UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 29, 2014
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EMC INSURANCE GROUP INC.
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(Exact name of registrant as specified in its charter)
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Iowa
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0-10956
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42-6234555
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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717 Mulberry Street, Des Moines, Iowa
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50309
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(Address of principal executive offices)
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(Zip Code)
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(515) 345‑2902
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(Registrant’s telephone number, including area code)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
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On December 29, 2014, the Board of Directors of the Registrant approved the addition of a “clawback” policy to the following Employers Mutual Casualty Company executive compensation bonus programs: 1) Senior Executive Compensation Bonus Program, 2) Employers Mutual Casualty Company Senior Executive Long Term Incentive Plan, 3) Executive Contingent Salary Plan - EMC Reinsurance Company, and 4) EMC Reinsurance Company Executive Long Term Incentive Plan. The “clawback” policy may require the repayment of previously awarded incentive-based compensation in the event Employers Mutual Casualty Company is required to prepare an accounting restatement due to the material noncompliance with any financial reporting requirements.
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Item 9.01
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Financial Statements and Exhibits.
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Exhibit Number
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Description
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10.2.3
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Senior Executive Compensation Bonus Program
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10.2.4
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Executive Contingent Salary Plan - EMC Reinsurance Company
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10.2.5
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Employers Mutual Casualty Company Senior Executive Long Term Incentive Plan
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10.2.6
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EMC Reinsurance Company Executive Long Term Incentive Plan
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized, on December 29, 2014.
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EMC INSURANCE GROUP INC.
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Registrant
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/s/ Mark E. Reese
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Mark E. Reese
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Senior Vice President and
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Chief Financial Officer
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EXHIBIT INDEX
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Exhibit Number
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Description
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10.2.3
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Senior Executive Compensation Bonus Program
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10.2.4
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Executive Contingent Salary Plan - EMC Reinsurance Company
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10.2.5
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Employers Mutual Casualty Company Senior Executive Long Term Incentive Plan
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10.2.6
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EMC Reinsurance Company Executive Long Term Incentive Plan
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SENIOR EXECUTIVE COMPENSATION BONUS PROGRAM
The Senior Executive Compensation Bonus Program is a measure of three areas often reviewed when comparing results of different companies or in comparing current company results from one year to the next.
PURPOSE
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1.
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To provide a motivational tool in the form of compensation to help executives focus on specific organizational goals to improve profits, surplus and service in all areas of the corporation.
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2.
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To maintain competitive advantage in terms of recruitment and retention of senior executives.
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3.
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To provide a plan based on EMC results and industry results, to provide a better measure of performance.
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4.
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Reward superior results appropriately.
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5.
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Provide a maximum bonus difficult to attain so there is incentive to strive for better results.
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6.
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To provide a measure of safety to the company so that senior officers' total compensation is reduced if company performance declines.
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EXECUTIVES ELIGIBLE FOR BONUS
All members of the Policy Committee will be eligible for an executive bonus as provided in this Program. In addition, all vice presidents of Employers Mutual Casualty Company (not covered by a separate program) will be eligible for an executive bonus. Each bonus will be calculated according to the terms and conditions of the Program and according to each executive’s status as an officer.
GENERAL BONUS CALCULATION
The bonus plan uses production, surplus growth and the combined ratio, all valid measures of performance, as follows:
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1.
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EMC WRITTEN PREMIUM
- Compares consolidated written premium to a target that is established by the committee each year.
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3.
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COMBINED RATIO
- Compares EMC combined ratio to a target ratio established by the Committee each year. Also compares EMC's combined ratio to that of the industry.
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Seventy-five percent of any bonus will be based on the Industry estimate published in January by A.M. Best and paid at that time. The remaining twenty-five percent will be paid when final numbers are released by A.M. Best (generally in March).
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ALL CALCULATIONS ARE ROUNDED TO THE NEAREST ONE-TENTH OF ONE PERCENT.
The factors in each of the formulas are subject to change each year with final approval by the Senior Executive Compensation and Incentive Stock Option Committee.
WRITTEN PREMIUM
This component is based on actual net written premium growth compared to a consolidated written premium target established each year and approved by the Committee. (See appendix for current factor)
Achieving goal results in a bonus contribution of plus 7.5 percent of salary. This changes by 1.5 percent for each 1.0 percent variation from goal, subject to a maximum contribution of plus 15.0 percent and a minimum contribution of minus 15.0 percent.
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The written premium component is determined as follows:
Percent of actual change, minus goal, plus 5.0, times 1.50.
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Example 1
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The goal equals 8.5 percent premium growth.
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The actual change equals 7.5 percent premium growth.
7.5 percent minus 8.5 percent equals minus 1 plus 5.0, equals 4.0 times 1.50 equals 6.0.
The contribution in this example of written premium towards the total bonus is equal to
6.0 percent
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Example 2
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The goal equals 5.7 percent premium growth.
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The actual change equals minus 1.3 percent premium growth.
Minus 1.3 percent minus 5.7 percent equals minus 7.0 plus 5.0 equals minus 2.0 times 1.50 equals
minus 3.0
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Example 3
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The goal equals 4.7 percent premium growth.
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The actual change equals 9.8 percent premium growth.
9.8 percent minus 4.7 percent equals 5.1 percent plus 5.0 equals 10.1 times 1.50 equals 15.2 percent. The contribution in this example of written premium towards the total bonus equals plus
15.0 percent
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(This component not to exceed plus or minus 15.0 percent)
SURPLUS
The component of surplus is based on the actual change in surplus. Each one percent increase in surplus produces a 1.0 percent increase in the bonus percent subject to a maximum of 25.0 percent. Each one percent decrease in surplus represents a 1.0 percent decrease in the bonus percent subject to a minimum of minus 20.0 percent.
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The surplus component is determined as follows:
Positive change in surplus times multiplier of 1.00
Negative change in surplus times multiplier of 1.00
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Example 1
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Change in surplus equals plus 4.6 percent.
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Contribution towards total bonus from surplus component equals 4.6 percent times 1.00 equals
4.6 percent
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Example 2
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Change in surplus equals a minus 2.4 percent. Contribution towards total bonus from surplus component equals minus 2.4 percent times 1.00 equals
minus 2.4 percent
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Example 3
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Change in surplus equals a plus 10.7 percent. Contribution towards total bonus from surplus component equals 10.7 percent times 1.00 equals
10.7 percent
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COMBINED RATIO
The component for combined ratio is based on EMC's consolidated combined ratio relative to a target combined ratio on a trade basis, adjusted by a comparison of the EMC combined ratio to that of the industry.
Refer to appendix for current target combined ratio and maximum combined ratio.
The target ratio is subject to Committee approval each year. For each 1.0 percent change in the combined ratio, the bonus contribution changes 5.0 percent subject to a maximum contribution of plus 65.0 percent and a minimum contribution of minus 40.0 percent.
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First determine EMC's relationship to the industry by subtracting EMC's combined ratio from that of the industry.
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The initial industry estimate published in January by A.M. Best will be the number used in the calculation. Adjustments will be made as required when A.M. Best releases final numbers, generally in March.
If the result is a positive number, subtract result (not to exceed 3.0 percent) from EMC's combined ratio to obtain adjusted combined ratio. Subtract adjusted combined ratio from target combined ratio, add difference between maximum and target combined, multiply by 5.00 to equal the bonus produced by the combined ratio component.
If the result is a negative number or 0.0, no adjustment is necessary and the EMC combined ratio is the adjusted combined ratio. Subtract the adjusted combined ratio from the target combined ratio, add difference between maximum and target combined ratios, multiply by 5.00 to equal the bonus produced by the combined ratio component.
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The combined ratio formula is determined as follows:
Target combined ratio minus the adjusted combined ratio plus difference between maximum and target combined ratios times 5.00.
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In the examples below, a target combined ratio of 103.0 and a maximum combined ratio of 109.0 are used.
Example 1
: Industry ratio equals 101.6 percent.
EMC ratio equals 97.1 percent.
Adjustment * 101.6 minus 97.1 equals 3.0 (maximum adjustment allowed).
Adjusted ratio
* 97.1 minus 3.0 equals 94.1 percent.
Target ratio equals 103.0 percent.
103.0 percent minus 94.1 percent equals 8.9 plus 109.0 minus 103.0 equals 14.9 times 5.00 equals
74.5 percent
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The contribution towards total bonus from the combined ratio component equals
65.0 percent
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Example 2
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Industry ratio equals 101.6 percent.
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EMC ratio equals 100.1 percent.
Adjustment * 101.6 minus 100.1 equals 1.5 percent.
Adjusted ratio
* 100.1 minus 1.5 equals 98.6 percent.
Target ratio equals 103.0 percent.
103.0 percent minus 98.6 percent equals 4.4 percent plus 109.0 minus 103.0 equals 10.4 percent times 5.00 equals
52.0 percent.
The contribution towards the total bonus from the combined ratio component equals
52.0 percent
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Example 3
: Industry ratio equals 101.6 percent.
EMC ratio equals 110.1 percent.
Adjustment - None (If EMC performance is worse than the industry average, use the EMC ratio in the formula).
Adjusted ratio
* 110.1.
Target ratio equals 103.0 percent.
103.0 percent minus 110.1 percent equals minus 7.1 plus 109.0 minus 103.0 equals minus 1.1 times 5.00 equals
minus 5.5 percent
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The contribution towards the total bonus from the combined ratio component equals
minus 5.5 percent
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Assuming each example represents one year, the bonus for the three years would be as follows:
Component
Example 1
Example 2
Example 3
Written Premium 6.0% -3.0% 15.0%
Surplus 4.6% -2.4% 10.7%
Combined Ratio
65.0%
52.0%
-5.5%
Total Bonus* 75.0% 46.6% 20.2%
* The total bonus is the sum of the three components subject to a maximum of 75.0 percent of salary.
This represents the bonus for Vice Presidents (level 2). Factors would be applied as follows to arrive at the bonus calculations for Vice Presidents (level 1), Senior Vice Presidents, Executive Vice Presidents, and President.
FACTORS AND MAXIMUM BONUS
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Factor
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Maximum Bonus
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Vice Presidents (level 1)
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.80
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60.0%
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Vice Presidents (level 2)
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1.00
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75.0%
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Senior Vice Presidents
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1.10
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82.5%
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Executive Vice Presidents
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1.20
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90.0%
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President
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1.30
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97.5%
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Note: Level 1 includes Vice Presidents holding the title for less than five years and not on the Policy Committee. Level 2 includes Policy Committee members and those holding the Vice President title for five years or more.
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Position
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Factor
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Example 1
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Example 2
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Example 3
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Vice Presidents (level 1)
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.80
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60.0%
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37.3%
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16.2%
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Vice Presidents (level 2)
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1.00
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75.0%
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46.6%
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20.2%
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Senior Vice Presidents
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1.10
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82.5%
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51.3%
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22.2%
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Executive Vice Presidents
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1.20
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90.0%
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55.9%
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24.2%
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President
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1.30
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97.5%
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30.6%
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26.3%
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PLAN ADMINISTRATION
1. Payments to eligible employees (as listed in appendix 2) under this plan are subject to "clawback provisions" as described in detail under the “Policy For Recovery of Erroneously Awarded Incentive-Based Compensation” set forth below.
2. An executive terminating employment prior to the end of the year in which a bonus is established will not be paid such bonus.
3. Executives retiring or becoming deceased or disabled before the established date for the payment of bonuses will receive a bonus on the basis of the portion of the year he/she was on the payroll.
4. If an executive becomes bonus eligible at some time during the year, he/she will receive a pro rata bonus for that portion of the year he/she is eligible.
5. If an executive is promoted or changes eligibility levels during the year and/or given a salary increase, the bonus will be prorated on the basis of the position and/or the salaries paid for the specific position.
6. Deductions for federal and state income taxes, and FICA, if applicable, will be made from each bonus on the basis of IRS regulations.
7. The Executive Compensation Committee may, at its discretion, adjust the bonus calculation for unusual or extenuating circumstances.
8. The EMC Employee Contingent Salary Plan provides that employees eligible under a separate bonus program will receive the larger of the “bonus” or the “contingent salary” for the plan year. In the unlikely event the “contingent salary” is larger than the “senior executive bonus” the Executive Compensation Committee may, at its discretion, approve payment of the “contingent salary” in lieu of the “senior executive bonus”.
9. If there is a disagreement or misunderstanding regarding the basis for the bonus or in the calculation of the amounts, the decision of the Senior Executive Compensation and Incentive Stock Option Committee will be final. The Committee may, at its discretion, choose to pay more than 75% of bonus at one time if final industry results will have little or no impact on the final bonus percentage.
EMPLOYERS MUTUAL CASUALTY COMPANY POLICY FOR RECOVERY OF ERRONEOUSLY AWARDED INCENTIVE-BASED COMPENSATION
Executive officers (as defined below) of Employers Mutual Casualty Company (the “Company”) may be required to repay previously awarded incentive-based compensation to the Company in certain circumstances and to the extent required under applicable law. For incentive compensation performance periods in progress as of the adoption of this policy and paid on or after January 1, 2015, the statement of terms and conditions accompanying any incentive-based compensation award made by the Company shall include a provision incorporating the requirements of this policy.
To the extent there is a determination made that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirements, the Compensation Committee of the Company’s Board of Directors and the Compensation Committee of EMC Insurance Group Inc.’s Board of Directors (EMCI) (collectively referred to as the Compensation Committees) will determine whether, and to what extent, recovery of any incentive-based compensation previously paid is appropriate based on the facts and circumstances involved. If it is determined that a recovery is appropriate, the Compensation Committees shall direct that the Company recover that portion of any incentive-based compensation (whether in the form of cash or equity, if applicable) paid to current and former executive officers during the 36-month period preceding the date the Company is required to issue the accounting restatement that is in excess of what would have been paid to the executive officers under the accounting restatement. The amount to be recovered from the executive officers based on an accounting restatement shall be the amount by which the affected incentive-based compensation exceeded the amount that would have been payable to such executive officers had the accounting statements initially been issued as restated; provided, however, the Compensation Committees reserve the authority to recover different amounts from different executive officers on such bases as they shall deem appropriate, such as in the case of an executive officer’s misconduct that contributes to the need for the accounting restatement.
The Compensation Committees shall determine, subject to applicable law, whether the Company shall effect such recovery of incentive-based compensation (i) by seeking recovery from the executive officer; (ii) by reducing the amount that would otherwise be payable to the executive officer under any compensatory plan, program or arrangement maintained by the Company; (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount); or (iv) by any combination of the foregoing.
For purposes of this policy, the term “executive officers” means those persons who received incentive-based compensation under the Company’s Senior Executive Compensation Bonus Program, Senior Executive Long Term Incentive Plan, or the incentive-based compensation plans applicable to the Company’s Bond Manager and the President of EMC Reinsurance Company. The term “incentive-based compensation” means, as applicable, cash or equity compensation paid under any of the above mentioned plans, the amount of which was determined in whole, or in part, upon specific performance-based goals relating to the financial results of EMC Insurance Companies, or its individual operating segments.
The remedies outlined herein are in addition to, and not in lieu of, any action deemed necessary by the Compensation Committees, the Company’s Board of Directors, EMCI’s Board of Directors, or the Company (up to and including termination of employment), and any legal rights available to the Company to recover incentive-based compensation, and any action imposed by law enforcement agencies, regulators, or other authorities.
EXECUTIVE CONTINGENT SALARY PLAN (CSP)
EMC Reinsurance Company (EMC Re)
Purpose
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To provide special incentive for participants to contribute to the success of EMC Reinsurance Company and EMC Insurance Companies and to provide a means to participate in the favorable underwriting results of the companies.
Plan Year
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Calendar year beginning January 1 and ending December 31.
Eligible Participants
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Ronnie D. Hallenbeck, President – EMC Reinsurance Company
Subject Compensation
– base salary and wages paid during the plan year in the eligible position
Contingent Salary Percentage
– based on (1) the Consolidated Combined Trade Ratio for EMC Insurance Companies, (2) the
adjusted
Combined Trade Ratio for EMC Re computed according to the formula below, (3) change in policyholder surplus for EMC Re and (4) change in net written premiums for EMC Re. Calculations will be to the nearest 1/10th of 1%.
Determination of adjusted Combined Trade Ratio for EMC Re
Step One
: The actual combined trade ratio is adjusted for the profit or loss incurred by EMCC under the occurrence cap protection.
Step Two
: The adjusted combined trade ratio from
Step One
is compared to that of the reinsurance industry as published by the Reinsurance Association of America. If it is greater than the RAA combined, no further adjustment is made. If it is lower than the RAA combined ratio, the adjusted combined trade ratio is reduced by the difference, subject to a maximum reduction of three points.
Contingent Salary Percentage =
Consolidated Combined Trade Ratio Component (A)
+ Adjusted EMC Re Combined Trade Ratio Component (B)
+ EMC Re Surplus Component (C)
+ EMC Re Net Written Premium Component (D)
(Subject to maximum of 75.0%)
Where,
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(A)
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= (
Combined Ratio Threshold
– Consolidated Combined Trade Ratio) X 2.0%
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(Subject to maximum of 20.0% and minimum of 0.0%)
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(B)
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= (
Combined Ratio Threshold
– adjusted EMC Re Combined Trade Ratio) X 5.0%
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(Subject to maximum of 50.0% and minimum of -20.0%)
(C) = Percent change in policyholder surplus X 1.0 (if change is positive) or
Percent change in policyholder surplus X 1.0 (if change is negative)
(Subject to maximum of 25.0% and minimum of -20.0%)
(D) = Percent change in Net Written Premium X 2.0
(Subject to maximum of 15.0% and minimum of -10.0%)
Note:
Combined Ratio Threshold
provided in memo announcing plan each year
The Contingent Salary Payment
for the
plan year
will be made to eligible participants as soon as all necessary information is available and calculations have been completed and verified and will be equal to –
Contingent Salary Percentage X Subject Compensation
Administration
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1.
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An otherwise eligible participant will not be eligible to receive payment if he/she is not employed by the Companies on the last day of the plan year.
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2.
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Exception - an eligible participant who retires or becomes deceased or disabled before the last day of the plan year will receive payment based on subject compensation for the plan year.
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3.
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Calculations may be adjusted for unusual or extenuating events or circumstances as determined by the Executive Vice President for Corporate Development.
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4.
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If there is a disagreement or misunderstanding of the basis for the CSP or in the calculation of the amount payable, the decision of the Executive Vice President for Corporate Development will be final.
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Required taxes and voluntary deductions will be withheld from the contingent salary payment as appropriate.
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6.
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Neither the adoption of the Executive Contingent Salary Plan nor any of its provisions shall confer upon any participant any right to continued employment with the Companies or affect in any way the right of the Companies to terminate the employment of a participant at any time.
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7.
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Payments to eligible employees (as listed under “eligible participants”) under this plan are subject to "clawback provisions" as described in detail under the “Policy For Recovery of Erroneously Awarded Incentive-Based Compensation” set forth below.
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Employers Mutual Casualty Company Policy for Recovery of Erroneously Awarded Incentive-Based Compensation:
Executive officers (as defined below) of Employers Mutual Casualty Company (the “Company”) may be required to repay previously awarded incentive-based compensation to the Company in certain circumstances and to the extent required under applicable law. For incentive compensation performance periods in progress as of the adoption of this policy and paid on or after January 1, 2015, the statement of terms and conditions accompanying any incentive-based compensation award made by the Company shall include a provision incorporating the requirements of this policy.
To the extent there is a determination made that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirements, the Compensation Committee of the Company’s Board of Directors and the Compensation Committee of EMC Insurance Group Inc.’s Board of Directors (EMCI) (collectively referred to as the Compensation Committees) will determine whether, and to what extent, recovery of any incentive-based compensation previously paid is appropriate based on the facts and circumstances involved. If it is determined that a recovery is appropriate, the Compensation Committees shall direct that the Company recover that portion of any incentive-based compensation (whether in the form of cash or equity, if applicable) paid to current and former executive officers during the 36-month period preceding the date the Company is required to issue the accounting restatement that is in excess of what would have been paid to the executive officers under the accounting restatement. The amount to be recovered from the executive officers based on an accounting restatement shall be the amount by which the affected incentive-based compensation exceeded the amount that would have been payable to such executive officers had the accounting statements initially been issued as restated; provided, however, the Compensation Committees reserve the authority to recover different amounts from different executive officers on such bases as they shall deem appropriate, such as in the case of an executive officer’s misconduct that contributes to the need for the accounting restatement.
The Compensation Committees shall determine, subject to applicable law, whether the Company shall effect such recovery of incentive-based compensation (i) by seeking recovery from the executive officer; (ii) by reducing the amount that would otherwise be payable to the executive officer under any compensatory plan, program or arrangement maintained by the Company; (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount); or (iv) by any combination of the foregoing.
For purposes of this policy, the term “executive officers” means those persons who received incentive-based compensation under the Company’s Senior Executive Compensation Bonus Program, Senior Executive Long Term Incentive Plan, or the incentive-based compensation plans applicable to the Company’s Bond Manager and the President of EMC Reinsurance Company. The term “incentive-based compensation” means, as applicable, cash or equity compensation paid under any of the above mentioned plans, the amount of which was determined in whole, or in part, upon specific performance-based goals relating to the financial results of EMC Insurance Companies, or its individual operating segments.
The remedies outlined herein are in addition to, and not in lieu of, any action deemed necessary by the Compensation Committees, the Company’s Board of Directors, EMCI’s Board of Directors, or the Company (up to and including termination of employment), and any legal rights available to the Company to recover incentive-based compensation, and any action imposed by law enforcement agencies, regulators, or other authorities.
EMPLOYERS MUTUAL CASUALTY COMPANY
SENIOR EXECUTIVE LONG TERM INCENTIVE PLAN
The Senior Executive Long Term Incentive Plan (LTIP) is a bonus program based on long term Company results that incorporate the criteria and results of the Senior Executive Compensation Bonus Program (SECBP) on a rolling three year basis for calculation purposes.
Purpose:
1. To provide a motivational tool in the form of compensation to help executives focus on long term results for specific corporate goals and objectives.
2. To maintain a competitive advantage in terms of recruitment and retention of senior executives.
3. To provide a mechanism that encourages adequate notice to the Company from senior executives regarding their retirement plans.
4. To reward superior, long term results.
Eligibility:
All members of the Policy Committee will be eligible for the LTIP if they have been eligible for the Senior Executive Compensation Bonus Program for at least three years. All vice presidents of Employers Mutual Casualty Company, not covered by a separate program, will be eligible for the LTIP if they have been eligible for the Senior Executive Compensation Bonus Program for the past three years. In addition, retiring senior executives will be eligible during the year of their retirement and the next two years should bonuses be paid. Each LTIP bonus will be calculated according to the terms and conditions of the Program and using each executive’s final status as an officer and his or her base salary for the most recent year.
General LTIP Bonus Calculation
The LTIP uses the results of the latest three years Senior Executive Compensation Bonus Program calculations, except that no minimums or maximums are applied for the annual calculations. The results from three years of the Bonus Program are averaged and multiplied by an adjustment factor determined by the EMCC Executive Compensation and Stock Option Committee.
Example: (
Year 1) 25% + (Year 2) 35% + (Year 3) 30%
= 30% X .50 (adjustment factor) = 15% X Base Salary
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Plan Administration
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1.
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Payments to eligible employees (as listed in appendix 2 of the SECBP) under this plan are subject to "clawback provisions" as described in detail under the “Policy For Recovery of Erroneously Awarded Incentive-Based Compensation” set forth below.
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2.
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An executive must be in the position of vice president or above a minimum of three years before he/she is eligible for a LTIP bonus payment.
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3.
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An executive terminating employment prior to the end of a year is not eligible for any future LTIP payments reflecting that year’s results.
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Revision Date: 12-29-2014
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4.
|
Executives retiring, deceased or disabled will continue eligibility based on a calculation using subsequent year results and based on their final status as an officer according to the following:
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A.
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1
st
payment X 3/3 after last full year of employment (Y1)
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B.
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2
nd
payment X 2/3 after year Y1 + 1
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C.
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3
rd
payment X 1/3 after year Y1 + 2
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5.
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For those retired, deceased or disabled, the LTIP percentage will be applied to the final full year of base salary.
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6.
|
If retirement notification is provided 360 days or more in advance, the final two payments will be multiplied by a factor of 1.50.
(Note of clarification: notification is for internal succession planning purposes and can be expected to remain confidential until public disclosure is deemed appropriate.)
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7.
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If retirement notification is provided 180 days or less in advance, the final two payments will be multiplied by a factor of 1.00.
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8.
|
For notifications between those two time frames, the multiplying factor will be prorated.
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9.
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Deductions for federal and state income taxes, and FICA, if applicable, will be made from each bonus on the basis of IRS regulations.
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10.
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Amounts received under the LTIP may not be deferred into the Board and Executive Non-qualified Excess Plan due to IRS limitations.
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11.
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The Executive Compensation Committee may, at its discretion, adjust the bonus calculation due to unusual or extenuating circumstances.
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12.
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Final calculations for LTIP amounts will be made after “final” A.M. Best industry estimates are released in late March or early April, subject to Committee discretion.
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13.
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Due to the long term nature of the LTIP, beneficiary forms will be necessary from each eligible executive. Failure to submit a beneficiary form will result in a default payment according to the following:
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A.
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Spouse. The eligible executive’s surviving spouse, and if no surviving spouse, to
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B.
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Descendants. The eligible executive’s children (including adopted children), in equal shares by right of representation (one share for each surviving child and one share for each child who predeceases the eligible executive with living descendents) and if none to
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C.
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Parents. The eligible executive’s surviving parents, in equal shares, and if none to
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D.
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Estate. The eligible executive’s estate.
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14.
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If there is a disagreement or misunderstanding regarding the basis for the bonus or in the calculation of the amounts, the decision of the Senior Executive Compensation and Incentive Stock Option Committee will be final. The Committee may, at its discretion, choose to pay the bonus amount earlier than the “final” A.M. Best estimates of industry results if those final numbers will have little or no impact on the final bonus percentage.
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Revision Date: 12-29-2014
Effective Date
The effective date of the Long Term Incentive Plan will be January 1, 2009, with the first calculation based on the results of the Senior Executive Compensation Bonus Plans for 2007, 2008, and 2009. Only those executives who have been eligible for the short term bonus plan during those full three years at the end of 2009 will be eligible for the first payment in 2010.
Employers Mutual Casualty Company Policy for Recovery of Erroneously Awarded Incentive-Based Compensation
Executive officers (as defined below) of Employers Mutual Casualty Company (the “Company”) may be required to repay previously awarded incentive-based compensation to the Company in certain circumstances and to the extent required under applicable law. For incentive compensation performance periods in progress as of the adoption of this policy and paid on or after January 1, 2015, the statement of terms and conditions accompanying any incentive-based compensation award made by the Company shall include a provision incorporating the requirements of this policy.
To the extent there is a determination made that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirements, the Compensation Committee of the Company’s Board of Directors and the Compensation Committee of EMC Insurance Group Inc.’s Board of Directors (EMCI) (collectively referred to as the Compensation Committees) will determine whether, and to what extent, recovery of any incentive-based compensation previously paid is appropriate based on the facts and circumstances involved. If it is determined that a recovery is appropriate, the Compensation Committees shall direct that the Company recover that portion of any incentive-based compensation (whether in the form of cash or equity, if applicable) paid to current and former executive officers during the 36-month period preceding the date the Company is required to issue the accounting restatement that is in excess of what would have been paid to the executive officers under the accounting restatement. The amount to be recovered from the executive officers based on an accounting restatement shall be the amount by which the affected incentive-based compensation exceeded the amount that would have been payable to such executive officers had the accounting statements initially been issued as restated; provided, however, the Compensation Committees reserve the authority to recover different amounts from different executive officers on such bases as they shall deem appropriate, such as in the case of an executive officer’s misconduct that contributes to the need for the accounting restatement.
The Compensation Committees shall determine, subject to applicable law, whether the Company shall effect such recovery of incentive-based compensation (i) by seeking recovery from the executive officer; (ii) by reducing the amount that would otherwise be payable to the executive officer under any compensatory plan, program or arrangement maintained by the Company; (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount); or (iv) by any combination of the foregoing.
For purposes of this policy, the term “executive officers” means those persons who received incentive-based compensation under the Company’s Senior Executive Compensation Bonus Program, Senior Executive Long Term Incentive Plan, or the incentive-based compensation plans applicable to the Company’s Bond Manager and the President of EMC Reinsurance Company. The term “incentive-based compensation” means, as applicable, cash or equity compensation paid under any of the above mentioned plans, the amount of which was determined in whole, or in part, upon specific performance-based goals relating to the financial results of EMC Insurance Companies, or its individual operating segments.
Revision Date: 12-29-2014
The remedies outlined herein are in addition to, and not in lieu of, any action deemed necessary by the Compensation Committees, the Company’s Board of Directors, EMCI’s Board of Directors, or the Company (up to and including termination of employment), and any legal rights available to the Company to recover incentive-based compensation, and any action imposed by law enforcement agencies, regulators, or other authorities.
Revision Date: 12-29-2014
EMC REINSURANCE COMPANY
EXECUTIVE LONG TERM INCENTIVE PLAN
The EMC Re Executive Long Term Incentive Plan (ReLTIP) is a bonus program based on long term Consolidated and EMC Re results that incorporate the criteria and results of the EMC Re Executive Contingent Salary Plan on a rolling three year basis for calculation purposes.
Purpose:
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1.
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To provide a motivational tool in the form of compensation to help eligible executives focus on long term results for specific corporate and EMC Re goals and objectives.
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2.
|
To maintain a competitive advantage in terms of recruitment and retention of eligible executives.
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3.
|
To provide a mechanism that encourages adequate notice to the Company from eligible executives regarding their retirement plans.
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4.
|
To reward superior, long term results.
|
Eligibility:
EMC Re executives will be eligible for the ReLTIP if they have been eligible for the EMC Re Executive Contingent Salary Plan for at least three years. In addition, retiring executives will be eligible during the year of their retirement and the next two years should bonuses be paid. Each ReLTIP bonus will be calculated according to the terms and conditions of the Plan and using each eligible executive’s base salary and wages paid for the most recent year.
General ReLTIP Bonus Calculation
The ReLTIP uses the results of the latest three years EMC Re Executive Contingent Salary Program calculations, except that the EMC Re and total plan minimums are adjusted to offset the maximums for the annual calculations. The results from three years of the Bonus Plan are averaged and multiplied by an adjustment factor determined by the Executive Vice President for Corporate Development.
Example: (
Year 1) 25% + (Year 2) 35% + (Year 3) 30%
= 30% X .
50 (adjustment factor)
= 15% X Base Salary
3
Plan Administration
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|
|
1.
|
An executive must be an eligible participant of the EMC Re Executive Contingent Salary Plan for a minimum of three years before he/she is eligible for a ReLTIP bonus payment.
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|
|
2.
|
An executive terminating employment prior to the end of a year is not eligible for any future ReLTIP payments reflecting that year’s results.
|
|
|
|
|
3.
|
Executives retiring, deceased or disabled will continue eligibility based on a calculation using subsequent year results according to the following:
|
|
|
|
|
A.
|
1
st
payment X 3/3 after last full year of employment (Y1)
|
|
|
|
|
B.
|
2
nd
payment X 2/3 after year Y1 + 1
|
|
|
|
|
C.
|
3
rd
payment X 1/3 after year Y1 + 2
|
|
|
|
|
4.
|
For those retired, deceased or disabled, the ReLTIP percentage will be applied to the final full year of base salary and wages.
|
|
|
|
|
5.
|
If retirement notification is provided 360 days or more in advance, the final two payments will be multiplied by a factor of 1.50.
|
|
|
|
|
6.
|
If retirement notification is provided 180 days or less in advance, the final two payments will be multiplied by a factor of 1.00.
|
|
|
|
|
7.
|
For notifications between those two time frames, the multiplying factor will be prorated.
|
|
|
|
|
8.
|
For active employees, deductions for federal and state income taxes, and FICA, if applicable, will be made from each bonus on the basis of IRS regulations.
|
|
|
|
|
9.
|
Amounts received under the ReLTIP may not be deferred into the Board and Executive Non-qualified Excess Plan due to IRS limitations.
|
|
|
|
|
10.
|
The Executive Vice President for Corporate Development may, at his/her discretion, adjust the bonus calculation due to unusual or extenuating circumstances.
|
|
|
|
|
11.
|
Final calculations for ReLTIP amounts will be made after consolidated and adjusted EMC Re combined ratios are finalized.
|
|
|
|
|
12.
|
Due to the long term nature of the ReLTIP, beneficiary forms will be necessary from each eligible executive. Failure to submit a beneficiary form will result in a default payment according to the following:
|
|
|
|
|
A.
|
Spouse. The eligible executive’s surviving spouse, and if no surviving spouse, to
|
|
|
|
|
B.
|
Descendants. The eligible executive’s children (including adopted children), in equal shares by right of representation (one share for each surviving child and one share for each child who predeceases the eligible executive with living descendents) and if none to
|
|
|
|
|
C.
|
Parents. The eligible executive’s surviving parents, in equal shares, and if none to
|
|
|
|
|
D.
|
Estate. The eligible executive’s estate.
|
|
|
|
|
13.
|
If there is a disagreement or misunderstanding regarding the basis for the bonus or in the calculation of the amounts, the decision of the Executive Vice President for Corporate Development will be final.
|
|
|
|
|
14.
|
Payments to eligible employees (as listed above under “eligibility”) under this plan are subject to "clawback provisions" as described in detail under the “Policy For Recovery of Erroneously Awarded Incentive-Based Compensation” set forth below.
|
Effective Date
The effective date of the EMC Re Executive Long Term Incentive Plan will be January 1, 2009, with the first calculation based on the results of the EMC Re Executive Contingent Salary Plans for 2007, 2008, and 2009. Only those EMC Re executives who have been eligible for the EMC Re Executive Contingent Salary Plan during those full three years at the end of 2009 will be eligible for the first payment in 2010.
Employers Mutual Casualty Company Policy for Recovery of Erroneously Awarded Incentive-Based Compensation
Executive officers (as defined below) of Employers Mutual Casualty Company (the “Company”) may be required to repay previously awarded incentive-based compensation to the Company in certain circumstances and to the extent required under applicable law. For incentive compensation performance periods in progress as of the adoption of this policy and paid on or after January 1, 2015, the statement of terms and conditions accompanying any incentive-based compensation award made by the Company shall include a provision incorporating the requirements of this policy.
To the extent there is a determination made that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirements, the Compensation Committee of the Company’s Board of Directors and the Compensation Committee of EMC Insurance Group Inc.’s Board of Directors (EMCI) (collectively referred to as the Compensation Committees) will determine whether, and to what extent, recovery of any incentive-based compensation previously paid is appropriate based on the facts and circumstances involved. If it is determined that a recovery is appropriate, the Compensation Committees shall direct that the Company recover that portion of any incentive-based compensation (whether in the form of cash or equity, if applicable) paid to current and former executive officers during the 36-month period preceding the date the Company is required to issue the accounting restatement that is in excess of what would have been paid to the executive officers under the accounting restatement. The amount to be recovered from the executive officers based on an accounting restatement shall be the amount by which the affected incentive-based compensation exceeded the amount that would have been payable to such executive officers had the accounting statements initially been issued as restated; provided, however, the Compensation Committees reserve the authority to recover different amounts from different executive officers on such bases as they shall deem appropriate, such as in the case of an executive officer’s misconduct that contributes to the need for the accounting restatement.
The Compensation Committees shall determine, subject to applicable law, whether the Company shall effect such recovery of incentive-based compensation (i) by seeking recovery from the executive officer; (ii) by reducing the amount that would otherwise be payable to the executive officer under any compensatory plan, program or arrangement maintained by the Company; (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount); or (iv) by any combination of the foregoing.
For purposes of this policy, the term “executive officers” means those persons who received incentive-based compensation under the Company’s Senior Executive Compensation Bonus Program, Senior Executive Long Term Incentive Plan, or the incentive-based compensation plans applicable to the Company’s Bond Manager and the President of EMC Reinsurance Company. The term “incentive-based compensation” means, as applicable, cash or equity compensation paid under any of the above mentioned plans, the amount of which was determined in whole, or in part, upon specific performance-based goals relating to the financial results of EMC Insurance Companies, or its individual operating segments.
The remedies outlined herein are in addition to, and not in lieu of, any action deemed necessary by the Compensation Committees, the Company’s Board of Directors, EMCI’s Board of Directors, or the Company (up to and including termination of employment), and any legal rights available to the Company to recover incentive-based compensation, and any action imposed by law enforcement agencies, regulators, or other authorities.