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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the Securities
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Exchange Act of 1934
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Date of Report (Date of earliest event reported): May 27, 2015
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ProAssurance Corporation
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(Exact name of registrant as specified in its charter)
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Delaware
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001-16533
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63-1261433
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(State of Incorporation)
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(Commission File No.)
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(IRS Employer I.D. No.)
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100 Brookwood Place, Birmingham, Alabama
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35209
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(Address of Principal Executive Office )
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(Zip code)
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Registrant’s telephone number, including area code: (205) 877-4400
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Securities Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-(c) under the Exchange Act
(17CFR 240.13e-(c))
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Item 5.02
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DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS
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As reported in Item 5.07 (below), and incorporated into this Item 5.02 by reference, our shareholders overwhelmingly elected Ziad R. Haydar, M.D. to our Board, and also overwhelmingly re-elected M. James Gorrie, Frank A. Spinosa, D.P.M., and Thomas A. S. Wilson, M.D. to our Board of Directors during the Annual Meeting of Shareholders on May 27, 2015. As Previously announced in our Current Report on Form 8-K, dated April 15, 2015, Dr. Haydar was nominated to fill the vacancy created when Anthony R. Tersigni, EdD, FACHE, who was a member of our Audit Committee, decided not to stand for re-election due to increasing demands on his time as the President and CEO of Ascension Health. Dr. Tersigni’s replacement on our audit Committee will be Frank A. Spinosa, D.P.M., an independent director.
Also on May 27, 2015, ProAssurance and its Chairman and Chief Executive Officer, W. Stancil Starnes, executed an amendment to his current employment agreement that becomes effective immediately and extends the term of his current agreement by five years. His current agreement will expire on June 30, 2018. The amendment will extend the term to May 31, 2020.
The current employment agreement provides for the payment of severance benefits to Mr. Starnes if we terminate his employment without “cause” or if he terminates his employment for “good reason.” The current agreement further provides that it will terminate and Mr. Starnes will be paid an amount equal to his severance benefits upon a change of control of ProAssurance. The amount of the severance benefits payable under the current agreement is the sum of the base salary remaining to be paid during the remaining term of the agreement. If the severance benefits payable under the current agreement are subject to the excise tax on “golden parachute” payments, Mr. Starnes is entitled to be reimbursed for the reduction in the amount of the severance benefits resulting from the excise tax.
The amendment modifies the terms of Mr. Starnes current employment agreement relating to the payment of severance benefits as follows:
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Eliminates the “single trigger” for the payment of severance benefits on a change of control; payment of severance benefits will only be paid upon our termination of his employment for cause or his termination of his employment for good reason. To protect Mr. Starnes in a change of control, the amendment modifies the definition of good reason to include as “good reason” any material reduction in Mr. Starnes’ status as CEO of ProAssurance within two years after a change of control.
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Eliminates the provision requiring the company to provide an excise tax gross-up as part of severance payments upon a change-in-control;
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Eliminates the current method for the calculation severance benefits by including a fixed amount of severance compensation instead of paying him severance compensation that depends upon the amount of time remaining in the term of his employment agreement for the remainder of the term. His severance compensation will now be equal to three times the sum of his base salary and average annual incentive compensation for the prior three years regardless of when it is triggered.
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The extension of Mr. Starnes employment agreement does not carry any automatic or guaranteed salary or benefit increases, nor does it prevent our Compensation Committee from conducting a yearly review of Mr. Starnes’ performance, and adjusting salary and benefits to reflect that performance.
The agreement was extended to ensure continuity and stability at the top of our organization. The modification of the change-in-control payment items were made in response to a limited number of comments from investors, and to address concerns raised by corporate governance organizations.
A copy of the amendment to Mr. Starnes employment agreement is incorporated into this Item 5.02 by reference and filed as Exhibit 99.3 in this Current Report on Form 8K.
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Item 5.07
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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At the Annual Meeting of Shareholders of ProAssurance Corporation, held on May 27, 2015, our shareholders voted on three proposals with the following outcomes:
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(a)
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Ziad R. Haydar, M.D. was elected to the Board, and M. James Gorrie,
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Frank A. Spinosa, D.P.M., and Thomas A. S. Wilson, M.D. were re-elected to the Board.
Each will serve a three-year term ending at the Annual Meeting of Shareholders in 2018 and until their successors are elected and qualified. Voting was as follows:
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For
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Withheld
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M. James Gorrie
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42,666,373
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1,414,989
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Ziad R. Haydar, M.D.
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42,579,548
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1,501,814
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Frank A. Spinosa, D.P.M.
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42,837,608
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1,243,754
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Thomas A. S. Wilson, M.D.
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43,353,008
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728,354
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(b)
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The selection of Ernst & Young, LLP as our independent auditing firm for the fiscal year-ending December 31, 2015 was ratified by the following vote:
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For
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Against
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Abstain
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48,648,388
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197,999
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62,717
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(c) The 2014 compensation of our named executive officers was approved, on an advisory basis, by the following vote:
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For
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Against
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Abstain
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42,932,854
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989,843
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158,665
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There were a total of 4,827,742 broker non-votes on matters (a) and (c).
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Item 7.01
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REGULATION FD DISCLOSURE
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On May 27, 2015, we issued news releases reporting the result of our shareholder meeting as described in Items 5.02 and 5.07 and the Board Actions described in Item 8.01. We have included a copy of these releases in this Current Report on Form 8K as exhibits 99.1 and 99.2.
Declaration of Dividend
On May 27, 2015, our Board of Directors declared a quarterly dividend of $0.31 per common share. The record date for the dividend is June 25, 2015 and the payment date is July 9, 2015. Under the dividend policy updated December 3, 2014, our Board of Directors anticipates a total annual dividend of $1.24 per share, to be paid in equal quarterly installments. However, any decision to pay future cash dividends is subject to the Board’s final determination after a comprehensive review of the company’s financial performance, future expectations and other factors deemed relevant by the Board.
Authorization of Funds for Share Buyback or Debt Retirement
On May 27, 2015, our Board of Directors authorized an additional $100 million to be used for share repurchase or debt retirement, bringing total funds currently authorized for this purpose to approximately $187 million. Purchases made under the terms of the Plan will be subject to the rules of the New York Stock Exchange and applicable securities laws and regulations, including Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. There can be no guarantee that any shares will repurchased by ProAssurance either through the Plan or otherwise.
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Item 9.01
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FINANCIAL STATEMENTS AND EXHIBITS
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99.1 Our news release, dated May 27, 2015, announcing the authorization of funds for share buyback or debt retirement and the declaration of a quarterly cash dividend by our Board at their meeting on May 27, 2015.
99.2 Our news release, dated May 27, 2015, announcing the results of voting at the 2015 Annual Meeting of Shareholders.
99.3 An Amendment to the employment agreement between ProAssurance Corporation and
W. Stancil Starnes.
We are furnishing Exhibits 99.1 and 99.2 to this Current Report on Form 8-K in support of Item 7.01. This exhibit shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 27, 2015
PROASSURANCE CORPORATION
by: /s/ Frank B. O’Neil
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Frank B. O’Neil
Senior Vice-President
NEWS RELEASE
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For More Information Contact:
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Frank B. O’Neil
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Sr. Vice-President, Corporate Communications & Investor Relations
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800.282.6242 • 205.877.4461 • foneil@ProAssurance.com
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ProAssurance Declares Regular Dividend and
Adds to Share Repurchase Authorization
BIRMINGHAM, AL – (PRNewswire) – May 27, 2015 – ProAssurance Corporation (NYSE: PRA) announced today that the Board of Directors has declared a cash dividend of $0.31 per common share, payable on July 9, 2015 to shareholders who own our stock as of June 25, 2015. The Board also authorized an additional $100 million to be used for share repurchase or debt retirement. This brings the outstanding authorization to approximately $187 million as of May 27, 2015. This year, through May 22, 2015, we have repurchased approximately 2.1 million shares at a cost of $94.4 million.
Our dividend policy anticipates a total annual dividend of $1.24 per share, to be paid in equal quarterly installments. However, any decision to pay future cash dividends will be subject to the Board’s final determination after a comprehensive review of the company’s financial performance, future expectations and other factors deemed relevant by the Board.
We expect to continue deploying the funds in the share repurchase authorization over the near term, but purchases will depend on financial market conditions as well as the company’s view of its future capital needs. Any share repurchase will be subject to the rules of the New York Stock Exchange and applicable securities laws and regulations, including Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. There can be no guarantee that any shares will be repurchased by ProAssurance.
About ProAssurance
ProAssurance Corporation is an industry-leading specialty insurer with extensive expertise in healthcare professional liability, products liability for medical technology and life sciences, legal professional liability, and workers’ compensation insurance. ProAssurance is recognized as one of the top performing insurance companies in America by virtue of our inclusion in the Ward’s 50 for the past eight years. ProAssurance Group is rated “A+” (Superior) by A.M. Best; ProAssurance and its operating subsidiaries are rated “A” (Strong) by Fitch Ratings.
Caution Regarding Forward-Looking Statements
Statements in this news release that are not historical fact or that convey our view of future business, events or trends are specifically identified as forward-looking statements. Forward-looking statements are based upon our estimates and anticipation of future events and highlight certain risks and uncertainties that could cause actual results to vary materially from our expected results. We expressly claim the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, for any forward-looking statements in this news release. Forward-looking statements represent our outlook only as of the date of this news release. Except as required by law or regulation, we do not undertake and specifically decline any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Forward-looking statements are generally identified by words such as, but not limited to, “anticipate,” “believe,” “estimate,” “expect,” “hope,” “hopeful,” “intend,” “likely,” “may,” “optimistic,” “possible,” “potential,” “preliminary,” “project,” “should,” “will,” and other analogous expressions. When we address topics such as liquidity and capital requirements, the value of our investments, return on equity, financial ratios, net income, premiums, losses and loss reserves, premium rates and retention of current business, competition and market conditions, the expansion of product lines, the development or acquisition of business in new geographical areas, the availability of acceptable reinsurance, actions by regulators and rating agencies, court actions, legislative actions, payment or performance of obligations under indebtedness, payment of dividends, and other similar matters, we are making forward-looking statements.
NEWS RELEASE CONTINUES
These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following factors that could affect the actual outcome of future events:
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changes in general economic conditions, including the impact of inflation or deflation and unemployment;
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our ability to maintain our dividend payments;
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regulatory, legislative and judicial actions or decisions that could affect our business plans or operations;
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the enactment or repeal of tort reforms;
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formation or dissolution of state-sponsored insurance entities providing coverages now offered by ProAssurance which could remove or add sizable numbers of insureds from or to the private insurance market;
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changes in the interest rate environment;
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changes in U.S. laws or government regulations regarding financial markets or market activity that may affect the U.S. economy and our business;
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loss or consolidation of independent agents, agencies, brokers, or brokerage firms;
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changes in our organization, compensation and benefit plans;
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changes in the business or competitive environment may limit the effectiveness of our business strategy and impact our revenues;
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our ability to retain and recruit senior management;
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the availability, integrity and security of our technology infrastructure or that of our third party providers of technology infrastructure, including any susceptibility to cyber-attacks which might result in a loss of information or operating capability;
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the impact of a catastrophic event, as it relates to both our operations and our insured risks;
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the impact of acts of terrorism and acts of war;
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the effects of terrorism related insurance legislation and laws;
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assessments from guaranty funds;
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our ability to achieve continued growth through expansion into new markets or through acquisitions or business combinations;
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changes to the ratings assigned by rating agencies to our insurance subsidiaries, individually or as a group;
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provisions in our charter documents, Delaware law and state insurance laws may impede attempts to replace or remove management or may impede a takeover;
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state insurance restrictions may prohibit assets held by our insurance subsidiaries, including cash and investment securities, from being used for general corporate purposes;
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taxing authorities can take exception to our tax positions and cause us to incur significant amounts of legal and accounting costs and, if our defense is not successful, additional tax costs, including interest and penalties; and
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expected benefits from completed and proposed acquisitions may not be achieved or may be delayed longer than expected due to business disruption; loss of customers, employees and key agents; increased operating costs or inability to achieve cost savings; and assumption of greater than expected liabilities, among other reasons.
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Additional risks that could arise from our membership in the Lloyd's of London market (Lloyd's) and our participation in Lloyd's Syndicate 1729 (Syndicate 1729) include, but are not limited to, the following:
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members of Lloyd's are subject to levies by the Council of Lloyd's based on a percentage of the member's underwriting capacity, currently a maximum of 3%, but can be increased by Lloyd's;
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Syndicate operating results can be affected by decisions made by the Council of Lloyd's over which the management of Syndicate 1729 has little ability to control, such as a decision to not approve the business plan of the Syndicate, or a decision to increase the capital required to continue operations, and by our obligation to pay levies to Lloyd's;
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NEWS RELEASE CONTINUES
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Lloyd's insurance and reinsurance relationships and distribution channels could be disrupted or Lloyd's trading licenses could be revoked making it more difficult for Syndicate 1729 to distribute and market its products; and
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rating agencies could downgrade their ratings of Lloyd's as a whole.
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Our results may differ materially from those we expect and discuss in any forward-looking statements. The principal risk factors that may cause these differences are described in “Item 1A, Risk Factors” in our Form 10-K and other documents we file with the Securities and Exchange Commission, such as our current reports on Form 8-K, and our regular reports on Form 10-Q.
We caution readers not to place undue reliance on any such forward-looking statements, which are based upon conditions existing only as of the date made, and advise readers that these factors could affect our financial performance and could cause actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. Except as required by law or regulations, we do not undertake and specifically decline any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
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NEWS RELEASE
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For More Information Contact:
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Frank B. O’Neil
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Sr. Vice President, Corporate Communications & Investor Relations
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800-282-6242 • 205-877-4461 • foneil@ProAssurance.com
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ProAssurance Announces Results from
2015 Annual Meeting of Shareholders
BIRMINGHAM, AL — (PRNEWSWIRE)—May 27, 2015 – Shareholders of ProAssurance Corporation (NYSE:PRA), acting at today’s Annual Meeting of Shareholders, overwhelmingly elected Ziad R. Haydar, M.D. to our Board and also overwhelmingly re-elected three Board members, M. James Gorrie, Frank A. Spinosa, D.P.M., and Thomas A. S. Wilson, M.D. Each received more than 96% of the votes cast by shareholders and will serve a three-year term ending at the Annual Meeting of Shareholders in 2018 and until their successors are elected and qualified.
Acting on matters related to compensation, our shareholders cast more than 97% of votes to approve, on an advisory basis, the compensation of our named executive officers for 2014. The selection of Ernst & Young, LLP as our independent auditing firm for the fiscal year-ending December 31, 2015 was ratified by 99% of the votes cast by shareholders.
About ProAssurance
ProAssurance Corporation is an industry-leading specialty insurer with extensive expertise in healthcare professional liability, products liability for medical technology and life sciences, legal professional liability, and workers’ compensation insurance. ProAssurance is recognized as one of the top performing insurance companies in America by virtue of our inclusion in the Ward’s 50 for the past eight years. ProAssurance Group is rated “A+” (Superior) by A.M. Best; ProAssurance and its operating subsidiaries are rated “A” (Strong) by Fitch Ratings.
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AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the “
Amendment
”) effective June 1, 2015 (the “
Effective Date
”) amends that certain Employment Agreement (the “
Agreement
”)
made and entered into by and between ProAssurance Corporation, a Delaware corporation (“
ProAssurance
”) and W. Stancil Starnes, an individual (“
Executive
”) dated May 1, 2007, as amended January 1, 2008 and December 22, 2008.
RECITALS:
Executive is currently employed with ProAssurance under the terms of the Agreement. The Compensation Committee of ProAssurance has approved this Amendment to the Agreement, and the independent directors have ratified and approved the Amendment. ProAssurance and Executive desire to enter into this Amendment to set forth the terms and conditions of Executive’s employment with ProAssurance beginning on the Effective Date.
NOW, THEREFORE, THESE PREMISES CONSIDERED, Executive and ProAssurance hereby agree as follows:
A. Section 1,
Employment Term
, is deleted in its entirety and replaced with the following:
ProAssurance hereby employs Executive, and Executive accepts employment, upon the terms and conditions of the Agreement and the Amendment for an initial term running from the Effective Date to and including May 31, 2020 (the “
Term
”).
B. Section 4.3
Termination by Executive for Good Reason
is deleted in its entirety and replaced with the following:
Executive may terminate his employment with ProAssurance for Good Reason. For purposes of this Agreement, "
Good Reason
" shall constitute any of the following circumstances if they occur without the Executive's express written consent during the Term: (i) if the Board shall refuse or fail to reelect Executive to the office of Chief Executive Officer of ProAssurance or should change the duties and responsibilities of Executive in a manner that is a material diminution of the duties and responsibilities of the Chief Executive Officer under the bylaws of ProAssurance as currently in effect; (ii) ProAssurance shall require that the Executive's primary location of employment be more than 100 miles from the location of ProAssurance's principal offices as of the date of this Agreement; (iii) a material reduction in the Executive's Base Salary as set forth in Section 3.1 hereof; (iv) a material breach by ProAssurance of any provision of this Agreement; or (v) a Change of Control Transaction (as defined in Section 8.1 hereof) is completed and during the two year period following such completion, the Executive's duties and responsibilities are changed such that he no longer (A) serves as the functional Chief Executive Officer of all business operations that comprised ProAssurance immediately preceding the public announcement of the Change of Control Transaction or (B) reports directly to the board of directors of the ultimate parent of the entity surviving the Change of Control Transaction.
C. Subsections (a) and (b) of Section 5.2
Severance Benefits
are deleted in their entirety and replaced with the following:
(a) If, (i) during the Term, ProAssurance terminates the employment of Executive for any reason other than Cause, death, Disability or Retirement, or Executive terminates his employment with ProAssurance for Good Reason, and (ii) the Executive signs the release form that is attached to this Agreement as Exhibit C (the "
Release
") within sixty (60) days after the Date of Termination, the Executive shall be entitled to receive
Severance Benefits
(herein defined). Executive understands that the payment of the Severance Benefits is subject to and conditioned upon the execution of the Release within sixty (60) days after the Date of Termination without subsequent revocation within seven (7) days after execution of the Release. Subject to the foregoing, the Severance Benefits shall be paid in cash or good funds in equal monthly installments during the Restricted Period (as defined in Section 6.1 hereof) commencing seventy-five (75) days after Date of Termination and on the first day of each successive calendar month thereafter until the first day of the last full calendar month in the Restricted Period; provided that the obligation of ProAssurance to pay such Severance Benefits to the Executive after termination of employment shall be subject to termination as herein provided in the event Executive violates the covenants under Section 6.1 hereof. ProAssurance shall withhold from any amounts payable under this Agreement all federal, state, city or other income and employment taxes that shall be required. Notwithstanding the foregoing, if the Executive is a "specified employee" within the meaning of Code Section 409A(a)(2)(b)(i), the payment schedule for Severance Benefits shall be modified or adjusted to provide that no payments shall be made until the expiration of six (6) months following the Date of Termination. In the event that payments are so delayed, a lump sum payment of the accumulated unpaid amounts attributable to the six (6) month period shall be made to Executive on the first day of the seventh month following the Date of Termination. This six month delay shall not apply to any Severance Benefits which are not subject to the requirements of Section 409A of the Code by reason of (i) their being separation pay upon an involuntary separation from service and (ii) their otherwise meeting the requirements and limitations of the regulations under the above referenced Code section. In no event shall the aggregate amount of Severance Benefits be reduced as a result of such modification or adjustment.
“
Severance Benefits
” means (a) an amount equal to three (3) times Executive’s Annual Base Salary as of the Date of Termination, plus (b) an amount equal to three (3) times Executive’s average annual incentive award(s) and bonus(es). The “average annual incentive award(s) and bonus(es)” shall mean the amount equal to the average of the annual incentive award(s) and bonus(es) paid to Executive in each of the three complete calendar years prior to the Date of Termination and shall include the dollar value of the cash or other consideration paid to Executive as annual performance-based compensation (whether or not deferred) in each calendar year during the period. “Average annual incentive award(s) and bonus(es)” does not include long-term incentive compensation such as options to purchase stock, performance shares, restricted stock units, or other long-term incentives.
(b) ProAssurance shall fund the obligation to pay Severance Benefits under this Section 5.2 by depositing in escrow an amount equal to the sum of the amounts payable to Executive hereunder (the "Escrow Funds") with a financial institution with total assets of more than One Billion Dollars ($1,000,000,000) as escrow agent
(the "Escrow Agent"). The Escrow Funds shall be the property of ProAssurance and shall be held, invested, and distributed by the Escrow Agent in accordance with the following provisions. At the time of delivery of the Escrow Funds, the Escrow Agent shall acknowledge receipt of the Escrow Funds and agree to be bound by the provisions of this Agreement in a separate written document. The Escrow Agent shall invest the Escrow Funds in a money market account for the benefit of Executive, and Escrow Agent shall distribute the earnings to Executive with each monthly installment. Unless and until the Escrow Agent receives notice from ProAssurance that Executive has breached this Agreement, the Escrow Agent shall distribute the Escrow Funds to the Executive in the same number of equal monthly installments as the number of whole calendar months in the Restricted Period (as defined in Section 6.1 hereof). The monthly installments shall be distributed to Executive on the first day of each calendar month in the Restricted Period together with accrued and undistributed earnings of the Escrow Fund and less reimbursement to ProAssurance for the amount required to be withheld from said installment for federal, state, city or other income or employment taxes. If ProAssurance delivers written notice to the Escrow Agent and the Executive that Severance Benefits payable to Executive are subject to termination under Section 6.2 of this Agreement, the Escrow Agent shall distribute the balance of the Escrow Funds and accrued and undistributed earnings thereon to ProAssurance unless the Escrow Agent receives a written notice of objection from Executive within 15 days after delivery of ProAssurance's notice. If Executive provides timely notice of objection, Escrow Agent shall hold the Escrow Funds until it receives written notice of distribution from the arbitrator appointed pursuant to Section 10 hereof or a joint written notice of distribution from Executive and ProAssurance. Failure of Executive or ProAssurance to deliver notice to the Escrow Agent as herein provided shall not be a waiver of any of their respective rights under this Agreement.
D. Section 5.3,
Parachute Payment Tax Reimbursement
, is deleted in its entirety.
E. Section 8.2,
Effect of Change in Control
, is deleted in its entirety.
F. Except as specifically amended herein, the Agreement is hereby reaffirmed.
IN WITNESS WHEREOF,
the parties have duly executed this Amendment to Employment Agreement as of the Effective Date stated above.
/s/ W. Stancil Starnes
W. Stancil Starnes
PROASSURANCE CORPORATION
By:
/s/ Jeffrey P. Lisenby
Jeffrey P. Lisenby
Its: Secretary