Meadowbrook Insurance Group (MIG)

 

In 2008, the Committee engaged Towers Perrin to provide it with updated information and recommendations regarding the Company’s compensation plans, as well as the compensation for our Chief Executive Officer and other principal executive officers, who report to the Chief Executive Officer. This engagement was prompted by the amount of time that had passed since the last analysis of Towers Perrin, as well as, the recent merger with ProCentury. Towers Perrin met with the Committee and management to discuss the Company’s current compensation philosophy and the key objectives for its compensation program. Towers Perrin conducted a market review of our compensation program. The market review considered general industry data of companies similar in size and revenue of the Company, which was supplemented with similar insurance industry information. In addition to the general industry data, Towers Perrin reviewed the 2007 pay levels of fifteen insurance companies, specifically, One Beacon Insurance Group, Ltd., Selective Insurance Group, Inc., Philadelphia Consolidated Holding Corporation, State Auto Financial Corporation, Argo Group International Holdings, Ltd., Harleysville Group, Inc., ProAssurance Corporation, Navigators Group, Inc., RLI Corporation, Inc., AmTrust Financial Services, Inc., Tower Group, Inc., Darwin Professional Underwriters, Inc., First Mercury Financial Corporation, American Physicians Capital, Inc. and Northpointe Holdings Corporation.

 

Based on its analysis and discussions with the Committee, Towers Perrin recommended that select positions receive market based increases in order to place the executive at plus/minus ten percent of the market median for his or her current position. In terms of annual incentive compensation, Towers Perrin recommended market-based increases for certain executives to align them with the market median for their positions. Towers Perrin noted that the long term incentive opportunities for senior executives were well below the market median. Because increases at or near the market median were unaffordable to the Company given current market competitive conditions, Towers Perrin recommended the use of restricted stock awards to senior executives, in order to bring them near the competitive range. Issuance of restricted stock awards would require achievement by the Company of certain financial targets and would be based upon the individual’s performance. The award of restricted stock awards would be within the discretion of the Committee. If granted, the awards would vest over a four year period and would be subject to forfeiture in the event the executive was terminated for “cause,” as defined within his or her employment agreement, or voluntarily resigned his or her position.

 

The recommendations of Towers Perrin were approved by the Committee. On February 13, 2009, the Board approved the recommendation.

 

 

Periodically, the Committee has retained Towers Perrin to review our compensation plans, as well as the compensation for our senior executives and the Board.

 

During 2006, the Committee engaged Towers Perrin to: 1) provide information relating to competitive salary, target annual and long term incentive levels for eight of our senior executives (excluding the Chairman of the Board) and current compensation trends, and 2) assess the structure of our annual bonus and Long Term Incentive Plan (“LTIP”). The review considered the compensation practices in the insurance industry, which was supplemented with general industry data and companies similar in size, assets and revenue. The eight executive salaries and target annual bonus opportunities were within the competitive range of market median levels. However, the executives’ long-term incentive award opportunities were, on average, below market median levels. For reference purposes, in addition to the survey pay analysis described above, Towers Perrin presented fiscal 2005 pay levels (from proxy filings) of nine insurance companies, specifically, HCC Insurance Holdings, Inc., Markel Corporation, Philadelphia Consolidated Holding Corporation, ProAssurance Corporation, RLI Corporation, Argonaut Group, Inc., Sea Bright Insurance Holdings, Inc., Tower Group and American Physicians Capital, Inc.

 

Periodically, the Committee has retained Towers Perrin to review our compensation plans, as well as the compensation for our senior executives and the Board.

 

In 2006, the Committee engaged Towers Perrin to: 1) provide information relating to competitive salary, target annual and long term incentive levels for eight of our senior executives (excluding the Chairman of the Board) and current compensation trends, and 2) assess the structure of our annual bonus and Long-Term Incentive Plan (“LTIP”). The review considered the compensation practices in the insurance industry, which was supplemented with general industry data and companies similar in size, assets and revenue. The eight executive salaries and target annual bonus opportunities were within the competitive range of market median levels. However, the executives’ long-term incentive award opportunities were, on average, below market median levels. For reference purposes, in addition to the survey pay analysis described above, Towers Perrin presented fiscal 2005 pay levels (from proxy filings) of nine insurance companies, specifically, HCC Insurance Holdings, Inc., Markel Corporation, Philadelphia Consolidated Holding Corporation, ProAssurance Corporation, RLI Corporation, Argonaut Group, Inc., Sea Bright Insurance Holdings, Inc., Tower Group and American Physicians Capital, Inc.