PROXY STATEMENT
FOR THE
ANNUAL GENERAL MEETING OF HOLDERS OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 2017
______________________________
This proxy statement (this “Proxy Statement”) is furnished in connection with the solicitation of proxies on behalf of the Board of Directors (the “Board”) of Aspen Insurance Holdings Limited (the “Company,” “Aspen,” “we,” “us” or “our” and, together with its subsidiaries, the “Group”) to be voted at our annual general meeting of shareholders to be held at the offices of the Company located at 141 Front Street, Hamilton HM19, Bermuda on
April 26, 2017
at 12:00 p.m. local time, or at such other meeting upon any postponement or adjournment thereof (the “Annual General Meeting”). Directions to the Annual General Meeting may be obtained by contacting the Company at +1 (441) 295-8201. This Proxy Statement, the Notice of Internet Availability of Proxy Materials and the accompanying form of proxy are being first mailed to shareholders on or about
March 15, 2017
. These proxy materials, along with a copy of the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2016
, are also available for viewing at
http://www.edocumentview.com/AHL
and
http://www.aspen.co
.
Shareholders will be asked to take the following actions at the Annual General Meeting:
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1.
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To vote FOR the re-election of Messrs. Christopher O’Kane, John Cavoores and Albert Beer and Ms. Heidi Hutter and to elect Mr. Matthew Botein as Class I directors of the Company;
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2.
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To vote FOR the approval of compensation of the Company’s named executive officers as set forth in this Proxy Statement, as part of the non-binding, advisory say-on-pay vote (“Say-On-Pay Vote”);
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3.
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To vote FOR the re-appointment of KPMG LLP (“KPMG”), London, England, to act as the Company’s independent registered public accounting firm and auditor for the fiscal year ending December 31, 2017 and to authorize the Board through the Audit Committee (the “Audit Committee”) to set the remuneration for KPMG.
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Shareholders may be asked to consider such other business as may properly come before the Annual General Meeting or any adjournments thereof.
Proposals 1, 2 and 3 each require an affirmative vote of the majority of the voting power of the votes cast and entitled to vote at the Annual General Meeting (taking into account the Company’s Bye-Laws 63 to 67). The Company intends to conduct all voting at the Annual General Meeting by poll as requested by the Chairman of the Annual General Meeting, in accordance with our Bye-Laws.
As of
February 27, 2017
, the record date for the determination of persons entitled to receive notice of, and to vote at, the Annual General Meeting, there were 59,945,096 ordinary shares of the Company, par value U.S. 0.15144558 cents per share (the “ordinary shares”), issued and outstanding. The ordinary shares are our only class of equity securities outstanding currently entitled to vote at the Annual General Meeting. Holders of ordinary shares are entitled on a poll to one vote for each ordinary share held on each matter to be voted upon by the shareholders at the Annual General Meeting.
The presence of one or more shareholders in person or by proxy holding at least 50% of the voting power (that is, the number of maximum possible votes of the shareholders entitled to attend and vote at a general meeting, after giving effect to the provision of our Bye-Laws 63 to 67) of all of the issued ordinary shares of the Company throughout the Annual General Meeting shall form a quorum for the transaction of business at the Annual General Meeting. Only recordholders or their properly appointed proxies, beneficial owners of the Company’s ordinary shares who have evidence of such ownership and provide personal identification (such as a driver’s license or passport) and the Company’s guests may attend the Annual General Meeting.
Pursuant to our Bye-Laws 63 to 67, the voting power of all ordinary shares is adjusted to the extent necessary so that there is no 9.5% U.S. Shareholder. For the purposes of our Bye-Laws, a “9.5% U.S. Shareholder” is defined as a United States Person (as defined in the Internal Revenue Code of 1986, as amended, of the United States (the “Code”)) whose “controlled shares” (as defined below) constitute 9.5% or more of the voting power of all ordinary shares and who would be generally required to recognize income with respect to the Company under Section 951(a)(1) of the Code, if the Company were a controlled foreign corporation as defined in Section 957 of the Code and if the ownership threshold under Section 951(b) of the Code were 9.5%.
The applicability of the voting power reduction provisions to any particular shareholder depends on facts and circumstances that may be known only to the shareholder or related persons. Accordingly, the Company requests that any holder of ordinary shares with reason to believe that it is a 9.5% U.S. Shareholder (as described above) contact the Company promptly so that the Company may
determine whether the voting power of such holder’s ordinary shares should be reduced. By submitting a proxy, unless the Company has otherwise been notified or made a determination with respect to a holder of ordinary shares, a holder of ordinary shares will be deemed to have confirmed that, to its knowledge, it is not, and is not acting on behalf of, a 9.5% U.S. Shareholder.
In order to determine the number of controlled shares owned by each shareholder, we are authorized to require any shareholder to provide such information as the Board may deem necessary for the purpose of determining whether any shareholder’s voting rights are to be adjusted pursuant to the Company’s Bye-Laws. We may, in our reasonable discretion, disregard the votes attached to ordinary shares of any shareholder failing to respond to such a request or submitting incomplete or inaccurate information. “Controlled shares” will include, among other things, all ordinary shares that a person is deemed to beneficially own directly, indirectly or constructively (as determined pursuant to Sections 957 and 958 of the Code).
Pursuant to our Bye-Laws 63 to 67, it is currently expected that there will be no adjustments to the voting power of any of the Company’s shareholders. Therefore, every shareholder will be entitled on a poll to one vote for each ordinary share held by such shareholder on each matter to be voted upon.
The Company’s Bye-Law 84 provides that if the voting rights of any shares of the Company are adjusted pursuant to Bye-Laws 63 to 67 and the Company is required or entitled to vote at a general meeting of any of its subsidiaries organized under the laws of a jurisdiction outside of the United States of America (each, a “Non-U.S. Subsidiary”), the Board shall refer the subject matter of the vote to shareholders of the Company on a poll and seek authority from the shareholders in a general meeting of the Company for the Company’s corporate representative or proxy to vote in favor of the resolutions proposed by such Non-U.S. Subsidiary pro rata to the votes received at the general meeting of the Company’s corporate representative or proxy to vote against the directing resolution being taken, respectively, as an instruction for the Company’s corporate representative or proxy to vote in the appropriate proportion of its shares for, and the appropriate proportion of its shares against, the resolution proposed by the Non-U.S. Subsidiary.
At the Company’s 2009 annual general meeting of shareholders, shareholders approved resolutions amending the constitutional documents of the Company and its Non-U.S. Subsidiaries to modify each of their respective voting push-up provisions (which mirror those of the Company described in the preceding paragraph) found in such constitutional documents, so that such provision is only applicable in the event that the voting rights of any shares of the Company are adjusted pursuant to the Company’s Bye-Laws 63 to 67. If voting rights are not adjusted pursuant to the above, resolutions proposed by the Company’s Non-U.S. Subsidiaries will not be voted upon by the Company’s shareholders at the Annual General Meeting.
PRESENTATION OF FINANCIAL STATEMENTS
In accordance with the Bermuda Companies Act 1981, as amended, and Bye-Law 139 of the Company, the Company’s audited financial statements for the fiscal year ended
December 31, 2016
were approved by the Board and will be presented at the Annual General Meeting. There is no requirement under Bermuda law that these financial statements be approved by shareholders and no such approval will be sought at the Annual General Meeting.
SOLICITATION AND REVOCATION
PROXIES IN THE FORM ENCLOSED ARE BEING SOLICITED BY, OR ON BEHALF OF, THE BOARD. THE
BOARD HAS DESIGNATED THE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY AS PROXIES. Such persons designated as proxies serve as officers of the Company. Any shareholder desiring to appoint another person to represent him or her at the Annual General Meeting may do so either by inserting such person’s name in the blank space provided on the accompanying form of proxy or by completing another form of proxy and, in either case, delivering an executed proxy to the Company Secretary at 141 Front Street, Hamilton HM19, Bermuda prior to the Annual General Meeting. It is the responsibility of the shareholder appointing such other person to represent him or her to inform such person of this appointment.
Each ordinary share represented by a properly executed proxy which is returned and not revoked will be voted in accordance with the instructions, if any, given thereon. If no instructions are provided in a properly executed proxy, it will be voted “FOR” all nominees in Proposal 1, “FOR” Proposals 2 and 3 and in accordance with the proxyholder’s best judgment as to any other business as may properly come before the Annual General Meeting. If a shareholder appoints a person other than the persons named in the enclosed form of proxy to represent him or her, such person will vote the shares in respect of which he or she is appointed proxyholder in accordance with the directions of the shareholder appointing him or her. Any shareholder who executes a proxy may revoke it at any time before it is voted by (i) delivering to the Company Secretary a written statement revoking such proxy, (ii) executing and delivering a later-dated proxy or (iii) voting in person at the Annual General Meeting. Attendance at the Annual General Meeting by a shareholder who has executed and delivered a proxy to us shall not in and of itself constitute a revocation of such proxy. For ordinary shares held in “street name” by a broker, bank or other nominee, new voting instructions must be delivered to the broker, bank or nominee prior to the Annual General Meeting.
To the extent that beneficial owners do not furnish voting instructions with respect to any or all proposals submitted for shareholder action, member brokerage firms of The New York Stock Exchange, Inc. (the “NYSE”) that hold ordinary shares in “street name” for such beneficial owners may not vote in their discretion on non-routine matters, such as Proposals 1 and 2, but have the discretion to vote on routine matters, such as Proposal 3. If beneficial owners do not provide voting instructions to their brokerage firm or other nominee, such
brokerage firm or other nominee may therefore only vote their shares on Proposal 3 and any other routine matters properly presented for a vote at the Annual General Meeting.
Any “broker non-votes” and abstentions will be counted toward the presence of a quorum at, but will not be considered votes cast on any proposal brought before, the Annual General Meeting. Generally, “broker non-votes” occur when ordinary shares held for a beneficial owner are not voted on a particular proposal because the broker has not received voting instructions from the beneficial owner and the broker does not have discretionary authority to vote the ordinary shares on a particular proposal. If a quorum is not present, the Annual General Meeting shall stand adjourned to such other day, time and place as the chairman of the meeting may determine and at such adjourned meeting two shareholders present in person or by proxy and holding at least 10% in the aggregate of the voting power of ordinary shares entitled to vote at such meeting (taking into account the Company’s Bye-Laws 63 to 67) shall be a quorum. The Company shall give not less than twenty-one days’ notice of any meeting adjourned through want of a quorum and such notice shall state that two shareholders present in person or by proxy and holding at least 10% in the aggregate of the voting power of ordinary shares entitled to vote at such meeting (taking into account the Company’s Bye-Laws 63 to 67) shall be a quorum. An adjournment will have no effect on the business that may be conducted at the adjourned meeting.
We will bear the cost of solicitation of proxies. We have engaged Innisfree M&A Incorporated to be our proxy solicitation agent. For these services, we will pay Innisfree M&A Incorporated a fee of approximately
$15,000
plus reasonable expenses. Further solicitation may be made by our directors, officers and employees personally, by telephone, Internet or otherwise, but such persons will not be specifically compensated for such services. We may also make, through bankers, brokers or other persons, a solicitation of proxies of beneficial holders of the ordinary shares. Upon request, we will reimburse brokers, dealers, banks or similar entities acting as nominees for reasonable expenses incurred in forwarding copies of the proxy materials relating to the Annual General Meeting to the beneficial owners of ordinary shares which such persons hold of record.
MANAGEMENT
Board of Directors of the Company
Our Bye-Laws provide for a classified Board divided into three classes of directors with each class elected to serve a term of three years. With the exception of Mr. Botein who was appointed to the Board on February 7, 2017 and is seeking election at the Annual General Meeting, our incumbent Class I directors were elected at our 2014 annual general meeting of shareholders. With the exception of Mr. Ahamed who will not stand for re-election at the Annual General Meeting, our incumbent Class I directors are standing for re-election at the Annual General Meeting. Our incumbent Class II directors were elected at our 2015 annual general meeting of shareholders and are scheduled to serve until our 2018 annual general meeting of shareholders. Our incumbent Class III directors were elected at our 2016 annual general meeting of shareholders and are scheduled to serve until our 2019 annual general meeting of shareholders.
As of March 1, 2017, we had the following directors on the Board and committees of the Board:
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Name
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Age
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Director
Since
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Audit
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Compensation
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Corporate
Governance
& Nominating
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Investment
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Risk
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Lead Independent Director
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Class I Directors:
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Christopher O’Kane
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62
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2002
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Heidi Hutter
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59
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2002
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P
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Chair
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P
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P
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John Cavoores
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59
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2006
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P
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P
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Liaquat Ahamed
(1)
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64
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2007
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Chair
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Albert Beer
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66
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2011
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P
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P
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Matthew Botein
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43
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2017
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P
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Class II Directors:
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Glyn Jones
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64
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2006
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P
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Gary Gregg
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61
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2013
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P
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P
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Chair
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Bret Pearlman
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50
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2013
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P
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P
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P
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Class III Directors:
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Ronald Pressman
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58
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2011
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Chair
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P
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Gordon Ireland
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63
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2013
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Chair
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P
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Karl Mayr
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66
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2015
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P
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P
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P
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___________
(1) Mr. Ahamed will not stand for re-election at the Annual General Meeting of shareholders.
Glyn Jones.
With effect from May 2, 2007, Mr. Jones was appointed as Chairman of the Board. Mr. Jones has been a director and a member of the Investment Committee since October 30, 2006. He also served as a non-executive director and Chairman of Aspen Insurance UK Limited (“Aspen U.K.”) between December 4, 2006 and May 6, 2014. Mr. Jones serves as Chairman of Old Mutual Wealth following his appointment on September 29, 2016.
Mr. Jones was the Chairman of Aldermore Group plc, chair of its corporate governance and nominating committee and a member of its compensation committee from March 2014 until February 2017. Mr. Jones was also the Chairman of Aldermore Bank plc, Aldermore Group plc’s banking subsidiary, from March 2014 until February 2017. Between September 2012 and May 2015, Mr. Jones was the Senior Independent Director, chair of the investment committee and audit committee member of Direct Line Insurance Group plc, a FTSE 100 company. He was also a director of UK Insurance Limited, a subsidiary of Direct Line, between October 2012 and May 2015. Mr. Jones was previously the Chairman of Hermes Fund Managers, BT Pension Scheme Management and Towry Holdings. Mr. Jones was the Chief Executive Officer of Thames River Capital LLP from October 2005 until May 2006. From 2000 to 2004, he served as Chief Executive Officer of Gartmore Investment Management in the United Kingdom. Prior to Gartmore, Mr. Jones was Chief Executive Officer of Coutts NatWest Group and Coutts Group, which he joined in 1997, and was responsible for strategic leadership, business performance and risk management. In 1991, he joined Standard Chartered, later becoming the general manager of Global Private Banking. Mr. Jones was a consulting partner with Coopers & Lybrand/Deloitte Haskins & Sells Management Consultants from 1981 to 1990.
Mr. Jones has over 30 years of experience within the financial services sector. He is the former chief executive officer of a number of large, regulated, international financial services groups and has served as chairman of the board in a number of other financial services companies. As a result, Mr. Jones provides the Board leadership for a complex, global and regulated financial services business such as ours.
Christopher O’Kane.
Mr. O’Kane has been the Chief Executive Officer and a director of the Company since June 21, 2002. He was also a director of Aspen U.K. between 2002 and 2014 and its Chief Executive Officer until January 2010. He also serves as a director on various other boards of the Company’s subsidiaries. Mr. O’Kane served as Chairman of Aspen Bermuda Limited (“Aspen Bermuda”) until December 2006. Effective July 26, 2016, Mr. O’Kane has been a director of Blue Marble Micro Insurance, a consortium of eight companies, including the Company. Prior to the creation of the Company, from November 2000 until June 2002, Mr. O’Kane served as a director of Wellington Underwriting plc and Chief Underwriting Officer of Lloyd’s Syndicate 2020 where he built his specialist knowledge in the fields of property insurance and reinsurance, together with active underwriting experience in a range of other insurance disciplines. From September 1998 until November 2000, Mr. O’Kane served as one of the underwriting partners for Syndicate 2020. Prior to joining Syndicate 2020, Mr. O’Kane served as deputy underwriter for Syndicate 51 from January 1993 to September 1998. Mr. O’Kane began his career as a Lloyd’s broker.
Mr. O’Kane has over 30 years of experience in the specialty re/insurance industry and is both a co-founder of our Company’s business and its founding Chief Executive Officer. Mr. O’Kane brings his market experience and industry knowledge to Board discussions and is also directly accountable to the Board for the day-to-day management of the Company and the implementation of its business strategy.
Albert J. Beer.
Mr. Beer has been a director of the Company since February 4, 2011 and a director of Aspen Bermuda since July 23, 2014. Since 2006, Mr. Beer has been the Michael J Kevany/XL Professor of Insurance and Actuarial Science at St John’s University School of Risk Management. From 1992 to 2006, Mr. Beer held various senior executive positions at American Re-Insurance Corporation (Munich Re America). Previously, from 1989 to 1992, Mr. Beer held various positions at Skandia America Reinsurance Corporation, including that of Chief Actuary. He also has been a board member of United Educators Insurance Company since 2006, having served as Vice-Chair from 2009 to 2013. Since 2009, Mr. Beer has been a Trustee Emeritus for the Actuarial Foundation, having served as a board member from 2006 until 2009. In 2013, Mr. Beer was elected as a member of the Board of the American Academy of Actuaries, having previously served on such board from 1992 until 1994 and from 1996 until 1999. Since 2006, Mr. Beer has served on the Board of United Educators Insurance Company, a risk retention group focused on colleges and universities in the United States. Mr. Beer was also a member of the Actuarial Standards Board, which promulgates standards for the actuarial profession in the United States, from 2007 to 2012 and was its Chair from 2010 to 2011. Mr. Beer previously served as a member of the Board of the Casualty Actuarial Society.
Mr. Beer has over 30 years of actuarial and management experience in the insurance industry. Mr. Beer’s roles at American Re-Insurance Corporation included the active supervision of principal financial and accounting officers. In addition, Mr. Beer has extensive experience in reserving matters, which constitute the principal subjective assessments within the Company’s accounts. As a result, Mr. Beer serves as a designated financial expert on the Company’s Audit Committee and is a member of the Risk Committee.
Matthew Botein.
Mr. Botein has been a director of the Company since February 7, 2017, having previously served as a non-executive director of the Company from 2002 to 2003 and 2007 to 2011. Mr. Botein is a Managing Partner of Gallatin Point Capital LLC. Previously, he was appointed Head of BlackRock Alternative Investors at BlackRock, Inc. (“BlackRock”) in 2010 and until January 2017 held the positions of co-Head and Chief Investment Officer of BlackRock’s alternative investment unit. Effective January 4, 2017, Mr. Botein serves as an advisor to BlackRock’s alternative investment unit. He served as Managing Director of BlackRock and was a member of BlackRock’s Global Operating Committee. From 2008, Mr. Botein has been a director of PennyMac Financial Services Inc. He has also served as a director at Northeast Bancorp since 2010. Previously, Mr. Botein was a director at Corelogic Inc. (previously First American Corporation) from 2009 until 2011, PennyMac Mortgage Investment Trust from 2009 until 2013, Alliance Partners LLC from 2011 until 2017 and Alignment Artist Capital LLC from2015 until 2017.
Mr. Botein has approximately 20 years of experience in the financial services industry, primarily managing portfolio investments in the banking, insurance, asset management, capital markets and financial processing sectors. As a result of his extensive financial services and investment management experience, Mr. Botein also serves as a member of the Investment Committee.
John Cavoores.
Mr. Cavoores has been a director of the Company since October 30, 2006. From October 5, 2010 through December 31, 2011, Mr. Cavoores was also the Co-Chief Executive Officer of our Aspen Insurance business segment (“Aspen Insurance”), focusing on Aspen Insurance’s casualty and professional lines and U.S. property businesses, where he had executive oversight for Aspen Insurance’s U.S. platform. From January 1, 2012, Mr. Cavoores continued his role as a non-executive director of the Company. From September 2006 until March 2010, Mr. Cavoores was an advisor to Blackstone. During 2006, Mr. Cavoores was a Managing Director of Century Capital, a Boston-based private equity firm. From 2003 to 2005, Mr. Cavoores served as President and Chief Executive Officer of OneBeacon Insurance Company, a subsidiary of the White Mountains Insurance Group.
He was employed with OneBeacon from 2001 to 2005. Among his other positions, Mr. Cavoores was President of National Union Insurance Company, a subsidiary of AIG, Inc. He spent 19 years at Chubb Insurance Group, where he served as Chief Underwriting Officer, Executive Vice President and Managing Director of overseas operations, based in London. Mr. Cavoores was the Chairman of Guidewire Software, Inc. from June 2015 until December 2016 and a director from December 2012 until December 2016. Mr. Cavoores was also a director of Cunningham Lindsey, Inc. from 2014 until 2016. Mr. Cavoores previously served as a director of Alliant Insurance Holdings.
Mr. Cavoores has over 30 years of experience within the insurance industry having, among other positions, formerly served as President and Chief Executive Officer of OneBeacon Insurance. As a result, Mr. Cavoores provides the Board with broad ranging business experience, with particular focus on insurance matters and strategies within the United States, and is a member of the Risk and Corporate Governance and Nominating Committees.
Gary Gregg.
Mr. Gregg has been a director of the Company since April 24, 2013. From May 2013 to January 2015, Mr. Gregg was an advisor to Ortelius Ventures LLC. From 2011 to 2013, Mr. Gregg was engaged as a private consultant on a number of insurance and non-insurance related business purchase transactions. Prior to this, Mr. Gregg held various senior positions at Liberty Mutual Group from 1989 to 2011. From 2005 to 2011, Mr. Gregg served as President of Liberty Mutual Agency Corporation, one of Liberty Mutual Group’s four major business units. Prior to this, he served as President of Commercial Markets, another of the four major business units within Liberty Mutual Group from 1999 to 2005. Before joining Liberty Mutual Group, Mr. Gregg was a partner at KPMG Peat Marwick LLP from 1988 to 1989, where he also held various positions of increasing responsibility from 1979 to 1988. Mr. Gregg is currently a member of the Executive Committee, the Nominating Committee, and Chairman of the Finance Committee of the Board of Trustees of the Museum of Science in Boston, Massachusetts, having previously served as a member of the board of governors. Mr. Gregg also serves as a Trustee, member of the Audit Committee and Chairman of the Development Committee at the Stimson Center in Washington D.C. Mr. Gregg previously served as a member of the academic affairs committee and the dean’s executive council of the D’Amore School of Business at Northeastern University until 2015.
Mr. Gregg has over 30 years of experience within the insurance industry, with expertise in the U.S. property and casualty market. Mr. Gregg also has relevant entrepreneurial experience in running insurance companies through his various positions held at Liberty Mutual Group, which included overseeing multiple business acquisitions and subsequent integrations; directing overall IT strategy for his business units, with annual budgets typically in the range of $400 million, including major claims, underwriting and CRM system implementations; and experience managing multiple insurance distribution channels including large national brokerage, the U.S. independent agency system and direct selling. Given his extensive operational background, Mr. Gregg also serves as Chair of the Risk Committee and is a member of the Audit and Compensation Committees.
Heidi Hutter.
Ms. Hutter has been a director of the Company since June 21, 2002 and Lead Independent Director since October 29, 2014. She has served as a non-executive director of Aspen U.K. since August 6, 2002 and as a director and Chair of Aspen Managing Agency Limited (“AMAL”), the managing agent of our Lloyd’s Syndicate 4711, since February 28, 2008. She has served as Chief Executive Officer of Black Diamond Group, LLC since 2001 and Manager of Black Diamond Capital Partners since 2005. Ms. Hutter began her career in 1979 with Swiss Reinsurance Company (“Swiss Re”) in New York where she specialized in the then new field of finite reinsurance. From 1993 to 1995, she was Project Director for the Equitas Project at Lloyd’s which became the largest run-off reinsurer in the world. From 1996 to 1999, she served as Chief Executive Officer of Swiss Re America and was a member of the Executive Board of Swiss Re in Zurich. Ms. Hutter is director of Shenandoah Life Insurance Company, a director of SBLI USA Life Insurance Company, Inc. and a director and Chair of the Audit Committee of Prosperity Life Insurance Group LLC (Shenandoah’s and SBLI’s holding company). Ms. Hutter previously served as a director and Chair of the audit committee of AmeriLife Group LLC and as a director of Aquila, Inc., Smart Insurance Company (formerly United Prosperity Life Insurance Company) and Talbot Underwriting and related corporate entities.
Ms. Hutter is a qualified actuary with over 35 years of experience within the re/insurance industry. Ms. Hutter is a recognized industry leader with relevant experience both in the United States and internationally. Ms. Hutter has particular insurance experience at Lloyd’s as she served as Project Director for the Equitas Project at Lloyd’s from 1993 to 1995, and having previously served on the board of Talbot Underwriting Ltd. (corporate member and managing agent of Lloyd’s syndicate) from 2002 to 2007. As a result of her experience, Ms. Hutter provides the Board with insight on numerous matters relevant to insurance practice. Ms. Hutter also serves as Chair of the Corporate Governance and Nominating Committee and as a member of the Audit and Risk Committees.
Gordon Ireland.
Mr. Ireland has been a director of the Company since February 7, 2013. He worked at PricewaterhouseCoopers and its predecessor firms for 36 years until 2010 where he was a member of the U.K. Firms’ Supervisory Board for nine years, serving at various times as Chairman of the Senior Management Remuneration Committee and Deputy Chairman of the Supervisory Board and was, for a number of years, Chairman of the PricewaterhouseCoopers’ partner admissions panel. Mr. Ireland was Chairman of the PricewaterhouseCoopers’ Global International Insurance Accounting Group. Mr. Ireland represented PricewaterhouseCoopers on The Institute of Chartered Accountants in England and Wales (“ICAEW”) Accounting sub-Committee. Mr. Ireland has also represented the ICAEW on the Federation des Experts Comptables European equivalent committee and was a member of the European Financial Reporting Advisory Group Financial Instruments Working Group. As of May 27,
2015, Mr. Ireland has been a director of Iccaria Insurance ICC Ltd, a subsidiary of Arthur J. Gallagher & Co. that focuses on longevity swaps for pension funds. Mr. Ireland has also been a director of Yorkshire Building Society Group since September 2015. Mr. Ireland served as a director of Global Insurance Company Limited between March 2011 and December 2014. From July 2010 until June 2015, Mr. Ireland was a director of L&F Holdings Limited and Chief Executive of L&F Indemnity Limited, the professional indemnity captive insurance group which serves the PricewaterhouseCoopers network. He also served as a director of Lifeguard Insurance (Dublin) Limited, Catamount Indemnity Limited and Professional Asset Indemnity Limited from July 2010 to June 2015.
Mr. Ireland has over 35 years of experience within the financial services sector having worked at PricewaterhouseCoopers. As a result of his audit-led exposure to the London Market and general insurance and reinsurance markets throughout his career, Mr. Ireland provides strong insurance audit skills and technical accountancy expertise to our Board. As a result, he serves as Chair of the Audit Committee, on which he is also a designated financial expert, and as a member of the Risk Committee.
Karl Mayr.
Mr. Mayr has been a director of the Company since December 2, 2015. Mr. Mayr has also served as a director of Aspen U.K. and a member of its Risk Committee since June 2015. Since October 2016, Mr. Mayr has served as a director of Aspen Managing Agency Limited and as a member of its Audit Committee. Mr. Mayr has served as a Director of Würzburger Versicherungs-AG since 2004. Mr. Mayr worked at Axis Re Europe and Axis Reinsurance from 2003 to 2014 where his most recent roles were as Vice Chairman of Axis Reinsurance and President and Chief Executive Officer of Axis Re Europe. Prior to this, Mr. Mayr was at GE Frankona Reinsurance Company.
Mr. Mayr has over 30 years of experience in the reinsurance sector, primarily in Europe, across a number of product lines in both an underwriting capacity and in senior management roles. As a result of his global expertise and senior leadership experience, Mr. Mayr also serves as a member of the Audit, Risk and Compensation Committees.
Bret Pearlman.
Mr. Pearlman has been a director of the Company since July 24, 2013. Since 2004, Mr. Pearlman has been a Managing Director of Elevation Partners, where he is also a Co-Founder. In October 2014, Mr. Pearlman also became a Manager of HRS 1776 Partners. Previously, Mr. Pearlman worked for The Blackstone Group where he served as a Senior Managing Director from 2000 to 2004 and held various roles from 1989 to 2000. Mr. Pearlman was a board member of Forbes Media LLC from 2009 to 2014. He joined the board of CHM Holdings LLC in 2015. Mr. Pearlman continues to serve on the board of the YRF Darca charity and the Jericho Athletic Association charity.
Mr. Pearlman has over 25 years of experience within private equity, including as a partner and co-founder, providing a strong understanding of performance management, business models, corporate finance and capital management. His current role as Managing Director at Elevation Partners provides significant experience of the digital world and technology. As a result of his financial and investment management experience, Mr. Pearlman also serves as a member of the Compensation, Corporate Governance and Nominating and Investment Committees.
Ronald Pressman.
Mr. Pressman has been a director of the Company since November 17, 2011. Mr. Pressman was appointed as Executive Vice President and Chief Executive Officer of TIAA Institutional Financial Services in September 2015, having previously served as Chief Operating Officer of TIAA from January 2012 until September 2015. Previously, he worked at General Electric (“GE”) Corporation for 31 years, where he was most recently President and Chief Executive Officer of GE Capital Real Estate from 2007 until 2011. From 2000 to 2007, Mr. Pressman also served as President and Chief Executive Officer of GE Asset Management and as Chairman, Chief Executive Officer and President of Employers Reinsurance. Earlier in his career, Mr. Pressman led GE energy businesses in Europe, the Middle East, Africa, Southwest Asia and the United States. Mr. Pressman previously served as a member of the board of New York Life Insurance Company from November 2011 until January 2012. Mr. Pressman currently serves as a director on the board of The American Council of Life Insurers and as a director of Pathways to College, a non-profit organization that prepares young people from deprived communities for college. He is also a charter trustee of Hamilton College and a member of the Business Higher Education Forum. From 2006 until 2016, Mr. Pressman also served as Chairman of the national board of A Better Chance, a non-profit organization which provides leadership development opportunities for children of color in the United States.
Mr. Pressman has over 30 years of experience within the financial services sector, in particular real estate, asset management and reinsurance, having worked at GE for over 30 years and served as Chief Operating Officer of TIAA until his appointment as Executive Vice President and Chief Executive Officer of TIAA Institutional Financial Services in September 2015. With his varied experience across such sectors and having held senior positions, Mr. Pressman provides further insight on a wide-range of matters including operations, insurance industry and investment management expertise. As a result of his experience, Mr. Pressman also serves as Chair of the Compensation Committee and as a member of the Investment Committee.
Director Independence
The Board has adopted director independence standards to assist it in making determinations as to whether directors have any material relationships with the Company for purposes of determining such directors’ independence under the listing standards of the New York Stock Exchange and Rule 10A-3 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”). These director independence standards are available on the Company’s website at www.aspen.co.
Following a review of the directors’ current and recent business relationships as outlined above under “— Board of Directors of the Company” and in accordance with the Company’s director independence standards, the Board determined that Messrs. Ahamed, Beer, Botein, Cavoores, Gregg, Ireland, Mayr, Pearlman and Pressman and Ms. Hutter are independent directors.
Committees of the Board of Directors
As of March 1, 2017, the Board had the following committees:
Audit Committee:
The Audit Committee is currently composed of Messrs. Ireland, Beer, Gregg, Mayr and Ms. Hutter and is chaired by Mr. Ireland. The Audit Committee has general responsibility for the oversight and supervision of our accounting, reporting and financial control practices. Among other things, the Audit Committee annually reviews the qualifications of the independent auditors, makes recommendations to the Board as to their selection and reviews the plan, fees and results of their audit. The Board determined that Messrs. Beer and Ireland each qualify as an “audit committee financial expert” pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The Audit Committee held four meetings during
2016
.
Compensation Committee:
The Compensation Committee is currently composed of Messrs. Pressman, Gregg, Pearlman and Mayr and is chaired by Mr. Pressman. The Compensation Committee oversees our compensation and benefit policies and programs, including administration of our annual bonus pool funding and long-term incentive plans. Among other things, the Compensation Committee determines the compensation of the Chief Executive Officer, executive officers and key employees. The Compensation Committee held five meetings during
2016
.
Investment Committee:
The Investment Committee is currently composed of Messrs. Ahamed, Botein, Jones, Pearlman and Pressman and is chaired by Mr. Ahamed. The Investment Committee is an advisory committee to the Board which, among other things, formulates our investment policy and oversees all of our significant investing activities. The Investment Committee held five meetings during
2016
. As noted above, Mr. Ahamed will not stand for re-election at the Annual General Meeting.
Corporate Governance and Nominating Committee:
The Corporate Governance and Nominating Committee is currently composed of Ms. Hutter and Messrs. Cavoores and Pearlman and is chaired by Ms. Hutter. The Corporate Governance and Nominating Committee establishes, among other things, the Board’s criteria for selecting new directors and oversees the evaluation of the Board. The Corporate Governance and Nominating Committee held four meetings during
2016
.
Risk Committee:
The Risk Committee is currently composed of Messrs. Gregg, Beer, Cavoores, Ireland, Mayr and Ms. Hutter and is chaired by Mr. Gregg. Among other things, the Risk Committee is responsible for establishing our risk management strategy, approving our risk management framework, methodologies and policies, and reviewing our approach for determining and measuring our risk tolerances. The Risk Committee held five meetings during
2016
.
In addition, the Board may, from time to time, implement ad hoc committees for specific purposes. No ad hoc committees were established during
2016
.
Board Leadership Structure
We have separate Chief Executive Officer and Chairman positions in the Company. The Chief Executive Officer is responsible for the day-to-day management of the Company. The Chairman, who is not an employee of the Company or part of the Company’s management, provides the appropriate leadership role for the Board and is able to effectively facilitate the contribution of non-executive directors and constructive interaction between management (including executive directors) and the non-executive directors in assessing the Company’s performance, strategies and means of achieving them. As part of his leadership role, the Chairman is responsible for the Board’s effectiveness and sets the Board’s agenda in conjunction with the Chief Executive Officer.
Under the scope of his role as Chairman, Mr. Jones is more involved in the management of the Company than an independent director would be under U.S. practice and rules; however, his role and compensation under practices in other jurisdictions, such as in the United Kingdom, would not compromise his independence. The more specific chairman duties identified in Mr. Jones’ appointment letter result in greater time allocated for the operations of the Company than the other non-executive directors.
In addition, the Board has appointed Ms. Hutter in the role of Lead Independent Director in order to provide further balance to the leadership of non-executive directors. Under the scope of her role as the Company’s Lead Independent Director, Ms. Hutter has the following additional responsibilities:
•
coordinating and moderating executive sessions of the Board’s independent directors not less than once annually;
•
working closely with the Chairman and providing support in relation to the Board’s operations and governance processes;
•
acting as the principal liaison between the independent directors and the Chairman and the Chief Executive Officer;
•
monitoring, in conjunction with the Chairman, the process by which Board agendas are set to ensure the quality, quantity and timeliness of the flow of information from management that is necessary for the independent directors to perform their duties effectively and responsibly;
•
being available to the shareholders to address any concerns or issues; and
•
performing such other duties as the Board may from time to time delegate to the Lead Independent Director to assist the Board in the fulfillment of its responsibilities.
Attendance at Meetings by Directors
The Board conducts its business through its meetings and meetings of the committees. Each director is expected to attend each regularly scheduled meeting of the Board, the constituent committees on which that director serves and our annual general meeting of shareholders. The Board held six formal meetings in
2016
. All of the directors attended the 2016 annual general meeting of shareholders and at least 75% of the meetings of the Board and meetings of the committees on which they serve.
Non-Executive Directors
The Board has adopted a policy of regularly scheduled executive sessions where non-executive directors meet independently of management. The non-executive directors include all our independent directors and Mr. Jones, our Chairman. The non-executive directors held four executive sessions during
2016
. Mr. Jones presided at each executive session. In
2016
, we also held one executive session comprised solely of independent directors which was presided by Ms. Hutter, the Company’s Lead Independent Director.
Shareholders and other interested parties may communicate any queries or concerns to the non-executive directors by sending written communications by mail to Mr. Jones, c/o Company Secretary, Aspen Insurance Holdings Limited, 141 Front Street, Hamilton HM19, Bermuda, by e-mail to secretary@aspen.co or by fax to +1 (441) 295-1829.
Policy on Shareholder Proposals for Director Nominees
The Board has adopted procedures relating to director nominations and shareholder proposals, as described below.
Submission of Shareholder Proposals
. Shareholder proposals to be included in the Company’s proxy materials will be considered only if received not later than the close of business on the 120th day before the first anniversary of the date of the Company’s proxy statement in connection with the previous year’s annual general meeting of shareholders and if they comply with the requirements of Rule 14a-8 of the Exchange Act. The Company can exclude a shareholder proposal if it has failed one of the eligibility or procedural requirements of Rule 14a-8 of the Exchange Act. Accordingly, the Company may exclude such shareholder proposals even if received in a timely manner.
If shareholders wish to nominate their own candidates for director on their own separate slate (as opposed to recommending candidates to be nominated by the Company in the Company’s proxy), shareholder nominations for directors at the annual general meeting of shareholders must be received by the Company not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual general meeting of shareholders.
Disclosure Requirements
. A shareholder who wishes to submit a proposal or a nomination for consideration (a “Notice Shareholder”) should send a written notice by mail, c/o Company Secretary, Aspen Insurance Holdings Limited, 141 Front Street, Hamilton HM19, Bermuda, by e-mail to secretary@aspen.co or by fax to +1 (441) 295-1829 and include the following information:
(1) the Notice Shareholder’s name and address;
(2) a description of: (a) the Notice Shareholder’s beneficial ownership, whether direct or indirect, of (i) common or preferred shares of the Company, (ii) any option, warrant or other security or right convertible into or exercisable or exchangeable for common or preferred shares of the Company and (iii) any derivative instrument or contract, swap, right or other transaction or series of transactions that has the characteristics of a long position, has an exercise, conversion or settlement mechanic at a price or value related to or derived in whole or in part from the price or value of common or preferred shares
of the Company or is designed to produce economic benefits and risks that correspond substantially to the ownership of common or preferred shares of the Company (even if such benefits and risks are hedged or otherwise mitigated), (b) any stock borrowing, hedging or other arrangement entered into by the Notice Shareholder that is designed to reduce the economic risk of changes to the price or value of common or preferred shares of the Company or has the characteristics of a short position or otherwise provides an opportunity to profit from any decrease in the price or value of common or preferred shares of the Company, (c) any rights of the Notice Shareholder to dividends on common or preferred shares of the Company that are separate from the underlying shares, (d) any performance-related fees (other than asset-based fees) to which the Notice Shareholder is entitled based on any increase or decrease in the value of common or preferred shares of the Company and (e) any proxy, contract or other understanding or arrangement providing the Notice Shareholder with the right to vote any common or preferred shares of the Company;
(3) the information that would be required to be set forth in a Schedule 13D or an amendment to Schedule 13D by the Notice Shareholder and all information with respect to such person or the applicable nomination or proposal that would be required to be set forth in a Schedule 14A proxy statement; and
(4) a description of any agreements, arrangements or understandings between or among any Notice Shareholders in connection with the nomination or proposal, as applicable.
A Notice Shareholder shall also comply with any applicable requirements of the Exchange Act with respect to the matters covered by the Company’s procedures regarding shareholder proposals and nominations.
Nomination Requirements
. In addition, a shareholder’s notice of a nomination must include the following information:
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(1)
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the name and address of each director nominee (each, a “Nominee”);
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(2)
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the information required by (2) above under “—General Requirements” with respect to each Nominee;
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(3)
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all information with respect to each Nominee that would be required to be set forth in a Schedule 14A proxy statement, including each Nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected;
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(4)
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a description of any compensation and other material agreements, arrangements and understandings during the past three years, and any other material relationships, between or among any Notice Shareholder, on the one hand, and any Nominee, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 under Regulation S-K if a Notice Shareholder were the “registrant” for purposes of such rule and the Nominee were a director or executive officer of such “registrant”; and
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(5)
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a D&O questionnaire completed and signed by each Nominee (a form of which will be provided to the requesting shareholder and/or Nominee following written request to the Company Secretary).
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In addition, the Notice Shareholder shall promptly provide the Company with any other information requested by the Company that is reasonably required to allow the Company to determine the eligibility of a Nominee to serve as a director or that could be material to a shareholder’s understanding of the independence of a Nominee.
Proposal Requirements
. In addition, a shareholder’s notice of a proposal must include the following information:
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(1)
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a brief description of the proposal or other business desired to be brought before the general meeting and the reasons for it;
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(2)
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any material interests of a Notice Shareholder in such proposal or other business; and
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(3)
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the text of the proposal or other business (including the text of any resolutions or bye-law amendments proposed for consideration).
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Updates and Supplements.
A shareholder’s notice of a nomination or proposal must be updated and supplemented, as necessary, so that the information provided or required to be provided in such notice is true and correct as of, not only the date of the notice, but also the record date of the general meeting and the date that is ten business days prior to the date of the general meeting or any adjournment or postponement of such general meeting. Any required updates and supplements to the notice must be delivered to the Company Secretary at the principal executive offices of the Company not later than three business days after the record date of
the general meeting or not later than three business days after the date that is ten business days prior to the date of the general meeting or any adjournment or postponement of such general meeting, as applicable. In no case will the obligation to update or supplement the notice extend any applicable deadlines or enable a shareholder to amend or update any proposal or nomination or submit any new proposal or nomination (e.g., by changing or adding nominees or proposals or resolutions).
Process for Evaluation of Director Nominees.
The Corporate Governance and Nominating Committee has the authority and responsibility to lead the search for individuals qualified to become members of the Board to the extent necessary to fill vacancies on the Board or as otherwise desired by the Board. The Corporate Governance and Nominating Committee will identify, evaluate and recommend that the Board select director nominees for shareholder approval at the applicable annual meetings based on minimum qualifications and additional criteria that the Corporate Governance and Nominating Committee deems appropriate, taking into account the diversity and other needs of the Board. The Corporate Governance and Nominating Committee periodically reviews the Board’s membership to assure the appropriate balance of skills and characteristics. The Board believes that all directors of the Company should be persons who combine the highest standards of integrity and significant accomplishments in their chose field of endeavor and bring a diversity of experiences, skills and perspectives to the Board as well as knowledge in the areas of insurance, reinsurance, financial services and other aspects of the Company’s activities.
The Corporate Governance and Nominating Committee may in its discretion engage a third-party search firm and other advisors to identify potential nominees for director. The Corporate Governance and Nominating Committee may also identify potential director nominees through director and management recommendations, business, insurance industry and other contacts, as well as through shareholder nominations.
Qualifications for Director Nominees.
A nominee recommended for a position on the Board must meet the following minimum qualifications:
•
have the highest standards of personal and professional integrity;
•
have exhibited mature judgment through significant accomplishments in his or her chosen field of expertise;
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•
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have a well-developed career history with specializations and skills that are relevant to understanding and benefiting the Company;
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•
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be able to allocate sufficient time and energy to director duties, including preparation for meetings and attendance at meetings;
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•
be able to read and understand financial statements to an appropriate level for the exercise of his or her duties; and
•
be familiar with, and willing to assume, the duties of a director on the board of directors of a public company.
Certain additional criteria for consideration of a director nominee may include, but are not limited to, the following as the Corporate Governance and Nominating Committee sees fit:
•
the nominee’s qualifications and accomplishments and whether they complement the Board’s existing strengths;
•
the nominee’s leadership, strategic, or policy setting experience;
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•
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the nominee’s experience and expertise relevant to the Company’s insurance and reinsurance business, including any actuarial or underwriting expertise, or other specialized skills;
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•
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the nominee’s independence qualifications as defined by NYSE listing standards and the Company’s director independence standards;
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•
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the nominee’s actual or potential conflict of interest, or the appearance of any conflict of interest, in the best interest of the Company and its shareholders;
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the nominee’s ability to represent the interests of all shareholders of the Company; and
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•
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the nominee’s financial literacy, accounting or related financial management expertise as defined by NYSE listing standards, or qualifications as an audit committee financial expert as defined by SEC rules and regulations.
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Communications to the Board of Directors
The Board provides a process for shareholders and interested parties to send communications to the Board or any of the directors. Shareholders may send written communications to the Board or any one or more of the individual directors, including non-executive directors, by mail, c/o Company Secretary, Aspen Insurance Holdings Limited, 141 Front Street, Hamilton HM19, Bermuda, by e-mail to secretary@aspen.co or by fax to +1 (441) 295-1829. All communications will be referred to the Board or relevant directors.
Executive Officers
The table below sets forth certain information concerning our executive officers as of March 1, 2017:
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Name
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Age
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Position(s)
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Christopher O’Kane
(1)
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62
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Group Chief Executive Officer
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Brian Boornazian
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56
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Chairman of Aspen Re, President of Aspen Re America, Chief Executive Officer of North America and Performance Director of Aspen Re
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Michael Cain
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45
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Chief Executive Officer of Aspen Bermuda, Group General Counsel and Company Secretary
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David Cohen
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58
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President and Chief Underwriting Officer of Aspen Insurance
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Karen Green
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49
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Chief Executive Officer of Aspen U.K. and AMAL, Group Head of Corporate Development and Office of the Group Chief Executive Officer
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Emil Issavi
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44
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President and Chief Underwriting Officer of Aspen Re
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Scott Kirk
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43
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Group Chief Financial Officer
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Thomas Lillelund
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44
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Chief Executive Officer of Aspen Re
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Stephen Postlewhite
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45
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Chief Executive Officer of Aspen Insurance
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Richard Thornton
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45
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Group Chief Operating Officer and Group Head of Strategy
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Kate Vacher
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45
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Group Director of Underwriting
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___________
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(1)
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Biography available under “— Directors” above.
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Brian Boornazian.
Mr. Boornazian was appointed Chairman of our Aspen Reinsurance business segment (“Aspen Re”) in August 2012 and has also served as the Performance Director of Aspen Re, Chief Executive Officer of North America and the President of Aspen Re America since August 2012. He was previously Chief Executive Officer of Aspen Re from January 2010 to August 2012 and President of Aspen Re from June 2008 until January 2010. Prior to this, he was appointed Head of Reinsurance in May 2006 and joined Aspen in January 2004 as President of Aspen Re America. Mr. Boornazian also serves as a director on various boards of the Company’s U.S. subsidiaries. Prior to joining the Company, Mr. Boornazian was at XL Re America where he acted in several capacities, including Senior Vice President, Chief Property Officer (responsible for property facultative and treaty, as well as marine) and Chief Marketing Officer. Mr. Boornazian began his career at General Reinsurance Corporation (“Gen Re”)( and also held senior positions at NAC Re, Cologne Re of America and Guy Carpenter.
Michael Cain.
Mr. Cain was appointed Group General Counsel in March 2008 and as Chief Executive Officer of Aspen Bermuda in October 2014, having served as a director of Aspen Bermuda since July 2012. Mr. Cain was appointed Company Secretary in February 2016 and also serves as a director on various boards of the Company’s subsidiaries. Mr. Cain served as Head of Group Human Resources from June 2011 to September 2016. Prior to joining the Company, Mr. Cain served as Corporate Counsel and Company Secretary to Benfield Group Limited from 2002 to 2008. Previously, Mr. Cain worked at Barlow Lyde & Gilbert LLP and Ashurst LLP.
David Cohen.
Mr. Cohen was appointed President and Chief Underwriting Officer of Aspen Insurance in November 2015 and serves as a director on various boards of the Company’s subsidiaries. He has over 35 years of insurance industry experience. Most recently, he was Global Casualty Chief Underwriting Officer at Liberty International Underwriters (“LIU”) from June 2001 to October 2015 and was President of LIU U.S. from December 2006 to October 2015. Prior to this, he was President of Casualty at Tamarack American (a division of Great American Insurance Company) for five years and worked in the Excess Casualty Division at The Home Insurance Company for 10 years. He began his career at American International Group in 1980.
Karen Green.
Ms. Green has been Chief Executive Officer of Aspen U.K. and AMAL since March 2011 and a member of the board of directors of Aspen U.K. since March 2010 and AMAL since March 2008. She is also Group Head of Corporate Development and Office of the Group Chief Executive Officer. Ms. Green joined the Company in March 2005 as Head of Strategy and Office of the Chief Executive Officer. From 2001 until 2005, Ms. Green was a Principal with MMC Capital Inc. (now Stone Point Capital), a global private equity firm (formerly owned by Marsh and McLennan Companies Inc.). Prior to MMC Capital, Ms. Green was a director at GE Capital in London from 1997 to 2001 where she co-ran the Business Development team (responsible for mergers and acquisitions for GE Capital in Europe). She is a former director of the International Underwriting Association and an elected working member of the Council of Lloyd’s and a member of the Risk and Remuneration Committees of Lloyd’s.
Emil Issavi.
Mr. Issavi was appointed President of Aspen Re in September 2014 and has served as Chief Underwriting Officer of Aspen Re since August 2012. Mr. Issavi serves as a director on various boards of the Company’s subsidiaries. Mr. Issavi previously served as Executive Vice President of Aspen Re and Head of Casualty Reinsurance from July 2008 to July 2012 and Head of Casualty Treaty of Aspen Re America from July 2006 to June 2008. Prior to joining the Company, Mr. Issavi was at Swiss Re America where he was Senior Treaty Account Executive responsible for various global and national property and casualty clients from 2002 to 2006. Mr. Issavi began his reinsurance career at Gen Re as a casualty facultative underwriter.
Scott Kirk.
Mr. Kirk was appointed the Group Chief Financial Officer in December 2014. Prior to this appointment, Mr. Kirk served as the Chief Financial Officer of Aspen Insurance from October 2011 to December 2014, having previously served as Group Head of Finance from May 2009 to September 2011 and Group Financial Controller from September 2007 to April 2009. In addition, Mr. Kirk serves as a director on various boards of the Company’s subsidiaries. Prior to joining the Company, Mr. Kirk worked at Endurance Specialty Holdings Limited, joining Endurance Re America in New York after its formation in 2002. Previously, Mr. Kirk was at Trenwick International in London working in finance and treasury for three years. Mr. Kirk began his career as an auditor at KPMG, Brisbane and is a member of the Institutes of Chartered Accountants in both England and Wales and Australia.
Thomas Lillelund
. Mr. Lillelund was appointed Chief Executive Officer of Aspen Re in May 2016. He was previously Managing Director of Asia Pacific for Aspen Re since 2012, having joined the Company in 2008 as General Manager and Principal Officer of the Singapore branch. Mr. Lillelund served as the Chairman of the Singapore Reinsurance Association from 2014 to 2016 and was a member of the Board of the Singapore College of Insurance from 2015 to 2016. Prior to joining the Company, Mr. Lillelund spent four years at American International Group, Inc. where he was the Regional Vice President for Commercial Property in the South East Asia Region. Mr. Lillelund previously held management roles at Swiss Re in Hong Kong and South Africa. He began his underwriting career at Gen Re in the United States in 1995 and in this role undertook further study to become an Associate in Reinsurance (ARe) of the American Institute for Chartered Property Casualty Underwriters.
Stephen Postlewhite.
Mr. Postlewhite was appointed Chief Executive Officer of Aspen Insurance in May 2016. Prior to this appointment, Mr. Postlewhite served as Chief Executive Officer of Aspen Re from September 2014 to May 2016, Group Chief Risk Officer from February 2013 to September 2014, Head of Risk from November 2012 to February 2013, Chief Risk Officer of Aspen U.K. from September 2009 to October 2012 and Head of Risk Capital from September 2009 to October 2012. During 2012, he also served as Interim Group Chief Risk Officer. Mr. Postlewhite serves as a director on various boards of the Company’s subsidiaries. Prior to joining the Company in 2003, Mr. Postlewhite spent a year at the U.K. Financial Services Authority (now the Prudential Regulation Authority) working extensively on the development of the Individual Capital Assessment process for non-life insurers and nine years with KPMG, both in London and Sydney, working as a senior general insurance actuarial consultant, predominantly on London Market, Lloyd’s and reinsurance clients. He has been a fellow of the Institute of Actuaries since 2001. Prior to embarking on an actuarial career, Mr. Postlewhite worked as a management consultant for Andersen Consulting.
Richard Thornton.
Mr. Thornton was appointed Group Chief Operating Officer in December 2016 and has been Group Head of Strategy since March 2014. Mr. Thornton previously served as Group Chief Risk Officer from September 2014 to December 2016. In addition, Mr. Thornton has served as a director of Aspen European Holdings Limited since December 2015. Prior to joining the Company, Mr. Thornton was at Oliver Wyman since 1999 where he became a partner in 2007 and led content development for the firm’s general insurance business in the United Kingdom and Europe. His global remit provided him the opportunity to work internationally with large insurance companies in Asia, South Africa, Australia and North America and to gain a global overview of the market. Mr. Thornton worked on a wide variety of projects spanning life and general insurance, ranging from retail to global corporate and from strategy to operations, risk and finance. Previously, Mr. Thornton was an economist in the Bank of England’s monetary analysis division.
Kate Vacher.
Ms. Vacher was appointed Director of Underwriting in May 2006. Previously, Ms. Vacher served as Head of Group Planning from April 2003 to May 2006 and a property reinsurance underwriter since joining Aspen in September 2002 to May 2006. Ms. Vacher has been a member of the board of directors of AMAL since February 2010 and was appointed Chairman of Aspen Risk Management Limited in 2015. From February 2010 until March 2016, Ms. Vacher was the Active Underwriter for Syndicate 4711 (our syndicate at Lloyd’s). Prior to joining the Company, Ms. Vacher worked as an underwriter with Wellington Syndicate 2020 from 1999 until 2002 and was an assistant underwriter at Syndicate 51 from 1995 until 1999.
Role in Risk Oversight
In this section, we provide a summary of our risk governance arrangements and current risk management strategy. We also provide more detail on the management of core underwriting and market risks and on our internal model. The internal model is an economic capital model which has been developed internally for use in certain business decision-making processes, the assessment of risk-based capital requirements and for various regulatory purposes.
Risk Governance
Board of Directors.
The Board considers effective identification, measurement, monitoring, management and reporting of the risks facing our business to be key elements of its responsibilities and those of the Group Chief Executive Officer and management. Matters relating to risk management that are reserved to the Board include approval of the internal controls and risk management framework and any changes to the Group’s risk appetite statement and key risk limits. The Board also receives reports at each scheduled meeting from the Group Chief Risk Officer and the Chairman of the Risk Committee as well as training in risk management processes including the design, operation, use and limitations of the internal model. As a result of these arrangements and processes,
the Board, assisted by management and the Board Committees, is able to exercise effective oversight of the operation of the risk management strategy described in “Risk Management Strategy” below.
Board Committees.
The Board delegates oversight of the management of certain key risks to its Risk, Audit and Investment Committees. Each of the committees is chaired by an independent director of the Company who also reports to the Board on the committees’ discussions and matters arising.
Risk Committee:
The purpose of this committee is to assist the Board in its oversight duties in respect of the management of risk, including:
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•
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making recommendations to the Board regarding management’s proposals for the risk management framework, risk appetite, key risk limits and the use of our internal model;
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•
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monitoring compliance with the agreed Group risk appetite and key risk limits; and
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•
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oversight of the process of stress and scenario testing established by management.
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Audit Committee:
This committee is primarily responsible for assisting the Board in its oversight of the integrity of the financial statements. It is also responsible for reviewing the adequacy and effectiveness of the Company’s internal controls and receives regular reports from both internal and external audit in this regard.
Investment Committee:
This committee is primarily responsible for setting and monitoring the Group’s investment risk and asset allocation policies and ensuring that the Chairman of the Risk Committee is kept informed of such matters.
Management Committees.
The Group also has a number of executive management committees which have oversight of certain risk management processes including the following:
Group Executive Committee:
This is the main executive committee responsible for advising the Group Chief Executive Officer on matters relating to the strategy and conduct of the Group’s business.
Capital and Risk Principles Committee:
The primary purpose of the Capital and Risk Principles Committee is to assist the Group Chief Executive Officer and the Group Chief Risk Officer in their oversight duties in respect of the design and operation of the Group’s risk management systems. In particular, it has specific responsibilities in relation to the internal model and for the establishment of risk limits for accumulating underwriting exposures and monitoring solvency and liquidity requirements.
Reserve Committee:
This committee is responsible for managing reserving risk and making recommendations to the Group Chief Executive Officer and the Group Chief Financial Officer relating to the appropriate level of reserves to include in the Group’s financial statements.
Underwriting Committee:
The purpose of this committee is to assist the Group Chief Executive Officer in his oversight duties in respect of the management and control of underwriting risk, including oversight of the independent review of the quality of each team’s underwriting.
Reinsurance Credit Committee:
The purpose of this committee is to seek to minimize credit risks arising from insurance and reinsurance counterparties by the assessment and monitoring of collateralized reinsurance arrangements, direct cedants, intermediaries and reinsurers.
Group Chief Risk Officer.
Among other things, our Group Chief Risk Officer provides the Board and the Risk Committee with reports and advice on risk management issues.
Risk Management Strategy
We operate an integrated enterprise-wide risk management strategy designed to deliver shareholder value in a sustainable and efficient manner while providing a high level of policyholder protection. The execution of our integrated risk management strategy is based on:
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•
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the establishment and maintenance of a risk management and internal control system based on a three lines of defense approach to the allocation of responsibilities between risk accepting units (first line), risk management activity and oversight from other central control functions (second line) and independent assurance (third line);
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•
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identifying material risks to the achievement of the Group’s objectives including emerging risks;
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•
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the articulation at Group level of our risk appetite and a consistent set of key risk limits for each material component of risk;
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•
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the cascading of key risk limits for material risks to each operating subsidiary and, where appropriate, risk accepting business units;
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•
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measuring, monitoring, managing and reporting risk positions and trends;
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•
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the use, subject to an understanding of its limitations, of the internal model to test strategic and tactical business decisions and to assess compliance with the risk appetite statement; and
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•
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stress and scenario testing, including reverse stress testing, designed to help us better understand and develop contingency plans for the likely effects of extreme events or combinations of events on capital adequacy and liquidity.
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Risk Appetite Statement.
The risk appetite statement is a central component of the Group’s overall risk management framework and is approved by the Board. It sets out, at a high level, how we think about risk in the context of our business model, Group objectives and strategy. It sets out boundary conditions and limits for the level of risk we assume, together with a statement of the reward we aim to receive for this level of risk.
Our risk appetite statement comprises the following components:
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•
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Risk preferences:
a high level description of the types of risks we prefer to assume and those we prefer to minimize or avoid;
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•
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Return objective:
the levels of return on capital we seek to achieve, subject to our risk constraints;
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•
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Volatility constraint:
a target limit on earnings volatility; and
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•
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Capital constraint:
a minimum level of risk adjusted capital.
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Risk Components.
The main types of risks that we face are summarized as follows:
Insurance risk:
The risk that underwriting results vary from their expected amounts, including the risk that reserves established in respect of prior periods differ significantly from the level of reserves included in the Group’s financial statements.
Market risk:
The risk of variation in the income generated by, and the fair value of, our investment portfolio, cash and cash equivalents and derivative contracts including the effect of changes in foreign currency exchange rates.
Credit risk:
The risk of diminution in the value of insurance receivables as a result of counter-party default. This principally comprises default and concentration risks relating to amounts receivable from intermediaries, policyholders and reinsurers. We include credit risks related to our investment portfolio under market risk. We include credit risks related to insurance contracts (
e
.
g
., credit and political risk policies) under insurance risk.
Liquidity risk:
The risks of failing to maintain sufficient liquid financial resources to meet liabilities as they fall due or to provide collateral as required for commercial or regulatory purposes.
Operational risk:
The risk of loss resulting from inadequate or failed internal processes, personnel or systems, or from external events.
Strategic risk
: The risk of adverse impact on shareholder value or income and capital of adverse business decisions, poor execution or failure to respond to market changes.
Regulatory risk
: The risk of non-compliance with regulatory requirements, including ensuring we understand and comply with changes to those requirements. There is a residual risk that changes in regulation impact our ability to operate profitably in some jurisdictions or some lines of business.
Taxation risk
: The risk that we do not understand, plan for and manage our tax obligations. There is a residual risk that changes in taxation impact our ability to operate profitably in some jurisdictions or some lines of business.
Emerging risk
: The risk that events or issues not previously identified or fully understood impact the operations or financial results of the Group.
We divide risks into “core” and “non-core” risks. Core risks comprise those risks which are inherent in the operation of our business, including insurance risks in respect of our underwriting operations and market and liquidity risks in respect of our investment activity. We intentionally expose the Company to core risks with a view to generating shareholder value but seek to manage the resulting volatility in our earnings and financial condition within the limits defined by our risk appetite. However, these core risks are intrinsically difficult to measure and manage and we may not, therefore, be successful in this respect. All other risks, including
regulatory and operational risks, are classified as non-core. We seek, to the extent we regard as reasonably practicable and economically viable, to avoid or minimize our exposure to non-core risks.
Key Risk Limits.
We use the term risk limit to mean the upper limit of our tolerance for exposure to a given risk. Key risk limits are a sub-set of risk limits and are subject to annual approval by the Board on the advice of the Risk Committee as part of the annual business planning process. If a risk exceeds key risk limits, the Group Chief Risk Officer is required to report the excess and management’s plans for dealing with it to the Risk Committee.
Code of Business Conduct and Ethics, Corporate Governance Guidelines and Committee Charters
We have adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) and Corporate Governance Guidelines (the “Governance Guidelines”) that apply to all of our employees, officers and directors. The Code of Conduct and Governance Guidelines outline the policies, principles, rules, regulations and law that govern the activities of the Company and its employees, officers and directors and establish guidelines for professional conduct in the workplace. Any waiver of a provision of the Code of Conduct for our directors and executive officers may be made only by the Audit Committee. We have posted the Code of Conduct and the Governance Guidelines on our website at www.aspen.co.
The charters for each of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are also posted on our website at www.aspen.co. Shareholders may request printed copies of the Code of Conduct, the Governance Guidelines and the committee charters at no charge by writing to the Company Secretary, Aspen Insurance Holdings Limited, 141 Front Street, Hamilton, HM19, Bermuda.
Review and Approval of Transactions with Related Persons
The review and approval of any direct or indirect transactions between the Company and “related persons” (
i
.
e
., directors, executive officers, principal shareholders owning 5% or more of the Company’s ordinary shares or any of their immediate family members) is governed by our Code of Business Conduct and Ethics which provides guidelines for any transaction which may create a conflict of interest between us and our employees, officers or directors and members of their immediate family. Pursuant to our Code of Business Conduct and Ethics, we will review personal benefits received, personal financial interest in a transaction and certain business relationships in evaluating whether a conflict of interest exists. The Audit Committee is responsible for applying the Company’s conflict of interest policy and approving certain individual transactions. The Company has no related party transactions.
Compensation Committee Interlocks and Insider Participation
During the year ended December 31,
2016
, none of the directors that served on the Compensation Committee served as an officer or employee of the Company or any of its subsidiaries. In addition, none of our executive officers served as a member of the Compensation Committee or as a director of another entity, one of whose executive officers served on our Compensation Committee or as one of our directors.
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COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis describes the overall objectives of our compensation program, each element of compensation and key compensation decisions that the Compensation Committee has made under our compensation program and the factors considered in making those decisions. This Compensation Discussion and Analysis also provides information regarding the compensation of our (i) Chief Executive Officer, (ii) Chief Financial Officer, (iii) the three most highly compensated executive officers for 2016, not including the Chief Executive Officer and the Chief Financial Officer, and (iv) the former Chief Executive Officer of Aspen Insurance and the former President of Aspen U.S. Insurance, each of whom would have been included in the three most highly compensated executive officers for 2016 but for the fact that they were no longer employed by the Company as of December 31, 2016 (collectively, the “NEOs”). The NEOs who were actively employed by us on December 31, 2016 are referred to in this Proxy Statement as the “continuing NEOs.”
Executive Summary
In 2016, our Say-On-Pay Vote received overwhelming support with approximately 95% of shareholders voting in favor of our compensation program, which we believe evidences our shareholders’ support for our NEOs’ compensation arrangements and our general executive compensation practices. We believe this strong support is the result of the Company’s executive compensation program being designed to align pay and performance and reflect market competitiveness and industry best practice.
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Our 2016 Named Executive Officers
Christopher O’Kane
Group Chief Executive Officer
Scott Kirk
Group Chief Financial Officer
Thomas Lillelund
Chief Executive Officer of Aspen Re
Stephen Postlewhite
Chief Executive Officer of Aspen Insurance
Brian Boornazian
Chairman of Aspen Re
Mario Vitale
Former Chief Executive Officer of Aspen Insurance
Robert Rheel
Former President of Aspen U.S. Insurance
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Reflecting the Compensation Committee’s desire to maintain a strong and effective compensation program which is aligned with shareholder interests over the short term and long term, the Compensation Committee reviews all elements of our executive compensation program regularly to ensure that its overall design continues to support the Company’s financial, operational and strategic program. The Compensation Committee decided to retain the core design of our executive compensation program in fiscal year
2016
as it believes that it continues to properly reward executives for their performance, motivate them to work towards achieving our long-term objectives and strengthen the alignment of their interests with those of our shareholders.
Given the Company’s performance in 2016 (as further described under “— Overview of 2016 Results” below) and taking into account our bonus formula, actual line of business performance and the actions taken by management in Aspen Insurance which we believe will ultimately generate greater shareholder value, the Compensation Committee approved an overall bonus pool funding of
70%
of target for the Company. In addition, based on the Company’s
2016
adjusted annual growth in diluted book value per ordinary share (“BVPS”) test for purposes of the vesting condition for its performance and phantom shares, one-third of each of the
2014
-
2016
,
2015
-
2017
and
2016
-
2018
performance share cycles vested at
34.2%
.
Our Board unanimously recommends that shareholders vote “FOR” the approval of the compensation of our NEOs as disclosed in this Proxy Statement. For more information, see Proposal 2 “Non-Binding Advisory Vote on Executive Compensation.”
Overview of 2016 Results
The insurance industry continued to be challenged in 2016 as a result of the impact of rate reductions across many lines of business and the low interest rate environment. These factors impacted our business and contributed to our delivery of a net income return on equity of 5.4% for 2016 and a 1.6% growth in diluted BVPS. In addition, we took a number of deliberate steps in 2016 to reposition our insurance business which also had an impact on short-term profitability. Notwithstanding, we made solid progress on our business optimization initiatives and further diversified our business by product and geography. We achieved this despite an increase in catastrophe losses and mark-to-market losses from our investment portfolio in 2016.
Our new insurance segment leadership team, led by Steve Postlewhite, Chief Executive Officer of Aspen Insurance, and David Cohen, President and Chief Underwriting Officer of Aspen Insurance, completed a thorough review of our insurance portfolio in 2016 and identified the best opportunities for long-term profitable growth. This review found that most insurance lines were meeting or exceeding our requirements for profitability and stability of returns. The review also identified certain accounts that we chose not to continue to write because we believed the level of volatility was too high or the returns were not expected to meet our current requirements. In total, we chose to not renew approximately $150 million of insurance business, or approximately 5% of our total portfolio, during 2016.
The review also resulted in a restructure of our ceded reinsurance arrangements which we expect will reduce volatility and, over time, benefit our expense ratio. As part of the decision to exit certain accounts, we also purchased additional reinsurance to substantially mitigate any potential residual risk from the run-off of some of the discontinued business. While these actions adversely impacted our performance in 2016, we do not believe they are a reflection of our underlying business. Ultimately, we believe these actions will lead to greater shareholder value as a result of expected lower earnings volatility, a lower expense ratio and greater flexibility in deciding where to deploy our capital.
Our reinsurance business segment, Aspen Re, continued to perform well in 2016. We diversified by product line through the acquisition of AG Logic Holdings, LLC (“AgriLogic”) in 2016 which significantly increased our exposure to U.S. agriculture business. In addition, we expect our regional strategy will continue to enable us to achieve profitable growth with the expansion of our presence in the Middle East and Africa through the opening of a hub in Dubai, and further penetration in Asia-Pacific with our office in Australia and in China through Lloyd’s. Our Aspen Capital Markets team also continued to effectively leverage Aspen Re’s underwriting expertise to continue to provide investors with access to diversified catastrophe risk backed by Aspen Re’s existing underwriting franchise.
A full description of our performance can be found in the Company’s Form 10-K for the fiscal year ended
December 31, 2016
filed with the SEC on February 22, 2017.
2016
Performance Highlights
The following table highlights our
2016
performance by setting forth the year-over-year comparison of some of our key financial metrics during the past three fiscal years:
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Key Metric
(1)
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2016
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2015
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2014
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Net Income Return on Equity
(2)
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5.4%
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10.0%
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11.1%
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Operating Return on Equity
(3)
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4.8%
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10.0%
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11.5%
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Diluted Book Value per Ordinary Share
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$46.72
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$46.00
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$45.13
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Adjusted Diluted Book Value per Ordinary Share Growth
(4)
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5.9%
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10.7%
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13.3%
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Combined Ratio
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98.5%
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91.9%
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91.7%
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Gross Written Premiums
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$3.15 Bn
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$3.00 Bn
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$2.90 Bn
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Diluted Net Income per Share
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$2.61
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$4.54
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$4.82
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(1)
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Certain of these metrics are not calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). For reconciliations of these metrics to the most comparable U.S. GAAP financial measure, please see Appendix A “Reconciliation of Non-U.S. GAAP Financial Measures.”
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(2)
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Net income return on equity is calculated using net income after tax less preference share dividends and non-controlling interests, divided by average equity.
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(3)
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Operating return on equity is calculated using operating income after tax less preference share dividends and non-controlling interest, divided by average equity.
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(4)
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Adjusted diluted book value per ordinary share growth, a test for purposes of the vesting condition of our performance shares, was
5.9%
for
2016
. Adjusted diluted book value per ordinary share as of
December 31, 2016
is calculated using the adjusted total shareholders’ equity of
$2,907.6 million
, less ordinary dividends of
$52.7 million
, divided by the number of diluted ordinary shares outstanding as of
December 31, 2016
of
61,001,071
, plus
$0.87
dividends per ordinary share distributed in 2016. This is compared to the adjusted diluted book value per ordinary share as of
December 31, 2015
, which is calculated using the adjusted total shareholders’ equity as at
December 31, 2015
of
$2,854.1 million
, less
$50.9 million
of ordinary dividends issued in
2015
, divided by the number of diluted ordinary shares outstanding as of
December 31, 2015
of
62,240,466
.
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2016
Compensation Highlights
A substantial portion of total compensation awarded to the NEOs is performance-based and is composed of short-term annual bonus awards and long-term equity awards. Our key compensation actions for
2016
reflect our financial performance in what continues to be a challenging environment. At the same time, however, the Compensation Committee believes that it is appropriate to reflect and reward, where relevant, work undertaken to achieve the Company’s long-term strategic goals even when such work may have a negative impact in the current financial year.
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•
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Based on the Company’s overall performance for
2016
and taking into account our bonus formula, actual line of business performance and the actions taken by management in Aspen Insurance which we believe will ultimately generate greater shareholder value, the Compensation Committee approved an overall bonus pool funding of
70%
of target for the Company. See “— Elements of Compensation — Annual Cash Incentive — Bonus Pool and Actual Award Levels” below for additional information.
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•
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Based on our
2016
adjusted annual growth in diluted BVPS test for purposes of the vesting condition for our performance shares, one-third of each of the
2014
-
2016
,
2015
-
2017
and
2016
-
2018
performance share cycles vested at
34.2%
. See “— Elements of Compensation — Long-Term Equity Incentives” below for additional information.
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•
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To better align employees’ long-term interests with those of the Company, the Compensation Committee agreed to extend the Company’s clawback policy, which originally applied to bonus and long-term incentive awards granted to executive
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officers, to all of the Company’s employees. In October 2016, the Compensation Committee also adopted a malus policy for all of the Company’s employees. See “— Clawback and Malus Policies” below for additional information.
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Effective January 1, 2016, the remuneration requirements set out in Article 275 of the European Commission Delegated Regulation 2015/35 (“Article 275”) came into effect for our U.K. operating subsidiaries. As a result, a number of specific remuneration arrangements are required for employees that are deemed to have a material impact on the risk profile of our U.K. operating subsidiaries, including certain of the NEOs. See “— Solvency II Remuneration Requirements” below for additional information.
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The following table illustrates the compensation decisions made for our continuing NEOs in respect of performance in
2016
and demonstrates the differential between actual earned compensation and target compensation.
The value of the restricted share units and the performance shares granted in
2016
in the table above is based on the grant date fair values of the awards calculated in accordance with FASB ASC Topic 718, without regard to forfeitures related to service-based vesting conditions. The “Actual” column in respect of the performance shares granted in
2016
represents
34.2%
of one-third of the grant which has been earned based on our growth in diluted BVPS of
5.9
% in
2016
and assumes 100% vesting for the remaining two tranches. The restricted share units granted to Messrs. O’Kane and Kirk on February 8, 2016 as part of their 2015 annual bonus are not included in the table above since those awards were for 2015 performance even though they are reported in the 2016 Summary Compensation Table below.
The Link Between Pay and Performance
We did not make significant changes to our executive compensation programs in
2016
. We continue to maintain a strong link between pay and performance, while balancing our performance and retention objectives, and to align our compensation programs with our objectives and compensation philosophy.
When analyzing its approach to pay for performance, the Compensation Committee seeks to assess performance across all aspects of our business. The Company’s underwriting business is made up of a number of lines which collectively achieve our diversified approach to business. The financial performance of each line of business can vary from time to time, both from each other and from the overall Company performance. In order to maintain our strategic position and reflecting market competitiveness across lines, the Compensation Committee seeks, where relevant, to understand the financial performance across each line of business rather than solely in our reported sub-segments and ensure that our compensation programs respond accordingly. When analyzing pay for performance, the Compensation Committee likewise considers the short-term financial impact of deliberate management actions designed to achieve long-term shareholder value, such as the actions taken in respect of Aspen Insurance in 2016 described under “— Overview of 2016 Results” above.
Each year, the Compensation Committee engages its independent advisor, Willis Towers Watson, to conduct a review of the alignment between our pay and performance for our Chief Executive Officer as compared to our peers. For the five-year period from January 1, 2011 through December 31, 2015, Willis Towers Watson reviewed the relative realizable pay of Mr. O’Kane as compared to the following three key financial measures for our industry and shareholders: total shareholder return, return on equity and diluted
BVPS. For the purpose of this analysis, realizable pay is defined as base salary, actual annual bonus paid and the current value of long-term incentives earned within the period (the market value of restricted share units, the in-the-money value of share options vested as of December 31, 2015 and the market value or cash value of any actual award earned or vested and issued under a performance plan).
Based on this analysis, the Compensation Committee believes that Mr. O’Kane’s realizable pay relative to peers is at a level that is supported by the Company’s relative performance measured by the selected key financial measures, whether the metrics are considered individually or in the aggregate. The Compensation Committee came to this conclusion because Mr. O’Kane’s realizable pay and performance are aligned over one-, three- and five-year periods.
Our Executive Compensation Program and Philosophy
We encourage a performance-based culture throughout the Company and at senior levels we have developed an approach to compensation that aligns the executive’s compensation with his or her performance and contribution to the results of the Company while reflecting an assessment of performance across all aspects of our business. Overall, our compensation programs are designed to align variable compensation decisions for individual executives to the achievement of the financial and strategic goals of the Company and, where relevant, the financial and strategic goals of the division in which the executive is principally engaged. At the same time, however, we believe that it is appropriate for the Compensation Committee to consider other aspects of performance which seek to generate long-term value but may impact the Company’s short-term financial goals. In addition, our compensation programs are designed to meet high governance standards and maintain an appropriate level of risk.
Our target incentive compensation opportunities are aligned with peer market practices. The Compensation Committee seeks to target total compensation approximating the median for the Company’s peer group. The actual payout will depend on actual performance and may be below or above the median of the Company’s peer group as warranted by performance.
The three elements of total direct compensation for our executives are (i) base salary, (ii) annual bonus and (iii) long-term incentive awards. Unlike base salary, which is non-discretionary compensation, annual bonus and long-term incentive awards each represent variable compensation. These three elements are balanced such that each executive has an appropriate amount of long-term pay that is contingent on performance.
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Compensation
Element
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Key Philosophical Underpinning
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Base Salary
|
• Attract and retain key talent
• Provide financial certainty and stability
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Annual Cash Incentive
|
• Incentivize and motivate executives to meet or exceed our short-term business and financial objectives
• Promote team orientation by encouraging participants in all areas of the Company to work together to achieve common Company goals
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Long-Term Incentive
(Performance Shares, Phantom Shares and Restricted Share Units)
|
• Incentivize and motivate executives to achieve key long-term business priorities and objectives
• Align executives’ interests with shareholders’ interests
• Foster a long-term focus to increase shareholder value
• Attract and retain key talent
• Encourage executive share ownership
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As illustrated in the graphics below, a substantial majority of each NEO’s target compensation for
2016
was delivered through variable compensation which is contingent on performance (
84%
for the Chief Executive Officer and 79% on average for the other continuing NEOs).
We also provide our continuing NEOs with employee benefits and perquisites and severance and double-trigger change of control benefits as further outlined in the table below.
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Compensation Element
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Key Philosophical Underpinning
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Benefits and Perquisites
|
• Attract and retain key talent
• Provide for safety and wellness of executives
• Provide financial security for retirement
• Enhance executive productivity
• Provide certain expatriate relocation needs as well as specific local market practices that are competitive
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Severance and Double-Trigger
(1)
Change of Control Benefits
|
• Attract and retain key talent
• Provide financial security in the event of termination
• Allow our executives to continue to focus their attention on our business operations in the face of the potentially disruptive impact of a change of control transaction and allow our executives to assess potential strategic actions objectively without regard to the potential impact on their own job security
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(1)
|
A double-trigger clause requires two distinct events to trigger the acceleration of vesting of stock awards. One event is a change in control of the Company, and the other event is termination of the employee without cause or for good reason.
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All elements of total compensation are considered together rather than in isolation. This process ensures that judgments made in respect of any individual element of compensation are taken in the context of the total compensation that an individual receives, particularly the balance between base salary, annual bonus and long-term incentive awards.
Market Intelligence
A core principle of our compensation program and philosophy is that shareholders are best served when the compensation packages of our senior executives are competitive and fair. A fair compensation package is one that reflects the executive’s market value and personal contribution to the business. To ensure our compensation levels and programs are competitive with those companies with which we compete for talent, we review external market data including:
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●
research of peer company proxy and/or annual reports;
●
pu
blicly available compensation surveys from reputable survey providers;
●
advice and tailored research from compensation consultants; and
●
experience with recruiting senior positions in the marketplace.
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Our Market for Talent
Our business model is unique in that we are a U.S.-listed company, domiciled in Bermuda but with significant operations in the U.K. As we employ senior executives in all three markets, our compensation plans strive to be considerate of the varying nature of these geographies. In addition, we operate in both the insurance and reinsurance businesses, whereas many of our competitors for executive talent focus on one primary business.
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We utilize a peer group for purposes of reviewing our executive compensation levels and programs. Our peer group, described in the table below, is regularly reviewed and reflects companies similar to us in terms of size and business mix and reflects those companies we compare to in terms of assessing our business performance.
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Peer Group
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|
Alleghany Corporation
|
Everest Re Group, Ltd.
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Allied World Assurance Company Holdings, AG
(1)
|
Hiscox Ltd.
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Amlin Plc
(2)
|
Markel Corporation
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Arch Capital Group Ltd.
|
PartnerRe Ltd.
(3)
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Argo Group International Holdings Ltd.
|
RenaissanceRe Holdings Ltd.
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Axis Capital Holdings Limited
|
Validus Holdings, Ltd.
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Beazley Plc
|
White Mountains Insurance Group, Ltd.
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Endurance Specialty Holdings Ltd.
(4)
|
XL Group plc
|
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