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| Item 2.02 | Results of Operations and Financial Condition. |
On August 1, 2022, James River Group Holdings, Ltd. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this “Form 8-K”).
The information in this Item 2.02 and in Exhibit 99.1 furnished herewith shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act unless specifically stated by the Company.
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Item 5.02
| Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On July 26, 2022, the board of directors (the “Board”) of the Company, acting at the recommendation of the Compensation Committee of the Board, approved the James River Group Holdings, Ltd. Short-Term Incentive Plan and granted initial award opportunities under such plan for performance during the 2022 fiscal year, as well as approved a long-term incentive plan.
Short-Term Incentive Plan
The Short-Term Incentive Plan (the “STI Plan”) is designed to provide incentives to designated senior officers of the Company to achieve certain financial and strategic performance targets and to link executive compensation to shareholder results by rewarding competitive and superior performance. Pursuant to the STI Plan, participants have the opportunity to receive a cash incentive award based upon the level of achievement of performance goals over the period of January 1, 2022 through December 31, 2022. The named executive officers of the Company are among the participants for the 2022 performance period.
The performance metrics for the Company’s senior officer participants with Company-wide responsibility, including Frank D’Orazio, Chief Executive Officer, and Sarah Doran, Chief Financial Officer, are adjusted Company combined ratio, adjusted earnings before interest and taxes (EBIT) and certain strategic goals, each of which account for one-third of the award opportunity. The performance metrics for the Company’s senior officer participants who are a business segment leader or whose responsibilities are primarily focused on a single business segment, including Richard Schmitzer, President and Chief Executive Officer of the Excess and Surplus Lines segment, Terence McCafferty, President and Chief Executive Officer of the Specialty Admitted Insurance segment, and Daniel Heinlein, President and Chief Executive Officer of the Casualty Reinsurance segment, are the same as those for participants with Company-wide responsibilities, except that the adjusted combined ratio metric will be evenly divided between the adjusted combined ratio of the Company and the adjusted combined ratio of the segment for which such person serves as the President and Chief Executive Officer. The manner of calculation of adjusted combined ratio and adjusted EBIT for purposes of the STI Plan are set forth on Appendix 1 to the form of the PRSU agreement, filed as Exhibit 10.1 to this Form 8-K.
Payouts for achievement of threshold, target and maximum performance levels are set at 50%, 100% and 150% of the target amount, respectively. Performance falling in-between these levels is determined by linear interpolation. Target payouts for each of the named executive officers is set forth below, and is equivalent to their 2022 annual base pay.
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| Executive Officer | Target Payout |
Frank D’Orazio | $925,000 |
| Sarah Doran | $550,000 |
| Richard Schmitzer | $650,000 |
| Terry McCafferty | $420,000 |
| Daniel Heinlein | $365,000 |
The Compensation Committee will determine and recommend to the Board for approval the aggregate payout for the 2022 performance period in the first quarter of 2023 following review of 2022 performance. Subject to Board approval, the Compensation Committee has discretion to adjust final results in the event of unusual or nonrecurring events.
To receive a payout, the participant must remain employed through the settlement of the award, subject to certain exceptions for (i) separation due to death, disability or a qualifying retirement, (ii) termination without cause, by reason of the Company’s non-renewal of the participant’s contract, or resignation by the participant for good reason, or (iii) a change in control of the Company, followed by termination without cause of the participant, the Company’s non-renewal of the participant’s employment contract, or resignation by the participant for good reason under the circumstances, and with modified payouts, described in the STI Plan.
The foregoing description of the STI Plan does not purport to be complete and is qualified in its entirety by reference to the STI Plan, which is filed as Exhibit 10.1 to this Form 8-K and is incorporated by reference herein.
Long-Term Incentive Plan
The long-term incentive plan (the “LTI Plan”) is designed to align compensation of designated senior officers of the Company with Company performance and shareholder interests over the long-term. Awards under the LTI Plan will be made in the form of performance restricted share units (a “PRSU”) and service based restricted share units (“RSUs”), with awards intended to be made in February 2023. The initial PRSU awards are intended to have a performance period of January 1, 2023 through December 31, 2025.
Each PRSU will represent a contingent right to receive one Company common share based upon the level of achievement of certain performance metrics during the performance period. The performance metrics for the PRSUs, which will be weighted equally, are (i) the Company’s adjusted operating return on average adjusted tangible common equity, and (ii) growth in adjusted tangible common equity per common share, which are non-GAAP financial measures. The manner of calculation of these metrics is set forth on Appendix 1 to the form of the PRSU agreement, filed as Exhibit 10.2 to this Form 8-K.
It is intended that the named executive officers will be granted PRSUs with a target value equal to 50% of such named executive officer’s 2022 salary, and a service based RSU with a value also equal to 50% of such named executive officer’s 2022 salary.
The number of PRSUs that will be eligible to be earned and become vested for the participants will be based upon the achievement of the performance metrics during the performance period, with payout for achievement of threshold, target and maximum performance levels to be set at 50%, 100% and 200% of the target number of PRSUs, respectively. Performance falling between these levels will be determined by linear interpolation.
To receive a payout, a participant must remain employed through the settlement of the award, subject to certain exceptions for (i) separation due to death or disability or a qualifying retirement, or (ii) a change in control of the Company, followed by termination without cause of the participant, the Company’s non-renewal of the participant’s employment contract or resignation by the participant for good reason, under the circumstances, and with modified payouts, described in the LTI Plan.
The foregoing description of the LTI Plan does not purport to be complete and is qualified in its entirety by reference to the form of PRSU agreement, which sets forth the terms of the LTI Plan, and is filed as Exhibit 10.2 to this Form 8-K and is incorporated by reference herein.