|
|
|
55,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,978
|
|
|
|
|
(1) |
|
Includes 993 shares of Common Stock granted to the
directors on May 21, 2008 as stock awards under the 2004
Equity Incentive Plan. The closing price of a share of Common
Stock on the NYSE on the date of grant was $50.33. Also includes
112 shares for each of the directors purchased with
matching contributions under the Amended and Restated Employee
Stock Ownership Plan on March 8, 2008. |
|
(2) |
|
Mr. Butrus resigned as director effective December 31,
2008. Dr. Crowe resigned as ProAssurances
non-executive Chairman of the Board on September 21, 2008. |
|
(3) |
|
Under the terms of his employment agreement, Mr. Butrus
received a base salary of $300,000 in 2008.
Mr. Butrus compensation also includes group health,
life and disability insurance and individual life and disability
insurance. |
|
(4) |
|
Under the terms of his employment agreement, Dr. Crowe
received a base salary of $500,000 in 2008.
Dr. Crowes compensation also includes group health,
life and disability insurance, individual life and disability
insurance and personal use of the corporate aircraft. The
compensation amount of $221,506 attributable to |
36
|
|
|
|
|
personal use of the aircraft was computed in the same manner as
disclosed under footnote 7 of the Summary Compensation Table. |
|
(5) |
|
ProAssurance has engaged Dr. Listwan to provide consulting
services to ProAssurance and PRA Wisconsin in consideration of
an annual retainer of $44,000. |
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. Non-management 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 ProAssurance
Corporation Stock Ownership Plan.
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 non-management 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. The Board
of Directors fixed the dollar value of the stock awards to be
granted to directors as compensation at $50,000 in 2007 and
those shares have been granted from shares reserved for issuance
under the 2004 Equity Incentive Plan. Effective with the annual
meeting in 2009, that stock-based compensation will rise 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.
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 2008.
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
|
37
|
|
|
|
|
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.
|
Historically, none of the executive officers or directors has
participated in a material transaction in which any such person
or any person related to them has had a material interest.
However, the personal use of the corporate aircraft has
presented the potential for material transactions between
ProAssurance and its directors and officers. 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.
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:
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the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated;
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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;
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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;
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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
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the consent of each nominee to serve as a director of
ProAssurance if so elected.
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Stockholder
Proposals for our 2010 Annual meeting
If you wish to present proposals for inclusion in the proxy
materials to be distributed by us in connection with our 2010
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 11, 2009, in order
for the proposal to be considered for inclusion in the proxy
statement for the 2010 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:
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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;
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the name and address of the stockholder who intends to propose
such matter or matters;
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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;
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any material interest of the stockholder in such matter or
matters; and
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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.
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The proposal and any accompanying statement may not exceed 500
words. Stockholders are not permitted to submit proposals for
consideration at special meetings.
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
non-management 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
We have sent a notice to certain street name stockholders of
Common Stock who share a single address, indicating that, if
such stockholders requests a paper copy, only one copy of this
proxy statement and our 2008 annual report will be sent to that
address unless we receive contrary instructions from any
stockholder at that address. This practice, known as
householding, reduces our printing and postage
costs. However, if any stockholder residing at such an address
wishes to receive a separate copy of this proxy statement or our
2008 annual report, he or she may contact Frank 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,
and we will deliver those documents to such stockholder promptly
upon receiving the request. Any such stockholder may also
contact BNYMellon at
800-851-9677
or
201-680-6578,
if he or she would like to receive separate proxy statements and
annual reports in the future. If you are receiving multiple
copies of our annual report and proxy
(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.
39
statement, you may request householding in the future by
contacting BNYMellon at
800-851-9677
or
201-680-6578.
Stockholders who are hearing impaired may phone BNYMellon at
800-231-5469
or
201-680-6610
to request documents or request householding.
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.
40
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the day before the cut-off date or
meeting date. 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, L 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 and, when prompted, indicate that you agree to receive or access proxy
materials electronically in future years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or
meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we
have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DET
ACH 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. vote FOR the following:
1. Election of Directors 0 0 0 Nominees 01 J. D. Brant DPM 02 J. J. McMahon, Jr. 03 W. H. Woodhams MD 04 W.W. Yeargan, Jr., MD
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.
R2.09.03.17
1 Please sign exactly as your name(s) appear(s) hereon. When
signing as 0000021331 attorney, executor, administrator, or
other fiduciary, please give full title as such. Joint owners
should each sign personally. All holders must sign. If a
corporation or partnership, please sign in full corporate or
partnership name, by authorized officer.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date |
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 5/20/2009 10:00 AM
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 7, 2009, 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 20, 2009, or at any adjournment, continuation or
postponement thereof, and instructs said proxies to vote as indicated on the reverse.
R2.09.03.17 2
0000021331
Continued and to be signed on reverse side |