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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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ARCH CAPITAL GROUP LTD.
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(Name of Registrant as Specified In Its Charter)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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Arch Capital Group Ltd.
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Waterloo House, Ground Floor
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100 Pitts Bay Road
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Pembroke HM 08, Bermuda
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T:
(441) 278-9250
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www.archcapgroup.com
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March 28, 2018
|
|
CONSTANTINE IORDANOU
Chairman of the Board
|
3
|
| 2018 PROXY STATEMENT
|
|
When:
|
Wednesday, May 9, 2018, 8:45 a.m., local time
|
Where:
|
Waterloo House, Ground Floor, 100 Pitts Bay Road,
|
1.
|
Elect four Class II Directors to serve for a term of three years or until their respective successors are elected and qualified (
Item 1
);
|
2.
|
Advisory vote to approve named executive officer compensation (
Item 2
);
|
3.
|
Appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31,
2018
(
Item 3
);
|
4.
|
Approve the Arch Capital Group Ltd.
2018
Long-Term Incentive and Share Award Plan (
Item 4
);
|
5.
|
Approve a three-for-one common share split effective on June 18, 2018 (
Item 5
);
|
6.
|
Elect certain individuals as Designated Company Directors of certain of our non-U.S. subsidiaries, as required by our bye-laws (
Item 6
);
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7.
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Conduct other business if properly raised.
|
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Susie Tindall
Secretary
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Hamilton Bermuda
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March 28, 2018
|
|
Go to the website listed on your proxy card or Notice to vote
VIA THE INTERNET
.
|
|
Call the telephone number specified on your proxy card or on your Voting Instruction Form to vote
BY TELEPHONE
.
|
|
If you received paper copies of your proxy materials, mark, sign, date and return your proxy card in the postage-paid envelope provided to vote
BY MAIL
.
|
|
Scan the QR Code on your proxy card, Notice or Voting Instruction Form to vote with your
MOBILE DEVICE
.
|
|
Attend the meeting to vote
IN PERSON
(see Annual Meeting Attendance in
Annex A—General Information
).
|
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
|
This proxy statement and 2017 Annual Report to Shareholders are available at
www.proxyvote.com
. On or about March 29, 2018, we expect to mail to our shareholders a Notice of Internet Availability containing instructions on how to access our proxy materials, including our proxy statement and 2017 Annual Report to Shareholders. The Notice of Internet Availability also will instruct you on how to access and submit your proxy through the Internet, by phone or with your mobile device.
|
|
2018 PROXY STATEMENT |
|
4
|
PROXY SUMMARY
|
|
Roadmap of Voting Matters
|
|
Director Nominees
|
|
Compensation Program Enhancements
|
|
Shareholder Engagement
|
|
Sound Governance Practices and Enhancements
|
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General Information
|
|
Learn More About Our Company
|
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GOVERNANCE
|
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Item 1 — Election of Directors
|
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Appointed Directors, Continuing Directors and Senior Management
|
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Board
|
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Committees of the Board
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Director Compensation
|
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Certain Relationships and Related Transactions
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SHARE OWNERSHIP
|
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Security Ownership of Certain Beneficial Owners and Management
|
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Common Shares
|
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Preferred Shares
|
|
Ownership of Watford Holdings Ltd. Shares
|
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Section 16(a) Beneficial Ownership Reporting Compliance
|
|
|
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COMPENSATION
|
|
Item 2 — Advisory Vote to Approve Named Executive Officer Compensation
|
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Compensation Discussion and Analysis
|
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2017 Performance Highlights
|
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Executive Compensation Philosophy
|
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Elements of Compensation Program
|
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Compensation Program Enhancements
|
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2017 Compensation Decisions
|
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How We Make Decisions
|
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Additional Compensation Policies and Practices
|
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Tax Considerations
|
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Report of the Compensation Committee on the Compensation Discussion and Analysis
|
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Compensation Committee Interlocks and Insider Participation
|
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Executive Compensation Tables
|
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Employment Arrangements
|
|
Share-Based Award Agreements
|
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AUDIT MATTERS
|
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Report of the Audit Committee of the Board
|
|
Principal Auditor Fees and Services
|
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Item 3 — Appointment of Independent Registered Public Accounting Firm
|
|
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2018 LONG-TERM INCENTIVE AND SHARE AWARD PLAN
|
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Item 4 — Approval of 2018 Plan
|
|
Reasons for the Proposal
|
|
Description of 2018 Plan
|
|
THREE-FOR-ONE COMMON SHARE SPLIT
|
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Item 5 — Approval of Amendment of Memorandum to Effect a Three-For-One Common Share Split
|
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Effects and Purposes of the Share Split
|
|
Effective Date of Proposed Amendment and Issuance of Shares for Share Split
|
|
|
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SUBSIDIARY DIRECTORS
|
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Item 6 — Election of Subsidiary Directors
|
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Nominees
|
|
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ANNEX A: GENERAL INFORMATION
|
|
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ANNEX B: 2018 LONG-TERM INCENTIVE AND SHARE AWARD PLAN
|
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ANNEX C: NON-GAAP FINANCIAL MEASURES
|
5
|
| 2018 PROXY STATEMENT
|
|
ROADMAP OF VOTING MATTERS
|
|
|
Our Board’s Recommendation
|
ITEM 1 - Election of Directors (page
9
)
|
|
The Board and the Nominating Committee believe that the four Director nominees possess the necessary qualifications and experience to provide quality advice and counsel to the Company’s management and effectively oversee the business and the long-term interests of shareholders.
|
FOR each Director Nominee
|
ITEM 2 - Advisory Vote to Approve Named Executive Officer Compensation (page
30
)
|
|
The Company seeks a non-binding advisory vote to approve the compensation of its named executive officers as described in the Compensation Discussion and Analysis beginning on page
30
and the Compensation Tables beginning on page
49
. The Board values shareholders’ opinions, and the Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions.
|
FOR
|
ITEM 3 - Appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm (page
69
)
|
|
The Audit Committee and the Board believe that the retention of PricewaterhouseCoopers LLP to serve as the Independent Auditors for the fiscal year ending December 31, 2018, is in the best interests of the Company and its shareholders. As required by Bermuda law, shareholders are being asked to appoint the Audit Committee’s selection of the Independent Auditors.
|
FOR One Year
|
ITEM 4 - Approval of the Arch Capital Group Ltd. 2018 Long-Term Incentive and Share Award Plan (page
70
)
|
|
On February 28, 2018, with the recommendation of the Compensation Committee, the Board adopted the 2018 Long-Term Incentive and Share Award Plan (the “2018 Plan”), subject to shareholder approval. The Board and the Compensation Committee believe that the 2018 Plan provides for competitive compensation opportunities, encourages long-term service, recognizes individual contributions and rewards achievement of performance goals, and promotes the creation of long-term value for shareholders by aligning the interests of such persons with those of shareholders.
|
FOR
|
ITEM 5 - Approval of Three-For-One Common Share Split (page
78
)
|
|
The Board and management believe that an increase in the number of issued common shares resulting from a three-for-one common share split would place the market price of the common shares in a more accessible trading range that would be increasingly attractive to investors, particularly individuals, as well as existing and prospective employees. The share split will also increase the number of Arch Capital’s authorized but unissued shares.
|
FOR
|
ITEM 6 - Election of Designated Company Directors of Certain Non-U.S. Subsidiaries (page
80
)
|
|
The Board and management believe that the named Designated Company Director nominees possess the necessary qualifications and experiences to provide oversight for the Company’s non-U.S. subsidiaries.
|
FOR each Director Nominee
|
|
2018 PROXY STATEMENT |
|
6
|
DIRECTOR NOMINEES
|
See page
9
.
|
|
|
|
|
|
Committee Membership (1)
|
|||||
Name
|
|
Age
|
Director Since
|
Primary Occupation
|
UW
|
A
|
C
|
E
|
FIR
|
N
|
Eric W. Doppstadt
|
|
58
|
November 2010
|
Vice President and Chief Investment Officer of the Ford Foundation
|
|
|
|
|
n
|
n
|
Laurie S. Goodman
|
|
62
|
Nominee
|
Vice President of the Housing Finance Policy Center at the Urban Institute
|
|
|
|
|
|
|
Constantine Iordanou
|
(2)
|
68
|
January 2002
|
Chairman of Arch Capital
|
|
|
|
n
|
n
|
|
John M. Pasquesi
|
|
58
|
November 2001
|
Managing Member of Otter Capital LLC
|
n
|
|
n
|
n
|
n
|
n
|
(1)
|
UW
= Underwriting Oversight Committee;
A
= Audit Committee;
C
= Compensation Committee;
E
= Executive Committee;
FIR
= Finance, Investment and Risk Committee;
N
= Nominating Committee
|
(2)
|
Effective March 3, 2018, Marc Grandisson succeeded Constantine Iordanou as CEO of the Company. Mr. Iordanou served as CEO until March 2, 2018, and will continue as Chairman of the Board.
|
COMPENSATION PROGRAM ENHANCEMENTS
|
See page
36
.
|
7
|
| 2018 PROXY STATEMENT
|
|
SHAREHOLDER ENGAGEMENT
|
|
SOUND GOVERNANCE PRACTICES AND ENHANCEMENTS
|
See page
35
.
|
▪
|
Stock ownership guidelines:
Executives and non-employee directors must hold common shares with a value at least equal to
6 times salary for our CEO, 4 times salary for our Section 16 officers and 3 times salary for our senior management, and 3 times the annual cash retainer for our non-employee directors.
|
▪
|
Stock holding requirement:
Executives and non-employee directors must retain 50% of net shares received through equity awards until holding requirements are achieved.
|
▪
|
Double-trigger change in control benefits:
Equity awards that are assumed by an acquirer in the case of a change in control are subject to double-trigger vesting.
|
▪
|
No excise tax gross-ups
: Executives receive no excise tax gross-up payments in connection with change in control benefits.
|
▪
|
Clawback
policy
:
All incentive-based compensation is subject to potential clawback in the event of a financial restatement.
|
▪
|
Anti-hedging policy
:
Executives and directors are prohibited from engaging in hedging activities.
|
▪
|
Limiting the shares that can be pledged
by an executive or non-employee director.
|
▪
|
Eliminating tax gross-up payments
on executive perquisites.
|
▪
|
Independent consultant
:
In March 2017, we selected and directly retained the services of Meridian Compensation Partners, LLC, an independent executive compensation consulting firm
.
|
GENERAL INFORMATION
|
See page
A-1
.
|
LEARN MORE ABOUT OUR COMPANY
|
|
▪
|
Our website
— www.archcapgroup.com
|
▪
|
Proxy website
—
www.proxyvote.com which includes this proxy statement and our
2017
Annual Report to Shareholders.
|
|
2018 PROXY STATEMENT |
|
8
|
Eric W. Doppstadt
|
||
|
|
|
n
|
58 years old
|
Mr. Doppstadt serves as Vice President and Chief Investment Officer of the Ford Foundation. Mr. Doppstadt has been with the Ford Foundation for more than 28 years, most recently as director of private equity investments for the foundation’s endowment. He joined the Ford Foundation in 1989 as resident counsel, later assuming senior positions managing the Ford’s alternative investment portfolio. He has also served on the investment advisory boards of numerous private equity and venture capital funds. Mr. Doppstadt holds the Chartered Financial Analyst designation from the CFA Institute and is a director of Makena Capital Management, LLC. He holds an A.B. from The University of Chicago and a J.D. from New York University School of Law.
Mr. Doppstadt’s qualifications for service on our Board include his extensive investment experience and investment management skills.
|
n
|
Director since November 2010
|
|
n
|
Class II Director of Arch Capital
|
|
n
|
Finance, Investment and Risk Committee
|
|
n
|
Nominating Committee
|
9
|
| 2018 PROXY STATEMENT
|
|
Laurie S. Goodman
|
||
|
|
|
n
|
62 years old
|
Ms. Goodman is the founder and serves as Co-Director of the Housing Finance Policy Center at the Urban Institute. Before joining the Urban Institute in 2013, Ms. Goodman spent 30 years at several Wall Street firms. From 2008 to 2013, she was Senior Managing Director at Amherst Securities Group LP. From 1993 to 2008, Ms. Goodman was head of global fixed income research and Manager of U.S securitized products research at UBS and predecessor firms. Before that, she was a senior fixed income analyst, a mortgage portfolio manager and a senior economist at the Federal Reserve Bank of New York.
Ms. Goodman serves on the board of directors of the real estate investment trust MFA Financial, is an adviser to Amherst Capital Management and is a member of the Federal Reserve Bank of New York’s Financial Advisory Roundtable. She has also served on the Bipartisan Policy Center’s Housing Commission and Fannie Mae’s Affordable Housing Advisory Council. Ms. Goodman has a B.A. in Mathematics from the University of Pennsylvania and an A.M. and Ph.D. in Economics from Stanford University. The nominating committee engaged an independent consulting firm to assist it in identifying and assessing potential director candidates, resulting in the identification, evaluation and nomination of Ms. Goodman for election to the Board. Ms. Goodman’s qualifications for service on our Board include her extensive analytics and strategy experience, her housing finance expertise and her service on boards of directors of other companies. |
n
|
Nominated Director
|
|
|
|
Constantine Iordanou
|
||
|
|
|
n
|
68 years old
|
Mr. Iordanou has been Chairman of the Board of Arch Capital since November 2009 and was Chief Executive Officer of Arch Capital from August 2003 to March 2018. From March 1992 through December 2001, Mr. Iordanou served in various capacities for Zurich Financial Services and its affiliates, including as Senior Executive Vice President of group operations and business development of Zurich Financial Services, President of Zurich-American Specialties Division, Chief Operating Officer and Chief Executive Officer of Zurich-American and Chief Executive Officer of Zurich North America. Prior to joining Zurich, he served as President of the commercial casualty division of the Berkshire Hathaway Group and served as Senior Vice President with the American Home Insurance Company, a member of the American International Group. Since 2001, Mr. Iordanou has served as a director of Verisk Analytics, Inc. (formerly known as ISO Inc.). He holds an aerospace engineering degree from New York University.
Mr. Iordanou’s qualifications for service on our Board include his extensive leadership, executive management and operating experience in the insurance industry, his in-depth knowledge of our operations and service on boards of directors of other companies.
|
n
|
Director since January 2002
|
|
n
|
Chairman of the Board and Class II Director of Arch Capital
|
|
n
|
Executive Committee
|
|
n
|
Finance, Investment and Risk Committee
|
|
2018 PROXY STATEMENT |
|
10
|
|
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL.
|
11
|
| 2018 PROXY STATEMENT
|
|
Marc Grandisson
|
||
|
|
|
n
|
50 years old
|
Mr. Grandisson was promoted to the position of President and Chief Executive Officer of Arch Capital on March 3, 2018 and was appointed to our Board in February 2018. From January 2016 to March 2018, he was President and Chief Operating Officer of Arch Capital. Prior to that role, he was Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group from 2005 to 2015, and the Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group from February 2014 to December 2015. He joined Arch Reinsurance Ltd. (“Arch Re Bermuda”) in October 2001 as Chief Actuary. He subsequently held various leadership roles, including Chief Underwriting Officer and Actuary, President and Chief Operating Officer, eventually being named President and Chief Executive Officer at Arch Re Bermuda. Prior to joining Arch, he held various positions with the Berkshire Hathaway Group, F&G Re, Inc. and Tillinghast/Towers Perrin. He holds a B.Sc. in Actuarial Science from Université Laval in Canada and an M.B.A. from The Wharton School of the University of Pennsylvania. He is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries.
Mr. Grandisson’s qualifications for service on our Board include his financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations.
|
n
|
With Arch since October 2001
|
|
n
|
President and Chief Executive Officer of Arch Capital
|
|
n
|
Director since February 2018
|
|
n
|
Class III Director of Arch Capital
|
|
n
|
Term expires 2019
|
|
n
|
Executive Committee
|
|
2018 PROXY STATEMENT |
|
12
|
Yiorgos Lillikas
|
||
|
|
|
n
|
57 years old
|
Mr. Lillikas is the Chief Executive Officer of BlueTree Consultants, a corporate consulting firm he founded in 2008. From 2006 to 2007, Mr. Lillikas served as the Minister of Foreign Affairs of the Republic of Cyprus (E.U.). From 2003 to 2006, he was the Minister of Commerce, Industry and Tourism of the Republic of Cyprus. From 1996 through 2003, Mr. Lillikas served as a member of the House of Representatives of the Republic of Cyprus and a member of the Parliamentary Committees for Economic and Budget, Commerce, Foreign and European Affairs and Environment. In 2000 he was elected Vice President of the Committee of Political Affairs of the Parliamentary Assembly of the OSCE. He was founder and Chief Executive Officer of Marketway, a strategic, advertising and public relations firm. Prior thereto, he served the Republic of Cyprus in various roles, including special advisor to the president. He holds a diploma in political sciences from the Institute of Political Sciences in the University of Lyon II, a D.E.A. (a diploma of doctorate cycle) in political sciences from the Institute of Political Science in Grenoble.
Mr. Lillikas’ qualifications for service on our Board include his extensive experience in the fields of international and European affairs.
|
n
|
Director since November 2010
|
|
n
|
Class III Director of Arch Capital
|
|
n
|
Term expires 2019
|
|
n
|
Audit Committee
|
|
n
|
Underwriting Oversight Committee
|
Louis J. Paglia
|
||
|
|
|
n
|
60 years old
|
Mr. Paglia is the founding member of Oakstone Capital LLC, a private investment firm. He previously founded Customer Choice LLC in April 2010, a data analytics company serving the electric utility industry. He previously served as Executive Vice President of UIL Holdings Corporation, an electric utility, contracting and energy infrastructure company. Mr. Paglia also served as UIL Holdings’ Chief Financial Officer and as President of its investment subsidiaries. Prior to joining UIL Holdings, Mr. Paglia was Executive Vice President and Chief Financial Officer of eCredit.com, a credit evaluation software company. Prior to that, Mr. Paglia served as the Chief Financial Officer for TIG Holdings Inc., a property and casualty insurance and reinsurance holding company, and Emisphere Technologies, Inc. He holds a B.S. in Engineering from Massachusetts Institute of Technology and an M.B.A. from The Wharton School of the University of Pennsylvania.
Mr. Paglia’s qualifications for service on our Board include his strong financial background and extensive executive management and operating experience in financial services companies.
|
n
|
Director since July 2014
|
|
n
|
Class I Director of Arch Capital
|
|
n
|
Term expires 2020
|
|
n
|
Audit Committee
|
|
n
|
Compensation Committee
|
|
n
|
Nominating Committee
|
|
n
|
Underwriting Oversight Committee
|
13
|
| 2018 PROXY STATEMENT
|
|
Eugene S. Sunshine
|
||
|
|
|
n
|
68 years old
|
Mr. Sunshine retired at the end of August 2014 as the Senior Vice President for Business and Finance at Northwestern University, the university’s chief financial and administrative officer. Before joining Northwestern in 1997, he was Senior Vice President for Administration at The Johns Hopkins University. Prior to Johns Hopkins, Mr. Sunshine held positions as New York State Deputy Commissioner for Tax Policy and New York State Treasurer as well as Director of Energy Conservation for the New York State Energy Office. He currently is a member of the boards of directors of Chicago Board Options Exchange and Kaufman Hall and Associates. Mr. Sunshine is a former member of the boards of Bloomberg L.P., National Mentors Holdings and Nuveen Investments. He holds a B.A. from Northwestern University and a Master of Public Administration degree from Syracuse University’s School of Citizenship and Public Affairs.
Mr. Sunshine’s qualifications for service on our Board include his strong financial background and extensive executive management and operating experience.
|
n
|
Director since July 2014
|
|
n
|
Class III Director of Arch Capital
|
|
n
|
Term expires 2019
|
|
n
|
Audit Committee
|
|
n
|
Compensation Committee
|
|
n
|
Nominating Committee
|
|
2018 PROXY STATEMENT |
|
14
|
John D. Vollaro
|
||
|
|
|
n
|
73 years old
|
Mr. Vollaro has been a Senior Advisor of Arch Capital since April 2009. He was Executive Vice President and Chief Financial Officer of Arch Capital from January 2002 to March 2009 and Treasurer of Arch Capital from May 2002 to March 2009. Prior to joining us, Mr. Vollaro acted as an independent consultant in the insurance industry since March 2000. Prior to March 2000, Mr. Vollaro was President and Chief Operating Officer of W.R. Berkley Corporation from January 1996 and a director from September 1995 until March 2000. Mr. Vollaro was Chief Executive Officer of Signet Star Holdings, Inc., a joint venture between W.R. Berkley Corporation and General Re Corporation, from July 1993 to December 1995. Mr. Vollaro served as Executive Vice President of W.R. Berkley Corporation from 1991 until 1993, Chief Financial Officer and Treasurer of W.R. Berkley Corporation from 1983 to 1993 and Senior Vice President of W.R. Berkley Corporation from 1983 to 1991. Mr. Vollaro currently serves on the board of directors of Tiberius Acquisition Corporation.
Mr. Vollaro’s qualifications for service on our Board include his financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations.
|
n
|
Director since November 2009
|
|
n
|
Class I Director of Arch Capital and Senior Advisor
|
|
n
|
Term expires 2020
|
|
n
|
Finance, Investment and Risk Committee
|
|
n
|
Underwriting Oversight Committee
|
Mark D. Lyons
|
||
|
|
|
n
|
61 years old
|
Mr. Lyons has served as Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital since September 2012. From September 2012 to May 2015, he also functioned as Chief Risk Officer. Prior to that, he served as Chairman and Chief Executive Officer of Arch Worldwide Insurance Group, an officer position of Arch Capital, and Chairman and Chief Executive Officer of Arch Insurance Group Inc. (“Arch Insurance Group”) since July 2008. Prior thereto, he served as President and Chief Operating Officer of Arch Insurance Group from June 2006. Prior to June 2006, he served as Executive Vice President of group operations and Chief Actuary of Arch Insurance Group from August 2003. From August 2002 to 2003, he was Senior Vice President of group operations and Chief Actuary of Arch Insurance Group. From 2001 until August 2002, Mr. Lyons worked as an independent consultant. From 1992 to 2001, Mr. Lyons was Executive Vice President of product services at Zurich U.S. From 1987 until 1992, he was a Vice President and actuary at Berkshire Hathaway Insurance Group. Mr. Lyons holds a B.S. in Mathematics from Elizabethtown College. He is also an Associate of the Casualty Actuarial Society and a Member of the American Academy of Actuaries.
|
n
|
With Arch since August 2002
|
|
n
|
Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital
|
15
|
| 2018 PROXY STATEMENT
|
|
Nicolas Papadopoulo
|
||
|
|
|
n
|
55 years old
|
Mr. Papadopoulo is Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for the Property & Casualty Group, executive positions at Arch Capital. From July 2014 to September 2017, Mr. Papadopoulo was Chairman and Chief Executive Officer of Arch Reinsurance Group at Arch Capital. He joined Arch Re Bermuda in December 2001 where he held variety of underwriting roles. Prior to joining Arch, he held various positions at Sorema N.A. Reinsurance Group, a U.S. subsidiary of Groupama and he was also an insurance examiner with the Ministry of Finance, Insurance Department, in France. Mr. Papadopoulo graduated from École Polytechnique in France and École Nationale de la Statistique et de l’Administration Economique in France with a masters degree in statistics. He is also a Member of the International Actuarial Association and a Fellow at the French Actuarial Society.
|
n
|
With Arch since December 2001
|
|
n
|
Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for the Property & Casualty Group
|
Maamoun Rajeh
|
||
|
|
|
n
|
47 years old
|
Mr. Rajeh was promoted to the position of Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group in October 2017. From July 2014 to September 2017, he was Chairman and Chief Executive Officer of Arch Re Bermuda. He joined Arch Re Bermuda in 2001 as an underwriter, ultimately becoming Chief Underwriting Officer in November 2005. Most recently, he was President and Chief Executive Officer of Arch Reinsurance Europe Underwriting Designated Activity Company from October 2012 to July 2014. From 1999 to 2001, Mr. Rajeh served as Assistant Vice President at HartRe, a subsidiary of The Hartford Financial Services Group, Inc. Mr. Rajeh also served in several business analysis positions at the United States Fidelity and Guarantee Company between 1992 and 1996 and as an underwriter at F&G Re from 1996 to 1999. He has a B.S. from The Wharton School of Business of the University of Pennsylvania and he is a Chartered Property Casualty Underwriter.
|
n
|
With Arch since December 2001
|
|
n
|
Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group
|
Andrew T. Rippert
|
||
|
|
|
n
|
57 years old
|
Mr. Rippert has served as Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group at Arch Capital since January 2014. Prior to that, he served as President and Chief Executive Officer of Arch Mortgage Insurance Designated Activity Company from December 2011 to March 2014. Prior to December 2011, he served as senior executive of mortgage insurance at Arch Re Bermuda. He joined Arch Insurance Company (Europe) Limited in September 2010 as a Senior Vice President. Prior to that time, he worked as a consultant to mortgage insurers and mortgage backed security investors. From 2001 through 2006, he held various positions at Radian Guaranty Inc., a subsidiary of Radian Group Inc., including senior vice president and managing director of the international mortgage insurance group. He has also worked in reinsurance as an actuary and underwriter. Mr. Rippert serves on the board of directors of the Mortgage Bankers Association (“MBA”) and the MBA’s Opens Doors Foundation. He is also a member of the Executive Committee of the Housing Policy Council and a voting member of the MBA’s Residential Board of Governors. Mr. Rippert graduated from Drexel University with a B.S. in Physics and Mathematics and has an M.B.A. from The Wharton School of the University of Pennsylvania. Mr. Rippert is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries.
|
n
|
With Arch since September 2010
|
|
n
|
Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group
|
|
2018 PROXY STATEMENT |
|
16
|
Dennis R. Brand
|
||
|
|
|
n
|
67 years old
|
Mr. Brand is Chairman, Worldwide Services at Arch Capital Services Inc. Mr. Brand also serves on the Group Reinsurance Steering Committee. He served as Senior Executive Vice President and Chief Administration Officer for Arch Insurance Group until December 2017. Mr. Brand joined Arch Insurance Group in 2004 as Senior Vice President and Chief Reinsurance Officer where he oversaw reinsurance, finance, information technology, actuarial, corporate underwriting, human resources, legal and premium audit departments. Prior to joining Arch Insurance Group, Mr. Brand held various positions in the insurance industry: first in finance, then in assumed underwriting and ceded reinsurance, as well as serving in other operational roles in the industry. Mr. Brand has over 40 years of reinsurance and executive management experience through positions held at Kemper and Reliance National. Mr. Brand holds a B.A. in Business from West Virginia University; he has also served in the United States Navy.
|
n
|
With Arch since February 2004
|
|
n
|
Chairman, Worldwide Services at Arch Capital Services Inc.
|
W. Preston Hutchings
|
||
|
|
|
n
|
61 years old
|
Mr. Hutchings has served as President of Arch Investment Management Ltd. since April 2006 and Senior Vice President and Chief Investment Officer of Arch Capital since July 2005. Prior to joining Arch Capital, Mr. Hutchings was at RenaissanceRe Holdings Ltd. from 1998 to 2005, serving as Senior Vice President and Chief Investment Officer. Previously, he was Senior Vice President and Chief Investment Officer of Mid Ocean Reinsurance Company Ltd. from January 1995 until its acquisition by XL Group plc in 1998. Mr. Hutchings began his career as a fixed income trader at J.P. Morgan & Co., working for the firm in New York, London and Tokyo. He graduated in 1978 with a B.A. from Hamilton College and received in 1981 an M.A. in Jurisprudence from Oxford University, where he studied as a Rhodes Scholar.
|
n
|
With Arch since July 2005
|
|
n
|
President of Arch Investment Management Ltd. and Senior Vice President and Chief Investment Officer of Arch Capital
|
François Morin
|
||
|
|
|
n
|
50 years old
|
Mr. Morin is Senior Vice President, Chief Risk Officer and Chief Actuary of Arch Capital, a position he has held since May 2015. He joined Arch Capital in October 2011 as Chief Actuary and Deputy Chief Risk Officer. From January 1990 through September 2011, Mr. Morin served in various roles for Towers Watson & Co. and its predecessor firm Towers Perrin Forster & Crosby, including its actuarial division, Tillinghast. He holds a B.Sc. in Actuarial Science from Université Laval in Canada. He is a Fellow of the Casualty Actuarial Society, a Chartered Financial Analyst, a Chartered Enterprise Risk Analyst, and a Member of the American Academy of Actuaries.
|
n
|
With Arch since October 2011
|
|
n
|
Senior Vice President, Chief Risk Officer and Chief Actuary of Arch Capital
|
Louis T. Petrillo
|
||
|
|
|
n
|
52 years old
|
Mr. Petrillo has been President and General Counsel of Arch Capital Services Inc. since April 2002. From May 2000 to April 2002, he was Senior Vice President, General Counsel and Secretary of Arch Capital. From 1996 until May 2000, Mr. Petrillo was Vice President and Associate General Counsel of Arch Capital’s reinsurance subsidiary. Prior to that time, Mr. Petrillo practiced law at the New York firm of Willkie Farr & Gallagher LLP. He holds a B.A. from Tufts University and a law degree from Columbia University.
|
n
|
With Arch since January 1996
|
|
n
|
President and General Counsel of Arch Capital Services Inc.
|
17
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
18
|
Underwriting Oversight Committee
|
Oversees risks relating to our underwriting activities, including with respect to accumulations and aggregations of exposures in our insurance, reinsurance and mortgage businesses.
|
Audit Committee
|
Oversees management of financial reporting and compliance risks.
|
Compensation Committee
|
Oversees the management of risks relating to the Company’s compensation plans and arrangements, retention of personnel and succession planning.
|
Finance, Investment and Risk Committee
|
Oversees risks relating to the financial, investment, operational (including information technology and data security) and other risk affairs of the Company.
|
Nominating Committee
|
Oversees risks associated with the composition of the Board.
|
19
|
| 2018 PROXY STATEMENT
|
|
Director
|
Audit
|
Compensation
|
Executive
|
Finance, Investment and Risk
|
Nominating
|
Underwriting Oversight
|
||||||
John L. Bunce, Jr.
|
|
|
n
|
|
n
|
|
n
|
|
n
|
Chair
|
|
|
Eric W. Doppstadt
|
|
|
|
|
|
|
n
|
Chair
|
n
|
|
|
|
Marc Grandisson
|
|
|
|
|
n
|
|
|
|
|
|
|
|
Constantine Iordanou
|
|
|
|
|
n
|
Chair
|
n
|
|
|
|
|
|
Yiorgos Lillikas
|
n
|
|
|
|
|
|
|
|
|
|
n
|
|
Louis J. Paglia
|
n
|
|
n
|
|
|
|
|
|
n
|
|
n
|
|
John M. Pasquesi
|
|
|
n
|
|
n
|
|
n
|
|
n
|
|
n
|
|
Brian S. Posner
|
n
|
Chair
|
|
|
|
|
n
|
|
|
|
n
|
|
Eugene S. Sunshine
|
n
|
|
n
|
Chair
|
|
|
|
|
n
|
|
|
|
John D. Vollaro
|
|
|
|
|
|
|
n
|
|
|
|
n
|
Chair
|
|
|
2018 PROXY STATEMENT |
|
20
|
21
|
| 2018 PROXY STATEMENT
|
|
Name
|
|
|
|
Fees Earned
or Paid in Cash
($)(1)
|
|
Stock
Awards
($)(2)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
Change in
Pension
Value
and Non-
qualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($)(3)
|
|
Total
($)
|
|||||||
John L. Bunce, Jr.
|
|
C
|
|
158,528
|
|
|
74,933
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
233,461
|
|
Eric W. Doppstadt
|
|
FC
|
|
154,528
|
|
|
74,933
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,000
|
|
|
244,461
|
|
Kewsong Lee
|
|
*
|
|
157,528
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
|
207,528
|
|
Yiorgos Lillikas
|
|
|
|
173,528
|
|
|
74,933
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
248,461
|
|
Deanna Mulligan (4)
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Louis J. Paglia
|
|
|
|
179,528
|
|
|
74,933
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
|
304,461
|
|
John M. Pasquesi
|
|
LD*
|
|
174,028
|
|
|
74,933
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
|
298,961
|
|
Brian S. Posner
|
|
AC
|
|
204,528
|
|
|
74,933
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
|
329,461
|
|
Eugene S. Sunshine
|
|
C
|
|
184,528
|
|
|
74,933
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,900
|
|
|
280,361
|
|
John D. Vollaro (5)(6)
|
|
C
|
|
700,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
77,777
|
|
|
777,777
|
|
(1)
|
Non-Employee Director Cash Compensation
|
Annual Cash Retainer
|
||
|
Non-Employee Director Retainer (A)
|
$
|
125,000
|
|
|
Additional Retainers and Fees for Board Members, Committee Chairs, Committee Members (B)
|
|
||
|
Meeting Fees
|
|
||
|
Board
|
$
|
2,500
|
|
|
Committee
|
$
|
1,500
|
|
|
Audit Committee Chair
|
$
|
50,000
|
|
|
Audit Committee Member
|
$
|
25,000
|
|
|
Finance, Investment & Risk Committee Chair
|
$
|
15,000
|
|
|
Committee Chair (other than above)
|
$
|
10,000
|
|
|
2018 PROXY STATEMENT |
|
22
|
(A)
|
Each non-employee member may elect to receive the retainer fee in the form of common shares instead of cash. If so elected, the number of shares distributed to the non-employee director would be equal to 100% of the amount of the annual retainer fee otherwise payable divided by the fair market value of our common shares. This column includes the annual retainer (whether paid in cash or, at the election of the director, in common shares), meeting fees and committee chairman and retainer fees, as applicable and as described above. For the 2017-2018 annual period, Mr. Sunshine received his annual retainer fees in the form of cash and Messrs. Bunce, Doppstadt, Lee, Lillikas, Paglia, Pasquesi and Posner received their annual retainers in the form of
1,286
common shares.
|
(B)
|
Beginning in May 2018, each non-employee director serving as chairman of the finance, investment and risk committee, the nominating committee and the compensation committee will receive an annual fee of $25,000 and the audit committee and executive committee chairs will continue to receive a retainer of $50,000, and $10,000, respectively. In addition, the lead director will receive an annual fee of $25,000.
|
(2)
|
Each year, the non-employee directors are granted a number of restricted shares equal to
$75,000
divided by the closing price on the date of grant (
i.e.,
the first day of the annual period of compensation for the non-employee directors), and such shares vest on May 1st of the following year. The grant date fair value indicated in the table has been calculated in accordance with FASB ASC Topic 718 Compensation—Stock Compensation. On May 4, 2017, each non-employee director received
771
restricted common shares, which will vest on May 1, 2018. With respect to Ms. Mulligan and Mr. Lee, such restricted shares were canceled on February 23, 2017 and November 2, 2017 respectively, the dates of their respective resignations. Beginning in May 2018, non-employee directors will be granted a number of restricted shares equal to $95,000, an increase of $20,000 from 2017.
|
(3)
|
The amounts in the “All Other Compensation” column for Messrs. Doppstadt, Lee, Paglia, Pasquesi, Posner, and Sunshine include matching gifts made under the Company’s matching gift program.
|
(4)
|
Ms. Mulligan served as a Director until her resignation from our Board on February 23, 2017 due to a potential conflict of interest. Ms. Mulligan received no compensation during 2017.
|
(5)
|
Mr. Vollaro is a senior advisor and an employee of the Company. Mr. Vollaro’s employment agreement provides that he receives an annual base salary of $250,000 and a bonus determined by the compensation committee and the Board for his role as Senior Advisor of the Company. For
2017
, Mr. Vollaro received a cash bonus of $450,000. In addition, Mr. Vollaro serves as chairman of the underwriting and oversight committee and is a member of the finance, investment and risk committee of the Board. A description of Mr. Vollaro’s employment agreement is included below.
|
(6)
|
The amount for Mr. Vollaro includes: (a) $32,790 in contributions to our defined contribution plans and (b) $6,369, which represents an additional payment to reimburse Mr. Vollaro for the approximate amount of additional tax liability for club dues. In addition, the total amount also includes the payment for club dues, life insurance premiums and tax preparation services, which did not exceed the greater of $25,000 or 10% of the total amount of these benefits for Mr. Vollaro.
|
23
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
24
|
25
|
| 2018 PROXY STATEMENT
|
|
|
Common Shares
|
|||
Name and Address of Beneficial Owner
|
(A)
Number of Common Shares Beneficially Owned(1)
|
|
(B)
Rule 13d-3
Percentage Ownership(1)
|
|
Artisan Partners Holdings LP (2)
875 East Wisconsin Avenue, Suite 800 Milwaukee, Wisconsin 53202 |
17,572,350
|
|
12.9
|
%
|
Cascade Investment, L.L.C. (3)
2365 Carillon Point Kirkland, Washington 98033 |
11,511,099
|
|
8.4
|
%
|
The Vanguard Group (4)
100 Vanguard Blvd. Malvern, Pennsylvania 19355 |
10,654,794
|
|
7.8
|
%
|
BlackRock Inc. (5)
55 East 52nd Street New York, New York 10022 |
8,897,534
|
|
6.5
|
%
|
Baron Capital Group, Inc. (6)
767 Fifth Avenue New York, New York 10153 |
8,433,758
|
|
6.2
|
%
|
Constantine Iordanou (7)
|
2,422,476
|
|
1.7
|
%
|
Marc Grandisson (8)
|
865,640
|
|
*
|
|
John L. Bunce, Jr. (9)
|
688,022
|
|
*
|
|
Eric W. Doppstadt (10)
|
15,904
|
|
*
|
|
Yiorgos Lillikas (11)
|
18,053
|
|
*
|
|
Louis J. Paglia (12)
|
7,191
|
|
*
|
|
John M. Pasquesi (13)
|
1,723,538
|
|
1.3
|
%
|
Brian S. Posner (14)
|
22,439
|
|
*
|
|
Eugene S. Sunshine (15)
|
4,128
|
|
*
|
|
John D. Vollaro (16)
|
184,616
|
|
*
|
|
Mark D. Lyons (17)
|
171,660
|
|
*
|
|
Nicolas Papadopolou (18)
|
227,314
|
|
*
|
|
Maamoun Rajeh (19)
|
203,211
|
|
*
|
|
Andrew T. Rippert (20)
|
74,217
|
|
*
|
|
All directors and executive officers (16 persons) (21)
|
7,107,361
|
|
5.1
|
%
|
(1)
|
Pursuant to Rule 13d-3 promulgated under the Exchange Act, amounts shown include common shares that may be acquired by a person within 60 days of
March 14, 2018
. Therefore, column (B) has been computed based on (a)
136,702,745
common shares actually
|
|
2018 PROXY STATEMENT |
|
26
|
(2)
|
Based on a Schedule 13G/A filed with the SEC on February 7, 2018 jointly by Artisan Partners Limited Partnership (“APLP”), Artisan Investments GP LLC (“Artisan Investments”), Artisan Partners Holdings LP (“Artisan Holdings”), Artisan Partners Asset Management Inc. (“APAM”) and Artisan Partners Funds, Inc. (“Artisan Funds”). APLP is an investment advisor and Artisan Funds is an investment company. Artisan Holdings is the sole limited partner of APLP and the sole member of Artisan Investments. Artisan Investments is the general partner of APLP and APAM is the general partner of Artisan Holdings. The Schedule 13G/A reported that the common shares have been acquired on behalf of discretionary clients of APLP, which holds
17,572,350
common shares, including 8,415,949 common shares on behalf of Artisan Funds. In addition, the Schedule 13G/A reported that (a) APLP, Artisan Investments, Artisan Holdings and APAM each has shared voting with respect to 16,335,076 common shares and shared dispositive power with respect to
17,572,350
common shares and (b) Artisan Funds has shared voting and dispositive power with respect to 8,415,949 common shares.
|
(3)
|
Based on a Schedule 13G/A filed with the SEC on February 14, 2013 jointly by Cascade Investment, L.L.C. (“Cascade”) and William H. Gates III. In the Schedule 13G/A, it is reported that Cascade has sole voting and dispositive power with respect to 11,511,099 common shares. In addition, all common shares held by Cascade may be deemed to be beneficially owned by William H. Gates III as the sole member of Cascade.
|
(4)
|
Based on a Schedule 13G/A filed with the SEC on February 8, 2018 by The Vanguard Group (“Vanguard”). In the Schedule 13G/A it is reported that Vanguard has shared dispositive power with respect to 128,793 common shares, sole voting power with respect to 101,216 shares, shared voting power with respect to 36,952 common shares and sole dispositive power with respect to 10,526,001 common shares.
|
(5)
|
Based on a Schedule 13G/A filed with the SEC on January 30, 2018 by BlackRock. In the Schedule 13G/A, it is reported that BlackRock has sole voting power with respect to 7,767,696 common shares and sole dispositive power with respect to
8,897,534
common shares.
|
(6)
|
Based upon a Schedule 13G/A filed with the SEC on February 14, 2018 jointly by Baron Capital Group, Inc. (“BCG”), BAMCO, Inc. (“BAMCO”), Baron Capital Management, Inc. (“BCM”) and Ronald Baron (collectively, the “Baron Group”). In the Schedule 13G/A, the Baron Group reported that BAMCO and BCM are subsidiaries of BCG, and Ronald Baron owns a controlling interest in BCG. In addition, the Schedule 13G/A reported that (a) BCG has shared voting power with respect to
8,108,685 common shares
and shared dispositive power with respect to
8,433,758
common shares; (b) BAMCO has shared voting power with respect to 7,757,314 common shares and shared dispositive power with respect to 8,082,414 common shares; (c) BCM has shared voting power with respect to 351,344 common shares and shared dispositive power with respect to 351,344 common shares; and (d) Ronald Baron has shared voting power with respect to
8,108,685 common shares
and shared dispositive power with respect to
8,433,758
common shares.
|
(7)
|
Amounts in columns (A) and (B) reflect (a)
99,578
common shares owned directly by Mr. Iordanou (including
50,054
restricted shares, which are subject to vesting); (b)
3,297
common shares owned by limited liability companies, for which Mr. Iordanou serves as the managing member for the benefit of members of his family; (c)
201,676
common shares, which are held by a grantor retained annuity trust; (d) stock options and SARs with respect to
992,334
common shares that are exercisable currently or within 60 days of the date hereof, (e) stock options and SARs with respect to
1,109,726
common shares that are exercisable currently or within 60 days of the date hereof, which are held by two grantor retained annuity trusts; and (f)
15,865
restricted stock units that will be settled in common shares within 60 days hereof. Amounts do not include (a) stock options and SARs with respect to
46,987
common shares that are not exercisable within 60 days of the date hereof, (b)
31,635
restricted common share units that will not be settled in common shares within 60 days of the date hereof; and (c)
13,251
restricted common share units that will be settled in common shares after the termination of Mr. Iordanou’s employment, as provided in the award agreement. Mr. Iordanou holds a security agreement with respect to 49,524 directly owned common shares, which is not currently being utilized. Mr. Iordanou’s reported beneficial ownership (pursuant to Rule 13d-3) decreased by approximately 31% compared to the amount reported in the Proxy Statement filed on March 24, 2017. This decrease is primarily due to estate planning changes and family trust distributions.
|
(8)
|
Amounts in columns (A) and (B) reflect
608,762
common shares owned indirectly by Mr. Grandisson (including
35,805
restricted shares which are subject to vesting); (b)
660
common shares owned by his spouse; and (c) stock options and SARs with respect to
256,218
common shares that are exercisable currently or within 60 days of the date hereof. Amounts do not include stock options and SARs with respect to
19,319
common shares that are not exercisable within 60 days of the date hereof.
|
(9)
|
Amounts in columns (A) and (B) reflect
688,022
common shares owned directly by Mr. Bunce.
|
(10)
|
Amounts in columns (A) and (B) reflect
15,904
common shares owned directly by Mr. Doppstadt.
|
(11)
|
Amounts in columns (A) and (B) reflect (a)
17,968
common shares owned directly by Mr. Lillikas and (b) 85 common shares owned by his child.
|
(12)
|
Amounts in columns (A) and (B) reflect
7,191
common shares owned directly by Mr. Paglia.
|
(13)
|
Amounts in columns (A) and (B) reflect (a)
407,231
common shares owned by Otter Capital LLC, for which Mr. Pasquesi serves as the Managing Member; (b)
1,033,021
common shares owned indirectly by revocable trusts for which Mr. Pasquesi and his spouse are the trustees; (c)
52,515
common shares owned indirectly by a family limited partnership; (d) 230,000 common shares, which are held
|
27
|
| 2018 PROXY STATEMENT
|
|
(14)
|
Amounts in columns (A) and (B) reflect
22,439
common shares owned directly by Mr. Posner.
|
(15)
|
Amounts in columns (A) and (B) reflect
4,128
common shares owned directly by Mr. Sunshine.
|
(16)
|
Amounts in columns (A) and (B) reflect (a)
118,016
common shares owned by a revocable trust for which Mr. Vollaro serves as trustee and (b) stock options and SARs with respect to
66,600
common shares that are exercisable currently.
|
(17)
|
Amounts in columns (A) and (B) reflect (a)
76,494
common shares owned directly by Mr. Lyons (including
16,932
restricted shares, which are subject to vesting); and (b) stock options and SARs with respect to
95,166
common shares that are exercisable currently or within 60 days of the date hereof. Amounts do not include (a) stock options and SARs with respect to
8,126
common shares that are not exercisable within 60 days of the date hereof; and (b)
86,722
restricted common share units, which will be settled in common shares after the termination of Mr. Lyons’ employment as provided in the award agreements.
|
(18)
|
Amounts in columns (A) and (B) reflect (a)
216,914
common shares owned directly by Mr. Papadopolou (including
30,290
restricted shares, which are subject to vesting) and (b) stock options and SARs with respect to
10,400
common shares that are exercisable currently or within 60 days of the date hereof. Amounts do not include stock options and SARs with respect to
57,331
common shares that are not exercisable within 60 days of the date hereof.
|
(19)
|
Amounts in columns (A) and (B) reflect (a)
115,060
common shares owned directly by Mr. Rajeh (including
21,565
restricted shares, which are subject to vesting) and (b) stock options and SARs with respect to
88,151
common shares that are exercisable currently or within 60 days of the date hereof. Amounts do not include (a) stock options and SARs with respect to
15,802
common shares that are not exercisable within 60 days of the date hereof.
|
(20)
|
Amounts in columns (A) and (B) reflect (a)
36,550
common shares owned directly by Mr. Rippert (including
11,243
restricted shares, which are subject to vesting) and (b) stock options and SARs with respect to
37,667
common shares that are exercisable currently or within 60 days of the date hereof. Amounts do not include stock options and SARs with respect to
5,795
common shares that are not exercisable within 60 days of the date hereof.
|
(21)
|
In addition to securities beneficially owned by the directors and the named executive officers reflected in the table, includes an aggregate of
478,952
common shares, including common shares issuable upon exercise of stock options and SARs that are exercisable currently or within 60 days of the date hereof, which are beneficially owned by executive officers who are not directors of Arch Capital.
|
|
Preferred Shares
|
|||||
Name of Beneficial Owner
|
Number of Series E Preferred Shares Beneficially Owned
|
|
Percentage of Class Owned
|
Number of Series F Preferred Shares Beneficially Owned
|
|
Percentage of Class Owned |
Constantine Iordanou (1)
|
*
|
|
*
|
10,000
|
|
*
|
Brian S. Posner
|
6,000
|
|
*
|
_
|
|
*
|
All directors and executive officers (16 persons)
|
6,000
|
|
*
|
10,000
|
|
*
|
(1)
|
7,000 of such preferred shares are directly owned by Mr. Iordanou and 3,000 preferred shares are owned by Mr. Iordanou’s spouse.
|
|
2018 PROXY STATEMENT |
|
28
|
|
Common Shares
|
Preferred Shares
|
||||||
Name of Beneficial Owner
|
(A) Number of Watford Common Shares Beneficially Owned(1) |
|
(B)
Rule 13d-3
Percentage
Owned
|
|
(C) Number of Watford Preferred Shares Beneficially Owned(2) |
|
(D)
Percentage of Class
Owned
|
|
Constantine Iordanou
|
50,000
|
|
*
|
|
120,000
|
|
1.3
|
%
|
Marc Grandisson
|
125,000
|
|
*
|
|
—
|
|
*
|
|
John M. Pasquesi
|
125,000
|
|
*
|
|
—
|
|
*
|
|
Nicolas Papadopoulo
|
62,500
|
|
*
|
|
—
|
|
*
|
|
Maamoun Rajeh
|
12,500
|
|
*
|
|
—
|
|
*
|
|
Mark D. Lyons
|
6,250
|
|
*
|
|
—
|
|
*
|
|
Brian S. Posner
|
6,250
|
|
*
|
|
—
|
|
*
|
|
All directors and executive officers (16 persons)
|
393,750
|
|
2.0
|
%
|
130,000
|
|
1.4
|
%
|
29
|
| 2018 PROXY STATEMENT
|
|
|
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL.
|
|
Name
|
Title
|
Constantine Iordanou
|
Chairman of the Board and Class II Director of Arch Capital
|
Marc Grandisson
|
President, Chief Executive Officer and Class III Director of Arch Capital
|
Mark D. Lyons
|
Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital
|
Nicolas Papadopoulo
|
Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for the Property & Casualty Group
|
Maamoun Rajeh
|
Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group
|
Andrew T. Rippert
|
Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group
|
|
2018 PROXY STATEMENT |
|
30
|
(U.S. Dollars in millions, except share data)
|
Year Ended December 31,
|
|||||||
2017
|
2016
|
Change
|
||||||
Book value per common share at year-end
|
$
|
60.91
|
|
$
|
55.19
|
|
10.4
|
%
|
Tangible book value per common share at year-end
2
|
$
|
56.19
|
|
$
|
49.48
|
|
13.6
|
%
|
Net income available to common shareholders
|
$
|
566.5
|
|
$
|
664.7
|
|
(14.8
|
)%
|
Per share
|
$
|
4.07
|
|
$
|
5.33
|
|
(23.6
|
)%
|
Net income return on average common equity
|
7.2
|
%
|
10.9
|
%
|
(3.7
|
)
|
||
After-tax operating income available to Arch common shareholders
2
|
$
|
447.2
|
|
$
|
577.4
|
|
(22.6
|
)%
|
Per share
|
$
|
3.21
|
|
$
|
4.63
|
|
(30.7
|
)%
|
Annualized return on average common equity
|
7.2
|
%
|
10.9
|
%
|
(3.7
|
)
|
||
Annualized operating return on average common equity
2
|
5.7
|
%
|
9.4
|
%
|
(3.7
|
)
|
||
Combined ratio
|
88.8
|
%
|
87.6
|
%
|
1.2
|
|
||
Gross premiums written
|
$
|
6,088
|
|
$
|
5,019
|
|
21.3
|
%
|
Net premiums written
|
$
|
4,408
|
|
$
|
3,518
|
|
25.3
|
%
|
Underwriting income
2
|
$
|
447.4
|
|
$
|
447.1
|
|
0.1
|
%
|
Net investment income
|
$
|
382
|
|
$
|
277
|
|
37.8
|
%
|
Per share
|
$
|
2.74
|
|
$
|
2.22
|
|
23.4
|
%
|
Weighted average common shares and common share equivalents outstanding
|
139.3
|
|
124.7
|
|
11.7
|
%
|
▪
|
Net income available to Arch common shareholders was $566.5 million, or $4.07 per share, a decrease of 23.6% on a per-share basis, while after-tax operating income available to Arch common shareholders was $447.2 million, or $3.21 per share, a decrease of 30.7% on a per-share basis. The lower level of income primarily resulted from catastrophe losses, amortization of intangible assets from the acquisition of United Guaranty Corporation (“UGC”) and a one-off charge related to the new U.S. federal tax law.
|
▪
|
Our combined ratio for the year was 88.8% with underwriting income of $510.8 million, up 6.7% from 2016.
|
▪
|
Net premiums written increased 25.3% to $4.41 billion, emanating primarily from our mortgage segment and highlighting the benefits of our diversification.
|
▪
|
Net investment income rose to $382.1 million, a 23.4% increase on a per-share basis, primarily attributable to income generated on investable assets we acquired in the UGC acquisition.
|
▪
|
Book value per common share increased 10.4% to $60.91 per share.
|
▪
|
Tangible book value per common share increased 13.6% to $56.19 per share.
|
▪
|
Our annualized return on average common equity (“Net Income ROE”) was 7.2%, and contributes more directly to value creation and book value growth over time. In addition, Net Income ROE reflects the impact of our investment philosophy of maximizing total returns in our portfolio. Total return on investments includes net investment income, net realized gains and losses, changes in unrealized gains and losses, and equity in the
|
31
|
| 2018 PROXY STATEMENT
|
|
▪
|
Our annualized operating return on average common equity (“Operating ROE”) was 5.7%, and is a key driver of book value growth, which produces a stable stream of earnings in the short term.
|
▪
|
Our total shareholder return (TSR) was 5.2%, which underperformed the benchmark indices. The annual
|
|
Growth in Book Value Per Common Share
|
|
2018 PROXY STATEMENT |
|
32
|
|
Average Return on Equity (ROE)
|
|||||||
|
1 Year
|
|
3 Year
|
|
5 Year
|
|
10 Year
|
|
Net Income ROE
|
7.2
|
%
|
8.7
|
%
|
10.8
|
%
|
12.8
|
%
|
Operating ROE
|
5.7
|
%
|
8.0
|
%
|
9.4
|
%
|
10.8
|
%
|
Net Income ROE and Operating ROE
|
33
|
| 2018 PROXY STATEMENT
|
|
|
December 31,
|
|||||||
2017
|
|
2016
|
|
Change
|
||||
Senior notes/total capital available to Arch
|
15.3
|
%
|
|
16.5
|
%
|
|
(1.2
|
)
|
Revolving credit agreement borrowings/total capital available to Arch
|
3.3
|
%
|
|
4.8
|
%
|
|
(1.5
|
)
|
Debt/total capital available to Arch
|
18.6
|
%
|
|
21.3
|
%
|
|
(2.7
|
)
|
Preferred/total capital available to Arch
|
7.7
|
%
|
|
7.4
|
%
|
|
0.3
|
|
Debt and preferred/total capital available to Arch
|
26.4
|
%
|
|
28.7
|
%
|
|
(2.3
|
)
|
Total Shareholder Return
|
|
2018 PROXY STATEMENT |
|
34
|
|
▪
|
Create Shareholder Alignment:
Create strong shareholder alignment within our executive population;
|
▪
|
Link Pay with Performance
:
Link significant elements of executive compensation to the achievement of short- and long-term strategically important operating and financial performance goals without encouraging inappropriate risk taking;
|
▪
|
Attract and Retain
:
Attract and retain quality executives who will contribute to our long-term success and, thereby, increase shareholder value;
|
▪
|
Support Culture
:
Support the Arch Capital culture of teamwork, underwriting discipline and commitment to the highest ethical standards; and
|
▪
|
Provide Market Competitive Pay
:
For each executive position, we consider external market data at median values for base salary, annual target bonus levels, and annualized long-term incentive target grants. Based upon the considerable range of unique facts and circumstances pertaining to our executive talent, we adjust opportunities as appropriate, to take into consideration various factors such as consistent high performance and value delivery to the Company, retention, succession, successful tenure and other factors.
|
1.
|
base salary;
|
2.
|
short-term annual cash incentive bonuses; and
|
3.
|
long-term incentive share-based awards.
|
35
|
| 2018 PROXY STATEMENT
|
|
Financial Metric(s)
(70% weighting)
|
+
|
Individual/Operational Strategic Metric(s)
(30% weighting)
|
36
|
| 2018 PROXY STATEMENT
|
|
Performance Criteria
|
Measurement
|
Weights for Corporate Executives
|
Weights for
Unit
Executives
|
Range of Performance Modifiers
|
||
Financial Metrics - Group Level
|
The Group Performance Modifier is derived as the weighted average ROE of each of the Operating Units. In order to develop an overall Group-level ROE, the investment unit’s payout multiple (as a % of target) is converted to an implied ROE using the underwriting units’ payout scale.
|
70
|
%
|
20
|
%
|
0 - 200%
|
Financial Metrics - Operating Unit Level
|
Under our existing incentive compensation formula plans, bonus awards are determined for each underwriting unit based on ROE measures (measured over the applicable 10-year development periods) and the relative performance of the investment unit compared to the benchmark index (over the past 1, 3 and 5 years). Performance against financial goals for each Unit Executive is evaluated against the overall results of his/her respective plan.
|
0%
|
|
50%
|
|
0 - 200%
|
Strategic Metrics
|
Based on year-end performance evaluation.
|
30%
|
|
30%
|
|
0 - 250% (1)
|
Total
|
|
100%
|
|
100%
|
|
0 - 200%
|
(1)
|
For the Strategic criteria, performance modifiers over 200% may only be used if the overall Financial Criteria performance modifier is 100% (
i.e.
, target level of performance) or higher.
|
Range of Performance Modifiers as % of Target - Financial Goals
|
Threshold/Minimum
|
|
Target
|
|
Maximum
|
|
Payout as a % of Target (1)
|
20%
|
|
100%
|
|
200%
|
|
Level of Goal Achievement Required: Financial - Group Level
|
85
|
%
|
100
|
%
|
115
|
%
|
Level of Goal Achievement Required: Financial - Operating Unit Level
|
50
|
%
|
100
|
%
|
150
|
%
|
(1)
|
Payout for performance achievement between stated levels will be interpolated on a straight-line basis.
|
(1)
|
For the Strategic criteria, performance modifiers over 200% may only be used if the overall Financial Criteria performance modifier is 100% (
i.e.
, target level of performance) or higher.
|
37
|
| 2018 PROXY STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Shares
55% of Economic Value
|
|
|
|
Stock Options
25% of Economic Value
|
|
|
|
Restricted Stock/Units
20% of Economic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Period
: 3-year, with overlapping 3-year cycles.
Underlying Value
: Denoted in shares of Arch Capital stock.
Metrics
: Absolute Tangible Book Value per share growth over the 3-year performance period (adjusted for share buy-backs), with a 25% +/- TSR modifier, relative to the TSR of an established peer group.
Opportunities
: Pre-established minimum, target and maximum opportunities (
e.g.
, 50%, 100%, 200%).
Payout
: In shares at the end of the performance period, with the number of shares dependent upon the level of goal achievement.
|
|
+
|
|
Vesting
: 3-year ratable commencing on first anniversary of grant date.
Exercise Price
: Equal to share price on grant date.
Life
: 10 year maximum term.
|
|
+
|
|
Vesting
: 3-year ratable commencing on first anniversary of grant date.
Underlying
Value:
Denoted in shares of Arch Capital stock.
Payout
: In shares.
Dividends
: Accrue and are paid out upon vesting.
|
|
38
|
| 2018 PROXY STATEMENT
|
|
39
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
40
|
41
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
42
|
How the Peer Group Was Chosen
|
|
Step 1:
Industry Filters
|
Select industries relative to Arch Capital’s business operations.
|
Step 2:
Size Filters
|
Filter companies based on revenue and asset size.
|
Step 3:
Additional Objective Filters
|
Remove Real Estate Investment Trusts, Financial Exchanges and Investment Banks / Brokerage companies.
|
Step 4:
Additional Subjective Filters
|
Review business descriptions and additional financial measures.
|
43
|
| 2018 PROXY STATEMENT
|
|
How We Use the Peer Group
|
|
Pay Comparisons
|
Determine competitive pay levels and identify differences from general industry market data.
|
|
Assess ability to attract, retain, engage and motivate top talent.
|
Compensation Structure
|
Provide benchmarks for compensation structure (pay mix, performance metrics, leverage, vehicles, etc.).
|
|
Use as a foundation or reference when making design changes to the compensation program.
|
Performance Comparisons
|
Determine performance relative to companies facing similar business challenges.
|
|
Input to setting incentive plan goals.
|
2017 Peer Group
|
Alleghany Corporation
|
American Financial Group, Inc.
|
AmTrust Financial Services, Inc.
|
Argo Group International Holdings, Ltd.
|
Aspen Insurance Holdings Limited
|
Assurant, Inc.
|
AXIS Capital Holdings Limited
|
CNA Financial Corporation
|
Cincinnati Financial Corporation
|
Essent Group Ltd.
|
Everest Re Group, Ltd.
|
First American Financial Corporation
|
The Hanover Insurance Group, Inc.
|
The Hartford Financial Services Group
|
Markel Corporation
|
Old Republic International Corporation
|
Radian Group Inc.
|
RenaissanceRe Holdings Ltd.
|
Selective Insurance Group, Inc.
|
Validus Holdings, Ltd.
|
W. R. Berkley Corporation
|
XL Group Ltd
|
|
2018 PROXY STATEMENT |
|
44
|
45
|
| 2018 PROXY STATEMENT
|
|
▪
|
in no event may any executive officer or director of the Company pledge an amount of common shares that exceeds the lesser of 30% of the common shares beneficially owned by the individual (as reported or would be reported in our proxy statement) or 0.5% of the then outstanding common shares of Arch Capital; and
|
▪
|
any securities pledged would not count toward satisfying any required ownership level of securities under relevant share retention guidelines.
|
|
2018 PROXY STATEMENT |
|
46
|
|
|
|
|
|
COMPENSATION COMMITTEE
Eugene S. Sunshine (chairman)
John L. Bunce, Jr.
Louis J. Paglia
John M. Pasquesi
|
47
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
48
|
Name and Principal Position
|
Year
|
Salary
($)
|
|
Annual Bonus
($)
|
|
|
UGC Acquis. Bonus ($)(1)
|
|
|
Stock
Awards
($)(2)
|
|
Option
Awards
($)(2)
|
|
Non-Equity
Incentive Plan
Compen-sation
($)
|
|
Change in
Pension
Value and
Non-qualified
Deferred
Compen-sation
Earnings
($)
|
|
All Other
Compen-sation
($)
|
|
|
Total
($)
|
|
Constantine Iordanou*
|
2017
|
1,000,000
|
|
5,000,000
|
|
|
—
|
|
(3)
|
4,572,350
|
|
1,171,673
|
|
—
|
|
—
|
|
1,008,073
|
|
(4)
|
12,752,096
|
|
Chairman of the Board and Class II Director of Arch Capital
|
2016
|
1,000,000
|
|
4,550,000
|
|
|
1,500,000
|
|
(3)
|
3,305,370
|
|
805,054
|
|
—
|
|
—
|
|
1,050,962
|
|
|
12,211,386
|
|
2015
|
1,000,000
|
|
4,050,000
|
|
|
—
|
|
(3)
|
3,632,166
|
|
935,124
|
|
—
|
|
—
|
|
995,269
|
|
|
10,612,559
|
|
|
Marc Grandisson*
|
2017
|
900,000
|
|
3,000,000
|
|
|
—
|
|
|
2,233,232
|
|
572,270
|
|
—
|
|
—
|
|
426,243
|
|
(5)
|
7,131,745
|
|
President, Chief Executive Officer and Class III Director of Arch Capital
|
2016
|
900,000
|
|
2,500,000
|
|
|
1,200,000
|
|
|
832,437
|
|
202,748
|
|
—
|
|
—
|
|
416,167
|
|
|
6,051,352
|
|
2015
|
775,000
|
|
2,250,000
|
|
|
—
|
|
|
914,448
|
|
235,430
|
|
—
|
|
—
|
|
421,646
|
|
|
4,596,524
|
|
|
Mark D. Lyons
|
2017
|
700,000
|
|
1,365,000
|
|
|
—
|
|
|
785,482
|
|
201,281
|
|
—
|
|
—
|
|
501,529
|
|
(6)
|
3,553,292
|
|
Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital
|
2016
|
700,000
|
|
1,200,000
|
|
|
900,000
|
|
|
579,336
|
|
141,103
|
|
—
|
|
—
|
|
450,917
|
|
|
3,971,356
|
|
2015
|
700,000
|
|
1,080,000
|
|
|
—
|
|
|
636,301
|
|
163,820
|
|
—
|
|
—
|
|
421,439
|
|
|
3,001,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nicolas Papadopoulo
|
2017
|
675,000
|
|
3,816,414
|
|
(7)
|
—
|
|
|
2,635,311
|
|
1,399,596
|
|
—
|
|
—
|
|
362,353
|
|
(8)
|
8,888,674
|
|
Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for the Property & Casualty Group
|
2016
|
650,000
|
|
2,500,000
|
|
(7)
|
—
|
|
|
524,127
|
|
127,656
|
|
—
|
|
—
|
|
368,690
|
|
|
4,170,473
|
|
2015
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Maamoun Rajeh
|
2017
|
556,250
|
|
1,182,000
|
|
|
—
|
|
(9)
|
1,523,236
|
|
386,823
|
|
—
|
|
—
|
|
495,772
|
|
(10)
|
4,144,081
|
|
Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group
|
2016
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
2015
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Andrew T. Rippert
|
2017
|
650,000
|
|
1,299,000
|
|
|
—
|
|
(11)
|
628,578
|
|
161,074
|
|
—
|
|
—
|
|
380,479
|
|
(12)
|
3,119,131
|
|
Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group
|
2016
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
2015
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
*
|
Effective March 3, 2018, Marc Grandisson succeeded Constantine Iordanou as CEO of Arch Capital. Mr. Iordanou served as CEO until March 2, 2018, and continues to serve as Chairman of the Board.
|
49
|
| 2018 PROXY STATEMENT
|
|
(1)
|
Represents an additional bonus to reflect the named executive officers’ role in connection with the UGC acquisition, which closed on December 31, 2016. Please see
“Compensation Discussion and Analysis—2017 Performance Highlights”
and
“Compensation Discussion and Analysis—2017 Compensation Decisions.”
|
(2)
|
The amounts shown in these columns represent the aggregate grant date fair value of awards computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 Compensation—Stock Compensation, excluding the effect of forfeitures. We have computed the estimated grant date fair values of share-based compensation related to stock options using the Black-Scholes option valuation model having applied the assumptions set forth in the notes accompanying our financial statements. See
note 20
, “Share-Based Compensation,” of the notes accompanying our consolidated financial statements included in our
2017
Annual Report. These grants were made in May of the year for which they are reported and were based on performance for the prior year,
e.g.,
the
2017
awards were based on
2016
performance.
|
(3)
|
Mr. Iordanou elected to receive 100% of his approved cash bonuses for
2017
,
2016
and
2015
in the form of stock options under elections provided by the Company for Bermuda-based employees. On
March 1, 2018
,
February 24, 2017
and
February 26, 2016
, Mr. Iordanou was awarded
212,480
,
250,468
, and 244,750 stock options respectively, with a Black-Scholes value equal to $5.0 million, $6.05 million and $4.05 million, respectively, but each with an intrinsic value of zero on the grant date, respectively. The stock options awarded to Mr. Iordanou are fully vested and will expire 10 years from the date of grant. The stock options granted on
February 24, 2017
are included in the Grants of Plan-Based Awards table.
|
(4)
|
The amount for Mr. Iordanou includes: (a) contributions to our defined contribution plans of
$32,790
and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of
$105,850
, which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of
$137,419
; (c) incremental costs to the Company of
$451,458
resulting from the use of Company-provided aircraft primarily for commuting to the Company’s offices; and (d) an aggregate of
$183,972
for additional payments pursuant to his employment agreement intended to reimburse the executive for approximate amounts of additional tax liability arising from his working and residing in Bermuda. The tax reimbursement payments are subject to adjustment—up or down—based upon the executive’s final tax return filed for the year (accordingly, such amount originally recorded for
2016
and
2015
has been adjusted). The calculation of the incremental cost for Company-provided aircraft use is based on the variable operating costs to the Company for each flight, including hourly charges, fuel variable charges and applicable international fees. In addition, the total amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Iordanou: an automobile allowance, tax preparation services, club dues, and life insurance premiums.
|
(5)
|
The amount for Mr. Grandisson includes: (a) contributions to our defined contribution plans of $
20,000
and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of $
91,350
which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of $
210,754
; (c) fees for children’s schooling of $
61,829
; and (d) payment of Bermuda social insurance in the amount of
$1,792
. In addition, the amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Grandisson: an automobile allowance, tax preparation services, family travel, club dues, and life insurance premiums.
|
(6)
|
The amount for Mr. Lyons includes: (a) $
32,790
in contributions to our defined contribution plans and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of $
62,350
, which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of $
79,101
; (c) payment of Bermuda social insurance in the amount of
$1,792
; and (d) an aggregate of $
269,478
for additional payments pursuant to his employment agreement intended to reimburse the executive for approximate amounts of additional tax liability arising from his working and residing in Bermuda. The tax reimbursement payments are subject to adjustment—up or down—based upon the executive’s final tax return filed for the year (accordingly, such amount originally recorded for
2016
and
2015
has been adjusted). In addition, the total amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Lyons: commercial jet for commuting to the Company’s offices, tax preparation services, and life insurance premiums.
|
(7)
|
The 2016 amount for Mr. Papadopoulo, who previously participated in the Formula Approach through the 2014 underwriting year, includes a payment of
$1,171,364
based on the calculated results for prior underwriting years under such Formula Approach. The 2017 amount includes a payment received by Mr. Papadopoulo in December of 2017 of $
2,316,414
in full settlement of his entitlements under the Formula Approach.
|
(8)
|
The amount for Mr. Papadopoulo includes: (a) contributions to our defined contribution plans of $
20,000
and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of $
58,725
, which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of $
219,290
; and (c) payment of Bermuda social insurance in the amount of $
1,792
. In addition, the amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Papadopoulo: fees for children’s schooling, automobile allowance, tax preparation services, family travel, club dues, and life insurance premiums.
|
(9)
|
The 2017 amount for Mr. Rajeh, who previously participated in the Formula Approach through the 2017 underwriting year, includes a payment of $
851,547
based on the calculated results for prior underwriting years under such Formula Approach.
|
|
2018 PROXY STATEMENT |
|
50
|
(10)
|
The amount for Mr. Rajeh includes: (a) contributions to our defined contribution plans of
$32,790
and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of
$41,506
, which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of
$197,403
; (c) payment of Bermuda social insurance in the amount of
$1,792
; and (d) an aggregate of $
129,742
for additional payments pursuant to his employment agreement intended to reimburse the executive for approximate amounts of additional tax liability arising from his working and residing in Bermuda. In addition, the amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Rajeh: fees for children’s schooling, automobile allowance, tax preparation services, family travel, club dues, and life insurance premiums.
|
(11)
|
The 2017 amount for Mr. Rippert, who previously participated in the Formula Approach through the 2016 underwriting year, includes a payment of $
375,261
based on the calculated results for prior underwriting years under such Formula Approach.
|
(12)
|
The amount for Mr. Rippert includes: (a) contributions to our defined contribution plans of $
32,790
and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of $
55,100
, which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of $
148,939
; (c) payment of Bermuda social insurance in the amount of $
1,792
; and (d) an aggregate of $
104,458
for additional payments pursuant to his employment agreement intended to reimburse the executive for approximate amounts of additional tax liability arising from his working and residing in Bermuda. In addition, the amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Rippert: tax preparation services, family travel, and life insurance premiums.
|
Name
|
Grant
Date
|
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards
|
|
Estimated Future
Payouts Under Equity
Incentive Plan Awards
|
|
All Other Stock Awards: Number of Shares of Stock or Units (#)(1)
|
|
All Other Option Awards: Number of Securities Underlying Options (#)(1)
|
|
|
Exercise or Base Price of Option Awards($/Sh)
|
|
Grant Date
Fair Value of
Stock and
Option Awards
($)(2)
|
|
Constantine Iordanou
|
2/24/2017
|
—
|
|
—
|
|
—
|
|
250,468
|
|
(3)
|
94.54
|
|
6,049,979
|
|
|
5/8/2017
|
—
|
|
—
|
|
—
|
|
47,500
|
|
|
96.26
|
|
1,171,673
|
|
|
5/8/2017
|
—
|
|
—
|
|
47,500
|
|
—
|
|
|
—
|
|
4,572,350
|
|
Marc Grandisson
|
5/8/2017
|
—
|
|
—
|
|
—
|
|
23,200
|
|
|
96.26
|
|
572,270
|
|
|
5/8/2017
|
—
|
|
—
|
|
23,200
|
|
—
|
|
|
—
|
|
2,233,232
|
|
Mark D. Lyons
|
5/8/2017
|
—
|
|
—
|
|
—
|
|
8,160
|
|
|
96.26
|
|
201,281
|
|
|
5/8/2017
|
—
|
|
—
|
|
8,160
|
|
—
|
|
|
—
|
|
785,482
|
|
Nicolas Papadopoulo
|
5/8/2017
|
—
|
|
—
|
|
—
|
|
7,350
|
|
|
96.26
|
|
181,301
|
|
|
5/8/2017
|
—
|
|
—
|
|
7,350
|
|
—
|
|
|
—
|
|
707,511
|
|
|
9/19/2017
|
—
|
|
—
|
|
—
|
|
50,000
|
|
|
96.39
|
|
1,218,295
|
|
|
9/19/2017
|
—
|
|
—
|
|
5,000
|
|
—
|
|
|
—
|
|
481,950
|
|
|
9/19/2017
|
—
|
|
—
|
|
15,000
|
|
—
|
|
|
—
|
|
1,445,850
|
|
Maamoun Rajeh
|
5/8/2017
|
—
|
|
—
|
|
—
|
|
5,310
|
|
|
96.26
|
|
130,981
|
|
|
5/8/2017
|
—
|
|
—
|
|
5,310
|
|
—
|
|
|
—
|
|
511,141
|
|
|
9/19/2017
|
—
|
|
—
|
|
—
|
|
10,500
|
|
|
96.39
|
|
255,842
|
|
|
9/19/2017
|
—
|
|
—
|
|
10,500
|
|
—
|
|
|
—
|
|
1,012,095
|
|
Andrew T. Rippert
|
5/8/2017
|
—
|
|
—
|
|
—
|
|
6,530
|
|
|
96.26
|
|
161,074
|
|
|
5/8/2017
|
—
|
|
—
|
|
6,530
|
|
—
|
|
|
—
|
|
628,578
|
|
(1)
|
All of the grants indicated above were awarded under the 2015 Long-Term Incentive and Share Award Plan in the form of stock options and restricted share awards or units except for the
February 24, 2017
grant to Mr. Iordanou which was awarded under the 2012 Long-Term Incentive and Share Award Plan.
|
51
|
| 2018 PROXY STATEMENT
|
|
(2)
|
The amounts shown in this column represent the grant date fair value of the underlying award computed in accordance with accounting guidance governing share-based compensation arrangements as discussed in
note 20
, “Share-Based Compensation,” of the notes accompanying our consolidated financial statements included in our
2017
Annual Report.
|
(3)
|
Mr. Iordanou elected to receive 100% of his approved cash bonus for 2016 in the form of stock options under an election provided by the Company for Bermuda-based employees. On
February 24, 2017
, Mr. Iordanou was awarded
250,468
stock options, with a Black-Scholes value equal to $6.05 million. The stock options are fully vested and will expire 10 years from the date of grant. The Black-Scholes value of these stock options is reflected in the
“2017 Summary Compensation Table”
in the “Bonus” column for 2016, but had an intrinsic value of zero on the grant date.
|
|
Option Awards
|
|
Stock Awards
|
|||||||||||||||
Name
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
|
Number of Securities Underlying Unexercised Options (#) Unexercisable
(1)
|
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
|
|
Option Exercise Price ($)
|
|
Option Expiration Date
|
|
Number of Shares or Units of Stock That Have Not Vested (#)(2)
|
|
Market Value of Shares or Units of Stock That Have Not Vested ($)(3)
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
|
|
Constantine Iordanou (4)
|
135,000
|
|
—
|
|
—
|
|
23.10
|
|
5/9/2018
|
|
97,554
|
|
8,854,977
|
|
—
|
|
—
|
|
|
50,000
|
|
—
|
|
—
|
|
19.29
|
|
5/6/2019
|
|
|
|
|
|
||||
|
212,253
|
|
—
|
|
—
|
|
24.67
|
|
2/25/2020
|
|
|
|
|
|
||||
|
126,000
|
|
—
|
|
—
|
|
25.01
|
|
5/5/2020
|
|
|
|
|
|
||||
|
100,065
|
|
—
|
|
—
|
|
33.91
|
|
5/6/2021
|
|
|
|
|
|
||||
|
161,636
|
|
—
|
|
—
|
|
37.05
|
|
2/28/2022
|
|
|
|
|
|
||||
|
101,000
|
|
—
|
|
—
|
|
38.58
|
|
5/9/2022
|
|
|
|
|
|
||||
|
300,187
|
|
—
|
|
—
|
|
49.12
|
|
2/28/2023
|
|
|
|
|
|
||||
|
70,930
|
|
—
|
|
—
|
|
53.53
|
|
5/9/2023
|
|
|
|
|
|
||||
|
302,555
|
|
—
|
|
—
|
|
56.12
|
|
2/29/2024
|
|
|
|
|
|
||||
|
63,000
|
|
—
|
|
—
|
|
57.27
|
|
5/13/2024
|
|
|
|
|
|
||||
|
149,556
|
|
—
|
|
—
|
|
59.16
|
|
2/27/2025
|
|
|
|
|
|
||||
|
38,759
|
|
19,351
|
|
—
|
|
62.51
|
|
5/13/2025
|
|
|
|
|
|
||||
|
244,750
|
|
—
|
|
—
|
|
68.20
|
|
2/26/2026
|
|
|
|
|
|
||||
|
15,397
|
|
30,703
|
|
—
|
|
71.70
|
|
5/13/2026
|
|
|
|
|
|
||||
|
250,468
|
|
—
|
|
—
|
|
94.54
|
|
2/24/2027
|
|
|
|
|
|
||||
|
—
|
|
47,500
|
|
—
|
|
96.26
|
|
5/8/2027
|
|
|
|
|
|
||||
Marc Grandisson
|
30,000
|
|
—
|
|
—
|
|
23.10
|
|
5/9/2018
|
|
35,805
|
|
3,250,020
|
|
—
|
|
—
|
|
|
22,800
|
|
—
|
|
—
|
|
19.29
|
|
5/6/2019
|
|
|
|
|
|
||||
|
30,000
|
|
—
|
|
—
|
|
25.01
|
|
5/5/2020
|
|
|
|
|
|
||||
|
24,000
|
|
—
|
|
—
|
|
33.91
|
|
5/6/2021
|
|
|
|
|
|
||||
|
25,000
|
|
—
|
|
—
|
|
38.58
|
|
5/9/2022
|
|
|
|
|
|
||||
|
33,600
|
|
—
|
|
—
|
|
42.65
|
|
11/12/2022
|
|
|
|
|
|
||||
|
17,700
|
|
—
|
|
—
|
|
53.53
|
|
5/9/2023
|
|
|
|
|
|
||||
|
16,000
|
|
—
|
|
—
|
|
57.27
|
|
5/13/2024
|
|
|
|
|
|
|
2018 PROXY STATEMENT |
|
52
|
|
Option Awards
|
|
Stock Awards
|
|||||||||||||||
Name
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
|
Number of Securities Underlying Unexercised Options (#) Unexercisable
(1)
|
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
|
|
Option Exercise Price ($)
|
|
Option Expiration Date
|
|
Number of Shares or Units of Stock That Have Not Vested (#)(2)
|
|
Market Value of Shares or Units of Stock That Have Not Vested ($)(3)
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
|
|
|
26,997
|
|
—
|
|
—
|
|
57.08
|
|
11/6/2024
|
|
|
|
|
|
||||
|
9,758
|
|
4,872
|
|
—
|
|
62.51
|
|
5/13/2025
|
|
|
|
|
|
||||
|
3,877
|
|
7,733
|
|
—
|
|
71.70
|
|
5/13/2026
|
|
|
|
|
|
||||
|
—
|
|
23,200
|
|
—
|
|
96.26
|
|
5/8/2027
|
|
|
|
|
|
||||
Mark D. Lyons
|
60,000
|
|
—
|
|
—
|
|
40.10
|
|
9/6/2022
|
|
16,932
|
|
1,536,918
|
|
—
|
|
—
|
|
|
14,272
|
|
—
|
|
—
|
|
56.12
|
|
2/29/2024
|
|
|
|
|
|
||||
|
6,000
|
|
—
|
|
—
|
|
57.27
|
|
5/13/2024
|
|
|
|
|
|
||||
|
3,390
|
|
3,390
|
|
—
|
|
62.51
|
|
5/13/2025
|
|
|
|
|
|
||||
|
2,698
|
|
5,382
|
|
—
|
|
71.70
|
|
5/13/2026
|
|
|
|
|
|
||||
|
—
|
|
8,160
|
|
—
|
|
96.26
|
|
5/8/2027
|
|
|
|
|
|
||||
Nicolas Papadopoulo
|
—
|
|
3,071
|
|
—
|
|
62.51
|
|
5/13/2025
|
|
30,290
|
|
2,749,423
|
|
—
|
|
—
|
|
|
2,441
|
|
4,869
|
|
—
|
|
71.70
|
|
5/13/2026
|
|
|
|
|
|
||||
|
—
|
|
7,350
|
|
—
|
|
96.26
|
|
5/8/2027
|
|
|
|
|
|
||||
|
—
|
|
50,000
|
|
—
|
|
96.39
|
|
9/19/2027
|
|
|
|
|
|
||||
Maamoun Rajeh
|
8,850
|
|
—
|
|
—
|
|
33.91
|
|
5/6/2021
|
|
21,565
|
|
1,957,455
|
|
—
|
|
—
|
|
|
8,250
|
|
—
|
|
—
|
|
38.58
|
|
5/9/2022
|
|
|
|
|
|
||||
|
19,071
|
|
—
|
|
—
|
|
39.69
|
|
7/1/2022
|
|
|
|
|
|
||||
|
16,130
|
|
—
|
|
—
|
|
42.65
|
|
11/12/2022
|
|
|
|
|
|
||||
|
6,600
|
|
—
|
|
—
|
|
53.53
|
|
5/9/2023
|
|
|
|
|
|
||||
|
6,500
|
|
—
|
|
—
|
|
57.27
|
|
5/13/2024
|
|
|
|
|
|
||||
|
10,762
|
|
—
|
|
—
|
|
58.00
|
|
7/1/2024
|
|
|
|
|
|
||||
|
4,455
|
|
2,225
|
|
—
|
|
62.51
|
|
5/13/2025
|
|
|
|
|
|
||||
|
1,770
|
|
3,530
|
|
—
|
|
71.70
|
|
5/13/2026
|
|
|
|
|
|
||||
|
—
|
|
5,310
|
|
—
|
|
96.26
|
|
5/8/2027
|
|
|
|
|
|
||||
|
—
|
|
10,500
|
|
—
|
|
96.39
|
|
9/19/2027
|
|
|
|
|
|
||||
Andrew T. Rippert
|
1,500
|
|
—
|
|
—
|
|
38.58
|
|
5/9/2022
|
|
11,243
|
|
1,020,527
|
|
—
|
|
—
|
|
|
8,960
|
|
—
|
|
—
|
|
42.65
|
|
11/12/2022
|
|
|
|
|
|
||||
|
2,500
|
|
—
|
|
—
|
|
53.53
|
|
5/9/2023
|
|
|
|
|
|
||||
|
10,062
|
|
—
|
|
—
|
|
53.04
|
|
2/4/2024
|
|
|
|
|
|
||||
|
4,100
|
|
—
|
|
—
|
|
57.27
|
|
5/13/2024
|
|
|
|
|
|
||||
|
3,648
|
|
1,822
|
|
—
|
|
62.51
|
|
5/13/2025
|
|
|
|
|
|
||||
|
1,449
|
|
2,891
|
|
—
|
|
71.70
|
|
5/13/2026
|
|
|
|
|
|
||||
|
—
|
|
6,530
|
|
—
|
|
96.26
|
|
5/8/2027
|
|
|
|
|
|
(1)
|
Each of the above stock options and SARs, as applicable, vest in three equal annual installments commencing on the first anniversary of the grant date, except for the award granted on September 19, 2017 to Mr. Papadopoulo. For such award, 25% vested immediately on September 19, 2017, and the remaining stock options will vest in three equal annual installments commencing on the first anniversary of the grant date. The portion that vested immediately is not exercisable until the first anniversary of the grant date. All of the options and SARs will expire 10 years from the grant date, subject to the terms of the award agreements.
|
(2)
|
The above restricted share or unit awards vest in three equal annual installments commencing on the first anniversary of the grant date. Mr. Lyons’ awards granted in May 2012 were granted in the form of restricted common share units, a portion of such units will be settled in common shares
|
53
|
| 2018 PROXY STATEMENT
|
|
(3)
|
Market value of unvested shares or units on an aggregate basis are valued as of
December 31, 2017
in accordance with applicable SEC rules.
|
(4)
|
As of
December 31, 2017
, such stock option and SAR awards have been transferred other than for value to grantor retained annuity trusts, except for 40,710 SARs from the May 2009 grant, 100,065 SARs from the May 2011 grant, 97,248 SARs from the February 2012 grant, 244,750 stock options from the February 2016 grant, 46,100 stock options from the May 2016 grant, 250,468 stock options from the February 2017 grant and 47,500 stock options from the May 2016 grant, which are held directly by Mr. Iordanou.
|
|
Option Awards
|
|
Stock Awards
|
||||||
Name
|
Number of Shares Acquired on Exercise (#)
|
|
Value Realized on Exercise ($)
|
|
|
Number of Shares Acquired on Vesting (#)
|
|
Value Realized on Vesting ($)(1)
|
|
Constantine Iordanou
|
199,750
|
|
14,564,686
|
|
|
95,480
|
|
8,874,473
|
|
Marc Grandisson
|
31,350
|
|
2,204,949
|
|
|
56,668
|
|
5,402,840
|
|
Mark D. Lyons
|
73,600
|
|
3,556,898
|
|
|
69,751
|
|
6,611,998
|
|
Nicolas Papdopoulo
|
155,246
|
|
8,660,452
|
|
|
41,718
|
|
3,982,810
|
|
Maamoun Rajeh
|
18,750
|
|
1,347,128
|
|
|
25,873
|
|
2,458,622
|
|
Andrew T. Rippert
|
—
|
|
—
|
|
|
16,948
|
|
1,599,467
|
|
(1)
|
We computed the dollar amount realized upon vesting by multiplying the number of shares by the market value of the underlying shares on the vesting date
.
|
Name
|
Executive Contributions in Last FY ($)
|
|
Registrant Contributions in Last FY ($)
|
|
Aggregate Earnings in Last FY ($)
|
|
Aggregate Withdrawals/Distributions ($)
|
|
|
Aggregate Balance at Last FYE ($)
|
|
|
Constantine Iordanou
|
—
|
|
—
|
|
6,149,317
|
|
(28,504,633
|
)
|
(4)
|
3,163,258
|
|
(1)
|
|
—
|
|
—
|
|
198,898
|
|
(3,569,819
|
)
|
(5)
|
1,202,793
|
|
(2)
|
Marc Grandisson
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
Mark D. Lyons
|
—
|
|
—
|
|
14,508
|
|
(7,438
|
)
|
(3)
|
1,154,852
|
|
(1)
|
|
—
|
|
—
|
|
388,515
|
|
—
|
|
|
7,871,756
|
|
(2)
|
Nicolas Papadopoulo
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
Maamoun Rajeh
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
Andrew T. Rippert
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
(1)
|
Includes the following cash amounts which we also included in the
“2017 Summary Compensation Table”
for fiscal year 2017 or in prior years: Mr. Iordanou—$2,824,232 and Mr. Lyons—$602,582.
|
(2)
|
Indicates the value of restricted common share units that will be settled in common shares after the termination of employment as provided in the applicable award agreements. The amounts indicated in the “Aggregate Balance at Last FYE” column are based on
|
|
2018 PROXY STATEMENT |
|
54
|
(3)
|
Amount represents a distribution based on an irrevocable payout election made by the named executive officer in accordance with the terms of the deferred compensation plan.
|
(4)
|
Amount represents a distribution prior to December 31, 2017, in accordance with Internal Revenue Code Section 457A.
|
(5)
|
On December 14, 2017, 39,753 restricted stock units held by Mr. Iordanou were settled in accordance with Internal Revenue Code Section 457A by distribution of shares having a fair market value of $89.80 per share on the date of distribution.
|
55
|
| 2018 PROXY STATEMENT
|
|
Name
|
Without Good Reason ($) (1) (2) (11)
|
|
For Cause ($)
|
|
Death ($)(9)
|
|
Disability ($)(10)
|
|
Without Cause or For Good Reason (as applicable) ($)(9)
|
|
Without Cause or For Good Reason (as applicable) following a Change in Control ($)(9)
|
|
Constantine Iordanou
|
|
|
|
|
|
|
||||||
Cash Severance (3)
|
—
|
|
—
|
|
5,000,000
|
|
1,000,000
|
|
5,000,000
|
|
5,000,000
|
|
Accelerated Vesting of Share-Based Awards (4)
|
—
|
|
—
|
|
9,987,439
|
|
9,987,439
|
|
—
|
|
9,987,439
|
|
Health & Welfare (5)
|
—
|
|
—
|
|
28,754
|
|
28,754
|
|
28,754
|
|
28,754
|
|
Total
|
—
|
|
—
|
|
15,016,193
|
|
11,016,193
|
|
5,028,754
|
|
15,016,193
|
|
Marc Grandisson
|
|
|
|
|
|
|
||||||
Cash Severance (6)
|
—
|
|
—
|
|
—
|
|
—
|
|
900,000
|
|
900,000
|
|
Accelerated Vesting of Share-Based Awards (4)
|
—
|
|
—
|
|
3,535,195
|
|
3,535,195
|
|
—
|
|
3,535,195
|
|
Health & Welfare (5)
|
—
|
|
—
|
|
—
|
|
31,350
|
|
31,350
|
|
31,350
|
|
Total
|
—
|
|
—
|
|
3,535,195
|
|
3,566,545
|
|
931,350
|
|
4,466,545
|
|
Mark D. Lyons
|
|
|
|
|
|
|
||||||
Cash Severance (7)
|
—
|
|
—
|
|
1,160,000
|
|
1,160,000
|
|
1,050,000
|
|
1,050,000
|
|
Accelerated Vesting of Share-Based Awards (4)
|
—
|
|
—
|
|
1,735,371
|
|
1,735,371
|
|
—
|
|
1,735,371
|
|
Health & Welfare (5)
|
—
|
|
—
|
|
—
|
|
13,579
|
|
13,579
|
|
13,579
|
|
Total
|
—
|
|
—
|
|
2,895,371
|
|
2,908,950
|
|
1,063,579
|
|
2,798,950
|
|
Nicolas Papadopoulo
|
|
|
|
|
|
|
||||||
Cash Severance (8)
|
—
|
|
—
|
|
—
|
|
—
|
|
1,875,000
|
|
1,875,000
|
|
Accelerated Vesting of Share-Based Awards (4)
|
—
|
|
—
|
|
2,929,077
|
|
2,929,077
|
|
—
|
|
2,929,077
|
|
Health & Welfare (5)
|
—
|
|
—
|
|
27,436
|
|
27,436
|
|
27,436
|
|
27,436
|
|
Total
|
—
|
|
—
|
|
2,956,513
|
|
2,956,513
|
|
1,902,436
|
|
4,831,513
|
|
Maamoun Rajeh
|
|
|
|
|
|
|
||||||
Cash Severance (8)
|
—
|
|
—
|
|
—
|
|
—
|
|
1,625,000
|
|
1,625,000
|
|
Accelerated Vesting of Share-Based Awards (4)
|
—
|
|
—
|
|
2,087,662
|
|
2,087,662
|
|
—
|
|
2,087,662
|
|
Health & Welfare (5)
|
—
|
|
—
|
|
27,436
|
|
27,436
|
|
27,436
|
|
27,436
|
|
Total
|
—
|
|
—
|
|
2,115,098
|
|
2,115,098
|
|
1,652,436
|
|
3,740,098
|
|
Andrew T. Rippert
|
|
|
|
|
|
|
||||||
Cash Severance (8)
|
—
|
|
—
|
|
—
|
|
—
|
|
1,625,000
|
|
1,625,000
|
|
Accelerated Vesting of Share-Based Awards (4)
|
—
|
|
—
|
|
3,882,437
|
|
3,882,437
|
|
—
|
|
3,882,437
|
|
Health & Welfare (5)
|
—
|
|
—
|
|
27,436
|
|
27,436
|
|
27,436
|
|
27,436
|
|
Total
|
—
|
|
—
|
|
3,909,873
|
|
3,909,873
|
|
1,977,436
|
|
5,534,873
|
|
(1)
|
In the case of resignation by giving six months’ advance notice without good reason by Messrs. Papadopoulo, Rajeh or Rippert, the Company may elect to place them on “garden leave” during all or part of the notice period. In this event, each of these individuals will (a) continue to receive base
|
|
2018 PROXY STATEMENT |
|
56
|
(2)
|
Since Messrs. Iordanou, Lyons, Papadopoulo and Rippert are of retirement age (as defined in our plans), any unvested restricted shares/units and unvested stock options/SARs will continue to vest according to the vesting schedule and, in the case of stock options/SARs, the options/SARs will continue to have the full exercise period of 10 years from the date of grant, so long as they do not engage in a competitive activity (as defined in the applicable award agreements). In the event the executives engage in a competitive activity following retirement, unvested awards will be forfeited and the exercise periods for vested options/SARs would be reduced.
|
(3)
|
In the case of termination (i) due to death, (ii) by the Company without cause or (iii) by the executive for good reason, Mr. Iordanou (or his estate) would have been entitled to receive a prorated target bonus based on the termination date plus two times the sum of his base salary and target annual bonus, with such amounts payable (A) in a lump sum as soon as practicable following death but offset by life insurance proceeds received by his estate from coverage provided by the Company and (B) except as otherwise required to be deferred for six months under Section 409A of the Code, over a nine-month period for the other cases as provided in his employment agreement. In the case of termination due to disability, Mr. Iordanou would have been entitled to receive a prorated bonus based on the termination date.
|
(4)
|
Represents the intrinsic value (
i.e.,
the value based upon the Company’s closing share price on
December 31, 2017
or in the case of stock options/SARs, the excess of the closing price over the exercise price) of accelerated vesting of certain unvested share-based awards as of
December 31, 2017
under the various circumstances presented.
|
(5)
|
Represents the employer cost relating to the continuation of medical insurance coverage under the terms described in each executive’s employment agreement for the various circumstances presented.
|
(6)
|
In the case of termination by the Company without cause or by the executive for good reason, Mr. Grandisson will be entitled to receive twelve months of base salary payable in equal monthly installments.
|
(7)
|
In the case of termination by the Company due to death or disability, Mr. Lyons (or his estate) will receive a prorated bonus based on the termination date. For such purposes, the annual bonus will not be less than the average annual bonus received for the preceding three years. In the case of termination by the Company without cause or by the executive for good reason, Mr. Lyons will be entitled to receive an amount equal to the greater of (i) 18 months of base salary and (ii) the total remaining base salary payable under his agreement, except as otherwise required to be deferred for six months under Section 409A of the Code, in equal monthly installments.
|
(8)
|
In the case of termination by the Company without cause or by Messrs. Papadopoulo, Rajeh or Rippert for good reason, each will be entitled to receive twelve months of base salary from the date of notice of termination and an amount equal to the sum of the (i) the annual target bonus plus (ii) a pro-rated portion of the annual target bonus through the date of notice, one half of which amount shall be paid in a single lump sum on the date that is sixty days following the date of termination and the remaining half will be payable in equal monthly installments over six months following the date of termination.
|
(9)
|
Messrs. Rajeh and Rippert participated under the Formula Approach of our Incentive Compensation Plan for underwriting years through 2017 and 2016, respectively. In the event of termination on December 31, 2017 due to death, termination without cause or termination for good reason, Messrs. Rajeh and Rippert would have been entitled to payments in full settlement under the Formula Approach in the amounts determined by the Committee, taking into account such factors it deems relevant including that such amounts are generally subject to recalculation over the applicable 10-year development periods for open underwriting years. As of December 31, 2017, such amounts for Messrs. Rajeh and Rippert are estimated to be up to approximately $5,680,000 and $2,435,000, respectively. Any such payments would be made by the end of the year following termination.
|
(10)
|
Upon termination on December 31, 2017 due to disability, Messrs. Rajeh and Rippert would have been entitled to payments in full settlement under the Formula Approach as described in footnote 9 above, provided they did not engage in competition with the Company.
|
(11)
|
Since Mr. Rippert is of retirement age (as defined in our plans), if Mr. Rippert retired on December 31, 2017 he would have been entitled to payments in full settlement under the Formula Approach as described in footnote 9 above, provided he did not engage in competition with the Company.
|
57
|
| 2018 PROXY STATEMENT
|
|
▪
|
2017 base salary;
|
▪
|
bonuses paid during 2017;
|
▪
|
variable incentive compensation paid during 2017; and
|
▪
|
the fair value of all equity grants made during 2017.
|
|
2018 PROXY STATEMENT |
|
58
|
59
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
60
|
61
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
62
|
63
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
64
|
65
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
66
|
|
|
|
|
|
AUDIT COMMITTEE
Brian S. Posner (chairman)
Yiorgos Lillikas
Louis J. Paglia
Eugene S. Sunshine
|
67
|
| 2018 PROXY STATEMENT
|
|
|
Year Ended December 31,
|
|
|||||
|
2017
|
2016
|
Description
|
||||
Audit Fees
|
$
|
8,440,876
|
|
$
|
6,918,268
|
|
Includes fees for the integrated audit of our annual financial statements and internal control over financial reporting, review of our financial statements included in our quarterly reports on Form 10-Q, statutory audits for our insurance subsidiaries and review of SEC registration statements. Audit fees for the year ended December 31, 2017 increased primarily due to fees associated with growth in Arch Mortgage Insurance as a result of the UGC acquisition, common and preferred share issuance costs, the impact of tax reform and non-recurring transactions in 2017.
|
Audit Related Fees
|
271,867
|
|
212,708
|
|
Fees consisted of the audit of the Company’s benefit plans and other audit related services.
|
||
Tax Fees
|
584,438
|
|
656,571
|
|
Fees for tax services, including tax compliance, tax advice and tax planning.
|
||
All Other Fees
|
58,216
|
|
37,933
|
|
Fees for services that are not included in the above categories and primarily include fees related to software licensing fees.
|
||
Total (1)
|
$
|
9,355,397
|
|
$
|
7,825,480
|
|
|
(1)
|
Excludes fees related to audit work for Watford, which are subject to approval by Watford’s board of directors and its audit committee. We own common and preferred interests in Watford and have the right to designate two members of Watford’s six member board of directors. We consolidate Watford’s results under applicable accounting guidance. Please see note 4, “Variable Interest Entity and Noncontrolling Interests,” of the notes accompanying our consolidated financial statements included in our 2017 Annual Report, for additional information about our ownership interest in Watford.
|
|
2018 PROXY STATEMENT |
|
68
|
|
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL.
|
69
|
| 2018 PROXY STATEMENT
|
|
|
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL.
|
|
2018 PROXY STATEMENT |
|
70
|
Total shares underlying outstanding stock options
|
|
6,668,045
|
|
|
Weighted average exercise price of outstanding stock options
|
|
$
|
53.05
|
|
Weighted average remaining contractual life of outstanding stock options
|
|
5.32
|
|
|
Total shares underlying outstanding unvested restricted stock and restricted stock unit awards
|
|
980,157
|
|
|
Total shares currently available for grant under existing plans
|
|
1,594,277
|
|
|
Remaining full value shares available for grant under existing plans
|
|
881,733
|
|
|
Total shares of common stock outstanding as of March 14, 2018
|
|
136,702,745
|
|
▪
|
Minimum Vesting Requirements.
Subject to certain limited exceptions described below, Awards will be granted under the 2018 Plan with vesting periods of at least one year.
|
▪
|
No Single-Trigger Change in Control Vesting Provided Awards are Assumed.
If awards granted under the 2018 Plan are assumed by the successor entity in connection with a change in control of the Company, the awards will not automatically vest and pay out upon the change in control.
|
▪
|
No Discounted Stock Options or Stock Appreciation Rights (SARs).
Stock options and SARs may not be granted with exercise prices lower than the fair market value of the underlying shares on the grant date.
|
▪
|
No Repricing of Stock Options or SARs.
The exercise price of a stock option or SAR may not be reduced, directly or indirectly, without the prior approval of shareholders, including by repurchase of “underwater” stock options or SARs.
|
▪
|
Limit on Full Value Awards.
The
share limits are designed such that the number of “full-value” awards (awards other than stock options and SARs) that may be granted under the 2018 Plan are limited since these
|
71
|
| 2018 PROXY STATEMENT
|
|
▪
|
No Dividends on Unvested Awards.
In no event will dividends or dividend equivalents be paid on unvested awards.
|
▪
|
No Liberal Share Recycling on Stock Options or SARs.
Shares retained by or delivered to Arch Capital to pay the exercise price of a stock option or SAR or to satisfy tax withholding in connection with the exercise of such awards will count against the number of shares remaining available under the 2018 Plan.
|
▪
|
No Tax Gross-Ups.
The 2018 Plan does not provide tax gross-ups.
|
▪
|
Awards Subject to Clawback Policy.
Awards under the 2018 Plan will be subject to Arch Capital’s clawback policy as in effect from time to time.
|
|
2018 PROXY STATEMENT |
|
72
|
73
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
74
|
75
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
76
|
|
Column A
|
|
Column B
|
|
Column C
|
|
|||
Plan Category
|
Number of Securities to be Issued Upon Exercise of Outstanding Stock Options(1), Warrants and Rights (a)
|
|
|
Weighted-Average Exercise Price of Outstanding
Stock Options(1), Warrants and Rights ($)
|
|
|
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
|
|
|
Equity compensation plans approved by security holders
|
6,894,554
|
|
|
51.67
|
|
|
2,998,321
|
|
|
Equity compensation plans not approved by security holders
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
6,894,554
|
|
|
51.67
|
|
|
2,998,321
|
|
(2)
|
(1)
|
Includes all vested and unvested stock options outstanding of
6,590,058
and restricted stock units outstanding of
304,496
. The weighted average exercise price does not take into account restricted stock units. In addition, the weighted average remaining contractual life of Arch Capital’s outstanding exercisable stock options and SARs at
December 31, 2017
was
4.8
years.
|
(2)
|
Includes
1,209,876
common shares remaining available for future issuance under our Employee Share Purchase Plan and
1,788,445
common shares remaining available for future issuance under our equity compensation plans. Shares available for future issuance under our equity compensation plans may be issued in the form of stock options, SARs, restricted shares, restricted share units payable in common shares or cash, share awards in lieu of cash awards, dividend equivalents, performance shares and performance units and other share based awards. In addition
952,517
common shares, or
53.3%
of the
1,788,445
common shares remaining available for future issuance may be issued in connection with full value awards (
i.e.,
awards other than stock options or SARs).
|
77
|
| 2018 PROXY STATEMENT
|
|
|
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL.
|
|
2018 PROXY STATEMENT |
|
78
|
IMPORTANT NOTE:
|
PLEASE DO NOT DESTROY OR SEND YOUR EXISTING SHARE CERTIFICATES TO US. IF THE PROPOSED AMENDMENT IS ADOPTED, THOSE CERTIFICATES WILL REMAIN VALID FOR THE NUMBER OF SHARES SHOWN THEREON, AND SHOULD BE CAREFULLY PRESERVED BY YOU. ALL SHARES ISSUED AS A RESULT OF THE PROPOSED SHARE SPLIT WILL BE ISSUED IN BOOK-ENTRY FORM OR AS A CREDIT TO AN EXISTING ACCOUNT OF A SHAREHOLDER OF RECORD. YOU WILL RECEIVE INFORMATION ABOUT THE ADDITIONAL SHARES TO WHICH YOU ARE ENTITLED ON OR AROUND THE DISTRIBUTION DATE.
|
79
|
| 2018 PROXY STATEMENT
|
|
|
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL.
|
Arch Capital Holdings Ltd.
|
Graham B.R. Collis; Mark D. Lyons
|
|
Arch Investment Property Holdings Ltd.
|
Robert Appleby; W. Preston Hutchings; David J. Mulholland
|
|
Arch Investment Holdings I Ltd., Arch Investment Holdings II Ltd., Arch Investment Holdings III Ltd., Arch Investment Holdings IV Ltd.
|
W. Preston Hutchings; Mark D. Lyons; David J. Mulholland
|
|
Arch Risk Transfer Services Ltd., Alternative Re Holdings Limited, Alternative Re Limited, Alternative Underwriting Services, Ltd.
|
Graham B.R. Collis; Mark D. Lyons
|
|
Arch Reinsurance Ltd. (“Arch Re Bermuda”)
|
Nicolas Papadopoulo; Maamoun Rajeh
|
|
Arch Investment Management Ltd. (“AIM”)
|
W. Preston Hutchings; Constantine Iordanou; Mark D. Lyons
|
|
Arch Global Services Holdings Ltd.
|
Dennis R. Brand; François Morin
|
|
Arch Insurance Canada Ltd. (“Arch Insurance Canada”)
|
Patrick Mailloux; Robert McDowell; Michael Price; Arthur Scace; Hugh Sturgess; Ross Totten; Gerald Wolfe
|
Arch Underwriters Ltd.
|
Nicolas Papadopoulo; Maamoun Rajeh
|
|
Arch Mortgage Insurance Designated Activity Company (“Arch Mortgage”)
|
Anthony Asquith; Michael Constantinides; Stephen J. Curley; Seamus Fearon; Beau H. Franklin; Giuliano Giovannetti; Mark Nolan; Andrew T. Rippert
|
|
Arch Reinsurance Europe Underwriting Designated Activity Company (“Arch Re Europe”)
|
Anthony Asquith; Ian Britchfield; Michael Hammer; Jason Kittinger; Gerald König; Maamoun Rajeh; Søren Scheuer
|
|
Alwyn Insurance Company Limited (“Alwyn”)
|
Paul Cole; Michael Feetham; Elisabeth Quinn; Maamoun Rajeh; William A. Soares
|
|
Arch Insurance Company (Europe) Limited (“Arch Insurance Europe”)
|
Stephen Bashford; Pierre-Andre Camps; Nick Denniston; Jason Kittinger; Lino Leoni; Patrick Mailloux; Paul Martin; David H. McElroy; Matthew Shulman; Patrick Storey
|
|
Arch MI Asia Limited
|
Chung Foo Choy; Christopher A. Edwards; Beau H. Franklin; Jean-Philippe Latour; Andrew T. Rippert
|
|
Other Non-U.S. Subsidiaries, as Required or Designated Under Bye-Law 75 (except as otherwise indicated herein)
|
François Morin; Nicolas Papadopoulo; Maamoun Rajeh
|
|
2018 PROXY STATEMENT |
|
80
|
81
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
82
|
83
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
84
|
85
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
86
|
|
|
Internet Availability of Proxy Materials
|
|
▪
|
gain faster access to your proxy materials;
|
▪
|
help reduce production and mailing costs;
|
▪
|
reduce the amount of mail you receive; and
|
▪
|
save paper.
|
|
|
Shareholders Entitled to Vote and Voting Standard
|
|
A-1
|
| 2018 PROXY STATEMENT
|
|
|
|
Quorum; Votes Required for Approval
|
|
|
2018 PROXY STATEMENT |
|
A-2
|
|
|
Effect of Your Proxy
|
|
|
|
Effect of Not Casting Your Vote
|
|
|
|
Revoking Your Proxy or Changing Your Vote
|
|
A-3
|
| 2018 PROXY STATEMENT
|
|
|
|
Arch Capital Employee Share Purchase Plan
|
|
|
|
Annual Meeting Attendance
|
|
|
|
Limitation on Voting Under Our Bye-laws
|
|
|
2018 PROXY STATEMENT |
|
A-4
|
|
|
Proxy Solicitation
|
|
|
|
Corporate Governance Materials
|
|
|
|
Reduce Duplicate Mailings
|
|
A-5
|
| 2018 PROXY STATEMENT
|
|
|
|
Shareholder Proposals for the 2019 Annual Meeting
|
|
|
|
Contacting Our Board, Individual Directors and Committees
|
|
|
|
Principal Executive Offices
|
|
Our registered office is located at:
|
Our principal executive offices are located at:
|
Clarendon House
2 Church Street
Hamilton HM 11, Bermuda
Phone: (441) 295-1422
|
Waterloo House, Ground Floor
100 Pitts Bay Road
Pembroke HM 08, Bermuda
Phone: (441) 278-9250
|
|
2018 PROXY STATEMENT |
|
A-6
|
(
A)
|
any person (within the meaning of the Exchange Act), other than a Permitted Person, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 50% or more of the total voting power or value of all the then outstanding Voting Securities; or
|
(B)
|
the individuals who, as of the date hereof, constitute the Board together with those who become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors
|
B-1
|
| 2018 PROXY STATEMENT
|
|
(C)
|
the consummation of a merger, consolidation, recapitalization, liquidation, sale or disposition by the Company of all or substantially all of the Company’s assets, or reorganization of the Company, other than any such transaction which would (x) result in more than 50% of the total voting power and value represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the former shareholders of the Company and (y) not otherwise be deemed a Change in Control under subparagraphs (A) or (B) of this definition.
|
|
2018 PROXY STATEMENT |
|
B-2
|
B-3
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
B-4
|
B-5
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
B-6
|
B-7
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
B-8
|
B-9
|
| 2018 PROXY STATEMENT
|
|
|
2018 PROXY STATEMENT |
|
B-10
|
B-11
|
| 2018 PROXY STATEMENT
|
|
|
Year Ended
|
||||||
|
December 31,
|
|
December 31,
|
||||
(U.S. Dollars in thousands, except share data)
|
2017
|
|
2016
|
||||
Net income available to Arch common shareholders (a)
|
$
|
566,502
|
|
|
$
|
664,668
|
|
Net realized (gains) losses
|
(148,836
|
)
|
|
(77,081
|
)
|
||
Net impairment losses recognized in earnings
|
7,138
|
|
|
30,442
|
|
||
Equity in net (income) loss of investment funds accounted for using the equity method
|
(142,286
|
)
|
|
(48,475
|
)
|
||
Net foreign exchange losses (gains)
|
113,613
|
|
|
(31,987
|
)
|
||
UGC transaction costs and other
|
22,150
|
|
|
41,729
|
|
||
Loss on redemption of preferred shares
|
6,735
|
|
|
—
|
|
||
Income tax expense (benefit)
|
22,139
|
|
|
(1,852
|
)
|
||
After-tax operating income available to Arch common shareholders (b)
|
$
|
447,155
|
|
|
$
|
577,444
|
|
|
|
|
|
||||
Beginning common shareholders’ equity
|
$
|
7,481,163
|
|
|
$
|
5,841,542
|
|
Ending common shareholders’ equity
|
8,324,047
|
|
|
7,481,163
|
|
||
Average common shareholders’ equity (1) (c)
|
$
|
7,902,605
|
|
|
$
|
6,113,718
|
|
|
|
|
|
||||
Annualized return on average common equity (a)/(c)
|
7.2
|
%
|
|
10.9
|
%
|
||
Annualized operating return on average common equity (b)/(c)
|
5.7
|
%
|
|
9.4
|
%
|
(1)
|
Average common shareholders’ equity and the related returns on average common equity reflect the weighted impact of the $1.10 billion of convertible non-voting common equivalent preferred shares, which were issued on December 31, 2016 as part of the UGC acquisition.
|
|
2018 PROXY STATEMENT |
|
C-1
|
|
Year Ended
|
||||||
|
December 31,
|
|
December 31,
|
||||
(U.S. Dollars in thousands, except share data)
|
2017
|
|
2016
|
||||
Total shareholders’ equity available to Arch
|
$
|
9,196,602
|
|
|
$
|
8,253,718
|
|
Less preferred shareholders’ equity
|
872,555
|
|
|
772,555
|
|
||
Common shareholders’ equity available to Arch (a)
|
$
|
8,324,047
|
|
|
$
|
7,481,163
|
|
Less: goodwill and intangible assets
|
645,802
|
|
|
774,744
|
|
||
Common shareholders’ equity available to Arch less goodwill and intangible assets (b)
|
$
|
7,678,245
|
|
|
$
|
6,706,419
|
|
|
|
|
|
||||
Common shares and common share equivalents outstanding, net of treasury shares (c)
|
136,652,139
|
|
|
135,550,337
|
|
||
|
|
|
|
||||
Book value per common share (a)/(c)
|
$
|
60.91
|
|
|
$
|
55.19
|
|
Tangible book value per common share (b)/(c)
|
$
|
56.19
|
|
|
$
|
49.48
|
|
C-2
|
| 2018 PROXY STATEMENT
|
|