UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
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Radian Group Inc.
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Radian Group Inc.
1500 Market Street Philadelphia, Pennsylvania 19102
800.523.1988 215.231.1000 |
April 9, 2018
Dear Stockholder:
You are cordially invited to attend the 2018 Annual Meeting of Stockholders of Radian Group Inc., which will be held at our headquarters, 1500 Market Street, 18th Floor, Philadelphia, Pennsylvania 19102, at 9:00 a.m. local time on May 9, 2018. The accompanying Notice of 2018 Annual Meeting of Stockholders and proxy statement describe the items to be considered and acted upon by the stockholders at the meeting.
Regardless of whether you plan to attend the annual meeting, please sign, date and return the enclosed proxy card as soon as possible so that your shares can be voted in accordance with your instructions. If you attend the meeting, you may revoke your proxy, if you wish, and vote personally. Because the representation of stockholders at the annual meeting is very important, we thank you in advance for your participation.
Sincerely,
Edward J. Hoffman General Counsel and Corporate Secretary |
RADIAN GROUP INC.
1500 Market Street
Philadelphia, Pennsylvania 19102
NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS
Radian Group Inc. will hold its 2018 Annual Meeting of Stockholders as provided below:
Date and Time: | Wednesday, May 9, 2018, 9:00 a.m. local time | |
Place: | Radian Group Inc. 1500 Market Street, 18th Floor Philadelphia, Pennsylvania 19102 | |
Items of Business: | (1) Elect ten directors, each for a one-year term, to serve until their successors have been duly elected and qualified; | |
(2) Conduct an advisory vote to approve the compensation of our named executive officers; | ||
(3) Approve the Amended and Restated Radian Group Inc. Employee Stock Purchase Plan; | ||
(4) Ratify the appointment of PricewaterhouseCoopers LLP as Radians independent registered public accounting firm for the year ending December 31, 2018; and | ||
(5) In addition to the items above, the Company may transact such other business as may properly come before the meeting or any adjournment or postponement of the meeting. | ||
Record Date: | Stockholders of record as of the close of business on March 15, 2018 will be entitled to notice of, and to vote at, the annual meeting or any adjournment or postponement of the meeting. |
Regardless of whether you plan to attend Radians annual meeting, please submit your proxy with voting instructions. To submit your proxy by mail, please complete, sign, date and return the accompanying proxy card in the enclosed self-addressed, stamped envelope. For instructions about voting, please see How Shares May Be Voted on page 1 of the proxy statement.
By Order of the Board of Directors,
Edward J. Hoffman
General Counsel and Corporate Secretary
Philadelphia, Pennsylvania
April 9, 2018
RADIAN GROUP INC.
1500 Market Street
Philadelphia, Pennsylvania 19102
www.radian.biz
PROXY STATEMENT
FOR 2018 ANNUAL MEETING OF STOCKHOLDERS
The board of directors (the Board) of Radian Group Inc. (Radian or the Company) is furnishing this proxy statement to solicit proxies from the Companys stockholders for use at Radians 2018 Annual Meeting of Stockholders (the Annual Meeting). A copy of the Notice of 2018 Annual Meeting of Stockholders accompanies this proxy statement. These materials are also available on the internet at www.radian.biz/StockholderReports. This proxy statement and the accompanying proxy card are being mailed to stockholders beginning on or about April 9, 2018 to furnish information relating to the business to be transacted at the Annual Meeting.
1 | 2018 Proxy Statement |
Information About Voting
The following table summarizes the vote threshold required for approval of each item of business to be transacted at the Annual Meeting. In addition, the table shows the effect on the outcome of the vote of: (i) abstentions; (ii) uninstructed shares held by brokers (which result in broker non-votes when a beneficial owner of shares held in street name does not provide voting instructions and, as a result, the Nominee is prohibited from voting those shares on certain proposals); and (iii) signed but unmarked proxy cards.
Proposal
|
Voted Required for Approval
|
Effect of (1)
|
Uninstructed Effect of
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Signed but (2)
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Proposal 1 Election of directors |
Majority of votes cast |
No effect (4) |
Not voted/No |
Voted For | ||||
Proposal 2 Advisory, non-binding vote to approve named executive officer compensation |
Majority of shares present |
Same effect |
Not voted/No |
Voted For | ||||
Proposal 3 Approval of the Amended and Restated Radian Group Inc. Employee Stock Purchase Plan |
Majority of shares present |
Same effect |
Not voted/No |
Voted For | ||||
Proposal 4 Ratification of the appointment of PricewaterhouseCoopers LLP as Radians independent registered public accounting firm for the year ending December 31, 2018 |
Majority of shares present |
Same effect |
Discretionary |
Voted For |
(1) | Abstentions and broker non-votes are included for purposes of determining whether a quorum is present, however, abstentions are considered entitled to vote whereas broker non-votes are not. |
(2) | If you complete and return your proxy card properly, but do not provide instructions on your proxy card as to how to vote your shares, your shares will be voted as shown in this column and in accordance with the judgment of the individuals named as proxies on the proxy card as to any other matter properly brought before the Annual Meeting. |
(3) | See below for an explanation of our majority voting standard with respect to uncontested director elections. |
(4) | Under Section 4.13(f) of our Amended and Restated By-Laws (the By-Laws), abstentions are not counted as votes For or Against a directors election. |
(5) | For purposes of this proposal, the New York Stock Exchange (the NYSE) listing standards require approval by at least a majority of votes cast and count abstentions as votes cast, meaning an abstention has the same effect as a vote Against. Accordingly, the NYSE approval requirement is consistent with that required by Radians By-Laws. |
2 | 2018 Proxy Statement |
Information About Voting
As described in the table above, in an uncontested election, meaning the number of director nominees is equal to or less than the number of directors to be elected at the meeting, our directors are elected by majority voting (Proposal 1). For an uncontested election of directors, a director is elected only if the number of shares voted For that director exceeds the number of shares voted Against that director. In accordance with our By-Laws, each of our incumbent directors submits a conditional resignation in advance of the Annual Meeting that will become effective if the number of shares voted For that director does not exceed the number of shares voted Against that director and the Board accepts the directors resignation. The director also may choose to retire from the Board before the resignation is accepted by the Board and becomes effective. If a sitting director fails to receive a majority of the votes cast, our Board will determine within 90 days of the Annual Meeting whether to accept the resignation of such director, unless the director retires during this 90-day period. If a nominee fails to receive a majority of the votes cast and the Board accepts the directors resignation or the director retires, there would be a vacancy created on the Board. Our Board would then have the option under our By-Laws either to appoint someone to fill the vacancy or to reduce the size of the Board.
This years election of directors is an uncontested election of directors. If there were a contested election, then plurality voting, by which directors receiving the greatest number of votes cast would be elected, would apply.
We will announce the preliminary voting results at the conclusion of the Annual Meeting, if practicable, and we will publish the voting results in a Current Report on Form 8-K that will be filed with the United States Securities and Exchange Commission (the SEC) within four business days after the conclusion of the Annual Meeting.
3 | 2018 Proxy Statement |
PROPOSAL 1 ELECTION OF DIRECTORS
Our Amended and Restated Certificate of Incorporation and our By-Laws provide for the annual election of directors. These organizational documents also provide that the number of directors, which shall not be less than nine or more than fourteen, shall be determined by our Board. Our Board has set the current number of directors at ten.
Upon election, each of our directors serves for a one-year term and until his or her successor has been duly elected and qualified, or until his or her earlier removal or resignation. Our Board currently consists of Herbert Wender, David C. Carney, Howard B. Culang, Lisa W. Hess, Stephen T. Hopkins, Brian D. Montgomery, Gaetano Muzio, Gregory V. Serio, Noel J. Spiegel and Richard G. Thornberry.
Upon the recommendation of the Governance Committee of our Board, the Board has nominated each of our current directors for reelection. All nominees (other than our Chief Executive Officer, Mr. Thornberry) are independent under applicable independence rules of the SEC and the NYSE, and all nominees have consented to be named in this proxy statement and to serve if elected. If, at the time of the Annual Meeting, any nominee is not available for election, proxies may be voted for another person nominated by the Board, the position may become vacant or the size of the Board may be reduced.
Board Composition
When evaluating director nominees for election at our Annual Meeting, our Governance Committee seeks to nominate a Board that will be most effective in overseeing the affairs of the Company, and in particular, in supporting the development and execution of the Companys strategic plan. See BusinessGeneralBusiness Strategy on pages 11 and 12 of our Annual Report on Form 10-K for the year ended December 31, 2017 for a discussion of the Companys current strategic focus. As part of this process, our Governance Committee regularly assesses whether our director nominees possess an appropriate diversity of experience, skills, perspective and tenure to complement one anothers strengths and to help drive results.
The professional background and individual skill sets for each of our director nominees are set forth in detail below under Biographical Information for Director Nominees. As shown below, as a whole, our director nominees have professional experiences (in addition to their experience on the Board) broadly covering the following areas that we believe are important to our future success:
4 | 2018 Proxy Statement |
Proposal 1 Election of Directors
In addition to diversity of experience, skills and perspective, our Board believes diversity in tenure also is important in effectively overseeing our businesses. The performance of our mortgage insurance (MI) and mortgage and real estate services (Services) businesses can be impacted significantly by mortgage credit and housing market cycles. The Board believes that the institutional knowledge acquired during previous periods of cyclicality in our industries is critical to effectively overseeing our risk management going forward. As a result, the Governance Committee seeks to nominate a Board that has a diversity of tenure. The following represents our current Board tenure, reflecting a balance between engaging new talent and maintaining institutional knowledge of our businesses and the markets in which they operate:
The Governance Committee assesses the overall composition of the Board at least annually and regularly considers new potential nominees for director who would enhance the Boards oversight objectives. The Governance Committee recently has engaged Spencer Stuart, a leading search firm, to support its efforts in seeking to identify new potential Board talent.
5 | 2018 Proxy Statement |
Proposal 1 Election of Directors
Biographical Information for Director Nominees
Biographical information for each of the director nominees is provided below along with a discussion of each nominees specific experience, qualifications, attributes or skills that have led the Board to conclude that he or she should be nominated for election or reelection.
Herbert Wender | Mr. Wender, 80, has served as non-executive Chairman of our Board since May 2005. He also previously served in this role from August 1992 to May 1999 and as Lead Director from May 1999 until his current appointment. Mr. Wender served as Chairman of the Board and Chief Executive Officer of Radian Guaranty Inc., our principal MI subsidiary (Radian Guaranty), from June 1983 until July 1992. Between 1998 and 2001, Mr. Wender also served as a director and Vice Chairman of LandAmerica Financial Group, Inc., a title insurance company. Before that, he was Chairman of the Board and Chief Executive Officer of LandAmerica Financial Groups predecessor, Commonwealth Land Title Insurance Company. He has been a director of Radian since July 1992.
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David C. Carney | Mr. Carney, 80, has served as President of Carney Consulting since March 1995. He served as Executive Vice President of Jefferson Health Systems, the parent company of a regional network of health care providers, from 1996 until 1999. Before that, he served as Chief Financial Officer of CoreStates Financial Corp, a banking and financial services holding company, from 1991 to 1995. Mr. Carney is a certified public accountant and served as Philadelphia Area Managing Partner for Ernst & Young LLP from 1980 through 1991. Mr. Carney served as Chief Executive Officer and Chairman of the Board of ImageMax, Inc., a provider of outsourced document management solutions, from 1999 through 2003. Mr. Carney also served as a director and Chairman of the Audit Committee of CSAA Insurance Group, an AAA insurer, from 2011 through 2014. Mr. Carney currently serves as a director and Chairman of the Executive Committee of AAA Club Alliance and as a director of AAA Club Partners. He has been a director of Radian since November 1992.
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6 | 2018 Proxy Statement |
Mr. Wenders extensive leadership experience on our Board, his intimate familiarity with Radian, his prior management experience as Chief Executive Officer of Radian Guaranty and his industry experience give him the expertise, skills and judgment to serve as a director and non-executive Chairman.
Proposal 1 Election of Directors
Howard B. Culang | Mr. Culang, 71, served as President of Laurel Corporation, a financial services firm, from January 1996 through December 2011. Mr. Culang was a Managing Member of JH Capital Management LLC, a management company for a private equity fund, from July 1998 to December 2010, and of Cognitive Capital Management LLC, a management company for a fund of hedge funds, from April 2001 to December 2005. In the past, he has served as Vice Chairman of Residential Services Corporation of America, the holding company for Prudential Home Mortgage, Lenders Service, Inc. and Prudential Real Estate Affiliates, and as a Managing Director and member of the Executive Committee of the Prudential Home Mortgage Company, where he worked from November 1985 to December 2005. Mr. Culang also held a number of senior management positions with Citibank, N.A., including as a Senior Credit Officer. Mr. Culang currently serves as a director of Phase Change Software, LLC (formerly ioSemantics, LLC), a privately owned artificial intelligence (AI) software company. He has been a director of Radian since June 1999.
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Lisa W. Hess | Ms. Hess, 62, has been President and Managing Partner of SkyTop Capital Management LLC (SkyTop), an investment fund, since October 2010. From October 2002 to December 2008, she was the Chief Investment Officer of Loews Corporation, a diversified holding company, where she was responsible for managing approximately $50 billion in assets. Ms. Hess was a Founding Partner of Zesiger Capital Group, a diversified money manager, and also has held positions at First Boston Corporation, Odyssey Partners and Goldman, Sachs & Co. She has served on the U.S. Treasury Debt Advisory Committee and the Federal Reserve Bank of New York Investors Advisory Committee. Since June 2009, Ms. Hess has been a Trustee of Teachers Insurance and Annuity Association (TIAA), serving on the investment, real estate, customers and products and corporate governance committees. She has been a director of Radian since February 2011.
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7 | 2018 Proxy Statement |
Mr. Carneys service as a director of Radian through various business and economic cycles gives him significant knowledge of Radian, its history and its businesses. Mr. Carneys experience as a CPA, as managing partner of the Philadelphia area offices of one of the big four nationally recognized accounting firms, and as a Chief Financial Officer of a large, publicly-traded financial institution give him particular financial expertise and management experience relevant to his qualifications as a director and as the Chair of the Audit Committee of our Board. In addition, Mr. Carneys consulting experience and service on other boards of directors give him a broad perspective and insight on effectively running and advising a business. Mr. Culangs service as a director of Radian through various business and economic cycles gives him significant knowledge of Radian, its history and its businesses. In addition, his significant management experience in the mortgage and financial services industries gives him valuable expertise and a broad understanding of the mortgage and real estate businesses. These experiences are particularly relevant in Mr. Culangs role as Chair of the Credit Management Committee of our Board. His role as a director of an AI software company has given him important insights into emerging technology trends in the financial services sector, including AI and cyber security that are valuable in overseeing our technology initiatives.
Proposal 1 Election of Directors
Stephen T. Hopkins |
Mr. Hopkins, 67, served most recently as President of Hopkins and Company LLC, a management consulting business, from February 1999 to 2014. From 1976 to January 1999, Mr. Hopkins held a number of managerial positions with the Federal Home Loan Mortgage Corporation (Freddie Mac), a government sponsored enterprise that purchases and securitizes qualifying mortgage loans, serving as Senior Vice President and National Sales Director from April 1994 through August 1998. He has been a director of Radian since June 1999.
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Brian D. Montgomery | Mr. Montgomery, 61, serves as Managing Director of The Collingwood Group, LLC (Collingwood), a business consulting firm that advises corporate leadership on a range of issues within the financial services and mortgage banking industries. Mr. Montgomery also serves as a Partner of Collingwood Capital Advisors, LLC, which is a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. Prior to joining Collingwood in August 2009, Mr. Montgomery served as the Assistant Secretary for Housing and Commissioner of the Federal Housing Administration (FHA) within the U.S. Department of Housing and Urban Development from June 2005 to July 2009. Before serving as Commissioner of the FHA, from January 2001 to April 2005, Mr. Montgomery served in the White House as Deputy Assistant to the President and Cabinet Secretary, as well as Deputy Assistant to the President and Director of Presidential Advance. Mr. Montgomery was Chairman of the Hope for Homeowners Oversight Board from 2008 to 2009 and served as a board member of the Federal Housing Finance Board from 2005 to 2008. In 2014, Mr. Montgomery became a director of Reverse Mortgage Investment Trust Inc., a real estate finance company that is focused on acquiring, originating, financing and managing home equity conversion mortgage loans, home equity conversion mortgage backed securities guaranteed by the Government National Mortgage Association and other real estate-related assets. He has been a director of Radian since May 2012.
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Mr. Montgomery has been nominated by President Trump to serve as Commissioner of the FHA. His appointment to that position is subject to ratification and confirmation by the U.S. Senate (Confirmation). If reelected, Mr. Montgomery intends to resign from the Board effective upon Confirmation should he be so confirmed.
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8 | 2018 Proxy Statement |
Ms. Hess extensive experience managing financial assets, including in her current role with SkyTop, and previously as a chief investment officer of Loews Corporation, and as a member of various investment and advisory committees, gives her a broad range of expertise with respect to finance, investments and the capital markets that is particularly beneficial to the Board and in her role as Chair of the Finance and Investment Committee of the Board. Her position as President and Managing Partner of SkyTop brings a current, day-to-day business perspective that is valuable in enhancing Board oversight in todays operating environment. In addition, her experience serving on the corporate governance committee at TIAA brings an added perspective and insight to the Boards consideration of corporate governance issues and the concerns of institutional shareholders. Mr. Hopkins service as a director of Radian through various business and economic cycles gives him significant knowledge of Radian, its history and its businesses. Additionally, Mr. Hopkins experience of more than 20 years with Freddie Mac gives him specialized insight into the mortgage industry and the role of government sponsored enterprises within the industry. Because Radian works closely on a regular basis with such government sponsored enterprises, Mr. Hopkins experience is especially valuable in this regard. Having served as an executive officer of Freddie Mac, he has broad general management experience and expertise to apply to many aspects of Radians business, including in his role as Chair of the Compensation and Human Resources Committee of our Board.
Proposal 1 Election of Directors
Gaetano Muzio | Mr. Muzio, 64, is a Principal and co-founder of Ocean Gate Capital Management, LP (Ocean Gate), an investment fund. For 27 years prior to founding Ocean Gate, Mr. Muzio worked at Goldman, Sachs & Co. in various positions, including serving as a Managing Director from 1996 until 2004. In 1986, he became the first Global Mortgage and Asset Backed Sales Manager responsible for creating the sales team and strategy for, and was also one of the founding members of, Goldmans Mortgage and Asset Backed Department. In 1990, he became a general partner and Co-Head of Goldmans Mortgage Department, with responsibilities for overseeing trading, risk management, sales, research, structured finance and compliance for the department. He has been a director of Radian since May 2012.
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Gregory V. Serio | Mr. Serio, 56, has served as a partner with Park Strategies, LLC (Park Strategies), a management and government relations consulting firm, since January 2005. He currently serves as the head of Park Strategies risk and insurance management practice group. Prior to joining Park Strategies, Mr. Serio served as Superintendent of Insurance for the State of New York from May 2001 to January 2005. From January 1995 until his appointment as Superintendent in 2001, Mr. Serio served as First Deputy Superintendent and General Counsel of the New York Insurance Department. Mr. Serio also has served as the Chairman of the Government Affairs Task Force of the National Association of Insurance Commissioners (NAIC) and as a member of and NAIC representative on the Financial Services and Banking Information Infrastructure Committee of the United States Treasury. He was also a commissioner of the International Commission on Holocaust Era Insurance Claims which was established by the NAIC. He has been a director of Radian since May 2012.
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Noel J. Spiegel | Mr. Spiegel, 70, was a partner at Deloitte & Touche, LLP (Deloitte) where he practiced from September 1969 until May 2010. In his career at Deloitte, he served in numerous management positions, including as Deputy Managing Partner; a member of Deloittes Executive Committee; Managing Partner of Deloittes Transaction Assurance practice, Global Offerings and International Financial Reporting Standards practice and Technology, Media and Telecommunications practice (Northeast Region); and as Partner-in-Charge of Audit Operations in Deloittes New York Office. Mr. Spiegel currently serves on the boards of directors and as Chair of the audit committees of American Eagle Outfitters, Inc. and vTv Therapeutics, Inc. He has been a director of Radian since February 2011.
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9 | 2018 Proxy Statement |
Mr. Montgomery possesses a significant understanding of the mortgage industry, a deep knowledge of federal housing policies and broad experience in the federal regulation of housing. This expertise is extremely valuable to the Company as it seeks to navigate and capitalize upon the regulatory and legislative changes in the housing and mortgage finance industries. Mr. Muzio possesses a broad understanding of the mortgage industry. In addition, his significant experience in finance, risk management and corporate governance and strategy gives him extensive expertise in several areas that are valuable to the Boards oversight responsibilities. From both his private and public sector roles, Mr. Serio possesses extensive knowledge and experience in the insurance industry. His in-depth understanding of insurance regulatory matters, including financial and market conduct examinations and other compliance-related matters, combined with his experience in risk management and corporate governance matters, further strengthens the Boards oversight and perspective in these areas. He is also a Board Leadership Fellow of the National Association of Corporate Directors, which, together with his current and past work experiences, provide him with especially valuable expertise in his role as Chair of the Governance Committee of our Board.
Proposal 1 Election of Directors
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Richard G. Thornberry | Mr. Thornberry, 59, has served as Radians Chief Executive Officer since March 2017. Before joining Radian, from 2006 until 2016, Mr. Thornberry served as the Chairman and Chief Executive Officer of NexSpring Group, LLC (NexSpring Group), a company that he co-founded in 2006. NexSpring Group provides mortgage industry advisory and technology services to private equity investors, mortgage lenders, financial institutions, mortgage investors and other mortgage industry participants. Mr. Thornberry also has served as the Chairman and Chief Executive Officer of NexSpring Financial, LLC, an early stage fintech company that he co-founded to focus on improving the overall value proposition for all participants in a residential mortgage origination transaction. Prior to founding NexSpring Group, from 1999 until 2005, Mr. Thornberry served as President and Chief Executive Officer of Nexstar Financial Corporation, an end-to-end mortgage business process outsourcing firm, which he co-founded in 1999 and sold to MBNA Home Finance in 2005. Mr. Thornberry has also held executive positions with MBNA Home Finance from 2005 until 2006, Citicorp Mortgage Inc. from 1996 until 1998 and Residential Services Corporation of America/Prudential Home Mortgage Company from 1987 until 1996. Mr. Thornberry currently serves on the board of directors of the Mortgage Bankers Association and as an executive council member of the Housing Policy Council. Mr. Thornberry began his career as a certified public accountant at Deloitte where he primarily worked with financial services clients and entrepreneurial businesses. He has been a director of Radian since March 2017.
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Additional Information Regarding Directors
For additional information regarding our Board, its standing committees, and our standards for corporate governance and director independence, refer to the sections entitled Corporate Governance and Board Matters and Compensation of Executive Officers and DirectorsDirector Compensation below.
RADIANS BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR NOMINEES. SIGNED PROXIES WILL BE VOTED FOR EACH OF THE DIRECTOR NOMINEES UNLESS A STOCKHOLDER GIVES OTHER INSTRUCTIONS ON THE PROXY CARD.
10 | 2018 Proxy Statement |
Mr. Spiegels significant prior service as a partner at Deloitte, and his current experience as chair of audit committees of publicly held companies, provides him with a depth of experience in management, financial reporting, risk management, and public accounting and finance that is of significant value and relevance to the Board and in particular the Audit Committee. In addition, his work with many public companies as an independent auditor provides him with a unique perspective and depth of insight with respect to corporate governance, Board leadership and corporate strategy. Mr. Thornberrys broad understanding of the mortgage finance industry and experience leading innovative mortgage industry businesses gives him a unique perspective and set of skills to lead our Company and contribute to the Board.
11 | 2018 Proxy Statement |
Proposal 2 Advisory Vote to Approve the Compensation of the Companys Named Executive Officers
12 | 2018 Proxy Statement |
Proposal 2 Advisory Vote to Approve the Compensation of the Companys Named Executive Officers
RADIANS BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE COMPENSATION OF THE COMPANYS NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT. SIGNED PROXIES WILL BE VOTED FOR APPROVAL UNLESS A STOCKHOLDER GIVES OTHER INSTRUCTIONS ON THE PROXY CARD.
13 | 2018 Proxy Statement |
14 | 2018 Proxy Statement |
Proposal 3 Approval of the Amended and Restated Radian Group Inc. Employee Stock Purchase Plan
15 | 2018 Proxy Statement |
Proposal 3 Approval of the Amended and Restated Radian Group Inc. Employee Stock Purchase Plan
16 | 2018 Proxy Statement |
Proposal 3 Approval of the Amended and Restated Radian Group Inc. Employee Stock Purchase Plan
The table below shows, as to each of the Companys NEOs and the various indicated groups, the number of shares of common stock purchased under the 2008 Stock Purchase Plan between January 1, 2017 and December 31, 2017, the most recent purchase date. The closing price of our common stock on March 15, 2018 was $18.51 per share.
Name and Position
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Weighted Average Purchase Price Per Share (#)
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Number of Purchased Shares (#)
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Named Executive Officers: | ||||
Richard G. Thornberry |
$13.898 |
1,528 | ||
J. Franklin Hall |
$13.898 |
467 | ||
Derek V. Brummer |
$13.898 |
1,446 | ||
Edward J. Hoffman |
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0 | ||
Brien J. McMahon |
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0 | ||
Sanford A. Ibrahim |
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0 | ||
Jeffrey G. Tennyson |
$13.898 |
467 | ||
All executive officers as a group (7 persons) |
$13.898 |
3,441 | ||
All non-executive directors as a group (9 persons) |
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0 | ||
All participating employees, excluding executive officers, as a group (510 persons) |
$13.898 |
102,876 | ||
Total |
$13.898 |
106,317 |
As discussed above, directors who are not employees do not qualify as eligible employees and thus cannot participate in the Amended Stock Purchase Plan. Future purchase prices are not determinable because they will be based upon the closing price of our common stock (either at the beginning of the offering period or the last day of the purchase period) as determined on the purchase date. No shares of our common stock have been issued with respect to the first offering and purchase periods under the Amended Stock Purchase Plan for which stockholder approval is being sought under this proposal.
17 | 2018 Proxy Statement |
Proposal 3 Approval of the Amended and Restated Radian Group Inc. Employee Stock Purchase Plan
18 | 2018 Proxy Statement |
Proposal 3 Approval of the Amended and Restated Radian Group Inc. Employee Stock Purchase Plan
Equity Compensation Plan Information
The following table sets forth certain information relating to our current equity compensation plans as of December 31, 2017, not including the shares that would be added to the Amended Stock Purchase Plan. Each number of securities reflected in the table is a reference to shares of our common stock.
Plan Category (1) | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights |
(b) Weighted-average exercise price of outstanding options, warrants and rights |
(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) |
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Equity compensation plans approved by stockholders (2) |
5,362,021 | (3) | $3.85 | (4) | 9,753,999 | (5) | ||||||
Equity compensation plans not approved by stockholders |
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Total |
5,362,021 | (3) | $3.85 | (4) | 9,753,999 | (5) |
(1) | The table does not include information for equity compensation plans assumed by us in mergers, under which we do not grant additional awards. |
(2) | These plans consist of the Radian Group Inc. 1995 Equity Compensation Plan (the 1995 Equity Plan), the Radian Group Inc. 2008 Equity Compensation Plan (the 2008 Equity Plan), the Radian Group Inc. Equity Compensation Plan, which amended and restated the Radian Group Inc. 2014 Equity Compensation Plan (as so amended and restated, the Amended and Restated Equity Plan) and the 2008 Stock Purchase Plan. |
(3) | Represents 234,302 shares of phantom stock issued under our 1995 Equity Plan, 1,055,900 non-qualified stock options and 944,352 RSUs issued under our 2008 Equity Plan, and 636,843 non-qualified stock options and 2,490,624 RSUs issued under the Amended and Restated Equity Plan. Of the RSUs included herein, 1,517,442 are performance-based stock-settled RSUs that could potentially pay out between 0% and 200% of this represented target, and 123,496 are performance-based stock-settled RSUs that could pay out to our former CEO at 0% or 100%. Not reflected in this table are 26,331 performance-based RSUs that were granted in June 2014 and vested in 2017 and that represent the performance-based RSUs that were earned in 2017. |
(4) | The shares of phantom stock and RSUs were granted at full value, and therefore, have a weighted-average exercise price of $0. Excluding shares of phantom stock and RSUs from this calculation, the weighted-average exercise price of outstanding non-qualified stock options was $8.16 at December 31, 2017. |
(5) | Includes 8,851,531 shares available for issuance under our Amended and Restated Equity Plan and 902,468 shares available for issuance under the 2008 Employee Stock Purchase Plan, in each case as of December 31, 2017. In January 2018, we issued 52,464 shares from the shares available for issuance under the 2008 Employee Stock Purchase Plan. As a result, 850,004 shares currently remain available for issuance under the 2008 Employee Stock Purchase Plan. |
RADIANS BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDED AND RESTATED RADIAN GROUP INC. EMPLOYEE STOCK PURCHASE PLAN. SIGNED PROXIES WILL BE VOTED FOR APPROVAL UNLESS A STOCKHOLDER GIVES OTHER INSTRUCTIONS ON THE PROXY CARD.
19 | 2018 Proxy Statement |
PROPOSAL 4 RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
The Audit Committee of our Board is responsible for selecting an independent registered public accounting firm to perform the annual audit of our financial statements. The Audit Committees appointment of PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for 2018 is being submitted to our stockholders for ratification. PwC has been Radians independent registered public accounting firm since 2007. The Audit Committee believes that the continued retention of the independent registered public accounting firm is in the best interests of the Company and its investors. A representative of PwC is expected to attend our Annual Meeting, will have an opportunity to make a statement if he or she desires, and will be available to respond to questions.
If the stockholders fail to ratify the appointment of PwC, the Audit Committee will reconsider whether to retain the firm. Regardless of whether the stockholders ratify the appointment of PwC at the Annual Meeting, the Audit Committee, in its discretion, may retain PwC or select a new independent registered public accounting firm at any time if it determines that doing so would be in the Companys best interests and those of our stockholders.
Independent Registered Public Accounting Firm Fees and Services
The following is a summary of the fees billed for professional services rendered to Radian by PwC for the fiscal years ended December 31, 2017 and December 31, 2016:
Type of Fees
|
2017
|
2016
|
||||||
Audit Fees |
$ | 3,567,726 | $ | 3,124,306 | ||||
Audit-Related Fees |
180,083 | 0 | ||||||
Tax Fees |
315,557 | 604,781 | ||||||
All Other Fees |
86,207 | 60,736 | ||||||
Total |
$ | 4,149,573 | $ | 3,789,823 |
For purpose of the above table, in accordance with the SECs definitions and rules:
| Audit Fees are fees for professional services for the audit of the financial statements included in our Annual Report on Form 10-K (which includes an audit of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002), for the review of our financial statements included in our Quarterly Reports on Form 10-Q, for the review of registration statements filed under the Securities Act of 1933, as amended (the Securities Act) and for services that normally are provided in connection with statutory and regulatory filings. |
| Audit-Related Fees, if any, are fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and which are not reported under Audit Fees, including services related to consultation on financial accounting and reporting matters. |
| Tax Fees are fees for professional services for tax compliance, tax advice and tax planning. |
| All Other Fees are fees for products and services provided by our independent registered public accounting firm other than those services reported above. For both 2017 and 2016, All Other Fees included miscellaneous advisory services fees, as well as license fees for accounting research software products. |
In addition to retaining PwC to audit our consolidated financial statements for 2017, we retained PwC to provide other auditing and advisory services as discussed above. We understand the need for PwC to maintain objectivity and independence in its audit of our financial statements. To minimize relationships that could appear to impair the objectivity of PwC, our Audit Committee is required to pre-approve all non-audit work performed by PwC in accordance with applicable SEC rules and our pre-approval policy. All services provided by PwC and listed in the table above were approved by the Audit Committee in accordance with our pre-approval policy.
20 | 2018 Proxy Statement |
Proposal 4 Ratification of the Appointment of Pricewaterhousecoopers LLP
The Audit Committee considered the nature and proposed extent of the non-audit services provided by PwC and determined that those services were in compliance with the provision of independent audit services by the firm.
RADIANS BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS RADIANS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2018. SIGNED PROXIES WILL BE VOTED FOR RATIFICATION UNLESS A STOCKHOLDER GIVES OTHER INSTRUCTIONS ON THE PROXY CARD.
21 | 2018 Proxy Statement |
22 | 2018 Proxy Statement |
Corporate Governance and Board Matters
23 | 2018 Proxy Statement |
Corporate Governance and Board Matters
24 | 2018 Proxy Statement |
Corporate Governance and Board Matters
25 | 2018 Proxy Statement |
Corporate Governance and Board Matters
26 | 2018 Proxy Statement |
Corporate Governance and Board Matters
27 | 2018 Proxy Statement |
Corporate Governance and Board Matters
28 | 2018 Proxy Statement |
Corporate Governance and Board Matters
29 | 2018 Proxy Statement |
The following information is provided with respect to each of our current executive officers other than our Chief Executive Officer whose information is set forth under Proposal 1Election of Directors. Our executive officers are appointed by our Board to serve in their respective capacities until their successors are duly appointed and qualified or until their earlier resignation or removal.
J. Franklin Hall | Mr. Hall, 49, Senior Executive Vice President and Chief Financial Officer of Radian, joined Radian in December 2014 and became Radians Chief Financial Officer on January 1, 2015. Prior to joining Radian, Mr. Hall served in a number of different roles with First Financial Bancorp, a bank holding company based in Cincinnati, Ohio, including serving as Executive Vice President and Chief Financial Officer from 2005 until 2012, and then as Executive Vice President, Chief Financial Officer and Chief Operating Officer from 2012 until 2013. Mr. Hall began his career at Ernst & Young LLP. | |
Derek V. Brummer | Mr. Brummer, 47, Senior Executive Vice President, Mortgage Insurance and Risk Services, was appointed to his current role in 2018 and is responsible for all mortgage insurance, credit risk products and operations. Prior to his current role, Mr. Brummer served as Senior Vice President, Chief Risk Officer and also held several positions with Radian Asset Assurance, our former financial guaranty business that was sold to Assured Guaranty Corp. in April 2015. Prior to joining Radian in 2002, Mr. Brummer was a corporate associate at Allen & Overy, and Cravath, Swaine & Moore, both in New York. | |
Edward J. Hoffman | Mr. Hoffman, 44, Senior Executive Vice President, General Counsel and Corporate Secretary of Radian, was appointed General Counsel and Corporate Secretary in July 2008. Mr. Hoffman also provides executive oversight for the Companys compensation and human resources and government relations functions. Mr. Hoffman joined Radian in August 2005. Prior to joining Radian, Mr. Hoffman practiced in the Corporate and Securities Group of Drinker Biddle & Reath LLP in Philadelphia. Mr. Hoffman also currently serves as our Corporate Responsibility Officer. | |
Brien J. McMahon | Mr. McMahon, 58, Senior Executive Vice President and Chief Franchise Officer, joined Radian in 2010 as Chief Franchise Officer. He led our Mortgage Insurance sales group until May 2017, when he assumed responsibility for all of our enterprise-wide sales. Before joining Radian, Mr. McMahon served as executive vice president for Realogy Franchise Group (Realogy), where he directed sales, training and administration for multiple premier real estate brands including: Better Homes and Gardens Real Estate, Century 21 Real Estate LLC, Coldwell Banker, Coldwell Banker Commercial, ERA, and Sothebys International Realty. Prior to Realogy, Mr. McMahon served 14 years with PHH US Mortgage in a variety of roles, including senior vice president of national sales. | |
Eric R. Ray | Mr. Ray, 56, Senior Executive Vice President, Technology and Transaction Services, joined Radian in 2018 and is responsible for the overall vision, strategy and leadership for our enterprise-wide information technology function and for leading the Companys Services business. Prior to joining Radian, Mr. Ray served in various roles with IBM Corporation (IBM) in Armonk, New York from 1983 until 2018. Most recently, Mr. Ray served as IBMs General Manager, Global Technology Services from 2015 until 2018 and was responsible for the IBM North American technology consulting business, project based services and enterprise-wide technology offerings. Prior to that, he served as IBMs General Manager, Global Financial Services Sector from 2009 until 2014 and General Manager, Financial Services Sector from 2007 until 2009. | |
Catherine M. Jackson | Ms. Jackson, 55, Senior Vice President, Controller and Chief Accounting Officer of Radian, joined Radian in this role in January 2008. Before joining Radian, Ms. Jackson served eight years with Capmark Financial Group Inc., a financial services company, including as Chief Accounting Officer from June 2004 to August 2007. Prior to Capmark, she served eight years with Salomon Smith Barney as manager of accounting policy. She began her career in the audit practice at KPMG in Philadelphia. |
30 | 2018 Proxy Statement |
BENEFICIAL OWNERSHIP OF COMMON STOCK
Security Ownership of Management
The following table shows all shares of our common stock that were beneficially owned, as of March 15, 2018, by: (i) each of our current directors, nominees for director at the Annual Meeting and our NEOs; and (ii) all of our current directors and executive officers as a group. In general, a person beneficially owns shares if he or she has, or shares with others, the right to vote or dispose of them, or if he or she has the right to acquire them within 60 days of March 15, 2018 (such as by exercising options).
Name (1)
|
Shares Beneficially Owned (#) (2)
|
Percent
of Class | ||||
Herbert Wender
|
|
543,991
|
|
* | ||
David C. Carney
|
|
224,595
|
|
* | ||
Howard B. Culang
|
|
226,611
|
|
* | ||
Lisa W. Hess
|
|
89,545
|
|
* | ||
Stephen T. Hopkins
|
|
228,561
|
|
* | ||
Brian D. Montgomery
|
|
68,749
|
|
* | ||
Gaetano Muzio
|
|
73,749
|
|
* | ||
Gregory V. Serio
|
|
68,749
|
|
* | ||
Noel J. Spiegel
|
|
135,927
|
|
* | ||
Richard G. Thornberry
|
|
41,397
|
|
* | ||
Derek V. Brummer
|
|
87,190
|
|
* | ||
J. Franklin Hall
|
|
13,780
|
|
* | ||
Edward J. Hoffman
|
|
132,534
|
|
* | ||
Brien J. McMahon
|
|
95,159
|
|
* | ||
Sanford A. Ibrahim
|
|
895,108
|
|
* | ||
Jeffrey G. Tennyson
|
|
16,547
|
|
* | ||
All current directors and executive officers as a group (16 persons)
|
|
2,140,925
|
|
0.991% |
* | Less than one percent of class. Percentages are calculated in accordance with Rule 13d-3 under the Exchange Act. |
(1) | The address of each person listed is c/o Radian Group Inc., 1500 Market Street, Philadelphia, Pennsylvania 19102. |
(2) | Each individual (including each current executive officer) has or is entitled to have within 60 days of March 15, 2018, sole voting or dispositive power with respect to the shares reported as beneficially owned, other than: (i) Mr. Hopkins, who shares voting and dispositive power with his spouse with respect to 10,000 of the shares reported as beneficially owned; (ii) Mr. Spiegel, whose spouse owns 10,000 of the shares reported as beneficially owned and as to which shares Mr. Spiegel disclaims beneficial ownership; and (iii) Mr. Hoffman, who shares voting and dispositive power with his spouse with respect to 19,500 of the shares reported as beneficially owned. In addition to shares owned outright, the amounts reported include: |
| Shares of our common stock allocable to our NEOs based on their holdings in the Radian Group Inc. Stock Fund under the Radian Group Inc. Savings Incentive Plan (the Savings Plan) as of March 15, 2018. |
| Shares that may be acquired within 60 days of March 15, 2018 through the exercise of non-qualified stock options, as follows: Mr. Brummer19,025 shares; Mr. Hoffman73,195 shares; Mr. McMahon64,165 shares; Mr. Ibrahim345,060 shares; and all current directors and executive officers as a group189,120 shares. |
31 | 2018 Proxy Statement |
Beneficial Ownership of Common Stock
| Shares that may be acquired within 60 days of March 15, 2018 upon the conversion of stock-settled restricted stock units awarded to our non-employee directors and executive officers as follows: Mr. Wender298,892 shares; Mr. Carney159,873 shares; Mr. Culang159,873 shares; Ms. Hess89,545 shares; Mr. Hopkins159,873 shares; Mr. Montgomery68,749 shares; Mr. Muzio68,749 shares; Mr. Serio68,749 shares; Mr. Spiegel105,927 shares; Mr. Brummer3,808 shares; Mr. Hall3,313 shares; Mr. Hoffman3,313 shares; Mr. McMahon2,649 shares; Mr. Thornberry19,869 shares; and all current directors and executive officers as a group1,217,202 shares. The restricted stock units granted to directors generally vest three years from the date of grant or earlier upon a directors retirement, death or disability. All vested stock-settled restricted stock units granted to directors will be converted into shares of our common stock upon the directors departure from our Board. The time-based restricted stock units granted to NEOs generally vest in pro rata installments on each of the first three anniversaries of the grant date or earlier upon the NEOs retirement, death or disability. If applicable, the amounts reported in the above table include all shares payable upon retirement to those directors or NEOs who are or will be eligible to retire within 60 days of March 15, 2018. |
| Shares that may be issued within 60 days of March 15, 2018 upon the conversion of phantom stock awards granted to our non-employee directors as follows: Mr. Wender57,428 shares; Mr. Carney59,522 shares; Mr. Culang58,688 shares; Mr. Hopkins58,688 shares; and all current directors and executive officers as a group234,326 shares. All vested phantom stock awards granted to a director will be converted into shares of our common stock upon the directors departure from our Board. The amounts reported in the above table include all shares payable upon retirement to those directors who are or will be eligible to retire within 60 days of March 15, 2018, including dividend equivalents to be settled in shares of our common stock upon conversion of a directors phantom shares. |
Security Ownership of Certain Stockholders
The following table provides information concerning beneficial ownership of our common stock by the only persons shown by our records or the SECs public records as beneficially owning more than 5% of our common stock. For purposes of determining the existence and identity of, and the amount of common stock owned by, any stockholder, we rely on filings with the SEC of Schedules 13D, 13F and 13G (or any similar filings) as of any date, subject to our actual knowledge of the ownership of our common stock.
Name and Business Address |
Shares Beneficially Owned (#) |
Percent of Class* |
||||||
FMR LLC (1) |
18,657,843 | 8.65% | ||||||
245 Summer Street |
||||||||
Boston, MA 02110 |
||||||||
The Vanguard Group (2) |
18,134,246 | 8.41% | ||||||
100 Vanguard Blvd. |
||||||||
Malvern, PA 19355 |
||||||||
BlackRock, Inc. (3) |
14,438,816 | 6.70% | ||||||
55 East 52nd Street |
||||||||
New York, NY 10055 |
* | Based on shares of common stock outstanding at December 31, 2017. |
(1) | Based on a Schedule 13G/A filed with the SEC on February 13, 2018. These securities are beneficially owned by FMR LLC and various investment management subsidiaries and affiliates of FMR LLC. FMR LLC reports that it has sole dispositive power with respect to 18,657,843 shares and sole voting power with respect to 1,726,410 shares. Members of the Johnson family, including Abigail P. Johnson, a Director, Chairman and the Chief Executive Officer of FMR LLC, may be deemed to control FMR LLC. |
32 | 2018 Proxy Statement |
Beneficial Ownership of Common Stock
(2) | Based on a Schedule 13G/A filed with the SEC on February 12, 2018, The Vanguard Group reports that it has sole dispositive power with respect to 17,890,317 shares, sole voting power with respect to 237,666 shares, shared dispositive power with respect to 243,929 shares and shared voting power with respect to 23,772 shares. These shares are beneficially owned by funds and accounts managed by The Vanguard Group, Inc. and its subsidiaries. |
(3) | Based on a Schedule 13G/A filed with the SEC on February 1, 2018, BlackRock, Inc. reports that it has sole dispositive power with respect to 14,438,816 shares and sole voting power with respect to 13,996,186 shares. These shares are beneficially owned by funds and accounts managed by BlackRock, Inc. and its subsidiaries. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC and to furnish copies of these reports to us. Based on our review of the copies of the reports we have received, and written representations received from our executive officers and directors with respect to the filing of reports on Forms 3, 4 and 5, we believe that all filings required to be made during 2017 were made on a timely basis.
33 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Compensation Discussion and Analysis
The following Compensation Discussion and Analysis includes forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the U.S. Private Securities Litigation Reform Act of 1995. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of managements current views and assumptions with respect to future events, and are not a guarantee of future performance. For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Cautionary Note Regarding Forward Looking Statements-Safe Harbor Provisions and the Risk Factors detailed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date of this Compensation Discussion and Analysis. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.
In this Compensation Discussion and Analysis (CD&A), we discuss the executive compensation program for our NEOs, including our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers, as well as two former executive officers. For 2017, our NEOs were as follows:
Our Named Executive Officers*
| Richard G. Thornberry, Chief Executive Officer beginning March 6, 2017 (our principal executive officer) |
| J. Franklin Hall, Senior Executive Vice President, Chief Financial Officer (our principal financial officer) |
| Derek V. Brummer, Senior Executive Vice President, Mortgage Insurance and Risk Services |
| Edward J. Hoffman, Senior Executive Vice President, General Counsel and Corporate Secretary |
| Brien J. McMahon, Senior Executive Vice President, Chief Franchise Officer |
Our NEOs also include, pursuant to applicable SEC rules, the following former executive officers:
| Sanford A. Ibrahim, Chief Executive Officer through March 5, 2017 |
| Jeffrey G. Tennyson, President, Clayton Holdings Inc. through October 17, 2017 |
* | Please see Executive Officers for additional information regarding our NEOs (other than Mr. Ibrahim and Mr. Tennyson). |
2017 CEO Transition
In May 2016, S.A. Ibrahim, Radians former CEO, informed the Board that after 11 years of service to the Company, he intended to retire when his employment agreement (Prior Employment Agreement) expired on December 31, 2017. The Board appointed a special committee to conduct a nationwide search for Mr. Ibrahims successor, and on February 8, 2017, we announced that the Board had appointed Richard G. Thornberry to succeed Mr. Ibrahim as our new CEO. We simultaneously reported that to ensure an orderly transition and in support of our succession plan, Mr. Ibrahim had agreed to retire early on March 5, 2017, and also had agreed to provide consulting services to the Company during the one-year period following his retirement. Mr. Ibrahims compensation arrangements for 2017 are discussed under VI. Compensation Arrangements with Former Executives below and his agreements are further described under Compensation Arrangements and Agreements with CEO and have been filed with the SEC as exhibits to our Current Report on Form 8-K filed on February 13, 2017.
34 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
Mr. Thornberry joined Radian as CEO on March 6, 2017. His compensation arrangements are described under Compensation Arrangements and Agreements with CEO below and his agreements have been filed as exhibits to our Current Report on Form 8-K filed with the SEC on February 13, 2017. Unless otherwise noted, references to CEO and to CEO compensation in this CD&A refer to Mr. Thornberry and his compensation. Similarly, unless otherwise noted, references to NEO and to NEO compensation in this CD&A generally refer to our current executives and their compensation, with any post-termination arrangements discussed separately in this CD&A under VI. Compensation Arrangements with Former Executives.
I. Executive Summary
As background for the discussion that follows, we provide the following highlights regarding our 2017 performance and the material decisions affecting the 2017 compensation program for our NEOs.
Our 2017 Executive Compensation Program
✓ | Strong emphasis on performance-based, variable compensation, with 86% of our CEOs total target annual compensation in 2017 subject to performance-based metrics (excluding his one-time, sign-on cash and equity awards). |
✓ | Heavy emphasis on risk management with 50% of our NEOs STI awards withheld until it can be adequately determined that insurance written during the one-year STI performance period meets risk and profitability expectations. |
✓ | LTI awards are primarily performance-based with rigorous performance metrics, including restricted stock units dependent upon our relative outperformance of peer companies and our strong absolute book value growth. |
✓ | Strong governance and pay practices (e.g., limited perquisites; conservative severance arrangements with no single-trigger vesting of equity upon change of control; no excise tax gross-ups; strong clawback policy; and no speculative transactions permitted in our stock). |
✓ | Discretion is used in executive compensation program on a limited basis (less than a third of our NEOs total annual compensation requires some discretion) and only when coupled with quantitative metrics, disciplined decision making and transparency. |
✓ | Conducted a broad stockholder outreach program to discuss, among other items, our executive compensation program. Contacted top 35 stockholders (representing approximately 75% of our shares outstanding) and conducted meaningful discussions with many of them. |
Our 2017 Performance
✓ | Pretax income from continuing operations was $346.7 million, which included impairment charges of $200.2 million related to the goodwill and other intangible assets of our Services business. Net income was $121.1 million, which included an incremental tax provision of $102.6 million related to recent tax law changes. In 2017, we grew adjusted pretax operating income(1) and book value per share by 14% and 4%, respectively, over 2016. In 2017, we grew our tangible book value per share(2) by 12.4% from $12.10 to $13.60. |
✓ | Wrote $53.9 billion in new insurance (NIW), including the highest volume of flow NIW (i.e., loan by loan) in the Companys history. As a result, in 2017, we grew insurance in force by 9% to $200.7 billion, with 92% of our primary risk in force as of the end of 2017 consisting of loans insured in the strong underwriting years of 2009 to the present. |
✓ | Completed a series of capital actions in 2017 that simplified and strengthened our liquidity position and capital structure, improved our debt maturity profile, enhanced our return on capital, reduced our annual cash interest payments and increased Radian Guarantys financial position under the GSEs Private Mortgage Insurance Eligibility Requirements or PMIERs. |
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Compensation of Executive Officers and Directors
✓ | Completed a strategic review and initiated a restructuring of our Services business to focus on core products that are strongly aligned with our customer needs, have high growth potential and are most likely to produce predictable and recurring fee-based revenues. |
✓ | Made meaningful progress in transitioning to a One Company operating model, including instituting an enterprise-wide sales team to present our products more effectively in a solutions-focused manner. |
✓ | Achieved one- and three-year TSRs of 14.7% and 23.5%, respectively, and earned rating agency upgrades in 2017, including for Radian Guaranty, our principal MI subsidiary. |
Please see 2017 Short-Term Incentive Analysis for additional information regarding our 2017 performance.
(1) On a consolidated basis, adjusted pretax operating income is a non-GAAP financial measure. Please see pages 93 to 95 of our Annual Report on Form 10-K for the year ended December 31, 2017 for a definition of adjusted pretax operating income, including a reconciliation of adjusted pretax operating income to the most comparable GAAP measure, pretax income from continuing operations.
(2) Tangible book value per share is a non-GAAP measure, calculated as our GAAP book value per share, excluding the per-share impact of goodwill and other intangible assets, net. Please see Appendix B for a reconciliation of tangible book value per share to book value per share. |
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Compensation of Executive Officers and Directors
II. Compensation Principles and Objectives
Our executive compensation program is designed under the direction of the Committee to attract, motivate and retain high quality executive officers and to align our pay-for-performance philosophy with our overall business and strategic objectives. This pay-for-performance philosophy is intended to ensure that our NEOs interests are aligned with those of our stockholders, while not encouraging inappropriate actions, including unnecessary or excessive risk taking. The Committee has developed a set of principles and objectives to guide decisions about how to compensate executive officers appropriately for their contributions toward achieving our strategic, operational and financial objectives. Specifically, we believe our executive compensation program should:
| Focus executives on long-term performance that aligns with stockholders interests; |
| Support the execution of our business strategy and performance; |
| Maintain an appropriate balance between short-term and long-term compensation, while weighting total compensation in favor of longer-term variable pay; |
| Manage risk with appropriate protection and controls; |
| Maintain pay practices that are externally competitive and reasonable; and |
| Remain flexible to respond to changes in our businesses, strategies and current market developments. |
In 2017, as in past years, our executive compensation program was significantly focused on: performance-based variable compensation; challenging LTI metrics providing incentives to both outperform peers and achieve absolute growth; and using limited Committee discretion and only when coupled with quantitative metrics, disciplined decision making and transparency. We particularly note the following with respect to our 2017 executive compensation program:
➣ | NEO Compensation is Heavily Weighted Towards Performance-Based, Variable Compensation. |
Fixed compensation has continued to represent a limited portion of our NEOs total compensation. Base salary represented only 14% of Mr. Thornberrys 2017 total target compensation (excluding his one-time, sign-on cash and equity awards) and, on average, only 30% of the total target compensation for our other NEOs. The remaining target compensation of our NEOs was tied to, and is contingent upon, Company and
37 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
individual performance. The following charts highlight, for the CEO and our other NEOs, the percentage of 2017 total target compensation that was attributable to each primary component of compensation (average of each component for the other NEOs):
* | Based on components of compensation at target, and therefore, not directly comparable to amounts set forth in the 2017 Summary Compensation Table. In addition, excludes one-time, sign-on cash and equity awards granted to Mr. Thornberry. |
➣ | Our Compensation Program Demonstrates a Strong Correlation between Pay and Performance. |
1. | The Committee funded 2017 STI Awards above target due to the strength of our 2017 performance. |
As discussed above, the Company had a strong performance year, with a 14% year-over-year increase in consolidated adjusted pretax operating income, growth in book value per share, improved financial strength and flexibility, a record year in flow NIW driving growth in our insurance-in-force to over $200 billion, and meaningful progress in positioning the Companys Services business for future success. In recognition of these achievements, the independent directors awarded Mr. Thornberry an STI award of 125% of target and the Committee awarded STI awards to our other NEOs of between 124% and 146% of target. See IV. Primary Components of CompensationB. Short-Term and Medium-Term Incentive Program2017 Short-Term Incentive Analysis for additional information regarding the 2017 STI awards.
Our decisions regarding STI awards have consistently demonstrated a strong correlation between pay and performance. As demonstrated in the following table, with the exception of the 2015 performance year in which our businesses underperformed relative to our financial plan, our NEOs generally have received above target awards in more recent years. This trend largely reflects our return to operating profitability in 2014 for the first time in many years, Radian Guarantys on-going compliance with the PMIERs, the improvement in our capital and liquidity positions and corresponding rating agency upgrades, growth in our high-quality insured mortgage insurance portfolio (including multiple years of record-breaking volumes of flow NIW), and our on-going pursuit to diversify our revenue sources and
38 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
to execute our business objectives. In contrast, for the performance years during and following the financial crisis (from 2007 through 2011), the NEOs (other than our then CEO) received, on average, STI awards of 49% of target, with our former CEO receiving no STI award in three of those years.
2. | The Committee funded 2016 MTI Awards above target given the strong credit performance and projected profitability of our 2016 insured portfolio. |
During and following the financial crisis, the Committee reflected upon the various lessons learned from the period leading up to the crisis, including how to better structure executive compensation to reinforce an appropriate mindset among our NEOs with respect to risk-taking. As a result, in 2009, the Committee replaced our short-term bonus plan with a plan that allows for short-term and medium-term cash incentive awards. This plan, the Radian Group Inc. Short-Term and Medium-Term Incentive Plan for Executive Employees (the STI/MTI Plan), provided the Committee with the flexibility to introduce a medium-term (two-year) performance period during which our executive officers continue to have pay at risk associated with the credit performance and projected profitability of insurance written during the short-term performance period. The 2016 MTI award was based on the credit performance and projected profitability of our 2016 mortgage insurance portfolio through the end of 2017. Based on the credit performance and the expected strong profitability of this portfolio, we believe this portfolio represents one of the strongest performing portfolios that we have ever written. As a result, the Committee awarded the maximum payout of 115% of target (which was reduced from 125% of target in prior periods) for the 2016 MTI awards.
The STI/MTI Plan provides the Committee with the flexibility to determine whether our annual incentive program should include an MTI component for any given performance year. In making this determination, the Committee and management annually discuss the relative benefits of the MTI component against other potential alternatives. See IV. Primary Components of CompensationB. Short-Term and Medium-Term Incentive Program for more information.
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3. | Two-thirds of our annual LTI awards consist of performance-based equity that require relative outperformance and strong absolute growth for awards to vest at target. Failure to perform over the long-term significantly diminishes our NEOs realized pay. |
Our 2017 LTI awards provide for meaningful payouts only if the Company outperforms a group of peer companies and produces strong growth in book value. The 2017 performance-based restricted stock units (Performance-Based RSUs), which represent two-thirds of the total target value of our NEOs 2017 LTI awards, comprise two componentsrelative TSR performance and absolute book value growth. With respect to TSR performance, the NEOs are eligible for above-target awards only if the Companys TSR outperforms the median of a group of companies comprised mainly of our compensation peers. Also, if the Companys TSR is negative over this three-year performance period, the NEOs maximum payout for the TSR component will be reduced to 75% of target regardless of the extent to which the Companys TSR may be outperforming its peer group. With respect to the book value component, the Company must achieve at least a 30% increase in book value (as defined below in IV. Primary Components of CompensationC. Long-Term Incentive ProgramLTI Awards Granted in 20172017 Performance-Based RSU Awards) for a NEO to be eligible to receive an award at 100% of target.
A failure to achieve our long-term objectives will have a significant, negative affect on our NEOs realized pay. For example, the performance-based RSUs granted to our executive officers in 2013 resulted in no payout and those granted in 2014 resulted in a 4% of target payout for our NEOs upon the conclusion of the three-year performance period for these awards. Because these performance-based RSUs represented on average 24% and 32% of the 2013 and 2014 total target compensation of our NEOs who received these grants, respectively, realized pay for these NEOs was well below targeted compensation for these years.
➣ | We Use Limited Discretion in our Compensation Program and only when Coupled with Disciplined Decision Making and Transparency. |
Our executive compensation program is predominantly formula-based, with the components of our program (STI and MTI) that allow for a degree of discretion representing only 29% and 32% of the total target compensation of our CEO and the other NEOs (on average), respectively. Each year, the Committee considers the level of Committee discretion that is appropriate for determining the amount to be awarded to the NEOs under the STI/MTI Plan, and in particular, whether a more formula-based approach to the STI payouts would be appropriate. For our 2017 compensation program, the Committee determined that while a more formula-based approach could bring greater predictability to the level of potential payouts, the use of a pure formula also had the potential to ignore the multitude of variables that influenced our NEOs decision-making throughout the year, and most importantly, the potential to limit the Committees ability to appropriately recognize positive and negative factors that were not apparent to the Committee when setting goals at the beginning of the year. In addition, with the expected transition to a new CEO, the Committee believed discretion could be particularly important in 2017 given that a new CEO likely would have a fresh perspective with respect to strategy and the appropriate metrics indicative of success throughout 2017. As a result, clear quantitative and qualitative metrics were established for each major area of focus, but the payouts also remained subject to the Committees discretion. We recognize the potential impact of discretion on transparency, and therefore, we disclose in detail not only the quantitative performance metrics established for evaluating performance, but also the qualitative factors considered by the Committee in evaluating each of the major areas of focus and the Committees assigned payout percentage for each area. See IV. Primary Components and CompensationB. Short-Term and Medium-Term Incentive Program2017 Short-Term Incentive Analysis for more information.
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➣ | We Have Implemented Strong Governance and Compensation Practices; We Do Not Engage in Problematic Pay Practices. |
Consistent with our strong governance and compensation practices, we:
| Impose a double-trigger for payments upon a change of control and apply best pay practices under our equity plans. Beginning in 2010, we eliminated any payments to the NEOs based solely upon a change of control without termination of employment. Further, in the Radian Group Inc. Equity Compensation Plan, we (i) have formalized our approach to change of control by adding a presumption that there will be double trigger vesting of equity awards only upon an involuntary termination 90 days before, or within one year following, a change in control and (ii) prohibit the payment of dividends on equity awards that have not yet vested; |
| Do not provide gross-ups for excise taxes. We provide for gross-ups in very limited circumstances and do not provide for any gross-ups in a change of control situation; we recently eliminated gross-ups related to premiums paid by us for long-term disability insurance and life insurance for the benefit of the NEOs; |
| Prohibit speculative transactions in our stock. We specifically prohibit all hedging and other speculative transactions in Radian securities that could have the effect of mitigating the full risk of ownership of our shares and weakening the alignment of executive and shareholder interests; |
| Impose a strong compensation clawback policy. We have a clawback policy that provides for the recoupment of incentive compensation in the event of a material restatement of the Companys financial results and/or a determination that the level of achievement of an objectively quantifiable financial performance measure or goal was materially overstated; |
| Impose rigorous stock ownership and share retention requirements. Our CEO is required to hold Radian shares equal in value to seven times his base salary and our other NEOs are also held to meaningful stock ownership requirements. In addition, our 2015 through 2017 Performance-Based RSU awards include a one-year, post-vesting share retention period applicable to all NEOs; |
| Provide limited perquisites. We provided no perquisites to our CEO in 2017 other than the previously disclosed relocation arrangement, and perquisites to our other NEOs have been de minimis and in the ordinary course; and |
| Encourage and solicit feedback regarding our executive compensation program. We hold an annual stockholder vote on our compensation program for our NEOs, regularly engage with stockholders regarding our compensation practices and use an independent compensation consultant to offer an objective perspective on executive compensation. |
➣ | Our Compensation Programs are Constantly Evolving to Support Business and Strategic Objectives and to Address Market Conditions and Best Practices. |
Our Committee is focused on ensuring that our executive compensation program is aligned with our overall strategic objectives. We believe this is apparent based on how our executive compensation program has evolved over time to reflect market conditions and to drive our strategic objectives. Since the financial crisis, broadly speaking, the Company has performed through three business cycles or periods, with the following primary strategic objectives:
| A period of Survival characterized by overcoming significant losses, maximizing capital and flexibility, retaining customer relationships and GSE eligibility to insure loans purchased by the GSEs and protecting employee morale and motivation; |
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| A period of Traditional MI Growth characterized by rebuilding customer relationships, divesting our former financial guaranty business, improving financial strength and flexibility, modernizing our operations and technology, enhancing our risk capabilities to take into consideration lessons learned from the financial crisis and new data sources and technologies, and growing our talent base; and |
| The current period of Growth and Diversification characterized by continuing to enhance our traditional MI business through operational excellence and service, utilizing our mortgage credit expertise to pursue opportunities outside of traditional mortgage insurance, expanding our presence throughout the mortgage value chain to include fee for services business in mortgage and real estate services, and expanding and retaining talent, including talent brought in through acquisitions. |
Throughout each of these periods, the Committee has revised our executive compensation program to support our strategic objectives and to take into account the market factors influencing the type and form of awards that would be most appropriate for our executives. The following illustrates significant changes in our executive compensation program during each of these business cycles:
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III. Compensation Process and Oversight
A. | Committee Process and Role |
The Committee provides direction and oversight for our compensation and human resources programs, processes and functions. The Committee is supported by our Head of Human Resources and our General Counsel, who serve as liaisons to the Committee. The Committee has the sole authority to engage and terminate consulting firms and legal counsel as it deems appropriate to advise it and the Board with respect to executive compensation and human resources matters, including the sole authority to approve the compensation and other terms related to their engagement. The Committee currently retains Pay Governance as its sole independent compensation consultant. Pay Governance provides compensation advisory services to the Company relating to the compensation of executive officers and non-employee directors. Generally, these services include advising the Committee on the principal aspects of our compensation programs and evolving industry practices and providing market information, risk assessments and other analysis regarding our program design and incentive plan practices. Other than this work, Pay Governance performs no services for the Company. The Committee chair approves the payment of all work performed by the independent compensation consultant for the Company, and the Committee annually reviews the independence and performance of Pay Governance. The Committee also engages, from time to time, external legal counsel to provide legal advice in connection with executive compensation matters. In 2017, the Committee assessed the independence of Pay Governance and the Committees primary external counsel and concluded that the work performed by these advisors does not raise any conflict of interest. For a complete discussion of the responsibilities delegated by our Board to the Committee, please see the Committee charter, which is available on our website at www.radian.biz.
B. | Consideration of Stockholder Input Regarding our Executive Compensation Program |
Overview of Process
As part of our commitment to engaging with our investors, management frequently meets with stockholders to discuss matters of significance to them, including our executive compensation program. These meetings are conducted in the ordinary course of business regardless of the level of stockholder support we receive for our executive compensation program in any given year. In addition, to the extent stockholders indicate a concern with respect to our executive compensation program (through negative say-on-pay votes or otherwise), management will seek to identify and contact those stockholders to better understand their concerns. This may occur as part of our solicitation efforts in connection with our annual meeting of stockholders. In addition, as discussed below, if the overall level of stockholder support for our executive compensation program is below an acceptable level, we will embark on a broad stockholder outreach program to better understand stockholder concerns and what we can do to address them.
Through our stockholder engagement process, we learn about our stockholders voting considerations, influences and processes, as well as their perspectives and priorities with respect to executive compensation and other matters. Management shares this information with the Committee and with our Governance Committee, as relevant, and our Board committees regularly report to the full Board. Management and the Committee consider the outcome of our most recent say-on-pay vote and the information we learn from our solicitation and outreach efforts in designing our executive compensation program each year.
Engagement Based on 2017 Say-on-Pay Vote
Although we have historically received strong stockholder support (over 95% in 2014, 2015 and 2016) for our executive compensation program, at our 2017 annual meeting of stockholders, approximately 66% of the votes cast were in support of the overall compensation of the NEOs. In response to this disappointing outcome, we conducted a broad stockholder outreach program and contacted our top 35 stockholders (representing approximately 75% of our shares outstanding) to solicit their input on, among other things, our executive compensation program and to better understand their concerns.
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As a result of our outreach efforts, we engaged in meaningful discussions with stockholders representing more than 30% of our outstanding shares. On behalf of the Company, the meetings were attended by our General Counsel and the other members of our Corporate Secretary Office, the head of our executive compensation function and the head of our investor relations function. In addition, these stockholders were offered the opportunity to meet with the Chairman of the Committee and other members of the Board or senior management. All of the meetings were held telephonically. The feedback from these meetings was shared with the Committee, our Governance Committee and the full Board. The following represents what we heard in these meetings and how we are responding to the items raised:
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C. | Setting Compensation |
To set compensation for the NEOs, we utilize different compensation tools, including external benchmarking, internal equity, and wealth accumulation analyses. These collectively represent our primary compensation tools for establishing appropriate compensation levels for our NEOs. In addition, when evaluating a NEOs compensation, the Committee typically will assess the NEOs overall performance, skill sets, experience and current and potential future career path within the Company. For the compensation of the NEOs other than the CEO, the main participants in our compensation process are the Committee, its independent compensation consultant and two members of managementthe CEO and the Head of Human Resources. The Committee has ultimate authority over compensation decisions for the NEOs other than the CEO. The process for establishing the compensation of our NEOs other than the CEO is as follows:
We believe that managements participation in the compensation process is critical to an equitable program that is effective in motivating our NEOs, and to ensure that the process appropriately reflects our pay-for-performance culture, current strategies and our focus on risk management. Our NEOs annually develop a set of shared performance goals and associated metrics, which are predominantly based on the Companys annual operating plan that is approved by our Board, including those annual objectives that are intended to further our long-term strategic vision. In addition, each NEO develops a set of individual performance goals and presents them to the CEO, who reviews and adjusts them, as necessary, and then presents them to the Committee. These shared and individual performance goals and metrics serve as the primary basis for determining a NEOs STI award. The process for assessing performance against these objectives is discussed in greater detail below.
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With respect to the CEO, the independent directors of our Board have the ultimate authority over compensation decisions. The process for establishing the compensation of our CEO is as follows:
Benchmarking Compensation
We consider external benchmarking to be an important analytical tool to help us establish competitive points of reference for evaluating executive compensation. However, benchmarking is not the sole factor used in setting compensation, and the Committee regularly assesses how and the extent to which benchmarking is used. We benchmark each executive officer position annually and, if necessary, when a search for a new executive officer position is undertaken. It has been our practice to collaborate with the Committees independent compensation consultant in this process to apply a consistent and disciplined approach in our benchmarking methodology and philosophy.
For 2017 compensation, we benchmarked each of the primary components of our 2017 compensation program, as well as the 2017 total target cash and direct compensation for each NEO to external market reference points. In benchmarking an executive officers total target cash compensation, we consider base salary plus cash-based short-term and medium-term incentives. Total target direct compensation consists of target cash compensation plus the annualized accounting value of long-term incentives.
To the extent information was available, our NEOs compensation was benchmarked against similarly situated executive positions at other companies using one or all of the following three reference points (collectively referred to as the benchmark references), as appropriate:
Primary Compensation Peer Group. On an annual basis, management prepares, and the Committee reviews and approves, compensation peer companies to serve as the primary compensation peer group that is relevant for evaluating executive officer compensation. For 2017 benchmarking, the Committee approved the following peer companies*:
CoreLogic, Inc.
Essent Group Ltd.
Fidelity National Financial, Inc.
First American Financial Corporation
Genworth Financial, Inc.
MGIC Investment Corporation
National Mortgage Insurance Corporation
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Nationstar Mortgage Holdings, Inc.
Old Republic International Corporation
PHH Corporation
Stewart Information Services Corporation
United Guaranty Corporation
Walter Investment Management
* For 2017, the Committee removed Ocwen Financial Corporation from the primary compensation peer group due to the significant decline in its market capitalization and ongoing changes in its business. The Committee added CoreLogic, Inc. given its broad mix of mortgage services and United Guaranty Corporation, a mortgage insurance competitor that was owned by American International Group.
We believe the companies included within our 2017 primary compensation peer group were appropriate to consider in evaluating 2017 compensation based on the following:
| In most cases, the roles and responsibilities of our NEOs were sufficiently similar to the equivalent executive positions within the primary compensation peer group; |
| They represented our primary competition for talent; |
| Five of the companies had significant mortgage insurance operations and all had significant businesses in the mortgage and real estate industries, our core areas of operations; |
| They generally were of a comparable size and complexity to us. Among this peer group, as of December 31, 2016, based on publicly available information we ranked eighth and fourth in terms of largest revenue and market capitalization, respectively; and |
| Eight of the 13 companies also named us as a peer. |
Where appropriate, the Committee excluded companies that may be considered competitors of the Company, but did not represent a good benchmark for compensation given that their relative size and complexity were not comparable to the Company.
From time to time, third parties such as proxy advisory institutions establish peer groups for the Company for the purpose of assessing the Companys relative performance and compensation. The Committee reviews these peer groups in the ordinary course but does not utilize these peer groups for the purpose of evaluating our NEOs compensation and the Companys performance, mainly because the Committee believes the primary compensation peer group approved by the Committee represents the most appropriate peer group for the Company for the reasons discussed above.
Financial Services and General Industry Reference Points. Because we compete for talent in markets other than those in which we compete for business, we also use, as necessary, broader financial services and general industry compensation reference points.
The financial services data and the general industry data are compiled annually by Willis Towers Watson, an independent third-party, from 177 organizations that participate in Willis Towers Watsons Financial Services Executive Compensation Database (Financial Services) and from 484 organizations across a range of industries that participate in Willis Towers Watsons General Industry Executive Compensation Database (General Industry).
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For these two reference points, we use pre-established subsets of companies contained in the databases of Willis Towers Watson, so that we compare our compensation to that of companies of reasonably similar size to us. The subsets are based on standard revenue ranges that are provided in published compensation surveys, and we do not select or have any influence over the companies that participate in these surveys. The subset of companies we use consists of a broad array of companies in the financial services industry, including property/casualty insurance, life/health insurance, and investment, brokerage, retail and commercial bank organizations. The financial services data is focused on companies with assets of less than $20 billion and revenues less than $3 billion, while the general industry data is composed of companies with revenues of less than $3 billion. We do not participate in the selection of the companies for inclusion in these reference points and are not made aware of the companies that constitute these reference points.
We use benchmarking to identify a competitive compensation range for each executive officer position. From a quantitative perspective, we generally consider an executive officers compensation to be market competitive if it is within a 15% range of the median of the applicable benchmark references. However, because executive officer roles and responsibilities often vary within the industries in which we participate and in the broader financial services segment, our benchmarking process is tailored for each executive officer position, with an emphasis on benchmark data for comparable positions and, in particular, comparable positions in our primary compensation peer group. For each executive officer, the Committee may use one or more of the three benchmark references or, in some cases, a subset of the primary compensation peer group, depending on its judgment concerning the comparability of executive officer roles to these benchmark references. As a result, the Committees assessment of market competitiveness, in addition to the quantifiable benchmark data, may take into consideration other factors such as the scale and scope of the companies as well as specific roles against which our executive officer positions are being compared and the potential market demand for such positions.
For each of the NEOs, the results of the benchmarking conducted by the independent compensation consultant in October 2016 for the purpose of setting 2017 target compensation (expressed as a percentile of the benchmarked group) were as follows:
Executive Officer
|
Primary Compensation Peer Group Reference Point
|
Financial Services Reference Point
|
General Industry Reference Point
| |||
Mr. Thornberry
|
At 50th
|
Between 50th and 75th
|
Between 50th and 75th
| |||
Mr. Hall
|
Below 50th
|
At 50th
|
Below 50th
| |||
Mr. Brummer
|
At 50th
|
Between 50th and 75th
|
Not Applicable (1)
| |||
Mr. Hoffman
|
At 50th
|
Between 50th and 75th
|
Between 50th and 75th
| |||
Mr. McMahon
|
Not Applicable (1)
|
Not Applicable (1)
|
Between 50th and 75th
|
(1) | Positions within the relevant benchmarked group are not sufficiently similar to the NEOs role to provide an appropriate benchmark for compensation evaluation purposes. |
As our benchmarking process for 2017 illustrates, while the Committee considers benchmarking a valuable reference point for assessing the competitiveness of the NEOs compensation, the Committee does not set compensation for the NEOs to adhere strictly to any specific benchmarked reference point.
Internal Equity
While external benchmarking is important in assessing the overall competitiveness of our compensation program, we believe that our compensation program must also be internally consistent and equitable to reflect an executives responsibilities and contributions to value creation and to ensure teamwork and coordination across the organization. As a result, in addition to benchmarking, our CEO and the Committee consider internal equity among our executive officer group when setting the components of compensation.
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Our review of internal equity involves comparing the compensation of positions within a given level of the organization as well as comparing the differences in compensation among various organizational levels. For 2017 compensation, the Committee compared the compensation for each NEO (other than the CEO) against his peers in the executive officer group. Although we monitor the difference in pay between the CEO and the other executive officers, given the uniqueness of the CEO position and its breadth of responsibilities, we do not perform a formal internal equity analysis of the CEO relative to other executive officer positions.
Wealth Accumulation
The Committee regularly reviews total reward tally sheets for each of the NEOs and considers the current value and potential future value of existing equity awards as factors in evaluating a NEOs compensation.
IV. Primary Components of Compensation
Our executive compensation program provides a balanced mix of pay through the following primary components: base salary, short-term/medium-term cash-based incentives, and long-term equity-based incentives. As discussed in greater detail below, the incentive-based portions of our program are tied to: (i) our short-term and medium-term corporate and business performance; (ii) achievement of strategic and individual performance goals; and (iii) our long-term business performance and growth in stockholder value. The short-term incentives have been designed to recognize the achievement of annual objectives, while the medium-term and long-term incentives have been designed to ensure that decisions made in achieving short-term objectives are also appropriate to support our longer-term goals.
A. | Base Salary |
Base salaries are paid to executive officers to provide them with a competitive level of compensation for the day-to-day performance of their job responsibilities. As discussed above, base salaries for the NEOs primarily are established based on competitive market compensation data and internal equity. The following table provides the level of base salary for each of the NEOs:
Name | 2017 Base Salary | Current Base Salary (1) | ||||||||||
Richard G. Thornberry |
$750,000 | $800,000 | ||||||||||
J. Franklin Hall |
$400,000 | $425,000 | ||||||||||
Derek V. Brummer |
$450,000 | $475,000 | ||||||||||
Edward J. Hoffman |
$400,000 | $425,000 | ||||||||||
Brien J. McMahon |
$350,000 | $425,000 |
(1) Mr. Thornberrys salary was increased to improve competitiveness against our primary compensation peer group and to reflect the additional value he is able to provide with a year of experience with the Company and our industries. Mr. Brummers salary was increased to reflect his additional responsibilities following his promotion to Senior Executive Vice President, Mortgage Insurance and Risk Services. Base salaries for our other NEOs were increased to: (i) improve market competitiveness against our primary compensation peer group; (ii) reflect an increase in their responsibilities; and (iii) create internal equity among Mr. Thornberrys executive staff. |
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B. | Short-Term and Medium-Term Incentive Program |
This discussion refers to the 2017 performance objectives for the Company and the NEOs as well as to the Companys and NEOs actual 2017 performance results. These objectives and results are disclosed in the limited context of our compensation programs. We specifically caution investors not to apply these statements to other contexts.
Overview of Annual Program Design
Our STI/MTI Plan allows the Committee to design cash incentive programs for performance periods of up to two years, with the STI period covering the first calendar year in which the award is granted, and if included, an MTI period covering the full two-year performance period (from January 1 of the year of grant through December 31 of the second performance year). Accordingly, the Committee has the ability to reward NEOs for (among other items) new mortgage insurance originations in any short-term performance period, but it also retains discretion to pay a significant portion of the overall award only after it is determined that such originations are likely to satisfy targeted profitability expectations.
Management and the Committee annually assess whether to include an MTI component as part of this cash incentive program. Primary considerations impacting this decision include, among other items: (i) the potential complexity added by the MTI component and its impact on retaining and attracting talent; (ii) the importance to our overall success of managing risk and whether risk management is appropriately addressed through MTI or through other elements of our compensation program; (iii) the Committee discretion required in evaluating performance under the MTI program; and (iv) the applicability of MTIs portfolio management focus to our total officer base under our One Company focus. In evaluating these factors for 2017, the Committee determined to retain the MTI component as part our 2017 cash incentive program.
Overview of STI/MTI Program Structure
The amount of STI awarded to a NEO is based on the NEOs achievement of specified performance goals for the applicable year. Corporate and business unit/departmental goals are established each year in the context of our annual business planning process and are approved by our Board. Using these objectives, individual performance goals are established by each NEO and adjusted and approved by the CEO and the Committee (or the independent directors), as discussed in III. Compensation Process and Oversight above. By tying the STI award to our annual operating plan, the Committee aims to ensure accountability, focus and alignment throughout the Company with respect to those matters determined to be most critical to driving long-term stockholder value.
Once the amount of STI is determined for each NEO, if the Committee has determined to include an MTI component as part of the cash incentive program for that year, only 50% of this amount is actually paid to the NEO as an STI bonus. For 2017, these amounts are set forth in the Bonus column of our 2017 Summary Compensation Table. The remaining 50% of each NEOs STI award then becomes that NEOs target MTI award for the full two-year MTI performance period. Therefore, the MTI targets for the NEOs, which impact the amounts ultimately paid to our NEOs, can vary significantly from year to year, depending on the NEOs performance and the corresponding amounts earned for STI in any given performance period. Because our NEOs earned above-target STI awards for 2016 performance, their 2016 MTI targets and the amounts paid were also larger than in prior years, as reported within the Non-Equity Incentive Plan Compensation column of our 2017 Summary Compensation Table.
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At the end of the MTI performance period, the Committee determines what percentage, if any, of the target MTI awards will be paid to the NEOs based on the Companys achievement of certain pre-established business and financial performance metrics and goals (as illustrated below for the 2017 MTI award). Other than for determining the MTI target amount (which is derived based on each individuals STI performance), individual officer performance is not evaluated for purposes of determining or paying the MTI awards, as all NEOs receive the same percentage payout relative to target. Upon establishing the 2017 STI/MTI awards, the Committee set the maximum MTI payout at 115% of target, a reduction from the 125% of target maximum set in prior periods. The following diagram illustrates the award process under our STI/MTI Plan for the 2017 STI/MTI awards:
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2017 SHORT-TERM INCENTIVE ANALYSIS
2017 STI Funding Levels
For 2017, the funding levels for the NEOs STI awards were determined based on the Committees assessment of the Companys performance in three primary areasShared Corporate Objectives, Mortgage Insurance, and Services. The following table highlights: (i) the metrics (and corresponding targets) for each of these performance areas; (ii) the Companys actual performance against these targets (as applicable); and (iii) the percentage payout approved by the Committee for each area of performance:
Performance Area and Weighting (1)
|
Metric
|
Target Goal
|
2017 Actual
|
Committee approved payout percent relative to Target (2)
| ||||
Shared Corporate (40% Weighting) |
Adjusted Pretax Operating Income (3)
|
$612M
|
$617M
|
+25% above target | ||||
Capital Management (4)
|
Qualitative
|
Qualitative
|
||||||
Grow Revenue from Non-Traditional MI & Services
|
26%
|
-7%
|
||||||
Percent of Processes Evaluated (5)
|
75%
|
100%
|
||||||
Total Company Expense Ratio (6)
|
33%
|
33%
|
||||||
Mortgage Insurance (35% Weighting) |
NIW Target + Grow Market Share by 1%
|
$50B + 1%
|
$54B + 1.2%
|
|||||
Unlevered Return on PMIERs Capital (7)
|
13-14%
|
14-15%
|
+25% | |||||
Percent Improvement in Operating Productivity (8)
|
10%
|
41%
|
above target | |||||
MI Expense Ratio (9)
|
23%
|
25%
|
||||||
Services (25% Weighting) |
Revenue Target
|
$219M
|
$162M
|
|||||
EBITDA (10)
|
$22M
|
$2M
|
||||||
New Tier One Customers (11)
|
75
|
88
|
-50% | |||||
Adopt One Branding Strategy (12)
|
On hold
|
below target | ||||||
Improvement in TM Productivity (13)
|
11%
|
0%
|
||||||
EBITDA Margin Percentage (10)
|
10%
|
1%
|
(1) | Weighting of performance areas for the NEOs is shown in the chart, except that with respect to Mr. McMahon, whose primary responsibilities in 2017 were to lead our mortgage insurance sales and to develop and implement an enterprise-wide sales function, the target performance areas were weighted 30% Shared Corporate and 70% Mortgage Insurance. |
(2) | Performance relative to target is evaluated in the context of the multitude of variables that influence our NEOs decision-making throughout the performance period. See the qualitative discussion following this table for additional information impacting the Committees performance assessments. |
(3) | Adjusted Pretax Operating Income is a non-GAAP financial measure for the consolidated Company which is defined as GAAP consolidated pretax income from continuing operations, excluding the effects of: (i) net gains (losses) on investments and other financial instruments; (ii) loss on induced conversion and debt extinguishment; (iii) acquisition-related expenses; (iv) amortization or impairment of goodwill and other intangible assets; and (v) net impairment losses recognized in earnings and losses from the sale of lines of business. Please see pages 93 to 95 of our Annual Report on Form 10-K for the year |
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ended December 31, 2017 for a more detailed explanation of adjusted pretax operating income, including a reconciliation of adjusted pretax operating income to the most comparable GAAP measure, pretax income from continuing operations. |
(4) | Assessed based on our success in managing our capital and liquidity positions to further our business growth and diversification, maintain financial flexibility, and make progress towards achieving investment grade ratings at our holding company, Radian Group. |
(5) | Review and identify all products and business processes for potential integration, with decisions made with respect to 75% of these products and processes by year end 2017. |
(6) | Measured as Radian Groups (A) total GAAP expenses excluding: (i) provision for losses; (ii) loss on induced conversion and debt extinguishment; (iii) acquisition-related expenses; (iv) amortization or impairment of goodwill and other intangible assets; (v) net impairment losses recognized in earnings and losses from the sale of lines of business; and (vi) interest expense; as a percentage of (B) total GAAP revenues excluding net gains on investments and other financial instruments. |
(7) | Represents projected life-of-loan returns on an unlevered basis (i.e., after-tax underwriting returns plus projected investment income) on net income for 2017 NIW (net of reinsurance) as a percentage of the capital we are required to hold against such insured loans to satisfy the PMIERs. |
(8) | Measured as a 10% increase in the number of insurance applications processed per underwriter per day and the successful implementation of the contract underwriting phase of our technology modernization initiative. |
(9) | Calculated using amounts determined under GAAP. The ratio is calculated using policy acquisition costs and other operating expenses as a percentage of net premiums earned. |
(10) | For compensation purposes, as used in connection with the 2017 STI analysis, EBITDA is measured based on our Services segments adjusted earnings, before interest, income taxes, depreciation and amortization (Services Adjusted EBITDA), a non-GAAP measure. Services Adjusted EBITDA is calculated using Services adjusted pretax operating income, further adjusted to remove the impact of depreciation and corporate allocations for interest and operating expenses. In addition, Services Adjusted EBITDA Margin Percentage represents Services Adjusted EBITDA divided by our Services segments total services revenue. |
(11) | New Tier One customer is defined as a customer that has not provided any 2016 revenue to our Services business and provides a minimum of $10,000 of revenue (according to GAAP standards) in 2017. |
(12) | Measured as completion of an integrated branding strategy for the organization with the Services branding strategy launched by the end of October 2017. This initiative was postponed in 2017 given the restructuring of our Services business and the implementation of our One Company strategic objective. |
(13) | Measured as 10% improvement in the labor margin for our loan due diligence business (Transaction Management or TM). For purposes of this metric, the labor margin is calculated based on Transaction Managements direct cost of service as a percentage of Transaction Managements revenues. |
53 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
Shared Corporate Performance
(25% above target)
The Committee determined that the Company exceeded expectations with respect to the Shared Corporate goals, assigning a payout of 25% above target.
In 2017, the Company grew adjusted pretax operating income* to $617 million, or $75.4 million (approximately 14%) over 2016. This increase was driven by strong earned premium revenues from the Companys insured mortgage insurance portfolio, which the Company grew by 9% in 2017 primarily due to our record-breaking volume of NIW in 2017 and higher interest rates (which resulted in fewer mortgage refinancings and fewer cancellations of our insurance), as well as a positive loss environment with respect to new and existing loan defaults. These positive results contributed to a 4% growth in book value per share in 2017, notwithstanding the impairment of goodwill and other intangible assets in our Services segment as a result of underperformance and our decision to strategically reposition this business.
The Committee determined that the Company exceeded expectations in managing the Companys capital and liquidity positions, which included taking the following actions:
| Reduced annual cash interest expense and improved our debt maturity profile by completing a public offering of $450 million principal amount of 4.500% Senior Notes due 2024 and tendering for Senior Notes due in 2019 through 2021 with interest rates ranging from 5.25% to 7.00%; |
| Strengthened our financial position by retiring all convertible debt and reducing our debt-to-capital ratio from 27.1% to 25.5%; |
| Improved financial flexibility by executing upon a three-year, $225 million unsecured revolving credit facility with a syndicate of banks; |
| Managed Radian Guarantys capital position and improved its return on capital by securing a new quota share reinsurance arrangement for single-premium MI business written in 2018 and 2019 and by expanding Radian Guarantys initial quota share reinsurance arrangement to increase the amount of risk ceded on performing loans for single premium MI business written in 2015 through 2017; and |
| As of December 31, 2017, grew Radian Guarantys excess or cushion of Available Assets under the PMIERs over its Minimum Required Assets under the PMIERs to approximately $450 million, or 14%, and maintained total available liquidity, which includes the companys $225 million credit facility, of approximately $454 million as of December 31, 2017. |
We believe that as a result of many of the actions above, S&P upgraded Radian Group and Radian Guaranty to BB+ and BBB+, respectively in 2017. Moodys outlook for Radian Group and Radian Guaranty currently is positive.
The Companys ongoing strategic efforts to grow revenue from non-traditional MI and our Services business fell short of expectations in 2017. While the Company met its objective of increasing participation in GSE credit risk transfer transactions, the poor performance of the Companys Services business in 2017 (as discussed below under Services Performance) offset any such gains in revenue diversification and resulted in managements decision to restructure the Services business in 2017. The restructuring of the Services business complemented the Companys objective to implement a One-Company operating model in 2017, and we exceeded expectations by evaluating and making integration decisions on 100% of our products and processes in 2017 (comprising approximately 150 products and 400 processes), including the implementation of an enterprise sales model to better serve our customers and increase our revenues. Finally, the Company was able to achieve the results referenced above while remaining disciplined in meeting our expense management objectives.
* | Adjusted pretax operating income is a non-GAAP financial measure. Please see pages 93 to 95 of our Annual Report on Form 10-K for the year ended December 31, 2017 for a definition of adjusted pretax operating income, including a reconciliation of adjusted pretax operating income to the most comparable GAAP measure, pretax income from continuing operations. |
54 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
Mortgage Insurance Performance
(25% above target)
The Committee determined that the Company exceeded expectations with respect to its MI objectives in 2017, and assigned a payout of 25% above target.
In 2017, our MI business had a record setting year, generating $53.9 billion of NIW. This high-volume of NIW was achieved notwithstanding our strategic decision in 2017 to prioritize long-term value creation over near-term market share gains. During 2017, we focused on actively managing our customers and business mix to ensure pricing discipline and to achieve an appropriate level of returns on required capital, while at the same time competing aggressively for each targeted NIW opportunity. In particular, this strategic focus on customer and business mix strongly complemented our objective of enhancing returns on NIW, and we currently project unlevered returns on PMIERs capital of 14% to 15% for our 2017 NIW, which is above our targeted range. The Committee further noted that the Company was able to exceed its NIW and return objectives while significantly repositioning our sales force to focus on an enterprise-wide basis, an initiative that we expect will better position us to drive revenue growth and diversification in the future. Further, the Company was able to grow market share by 1.2% despite the downward pressure on market share resulting from our strategic focus on actively managing our customers and business mix.
In addition to price, the Company competes for MI business based on relationships and service, and in 2017, the Company placed a heavy focus on improving operating productivity to enhance efficiencies and our customer experience. The Committee determined that we exceeded expectations with respect to this metric in 2017, with improvements driven by our technology modernization initiative, an increased use of risk-informed underwriting and a better use of resources, including maximizing capacity. Further, the Companys improved operating productivity enabled us to achieve lower than anticipated MI policy acquisition costs and to meet our overall expectations with respect to our targeted MI expense ratio (which was negatively impacted by certain unplanned corporate allocations, including litigation costs).
55 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
Services Performance (50% below target)
The Committee determined that while our Services business significantly underperformed target expectations, significant efforts were undertaken in 2017 to reposition the business for future success, including the elimination of underperforming areas and certain roles that were not aligned with our strategic objectives. As a result, the Committee noted that the restructuring efforts largely fell to those individuals who will form the foundation for future success in our Services business. Taking this and other factors into consideration, the Committee assigned a payout of 50% below target.
Performance for Revenue Target, Services Adjusted EBITDA, Improvement in Transaction Management Productivity, and Services Adjusted EBITDA Margin Percentage all were significantly below target primarily due to: (i) anticipated product initiatives that failed to come to fruition; (ii) competition, including price competition and development of alternative services that compete with the services we offer; (iii) a decrease in the demand for certain services as our customers are relying on internal resources rather than outsourcing to us; (iv) lower than expected customer acceptance for certain of our services; and (v) delays in the realization of efficiencies and margin improvements associated with technology initiatives, all of which led to a restructuring of this business in 2017 (as further discussed below), with related charges that further impacted operating performance. We were successful in growing our Services customer base in 2017 with our growth in Tier One Services customers exceeding target expectations, an area that we hope to build upon with our new enterprise sales approach.
In light of the performance discussed above, we made the strategic decision in 2017 to restructure our Services business to focus on our core products to best support market opportunities and to create more consistent and sustainable revenues. Our restructuring efforts included discontinuing certain business initiatives, selling our European operations, closing offices and reducing our workforce in certain business units, increasing our focus and attention on core products and services and repositioning our sales force in an enterprise model. As a result of these efforts, we now believe that our Services business is better positioned to more effectively support our strategic focus on serving customers throughout the mortgage value chain.
|
2017 STI Payouts for NEOs
At the end of each performance year, each NEO (other than the CEO) provides a performance self-assessment to the CEO and the CEO provides a similar self-assessment to the Committee, in each case including his level of attainment of the specified performance goals. The CEO reviews the performance of each NEO (other than himself) against his respective performance goals and makes specific recommendations to the Committee regarding the amount of STI, if any, to be awarded. Maximum achievement can result in an STI award of up to 200% of the target amount, while performance below expectations can result in a below-target award or no award.
The Committee (or the independent directors in the case of the CEO) retains ultimate authority with respect to amounts awarded to the NEOs under the STI/MTI Plan. Although actual performance measured against the performance goals (as reflected by the STI funding levels discussed above) is the primary consideration for the STI awards, the Committee or the independent directors may, depending on the circumstances, exercise discretion in determining the amount to be awarded to each NEO. For each NEO, the Committee or the independent directors may weigh the various performance goals differently in light of the NEOs role, giving appropriate consideration to the degree to which each NEO impacted our performance.
56 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
The following table sets forth, for each NEO: (i) the maximum amount that could have been awarded under the STI/MTI Plan for 2017 short-term performance (column a); (ii) the NEOs target 2017 STI award (column b); (iii) the total amount actually awarded to the NEO based on 2017 short-term performance (column c); (iv) the total amount paid as a bonus to the NEO for 2017 STI (50% of amount awarded) (column d); and (v) the NEOs 2017 MTI target (the remaining 50% of amount awarded) (column e):
Name | (a) 2017 Maximum STI Award |
(b) 2017 Target STI Award |
(c) 2017 Total Amount Awarded ($ and % of Target) |
(d) 2017 STI Amount Paid |
(e) 2017 MTI Target |
|||||||||||||||
Richard G. Thornberry (1) |
$3,000,000 | $1,500,000 | $1,875,000 | $937,500 | $937,500 | |||||||||||||||
125% | ||||||||||||||||||||
J. Franklin Hall (2) |
800,000 | 400,000 | 500,000 | 250,000 | 250,000 | |||||||||||||||
125% | ||||||||||||||||||||
Derek V. Brummer (3) |
990,000 | 495,000 | 615,000 | 307,500 | 307,500 | |||||||||||||||
124% | ||||||||||||||||||||
Edward J. Hoffman (4) |
880,000 | 440,000 | 545,000 | 272,500 | 272,500 | |||||||||||||||
124% | ||||||||||||||||||||
Brien J. McMahon (5) |
700,000 | 350,000 | 510,000 | 255,000 | 255,000 | |||||||||||||||
146% |
(1) | In awarding him a payout above the designated funding level, the independent directors noted Mr. Thornberrys exceptional performance in: (a) overseeing the Companys strong financial performance and the successful execution of a capital plan to further strengthen our financial and liquidity positions; (b) driving the record performance year for our MI business with respect to flow NIW, while refocusing our MI business on maximizing long-term value creation; (c) repositioning our Services businesses to focus on core products and sustained profitability; (d) developing a long-term strategic vision for the Company to grow our businesses and diversify our presence throughout the mortgage value chain; and (e) instituting a One Company focus, including the implementation of an enterprise-wide approach to sales. |
(2) | In awarding him a payout above the designated funding level, the Committee noted Mr. Halls exceptional performance in: (a) successfully executing a capital plan to further strengthen our financial and liquidity positions; (b) initiating a disciplined approach to expense management that met internal and external financial goals; and (c) leading the development of a multi-year strategic planning process. |
(3) | In awarding him a payout above the designated funding level, the Committee noted Mr. Brummers exceptional performance in: (a) enhancing our projected returns on allocated PMIERs capital; (b) expanding the Companys use of reinsurance to improve Radian Guarantys expected return on required capital and financial position under the PMIERs and to manage the Companys portfolio of single premium products; (c) driving the development and implementation of a comprehensive customer segmentation framework methodology to establish profitability metrics company-wide; and (d) further developing our use of data analytics to support our core expertise in mortgage risk. |
(4) | In awarding him a payout above the designated funding level, the Committee recognized Mr. Hoffmans exceptional performance in: (a) supporting the Companys CEO succession planning process, including his management of the legal, governance and human resources aspects of this transition in leadership; (b) managing various litigation and regulatory matters; (b) overseeing the legal execution of the capital plan undertaken to further strengthen our financial and liquidity positions; (b) implementing a technology solution to strengthen the Companys regulatory compliance program; and (d) assuming oversight over, and developing a functional roadmap for, the Companys government relations function. |
57 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
(5) | In awarding him a payout above the designated funding level, the Committee determined that Mr. McMahon exceeded expectations in: (a) developing, implementing and overseeing an enterprise-wide sales team to deliver solutions-oriented products and services to all of Radians existing and future customers; and (b) achieving a record setting level of NIW for our primary, flow MI business. |
2016 MEDIUM-TERM INCENTIVE (MTI) ANALYSIS
Pursuant to our STI/MTI Plan, the 2016 MTI target awards were established in March 2017 at the time that the 2016 STI awards were paid to the NEOs. In addition to trends in the macroeconomic environment, the strength of our insured portfolio for any given year is primarily driven by the credit characteristics of the loans we insure, our product mix, the amount of premiums we charge and the amount of business we write, which among other factors, can significantly impact our results in future periods. Therefore, the Committee determined to measure performance under the 2016 MTI award based on the credit performance and profitability of the mortgage insurance written in 2016 through the end of 2017, as measured by the Companys cumulative incurred loss ratio, projected return on PMIERs capital and projected total profitability.
The Committee does not directly correlate payments under MTI awards with achievement of specific performance metrics, primarily because of the significant number of variables that affect both the credit performance and profitability of NIW, many of which are outside of managements control. The Committee does, however, use business targets established by management in the ordinary course of business as a point of reference in assessing the strength of a particular NIW vintage.
As of December 31, 2017, the two-year credit default rate for the 2016 portfolio was 1.2%, a very favorable rate compared to historical rates for our MI business. As demonstrated in the following chart, with respect to credit default rate, the 2016 portfolio is similar to the post-financial crisis 2009 through 2015 portfolios and is significantly better than the pre-crisis 2001 through 2004 portfolios at the same point of development.
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Compensation of Executive Officers and Directors
We have found early default experience, or EDE, which we define as the frequency of defaults occurring during the first six months following loan origination, to be a strong indicator of the underwriting quality of an insured portfolio. As demonstrated in the following chart, the performance of the 2016 portfolio of flow (loan-by-loan) insurance is consistent with the recent trend of extremely low EDE rates (well below historical experience), indicating that the underwriting quality for this book of business is very strong.
The chart above excludes defaults in areas that, following hurricanes Harvey and Irma in the third quarter of 2017, the U.S. Federal Emergency Management Agency designated as individual assistance disaster areas for the purpose of determining eligibility for various forms of federal assistance (also known as FEMA designated areas), as most are expected to cure and generally are not considered credit related. See pages 105 to 108 of our Annual Report on Form 10-K for the year ended December 31, 2017 for further information.
59 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
In addition to credit performance, the Committee evaluates the projected profitability of an insured portfolio to assess its overall strength of performance and potential value creation. As demonstrated in the following table, as of December 31, 2017, the 2016 portfolio yielded a loss ratio of 5.0%, generally in line with the 2009 through 2015 portfolio average of 4.4%, despite modest pricing reductions in recent years. As a result, similar to our other post-crisis vintages, the 2016 insured portfolio is expected to produce strong profitability. Loss ratio is calculated as provision for losses as a percentage of net premiums earned.
(1) | Represents inception-to-date losses incurred as a percentage of net premiums earned. |
To date, the credit performance of the 2016 insured portfolio has been stronger than originally anticipated, with the total projected, life of loan unlevered return for this portfolio (i.e., after-tax underwriting returns plus projected investment income) as of December 31, 2017 falling within our targeted return range and having increased from our initial expectation. This has translated to better than anticipated projected profitability for the portfolio, with the projected lifetime after-tax net income for the 2016 portfolio now higher than our original estimates.
60 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
In light of the strong credit performance and better than projected profitability of our 2016 portfolio of flow insurance, this portfolio is expected to generate significant economic value for the Company. As a result, the Committee awarded the maximum payout of 115% of target for the 2016 MTI awards. These amounts are included in the Non-Equity Incentive Plan Compensation column of our 2017 Summary Compensation Table, and the following table illustrates for each NEO the target award amount and the amount awarded under the 2016 MTI award.
Executive Officer | 2016 MTI Target | Approved Payout | ||||||||||
Richard G. Thornberry (1) |
$ | | $ | | ||||||||
J. Franklin Hall |
$ | 275,000 | $ | 316,250 | ||||||||
Derek V. Brummer |
$ | 337,500 | $ | 388,125 | ||||||||
Edward J. Hoffman |
$ | 337,500 | $ | 388,125 | ||||||||
Brien J. McMahon |
$ | 295,050 | $ | 339,308 |
(1) Mr. Thornberry joined the Company in March 2017 and did not participate in the 2016 MTI award. |
C. | Long-Term Incentive Program |
The contributions of the NEOs to the creation of stockholder value are primarily recognized through our LTI program. This program consists of a series of annual grants with overlapping performance and vesting periods and varying performance metrics. As a result, the NEOs are encouraged to create stockholder value through:
| Outstanding Performance-Based Options, which are designed to motivate the NEOs to drive performance that will lead to stock price growth and wealth creation for our stockholders; |
| Performance-Based RSUs, which focus the NEOs on outperforming our primary industry competitors as well as other financial services companies and meaningfully growing our book value; |
| Time-Based RSUs, which incent our NEOs to remain with the Company, drive growth in stockholder value, and foster greater share ownership by management. |
LTI Awards Granted in 2017
Each year, in designing the annual LTI awards for the NEOs, the Committee reviews and assesses the type of awards that would best complement our existing LTI program to enhance long-term stockholder value. In addition, the Committee considers, among other things: (i) whether the awards would effectively motivate the NEOs to achieve rigorous, performance-based objectives; (ii) whether the awards will remain motivational and retentive through various economic cycles; (iii) the potential financial, accounting and tax impact of the awards; (iv) whether the award objectives will be clear to the NEOs, stockholders and other constituencies; (v) the potential impact of the awards on risk behavior; and (vi) input from our stockholders with respect to the form and performance metrics for our awards.
For 2017, the Committee granted awards to our NEOs comprising the following components: (i) performance-based RSUs that will vest based on how Radians TSR compares to a designated peer group over a three-year performance period (the TSR RSUs); (ii) performance-based RSUs that will vest based on growth in the Companys LTI Book Value per Share (as defined below) over a three-year performance period (the BV RSUs and together with the TSR RSUs, the 2017 Performance Based RSUs); and (iii) time-based RSUs that will vest over three years in pro rata installments (the 2017 Time-Based RSUs). Each component of the 2017 LTI Awards represents one-third of the total target value of the 2017 LTI Awards, with the performance-based components representing 67% of the total awards.
For 2017, the Committee chose to eliminate stock options from the NEOs annual LTI program in favor of the 2017 Time-Based RSUs. The Committee made this change to ensure that the annual LTI awards include a
retention component through various performance cycles. See II. Compensation Principles and ObjectivesOur Compensation Program Demonstrates a Strong Correlation between Pay and Performance above.
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Compensation of Executive Officers and Directors
2017 Performance-Based RSUs.
The 2017 Performance-Based RSU awards will vest on May 10, 2020, based on the attainment of specified performance goals (as described below), subject to certain extraordinary conditions that could accelerate such vesting. Each vested Performance-Based RSU will be payable in one share of the Companys common stock.
TSR RSUs. On the vesting date, each NEO will become vested in a number of shares of the Companys common stock (from 0 to 200% of his target number of TSR RSUs) based on the Companys relative TSR over a three-year performance period, as further described below. Awards are subject to a maximum cap of six times the value of the target number of TSR RSUs on the grant date.
The Companys relative TSR will be a comparison of the Companys absolute TSR against the TSR of a designated peer group of 14 peer companies (the TSR Peer Group), which primarily consists of the primary compensation peer group approved by the Committee to benchmark compensation for the NEOs 2017 compensation. Because the Committee establishes the peer groups used for benchmarking compensation and to measure performance under our TSR awards at different times during the year, there may be differences between these peer groups to reflect business developments that have occurred since the previous peer group was developed.
The Companys absolute TSR will be determined based on the change in market value of the Companys common stock during the performance period, as measured by comparing (x) the average closing price of the Companys common stock on the NYSE for the 60 consecutive trading days preceding and including May 10, 2017 and (y) the average closing price for the 60 consecutive trading days preceding and including the last day of the performance period (May 10, 2020). Although dividends are not paid on unvested TSR awards, the calculation of TSR includes dividends paid during the performance period, as though they were reinvested in shares of the Companys common stock. The payout for the TSR RSUs will be determined by comparing the Companys absolute TSR over the performance period against the median TSR of the TSR Peer Group (the Median Peer Group TSR). The starting point for the payout determination will be 100% of the NEOs target number of TSR RSUs. For every 1% by which the Companys absolute TSR exceeds the Median Peer Group TSR, the payout percentage will increase by 2 percentage points above 100% of the TSR RSU Target. For every 1% by which the Companys absolute TSR is below the Median Peer Group TSR, the payout percentage will decrease by 2 percentage points below 100% of the TSR RSU Target. Regardless of whether the Companys absolute TSR may exceed the Median Peer Group TSR, if the Companys absolute TSR is negative over the performance period, the maximum potential payout for the TSR RSUs will be capped at 75% of the NEOs target number of TSR RSUs.
BV RSUs. On the vesting date, each NEO will become vested in a number of shares of the Companys common stock (from 0 to 200% of his target number of BV RSUs) based on the Companys cumulative growth in LTI Book Value per Share (as defined below) over a three-year performance period (from March 31, 2017 through March 31, 2020), as follows:
3-Year LTI Book Value per Share Growth (1) |
Payout Percentage (1) (% of BV RSU Target)
| |
³50% |
200% | |
40% |
150% | |
30% |
100% | |
20% |
50% | |
<10%(2)
|
0%
|
(1) If the Companys growth in LTI Book Value per Share falls between two referenced percentages, the payout percentage will be interpolated. |
(2) If the Companys growth in LTI Book Value per Share is less than 10%, the payout percentage will be 0. |
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Compensation of Executive Officers and Directors
The Companys LTI Book Value per Share is defined as: (A) tangible book value (total stockholders equity less goodwill and other intangible assets, net) adjusted to exclude: (1) accumulated other comprehensive income; and (2) the impacts, if any, during the three-year performance period from: (i) repurchases or retirements of convertible bonds; (ii) merger and acquisition-related expenses; (iii) changes in goodwill and other intangible assets related to acquisitions or dispositions; (iv) repurchases of common shares; and (v) declared dividends on common shares; divided by (B) basic shares of common stock outstanding, as adjusted to exclude the share impact, if any, related to any of the items identified in (A) above, each applied on a consistent basis.
The 2017 Performance-Based RSUs include a one-year, post-vesting holding period, such that the vested 2017 Performance-Based RSUs will not be settled in shares (other than shares withheld to pay taxes due at vesting) until the one-year anniversary of the vesting date of the 2017 Performance-Based RSUs. The post-vesting holding period, however, will not apply in certain circumstances, such as the NEOs death or disability during employment, the occurrence of a change of control after the end of the performance period, or certain terminations of employment in the event of a change of control before the end of the performance period.
The 2017 Performance-Based RSUs provide for double trigger vesting in the event of a change of control. In the event of a change of control of the Company before the end of the three-year performance period, the 2017 Performance-Based RSUs will vest at target at the end of the three-year performance period on May 10, 2020, provided that the NEO remains employed by the Company through that date. However, if the NEOs employment is terminated by the Company without cause, or the NEO terminates employment for good reason (as those terms are defined in the grant instrument), in each case within 90 days before or within one year after a change of control, the 2017 Performance-Based RSUs will become fully vested at target upon that termination (or the date of the change of control, if later).
If the NEO retires before the end of the three-year performance period, the award will remain outstanding and will vest at the end of the performance period to the extent that the performance criteria have been satisfied (or will vest at the target level in the event of a change of control as discussed above) and generally will become payable subject to the one-year holding period. Additionally, the 2017 Performance-Based RSUs will become fully vested and payable at target in the event of the NEOs death or disability during employment.
Except as described below, if the NEO is involuntarily terminated by the Company other than for cause or the NEO terminates employment for good reason, in each case six months or more after the award is granted, and the NEO executes a written release of claims against the Company, a prorated portion of the unvested 2017 Performance-Based RSUs (based on the number of months that the NEO was employed following the date the award was granted) will remain outstanding and will represent the NEOs new target award; provided however, that if termination occurs within six months prior to the end of the three-year performance period, the 2017 Performance-Based RSUs will not be prorated and the grant date target award will remain outstanding in its entirety. Any 2017 Performance-Based RSUs that remain outstanding will vest at the end of the performance period to the extent that the performance criteria have been satisfied (or will vest at the applicable target level in the event of a change of control) and generally will become payable subject to the one-year holding period discussed above.
The Performance-Based RSUs also include a provision that prohibits the NEO from competing with the Company and from soliciting the Companys employees or customers for a period of 18 months with respect to Mr. Thornberry and a period of 12 months for each of the other NEOs (in each case, the Restricted Period) following termination of the executives employment for any reason.
2017 Time-Based RSUs.
The 2017 Time-Based RSUs are scheduled to vest in pro rata installments on each of the first three anniversaries of the grant date (i.e., May 10, 2018, May 10, 2019 and May 10, 2020), as long as the NEO is an employee of the Company on the vesting date.
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Compensation of Executive Officers and Directors
In the event of the NEOs retirement, death or disability before the end of the three-year vesting period, any unvested 2017 Time-Based RSUs will become fully vested. Additionally, if the NEO is involuntarily terminated by the Company other than for cause or the NEO terminates employment for good reason and the NEO executes a written release of claims against the Company, any unvested 2017 Time-Based RSUs will become fully vested. The 2017 Time-Based RSU awards provide for double trigger vesting in the event of a change of control. The 2017 Time-Based RSUs also include a provision that prohibits the NEO from competing with the Company and from soliciting the Companys employees or customers for the applicable Restricted Period following termination of the NEOs employment for any reason.
Stock Ownership
Consistent with our compensation philosophy, we believe that senior management, including the NEOs, should have a significant equity investment in the Company to further align their interests and actions with the long-term interests of our stockholders and to further focus the NEOs on sustained performance.
Under our stock ownership guidelines, within three years of being designated an executive officer, Mr. Thornberry and the other NEOs are required to hold shares with a minimum aggregate market value each to 7 times salary and 2.5 times salary, respectively. In addition, our 2015 through 2017 Performance-Based RSU awards include a one-year, post-vesting share retention period applicable to all NEOs.
As of December 31, 2017, each of our NEOs was in compliance with our stock ownership guidelines. A NEOs failure to comply with the guidelines will be considered by the Committee in determining subsequent equity compensation awards to such NEO, including potentially reducing or eliminating future equity awards and making awards otherwise paid in cash, such as STI awards, payable in stock and subject to these guidelines. Willful or intentional violations may also be considered cause for purposes of termination from employment.
V. Other Compensation
In addition to the primary components of their compensation, the NEOs receive additional compensation through their participation in our benefit plans as well as, to a very limited extent, through perquisites.
A. | Retirement Compensation |
We are committed to providing all of the Companys employees with competitive benefits that make sense for their financial security.
Savings Incentive Plan
The Radian Group Inc. Savings Incentive Plan serves as a retirement vehicle for the NEOs and other employees. The Savings Plan, among other things, provides for quarterly matching contributions by Radian equal to 100% of employee contributions (up to 4.5% of eligible pay for 2017). Each of the NEOs participated in the Savings Plan in 2017.
Benefit Restoration Plan
We maintain the Radian Group Inc. Benefit Restoration Plan (BRP) to provide additional retirement benefits to our employees who are eligible to participate in the Savings Plan and whose benefits under the Savings Plan are limited by applicable IRS limits on eligible compensation. See Nonqualified Deferred Compensation below. We believe the BRP is an appropriate plan for employees and stockholders for the following reasons:
| Participation is predominately based on compensation earned rather than an employees title or position. All employees whose eligible pay exceeds the IRS compensation limit ($270,000 for 2017) are eligible to participate in the BRP in the same year in which they exceed the IRS limit. The Company makes annual contributions to each participants account based on eligible compensation; |
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Compensation of Executive Officers and Directors
| The same formula for calculating benefits under the BRP is used for all participants, creating alignment throughout the organization; and |
| In determining benefits under the BRP, bonus and commissions will affect a participants contribution only for the year in which they occur. As a result, compensation in one year is not locked into the benefit formula going forward. |
B. | Deferred Compensation |
We maintain a voluntary deferred compensation plan for the Companys executive officers. The deferred compensation plan allows executive officers to defer (or if amounts were previously deferred, to re-defer subject to certain limitations) receipt of all or a portion of cash received under their STI/MTI awards and the cash or shares associated with the vesting of RSUs. Deferring compensation allows executive officers to invest such amounts during the deferral period. The deferred compensation program complies with the requirements of applicable IRS regulations. See Nonqualified Deferred Compensation below.
C. | Perquisites |
In the ordinary course, perquisites generally represent an immaterial component of our NEOs compensation. In 2017, Mr. Thornberry received no perquisites other than his previously disclosed relocation arrangement, and the perquisites for each of our other NEOs represented less than 1% of his total salary.
VI. Compensation Arrangements with Former Executives
Sanford A. Ibrahim
Background and Timing
As discussed above, in May 2016, Mr. Ibrahim advised the Board that he intended to retire from Radian at the end of 2017, following completion of the remaining term of his three-year employment agreement. As a result, the Board appointed a special committee to conduct a nationwide search for Mr. Ibrahims successor, and in February 2017, we announced that Mr. Thornberry would succeed Mr. Ibrahim as our new CEO in March 2017. We simultaneously reported that, in support of our succession planning efforts and to ensure an orderly transition, Mr. Ibrahim had agreed to retire effective March 5, 2017, almost 10 months before the end of the term of the Prior Employment Agreement. The timeline of these events is as follows:
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(1) Assumes for purposes of this comparison that under his Prior Employment Agreement Mr. Ibrahim would have received the same form of 2017 LTI awards as our other NEOs. |
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Payouts under Post-Employment Compensation Agreements
Mr. Ibrahim has been awarded the following amounts under the performance-based components of his Post-Employment Compensation Agreements:
Component
|
Target and
|
Amount
|
Amount Paid
|
Rationale for Payout
|
||||||
Performance-Based RSUs | 123,496 RSUs (0 and 123,496 shares)(1) |
(1) | (1) | No payout to date given that stock price hurdle has not been met. | ||||||
Performance-Based Cash (STI) | $1,200,000 ($0 - $2,400,000) |
$1,272,000 | $636,000 (2) | Amount awarded was tied to the funding percentage for our NEOs (other than Mr. McMahon) under the 2017 STI program, prior to giving consideration to individual performance. See IV. Primary Components of CompensationB. Short-Term and Medium-Term Incentive Program2017 Short-Term Incentive Analysis. | ||||||
Performance-Based Cash (Consulting) | $1,800,000 ($0 - $1,800,000) |
$1,800,000 | $900,000 (2) | In awarding Mr. Ibrahim his consulting award at target, the Committee determined that Mr. Ibrahim was effective in: (1) supporting Mr. Thornberry with transition and succession planning matters; (2) continuing to present new opportunities to the Company for consideration; and (3) advising the Company with respect to matterssuch as the impact of 2017 hurricanes on defaultsfor which his tenure at Radian provided him with significant institutional knowledge.
|
(1) | Subject to certain conditions, RSUs will vest 100% only if, and at such time as, the Companys closing common stock price on the NYSE equals or exceeds $22.46 (120% of the grant date price) for 10 consecutive days in the period beginning 10 trading days before March 3, 2018 and ending March 3, 2022. |
(2) | Pursuant to the terms of Mr. Ibrahims Post-Employment Compensation Agreements, Mr. Ibrahim was paid 50% of the amount awarded to him under his cash-based performance awards, with the remaining 50% becoming his target MTI award to be paid to him in March 2019 based on the credit and profitability performance through 2018 of the mortgage insurance we wrote in 2017. |
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The following table provides information about compensation paid to each of our non-employee directors in 2017.
2017 DIRECTOR COMPENSATION
Name
|
Fees or Paid in Cash ($)
|
Stock Awards(1) ($)
|
Change to Non-qualified Deferred Compensation Earnings(2) ($)
|
All Other
|
Total ($)
|
|||||||||||||||||||
Herbert Wender |
288,000 | (3) | 215,000 | | 15,000 | (4) | 518,000 | |||||||||||||||||
David C. Carney |
145,500 | 115,000 | | | 260,500 | |||||||||||||||||||
Howard B. Culang |
135,500 | 115,000 | | | 250,500 | |||||||||||||||||||
Lisa W. Hess |
102,500 | 115,000 | | | 217,500 | |||||||||||||||||||
Stephen T. Hopkins |
144,000 | 115,000 | | | 259,000 | |||||||||||||||||||
Brian D. Montgomery |
86,500 | 115,000 | | | 201,500 | |||||||||||||||||||
Gaetano Muzio |
100,500 | 115,000 | | | 215,500 | |||||||||||||||||||
Gregory V. Serio |
138,500 | 115,000 | | | 253,500 | |||||||||||||||||||
Noel J. Spiegel
|
|
102,500
|
|
|
115,000
|
|
|
|
|
|
|
|
|
217,500
|
|
(1) | Represents the grant date fair value of awards computed in accordance with the accounting standard regarding share-based compensation payments. Each non-employee director who was elected at our 2017 Annual Meeting of Stockholders was awarded 6,924 RSUs (stock settled) on May 10, 2017, with a grant date fair value of $115,000. In addition, Mr. Wender received an additional award of 6,021 RSUs (stock settled) with a grant date fair value of $100,000 for his service as non-executive Chairman. For a discussion of the assumptions used in calculating the grant date fair values, see Note 15, Share-Based and Other Compensation Programs, of Notes to Consolidated Financial Statements in our 2017 Annual Report on Form 10-K. |
As of December 31, 2017, each non-employee director held the following number of shares of phantom stock and RSUs pursuant to grants awarded by the Company:
Name
|
Shares of Phantom Stock* (#)
|
Restricted Stock Units (#)
|
||||||||||
Mr. Wender |
57,428 | 298,892 | ||||||||||
Mr. Carney |
59,522 | 159,873 | ||||||||||
Mr. Culang |
58,688 | 159,873 | ||||||||||
Ms. Hess |
| 105,927 | ||||||||||
Mr. Hopkins |
58,688 | 159,873 | ||||||||||
Mr. Montgomery |
| 85,131 | ||||||||||
Mr. Muzio |
| 85,131 | ||||||||||
Mr. Serio |
| 85,131 | ||||||||||
Mr. Spiegel
|
|
|
|
|
105,927
|
|
*Includes dividend equivalents to be issued upon conversion of the phantom shares accrued through March 12, 2018. |
(2) | We do not pay above-market or preferential interest or earnings on amounts deferred under the Radian Director Deferred Compensation Plan. |
(3) | Mr. Wender deferred 100% of his cash compensation paid in 2017 pursuant to the Radian Voluntary Deferred Compensation Plan for Directors. |
(4) | Represents a charitable contribution made by the Company to Palm Beach Gardens Police Foundation on behalf of Mr. Wender in recognition of his service to the Company. |
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The following table describes our compensatory and other arrangements with: (1) Mr. Thornberry, our principal executive officer since March 6, 2017; (2) Mr. Hall, our principal financial officer; (3) Messrs. Brummer, Hoffman, and McMahon, our three most highly compensated executive officers (other than our principal executive officer and principal financial officer) serving as executive officers at December 31, 2017; (4) Mr. Ibrahim, our former principal executive officer who retired from the Company effective March 5, 2017; and (5) Mr. Tennyson, who served as President of our Services business and was employed by us through November 11, 2017, and who would have been included in category (3) above had he been serving as an executive officer at December 31, 2017.
2017 SUMMARY COMPENSATION TABLE
Name
|
Title
|
Year
|
Salary ($)
|
Bonus ($) (1)
|
Stock Awards ($) (2)
|
Option Awards ($)
|
Non-Equity Incentive Plan Compensation ($) (3)
|
All Other Compensation ($) (4)
|
Total ($)
|
|||||||||||||||||||||||||
Richard G. Thornberry |
Chief Executive Officer | 2017 | 605,769 | 1,437,500 | 4,749,044 | | | 84,503 | 6,876,816 | |||||||||||||||||||||||||
(Principal Executive Officer) | ||||||||||||||||||||||||||||||||||
J. Franklin Hall |
Senior Executive V.P., | 2017 | 400,000 | 250,000 | 625,055 | | 316,250 | 23,309 | 1,614,614 | |||||||||||||||||||||||||
Chief Financial Officer | 2016 | 400,000 | 275,000 | 546,330 | 125,000 | 212,500 | 23,309 | 1,582,139 | ||||||||||||||||||||||||||
2015 | 400,000 | 170,000 | 337,822 | 112,117 | 0 | 99,639 | 1,119,578 | |||||||||||||||||||||||||||
Derek V. Brummer |
Senior Executive V.P., | 2017 | 450,000 | 307,500 | 718,721 | | 388,125 | 30,081 | 1,894,427 | |||||||||||||||||||||||||
Mortgage Insurance and | 2016 | 415,000 | 337,500 | 788,090 | 143,828 | 271,875 | 28,113 | 1,984,406 | ||||||||||||||||||||||||||
Risk Services | 2015 | 415,000 | 1,049,500 | 388,566 | 128,847 | 387,500 | 35,861 | 2,405,274 | ||||||||||||||||||||||||||
Edward J. Hoffman |
Senior Executive V.P., | 2017 | 400,000 | 272,500 | 625,055 | | 388,125 | 26,452 | 1,712,132 | |||||||||||||||||||||||||
General Counsel and | 2016 | 400,000 | 337,500 | 706,080 | 125,000 | 250,000 | 26,452 | 1,845,032 | ||||||||||||||||||||||||||
Corporate Secretary | 2015 | 400,000 | 200,000 | 337,822 | 112,117 | 375,000 | 33,909 | 1,458,848 | ||||||||||||||||||||||||||
Brien J. McMahon |
Senior Executive V.P., | 2017 | 350,000 | 255,000 | 686,435 | | 339,308 | 32,667 | 1,663,410 | |||||||||||||||||||||||||
Chief Franchise Officer | ||||||||||||||||||||||||||||||||||
Sanford A. Ibrahim |
Former Chief Executive | 2017 | 222,276 | | 1,950,002 | | 1,437,500 | 3,159,962 | 6,769,740 | |||||||||||||||||||||||||
Officer | 2016 | 950,000 | 1,250,000 | 4,534,314 | 1,037,562 | 937,500 | 77,547 | 8,786,923 | ||||||||||||||||||||||||||
2015 | 950,000 | 750,000 | 2,128,068 | 705,721 | 1,437,500 | 94,248 | 6,065,537 | |||||||||||||||||||||||||||
Jeffrey G. Tennyson |
Former President, Services | 2017 | 417,116 | | 625,055 | | 287,500 | 1,530,480 | 2,860,151 |
(1) | Represents the STI award paid to each of our NEOs under our STI/MTI Plan for the performance year in which it was earned. Each NEO was paid 50% of his STI award for the year earned, with the remaining 50% forming the NEOs target MTI award. MTI award payments are reported in the Non-Equity Incentive Plan Compensation column, as described in footnote (3) below. See Compensation Discussion and AnalysisIV. Primary Components of CompensationB. Short-Term and Medium-Term Incentive Program. In addition to the amounts paid under our STI/MTI Plan, with respect to Mr. Thornberry, the amounts reported as Bonus in 2017 include a $500,000 cash bonus paid as an inducement to join the Company and to compensate him for certain costs associated with transitioning his prior business activities. |
(2) | Represents the grant date fair value of the awards computed in accordance with the accounting standard regarding share-based compensation payments. For a discussion of the assumptions used in calculating the grant date fair values, see Note 15, Share-Based and Other Compensation Programs, of Notes to Consolidated Financial Statements in our 2017 Annual Report on Form 10-K. |
In accordance with the rules of the SEC, the amounts in this column include the grant date fair values of the BV RSUs granted in 2017 and 2016, taking into account our perspective, as of the applicable grant date, regarding the probability for payout of the awards (175% and 200% for the 2017 and 2016 awards, respectively). The amounts shown do not reflect amounts paid to our NEOs or correspond to the actual value that may be received by our NEOs, which will depend on our performance against the applicable
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performance conditions at the end of the applicable performance period. If the value of the BV RSU awards for 2017 and 2016 were shown assuming the highest level of the applicable performance conditions were achieved (200%), the amounts reflected for this column in the table above would have been:
Name
|
2017 | 2016 | ||||||
Richard G. Thornberry | $ | 5,000,260 | $ | N/A | ||||
J. Franklin Hall | $ | 666,924 | $ | 546,330 | ||||
Derek V. Brummer | $ | 766,890 | $ | 788,090 | ||||
Edward J. Hoffman | $ | 666,924 | $ | 706,080 | ||||
Brien J. McMahon | $ | 719,952 | * | |||||
Sanford A. Ibrahim | $ | 1,950,002 | $ | 4,534,315 | ||||
Jeffrey G. Tennyson | $ | 666,924 | * |
*Value of BV RSU awards for 2016 are not presented for Messrs. McMahon and Tennyson who were not NEOs for 2016. |
For Mr. Thornberry, amounts reported for 2017 also include a one-time grant of 53,534 time-based RSUs that were granted on his employment date to further align his interests with the interests of the Companys stockholders. For Mr. McMahon, amounts reported for 2017 also include a one-time grant of 10,000 time-based RSUs that were granted in connection with our CEO transition and prior to him being designated as an executive officer.
(3) | Amounts reported for 2017 represent the MTI award paid to each of our NEOs with respect to the year in which it is earned (for 2017, reported amounts represent payments pursuant to the 2016 MTI award, covering the 2016 through 2017 performance period). See Compensation Discussion and AnalysisIV. Primary Components of CompensationB. Short-Term and Medium-Term Incentive Program. |
(4) | For 2017, All Other Compensation includes the following amounts: |
| $12,150 in matching contributions credited under our Savings Plan for the benefit of each of the NEOs other than Mr. Ibrahim, who received matching contributions of $10,002. |
| Contributions made by us under our BRP for the benefit of the NEOs in the following amounts: Mr. Thornberry$15,110; Mr. Hall$10,350; Mr. Brummer$13,162; Mr. Hoffman$10,350; Mr. McMahon$7,538 and Mr. Tennyson$10,729. |
| The dollar value of imputed income from premiums paid by us for long-term disability insurance for the benefit of the following NEOs in the following amounts: Mr. Thornberryimputed income of $3,380; Mr. Brummerimputed income of $2,018; Mr. Hoffmanimputed income of $2,167; Mr. McMahonimputed income of $3,372; Mr. Ibrahimimputed income of $1,528; and Mr. Tennysonimputed income of $3,377. |
| The dollar value of imputed income from premiums paid by us under life insurance policies on the lives of the NEOs in the following amounts: Mr. Brummerimputed income of $1,942; Mr. Hoffmanimputed income of $1,785; Mr. McMahonimputed income of $3,792; Mr. Ibrahimimputed income of $15,575; and Mr. Tennysonimputed income of $7,349. |
| With respect to Mr. McMahon, also includes $4,225 of income recognized in connection with family travel to accompany him to a business-related event and $1,590 in related tax gross-up payments. |
| Parking benefits for NEOs in the following amounts: Mr. Hall$809 and Mr. Brummer$809. |
| With respect to Mr. Thornberry, also includes aggregate relocation expenses of $36,770 in connection with his relocation to Philadelphia, Pennsylvania and $17,093 in related tax gross-ups. |
| With respect to Mr. Ibrahim, represents amounts paid to him under his Post-Employment Compensation Agreements, including: (i) various cash payments pursuant to his Retirement Agreement$859,363; (ii) monthly consulting payments$712,494; and (iii) incentive bonus |
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payments for his consulting services$1,536,000. Also includes a $25,000 charitable contribution made by the Company to the Interfaith Center of Philadelphia in recognition of Mr. Ibrahims retirement and years of dedicated service to the Company. See Compensation Discussion and AnalysisVI. Compensation Arrangements with Former ExecutivesSanford A. IbrahimPayouts under Post-Employment Compensation Arrangements. |
| With respect to Mr. Tennyson, includes severance payments totaling $1,496,875. |
2017 GRANTS OF PLAN BASED AWARDS
Estimated Future Payouts under Non-Equity Incentive Plan Awards (1) |
Estimated Future Payouts under Equity Incentive Plan Awards |
All Other Stock Awards: Number of Shares of Stock or Units (#)(2) |
Grant Date Fair Value of Stock and Option Awards ($) (3) |
|||||||||||||||||||||||||||||
Name | Grant Date | Target ($) |
Maximum ($) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||||
Richard G. Thornberry |
3/6/2017 | 53,534 | 1,000,015 | |||||||||||||||||||||||||||||
5/10/2017 | 60,210 | 998,884 | ||||||||||||||||||||||||||||||
5/10/2017 | (4) | 67,380 | 134,760 | 1,750,074 | ||||||||||||||||||||||||||||
5/10/2017 | (5) | 62,290 | 124,580 | 1,000,071 | ||||||||||||||||||||||||||||
J. Franklin Hall |
2/7/2017 | 275,000 | 316,250 | |||||||||||||||||||||||||||||
5/10/2017 | 10,040 | 166,564 | ||||||||||||||||||||||||||||||
5/10/2017 | (4) | 11,230 | 22,460 | 291,679 | ||||||||||||||||||||||||||||
5/10/2017 | (5) | 10,390 | 20,780 | 166,812 | ||||||||||||||||||||||||||||
Derek V. Brummer |
2/7/2017 | 337,500 | 388,125 | |||||||||||||||||||||||||||||
5/10/2017 | 11,540 | 191,449 | ||||||||||||||||||||||||||||||
5/10/2017 | (4) | 12,920 | 25,840 | 335,574 | ||||||||||||||||||||||||||||
5/10/2017 | (5) | 11,940 | 23,880 | 191,698 | ||||||||||||||||||||||||||||
Edward J. Hoffman |
2/7/2017 | 337,500 | 388,125 | |||||||||||||||||||||||||||||
5/10/2017 | 10,040 | 166,564 | ||||||||||||||||||||||||||||||
5/10/2017 | (4) | 11,230 | 22,460 | 291,679 | ||||||||||||||||||||||||||||
5/10/2017 | (5) | 10,390 | 20,780 | 166,812 | ||||||||||||||||||||||||||||
Brien J. McMahon |
2/7/2017 | 295,050 | 339,308 | |||||||||||||||||||||||||||||
2/24/2017 | 10,000 | 186,300 | ||||||||||||||||||||||||||||||
5/10/2017 | 8,030 | 133,218 | ||||||||||||||||||||||||||||||
5/10/2017 | (4) | 8,990 | 17,980 | 233,499 | ||||||||||||||||||||||||||||
5/10/2017 | (5) | 8,310 | 16,620 | 133,418 | ||||||||||||||||||||||||||||
Sanford A. Ibrahim |
2/7/2017 | 1,250,000 | 1,437,500 | |||||||||||||||||||||||||||||
3/3/2017 | (6) | 123,496 | 123,496 | 1,950,002 | ||||||||||||||||||||||||||||
Jeffrey G. Tennyson |
2/7/2017 | 250,000 | 287,500 | |||||||||||||||||||||||||||||
5/10/2017 | 10,040 | 166,564 | ||||||||||||||||||||||||||||||
5/10/2017 | (4) | 11,230 | 22,460 | 291,679 | ||||||||||||||||||||||||||||
5/10/2017 | (5) | 10,390 | 20,780 | 166,812 |
(1) | Represents the 2016 MTI award (covering the 2016 through 2017 performance period) granted under our STI/MTI Plan. As discussed above under Compensation Discussion and AnalysisIV. Primary Components of CompensationB. Short-Term and MediumTerm Incentive Program, each NEOs target 2016 MTI award was established in 2017, in connection with the payment of the 2016 STI awards. Each NEO was entitled to a cash payment for the two-year performance period ranging from 0% to 115% of his or her target 2016 MTI award. See the 2017 Summary Compensation Table for the amounts paid to each NEO under this award. These awards do not have a threshold level or equivalent. |
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(2) | Represents the 2017 Time-Based RSUs granted to our NEOs. For more information, see Compensation Discussion and AnalysisIV. Primary Components of CompensationC. Long-Term Incentive ProgramLTI Awards Granted in 2017Time-Based RSU Awards. In addition, with respect to Messrs. Thornberry and McMahon, also includes a one-time grant of 53,534 and 10,000 time-based RSUs, respectively. |
(3) | Represents the grant date fair value of the awards computed in accordance with the accounting standard regarding share-based compensation payments. For a discussion of the assumptions used in calculating these amounts, see Note 15, Share-Based and Other Compensation Programs, of Notes to Consolidated Financial Statements in our 2017 Annual Report on Form 10-K. For the BV RSUs, the grant date fair value incorporates our perspective as of the grant date regarding the probability for payout of the awards, which amounts do not reflect amounts paid to our NEOs or correspond to the actual value that may be received by our NEOs, which will depend on our performance against the applicable performance conditions at the end of the applicable performance period. |
(4) | Represents the target and maximum number of shares that may be issued pursuant to the BV RSU awards granted to each of the NEOs under the Amended and Restated Equity Plan. At the end of the performance period, the NEOs will be entitled to receive a number of RSUs (from 0 to 200% of target) based the Companys absolute growth in LTI Book Value per Share (as defined under the awards). The grant date fair value incorporates our perspective regarding the probability of the payout for this award. For more information, see Compensation Discussion and AnalysisIV. Primary Components of CompensationC. Long-Term Incentive Program LTI Awards Granted in 20172017 Performance-Based RSU Awards. These awards do not have a threshold level or equivalent. |
(5) | Represents the target and maximum number of shares that may be issued pursuant to the TSR RSUs granted to each of the NEOs under the Amended and Restated Equity Plan. At the end of the performance period, the NEOs will be entitled to receive a number of RSUs (from 0 to 200% of target) based on the Companys absolute and relative TSR for the performance period compared to a peer group. For more information, see Compensation Discussion and AnalysisIV. Primary Components of CompensationC. Long-Term Incentive Program LTI Awards Granted in 20172017 Performance-Based RSU Awards. These awards do not have a threshold level or equivalent. |
(6) | Represents the target and maximum number of shares that may be issued pursuant to performance-based RSUs granted to Mr. Ibrahim pursuant to the terms of his Post-Employment Compensation Agreements. Subject to certain conditions, these performance-based RSUs will vest 100% only if, and at such time as, our closing common stock price on the NYSE equals or exceeds $22.46 (120% of the grant date price) for 10 consecutive days in the period beginning 10 trading days before March 3, 2018 and ending March 3, 2022. |
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The following table provides information regarding all equity awards outstanding at December 31, 2017 for each of the NEOs.
OUTSTANDING EQUITY AWARDS AT 2017 FISCAL YEAR-END
Option Awards | Stock Awards | |||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock that Have Not Vested (#) |
Market Value of Shares or Units of Stock that Have Not Vested ($) (1) |
Equity Incentive Plan Awards: Number of Unearned Shares or Units of Stock That Have Not Vested (#) (1) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units of Stock that Have Not Vested ($) (1) | ||||||||||||||||||
Richard G. Thornberry |
53,534(2) | $ | 1,103,336 | |||||||||||||||||||||||
60,210 | (3) | $1,240,928 | ||||||||||||||||||||||||
134,760 | (4) | $2,777,404 | ||||||||||||||||||||||||
|
124,580
|
(5)
|
$2,567,594
| |||||||||||||||||||||||
J. Franklin Hall |
0 | 7,640 | (6) | 18.42 | 7/8/2025 | |||||||||||||||||||||
19,040 | (7) | $392,414 | ||||||||||||||||||||||||
0 | 12,880 | (8) | 12.16 | 5/10/2026 | ||||||||||||||||||||||
63,020 | (9) | $1,298,842 | ||||||||||||||||||||||||
10,040 | (3) | $206,924 | ||||||||||||||||||||||||
22,460 | (4) | $462,901 | ||||||||||||||||||||||||
|
20,780
|
(5)
|
$428,276
| |||||||||||||||||||||||
Derek V. Brummer |
13,130 | 0 | 13.99 | 5/13/2023 | ||||||||||||||||||||||
5,895 | 5,895 | (10) | 15.44 | 6/16/2024 | ||||||||||||||||||||||
0 | 8,780 | (6) | 18.42 | 7/8/2025 | ||||||||||||||||||||||
21,900 | (7) | $451,359 | ||||||||||||||||||||||||
0 | 14,820 | (8) | 12.16 | 5/10/2026 | ||||||||||||||||||||||
15,000(11) | $ | 309,150 | ||||||||||||||||||||||||
72,480 | (9) | $1,493,813 | ||||||||||||||||||||||||
11,540 | (3) | $237,839 | ||||||||||||||||||||||||
25,840 | (4) | $532,562 | ||||||||||||||||||||||||
|
23,880
|
(5)
|
$492,167
| |||||||||||||||||||||||
Edward J. Hoffman |
14,985 | 0 | 3.58 | 6/9/2018 | ||||||||||||||||||||||
43,090 | 0 | 2.45 | 6/5/2022 | |||||||||||||||||||||||
9,990 | 0 | 13.99 | 5/13/2023 | |||||||||||||||||||||||
5,130 | 5,130 | (10) | 15.44 | 6/16/2024 | ||||||||||||||||||||||
0 | 7,640 | (6) | 18.42 | 7/8/2025 | ||||||||||||||||||||||
19,040 | (7) | $392,414 | ||||||||||||||||||||||||
0 | 12,880 | (8) | 12.16 | 5/10/2026 | ||||||||||||||||||||||
15,000(11) | $ | 309,150 | ||||||||||||||||||||||||
63,020 | (9) | $1,298,842 | ||||||||||||||||||||||||
10,040 | (3) | $206,924 | ||||||||||||||||||||||||
22,460 | (4) | $462,901 | ||||||||||||||||||||||||
|
20,780
|
(5)
|
$428,276
| |||||||||||||||||||||||
Brien J. McMahon |
50,920 | 0 | 2.45 | 6/5/2022 | ||||||||||||||||||||||
9,140 | 0 | 13.99 | 5/13/2023 | |||||||||||||||||||||||
4,105 | 4,105 | (10) | 15.44 | 6/16/2024 | ||||||||||||||||||||||
0 | 6,110 | (6) | 18.42 | 7/8/2025 | ||||||||||||||||||||||
15,240 | (7) | $314,096 | ||||||||||||||||||||||||
0 | 10,310 | (8) | 12.16 | 5/10/2026 | ||||||||||||||||||||||
50,420 | (9) | $1,039,156 | ||||||||||||||||||||||||
10,000(12) | $ | 206,100 | ||||||||||||||||||||||||
8,030 | (3) | $165,498 | ||||||||||||||||||||||||
17,980 | (4) | $370,568 | ||||||||||||||||||||||||
|
16,620
|
(5)
|
$342,538
|
78 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
Option Awards | Stock Awards | |||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock that Have Not Vested (#) |
Market Value of Shares or Units of Stock that Have Not Vested ($) (1) |
Equity Incentive Plan Awards: Number of Unearned Shares or Units of Stock That Have Not Vested (#) (1) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units of Stock that Have Not Vested ($) (1) | ||||||||||||||||||
Sanford A. Ibrahim |
139,700 | 0 | 3.58 | 6/9/2018 | ||||||||||||||||||||||
320,060 | 0 | 2.45 | 6/5/2022 | |||||||||||||||||||||||
0 | 32,290 | (10) | 15.44 | 6/16/2024 | ||||||||||||||||||||||
0 | 48,090 | (6) | 18.42 | 7/8/2025 | ||||||||||||||||||||||
119,940 | (7) | $2,471,963 | ||||||||||||||||||||||||
0 | 106,910 | (8) | 12.16 | 5/10/2026 | ||||||||||||||||||||||
523,040 | (9) | $10,779,854 | ||||||||||||||||||||||||
|
123,496
|
(13)
|
$2,545,253
| |||||||||||||||||||||||
Jeffrey G. Tennyson |
0 | 4,498 | (14) | 12.71 | 11/20/2020 | |||||||||||||||||||||
28,980 | (9) | $597,278 | ||||||||||||||||||||||||
3,742 | (4) | $77,123 | ||||||||||||||||||||||||
3,462 | (5) | $71,352 |
(1) | Unless otherwise noted, the number of unearned shares or units of stock that have not vested are reported assuming a payout of 100% of the target award level. The dollar amounts shown were calculated based on the closing price of our common stock on the NYSE on December 29, 2017 of $20.61. |
(2) | Sign-On RSUs subject to time-based vesting that are scheduled to vest pro rata on the second, third, and fourth anniversaries of the date of grant, subject to certain conditions. |
(3) | 2017 Time-Based RSUs that are scheduled to vest pro rata on the first, second, and third anniversaries of the date of grant, subject to certain conditions. |
(4) | BV RSUs scheduled to vest on May 10, 2020, with a post-vesting retention period (net of shares withheld for taxes) for one year. These performance-based RSUs have a potential payout ranging from 0% to 200% of the RSUs scheduled to vest, subject to certain conditions. Based on actual performance through December 31, 2017, we estimated that our NEOs would have been entitled to a number of RSUs in excess of their target amount, but less than the maximum 200%. Accordingly, pursuant to SEC rules and guidance, we have reported the maximum number of RSUs that may be received under these awards. The final number of RSUs to be awarded will not be determined until the vesting date, based on actual performance at that time. |
(5) | TSR RSUs scheduled to vest on May 10, 2020, with a post-vesting retention period (net of shares withheld for taxes) for one year. These performance-based RSUs have a potential payout ranging from 0% to 200% of the RSUs scheduled to vest, subject to certain conditions. Based on actual performance through December 31, 2017, we estimated that our NEOs would have been entitled to a number of RSUs in excess of their target amounts, but less than the maximum 200%. Accordingly, pursuant to SEC rules and guidance, we have reported the maximum number of RSUs that may be received under these awards. The final number of RSUs to be awarded will not be determined until the vesting date, based on actual performance at that time. |
(6) | Options scheduled to vest in two equal installments on each of the following dates: July 9, 2018 and July 9, 2019, provided that the options will vest only if the closing price of the Companys common stock on the NYSE exceeds $23.03 (125% of the option exercise price) for ten consecutive trading days ending on or any time after July 9, 2018, the third anniversary of the date of grant. |
79 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
(7) | RSUs scheduled to vest on July 9, 2018, with a post-vesting retention period (net of shares withheld for taxes) for one year. These performance-based RSUs have a potential payout ranging from 0% to 200% of the RSUs scheduled to vest, subject to a maximum cap of six times the value of the award on the grant date. Based on actual performance through December 31, 2017, we estimated that our NEOs would have been entitled to a number of RSUs below their target amounts, but greater than 0. Accordingly, pursuant to SEC rules and guidance, we have reported the target number of RSUs that may be received under these awards. The final number of RSUs to be awarded will not be determined until the vesting date, based on actual performance at that time. |
(8) | Options scheduled to vest in two equal installments on each of the following dates: May 11, 2019 and May 11, 2020, provided that the options will vest only if the closing price of the Companys common stock on the NYSE exceeds $15.20 (125% of the option exercise price) for ten consecutive trading days ending on or any time after May 11, 2019, the third anniversary of the date of grant. |
(9) | Performance-based RSUs scheduled to vest on May 11, 2019, with a post-vesting retention period (net of shares withheld for taxes) for one year. These performance-based RSUs have a potential payout ranging from 0% to 200% of the RSUs scheduled to vest, subject to certain conditions. Based on actual performance through December 31, 2017, we estimated that our NEOs would have been entitled to a number of RSUs in excess of their target amounts, but less than the maximum 200%. Accordingly, pursuant to SEC rules and guidance, we have reported the maximum number of RSUs that may be received under these awards. The final number of RSUs to be awarded will not be determined until the vesting date, based on actual performance at that time. |
(10) | Options scheduled to vest on June 17, 2018. |
(11) | RSUs subject to time-based vesting that vested on February 9, 2018, the second anniversary of the date of grant, subject to certain conditions. |
(12) | RSUs subject to time-based vesting that are scheduled to vest on February 24, 2019, the second anniversary of the date of grant. These RSUs were granted as a one-time special recognition award to Mr. McMahon. |
(13) | Performance-based RSUs scheduled to vest on March 3, 2018, provided that the performance-based RSUs will vest only if the closing price of the Companys common stock on the NYSE exceeds $22.46 (120% of the fair market value of the Companys common stock on the grant date) for ten consecutive trading days ending on or any time after March 3, 2018, the first anniversary of the date of grant. |
(14) | Options scheduled to vest in two equal installments on each of the following dates: August 10, 2019 and August 10, 2020, provided that the options will vest only if the closing price of the Companys common stock on the NYSE exceeds $15.89 (125% of the option exercise price) for ten consecutive trading days ending on or any time after August 10, 2019, the third anniversary of the date of grant. |
80 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
OPTION EXERCISES AND STOCK VESTED DURING 2017
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($) (1) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($) (2) |
||||||||||||
Richard G. Thornberry |
0 | 0 | 0 | 0 | ||||||||||||
J. Franklin Hall |
0 | 0 | 0 | 0 | ||||||||||||
Derek V. Brummer |
0 | 0 | 1,162 | (3) | 19,754 | |||||||||||
Edward J. Hoffman |
25,985 | 341,300 | 1,010 | (3) | 17,170 | |||||||||||
Brien J. McMahon |
0 | 0 | 808 | (3) | 13,736 | |||||||||||
Sanford A. Ibrahim |
322,120 | 3,746,794 | 6,364 | (3) | 108,188 | |||||||||||
Jeffrey G. Tennyson
|
|
0
|
|
|
0
|
|
|
20,040
|
(4)
|
|
399,998
|
|
(1) | Value realized on exercise reflects the difference between the closing price of the Companys common stock on the NYSE on the date of exercise and the exercise price of the option. |
(2) | Value realized on vesting reflects the number of RSUs that vested multiplied by the closing price of the Companys common stock on the NYSE on June 17, 2017. |
(3) | Represents the vesting and settlement in shares (at 4% of target) of performance-based RSUs granted on June 17, 2014 that vested on June 17, 2017. Performance for this award was measured based on the Companys TSR performance relative to the TSR performance of a designated peer group of companies. |
(4) | Represents the vesting and settlement of 2017 Time-Based RSUs that were accelerated upon the termination of Mr. Tennysons employment in accordance with the terms of this award. |
81 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
82 | 2018 Proxy Statement |
Compensation of Executive Officers and Directors
The following table sets forth information relating to our voluntary deferred compensation plan for officers and the BRP for each of the NEOs:
2017 NONQUALIFIED DEFERRED COMPENSATION
Name | Plan Name (1) | Executive Contributions in Last FY ($) |
Registrant Contributions in Last FY (2) ($) |
Aggregate Earnings (Losses) in Last FY ($) |
Aggregate Withdrawals / Distributions |