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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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Platinum Underwriters Holdings, Ltd.
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[PLATINUM UNGERWRITERS HOLDINGS LTD. LOGO]
The Belvedere Building
69 Pitts Bay Road
Pembroke HM 08 Bermuda
---------------------
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held On April 26, 2005
---------------------
To the Shareholders of Platinum Underwriters Holdings, Ltd.:
Notice is hereby given that the 2005 Annual General Meeting of Shareholders
(the "Annual Meeting") of Platinum Underwriters Holdings, Ltd. (the "Company")
will be held at the Fairmont Hamilton Princess Hotel, 76 Pitts Bay Road,
Pembroke HM 08 Bermuda, on Tuesday, April 26, 2005 at 3:00 p.m., local time, for
the following purposes:
1. To elect eight directors to the Company's Board of Directors to
serve until the Company's 2006 Annual General Meeting of Shareholders.
2. To consider and take action upon a proposal to ratify the selection
of KPMG LLP as the Company's independent registered public accounting firm
for the 2005 fiscal year.
At the Annual Meeting, shareholders will receive the audited consolidated
financial statements of the Company and its subsidiaries as of and for the year
ended December 31, 2004 with the independent registered public accounting firm's
report thereon, and may also be asked to consider and take action with respect
to such other business as may properly come before the meeting, or any
postponement or adjournment thereof.
The Company's Board of Directors has fixed the close of business on March
10, 2005 as the record date for the determination of shareholders entitled to
notice of, and to vote at, the Annual Meeting and any postponement or
adjournment thereof. You are cordially invited to be present. Shareholders who
do not expect to attend in person are requested to sign and return the enclosed
form of proxy in the envelope provided. At any time prior to their being voted
at the Annual Meeting, proxies are revocable by written notice to the Secretary
of the Company, by a duly executed proxy bearing a later date or by voting in
person at the Annual Meeting.
By order of the Board of Directors,
Michael E. Lombardozzi
Executive Vice President, General
Counsel
and Secretary
Pembroke, Bermuda
March 22, 2005
PLATINUM UNDERWRITERS HOLDINGS, LTD.
THE BELVEDERE BUILDING
69 PITTS BAY ROAD
PEMBROKE HM 08 BERMUDA
------------------------
ANNUAL GENERAL MEETING OF SHAREHOLDERS
APRIL 26, 2005
------------------------
GENERAL INFORMATION
This proxy statement and the accompanying form of proxy are being furnished
to holders of the common shares (the "Common Shares") of Platinum Underwriters
Holdings, Ltd. (the "Company") to solicit proxies on behalf of the Board of
Directors of the Company for the 2005 Annual General Meeting of Shareholders
(the "Annual Meeting") to be held at the Fairmont Hamilton Princess Hotel, 76
Pitts Bay Road, Pembroke HM 08 Bermuda, on Tuesday, April 26, 2005 at 3:00 p.m.,
local time. These proxy materials are first being mailed to shareholders on or
about March 22, 2005.
The Board of Directors has fixed the close of business on March 10, 2005 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the Annual Meeting. As of such date, there were 43,229,257 Common
Shares outstanding and entitled to vote. Each shareholder is entitled to one
vote for each Common Share held of record on the record date with respect to
each matter to be acted upon at the Annual Meeting, provided that if the number
of "Controlled Shares" (as defined below) of any shareholder constitutes 10% or
more of the combined voting power of the issued Common Shares (such holder, a
"10% Shareholder"), the vote of any such shareholder is limited to 9.9% of the
voting power of the outstanding Common Shares pursuant to the Company's
Bye-laws. "Controlled Shares" of any person refers to all Common Shares owned
(i) directly, (ii) with respect to persons who are United States persons, by
application of the attribution and constructive ownership rules of Sections
958(a) and 958(b) of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), or (iii) beneficially, directly or indirectly, within the meaning of
Rule 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder.
Because 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, the Company requests that any holder of
Common Shares with reason to believe that it is a 10% Shareholder (as defined in
the Company's Bye-laws and described above) contact the Company promptly so that
the Company may determine whether the voting power of such holder's Common
Shares should be reduced. By submitting a proxy, a holder of Common Shares will
be deemed to have confirmed that, to its knowledge, it is not, and is not acting
on behalf of, a 10% Shareholder. The directors of the Company are empowered to
require any shareholder to provide information as to that shareholder's
beneficial ownership of Common Shares, the names of persons having beneficial
ownership of the shareholder's Common Shares, relationships with other
shareholders or any other facts the directors may consider relevant to the
determination of the number of Controlled Shares attributable to any person. The
directors may disregard the votes attached to Common Shares of any holder who
fails to respond to such a request or who, in their judgment, submits incomplete
or inaccurate information. The directors retain certain discretion to make such
final adjustments that they consider fair and reasonable in all the
circumstances as to the aggregate number of votes attaching to the Common Shares
of any shareholder to ensure that no person shall be entitled to cast more than
9.9% of the voting power of the outstanding Common Shares at any time.
The presence, in person or by proxy, of holders of more than 50% of the
Common Shares outstanding and entitled to vote on the matters to be considered
at the Annual Meeting is required to constitute a quorum for the transaction of
business at the Annual Meeting. Each of the proposals to be considered at the
Annual Meeting will be decided by the affirmative vote of a majority of the
voting power of the
Common Shares present, in person or by proxy, at the Annual Meeting, and
entitled to vote thereon. A hand vote will be taken unless a poll is requested
pursuant to the Company's Bye-laws.
SOLICITATION AND REVOCATION
PROXIES IN THE FORM ENCLOSED ARE BEING SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY. Common Shares may be voted at the Annual Meeting by
returning the enclosed proxy card or by attending the Annual Meeting and voting
in person. The enclosed proxy card authorizes each of Steven H. Newman, Gregory
E.A. Morrison and Michael E. Lombardozzi to vote the Common Shares represented
thereby in accordance with the instructions given or, if no instructions are
given, in their discretion. They may also vote such Common Shares to adjourn or
postpone the meeting and will be authorized to vote such Common Shares at any
adjournment or postponement of the Annual Meeting. Common Shares held in "street
name" by a broker, bank or other nominee must be voted by the broker, bank or
nominee according to the instructions of the beneficial owner of the Common
Shares.
Proxies may be revoked at any time prior to the Annual Meeting by giving
written notice to the Secretary of the Company, by a duly executed proxy bearing
a later date or by voting in person at the Annual Meeting. For Common 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 Meeting.
If a shareholder abstains from voting on a particular proposal, or if a
shareholder's Common Shares are treated as a broker non-vote, those Common
Shares will not be considered as votes cast in favor of or against the proposal
but will be included in the number of Common Shares represented for the purpose
of determining whether a quorum is present. Generally, broker non-votes occur
when Common 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 Common Shares on a particular proposal. If a quorum is not present, the
shareholders who are represented may adjourn the Annual Meeting until a quorum
is present. The time and place of the adjourned meeting will be announced at the
time the adjournment is taken, and no other notice need be given. An adjournment
will have no effect on the business that may be conducted at the adjourned
meeting.
The Company will bear all costs of this proxy solicitation. Proxies may be
solicited by mail, in person, by telephone or by facsimile by officers,
directors, and employees of the Company. The Company may also reimburse
brokerage firms, banks, custodians, nominees and fiduciaries for their expenses
incurred in forwarding proxy materials to beneficial owners. The Company has
retained Mellon Investor Services, LLC to assist in the solicitation of proxies
and will pay a fee of $5,000 plus reimbursement of out-of-pocket expenses for
those services.
THE COMPANY
The Company was formed in April 2002 to assume substantially all of the
2002 property and casualty reinsurance business and related assets of the
reinsurance underwriting segment ("St. Paul Re") of The St. Paul Travelers
Companies, Inc., formerly The St. Paul Companies, Inc. ("St. Paul"). The St.
Paul Re business and assets were transferred to the Company concurrently with
the completion by the Company of an initial public offering of the Common Shares
and equity security units on November 1, 2002 (the "Initial Public Offering").
The Company provides property and casualty reinsurance, operating through
Platinum Underwriters Bermuda, Ltd. ("Platinum Bermuda"), Platinum Underwriters
Reinsurance, Inc. ("Platinum US") and Platinum Re (UK) Limited ("Platinum UK")
to a diverse clientele of insurers and select reinsurers on a worldwide basis.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of the following
eight members, each of whom was elected as a director in May 2004 at the
Company's 2004 Annual General Meeting of
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Shareholders: Steven H. Newman, Gregory E.A. Morrison, H. Furlong Baldwin,
Jonathan F. Bank, Dan R. Carmichael, Neill A. Currie, Jay S. Fishman and Peter
T. Pruitt. Mr. Currie was designated by RenaissanceRe Holdings Ltd.
("RenaissanceRe") as its nominee for election to the Board of Directors pursuant
to the Investment Agreement among the Company, St. Paul and RenaissanceRe dated
as of September 20, 2002 (the "Investment Agreement"). The terms of office of
each of the current directors will expire at the Annual Meeting. Mr. Fishman,
who has served on the Board since the Initial Public Offering, has informed the
Board of Directors that he will not be standing for re-election at the Annual
Meeting. Other than Mr. Fishman, each of the current directors has been
nominated by the Board of Directors for election as a director at the Annual
Meeting to serve until the Company's 2006 Annual General Meeting of
Shareholders. To fill the vacancy created by Mr. Fishman's decision not to stand
for re-election at the Annual Meeting, Robert V. Deutsch has been nominated by
the Board of Directors for election as a director of the Company. If elected,
Mr. Deutsch will be appointed to the Audit and Compensation Committees.
The Board of Directors has no reason to believe that any of its nominees
would be unable or unwilling to serve if elected. If a nominee becomes unable or
unwilling to accept nomination or election, the Board will select a substitute
nominee and the Common Shares represented by proxies may be voted for such
substitute nominee unless shareholders indicate otherwise.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES TO THE
COMPANY'S BOARD OF DIRECTORS.
INFORMATION CONCERNING NOMINEES
Set forth below is biographical and other information regarding the
nominees for election as directors, including their principal occupations during
the past five years.
Steven H. Newman.......................... Mr. Newman has been Chairman of the Board of Directors
Age: 61 of the Company since June 2002 and a consultant to
Director since 2002 Platinum US since March 2002. Mr. Newman was Chairman of
Chairman of the Board of Directors the Board of Directors of St. Paul Re from March 2002
and Chairman of the Executive until he became Chairman of the Company. Mr. Newman was
Committee Chairman of the Board of Directors of Swiss Re America
Holding Company, a reinsurance holding company, from May
2000 to October 2000. Prior thereto, Mr. Newman served
as Chairman of the Board and Chief Executive Officer of
Underwriters Re Group, Inc., a reinsurance holding
company.
Gregory E.A. Morrison..................... Mr. Morrison has been President and Chief Executive
Age: 47 Officer of the Company since June 2003. Mr. Morrison was
Director since 2003 President and Chief Executive Officer of London
Member of the Executive Committee Reinsurance Group Inc. ("LRG"), a Canadian reinsurance
company that he founded, from 1989 until 1998 and again
from September 2000 until May 2003. Mr. Morrison also
served as the Chairman of LRG operating subsidiaries in
the United States, Barbados and Ireland and as a member
of the LRG Board of Directors. From January 1999 to June
2000, Mr. Morrison served as President of Unum
Reinsurance, the reinsurance division of Unum Provident
Corporation.
3
H. Furlong Baldwin........................ Mr. Baldwin was Chairman of Mercantile Bankshares
Age: 73 Corporation, a bank holding corporation, from March 2001
Director since 2002 until his retirement in March 2003. Prior thereto, Mr.
Chairman of the Audit Baldwin was Chairman and Chief Executive Officer of
Committee and member of the Mercantile Bankshares Corporation. Mr. Baldwin is the
Governance Committee Chairman of the Board of Directors of Nasdaq Stock
Market, Inc. and a director of W.R. Grace & Company and
Allegheny Energy, Inc.
Jonathan F. Bank.......................... Mr. Bank has been counsel to Lord Bissell & Brook LLP, a
Age: 61 law firm, since May 2004. From May 2000 until May 2004,
Director since 2002 Member of the he was Senior Vice President of Tawa Associates Ltd.,
Compensation, Audit and Governance which is engaged in the acquisition, restructuring and
Committees management of property and casualty companies in
run-off. From September 1999 until May 2000, Mr. Bank
was the Insurance Practice Leader of
PricewaterhouseCoopers' U.S. insurance/reinsurance
regulatory and restructuring practice group. Prior
thereto, Mr. Bank was a partner at Chadbourne & Parke
LLP, a law firm.
Dan R. Carmichael......................... Mr. Carmichael has been President, Chief Executive
Age: 60 Officer and a director of Ohio Casualty Corporation, a
Director since 2002 property and casualty insurance company, since December
Chairman of the Governance 2000. Prior thereto, Mr. Carmichael served as President
Committee and member of the Audit and Chief Executive Officer of IVANS, Inc., an
Committee industry-owned organization that provides electronic
communications services to insurance, healthcare and
related organizations. Mr. Carmichael is a director of
Alleghany Corporation.
Neill A. Currie........................... Mr. Currie has been a private investor for the last six
Age: 52 years. Since June 2000, Mr. Currie has been the managing
Director since 2003 member and Chief Executive Officer of Currie Company,
Member of the Executive, LLC, a manager of equity investments and provider of
Compensation and Governance reinsurance consulting services. From 1993 to 1997, Mr.
Committees Currie was a Senior Vice President of RenaissanceRe.
Robert V. Deutsch......................... Mr. Deutsch has been a consultant to CNA Financial
Age: 45 Corporation since October 2004. From September 1999
Nominee until October 2004, Mr. Deutsch served as Executive Vice
President and Chief Financial Officer of CNA Financial
Corporation. Prior thereto, Mr. Deutsch was Executive
Vice President, Chief Financial Officer and Chief
Actuary of Executive Risk Inc. Mr. Deutsch serves as a
board member of Chaucer Holdings PLC.
Peter T. Pruitt........................... Mr. Pruitt was Chairman of Willis Re Inc., a reinsurance
Age: 72 intermediary, from June 1995 until his retirement in
Director since 2002 December 2001. He also served as Chief Executive Officer
Chairman of the Compensation of Willis Re Inc. from June 1995 through September 1999.
Committee and member of the Audit Prior thereto, Mr. Pruitt was President and a director
Committee of Frank B. Hall & Co., Inc., a global insurance broker.
Mr. Pruitt is a director of Poe Financial Group, Inc., a
privately held property and casualty insurance holding
company.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company maintains four standing committees:
the Audit, the Compensation, the Governance and the Executive Committees. During
2004, the Board of Directors met
4
six times, the Audit Committee met five times, the Compensation Committee met
four times, the Governance Committee met three times and the Executive Committee
met twice. Each director attended at least 75% of the aggregate number of
meetings of the Board of Directors and meetings of the Committees of the Board
of Directors on which he served that were held in 2004, with the exception of
Mr. Fishman. Board members are encouraged to attend the Company's Annual General
Meetings of Shareholders. Six directors attended the Company's 2004 Annual
General Meeting of Shareholders.
INDEPENDENCE OF DIRECTORS
New York Stock Exchange ("NYSE") listing standards require the Company to
have a majority of independent directors serving on the Board of Directors. A
member of the Board qualifies as independent if the Board affirmatively
determines that the director has no material relationship with the Company. The
Board has determined that Messrs. Baldwin, Bank, Carmichael, Currie and Pruitt,
constituting a majority of the Board, have no material relationship with the
Company other than in their capacities as members of the Board and committees
thereof, and thus are independent directors of the Company. The Board has also
determined that Mr. Deutsch, a nominee for election as a director of the
Company, has no material relationship with the Company and thus would be an
independent director if elected at the Annual Meeting. None of Messrs. Baldwin,
Bank and Currie has any relationship with the Company other than as a director
and member of committees of the Board. Mr. Carmichael is the President, Chief
Executive Officer and a director of Ohio Casualty Insurance Company ("Ohio
Casualty"). During 2004, the Company provided reinsurance coverage to
subsidiaries of Ohio Casualty resulting in premiums to the Company of $469,500,
representing approximately .03% of the Company's consolidated total revenue for
2004. Ohio Casualty is expected to generate premiums to the Company of
approximately $332,400 in 2005 (which is equal to approximately .02% of the
Company's consolidated total revenue for 2004). Mr. Carmichael was not involved
in the establishment of these reinsurance contracts and received no special
benefits therefrom. Based on the foregoing, the Board has determined that Mr.
Carmichael has no material relationship with the Company. Mr. Pruitt is a
director of and a consultant to Poe Financial Group, Inc. ("Poe Financial").
During 2004, the Company provided reinsurance coverage to subsidiaries of Poe
Financial resulting in premiums to the Company of $16,949,953, representing
approximately 1.1% of the Company's consolidated total revenue for 2004. Poe
Financial is expected to generate premiums to the Company of approximately
$9,969,000 in 2005 (which is equal to approximately .65% of the Company's
consolidated total revenue for 2004). Mr. Pruitt was not involved in the
establishment of these reinsurance contracts and received no special benefits
therefrom. Based on the foregoing, the Board has determined that Mr. Pruitt has
no material relationship with the Company. Until October 2004, Mr. Deutsch was
the Executive Vice President and Chief Financial Officer of CNA Financial
Corporation ("CNA"). During 2004, the Company provided reinsurance coverage to
subsidiaries of CNA resulting in premiums to the Company of $3,639,513 in 2004,
representing approximately .24% of the Company's consolidated total revenue for
2004. CNA is expected to generate premiums to the Company of approximately
$6,439,064 in 2005 (which is equal to approximately .42% of the Company's
consolidated total revenue for 2004). Mr. Deutsch was not involved in the
establishment of these reinsurance contracts and received no special benefits
therefrom. In addition, Mr. Deutsch is party to a letter agreement with the
Company under which he provides consulting services to the Board of Directors
and the Audit and Compensation Committees until the date of the Annual Meeting.
Mr. Deutsch will receive a total of $90,000 in fees for these consulting
services. This agreement is described in more detail under "Arrangements with
Director and Nominee" below. Based on the foregoing, the Board has determined
that Mr. Deutsch has no material relationship with the Company.
EXECUTIVE COMMITTEE
The Executive Committee presently consists of Messrs. Newman (Chairman),
Morrison, Currie and Fishman. The Executive Committee is authorized to exercise
all of the powers of the Board of Directors when the Board is not in session
upon a written determination of the Chairman of the Board that it is
impracticable to convene a meeting of the Board to exercise such powers, subject
to such limitations as are set forth in its charter or as may from time to time
be established by resolution of the Board.
5
AUDIT COMMITTEE
The Audit Committee presently consists of Messrs. Baldwin (Chairman), Bank,
Carmichael and Pruitt. The Board of Directors has determined that each member of
the Audit Committee is independent as defined in the NYSE listing standards and
meets the NYSE standards of financial literacy and accounting or related
financial management expertise. The Board of Directors has also determined that
Mr. Baldwin is an "audit committee financial expert" as defined by the
Securities and Exchange Commission ("SEC"), and that Mr. Deutsch would be an
"audit committee financial expert" if elected at the Annual Meeting and
appointed to the Audit Committee as planned.
The Audit Committee operates pursuant to a charter, which is posted on the
Company's website at www.platinumre.com and may be found under the "Investor
Relations" section by clicking on "Corporate Governance." A copy of the Audit
Committee's charter may also be obtained, without charge, upon written request
to the Secretary of the Company at the Company's principal executive offices.
The Audit Committee's primary responsibilities, as set forth in its charter, are
to:
- engage the independent registered public accounting firm (subject to
ratification by the shareholders of the Company as required by Bermuda
law), determine the compensation and oversee the performance of the
independent registered public accounting firm, and approve in advance all
audit services and all permitted non-audit services to be provided to the
Company by the independent registered public accounting firm;
- assess and take appropriate action regarding the independence of the
Company's independent registered public accounting firm;
- oversee the compensation, activities and performance of the Company's
internal audit function and review the quality and adequacy of the
Company's internal controls and internal auditing procedures;
- periodically review with management and the independent registered public
accounting firm the Company's accounting policies, including critical
accounting policies and practices and the estimates and assumptions used
by management in the preparation of the Company's financial statements;
- review with management and the independent registered public accounting
firm any material financial or other arrangements of the Company which do
not appear on the Company's financial statements;
- discuss with management the Company's guidelines and policies with
respect to corporate risk assessment and risk management;
- discuss with management each of the earnings press releases and earnings
guidance provided to analysts and rating agencies;
- review with management and the independent registered public accounting
firm the financial statements to be included in the quarterly and annual
reports of the Company, including management's discussion and analysis of
financial condition and results of operations, and recommend to the Board
of Directors whether the audited financial statements should be included
in the annual reports of the Company;
- approve a code of ethics, as required by SEC rules, for senior financial
officers and such other employees and agents of the Company as it
determines;
- establish procedures for the handling of complaints received by the
Company regarding accounting, internal accounting controls or auditing
matters; and
- annually review and evaluate Audit Committee performance and asses the
adequacy of the Audit Committee charter.
The Audit Committee report for 2004 appears beginning on page 31 of this
proxy statement.
6
COMPENSATION COMMITTEE
The Compensation Committee presently consists of Messrs. Pruitt (Chairman),
Bank and Currie. The Board of Directors has determined that each member of the
Compensation Committee is independent as defined in the NYSE listing standards.
The Compensation Committee operates pursuant to a charter, which is posted
on the Company's website at www.platinumre.com and may be found under the
"Investor Relations" section by clicking on "Corporate Governance." A copy of
the Compensation Committee's charter may also be obtained, without charge, upon
written request to the Secretary of the Company at the Company's principal
executive offices. The Compensation Committee's primary responsibilities, as set
forth in its charter, are to:
- review the compensation policies and practices of the Company and its
subsidiaries, including incentive compensation plans and equity plans,
and make recommendations to the Board of Directors with respect thereto;
- review the recommendations of the Chief Executive Officer concerning the
compensation of those officers of the Company and its subsidiaries with a
title more senior than Vice President and of any consultants, agents and
other persons to the extent that determinations with respect to their
compensation are expressly delegated to the Committee, and make
recommendations to the Board of Directors with respect thereto;
- review and approve the corporate goals and objectives relevant to the
Chief Executive Officer's compensation, evaluate the Chief Executive
Officer's performance in light of those goals and objectives and set the
Chief Executive Officer's compensation level based on such evaluation;
- review the recommendation of the Chief Executive Officer concerning the
aggregate amount available for the annual incentive bonus program each
year, and make a recommendation to the Board of Directors with respect
thereto;
- grant all awards under and oversee the administration of the Company's
2002 Share Incentive Plan (the "Share Incentive Plan") and any other
plans that provide for administration by the Compensation Committee; and
- annually review and evaluate Compensation Committee performance and asses
the adequacy of the Compensation Committee charter.
The Compensation Committee report for 2004 appears beginning on page 19 of
this proxy statement.
GOVERNANCE COMMITTEE
The Governance Committee presently consists of Messrs. Carmichael
(Chairman), Baldwin, Bank and Currie. The Board of Directors has determined that
each member of the Governance Committee is independent as defined in the NYSE
listing standards.
The Governance Committee operates pursuant to a charter, which is posted on
the Company's website at www.platinumre.com and may be found under the "Investor
Relations" section by clicking on "Corporate Governance." A copy of the
Governance Committee's charter may also be obtained, without charge, upon
written request to the Secretary of the Company at the Company's principal
executive offices. The Governance Committee's primary responsibilities, as set
forth in its charter, are to:
- develop a Board of Directors which is diverse in nature and provides
management with experienced and seasoned advisors with an appropriate mix
of skills in fields related to the current or future business directions
of the Company;
- identify, interview and screen individuals qualified to become members of
the Board of Directors and committees thereof, and to become the Chief
Executive Officer, for recommendation to the Board of Directors;
7
- develop and recommend to the Board of Directors a set of corporate
governance guidelines applicable to the Company addressing, among other
matters determined by the Committee to be appropriate, director
qualifications and responsibilities, director orientation and continuing
education, management succession and the annual performance evaluation of
the Board of Directors;
- regularly review issues and developments relating to corporate governance
and recommend to the Board of Directors proposed changes to the corporate
governance guidelines from time to time as the Committee determines to be
appropriate;
- annually evaluate the overall effectiveness of the Board of Directors and
the Chief Executive Officer and make recommendations to the Board of
Directors with respect thereto as appropriate, provided that any
determinations or recommendations relating to compensation are reserved
for the Compensation Committee;
- review periodically all committees of the Board of Directors and
recommend to the Board of Directors changes, as appropriate, in the
composition, responsibilities, charters and structure of the committees;
- recommend that the Board of Directors establish such special committees
as may be necessary or appropriate to address ethical, legal or other
matters that may arise; and
- annually review and evaluate Governance Committee performance and assess
the adequacy of the Governance Committee charter.
The Governance Committee believes that members of the Board should have the
highest professional and personal ethics and values, consistent with the
Company's ethics and values. Directors should be committed to enhancing
shareholder value and should have sufficient time to carry out their duties and
to provide insight and practical wisdom based on experience. Their service on
other boards of public companies should be limited to a number that permits
them, given their individual circumstances, to perform responsibly all director
duties. Each director must represent the interests of all shareholders. The
Governance Committee will consider recommendations from shareholders as to
candidates to be nominated for election to the Board of Directors. Any such
recommendations should include the candidate's name and qualifications for Board
membership and should be submitted in writing to the Governance Committee in
care of the Secretary of the Company at the Company's principal executive
offices.
The Governance Committee regularly assesses the appropriate size of the
Board, and whether any vacancies on the Board are expected due to retirement or
otherwise. In the event that vacancies are anticipated, or otherwise arise, the
Governance Committee will consider various candidates for director. Candidates
may come to the attention of the Governance Committee through current Board
members, professional search firms, shareholders or other persons. These
candidates will be evaluated at regular or special meetings of the Governance
Committee, and may be considered at any point during the year. In evaluating
candidates, the Governance Committee will seek to assure that specific talents,
skills and other characteristics that are needed to promote the Board's
effectiveness are possessed by an appropriate combination of directors. The
nomination of Mr. Deutsch was recommended by Mr. Newman, the Chairman of the
Board.
The Company has adopted Corporate Governance Guidelines and a Code of
Business Conduct and Ethics and Compliance Procedures. Copies of these documents
are available at the Company's website at www.platinumre.com and may be found
under the "Investor Relations" section by clicking on "Corporate Governance."
Copies of these documents may also be obtained, without charge, upon written
request to the Secretary of the Company at the Company's principal executive
offices.
8
EXECUTIVE SESSIONS
In accordance with the Company's Corporate Governance Guidelines, separate
executive sessions of non-management directors and independent directors are
held after each Board meeting. Mr. Carmichael, as Chairman of the Governance
Committee, presides at such sessions.
COMMUNICATIONS WITH THE BOARD
Interested parties may communicate with the Board, anonymously if they
wish, by sending a written note or memo to the Secretary, Platinum Underwriters
Holdings, Ltd., The Belvedere Building, 69 Pitts Bay Road, Pembroke HM 08
Bermuda. Communications that are intended specifically for non-management or
independent directors should be sent to the above address to the attention of
the Chairman of the Governance Committee. The Secretary will ensure that all
such communications remain confidential and are delivered to the appropriate
Board member or members.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company (other than Mr. Newman)
receives an annual retainer of $35,000. In addition, the Chairman of the Audit
Committee receives $20,000 per year, and each member of that committee receives
$10,000 per year. The Chairman of each other committee of the Board of Directors
receives $15,000 per year, and each member of those committees who is not an
employee of the Company receives $7,500 per year. Each director who is not an
employee of the Company (other than Mr. Newman) also receives $2,500 for
attendance at each meeting of the Board and of any committee of which he is a
member.
In addition, under the Share Incentive Plan, each nonemployee director
(other than Mr. Newman) receives annually, on the date of the Annual General
Meeting of Shareholders of the Company, an option to purchase 5,000 Common
Shares with an exercise price equal to the closing price of the Common Shares on
the business day immediately preceding the date of such meeting. This option has
a five-year term and becomes exercisable on the first anniversary of the date of
grant. Any Common Shares that become issuable under an option award shall be
issued from the shares previously authorized under the Share Incentive Plan, and
shall be subject to the terms and conditions of such plan.
Mr. Newman entered into a letter agreement with St. Paul, dated March 1,
2002 and amended June 14, 2002, pursuant to which he agreed to serve as Chairman
of the Board of Directors of the Company. This agreement was assigned to and
assumed by the Company upon completion of the Initial Public Offering. As
Chairman, Mr. Newman is entitled to receive an annual fee of $60,000, and a fee
of $5,000 for each meeting of the Board of Directors that he attends (not to
exceed $20,000 per year). Pursuant to the agreement, Mr. Newman received an
option to purchase 975,000 Common Shares at $22.50 per Common Share (the
offering price of the Common Shares in the Initial Public Offering) effective
upon completion of the Initial Public Offering. This option has a term of ten
years and is exercisable in three equal annual installments beginning November
1, 2003.
Pursuant to the Share Unit Plan for Nonemployee Directors (the "Share Unit
Plan"), 50% of all fees earned by a director who is not an employee of the
Company or any of its affiliates (including retainer fees, meeting fees and
committee fees) during each calendar quarter are automatically converted into
that number of share units equal to the number of Common Shares which could have
been purchased with such fees, based upon the closing price of the Common Shares
on the last day of the calendar quarter. In addition to the 50% mandatory
conversion, each nonemployee director may elect to have up to a total of 100% of
his fees converted into share units, provided the election is made before the
start of the calendar year in which the fees are earned. No Common Shares are
actually purchased, but the value of the share units is dependent upon the
market value of the Common Shares. A nonemployee director will receive
distributions under the Share Unit Plan in respect of his share units, each such
share unit valued at the then closing price of one Common Share, following the
expiration of five calendar years following the year in which his fees were
originally converted into share units, or following termination of his service
on the Board of Directors, if earlier. Each distribution under the Share Unit
Plan will be made, at the discretion
9
of the Board, either in cash or in Common Shares or some combination thereof.
The Share Unit Plan provides that a total of 150,000 shares may be issued
thereunder.
Under the Share Incentive Plan, a non-qualified option to purchase 25,000
Common Shares at $22.50 per Common Share (the offering price of the Common
Shares in the Initial Public Offering) was granted to each of the nonemployee
directors (other than Mr. Newman) effective upon completion of the Initial
Public Offering. Each option has a ten-year term and is exercisable in three
equal annual installments beginning November 1, 2003, except in the case of Mr.
Currie, whose option is exercisable beginning May 13, 2004, the first
anniversary of his election as a director. If elected as a director at the
Annual Meeting, Mr. Deutsch will receive an option to purchase 25,000 Common
Shares with an exercise price equal to the closing price of the Common Shares on
the business day immediately preceding the date of the Annual Meeting. This
option will have a ten-year term and will be exercisable in three equal
installments beginning on April 26, 2006.
Under the Company's Corporate Governance Guidelines, each director is
expected to retain all Common Shares received as compensation during such
director's term of service on the Board of Directors and until at least six
months thereafter.
ARRANGEMENTS WITH DIRECTOR AND NOMINEE
Mr. Newman entered into a letter agreement with St. Paul dated March 1,
2002, which was assigned to and assumed by Platinum US upon completion of the
Initial Public Offering, and amended on March 12, 2004, pursuant to which Mr.
Newman agreed to provide consulting services on a part-time basis to Platinum US
through February 28, 2005 (which date is automatically extended from year to
year unless either party elects not to extend it). The agreement was
automatically extended by one year on February 28, 2005. The agreement provides
that Mr. Newman performs services as reasonably requested, including assisting
with the establishment and development of Platinum US's reinsurance business,
for which he receives an annual consulting fee of $270,000. Pursuant to this
agreement, Mr. Newman is eligible to receive for each year of the term of this
consulting arrangement an annual incentive payment with a target of $440,000 and
a maximum of 200% of the target incentive payment. The objectives for this
incentive are determined by the Compensation Committee in consultation with the
members of the Board of Directors and Mr. Newman and are based on the value of
Mr. Newman's contributions as a consultant to Platinum US. Mr. Newman assigned
all of his right, title and interest in the consulting agreement to SHN
Enterprises, Inc., which Mr. Newman established for estate planning purposes and
of which he is the sole shareholder. For 2004, SHN Enterprises, Inc. received
from the Company $270,000 in consulting fees and no incentive payments. If the
consulting agreement with SHN Enterprises, Inc. is terminated by Platinum US for
cause (as defined in the agreement), SHN Enterprises, Inc. will receive no
further payments or benefits under the consulting agreement other than amounts
accrued prior to termination. Pursuant to the consulting agreement, during the
time Mr. Newman serves as a consultant and for fifteen months thereafter, Mr.
Newman is not permitted to be employed by, or to own, manage, operate or
control, any entity which is primarily engaged in the reinsurance business,
except that Mr. Newman is not prohibited from owning less than 5% of any
publicly traded corporation. In addition, the consulting agreement provides that
during the time Mr. Newman serves as a consultant and for two years thereafter,
he may not solicit any senior executive of the Company or Platinum US who served
as such at the time of the termination of the consulting agreement. Mr. Newman
would not be bound by either of these provisions if he is terminated without
cause unless he receives a payment of $350,000 from Platinum US. Mr. Newman is
also subject to certain confidentiality provisions under the consulting
agreement.
Mr. Deutsch entered into a letter agreement with the Company dated
September 1, 2004 pursuant to which Mr. Deutsch agreed to provide consulting
services to the Board of Directors and the Audit and Compensation Committees
until the date of the Annual Meeting. Pursuant to the agreement, Mr. Deutsch
provides consulting services to the Board and the Audit and Compensation
Committees with respect to matters related to the Company's business, financial
condition and compensation practices, as well as such other reasonable and
appropriate duties as may be mutually agreed to by Mr. Deutsch and the Company.
Mr. Deutsch is entitled to a fee of $90,000 for these services.
10
SHARE OWNERSHIP GUIDELINES
The Company has adopted share ownership guidelines requiring senior
executives to accumulate and hold a meaningful level of share ownership in the
Company in order to align the interests of the Company's senior executives and
the shareholders of the Company and to meet shareholder expectations that senior
executives have a long-term commitment to share price performance. These
guidelines apply to the Chief Executive Officer, Chief Underwriting Officer,
selected Executive Vice Presidents and selected Senior Vice Presidents, as
determined by the Board of Directors. The level of share ownership for each
executive under the guidelines is based on the executive's position with the
Company, and ranges from a minimum of 10,000 Common Shares for Senior Vice
Presidents to a minimum of 100,000 Common Shares for the Chief Executive
Officer. The Board of Directors may adjust the levels from time to time. Until
senior executives meet their ownership requirements, they must retain Common
Shares representing a certain percentage of the after-tax gain from the exercise
of options or the after-tax value of other share compensation awards. This
percentage ranges from 50% for Senior and Executive Vice Presidents to 75% for
the Chief Executive Officer. Common Shares owned outright by or for the benefit
of the executive, as well as vested share compensation awards, are counted
toward fulfilling the share ownership requirement. Common Shares that are
subject to unexercised share options or to unvested share compensation awards
are not counted toward satisfaction of the guideline levels, but are subject to
the retention percentage requirement upon exercise or payment.
INFORMATION CONCERNING EXECUTIVE OFFICERS
Set forth below is biographical and other information regarding the
Company's executive officers, including their principal occupations during the
past five years.
Gregory E.A. Morrison..................... Mr. Morrison has been President and Chief
Age: 47 Executive Officer of the Company since June
President and Chief Executive Officer 2003. Mr. Morrison was President and Chief
Executive Officer of London Reinsurance Group
Inc. ("LRG"), a Canadian reinsurance company
that he founded, from 1989 until 1998 and
again from September 2000 until May 2003.
During these periods, Mr. Morrison also
served as the Chairman of LRG operating
subsidiaries in the United States, Barbados
and Ireland and as a member of the LRG board
of directors. From January 1999 to June 2000,
Mr. Morrison served as President of Unum
Reinsurance, the reinsurance division of Unum
Provident Corporation.
Michael D. Price.......................... Mr. Price has been President and Chief
Age: 38 Underwriting Officer of Platinum US since
President and Chief Underwriting Officer November 2002. Mr. Price was Chief
of Platinum US Underwriting Officer of St. Paul Re from June
2002 until November 2002. Mr. Price served as
Chief Operating Officer of Associated
Aviation Underwriters Incorporated, a
subsidiary of Global Aerospace Underwriting
Managers Ltd. specializing in aerospace
insurance, from March 2001 through June 2002.
From May 2000 to September 2000, Mr. Price
was Chief Underwriting Officer at Swiss Re
America Holding Corporation, a reinsurance
holding company. He was Senior Vice President
and Chief Underwriting Officer of
Underwriters Re Group, Inc., a reinsurance
holding company, from April 1998 until May
2000.
11
Joseph F. Fisher.......................... Mr. Fisher has been Executive Vice President
Age: 49 and Chief Financial Officer of the Company
Executive Vice President and Chief since July 2004. Mr. Fisher was Chief
Financial Officer Financial Officer of the U.S. operations of
Royal & Sun Alliance Insurance Group PLC from
December 1995 until June 2004. Prior thereto,
Mr. Fisher was a partner at Coopers &
Lybrand, where he provided audit services to
a variety of insurance clients from 1984
until 1995.
Michael E. Lombardozzi.................... Mr. Lombardozzi has been Executive Vice
Age: 43 President and General Counsel of the Company
Executive Vice President, General since September 2002 and has been Secretary
Counsel and Secretary of the Company since November 2002. Mr.
Lombardozzi was Executive Vice President and
General Counsel of St. Paul Re from August
2002 until November 2002. Mr. Lombardozzi was
Senior Vice President -- Planning and
Operations of W.R. Berkley Corporation, an
insurance holding company, from December 2001
to July 2002, and Senior Vice President,
Secretary and General Counsel of Orius Corp.,
a telecommunications infrastructure company,
from January 2001 to September 2001. From
January 1994 to January 2001, Mr. Lombardozzi
was Senior Vice President, Secretary and
General Counsel of Berkley Insurance Company.
H. Elizabeth Mitchell..................... Ms. Mitchell has been Executive Vice
Age: 43 President of Platinum US since November 2002
Executive Vice President and Chief and Chief Operating Officer of Platinum US
Operating Officer of Platinum US since September 2003. Prior thereto, she was
Executive Vice President -- North American
Casualty of St. Paul Re, where she worked for
nine years.
Neal J. Schmidt........................... Mr. Schmidt has been Executive Vice President
Age: 48 and Chief Actuary of Platinum US since
Executive Vice President and Chief November 2002. Prior thereto, he was
Actuary of Platinum US Executive Vice President and Chief Actuary of
St. Paul Re, where he worked for sixteen
years.
12
EXECUTIVE COMPENSATION
The following information relates to the Chief Executive Officer and the
four other most highly compensated executive officers of the Company serving as
executive officers at the end of 2004.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION COMMON
--------------------------------------------- RESTRICTED SHARES
NAME AND OTHER ANNUAL SHARE UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) COMPENSATION($)(3) AWARDS($)(4) OPTIONS(#) COMPENSATION($)(5)
------------------ ---- ---------- ----------- ------------------ ------------ ------------ ------------------
Gregory E.A. Morrison... 2004 650,000 -- 313,938 -- -- 65,000
President and Chief 2003 379,167 1,000,000 241,400 -- 400,000 37,917
Executive Officer of
the Company(1)
Michael D. Price........ 2004 531,250 -- 2,769 2,750,000 -- 42,500
President and Chief 2003 500,000 750,000 -- -- -- 60,000
Underwriting Officer, 2002 250,027 450,000 30,129 -- 300,000 1,365
Platinum US
Michael E.
Lombardozzi........... 2004 350,000 175,000 187,464 -- -- 28,000
Executive Vice 2003 350,000 446,250 185,050 -- -- 42,000
President, General 2002 144,038 465,000 30,000 -- 150,000 4,475
Counsel and Secretary
of the Company
H. Elizabeth Mitchell... 2004 350,000 -- 969 -- -- 203,000
Executive Vice 2003 350,000 393,750 -- -- -- 92,000
President and Chief 2002 311,346 325,000 -- -- 150,000 63,882
Officer, Operating
Platinum US
Neal J. Schmidt......... 2004 350,000 -- 969 -- -- 203,000
Executive Vice 2003 350,000 393,750 4,755 -- -- 42,000
President and Chief 2002 317,211 450,000 -- -- 150,000 13,416
Actuary, Platinum US
---------------
(1) Mr. Morrison became the Company's President and Chief Executive Officer on
June 1, 2003.
(2) The amount for Mr. Lombardozzi for 2004 represents his guaranteed incentive
bonus for 2004, $131,250 of which was paid in cash and $43,750 of which was
paid in the form of 1,423 restricted share units. These restricted share
units were granted on February 24, 2005 based on the closing price of the
Common Shares of $30.75 on February 23, 2005 and were issued under the Share
Incentive Plan. Each restricted share unit entitles the holder thereof to
one Common Share on the date that is six months from the date of grant of
the restricted share unit, provided that the holder is employed by the
Company or one of its subsidiaries on such date or has been terminated
without cause.
(3) The amounts for 2004 include (i) for Mr. Morrison, $300,000 representing the
reimbursement of housing expenses, $10,800 representing reimbursement of
automobile expenses and a $3,138 cash payment for dividend equivalents
credited to the restricted share units granted as part of his 2003 incentive
bonus; (ii) for Mr. Price, a cash payment for dividend equivalents credited
to the restricted share units granted as part of his 2003 incentive bonus;
(iii) for Mr. Lombardozzi, $180,000 representing the reimbursement of
housing expenses, $6,300 representing reimbursement of automobile expenses
and a $1,164 cash payment for dividend equivalents credited to the
restricted share units granted as part of his 2003 incentive bonus; and (iv)
for each of Ms. Mitchell and Mr. Schmidt, a $969 cash payment for dividend
equivalents credited to the restricted share units granted as part of their
2003 incentive bonuses. The amounts for 2003 include (i) for Mr. Morrison,
$175,000 representing the reimbursement of housing expenses, $16,400
representing the difference between the market value and the purchase price
of 20,000 Common Shares purchased from the
13
Company in July 2003, and $50,000 representing the reimbursement of
relocation expenses; (ii) for Mr. Lombardozzi, $180,000 representing the
reimbursement of housing expenses; and (iii) for Mr. Schmidt, the value of
unvested St. Paul stock options. The amounts for 2002 consist of housing
expense reimbursements.
(4) Represents the dollar value of 98,531 Restricted Shares awarded to Mr. Price
on August 4, 2004 based on the closing price of the Common Shares of $27.91
on August 3, 2004. The Restricted Shares vest in five equal annual
installments beginning on August 1, 2005, subject to Mr. Price's continued
employment with the Company. Mr. Price has the right to vote these
Restricted Shares and receive all dividends and other distributions paid or
made with respect thereto.
(5) The amounts for 2004 consist of (i) for Mr. Morrison, an employer
contribution made by the Company to Mr. Morrison's pension account; (ii) for
Mr. Price, employer contributions made by the Company of $8,200 pursuant to
the Company's 401(k) plan, $13,050 pursuant to the Company's Non-Qualified
Executive Retirement Savings Plan, $8,200 pursuant to the Company's
qualified profit sharing plan and $13,050 pursuant to the Company's
non-qualified profit sharing plan; (iii) for Mr. Lombardozzi, employer
contributions made by the Company of $8,200 pursuant to the Company's 401(k)
plan, $5,800 pursuant to the Company's Non-Qualified Executive Retirement
Savings Plan, $8,200 pursuant to the Company's qualified profit sharing plan
and $5,800 pursuant to the Company's non-qualified profit sharing plan; and
(iv) for each of Ms. Mitchell and Mr. Schmidt, $175,000 representing a cash
retention bonus, employer contributions made by the Company of $8,200
pursuant to the Company's 401(k) plan, $5,800 pursuant to the Company's
Non-Qualified Executive Retirement Savings Plan, $8,200 pursuant to the
Company's qualified profit sharing plan and $5,800 pursuant to the Company's
non-qualified profit sharing plan. The amounts for 2003 consist of (i) for
Mr. Morrison, an employer contribution made by the Company to Mr. Morrison's
pension account; (ii) for Mr. Price, employer contributions made by the
Company of $8,000 pursuant to the Company's 401(k) plan, $12,000 pursuant to
the Company's Non-Qualified Executive Retirement Savings Plan, $16,000
pursuant to the Company's qualified profit sharing plan and $24,000 pursuant
to the Company's non-qualified profit sharing plan; (iii) for Mr.
Lombardozzi and Mr. Schmidt, employer contributions made by the Company of
$8,000 pursuant to the Company's 401(k) plan, $6,000 pursuant to the
Company's Non-Qualified Executive Savings Plan, $16,000 pursuant to the
Company's qualified profit sharing plan and $12,000 pursuant to the
Company's non-qualified profit sharing plan; and (iv) for Ms. Mitchell,
$50,000 representing a cash retention bonus and employer contributions made
by the Company of $8,000 pursuant to the Company's 401(k) plan, $6,000
pursuant to the Company's Non-Qualified Executive Savings Plan, $16,000
pursuant to the Company's qualified profit sharing plan and $12,000 pursuant
to the Company's non-qualified profit sharing plan. The amounts for 2002
consist of (i) for Mr. Price, premiums paid on life insurance maintained by
St. Paul; (ii) for Mr. Lombardozzi, $975 in premiums paid on life insurance
maintained by St. Paul and an employer contribution of $3,500 made by St.
Paul pursuant to St. Paul's 401(k) plan; (iii) for Ms. Mitchell, $50,000
representing a cash retention bonus, premiums of $2,340 paid on life
insurance maintained by St. Paul, $1,350 for tax planning services provided
through St. Paul and employer contributions of $8,000 made by St. Paul
pursuant to St. Paul's 401(k) plan and $2,192 made by St. Paul pursuant to
St. Paul's Non-Qualified Executive Savings Plan; and (iv) for Mr. Schmidt,
premiums of $2,340 paid on life insurance maintained by St. Paul, $650 for
tax planning services provided through St. Paul and employer contributions
of $8,000 made by St. Paul pursuant to St. Paul's 401(k) plan and $2,426
made by St. Paul pursuant to St. Paul's Non-Qualified Executive Savings
Plan.
14
AGGREGATED OPTION EXERCISES IN 2004 AND YEAR-END 2004 OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 2004(#) AT DECEMBER 31, 2004($)
ACQUIRED ON VALUE --------------------------- ------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
---- ----------- ----------- ----------- ------------- ----------- ----------------
Gregory E.A. Morrison..... -- -- 100,000 300,000 $497,000 $1,491,000
Michael D. Price.......... 100,000 1,016,354 100,000 100,000 $847,000 $ 847,000
Michael E. Lombardozzi.... -- -- 75,000 75,000 $635,250 $ 635,250
H. Elizabeth Mitchell..... 37,500 367,572 37,500 75,000 $317,625 $ 635,250
Neal J. Schmidt........... -- -- 75,000 75,000 $635,250 $ 635,250
---------------
(1) The value of unexercised in-the-money options at December 31, 2004 was
calculated by subtracting the exercise price of in-the-money options from
$30.97 per Common Share, which is the fair market value of one Common Share
on December 31, 2004 based upon the average of the high and low prices on
the NYSE on such date.
EQUITY BASED COMPENSATION INFORMATION
The following table summarizes information as of December 31, 2004 relating
to equity based compensation plans of the Company pursuant to which grants of
options, restricted shares, share appreciation rights, share units or other
rights to acquire shares may be granted from time to time.
(C)
NUMBER OF SECURITIES
(B) REMAINING AVAILABLE FOR
(A) WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO EXERCISE PRICE OF EQUITY COMPENSATION
BE ISSUED UPON EXERCISE OUTSTANDING PLANS (EXCLUDING
OF OUTSTANDING OPTIONS, OPTIONS, WARRANTS SECURITIES REFLECTED
PLAN CATEGORY WARRANTS AND RIGHTS AND RIGHTS IN COLUMN(A))
------------- ----------------------- -------------------- -----------------------
Equity compensation plans approved
by security holders(1)............ 4,427,975 $23.40 1,114,219(2)
Equity compensation plans not
approved by security holders...... -- -- --
--------- ------ ------------
Total............................... 4,427,975 $23.40 1,114,219
---------------
(1) These plans consist of the Share Incentive Plan, the Section 162(m)
Performance Incentive Plan, the Share Unit Plan for Nonemployee Directors
and the Capital Accumulation Plan, each of which was approved by the sole
shareholder of the Company prior to the Initial Public Offering.
(2) Includes 901,469 Common Shares which are available for future grants of
restricted Common Shares under the Share Incentive Plan and reduced for
359,275 exercised share options.
EMPLOYMENT AND OTHER ARRANGEMENTS
Mr. Morrison entered into an employment agreement with the Company on June
20, 2003, which was amended in January 2004, for a three-year term that began
June 1, 2003, subject to automatic one-year extensions thereafter unless either
party elects not to extend it, pursuant to which he has agreed to serve as the
President and Chief Executive Officer of the Company and Chief Executive Officer
of Platinum Bermuda. Pursuant to the employment agreement, Mr. Morrison is
entitled to receive a base annual salary of at least $650,000 and is eligible to
receive for each year of his term an annual bonus with a target of 100% of base
salary and a maximum of 200% of base salary. The employment agreement also
provides that Mr. Morrison shall be a participant in any long-term incentive
plan established for the Company's key employees. In 2003, Mr. Morrison received
a one-time cash sign-on bonus of $150,000 and was reimbursed for $50,000 of
expenses relating to his relocation to Bermuda. Mr. Morrison is also entitled to
the reimbursement of reasonable housing and living expenses (not exceeding
$25,000 per month) relating
15
to his residence in Bermuda. In addition, Mr. Morrison is entitled to an
allowance of $900 per month for expenses relating to the use of an automobile,
among other employee benefits and perquisites specified in the agreement.
Pursuant to the employment agreement, Mr. Morrison received an option to
purchase 400,000 Common Shares at $26.00 per Common Share (the closing price of
the Common Shares on the NYSE on the date prior to the date that the Board of
Directors approved his employment agreement) under the Share Incentive Plan. In
addition, Mr. Morrison agreed to purchase 20,000 Common Shares from the Company
at a purchase price of $26.00 per Common Share, which purchase was consummated
on July 30, 2003. If Mr. Morrison's employment is terminated by the Company
without "cause" or by Mr. Morrison for "good reason" (each as defined in the
employment agreement), he will receive monthly payments equal to one-twelfth of
the sum of (i) his base salary and (ii) the greater of his current target bonus
and his bonus for the preceding year for the lesser of 24 months or the number
of full months remaining in the term of his employment, provided that this
period shall not be less than twelve months. Mr. Morrison will be required to
execute a release of claims in order to be entitled to this severance
compensation. In addition, any vested and unexercised options to purchase Common
Shares held by Mr. Morrison at the date of termination will remain exercisable
for the greater of 45 days from such date or May 31, 2006, whichever is later.
Any unvested options to purchase Common Shares and any unvested equity incentive
awards held by Mr. Morrison at the date of such termination will be immediately
forfeited. If Mr. Morrison's employment is terminated by Mr. Morrison other than
for good reason, he will receive no further payments, compensation or benefits
under the employment agreement (other than amounts accrued prior to
termination), and all vested options will remain exercisable for 45 days after
termination. Any unvested options to purchase Common Shares and any unvested
equity incentive awards held by Mr. Morrison at the date of such termination
will be immediately forfeited. If Mr. Morrison's employment is terminated by the
Company for cause, he will receive no further payments, compensation or benefits
under the employment agreement (other than amounts accrued prior to termination)
and all vested and unvested options to purchase Common Shares and any other
equity incentive awards held by Mr. Morrison at the date of such termination
will be immediately forfeited. In the event his employment is terminated due to
death or "disability" (as defined in the employment agreement), he will receive
his base salary through the date of termination and an annual bonus (at target
level) prorated through the date of termination and all outstanding options will
immediately vest and remain exercisable (but not beyond their term) for one
year. Pursuant to the employment agreement, during Mr. Morrison's employment and
for fifteen months thereafter, Mr. Morrison is not permitted to be employed by,
or to own, manage, operate or control, any entity which is primarily engaged in
the reinsurance business, except that Mr. Morrison is not prohibited from owning
less than 2% of any publicly traded corporation. Mr. Morrison is also subject to
certain confidentiality and non-solicitation provisions under the employment
agreement.
Mr. Price entered into an employment agreement with Platinum US on August
4, 2004 for a five-year term that began August 1, 2004, pursuant to which he has
agreed to continue to serve as the President and Chief Underwriting Officer of
Platinum US. Except as specifically provided, this employment agreement
superceded his employment agreement with St. Paul Re dated May 2, 2002, which
was assigned to and assumed by Platinum US upon completion of the Initial Public
Offering and amended in July 2003. Under his new employment agreement, Mr. Price
is entitled to receive a base annual salary of $575,000 in the first year of his
term, $625,000 in the second year of his term, $675,000 in the third year of his
term and $750,000 in the fourth and fifth years of his term. In the event that
Mr. Price is appointed President and Chief Executive Officer of Platinum
Holdings, his employment agreement will be assigned to Platinum Holdings, he
will relocate to Bermuda, his base salary will be increased to $750,000 for the
balance of the term, and he will be entitled to reimbursement for his relocation
and for housing and automobile expenses, as more fully described in the
employment agreement. Mr. Price is eligible to receive for each year of his term
an annual bonus with a target of 100% of base salary and a maximum of 200% of
base salary. The employment agreement also provides that if certain performance
criteria are achieved by the Company, Mr. Price will be eligible for a target
annual award opportunity of 100% of his annual base salary, payable in the form
of Common Shares, or their equivalent, on the fifth anniversary of the award
date. Any such award will be made through the Executive Incentive Plan, which
the Company has
16
established as a long-term incentive plan. Pursuant to the employment agreement,
Mr. Price received a grant of 98,531 Restricted Shares that vest in equal annual
installments on each of the first five anniversaries of the date of the
agreement, subject to Mr. Price's continued employment with the Company. If Mr.
Price's employment is terminated by Platinum US without "cause" or by Mr. Price
for "good reason" (each as defined in the employment agreement), he will receive
a payment equal to one year's base salary and target bonus and any base salary
or other amounts accrued and owing through the date of termination, provided
that Mr. Price executes a release of claims. Any restricted share units, long-
term incentive plan awards, and the Restricted Shares will vest in accordance
with their respective terms. The employment agreement provides that Mr. Price
may terminate his employment for "good reason" if, among other things, the Board
of Directors of Platinum Holdings has not appointed him Chief Executive Officer
of Platinum Holdings on or before August 1, 2007. If Mr. Price's employment is
terminated by Platinum US for cause or by Mr. Price other than for good reason,
he will receive no further payments, compensation or benefits under the
employment agreement (other than amounts accrued prior to termination). Pursuant
to the employment agreement, during Mr. Price's employment and for fifteen
months thereafter, Mr. Price is not permitted to be employed by, or to own,
manage, operate or control, or serve as a director of any entity which is
primarily engaged in the reinsurance business, except that Mr. Price is not
prohibited from owning less than 2% of any publicly traded corporation. Mr.
Price is also subject to certain confidentiality and non-solicitation provisions
under the employment agreement.
Mr. Lombardozzi entered into an employment agreement with St. Paul Re,
which was amended in August 2002, and assigned to and assumed by the Company
upon completion of the Initial Public Offering, and amended in March 2004, for a
three-year term that began August 5, 2002, subject to automatic one-year renewal
terms thereafter, pursuant to which he has agreed to serve as the Executive Vice
President, General Counsel and Secretary of the Company. Mr. Lombardozzi is
entitled to receive a base annual salary of at least $350,000, and he is
eligible to receive for each year of his term a target annual bonus of 75% of
his base salary and a minimum annual bonus of 50% of base salary for the 2003
and 2004 calendar years. Pursuant to the employment agreement, in 2002, Mr.
Lombardozzi received a one-time cash sign-on bonus of $275,000 from St. Paul Re
and an option to purchase 150,000 Common Shares at $22.50 per Common Share. Mr.
Lombardozzi is also entitled to the reimbursement of reasonable housing and
living expenses (not exceeding $15,000 per month) relating to his residence in
Bermuda. In addition, Mr. Lombardozzi is entitled to an allowance of $700 per
month for expenses relating to the use of an automobile. If Mr. Lombardozzi's
employment is terminated by the Company without "cause" or by Mr. Lombardozzi
for "good reason" (each as defined in the employment agreement), he will receive
a payment equal to the sum of one year's base salary and target bonus and any
base salary or other amounts accrued or owing through the date of termination,
provided that Mr. Lombardozzi executes a release of claims. If Mr. Lombardozzi's
employment is terminated by the Company for cause or by Mr. Lombardozzi other
than for good reason, he will receive no further payments, compensation or
benefits under the agreement (other than amounts accrued prior to termination).
Mr. Lombardozzi is subject to certain confidentiality and non-solicitation
provisions under the employment agreement.
Ms. Mitchell entered into a letter agreement with St. Paul Re, which was
assigned to and assumed by Platinum US upon completion of the Public Offering.
The letter agreement provided that Ms. Mitchell's base salary effective July 1,
2002 was $350,000 per year and she was eligible to receive an annual performance
bonus in the target amount of 75% of base salary. Ms. Mitchell received a
retention bonus of $175,000 on July 1, 2004 pursuant to the terms of this letter
agreement. In addition, Ms. Mitchell entered into a letter agreement with
Platinum US on June 24, 2004 regarding additional benefits in the event of her
separation from employment. This letter agreement provides that if Ms.
Mitchell's employment is terminated by the Company without "cause" or by Ms.
Mitchell for "good reason" (each as defined in the letter agreement), she will
receive a payment equal to the sum of one year's base salary and target bonus
and any base salary or other amounts accrued or owing through the date of
termination, provided that Ms. Mitchell executes a release of claims. If Ms.
Mitchell's employment is terminated by the Company for cause or by Mr. Mitchell
other than for good reason, she will receive no further payments, compensation
or benefits under the agreement (other than amounts accrued prior to
termination). In the event Ms. Mitchell's employment is terminated due to her
death or "disability" (as defined in the letter
17
agreement), she will receive her base salary through the date of termination and
an annual bonus (at target level) prorated through the date of termination.
Mr. Schmidt entered into a letter agreement with St. Paul Re, which was
assigned to and assumed by Platinum US upon completion of the Initial Public
Offering. The letter agreement provides that Mr. Schmidt's base salary effective
July 1, 2002 was $350,000 per year and he is eligible to receive an annual
performance bonus in the target amount of 75% of base salary. In addition, Mr.
Schmidt received a retention bonus of $175,000 on July 1, 2004 pursuant to the
terms of the letter agreement.
Mr. Fisher was appointed Executive Vice President and Chief Financial
Officer of the Company effective July 6, 2004 pursuant to an employment
agreement that he entered into with the Company on June 24, 2004. The employment
agreement provides that Mr. Fisher will serve in those positions for a
three-year term that began July 6, 2004, subject to automatic one-year renewal
terms thereafter. Mr. Fisher is entitled to receive a base annual salary of at
least $400,000, and he is eligible to receive for each year of his term an
annual bonus with a target of 75% of base salary and a maximum of 150% of base
salary, provided that Mr. Fisher is entitled to receive a minimum annual bonus
for the 2004 calendar year in an amount equal to a pro rata portion of his
target annual bonus, adjusted for the period beginning July 6, 2004, and ending
December 31, 2004. The employment agreement also provides that if certain
performance criteria are achieved by the Company, Mr. Fisher will receive an
annual award opportunity of not less than 37.5% of his annual base salary,
payable in the form of Common Shares, on the fifth anniversary of the award
date. Any such award will be made through the Executive Incentive Plan. Pursuant
to the employment agreement, Mr. Fisher received a one-time cash sign-on bonus
of $50,000 and is entitled to reimbursement for $50,000 of expenses relating to
his relocation to Bermuda. Mr. Fisher is also entitled to the reimbursement of
reasonable housing and living expenses (not exceeding $15,000 per month)
relating to his residence in Bermuda. In addition, Mr. Fisher is entitled to an
allowance of $700 per month for expenses relating to the use of an automobile.
Pursuant to the employment agreement, Mr. Fisher received an option to purchase
100,000 Common Shares at $30.45 per Common Share (the closing price of the
Common Shares on the NYSE on July 5, 2004) under the Share Incentive Plan. If
Mr. Fisher's employment is terminated by the Company without "cause" or by Mr.
Fisher for "good reason" (each as defined in the employment agreement), he will
receive a payment equal to one year's base salary and target bonus and any base
salary or other amounts accrued or owing through the date of termination,
provided that Mr. Fisher executes a release of claims. If Mr. Fisher's
employment is terminated by the Company for cause or by Mr. Fisher other than
for good reason, he will receive no further payments, compensation or benefits
under the agreement (other than amounts accrued prior to termination). Mr.
Fisher is subject to certain confidentiality and non-solicitation provisions
under the employment agreement.
William A. Robbie, who served as Executive Vice President and Chief
Financial Officer of the Company since the Initial Public Offering, resigned
from these positions effective July 6, 2004. In connection with such
resignation, the Company entered into a Separation Agreement with Mr. Robbie on
June 24, 2004, under which Mr. Robbie served as an employee of Platinum
Administrative Services, Inc. and assisted with such matters as reasonably
requested through November 30, 2004. In consideration of the termination of and
in accordance with his employment agreement, he received a payment of $612,500
and all base salary and other amounts accrued or owing through the date of
termination. Under the Separation Agreement, the Company also agreed to pay
termination fees and lease payments in connection with Mr. Robbie's residence in
Bermuda and relocation expenses, and paid Mr. Robbie a total of $20,000 in
respect thereof. The Separation Agreement superseded all terms of Mr. Robbie's
employment agreement, except that he continues to be bound by the terms of the
confidentiality, non-competition and non-solicitation provisions under the
employment agreement. Mr. Robbie exercised the portion of his option that was
vested prior to November 30, 2004, which represented to right to purchase 75,000
Common Shares. Pursuant to the terms of Mr. Robbie's Nonqualified Share Option
Agreement, that portion of the option held by Mr. Robbie that was unvested at
November 30, 2004, which represented the right to purchase 75,000 Common Shares,
terminated in accordance with its terms and all rights with respect thereto were
forfeited.
18
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors reviews the
compensation policies and practices of the Company and the recommendations of
the Chief Executive Officer concerning the compensation of those officers of the
Company with a title more senior than Vice President, and makes recommendations
to the Board with respect thereto. The Compensation Committee also reviews and
approves the corporate goals and objectives relevant to the Chief Executive
Officer's compensation, evaluates the Chief Executive Officer's performance in
light of those goals and objectives and sets the Chief Executive Officer's
compensation level based on such evaluation. The Compensation Committee grants
awards under and oversees the administration of various plans, including the
Share Incentive Plan, the Section 162(m) Performance Incentive Plan, the Annual
Incentive Plan, the Executive Incentive Plan, and the Executive Bonus Deferral
Plan. These plans serve to attract, retain and motivate officers and select
managers of the Company by providing them with the opportunity to earn short-
and long-term incentives. The Compensation Committee believes that the Company's
compensation program promotes and aligns the interests of the Company and its
shareholders by motivating superior performance by key personnel to achieve the
Company's objectives.
The Compensation Committee is composed exclusively of nonemployee
directors, as defined in applicable rules and regulations of the SEC, and none
of the members of the Committee is an employee or former employee of the
Company. Each of the members of the Compensation Committee also satisfies the
criteria necessary to be considered an "outside director" for purposes of
Section 162(m) of the Code, and an "independent" director under the NYSE listing
standards. The names of the members of the Compensation Committee appear at the
end of this report.
The Compensation Committee has retained the services of a nationally
recognized compensation consulting firm to support the Compensation Committee in
fulfilling its mission. In addition, the Compensation Committee retained Mr.
Deutsch, a nominee to the Board, as a consultant effective September 1, 2004
pursuant to a consulting agreement between the Company and Mr. Deutsch, as
described in more detail under "Arrangements with Director and Nominee" above.
OVERVIEW
The Company's compensation philosophy is designed to reward and support
superior performance and to attract, retain and motivate highly qualified
personnel. These objectives are achieved through various compensation programs,
described below, which are designed to support the current and long-term
performance of the Company.
The Compensation Committee believes that the Company's compensation
philosophy, with its emphasis on performance and long-term compensation, serves
to focus Company executives on attaining a sustained, high level of Company
performance and on enhancing shareholder value.
KEY COMPENSATION ELEMENTS
The principal elements of executive compensation are base salary, annual
incentive awards and long-term incentive awards. These components are
administered with the goal of providing total compensation that is competitive,
rewards sustained performance, inspires the highest individual performance, and
provides above-average rewards when merited by Company and individual results.
With the assistance of its compensation consulting firm and Mr. Deutsch, the
Compensation Committee considers several factors, including competitive
compensation practices and trends and market demand for talent, to assess the
effectiveness and competitiveness of the Company's executive compensation
structure.
The Compensation Committee benchmarks base salary and incentive
compensation awards for executives using market data compiled annually by its
compensation consulting firm. This market data is derived from other publicly
traded companies in the reinsurance industry with which the Company competes for
like talent. This group of companies can vary depending on changes in market
dynamics and
19
the extent to which the particular companies have positions similar in breadth
and scope of responsibilities to the Company.
BASE SALARY
The Compensation Committee annually reviews and determines the base
salaries of officers with titles more senior than Vice President, with specific
focus on the Chief Executive Officer and those officers who report directly to
the Chief Executive Officer. With respect to officers with titles more senior
than Vice President who do not report directly to the Chief Executive Officer,
the Compensation Committee evaluates management's salary recommendations based
on the results achieved by each officer, his or her future potential, scope of
responsibilities and experience, as well as competitive salary practices. The
Company generally targets officer salaries to approximately the median levels
expected to be paid to persons holding equivalent positions by like companies
within the reinsurance industry. With the exception of Mr. Price, the President
and Chief Underwriting Officer of Platinum US, the Compensation Committee did
not increase the base salaries of the Company's executive officers in 2004 based
on advice from its compensation consulting firm and the Compensation Committee's
belief that the current base salaries were consistent with market practices. Mr.
Price's base salary was increased in connection with his entering into a new
employment agreement with Platinum US in August 2004, as described in more
detail under "Employment and Other Arrangements" above.
ANNUAL INCENTIVE AWARDS
The Company's Annual Incentive Plan is structured to reward employees based
on short-term corporate and individual performance. The Compensation Committee
approves targets for incentives for each participating officer more senior than
Vice President. These targets are established as a percentage of each officer's
base salary and are calculated to deliver competitive compensation to the
officer and to motivate the officer to achieve superior performance. Awards
under the Annual Incentive plan may be delivered in cash and restricted share
units.
The Compensation Committee adopted performance measures for fiscal 2004 to
determine the amount of incentives to be paid at different levels of the
Company's performance. The annual incentive pool is funded at different levels
depending on the Company's achievement of net income targets, which were
established for 2004 at the beginning of the year.
At the threshold level of performance, the pool is funded at 40% of the
aggregate of target incentives for all participating officers. Below the
threshold, the pool is funded at 0%, except for a minimum pool established to
compensate employees with titles below Senior Vice President. At the target
level of performance, the pool is funded 100% and for every $10 million of net
income above target, the pool is funded an additional 10%, up to a maximum of
200% of target. The Compensation Committee exercises discretion in determining
individual awards granted under the Annual Incentive Plan.
The Company reported approximately $85 million of net income for the year
ended December 31, 2004, but did not meet the minimum threshold established by
the Compensation Committee under the Annual Incentive Plan. Failure to meet the
net income target was largely due to unusually high catastrophe losses resulting
from four hurricanes in the Caribbean and the southeast United States in the
third quarter of 2004. Therefore, for 2004, no annual incentive compensation was
paid to officers with titles more senior than Vice President, except for Mr.
Fisher and Mr. Lombardozzi, who were paid $150,000 and $175,000, respectively.
These annual incentive awards, of which 75% were paid in cash and 25% were paid
in the form of restricted share units, were made pursuant to minimum incentive
compensation provisions under their respective employment agreements, as
described in more detail under "Employment and Other Arrangements" above.
LONG-TERM INCENTIVE AWARDS
The Share Incentive Plan provides that the Compensation Committee has the
authority to grant equity-based compensation awards in the form of options to
purchase Common Shares, restricted Common
20
Shares, share appreciation rights and share units. The Compensation Committee
awarded 98,531 Restricted Shares to Mr. Price, subject to a five-year vesting
requirement, in connection with his entering into a new employment agreement
with Platinum US in August 2004, and 100,000 options to purchase Common Shares
to Joseph F. Fisher, the Company's Chief Financial Officer, upon joining the
Company in July 2004. These awards are described in more detail under
"Employment and Other Arrangements" above. Mr. Price and the remaining executive
officers received a grant of options effective upon completion of the Initial
Public Offering (in the case of the Chief Executive Officer, effective upon his
employment with the Company in June 2003) that, in the view of the Compensation
Committee, provides incentive to executive officers to focus on increasing
shareholder value over the long term.
The Compensation Committee also has authority to grant
cash-performance-based awards under the Executive Incentive Plan. The Executive
Incentive Plan is designed to promote the interests of the Company and its
shareholders by motivating superior performance by key personnel to achieve the
Company's objectives. Participation in the Executive Incentive Plan is limited
to executive officers and other senior officers of the Company who are
designated by the Compensation Committee. The amount payable is a percentage of
base salary and ranges from 0% to 200% depending on actual average return on
equity ("ROE") relative to the threshold average ROE over the stated performance
period.
During 2004, the Compensation Committee made an award to Mr. Morrison, the
Company's Chief Executive Officer, under the Executive Incentive Plan. The
performance cycle is five years. For 2004, the target average ROE is 13.75% over
the five-year period, which would result in a payout equal to 100% of base
salary. The minimum target average ROE is 10% over the five-year period, which
would result in a payout equal to 50% of base salary. There is no payout if
average ROE at the end of the five-year performance cycle is less than 10%. An
average ROE of 17.5% or greater over the five-year period would result in a
maximum payout equal to 200% of base salary. A payout between the minimum and
maximum is determined through straight-line interpolation. Other than this award
granted to Mr. Morrison, no awards were granted under this plan in 2004.
DEFERRED COMPENSATION
The Company maintains an Executive Bonus Deferral Plan that allows United
States tax paying employees with titles more senior than Vice President and who
have a base salary equal to or greater than $200,000 to defer 10% to 100% of the
cash portion of their annual bonus. Participation in the Executive Bonus
Deferral Plan is elective. Employees who elect to participate in the Executive
Bonus Deferral Plan must elect a specific distribution date upon which the
deferred compensation becomes payable. Two employees elected to participate in
the Executive Bonus Deferral Plan in 2005. No such deferral occurred, however,
because they did not receive a cash bonus.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Morrison was compensated pursuant to an employment agreement entered
into with the Company in June 2003 and amended in January 2004, as described in
more detail under "Employment and Other Arrangements" above. Mr. Morrison's
employment agreement provides for an annual base salary of $650,000 and an
annual incentive award for each year of his term, with a target opportunity of
100% of base salary and a maximum opportunity of 200% of the target. Pursuant to
the Annual Incentive Plan, any such incentive award is payable to Mr. Morrison
in a combination of cash and restricted share units. However, as discussed
above, the Compensation Committee did not grant Mr. Morrison an annual incentive
award for 2004 because the Company did not achieve its minimum net income
target. In 2004, Mr. Morrison received an award under the Executive Incentive
Plan, as described in more detail above.
INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Code imposes a limitation of $1 million per year on
the corporate income tax deduction for compensation paid to the Company's named
executive officers that would otherwise be
21
deductible by Platinum US. Among other exceptions, the deduction limit does not
apply to compensation that meets the specified requirements for
"performance-based compensation."
The Company's Share Incentive Plan, which was re-approved by the Company's
shareholders at the Company's 2004 Annual General Meeting of Shareholders, was
designed to meet the requirements for performance-based compensation in the case
of share options and share appreciation rights granted under the plan. In
addition, the Company's Section 162(m) Performance Incentive Plan, which was
approved by the Company's shareholders in 2003, allows the Company to grant
restricted shares, share units and other incentive compensation in a manner that
meets the requirements for performance-based compensation under Section 162(m).
The Compensation Committee believes that the deductibility of compensation is
only one factor in assessing whether a particular compensation arrangement is
appropriate given the goal of motivating executives to achieve corporate
objectives and increase shareholder value. Therefore, the Compensation Committee
retains the flexibility under circumstances it considers appropriate to pay
compensation to its executive officers that may not be deductible by Platinum US
under Section 162(m).
EXECUTIVE AND SHAREHOLDER ALIGNMENT
To assure that the interests of the Company's employees and shareholders
are aligned, equity ownership is a significant component of the Company's
compensation program. In particular, as employees progress to higher levels in
the organization, an increasing portion of their compensation is linked to
Company performance. For example, Executive Vice Presidents receive 25% of their
annual incentive awards in the form of restricted share units and the Chief
Executive Officer and President and Chief Underwriting Officer of Platinum US
receive 50% of their annual incentive awards in the form of restricted share
units. Each restricted share unit entitles the holder thereof to one Common
Share on the date that is six months from the date of grant. Any such Common
Shares must be retained by the officer in accordance with the Company's share
ownership guidelines, as described in more detail under "Share Ownership
Guidelines" above. The Compensation Committee believes that the Company's
compensation program fosters the long-term focus required for success in the
industry.
Peter T. Pruitt, Chairman
Jonathan F. Bank
Neill A. Currie
The foregoing Report of the Compensation Committee shall not be deemed to
be "soliciting material" or "filed" with the SEC or incorporated by reference in
any previous or future document filed by the Company with the SEC under the
Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act,
except to the extent that the Company specifically incorporates such Report by
reference in any such document.
22
PERFORMANCE GRAPH
The Company commenced operations on November 1, 2002 upon completion of the
Initial Public Offering. The graph below compares cumulative total return on the
Common Shares with the cumulative total return on the Standard & Poor's ("S&P")
500 Composite Stock Price Index (the "S&P 500 Index") and the S&P
Property-Casualty Industry Group Stock Price Index (the "S&P Property-Casualty
Index"), for the period commencing November 1, 2002 and ending on December 31,
2004, assuming $100 was invested on November 1, 2002. The graph shows the value
at June 30 and December 31 of each calendar year since the commencement of
operations by the Company of $100 invested in the Common Shares, the S&P 500
Index, and the S&P Property-Casualty Index as measured by the last sale price on
the last trading day of each such period.
(PERFORMANCE GRAPH)
S&P PROPERTY-CASUALTY
THE COMPANY S&P 500 INDEX INDEX
----------- ------------- ---------------------
11/1/2002 100.00 100.00 100.00
12/31/2002 105.61 97.98 96.57
6/30/2003 109.48 109.50 107.47
12/31/2003 121.69 126.08 122.07
6/30/2004 124.06 130.43 127.64
12/31/2004 127.49 139.80 134.79
The foregoing Performance Graph shall not be deemed to be "soliciting
material" or "filed" with the SEC or incorporated by reference in any previous
or future document filed by the Company with the SEC under the Securities Act or
the Exchange Act, except to the extent that the Company specifically
incorporates such Performance Graph by reference in any such document.
23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the beneficial
ownership of Common Shares as of March 1, 2005 of those persons known by the
Company to be the beneficial owners of more than 5% of the outstanding Common
Shares:
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ----------------- --------
RenaissanceRe Holdings Ltd. ............................. 4,302,652(1) 9.9
Renaissance House
8-12 East Broadway
Pembroke HM 19
Bermuda
Wellington Management Company, LLP....................... 4,243,628(2) 9.8
75 State Street
Boston, MA 02109
Perry Corp. ............................................. 3,197,135(3) 7.4
Richard C. Perry
599 Lexington Avenue
New York, NY 10022
Shapiro Capital Management Company, Inc. ................ 2,285,675(4) 5.3
3060 Peachtree Road NW
Suite 1555
Atlanta, GA 30305
---------------
(1) Concurrently with the completion of the Initial Public Offering, the Company
sold 3,960,000 Common Shares to RenaissanceRe. In addition, RenaissanceRe
received an option to purchase up to 2,500,000 additional Common Shares at
any time during the ten years following the Initial Public Offering at a
purchase price of $27.00 per share (the "RenaissanceRe Option"). The
RenaissanceRe Option was amended on November 18, 2004 to provide that, in
lieu of paying $27.00 per share, any exercise by RenaissanceRe of the
RenaissanceRe Option will be settled on a net share basis, which would
result in the Company issuing to RenaissanceRe a number of Common Shares
equal to the excess of the market price per share, determined in accordance
with the amendment, over $27.00 less the par value per share multiplied by
the number of Common Shares issuable upon exercise of the options, divided
by that market price per share. Based on the closing price per share on
March 1, 2005, RenaissanceRe had the right to acquire pursuant to the
RenaissanceRe Option 342,652 Common Shares as of such date, resulting in the
beneficial ownership by RenaissanceRe of 4,302,652 Common Shares (or 9.9% of
the then outstanding Common Shares) as of such date. Pursuant to a
limitation on voting rights in the Company's Bye-laws, RenaissanceRe's
voting power with respect to the Common Shares owned by it is limited to
9.9% of the voting power of the outstanding Common Shares.
(2) In a Schedule 13G statement filed on February 14, 2005, Wellington
Management Company, LLP ("Wellington") reported shared voting power over
3,680,648 Common Shares and shared dispositive power over 4,243,628 Common
Shares. Wellington is an investment adviser registered under the Investment
Advisers Act of 1940. This Schedule 13G statement indicated that the
securities reported therein were owned of record by clients of Wellington
who had the right to receive, or the power to direct the receipt of,
dividends from, or the proceeds from the sale of, such securities, and that
no such client was known to have such right or power with respect to more
than 5% of the class of such securities.
(3) In a Schedule 13G statement filed on February 9, 2005, Perry Corp. and
Richard C. Perry (the president and sole stockholder of Perry Corp.) jointly
reported sole voting power and sole dispositive power over 3,197,135 Common
Shares of the Company. Perry Corp. is an investment adviser registered under
the Investment Advisers Act of 1940. This Schedule 13G statement indicated
that
24
the limited partners of (or investors in) each of two or more private
investment funds for which Perry Corp. acts as general partner and/or
investment adviser had the right to participate in the receipt of dividends
from, and proceeds from the sale of, the Common Shares held for the accounts
of such funds in accordance with their respective limited partnership
interests (or investment percentages) in such funds. Mr. Perry disclaimed
any beneficial ownership interest of the Common Shares owned beneficially by
Perry Corp., except for that portion of such Common Shares that related to
his economic interest in Perry Corp.
(4) In a Schedule 13G statement filed on February 15, 2005, Shapiro Capital
Management Company, Inc. ("Shapiro") reported sole voting power over
2,035,620 Common Shares, shared voting power over 250,055 Common Shares and
sole dispositive power over 2,285,675 Common Shares of the Company. Shapiro
is an investment adviser registered under the Investment Advisers Act of
1940.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Common
Shares as of March 1, 2005 of each of the directors and executive officers.
Except as otherwise indicated, each of these persons had sole voting power and
sole dispositive power with respect to the Common Shares beneficially owned by
him.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------------ ----------------- --------
Steven H. Newman............................................ 730,000(1)(2) 1.7
Gregory E.A. Morrison....................................... 134,073(2) *
H. Furlong Baldwin.......................................... 26,668(1)(2) *
Jonathan F. Bank............................................ 23,668(1)(2) *
Dan R. Carmichael........................................... 24,194(1)(2) *
Neill A. Currie............................................. 28,334(1)(2) *
Jay S. Fishman.............................................. 29,668(2)(3) *
Peter T. Pruitt............................................. 25,668(1)(2) *
Joseph F. Fisher............................................ 1,000 *
Michael E. Lombardozzi...................................... 84,845(2) *
H. Elizabeth Mitchell....................................... 43,634(2) *
Michael D. Price............................................ 222,356(2) *
Neal J. Schmidt............................................. 86,261(2) *
All directors and executive officers as a group (13
persons).................................................. 1,460,369 3.4%
---------------
* Represents less than 1% of the outstanding Common Shares.
(1) Does not include share units. Under the Share Unit Plan, 50% of all fees
earned by a director who is not an employee of the Company or any of its
affiliates (including retainer fees, meeting fees and committee fees) during
each calendar quarter (or such higher percentage as elected by a director)
are automatically converted into that number of share units equal to the
number of Common Shares which could have been purchased with such fees,
based upon the closing price of the Common Shares on the last day of the
calendar quarter, as more fully described under "Director Compensation." As
of March 1, 2005, the following nonemployee directors had been credited with
the following number of share units: Mr. Newman: 3,634 share units; Mr.
Bank: 5,176 share units; Mr. Carmichael: 4,777 share units; Mr. Pruitt:
3,114 share units; Mr. Baldwin: 3,128 share units; and Mr. Currie: 2,415
share units.
(2) Includes Common Shares issuable upon exercise of options as follows: Mr.
Newman: 650,000 Common Shares; Mr. Morrison: 100,000 Common Shares; Mr.
Baldwin: 21,668 Common Shares; Mr. Bank: 21,668 Common Shares; Mr.
Carmichael: 21,668 Common Shares; Mr. Currie: 13,334 Common Shares; Mr.
Fishman: 21,668 Common Shares; Mr. Pruitt: 21,668 Common Shares;
25
Mr. Lombardozzi: 75,000 Common Shares; Ms. Mitchell: 37,500 Common Shares;
Mr. Price: 100,000 Common Shares; and Mr. Schmidt: 75,000 Common Shares.
(3) Mr. Fishman is the President and Chief Executive Officer of St. Paul, which
is the beneficial owner of a currently exercisable option to acquire
approximately 822,364 Common Shares as of March 1, 2005, as more fully
described below under "Related Party Transactions." Mr. Fishman disclaims
beneficial ownership of these Common Shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the Exchange Act, the Company's directors and executive officers and
any persons holding more than 10% of the Common Shares are required to report
their initial ownership of Common Shares and any subsequent changes in that
ownership to the SEC. Specific filing dates for these reports have been
established by the SEC, and the Company is required to disclose in this proxy
statement any failure by such persons to file these reports in a timely manner
during the 2004 fiscal year. The Company has determined that no person who at
any time during 2004 was a director, executive officer or holder of more than
10% of the Common Shares failed to file on a timely basis reports required by
the Exchange Act during 2004. This determination was based solely upon the
review by the Company of Forms 3, 4 and 5, and written representations that no
Forms 5 were required, which were submitted to the Company during or with
respect to 2004.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Pruitt, Bank and Currie currently serve on the Compensation
Committee of the Board of Directors of the Company. Each member of the
Compensation Committee is an independent director and no member of the
Compensation Committee had any relationship with the Company requiring
disclosure under Item 404 of SEC Regulation S-K. No executive officer of the
Company served on any board of directors or compensation committee of any other
company for which any of our directors served as an executive officer at any
time during the 2004 fiscal year.
RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH ST. PAUL AND ITS SUBSIDIARIES
Mr. Fishman, a current member of the Board of Directors, is the President
and Chief Executive Officer of St. Paul. Mr. Fishman has informed the Board of
Directors that he will not be standing for re-election at the Annual Meeting, as
more fully described above under "Proposal 1 -- Election of Directors."
Concurrently with the completion of the Initial Public Offering on November 1,
2002, the Company issued 6,000,000 Common Shares (or 14% of the then outstanding
Common Shares) to St. Paul in a private placement pursuant to a Formation and
Separation Agreement dated as of October 28, 2002 between the Company and St.
Paul (the "Formation Agreement"). On June 25, 2004, the Company announced St.
Paul's intent to sell these 6,000,000 Common Shares in an underwritten public
offering, which was effected pursuant to a prospectus supplement to the shelf
registration statement dated June 28, 2004 and completed on June 30, 2004. St.
Paul and one of its subsidiaries also received options to purchase up to
6,000,000 additional Common Shares at any time during the ten years following
the Initial Public Offering at a price of $27.00 per share (the "St. Paul
Option"). The St. Paul Option was amended on January 10, 2005 to provide that,
in lieu of paying $27.00 per share, any exercise by St. Paul of the St. Paul
Option will be settled on a net share basis, which would result in the Company
issuing to St. Paul a number of Common Shares equal to the excess of the market
price per share, determined in accordance with the amendment, over $27.00 less
the par value per share multiplied by the number of Common Shares issuable upon
exercise of the options, divided by that market price per share. Based on the
closing price per share on March 1, 2005, St. Paul had the right to acquire
pursuant to the St. Paul Option, and thus beneficially owned, 822,364 Common
Shares as of such date (or 1.9% of the then outstanding Common Shares). In
return for the Common Shares and the St. Paul Option, St. Paul contributed to
the Company cash in the amount of $122 million and substantially all of the 2002
reinsurance business and related assets of St. Paul
26
Re, including all of the outstanding capital stock of Platinum US. Among the
fixed assets transferred were furniture, equipment, systems and software, and
the intangible assets included broker lists, contract renewal rights and
licenses. The Formation Agreement contains provisions regarding indemnification
of each of St. Paul and the Company by the other, restrictions on St. Paul
regarding competition with the Company and the transfer or acquisition of Common
Shares in certain circumstances, and participation in Common Share buy-back
programs. The Formation Agreement provided that the Company and its subsidiaries
enter into several agreements with St. Paul and its subsidiaries, as described
below.
The Company entered into a registration rights agreement with St. Paul as
of November 1, 2002 and related letter agreement dated March 22, 2004, pursuant
to which St. Paul has the right to require the Company, subject to certain
specified exceptions, on three occasions to register under the Securities Act,
any Common Shares owned by St. Paul or its affiliates for sale in a public
offering. Pursuant to this agreement, the Company has also agreed to use its
reasonable best efforts to enable St. Paul from and after the third anniversary
of the completion of the Initial Public Offering to distribute the Common Shares
it beneficially owns in an offering on a continuous or delayed basis pursuant to
a registration statement under the 1933 Act. After November 1, 2007, St. Paul
will have the right to two additional demand registrations if St. Paul
beneficially owns more than 9.9% of the Common Shares then outstanding. Each
demand must include a number of Common Shares with a market value equal to at
least $50 million, except that this limitation will not apply to St. Paul's last
demand registration. Pursuant to the related letter agreement, each of St. Paul
and the Company have agreed that their respective rights, duties and obligations
with regard to the registration, offering and sale of St. Paul's shares under
the universal shelf registration statement of Form S-3 filed by the Company
shall be as if such registration statement had been filed pursuant to a demand
request under the registration rights agreement.
Certain subsidiaries of the Company entered into several quota share
retrocession agreements with subsidiaries of St. Paul, pursuant to which St.
Paul's subsidiaries transferred the liabilities, related assets and rights and
risks under substantially all of the reinsurance contracts entered into by St.
Paul's subsidiaries on or after January 1, 2002, excluding certain liabilities
relating to the flooding in Europe in August 2002 and business underwritten in
London for certain financial services companies (the "Quota Share Retrocession
Agreements"). These agreements provided for the transfer to subsidiaries of the
Company of cash and other assets aggregating approximately $485,687,000, which
represents substantially all of the existing 2002 underwriting year loss
reserves, excluding certain liabilities retained by St. Paul, allocated loss
adjustment expense reserves, other reserves related to non-traditional
reinsurance treaties, unearned premium reserves (subject to agreed upon
adjustments) and other related reserves, which relate to contracts entered into
on and after January 1, 2002, as of the date of the transfer and 100% of future
premiums (less any ceding commission under the Quota Share Retrocession
Agreements) associated with the transferred reinsurance contracts relating to
periods after the date of the transfer. Trusts have been established and funded
to secure Platinum US's retrocession obligations to St. Paul's subsidiaries.
Platinum US and St. Paul Fire and Marine Insurance Company, a wholly owned
subsidiary of St. Paul ("St. Paul Fire and Marine"), entered into a US
Underwriting Management Agreement dated as of November 1, 2002. Pursuant to this
agreement, Platinum US has authority to write renewals of certain
non-traditional reinsurance contracts for a period of three years on behalf of
St. Paul Fire and Marine or Mountain Ridge Insurance Company, a wholly owned
subsidiary of St. Paul. Platinum US bears all the expenses incurred in
underwriting and administering the non-traditional business that it reinsures.
St. Paul Fire and Marine is required to pay the direct and reasonable indirect
costs of non-traditional business not reinsured by Platinum US. Platinum UK and
St. Paul Reinsurance Company Limited ("St. Paul Re UK") entered into a similar
agreement dated as of November 1, 2002 providing Platinum UK with substantially
the same rights to underwrite business on behalf of St. Paul Re UK.
In addition, St. Paul Re UK, St. Paul Management Limited and Platinum UK
entered into a UK Business Transfer Agreement under which Platinum UK acquired
the reinsurance business of St. Paul Re UK, together with the associated
customer lists and goodwill (other than the assumption of liability for, or the
management of, existing reinsurance contracts entered into by St. Paul Re UK on
or prior to November 1, 2002). Platinum UK is entitled to write reinsurance
business for its own account and benefit
27
in succession to St. Paul Re UK. In consideration for the transfer, a portion of
the St. Paul Option was allocated to St. Paul Re UK. Pursuant to this agreement,
St. Paul paid Platinum UK $63,548 representing its pro rata share of retention
bonuses that were paid to certain employees of Platinum UK in 2004.
The Company and Platinum UK entered into Master Services Agreements with
St. Paul and St. Paul Re UK pursuant to which St. Paul and its subsidiaries
provide certain services, including accounting, payroll administration, human
resources management and systems support, at cost until the Company and Platinum
UK deem it no longer necessary. Both of these Master Services Agreements, which
originally were scheduled to terminate on June 30, 2003, were amended by the
parties to terminate on June 30, 2005 with respect to certain services. The
Company and Platinum UK paid St. Paul and St. Paul Re UK a total of $326,000 for
services provided in 2004 under the Master Services Agreements. The Company and
Platinum UK also entered into Run-off Services Agreements with St. Paul and St.
Paul Re UK, pursuant to which the Company and Platinum UK, for a period of up to
two years following completion of the Initial Public Offering, provide St. Paul
and St. Paul Re UK with specified services at cost in administering the run-off
of certain reinsurance contracts. These agreements expired by their terms on
November 1, 2004.
Pursuant to the Employee Benefits and Compensation Matters Agreement, St.
Paul transferred certain of its employees to Platinum US. The agreement provides
for the allocation of assets and liabilities and certain other agreements with
respect to employee compensation and benefit plans. Pursuant to this agreement,
St. Paul paid Platinum US $487,788 representing its pro rata share of retention
bonuses that were paid to certain employees of Platinum US in 2004. In addition,
St. Paul paid Platinum US $443,983 in 2004 as reimbursement for expenses
relating to payments to Platinum US employees for their unvested St. Paul
options at the time of the Initial Public Offering.
Pursuant to the reimbursement agreement between the Company and St. Paul
dated March 25, 2004, St. Paul paid the Company $2 million for expenses relating
to severance payments for certain employees of Platinum UK and information
technology equipment that was transferred from Platinum US to St. Paul Re.
Platinum US entered into an Aggregate Excess of Loss Retrocession Agreement
with Mountain Ridge Insurance Company, a St. Paul subsidiary, on June 11, 2003.
This Agreement related to an underlying agreement with Liberty Mutual which, in
turn, was reinsured by Platinum US under a 100% Quota Share Retrocession
Agreement with Mountain Ridge Insurance Company.
Platinum US has entered into several novation and other agreements with St.
Paul and various ceding insurance companies, whereby Platinum has replaced St.
Paul as the reinsurer on the respective contracts. In certain cases, these
contracts were originally issued by St. Paul Fire and Marine because Platinum US
was not authorized as a reinsurer in Wisconsin. Several novation agreements were
entered into after Platinum US became authorized in Wisconsin.
Platinum UK entered into an Excess of Loss Reinsurance contract with XL Re
on July 1, 2003 that replaced an existing contract between XL Re and St Paul.
This contract includes a provision whereby St. Paul received a commission as
compensation for forfeiting a $5.65 million deficit premium that would have been
paid to St. Paul if the existing contract had simply been terminated.
Platinum Bermuda was one of several reinsurers participating on five
excess-of-loss reinsurance contracts and a variable quota share reinsurance
contract with certain subsidiaries of St. Paul relating to contract surety
business. Platinum Bermuda received approximately $9.4 million in premium under
these contracts in 2004. Platinum Bermuda is one of several reinsurers
participating on a three-year structured surety excess of loss reinsurance
contract with certain subsidiaries of St. Paul. Platinum Bermuda has a 30%
participation under this contract and expects to receive approximately $26
million in total premium under this contract in 2005. Platinum Bermuda is one of
several reinsurers participating on three layers of a twelve-month surety excess
of loss reinsurance contract with certain subsidiaries of St. Paul. Platinum
Bermuda has a 7% participation under this contract and expects to receive
approximately $5.3 million in total premium under this contract in 2005.
Platinum US is one of several reinsurers participating on two
28
layers of a property catastrophe program with certain St. Paul subsidiaries.
Platinum US has a .5% and 1.25% participation on these two layers and receives
approximately $784,000 in total premium under this contract.
Platinum US is one of several reinsurers participating on two property
excess of loss reinsurance contracts with Discover Re, a subsidiary of St. Paul.
Platinum US has a 10% participation and receives approximately $3.7 million in
total premium under these contracts. Platinum US is one of several reinsurers
participating on an excess workers compensation quota share contract with
Discover Re. Platinum US has a 2.5% participation under this contract and
receives approximately $1.9 million in total premium under this contract.
Platinum US is one of several reinsurers participating on two layers of a
workers compensation excess of loss reinsurance contract with Discover Re.
Platinum US has a 10% participation under this contract and expects to receive
approximately $975,000 in total premium under this contract in 2005.
TRANSACTIONS WITH RENAISSANCERE AND ITS SUBSIDIARIES
Concurrently with the completion of the Initial Public Offering, the
Company sold 3,960,000 Common Shares to RenaissanceRe at a price of $22.50 per
share less the underwriting discount (the "RenaissanceRe Investment") in a
private placement pursuant to the Investment Agreement. In addition,
RenaissanceRe received an option to purchase up to 2,500,000 additional Common
Shares at any time during the ten years following the Initial Public Offering at
a purchase price of $27.00 per share (the "RenaissanceRe Option"). The
RenaissanceRe Option was amended on November 18, 2004 to provide that, in lieu
of paying $27.00 per share, any exercise by RenaissanceRe of the RenaissanceRe
Option will be settled on a net share basis, which would result in the Company
issuing to RenaissanceRe a number of Common Shares equal to the excess of the
market price per share, determined in accordance with the amendment, over $27.00
less the par value per share multiplied by the number of Common Shares issuable
upon exercise of the options, divided by that market price per share. Based on
the closing price per share on March 1, 2005, RenaissanceRe had the right to
acquire pursuant to the RenaissanceRe Option 342,652 Common Shares as of such
date, resulting in the beneficial ownership by RenaissanceRe of 4,302,652 Common
Shares (or 9.9% of the then outstanding Common Shares) as of such date. The
Investment Agreement provides that, for so long as RenaissanceRe beneficially
owns Common Shares representing at least 62.5% of the Common Shares purchased
pursuant to the Investment Agreement, one qualified person designated by
RenaissanceRe, who is reasonably acceptable to the Company, but not an officer,
director or employee of RenaissanceRe or any of its subsidiaries, will be
nominated by the Company for election as a director of the Company at each
shareholder meeting at which directors are elected and the Company shall use
commercially reasonable efforts to cause this director's appointment to the
Executive Committee and, subject to applicable law, rules or regulations, the
Governance Committee of the Board of Directors of the Company. The Investment
Agreement also provides that, for so long as RenaissanceRe beneficially owns
Common Shares representing at least 62.5% of the Common Shares purchased
pursuant to the Investment Agreement, RenaissanceRe will have the right to
designate a representative to attend (but not to vote at) meetings of the Board
of Directors and to receive notices, agendas, minutes and all other materials
distributed to participants at such meetings.
The Company and RenaissanceRe entered into a Transfer Restrictions,
Registration Rights and Standstill Agreement as of November 1, 2002, pursuant to
which, prior to November 1, 2003, RenaissanceRe could not transfer any interest
in the Common Shares it purchased pursuant to the Investment Agreement except
under certain conditions. Under this agreement, RenaissanceRe has the right to
require the Company, subject to certain specified exceptions, on four occasions
to register under the 1933 Act any Common Shares owned by RenaissanceRe or its
affiliates for sale in a public offering beginning as of November 1, 2003. The
Company has also agreed to use its reasonable best efforts to enable
RenaissanceRe, from and after the third anniversary of the completion of the
Initial Public Offering, to distribute the Common Shares it beneficially owns in
an offering on a continuous or delayed basis pursuant to a registration
statement under the 1933 Act. After November 1, 2007, RenaissanceRe will have
the right to an additional two demand registrations if RenaissanceRe
beneficially owns more than
29
9.9% of the Common Shares then outstanding. Each demand must include a number of
Common Shares with a market value equal to at least $50 million, except that
this limitation will not apply to RenaissanceRe's last demand registration. This
agreement also contains provisions regarding indemnification of each of
RenaissanceRe and the Company by the other, restrictions on RenaissanceRe
regarding the acquisition of Common Shares in certain circumstances, and
requirements relating to pre-emptive rights and participation in Common Share
buy-back programs.
The Company entered into a five-year Services and Capacity Reservation
Agreement with RenaissanceRe, effective October 1, 2002, pursuant to which
RenaissanceRe provides services to the subsidiaries of the Company in connection
with its property catastrophe book of business. At the Company's request,
RenaissanceRe will analyze the Company's property catastrophe treaties and
contracts and will assist the Company in measuring risk and managing the
Company's aggregate catastrophe exposures. Based upon such analysis,
RenaissanceRe will furnish quotations at the Company's request for rates for
non-marine property catastrophe retrocessional coverage with aggregate limits up
to $100 million annually, either on an excess-of-loss or proportional basis. The
Company and RenaissanceRe may then enter into retrocessional agreements on the
basis of the quotations. The fee for the coverage commitment and the services
provided by RenaissanceRe under this agreement is $4 million at inception and at
each anniversary, adjusted to 3.5% of the Company's gross written non-marine
non-finite property catastrophe premium for the previous annual period, if and
to the extent such amount is greater than the fee paid in such previous annual
period. Either party may terminate this agreement if the other is deemed
impaired or insolvent by applicable regulatory or judicial authorities or is the
subject of conservation, rehabilitation, liquidation, bankruptcy or similar
insolvency proceedings. The Company paid a total of $6.1 million to
RenaissanceRe pursuant to this agreement for 2004.
Platinum Bermuda and Platinum US have each entered into substantially
similar Referral Agreements with Renaissance Underwriting Managers Ltd. ("RUM"),
a subsidiary of RenaissanceRe, effective November 1, 2002 (collectively, the
"Referral Agreements"), pursuant to which RUM provides referrals of treaty and
facultative reinsurance contracts to Platinum Bermuda and Platinum US (the
"Referred Contracts"). Under the Referral Agreements, Platinum Bermuda and
Platinum US each have the opportunity to quote on Referred Contracts that would
not otherwise be presented to Platinum Bermuda or Platinum US in the normal
course. Under each of the Referral Agreements, Platinum Bermuda and Platinum US
pay RUM an annual finder's fee and, in certain circumstances, a profit
commission for Referred Contracts actually bound by Platinum Bermuda or Platinum
US in accordance with formulas set forth in the Referral Agreements. Under the
Referral Agreements, RUM may elect, at the time it refers a Referred Contract,
to cause Platinum Bermuda or Platinum US to retrocede up to 30% of such Referred
Contract actually bound by Platinum Bermuda or Platinum US (the "RenRe Retro
Share"). The finder's fee and any profit commission due to RUM under each
Referral Agreement is reduced by the amount of the RenRe Retro Share. The RenRe
Retro Share may be subject to an aggregate loss ratio cap that will limit the
maximum liability of RenaissanceRe to 225% of Gross Premium Written (as defined
in the Referral Agreement) for each annual period. The Referral Agreements
expire on October 31, 2007. In 2004, Platinum US paid RUM $387,725 under its
Referral Agreement and Platinum Bermuda paid RUM $458,533 under its Referral
Agreement.
Platinum US entered into an excess of loss contract with RenaissanceRe
effective as of June 11, 2003, where the loss index is based on a property
catastrophe program purchased by Platinum US. Under this contract, RenaissanceRe
is liable for 50% of all premiums (plus a 2% override) and is entitled to 50% of
any loss recoveries under the indexed property catastrophe program.
Platinum US is party to two property catastrophe excess of loss programs
with the Glencoe Group of Companies, which are affiliates of RenaissanceRe.
Platinum has a 5% participation across four layers of reinsurance on one program
and a 15% participation on the other program.
Platinum US is a party to a quota share retrocession agreement with Glencoe
Insurance Ltd., an affiliate of RenaissanceRe, pursuant to which Platinum US
cedes 85% of all liabilities under property facultative certificates
underwritten by Savannah Reinsurance Underwriting Management, LLC, an
30
underwriting manager. Platinum US receives an issuing carrier commission equal
to 4% of gross net written premium due under these certificates.
OTHER TRANSACTIONS
The Company is a party to an investment management agreement with Alliance
Capital Management L.P. ("Alliance"), pursuant to which Alliance provides
investment advisory services to the Company. The Company pays a fee to Alliance
for these services based on the amount of the Company's assets managed by
Alliance. A total of $2,247,865 is payable to Alliance for investment advisory
services provided in 2004. Holly Price, a Senior Vice President at
AllianceBernstein Institutional Investment Management, a unit of Alliance, is
the wife of Michael Price, the President and Chief Underwriting Officer of
Platinum US.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is currently composed of the
directors whose names appear at the end of this report. The members are
independent as defined in the NYSE listing standards, which provide, among other
things, that directors shall have no relationship with the Company that may
interfere with the exercise of their independence from management and the
Company. The Board of Directors has determined that the members of the Audit
Committee also meet the qualifications set forth in the NYSE listing standards
regarding financial literacy and accounting or related financial management
expertise. The Board of Directors has also determined that Mr. Baldwin is an
"audit committee financial expert" as defined by the SEC and that Mr. Deutsch
would be an "audit committee financial expert" if elected at the Annual Meeting
and appointed to the Audit Committee as planned.
The Audit Committee is responsible for, among other things, reviewing with
management and the independent registered public accounting firm the audited
financial statements to be included in the Company's Annual Report on Form 10-K,
reviewing with the independent registered public accounting firm the matters
required to be discussed by Statement on Auditing Standards No. 61,
"Communications With Audit Committees," as amended by Statement on Audit
Standards No. 90, "Audit Committee Communications" ("SAS No. 61") and
recommending whether the audited financial statements should be included in the
Company's Annual Report on Form 10-K. The Company's management has the primary
responsibility for the financial statements and the reporting process, including
the system of internal controls.
In this context, the Audit Committee has reviewed and discussed the
Company's audited financial statements as of December 31, 2004 and for the year
then ended, including management's discussion and analysis of financial
condition and results of operations, with management and KPMG LLP ("KPMG"), the
Company's independent registered public accounting firm. The Audit Committee has
also discussed with KPMG the matters required to be discussed by SAS No. 61,
including the quality, not just the acceptability, of the accounting principles,
the reasonableness of significant judgments, and the disclosures in the
financial statements.
The Audit Committee also discussed with KPMG the critical accounting
policies and practices used in the preparation of the audited financial
statements as of December 31, 2004 and for the year then ended; any alternative
treatments within accounting principles generally accepted in the United States
of America for policies and practices related to material items that have been
discussed with management, including the ramifications of the use of such
alternative treatments and the treatment preferred by KPMG; and any material
written communications between KPMG and management.
KPMG provided a report to the Audit Committee describing KPMG's internal
quality-control procedures and related matters. KPMG also provided to the Audit
Committee the written disclosures and the letter required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees," as adopted by the Independence Standards Board, and the Audit
Committee discussed with KPMG its independence. When considering KPMG's
independence, the Audit Committee
31
considered, among other matters, whether KPMG's provision of non-audit services
to the Company is compatible with maintaining the independence of KPMG.
In addition, the Audit Committee reviewed key initiatives and programs
aimed at strengthening the effectiveness of the Company's system of internal
controls. As part of this process, the Audit Committee monitored the scope and
adequacy of the Company's internal auditing function, reviewing steps taken to
implement recommended improvements in internal procedures and controls.
Based on the reviews and discussions with management and KPMG referred to
above, the Audit Committee has recommended to the Board of Directors that the
audited financial statements as of December 31, 2004 and for the fiscal year
then ended be included in the Company's Annual Report on Form 10-K for such
fiscal year. The Audit Committee also recommended to the Board of Directors that
KPMG be selected as the Company's independent registered public accounting firm
for the 2005 fiscal year, subject to shareholder ratification as required by
Bermuda law.
H. Furlong Baldwin, Chairman
Jonathan F. Bank
Dan R. Carmichael
Peter T. Pruitt
The foregoing Report of the Audit Committee shall not be deemed to be
"soliciting material" or "filed" with the SEC or incorporated by reference in
any previous or future document filed by the Company with the SEC under the
Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates such Report by reference in any such document.
PROPOSAL 2 -- RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Upon recommendation of the Audit Committee, the Board of Directors has
selected KPMG to serve as the Company's independent registered public accounting
firm for the 2005 fiscal year. A proposal will be submitted to shareholders at
the Annual Meeting for ratification of such selection as required by Bermuda
law. A representative of KPMG is expected to attend the Annual Meeting and will
have an opportunity to make a statement and respond to questions.
The following table summarizes the aggregate fees billed by KPMG for
services rendered for the years ended December 31, 2004 and 2003:
2004 2003
---------- ----------
Audit fees(1)............................................... $1,776,148 $ 923,890
Audit-related fees(2)....................................... 90,500 7,089
Tax fees(3)................................................. 155,312 151,652
All other fees(4)........................................... 0 48,709
---------- ----------
Total....................................................... $2,021,960 $1,131,340
---------------
(1) The amount shown for "Audit fees" for 2004 represents fees for professional
services rendered by KPMG for (a) the audit of the Company's annual
financial statements and internal control over financial reporting for 2004,
(b) the review of the Company's financial statements included in its
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2004, June
30, 2004 and September 30, 2004, (c) statutory audits for the Company's
insurance subsidiaries and (d) assistance with the review of documents filed
with the SEC. The amount shown for "Audit fees" for 2003 represents fees for
professional services rendered by KPMG for (a) the audit of the Company's
annual financial statements for 2003, (b) the review of the Company's
financial statements included in its Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2003, June 30, 2003 and September 30, 2003, (c)
statutory audits for the Company's insurance subsidiaries and (d) assistance
with the review of documents filed with the SEC.
32
(2) The amount shown for "Audit-related fees" for 2004 represents audit-related
fees for work related to the Company's shelf registration statement and the
underwritten public offering of St. Paul's 6,000,000 Common Shares. The
amount shown for "Audit-related fees" for 2003 represents audit-related fees
for assistance with United Kingdom statutory accounting matters.
(3) The amount shown for "Tax fees" for 2004 represents fees for tax compliance
matters in the United States, the United Kingdom and Ireland. The amount
shown for "Tax fees" for 2003 represents fees for tax compliance matters in
the United States and the United Kingdom.
(4) The amount shown for "All other fees" for 2003 represents fees for
administrative services relating to obtaining work permits and due diligence
and accounting consultation provided by KPMG Bermuda in connection with a
strategic investment.
The Audit Committee is primarily responsible for managing the Company's
relationship with its independent registered public accounting firm. Subject to
ratification by the shareholders of the Company as required by Bermuda law, the
Audit Committee has the sole authority to approve the engagement, determine the
compensation and oversee the performance of the Company's independent registered
public accounting firm. The Audit Committee has considered whether KPMG's
provision of non-audit services to the Company is compatible with maintaining
the independence of KPMG. It is the Company's policy that all audit services and
all permitted non-audit services to be provided to the Company by the
independent registered public accounting firm are approved in advance by the
Audit Committee (or by one or more of its members if duly authorized by the
Audit Committee). The Audit Committee pre-approved all audit, audit-related and
tax services provided by KPMG in 2004.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF KPMG AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.
33
ADDITIONAL INFORMATION
OTHER ACTION AT THE ANNUAL MEETING
As of the date of this statement, the Board of Directors knows of no
business that will be presented for consideration at the Annual Meeting other
than that referred to above. As to other business, if any, that may come before
the Annual Meeting, proxies in the enclosed form will be voted in accordance
with the discretion of the person or persons voting the proxies.
SHAREHOLDER PROPOSALS FOR 2006 ANNUAL GENERAL MEETING OF SHAREHOLDERS
In accordance with Rule 14a-8 of the Exchange Act, any shareholder who
wishes to present a proposal at the 2006 Annual General Meeting of Shareholders
and to include the proposal in the proxy statement for such meeting must deliver
the proposal to the Company's principal executive offices no later than the
close of business on November 21, 2005. Proposals should be addressed to the
Secretary, Platinum Underwriters Holdings, Ltd., The Belvedere Building, 69
Pitts Bay Road, Pembroke HM 08 Bermuda.
Pursuant to Rule 14a-4(c)(1) of the Exchange Act, if a shareholder who
intends to present a proposal at the 2006 Annual General Meeting of Shareholders
does not notify the Company of such a proposal on or before February 4, 2006,
then proxies received by the Company for that meeting will be voted by the
persons named as such proxies in their discretion with respect to such
proposals. Notices of such proposals are to be sent to the above address.
By order of the Board of Directors,
Michael E. Lombardozzi
Executive Vice President, General
Counsel
and Secretary
Pembroke, Bermuda
March 22, 2005
34
PLEASE MARK YOUR VOTE IN BOX IN THE FOLLOWING MANNER [X] USING DARK INK ONLY. Mark Here [ ]
for Address
Change or
Comments
SEE REVERSE SIDE
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE. IF NO CHOICES
ARE INDICATED, THIS PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2.
1. To elect the following nominees to the
Company's Board of Directors.
FOR ALL
01 H. Furlong Baldwin, FOR WITHHOLD EXCEPT
02 Jonathan F. Bank, [ ] [ ] [ ]
03 Dan R. Carmichael,
04 Neill A. Currie,
05 Robert V. Deutsch,
06 Gregory E. A. Morrison,
07 Steven H. Newman, and
08 Peter T. Pruitt.
TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, MARK
THE BOX LABELED "FOR ALL EXCEPT" AND STRIKE A LINE THROUGH
THE NOMINEE'S NAME ABOVE.
2. To consider and take action upon a FOR AGAINST ABSTAIN
proposal to ratify the selection of KPMG [ ] [ ] [ ]
LLP as the Company's independent
registered public accounting firm for the
2005 fiscal year.
Upon such other business as may properly come before the meeting or any
postponement or adjournment thereof.
PLACE "X" HERE IF YOU PLAN TO ATTEND [ ]
AND VOTE YOUR SHARES AT THE MEETING
SIGNATURE _______________ SIGNATURE ________________ DATED ______________, 2005
PIEASE SIGN EXACTLY AS YOUR NAME APPEARS ABOVE. I SHARES ARE HELD IN THE NAME OF
JOINT HOLDERS, EACH SHOULD SIGN. IF YOU ARE SIGNING AS A TRUSTEE, GUARDIAN,
EXECUTOR, ETC., PLEASE SO INDICATE.
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PLATINUM UNDERWRITERS HOLDINGS LTD.
THE BELVEDERE BUILDING
69 PITTS BAY ROAD
2ND FLOOR
PEMBROKE HM 08 BERMUDA
THIS PROXY IS SOLICITED ON OF THE BOARD OF DIRECTORS AND WILL BE VOTED FOR
ITEMS 1 AND 2 IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED.
The undersigned hereby appoints STEVEN H. NEWMAN, GREGORY E.A. MORRISON
and MICHAEL E. LOMBARDOZZI, jointly and severally, proxies, with the power of
substitution and with the authority in each to act in the absence of the other,
to vote ail shares the undersigned is entitled to vote at the Annual General
Meeting of Shareholders on April 26, 2005 or postponements or adjournments
thereof on all matters that may properly come before the meeting, and
particularly to vote as hereinafter indicated. The undersigned hereby
acknowledges receipt of the Notice of Annual General Meeting of Shareholders and
Proxy Statement dated March 22, 2005.
IMPORTANT - This proxy must be signed and dated on the reverse side.
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
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