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Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
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Long-Term Incentive Plan 2016-2018 PAU Performance Cycle
State Auto Financial Corporation (the "
Company
"
) had a Long-Term Incentive Plan, effective January 1, 2007 ("
2007 LTIP
"), under which grants of cash-based performance award units ("
PAUs
"
) were made to its Named Executive Officers ("
NEOs
") and other members of its leadership team. The value of a PAU granted under the 2007 LTIP depends on the State Auto Group's
1
relative performance compared to a peer group of other property and casualty insurers (the
"
LTIP Peer Group"
) during a three-year performance period. The value of the PAU awards to the NEOs for the three-year performance period ended December 31, 2018 (the "
2016-2018 performance period
"
) was omitted from the Company's definitive Proxy Statement dated March 22, 2019 (the "
2019 Proxy Statement
"
) because, as of that date, the final LTIP Peer Group data for the 2016-2018 performance period was not available to the Company.
On May 9, 2019, the Company's Compensation Committee approved PAU awards for the 2016-2018 performance period for the NEOs identified in the 2019 Proxy Statement. Set forth below are the non-equity incentive compensation and total compensation for each NEO reported in the Summary Compensation Table on Page 56 of the 2019 Proxy Statement, as recalculated to include the value earned with respect to the PAU awards for the 2016-2018 performance period.
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Named Executive Officer
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Year
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Non-Equity
Incentive Plan
Compensation
($)(1)
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Total Compensation
($)
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Michael E. LaRocco
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2018
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2,524,925
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6,844,859
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Steven E. English
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2018
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785,543
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2,410,938
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Kim B. Garland
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2018
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739,515
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2,313,691
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Paul M. Stachura
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2018
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561,371
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1,944,117
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Gregory A. Tacchetti
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2018
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563,464
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1,978,100
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(1) For the total 2018 non-equity incentive plan compensation, the dollar amounts shown in this column reflect the aggregate amount of the following awards earned by each NEO under the 2007 LTIP and the One Team Incentive Plan (the "OTIP").
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Named Executive Officer
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PAU Award ( $)
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OTIP Award
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Total Non-Equity Incentive Plan Compensation Awards
($)
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Michael E. LaRocco
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652,925
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1,872,000
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2,524,925
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Steven E. English
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204,225
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581,318
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785,543
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Kim B. Garland
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181,916
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557,599
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739,515
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Paul M. Stachura
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132,371
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429,000
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561,371
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Gregory A. Tacchetti
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124,714
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438,750
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563,464
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____________________________________
1
The State Auto Group refers to (1) the insurance subsidiaries of State Auto Financial Corporation: State Auto Property & Casualty Insurance Company ("State Auto P&C"), Milbank Insurance Company ("Milbank") and State Auto Insurance Company of Ohio ("SAOH") and to (2) State Automobile Mutual Insurance Company ("State Auto Mutual") and its insurance subsidiaries and affiliates: State Auto Insurance Company of Wisconsin ("SAWI"), Meridian Security Insurance Company ("Meridian"), Patrons Mutual Insurance Company of Connecticut ("Patrons"), Rockhill Insurance Company ("RIC"), Plaza Insurance Company ("Plaza"), American Compensation Insurance Company ("ACIC") and Bloomington Compensation Insurance Company ("BCIC").
2018 CEO PAY RATIO
The amount earned in 2018 by our CEO with respect to the PAUs granted to him under the 2007 LTIP for the 2016-2018 performance period was not calculable as of the date of the 2019 Proxy Statement because the final performance data for the 2016-2018 performance period that determines the number of PAUs earned was not available at that time. As a result, we omitted the CEO
pay ratio disclosure required by Item 402(u) of Regulation S-K from the Proxy Statement and have included the required CEO pay ratio disclosure in this Current Report on Form 8-K as permitted by Instruction 6 to Item 402(u) of Regulation S-K.
We determined that for the year ended December 31, 2018:
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the annual total compensation of our CEO, Michael E. LaRocco, was $6,844,859;
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the annual total compensation of our median employee was $83,817; and
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the ratio of the total compensation of our CEO to the annual total compensation of our median employee was these amounts was 82 to 1.
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As permitted by SEC rules, we used the same median employee that we identified for purposes of our 2017 pay ratio disclosure to calculate our 2018 pay ratio. We believe our continued use of the median employee we identified for 2017 is appropriate because there has been no change in our employee population or employee compensation arrangements since we identified the median employee that we believe would significantly impact our pay ratio disclosure.
We identified our median employee for our 2017 pay ratio using the following methodology. To identify the median of the annual total compensation of all of our 2,002 active employees as of December 22, 2017, including any full-time, part-time or seasonal employees but excluding our CEO, we used W-2, Box 5 earnings for 2017 and chose one of the two individuals identified at the median due to an even number of employees in our population. We consistently applied this compensation measure and methodology to all of our employees included in the calculation.
We determined the median employee's annual total compensation in the same manner that we determine the total compensation of our named executive officers for purposes of the Summary Compensation Table. With respect to the annual total compensation of our CEO, we used the amount for 2018 reported in the "Total Compensation" column of the Summary Compensation Table set forth above in this Current Report on Form 8-K.
The SEC rules for identifying the median employee and calculating the pay ratio based on that employee's annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.