DEF 14A 1 a2243109zdef14a.htm DEF 14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

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Definitive Proxy Statement

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Soliciting Material under §240.14a-12

 

Essent Group Ltd.

(Name of Registrant as Specified In Its Charter)

 

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Essent Group Ltd.
Clarendon House
2 Church Street
Hamilton HM11, Bermuda
  GRAPHIC

Notice of Annual General Meeting of Shareholders

To Our Shareholders:

You are cordially invited to attend the 2021 Annual General Meeting of Shareholders of Essent Group Ltd., a Bermuda limited company, which will be held via a live webcast originating from Bermuda at 12:30 p.m. Atlantic Daylight Time on May 5, 2021.

GRAPHIC   Date:
May 5, 2021
  GRAPHIC   Time:
12:30 p.m.,
Atlantic Daylight Time
  GRAPHIC   Location:
Live via the Internet originating
from Bermuda. Please visit:
https://web.lumiagm.com/209457238
  GRAPHIC   Record Date:
March 19, 2021

At the 2021 Annual General Meeting of Shareholders, shareholders of record as of the close of business on the record date will be asked to consider and vote upon the following matters, as more fully described in the Proxy Statement:

(1)
election of three Class I directors to serve through the 2024 Annual General Meeting of Shareholders;

(2)
re-appointment PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2021 and until our 2022 Annual General Meeting of Shareholders, and the referral the determination of the auditors' compensation to the Board of Directors;

(3)
a non-binding, advisory resolution on executive compensation; and

(4)
such other business that may properly come before the Annual Meeting.

In light of continuing concerns related to the COVID-19 pandemic and the various measures implemented to reduce its impact, including recommendations and protocols issued by public health authorities and US federal, state, and local and Bermuda governments, we have determined that it is in the best interest of Essent and its shareholders to hold the 2021 Annual General Meeting of Shareholders on a "virtual" basis. You will be able to attend and participate in the Annual Meeting online by visiting https://web.lumiagm.com/209457238 on the meeting date at the time described above and in the accompanying proxy statement. To participate, you will need your 16-digit control number included in your proxy materials, on your proxy card, or on the instructions that accompanied your proxy materials, and the meeting password, essent2021 (case sensitive). There is no physical location for the Annual Meeting.

        Your vote is important to us. To ensure that your shares are represented at the 2021 Annual General Meeting of Shareholders, whether or not you plan to participate in the virtual Annual Meeting, we encourage you to vote your shares electronically via the Internet, by telephone or, if you receive a paper copy of the proxy materials, by signing, dating and completing the accompanying proxy card in the enclosed postage-paid envelope. Voting electronically via the Internet, by telephone, or by returning your proxy card in advance of the meeting does not deprive you of your right to participate in the virtual Annual Meeting. If you participate in the virtual Annual Meeting, you may vote your shares in person, even if you have previously submitted a proxy in writing, by telephone or via the Internet. Our Proxy Statement includes additional instructions on voting procedures for shareholders whose shares are held by a brokerage firm or other custodian.

       By order of the Board of Directors,

 

 

Conyers Corporate Services (Bermuda) Limited
Secretary

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Proxy Statement for the
2021 Annual General Meeting of Shareholders

Wednesday, May 5, 2021
12:30 p.m. Atlantic Daylight Time
Live via the Internet originating from Bermuda
Please visit: https://web.lumiagm.com/209457238
Passcode: essent2021 (case sensitive)

The 2021 Annual General Meeting of Shareholders (the "Annual Meeting") of Essent Group Ltd. ("Essent," "we," "us," "our" or the "Company") will be held to consider and vote upon the following matters:

(1)
election of three Class I directors to serve through the 2024 Annual General Meeting of Shareholders;

(2)
re-appointment PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2021 and until our 2022 Annual General Meeting of Shareholders, and the referral the determination of the auditors' compensation to the Board of Directors;

(3)
a non-binding, advisory resolution on executive compensation; and

(4)
such other business that may properly come before the Annual Meeting.

Only holders of record of our common shares, par value $0.015 per share, as of the close of business on March 19, 2021 are entitled to notice of and to vote at the Annual Meeting or at any postponement or adjournment of the Annual Meeting.

Our Board of Directors knows of no other business that will be presented for consideration at the Annual Meeting. If any other matter should be properly presented at the Annual Meeting or any postponement or adjournment of the Annual Meeting for action by the shareholders, the persons named in the proxy card will vote the proxy in accordance with their discretion on such matter.

In light of continuing concerns related to the COVID-19 pandemic and the various measures implemented to reduce its impact, including recommendations and protocols issued by public health authorities and US federal, state, and local and Bermuda governments, we have determined that it is in the best interest of Essent and its shareholders to hold the 2021 Annual General Meeting of Shareholders on a "virtual" basis. You will be able to attend and participate in the Annual Meeting online by visiting https://web.lumiagm.com/209457238 on the meeting date at the time described above and in the accompanying proxy statement. To participate, you will need your 16-digit control number included in your proxy materials, on your proxy card, or on the instructions that accompanied your proxy materials, and the meeting password, essent2021 (case sensitive). There is no physical location for the Annual Meeting.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 5, 2021: The Notice of Annual General Meeting of Shareholders, Proxy Statement and 2020 Annual Report to Shareholders are available at www.essentgroup.com. These documents are first being mailed to shareholders on or about April 2, 2021. Our 2020 Annual Report to Shareholders, including our Annual Report on Form 10-K for the year ended December 31, 2020, is not part of the proxy soliciting material.


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Proxy Statement Summary

  1

2021 Annual General Meeting of Shareholders Information

  1

2020 Financial Highlights

  2

2020 Compensation Highlights

  3

Risk-Based Pricing and Reinsurance

  4

Dividends

  5

Commitment to Sustainability Practices

  5

Proposal No. 1: Election of Directors

  10

Director Criteria, Qualifications, Experience and Tenure

  11

Annual Board Evaluation Process

  12

Shareholder Nominees for the Board of Directors

  13

Information Concerning Directors

  14

Nominees for Election as Class I Directors for a Three Year Term Continuing Until the 2024 Annual General Meeting of Shareholders

  15

Directors With Terms That Do Not Expire at the Annual Meeting

  17

The Board of Directors and its Committees

  21

Role of the Board

  21

Board Leadership Structure

  21

Determination of Director Independence

  22

Board Committees and their Roles

  22

Corporate Governance

  26

Corporate Governance Guidelines

  26

Code of Business Conduct and Ethics

  26

Succession Planning

  26

Share Ownership Guidelines

  27

No Hedging Policy

  27

Compensation Committee Interlocks and Insider Participation

  27

Availability of Committee Charters; Corporate Governance Guidelines; and Code of Business Conduct and Ethics

  28

Communications with our Board of Directors and Non-Employee Directors

  28

Board of Directors' Role in Risk Oversight

  29

Director Compensation

  30

Executives and Executive Compensation

  32

Current Executive Officers

  32

Compensation Discussion and Analysis

  36

Compensation Committee Report

  51

Summary Compensation Table

  52

Grants of Plan Based Awards Table

  53

Narrative Disclosure to Summary Table and Grants of Plan-Based Award Table

  55

Outstanding Equity Awards at Fiscal Year-End

  56

Option Exercises and Stock Vested

  58

Pension Benefits

  58

Non-Qualified Deferred Compensation

  58

Potential Payments upon Termination or Change in Control

  59

CEO Pay Ratio

  63

Common Share Ownership by Directors and Executive Officers

  64

Principal Beneficial Owners of Shares

  66

Proposal No. 2: Re-appointment of Independent Registered Public Accounting Firm and Referral of the Determination of the Auditors' Compensation to the Board of Directors

  67

Required Vote and Recommendation

  67

Fees Paid to Independent Registered Public Accounting Firm

  68

Pre-Approval of Services

  68

Report of the Audit Committee

  69

Proposal No. 3: Advisory Vote on Executive Compensation

  70

Additional Information

  71

Certain Relationships and Related Transactions

  71

Annual Report to Shareholders

  72


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Proxy Statement Summary

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement, before voting.

2021 Annual General Meeting of Shareholders

GRAPHIC   Date:
May 5, 2021
  GRAPHIC   Time:
12:30 p.m.,
Atlantic Daylight Time
  GRAPHIC   Location:
Live via the Internet originating
from Bermuda. Please visit:
https://web.lumiagm.com/209457238
  GRAPHIC   Record Date:
March 19, 2021

Voting Matters

ITEMS OF BUSINESS BOARD
RECOMMENDATION
PROXY
STATEMENT DISCLOSURE
1 Election of Class I Directors FOR
each Director Nominee

Page 10
            
2 Ratification of Re-appointment of PricewaterhouseCoopers LLP as Independent Auditors FOR Page 67
            
3 Advisory Vote on Executive Compensation FOR Page 70

How To Vote

        You may vote at the Annual Meeting in any of the following ways:

GRAPHIC   GRAPHIC   GRAPHIC   GRAPHIC

INTERNET

 

TELEPHONE

 

MAIL

 

IN PERSON

Go to www.voteproxy.com.
You will need the control number included in your Proxy Card.

 

Dial toll-free 1-800-776-9437. You will need the control number included in your Proxy Card.

 

Mark, sign and date your Proxy Card and return it in the postage paid envelope provided.

 

Shareholders who own their shares in street name may vote in person at the virtual Annual Meeting only if they provide a legal proxy, executed in their favor, from the holder of record of their shares.

        See the section of this proxy statement entitled "Frequently Asked Questions about the 2021 Annual Meeting" beginning on page 74 for more information regarding the Annual Meeting, how you may vote your shares at the Annual Meeting, and other matters relating to the Annual Meeting.

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2020 FINANCIAL HIGHLIGHTS

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COVID-19 AND ITS IMPACT ON OUR BUSINESS IN 2020

        2020 was a challenging year due to the impact of COVID-19 on our economy, our communities and our lives. We believe, however, that we entered 2020 from a position of strength, with the primary facets of our buy, manage and distribute operating model of capital generation, risk based pricing and programmatic reinsurance firmly in place. It is these strengths that provide us confidence in managing our franchise during this unprecedented period.

        The COVID-19 pandemic had a material impact on our 2020 financial results. While uncertain, the future impact of the COVID-19 pandemic on our business, results of operations, financial condition and liquidity may also be material. Under forbearance plans announced by Fannie Mae and Freddie Mac, which we refer to as the "GSEs", and implemented by their servicers, eligible homeowners who are adversely impacted by COVID-19 are permitted to temporarily reduce or suspend their mortgage payments for up to 15 months if they entered forebearance before the end of February 2021. Over 90% of mortgage loans insured by us are federally backed by the GSEs. Because a mortgage loan in forbearance is considered to be delinquent, we will provide loss reserves as loans in forbearance are reported to us as delinquent once the borrower has missed two consecutive payments. However, we believe providing borrowers time to recover from the adverse financial impact of the COVID-19 event may allow some families to be able to remain in their homes and avoid foreclosure. For borrowers that have the ability to begin to pay their mortgage at the end of the forbearance period, we expect that mortgage servicers will work with them to modify their loans, at which time such mortgages will be removed from delinquency status.

        The COVID-19 pandemic also had a significant impact on our human capital management in 2020. Essent has had a pandemic plan in place as part of our comprehensive business continuity program for a number of years, and we invoked that pandemic plan in light of the COVID-19 event. A substantial majority of our workforce began working remotely on March 16, 2020. Through the use of technology, our team was successfully able to service our customers and execute on an exceptionally large volume of new business resulting largely from historically low mortgage rates in 2020. We reopened several of our office locations in September 2020 on a fully voluntary basis to provide our employees an in-office option. We support a healthy work environment by implementing new health and safety policies and practices including temperature scanning, face masks requirements, staggered shifts, upgraded cleaning practices, social distancing requirements and contact tracing. We did not furlough or conduct any employee layoffs due to the pandemic during the year.

        Notwithstanding the challenges presented in 2020, we were still able to grow book value per share over 10% in the year. It remains our belief that the impact of COVID-19 on our business will be an earnings, and not a capital, event. Given the confidence in our business model, during 2020 we maintained a quarterly dividend to shareholders and most recently, our Board of Directors approved a $0.16 dividend per share paid in March 2021.

        Despite challenging market conditions, particularly in the first months of the pandemic, we also took proactive steps to strengthen our financial position and flexibility. During 2020, we raised $440 million in equity and amended and increased the amount committed under our credit facility by $125 million, providing us with access to $300 million of undrawn capacity. In the normal course, we also completed two new insurance-linked note (ILN) transactions and one excess of loss transaction with a panel of reinsurers. Combining the results of these transactions with the $728 million in operating cash flow that we generated in 2020, we increased and enhanced our capital and liquidity resources by over $2.2 billion dollars during the year.

2020 COMPENSATION HIGHLIGHTS

        We maintain strong compensation governance practices that we believe support our pay-for-performance principles and align management incentives with the interests of our shareholders,

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emphasizing performance-based compensation that appropriately rewards our executives for delivering financial, operational and strategic results that meet or exceed pre-established goals. Consistent with prior years, our pay program continued to consist of three key elements significantly weighted to pay-for-performance: base salary; annual cash incentive tied to key operational and strategic goals; and long-term incentive awards linked to our common shares.

        In keeping with that philosophy and consistent with prior years, a substantial majority of the compensation paid to our President and Chief Executive Officer and other named executive officers for 2020 was performance based:

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        We believe that retaining productive employees is imperative to a sustainable model. As with our most senior executives, we also strongly believe that all employees should make good decisions, "do the right thing" and "act like owners". To that end, we awarded equity share grants in 2019 to all of our employees (the third time that we have made an employee-wide grant in Essent's 12-year history) that vest over a three year period. As a result, approximately 90% of our current workforce hold our shares directly or through future vesting awards.

RISK-BASED PRICING AND REINSURANCE

        From Essent's inception, we have taken a long-term approach to managing our franchise given the nature of insuring long-tail mortgage credit risk. In 2020, we continued to execute on our originate, manage and distribute operating model. During the year we continued to refine and roll out EssentEDGE®, our risk-based pricing engine, to our customers. In response to the COVID-19 pandemic, EssentEDGE allowed us to raise pricing quickly and tighten credit in a disciplined and targeted manner. Despite the market challenges created by the pandemic, we also continued to execute our programmatic reinsurance strategy. We believe that by increasing sophistication in originating risk on the front end through our risk-based pricing engine EssentEDGE and distributing that risk on the back end through reinsurance (i.e., credit risk transfer ("CRT") transactions), Essent is a stronger and more sustainable franchise. This is a long-term positive for policyholders, shareholders and employees.

        During 2020, we completed two insurance-linked note transactions. To date, we have placed reinsurance on vintages for 2015 through 2020. As of December 31, 2020, we had approximately $2 billion of excess of loss reinsurance and reinsurance protection on approximately 96% of our portfolio. These transactions have enabled us to diversify our capital sources in managing our business while also providing capital relief. For example, as of December 31, 2020, reinsurance transactions have resulted in capital credit of approximately $1.4 billion under the Private Mortgage Insurer Eligibility Requirements ("PMIERs").

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DIVIDENDS

        In March 2020, we increased our quarterly dividend to $0.16 per share as a means to continue to return capital to our shareholders. We remain confident that reinsurance will continue to provide us future cash flows by mitigating franchise volatility during times of stress. We believe that paying a dividend is a tangible demonstration of the benefits of our originate, manage and distribute business model. A dividend of this size not only affords us the flexibility to distribute capital but also to maintain sufficient capital levels to take advantage of any growth opportunities. We intend to continue to implement capital strategies that we believe are in the best long term interest of our franchise and shareholders.

COMMITMENT TO SUSTAINABILITY BEST PRACTICES

        Our mission is to serve as a trusted, best-in-class partner to the housing finance industry by responsibly offering mortgage insurance, reinsurance and risk management products to mortgage lenders and investors to support affordable home ownership.

        However, we also believe that our future is determined by actions taken today that go beyond just business strategy, encompassing the values important to our employees and the communities in which we operate that define our corporate responsibility and maintain sustainability. Our value commitments include: providing an inclusive work environment that offers employees the opportunity to further their development; supporting our communities through the donation of time and financial resources; maintaining our integrity across all aspects of the Company; and being an industry innovator to solve complex risks.

        Under the direction of our Chief Executive Officer and Board of Directors, Essent is committed to supporting sustainability initiatives that are relevant to the Company and align with our company-wide dedication to responsible corporate citizenship that positively impacts the communities and people served.

Corporate Governance Practices

        Essent has a strong top-down approach. Our Board is very active and has formal oversight over our environmental awareness, cybersecurity, corporate culture, employee engagement, diversity and community commitment. In February 2020, we renamed our Nominating and Corporate Governance Committee to the Nominating, Governance and Corporate Responsibility Committee and amended its charter to further emphasize that committee's responsibility for the "governance" and "environmental" aspects of the Company's sustainability programs. We also expanded the role of the Compensation Committee to include overseeing the "social" aspects of the Company's sustainability programs, including receiving periodic updates from the Company's management responsible for significant "social" activities. In addition, we enhanced our Corporate Governance Guidelines to further detail the Board's oversight of technology, innovation, cyber risk, and continued commitment to diversity and inclusion.

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        At the highest level, we believe that our Board has adopted a set of corporate governance and executive compensation standards that exemplify our commitment to sound governance practices:

    Governance Best Practice     Essent  
    Size of Board     9  
    Number of Independent Directors       8    
  Board Independence Standards     NYSE standards  
    Lead Independent Director       Yes    
  Majority Voting for Directors     Yes  
    Cumulative Voting       No    
  Shareholder Action by Written Consent     Yes  
    Shareholder Right to Call Special Meeting       Yes, by shareholders holding greater than 10% of outstanding shares    
  Poison Pill     No  
    Board Meeting Attendance       100% attendance in 2020    
  No Over-Boarding     Yes  
    Regularly Schedules Executive Session of Independent Directors       Yes    
  Policy Prohibiting Insider Hedging of Company Shares     Yes  
    Annual Equity Grant to Non-Employee Directors       Yes    
  Clawback Policy     Our equity plan provides that all awards will be subject to clawbacks, and executives consent in employment agreements to clawbacks, if the Company adopts a policy on clawbacks  
    Code of Business Conduct and Ethics for Directors, Officers, and Employees       Yes    
  No Separate Change in Control Agreement for CEO     Terms of CEO's change in control provisions in his employment and equity award agreements are substantively identical to those of the other Named Executive Officers  
    No Automatic Accelerated Vesting of Equity Awards       Yes    
  Double Trigger for Change in Control for Time-Vesting Awards     Yes  

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    Governance Best Practice     Essent  
  No Excise Tax Assistance     No gross-up payments for any excise taxes payable upon a change in control  
    Frequency of Say on Pay       Annually    
  No Re-pricing of Options and SARs without Shareholder Approval     Yes  
    Minimum Vesting Period of Equity Awards       Minimum 1 year vesting period for equity awards (and all executives have had a minimum 3 year vesting period since 2016)    
  Share recycling     No liberal share recycling  
    Stock Ownership Guidelines for Executive Officers       CEO—six times annual base salary    
            Other Senior Executives—two times annual base salary    
  Stock Ownership Guidelines for Non-Employee Directors     Five times annual cash compensation  
    Use of Performance Shares as Element of Long Term Incentive Compensation       Yes    

        We have also formalized and adopted a number of internal policies with respect to corporate and institutional governance, including:

    Anti-Corruption Policy

    Anti-Money Laundering Awareness Policy

    Anti-Trust Policy

    Code of Business Conduct and Ethics

    Compliance Policy

    Disaster Recovery Plan

    Diversity, Prevention of Discrimination & Harassment Policy

    Fitness for Duty Policy

    Fraud Policy Procedures

    Gift & Entertainment Policy

    Government Relations and Political Activities Policy

    Human Rights and Labor Policy

    Information Security Program Policy

    Media and External Communications Policy

    Privacy Policy

    Social Media Policy

    Statement of Freedom of Association, Right to Collective Bargaining

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    Third Party Vendor Code of Conduct

    Vulnerability Management Policy

        Our Board of Directors is committed to increasing the diversity of representation on the Board. In 2018, we added two highly qualified female directors to our Board who bring with them particularly notable experience in the information technology and cybersecurity fields. In addition, we continue to identify potential new candidates to serve on our Board. The Board continues to retain a search firm to assist in identifying diverse candidates for consideration to Board membership.

        We believe that engaging with investors is fundamental to our commitment to good governance. Throughout the year, we seek opportunities to engage in two-way conversations with our investors to gain and share valuable insights into current and emerging business strategies and trends. During 2020, we held over 200 meetings with shareholders whose ownership represented nearly 40% of shares outstanding as of the end of 2020 to discuss various key corporate matters. Topics discussed included our underwriting guidelines, credit selection, our risk management practices including around investment risk, liquidity risk and regulatory compliance risk, among others. These meetings were conducted in person, via teleconference or one-on-one at industry conferences.

Social Issues and Human Capital

        We have approximately 400 employees working across four primary offices in Pennsylvania, North Carolina, California and Bermuda, as well as remotely throughout the United States. We provide competitive benefits that promote the health of our employees and their families and design compelling job opportunities, aligned with our mission, in a fast-paced, results-focused work environment. All of our employees are eligible to receive grants under our stock incentive plan, which as discussed above currently has approximately 90% participation. We offer varied employee training, development, mentorship and leadership opportunities and encourage our employees to continue to develop in their careers.

        At Essent, we realize that continuous engagement with our employees is vital to driving successful, meaningful outcomes. Engagement surveys are conducted periodically and allow us to identify areas of strength and opportunities for improvement to ensure continued satisfaction and retention of our employees. CEO-led town hall style meetings are held regularly with our employees, covering topics such as business strategy and outlook, the competitive landscape, and emerging industry trends, and include a question and answer session with management. We believe that this format facilitates strong and productive conversations across our organization. As a result of our ongoing commitment to employee engagement and satisfaction, we have had an average annual employee retention rate of 95% since 2010.

        We are focused on cultivating a diverse and inclusive culture where our employees can freely bring diverse perspectives and varied experiences to work. We seek to hire and retain highly talented employees and empower them to create value for our shareholders. In our employee recruitment and selection process and operation of our business, we adhere to equal employment opportunity policies and encourage the participation of our employees in training programs that will enhance their effectiveness in the performance of their duties. As of December 31, 2020, approximately 66% of our workforce was comprised of women and minorities.

        Our commitment to good corporate citizenship extends to supporting the communities that we serve. Our Board of Directors, management and employees are committed to transforming our communities by leveraging the power of our Company. We partner with charitable organizations, make donations, and connect our employees with volunteer opportunities to better their communities. Essent's charitable contributions focus in particular on housing, education, children and the military.

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        Our employees volunteer their time, treasure and talents to support local charities and community organizations. We encourage charitable giving by employees by providing a 1:1 match of donations to 501(c)(3) organizations, up to $1,000 per employee per year.

        Our charitable program places special emphasis on championing education, in particular, for underserved youth. For example, we have made a $3 million, 10-year commitment to Cristo Rey Philadelphia High School. Cristo Rey is an inner-city, independent, college preparatory school for low-income students who cannot otherwise afford a private education. Cristo Rey is a new model of private high school that opened in 2012 and has developed a unique partnership with local educators, businesses and universities. In addition, we initiated in 2019 a $500,000 multi-year commitment to support a Science, Technology, Engineering and Math (STEM) program specifically targeted to young women.

Environmental Responsibility

        Essent is committed to the stewardship of our shared environment. While the nature of our operations does not directly impact the environment in a material way, we seek to operate our corporate facilities in an environmentally sustainable, safe and healthy manner. We strive to be energy efficient across our operations, utilizing energy management systems that conserve energy as well as LED lighting and motion control sensors. Our corporate headquarters in Radnor, Pennsylvania is Energy Star certified as an environmentally-conscious corporate headquarters. In addition, we are committed to increasing waste recycling and increasing overall environmental awareness and training across our organization.

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Proposal No. 1: Election of Directors

        Our Board of Directors currently consists of nine directors. Our Bye-laws provide that our Board is divided into three classes consisting, as nearly as possible, of one-third of the total number of directors constituting the entire Board. Our directors hold office until their successors have been elected and qualified, or the earlier of their death, resignation or removal. Vacancies on the Board of Directors may be filled by shareholders or the Board. Our system of electing and removing directors may delay or prevent a change of our management or a change in control of our Company.

        At the Annual Meeting, shareholders will elect three individuals to serve as Class I directors to hold office until our 2024 Annual General Meeting of Shareholders or until his or her successor has been duly elected and qualified or his or her earlier resignation or removal.

        Each of Jane Chwick, Aditya Dutt and Roy J. Kasmar have been nominated to stand for election at the Annual Meeting to serve as a Class I director. These nominees were recommended and approved for nomination by the Nominating, Governance and Corporate Responsibility Committee of our Board of Directors.

        Proxies cannot be voted for a greater number of persons than the number of nominees named. If you sign and return the accompanying proxy, your shares will be voted for the election of the three nominees recommended by our Board of Directors unless you mark the proxy in such a manner as to withhold authority to vote or as to vote for one or more alternate candidates. If, for any reason, any nominee is unable or unwilling to serve, the persons named in the proxy will use their best judgment in selecting and voting for a substitute candidate, or our Board of Directors may reduce the number of Class I directors. Our Board of Directors, however, has no reason to believe that any of the nominees will be unable or unwilling to be a candidate for election at the time of the Annual Meeting.

        Directors are elected by a majority of votes cast at the Annual Meeting.

        The Board of Directors recommends a vote FOR the election of each of the nominated individuals.

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Director Criteria, Qualifications, Experience and Tenure

        The Nominating, Governance and Corporate Responsibility Committee of our Board of Directors is responsible for recommending to our Board of Directors candidates for nomination and election as directors at annual general meetings of shareholders or for appointment to fill vacancies on the Board. The Nominating, Governance and Corporate Responsibility Committee annually reviews with the Board the applicable skills and characteristics required of Board nominees in the context of current Board composition and company circumstances. In making its recommendations to our Board of Directors, the Nominating, Governance and Corporate Responsibility Committee considers, among other things, the qualifications of individual director candidates in light of the criteria described below. In accordance with its charter, the Nominating, Governance and Corporate Responsibility Committee may use a variety of sources, including but not limited to executive search firms, to identify director candidates, and has the authority to retain and approve compensation for such firms.

        In evaluating a candidate, our Nominating, Governance and Corporate Responsibility Committee and our Board of Directors take into account a variety of factors, including:

    high personal and professional ethics, values and integrity;

    sound business judgment and financially literacy;

    diversity of point of view, including the candidate's education, skill, professional background, personal accomplishments, geography, race, gender, age, ethnic background, national origin, experience with mortgage, insurance, reinsurance or other businesses and organizations that our Board deems relevant and useful, including whether such attributes or background would contribute to the diversity of the Board as a whole;

    ability and willingness to serve on any committees of our Board of Directors;

    ability and willingness to commit adequate time to the proper functioning of our Board of Directors and its committees; and

    any criteria regarding independence and other matters required by the New York Stock Exchange (NYSE) or other applicable law or regulations.

        The Nominating, Governance and Corporate Responsibility Committee and Board of Directors evaluate each individual in the context of the Board as a whole, with the objective of recommending a group that can perpetuate the success of our business and represent shareholder interests through the exercise of sound judgment, using its diversity of experience. Our Nominating, Governance and Corporate Responsibility Committee and Board of Directors evaluates the Board's own composition in the context of the diverse experiences and perspectives that the directors collectively bring to the boardroom. Their backgrounds provide the Board with valuable insights in areas such as:

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GRAPHIC

        The experiences, qualifications and skills of each director that the Board considered in his or her nomination are listed beside the directors' individual biographies on the following pages.

        Based on the information available to it about a potential nominee, the Nominating, Governance and Corporate Responsibility Committee makes an initial determination whether to conduct a full evaluation of a candidate. As part of the full evaluation process, the Nominating, Governance and Corporate Responsibility Committee may conduct interviews, obtain additional background information and conduct reference checks of potential nominees. The Nominating, Governance and Corporate Responsibility Committee may also ask potential nominees to meet with management and other members of our Board of Directors. After completing this evaluation process, the Nominating, Governance and Corporate Responsibility Committee makes a recommendation to the full Board of Directors, which makes the final determination whether to nominate the candidate for election as a director.

        The Board has concluded that each nominee for election as a Class I director should serve as a director based on the specific experience and attributes listed beside each such nominee's biography below and the Board's knowledge of that nominee, including the insight and collegiality that nominee is expected to bring to the Board's functions and deliberations.

        The Nominating, Governance and Corporate Responsibility Committee and the Board consider director tenure in making Board nomination decisions, and believe that it is desirable to maintain a mix of longer-tenured, experienced directors and newer directors with fresh perspectives. While we believe that longer-tenured, experienced directors, who have accumulated a substantial understanding of our business during their service, are a significant strength of the Board, we also believe that we benefit from the skill sets and perspectives of our newest directors.

        Each director is expected to maintain an acceptable level of attendance, preparedness and participation with respect to meetings of the Board of Directors and its committees. In determining whether to recommend a director for re-election, the Nominating, Governance and Corporate Responsibility Committee also considers the director's past attendance at meetings, participation in and contributions to the activities of our Board of Directors, and the results of the most recent Board self-evaluation.

Annual Board Evaluation Process

        Our Board of Directors recognizes that a robust and constructive evaluation process is an essential part of good corporate governance and board effectiveness. The evaluation processes utilized by the Board are designed and implemented under the direction of the Nominating, Governance and Corporate Responsibility Committee and aim to assess Board and committee effectiveness as well as individual director performance and contribution levels.

        Each year, our directors complete governance questionnaires and self-assessments. These questionnaires and assessments facilitate a candid assessment of: the Board's performance in areas

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such as business strategy, risk oversight, talent development and succession planning and corporate governance; the Board's structure, composition and culture; and the mix of skills, qualifications and experiences of our directors.

        The Nominating, Governance and Corporate Responsibility Committee and Board consider the results of the annual evaluations in connection with their review of director nominees to ensure the Board continues to operate effectively.

Shareholder Nominees for the Board of Directors

        Shareholders desiring to recommend nominees for election as directors should submit their recommendations in writing to our Secretary at Essent Group Ltd., Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. Recommendations from shareholders should include pertinent information concerning the proposed nominee's background and experience. The Nominating, Governance and Corporate Responsibility Committee may consider, as one of the factors in its evaluation of shareholder recommended nominees, the size and duration of the interest of the recommending shareholder or shareholder group in our capital stock. The Nominating, Governance and Corporate Responsibility Committee may also consider the extent to which the recommending shareholder intends to continue holding its interest in our capital stock, including, in the case of nominees recommended for election at an annual general meeting of shareholders, whether the recommending shareholder intends to continue holding its interest at least through the time of such annual general meeting of shareholders.

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Information Concerning Directors

Experience, Qualifications and Skills

    Name
Age
Director Since
Current Position
    Mark A. Casale   56   2008   Chairman of the Board, President and Chief Executive Officer    
    Jane Chwick   58   2018   Director    
    Aditya Dutt   45   2010   Director    
    Robert Glanville   54   2008   Director    
  Angela Heise   46   2018   Director    
    Roy Kasmar   65   2013   Director    
    Allan Levine   52   2020   Director    
    Douglas Pauls   62   2013   Director    
    William Spiegel   58   2008   Director    

 

LOGO

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Nominees for Election as Class I Directors for a Three Year Term Continuing Until the 2024 Annual General Meeting of Shareholders

        The experiences, qualifications and skills of each director that the Board considered in his or her nomination for election as a Class I director are included below the nominee directors' individual biographies below. The Board concluded that each nominee should serve as a Class I director based on the specific experience and attributes listed below each director nominees' biography and the Board's knowledge of each director nominee, including the insight and collegiality each nominee is expected to bring to the Board's functions and deliberations.

Jane P. Chwick
 

GRAPHIC
Director
Term Expires 2021

  
BACKGROUND

Ms. Chwick served as Co-CEO of Trewtec, Inc., a technology advisory firm designed to help board members and CEOs evaluate the technology function in their companies, from 2014 to 2017. Prior to this role, she was a partner and co-chief operating officer of the technology division of Goldman Sachs Group,  Inc., where she was responsible for financial and business planning, technical strategy and ongoing management of an 8,000-person organization until her retirement in April 2013. During her 30 year career at Goldman Sachs, Ms. Chwick held a number of senior positions, including global head of technology of the securities division and global head of derivatives technology. She is currently a director of MarketAxess Holdings, Inc., ThoughtWorks, Inc., People's United Financial, Inc. and Voya Financial, Inc., and also serves as a board member of the Queens College Foundation. Ms. Chwick received a BA in mathematics from Queens College and an MBA from St. Johns University with a concentration in MIS and quantitative analysis.

  
QUALIFICATIONS

Ms. Chwick is qualified to serve on our Board of Directors because of her experience as chief operating officer of a major function within a global financial institution, as well as her experience in technology, strategy, risk management and operations.

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Aditya Dutt
 

GRAPHIC
Director
Term Expires 2021

  
BACKGROUND

Mr. Dutt held various roles with RenaissanceRe Ltd., a Bermuda-based reinsurance company, from 2008 to July 2020 including most recently serving as the senior vice president of RenaissanceRe Holdings Ltd., president of RenaissanceRe Underwriting Managers, Ltd. and a member of RenaissanceRe's executive committee. Mr. Dutt's responsibilities included managing all of RenaissanceRe's strategic investments, insurance-linked securities investments and catastrophic reinsurance joint ventures, including Da Vinci Re, Top Layer Re, Upsilon Fund and Medici Fund. Prior to joining RenaissanceRe in 2008, Mr. Dutt served as an executive director in Morgan Stanley's investment banking division in New York and Hong Kong, responsible for executing strategic transactions including mergers, acquisitions, divestitures and capital-raising for the insurance and reinsurance industry. Prior to Morgan Stanley, Mr. Dutt worked at Salomon Brothers in the corporate finance and fixed income departments in Hong Kong. Mr. Dutt holds a BA in mathematics from Dartmouth College.

  
QUALIFICATIONS

Mr. Dutt is qualified to serve on our Board of Directors because of his experience in the insurance and reinsurance industry.


Roy J. Kasmar
 

GRAPHIC
Director
Term Expires 2021

  
BACKGROUND

Mr. Kasmar is currently the president of Kazmar Co. LLC, which provides advisory services to the mortgage and mortgage insurance industry. Mr. Kasmar has over 30 years of experience in the mortgage and mortgage insurance industry. Prior to forming Kazmar Co. LLC, Mr. Kasmar served as the president of Radian Group Inc. and Radian Guaranty Inc., a private mortgage insurer, from 1999 to 2007. Prior to joining Radian, Mr. Kasmar served as the president and chief operating officer of Amerin Guaranty Corporation, a mortgage insurer, from 1996 to 1999. Additionally, Mr. Kasmar has held senior management positions with Prudential Home Mortgage, First Boston Capital Group and Chase Home Mortgage. Mr. Kasmar holds a BS in economics and business administration from Drury College and an MBA in finance from Fairleigh Dickinson University.

  
QUALIFICATIONS

Mr. Kasmar is qualified to serve on our Board of Directors because of his experience in the mortgage and mortgage insurance industries, including his prior role as president of Radian Group Inc. and Radian Guaranty Inc.

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Directors with Terms That Do Not Expire at the Annual Meeting

        The following provides information with respect to the remaining members of our Board of Directors, including the specific experience and attributes that the Board believes each such director brings to the Company and the Board of Directors.

Mark A. Casale
 

GRAPHIC
Chairman of the Board of Directors, Chief Executive Officer and President
Term Expires 2023

  
BACKGROUND

Mr. Casale has more than 25 years of financial services management experience, with senior roles in the areas of mortgage banking, mortgage insurance, bond insurance and capital markets. He has served as our President and Chief Executive Officer and a member of our Board of Directors since 2008, including as the Chairman of the Board of Directors since 2013. From 2001 to 2007, Mr. Casale held various senior management positions with Radian Group Inc., including most recently serving as the president of its mortgage insurance subsidiary, Radian Guaranty Inc. Prior to that, Mr. Casale oversaw capital markets and strategic investments for Radian and managed its joint venture businesses. Mr. Casale also held various management positions with Advanta Corp., a financial services company, including serving as its senior vice president of corporate finance services. Mr. Casale holds a BS in accounting from St. Joseph's University and an MBA in finance from New York University. Mr. Casale currently serves on the Board of Trustees of St. Joseph's University.

  
QUALIFICATIONS

Mr. Casale is qualified to serve on our Board of Directors because of his experience in the mortgage and mortgage insurance industries as well as his extensive knowledge of our operations.

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Robert Glanville
 

GRAPHIC
Director
Term Expires 2022

  
BACKGROUND

Mr. Glanville currently serves as the managing member of REG Consulting LLC, a financial advisory business. Mr. Glanville was a founding partner and served as a managing director on the financial services investment team of Pine Brook Road Partners, LLC, an investment firm, from 2006 to 2015. Mr. Glanville currently serves as a director and chairman of the board of Kairos Acquisition Corp., a publicly traded special acquisition company focused on growth insurance and insuretech investments. Mr. Glanville also serves as a director for each of ClearBlue Insurance Services, ProWriters, and Agritecture, all of which are private companies, and as an executive advisor to Aquiline Capital Partners. From 2003 to 2006, Mr. Glanville was senior vice president, financial and treasury services for Arch Capital Group, Ltd., an insurance and reinsurance company. From 1999 to 2003, Mr. Glanville was employed by Warburg Pincus, a private equity firm. Before joining Warburg Pincus, Mr. Glanville founded FA Services, an emerging markets financial services and investment boutique based in Moscow. From 1988 to 1992, Mr. Glanville worked in New York and Tokyo for Morgan Stanley, an investment banking firm, specializing in corporate finance and M&A. Mr. Glanville holds an AB in American history from Princeton University.

  
QUALIFICATIONS

Mr. Glanville is qualified to serve on our Board of Directors because of his experience in private equity fund management and his financial expertise, as well as his management experience with financial services and insurance and reinsurance companies.

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Angela L. Heise
 

GRAPHIC
Director
Term Expires 2022

  
BACKGROUND

Ms. Heise served as the president of civil group at Leidos Holdings,  Inc., a provider of services and solutions in the defense, intelligence, civil and health markets, from 2016 to 2019, where she was responsible for providing solutions to US Cabinet-level civil agencies and major elements of the public sector across the globe. Her areas of focus include air traffic automation, energy and the environment, federal infrastructure and logistics, information technology and cybersecurity, and transportation security. Prior to her role with Leidos, Ms. Heise held a number of positions with Lockheed Martin between 1997 and 2016. Most recently, from 2015 to 2016, Ms. Heise served as vice president-commercial markets, where she was responsible for delivery of a portfolio of cybersecurity and information technology solutions and services to Global 1000 customers. Prior to this role, she held a number of senior positions with Lockheed Martin, including vice president-enterprise information Technology Solutions. Ms. Heise holds a BS in computer science from Southern Illinois University at Edwardsville.

  
QUALIFICATIONS

Ms. Heise is qualified to serve on our Board of Directors because of her extensive experience in the areas of information technology and cybersecurity.


Allan Levine
 

GRAPHIC
Director
Term Expires 2022

  
BACKGROUND

Allan Levine rejoined the board of directors in August 2020, after previously serving as a member of the board from 2009 to 2019. Mr. Levine currently is the chairman and chief executive officer of Global Atlantic Financial Group, a global financial services company, formerly the Goldman Sachs Reinsurance Group, which he initially joined in 1997. Prior to the spin-off of Global Atlantic from Goldman Sachs in 2013, Mr. Levine was a partner and managing director of Goldman, Sachs & Co. and global head of the Goldman Sachs Reinsurance Group, and prior to assuming that role, was co-head of the firm's strategy group. Mr. Levine holds a BS from Miami University and an MBA from Columbia Business School.

  
QUALIFICATIONS

Mr. Levine is qualified to serve on our Board of Directors because of his extensive experience in the financial services and insurance and reinsurance industries as well as his financial expertise.

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Douglas J. Pauls
 

GRAPHIC
Director
Term Expires 2023

  
BACKGROUND

Mr. Pauls has over 30 years of experience in the areas of finance, accounting, internal controls, and financial reporting for public companies, including most recently senior roles with financial institutions. Mr. Pauls served as chief financial officer of BankUnited, Inc., a bank holding company, from 2009 until his retirement in 2013, and Mr. Pauls currently serves as a director of BankUnited, Inc. From 2008 until 2009, Mr. Pauls served as executive vice president of finance for TD Bank, NA following TD Bank's acquisition of Commerce Bancorp, Inc. in March 2008. Prior to that, Mr. Pauls held several positions with Commerce, including serving as its chief financial officer from 2002 until its acquisition by TD Bank and its chief accounting officer from 1995 to 2002. Earlier in his career, Mr. Pauls was a senior manager in the audit department of Ernst & Young in Philadelphia and Pittsburgh, Pennsylvania. He also serves as a director of North Mountain Merger Corp. Mr. Pauls holds a BA in economics from Dickinson College and serves on Dickinson's Board of Trustees.

  
QUALIFICATIONS

Mr. Pauls is qualified to serve on our Board of Directors because of his more than 30 years of experience as a corporate executive and his experience as a chief financial officer of publicly traded companies.


William Spiegel
 

GRAPHIC
Director
Term Expires 2023

  
BACKGROUND

Mr. Spiegel has served as deputy executive chairman of Randall & Quilter Investment Holdings, a UK-based insurance and reinsurance company, since January 2020. Mr. Spiegel has over 29 years of private equity investment experience. Mr. Spiegel was co-president and a founding partner of Pine Brook Road Partners, LLC, an investment firm from 2006 to January 2020, where he was responsible for managing Pine Brook's financial services investing activities and also served as a member of Pine Brook's investment committee. Prior to joining Pine Brook, Mr. Spiegel was with The Cypress Group from its inception in 1994 until 2006. Prior to joining The Cypress Group, Mr. Spiegel worked in the Merchant Banking Group at Lehman Brothers. He has served on the board of directors of numerous companies, including seven publicly traded entities. Mr. Spiegel holds a BSc in economics from The London School of Economics and Political Science, an MA in economics from the University of Western Ontario and an MBA from The University of Chicago. Mr. Spiegel is currently a member of The University of Chicago Polsky Center for Entrepreneurship and Innovation Advisory Board and the Private Equity Counsel.

  
QUALIFICATIONS

Mr. Spiegel is qualified to serve on our Board of Directors because of his experience in insurance and private equity fund management and his financial expertise, as well as his experience as a director and executive of public and private companies.

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The Board of Directors and its Committees

Role of the Board

        Governance is a continuing focus at the Company, starting with our Board of Directors and extending to management and all employees. The Board reviews the Company's policies and business strategies and advises and counsels the CEO and the other executive officers who manage the Company's business. In addition, we solicit feedback from our shareholders and engage in discussions with various stakeholders on governance issues and improvements.

        Our Board of Directors met three times during 2020. Each incumbent director attended at least 75% of the aggregate meetings of our Board of Directors during 2020 that were held following his or her election and the meetings held by all Board committees on which he or she served. Although we do not have a policy regarding the attendance of our Board members at our annual general meetings of shareholders, we encourage all directors to attend our annual general meetings of shareholders.

        Our non-employee and independent directors also hold regular meetings without our management being present. Our non-employee and independent directors held three such meetings in 2020.

Board Leadership Structure

        Our Board of Directors does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of our Board of Directors, as our Board of Directors believes it is in our best interests to make that determination based on the position and direction of the Company and the membership of our Board of Directors.

        Both the Chairman of the Board of Directors and Chief Executive Officer positions are currently held by Mr. Casale. Pursuant to our Corporate Governance Guidelines, in the event that the role of chairman is held by a member of our management, the independent members of our Board of Directors may designate one independent director to serve as the lead independent director. Mr. Spiegel currently serves as our lead independent director. Under the terms of our Corporate Governance Guidelines, the lead independent director has broad responsibility and authority, including:

    organizing and presiding over all meetings of our Board of Directors at which the chairman is not present, including all executive sessions of our non-employee and independent directors;

    serving as the liaison between the chairman and the non-employee directors;

    overseeing the information sent to our Board of Directors by management;

    approving meeting agendas and schedules for our Board of Directors;

    facilitating communication between our Board of Directors and management; and

    performing such other duties as requested by our Board of Directors.

        We believe that having Mr. Casale serve as both our Chief Executive Officer and the Chairman of our Board of Directors, along with a lead independent director, is in the best interests of the Company and our shareholders at this time.

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        A number of factors support the leadership structure chosen by our Board, including, among others:

    Mr. Casale has extensive knowledge of all aspects of us and our business and risks, our industry and our customers, is intimately involved in our day-to-day operations and is best positioned to elevate the most critical business issues for consideration by our Board of Directors;

    our Board of Directors believes that having Mr. Casale serve in both capacities allows him to more effectively execute our strategic initiatives and business plans and confront our challenges;

    the combined role is both counterbalanced and enhanced by the effective oversight and independence of our Board of Directors and the independent leadership provided by our lead independent director and independent committee chairs; and

    our Board of Directors believes that the appointment of a strong lead independent director and the use of regular executive sessions of the non-employee directors, along with the Board's strong committee system and all directors being independent except for Mr. Casale, allow it to maintain effective oversight of management.

Determination of Director Independence

        Our Board of Directors has considered whether our directors qualify as "independent" directors in accordance with NYSE listing requirements. The NYSE independence definition include a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his family members has engaged in various types of business dealings with us.

        In its assessment of director independence, our Board considers all commercial, charitable and other transactions and relationships (including tenure of Board service) that any director or member of his or her immediate family may have with us, with any of our affiliates, or with any of our consultants or advisers. Our Board applies the same criteria for assessing independence for purposes of each of the Audit Committee, Compensation Committee and Nominating, Governance and Corporate Responsibility Committee. Furthermore, in its assessment of a director's independence for service on the Compensation Committee, our Board considers all factors that the Board believes specifically relevant to determining whether the director has a relationship which is material to such director's ability to be independent from management in connection with his or her duties as a member of the Compensation Committee, including but not limited to any compensation payable to such director.

        Based upon these standards, our Board of Directors has determined that only Mr. Casale is not considered to be independent, as he is a current employee of the Company. In making this determination, our Board of Directors reviewed and discussed information provided by the directors and us with regard to each director's business and personal activities and relationships as they may relate to us and our management.

Board Committees and their Roles

        Our Board of Directors maintains standing Audit, Compensation, Nominating, Governance and Corporate Responsibility, Risk, and Technology, Innovation and Operations Committees. Each committee has a charter that, among other things, reflects what we believe to be the best current practices in corporate governance.

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        The table below provides 2020 membership and meeting information for each of the Board's committees.

        Committee    
 
    Name   Audit   Compensation   Nominating,
Governance
and
Corporate
Responsibility
  Technology,
Innovation
and
Operations
  Risk    
    Mark A. Casale            
    Jane P. Chwick               GRAPHIC        
  Aditya Dutt   GRAPHIC         GRAPHIC  
    Robert Glanville   GRAPHIC               GRAPHIC    
  Angela L. Heise         GRAPHIC    
    Roy J. Kasmar       GRAPHIC   GRAPHIC   GRAPHIC        
  Allan Levine           GRAPHIC  
    Douglas J. Pauls   GRAPHIC   GRAPHIC       GRAPHIC        
  William Spiegel     GRAPHIC   GRAPHIC      
    Meetings in 2020   4   2   3   2   2    

  Chair     GRAPHIC         Member     GRAPHIC

Audit Committee
Committee Chair:
Douglas J. Pauls

GRAPHIC

Additional Members:
Aditya Dutt
Robert Glanville





Key Responsibilities:

Overseeing our financial reporting and other internal control processes.

Reviewing our financial statements.

Overseeing processes for monitoring the independent auditors' qualifications, independence and compensation.

Overseeing the implementation of new accounting standards.

Communicating with the independent auditors on matters relating to the conduct of the audit and on critical audit matters expected to be described in the independent auditors' report.

Assessing the performance of our internal audit function and independent auditors.

Ensuring our compliance with legal and regulatory requirements and our Code of Business Conduct and Ethics.

Our Board of Directors has determined that all of the members of the Audit Committee are independent, and meet the requirements for financial literacy, under applicable rules and regulations of the Securities and Exchange Commission (SEC) and the NYSE. Our Board of Directors has determined that each of Messrs. Pauls and Glanville is an "audit committee financial expert" as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of the NYSE.

The Audit Committee met four times during 2020.

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Compensation Committee
Committee Chair:
Roy J. Kasmar

GRAPHIC

Additional Members:
Douglas J. Pauls
William Spiegel





Key Responsibilities:

Determining the compensation of our executive officers and directors.

Reviewing our executive compensation policies and plans.

Administering and implementing our equity compensation plans.

Preparing a report on executive compensation for inclusion in our proxy statement for our annual meeting.

Coordinating the Company's succession planning efforts for its chief executive officer and other senior executives.

Overseeing the "social" aspects of our sustainability programs.

Our Board of Directors has determined that all of the members of the Compensation Committee are independent under applicable rules and regulations of the SEC and the NYSE.

The Compensation Committee met two times during 2020.

Nominating, Governance and Corporate Responsibility Committee
Committee Chair:
William Spiegel

GRAPHIC

Additional Member:
Roy J. Kasmar




Key Responsibilities:

Reviewing Board structure, composition and practices.

Making recommendations on these matters to our Board of Directors.

Reviewing, soliciting and making recommendations to our Board of Directors and shareholders with respect to candidates for election to the Board of Directors.

Overseeing our Board of Directors' performance and self-evaluation process.

Developing and reviewing a set of corporate governance principles for the Company.

Overseeing the "governance" and "environmental" aspects of our sustainability programs.

Our Board of Directors has determined that all of the members of the Nominating, Governance and Corporate Responsibility Committee are independent under applicable rules and regulations of the SEC and the NYSE.

The Nominating, Governance and Corporate Responsibility Committee met three times during 2020.

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Risk Committee
Committee Chair:
Allan Levine

GRAPHIC

Additional Members:
Aditya Dutt
Robert Glanville





Key Responsibilities:

Assisting with the oversight of key risks that we face.

Overseeing management's identification, mitigation and monitoring of the Company's material risks and exposures, current activities and products.

Reviewing management's processes for monitoring and aggregating risks across the Company.

Overseeing compliance with material guidelines, policies and procedures governing the process by which management assesses and manages the Company's material risks and exposures.

Overseeing the implementation, execution and performance of the Company's enterprise risk management program.

Reviewing the Company's capital management strategy and investment policy and investing activities.

The Risk Committee met two times during 2020.

 

 

Technology, Innovation and Operations Committee
Committee Chair:
Jane P. Chwick

GRAPHIC

Additional Members:
Angela L. Heise
Roy J. Kasmar
Douglas J. Pauls






Key Responsibilities:

Ensuring that our technology programs support our business objectives and strategies, and provide for appropriate data security and data privacy.

Identifying technology-related risks that could have a significant impact on our operations and pursuit of our long-term strategic goals.

Advising our senior technology and operations management teams.

Advising us on technology, innovation, data security and data privacy, and operations-related matters.

The Technology, Innovation and Operations Committee met two times during 2020.

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Corporate Governance

        Our Board of Directors and management have a strong commitment to effective corporate governance. We believe that we maintain a comprehensive corporate governance framework for our operations which, among other things, takes into account the requirements of the SEC, the NYSE, the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Corporate Governance Guidelines

        Our Board of Directors has adopted Corporate Governance Guidelines that serve as a flexible framework within which our Board of Directors and its committees operate. These guidelines cover a number of areas including the size and composition of the Board, Board membership criteria and director qualifications, director responsibilities, board agenda, roles of the Chairman of the Board of Directors and Chief Executive Officer, meetings of independent directors, committee responsibilities and assignments, Board member access to management and independent advisors, director communications with third parties, director compensation, director orientation and continuing education, evaluation of senior management and management succession planning.

Code of Business Conduct and Ethics

        Our Code of Business Conduct and Ethics includes information regarding procedures established by the Audit Committee for the submission of complaints about our accounting or auditing matters. Our Code of Business Conduct and Ethics is applicable to our directors, executives and employees, and reflects and reinforces our commitment to integrity in the conduct of our business. Amendments to our Code of Business Conduct and Ethics and any grant of a waiver from a provision of our Code of Business Conduct and Ethics will be included in a current report on Form 8-K within four days of the date of the amendment or waiver, unless posting such information on our website will then satisfy the rules of the NYSE.

        Our Audit Committee, on behalf of itself and our other non-employee directors, has established procedures to enable employees or other parties who may have a concern about our conduct or policies to communicate that concern. Our employees are encouraged and expected to report any conduct which they believe in good faith to be an actual or apparent violation of our Code of Business Conduct and Ethics. In addition, our Audit Committee has established procedures pertaining to receiving, retaining, and treating complaints received regarding accounting, internal accounting controls, or auditing matters, and with respect to the confidential, anonymous submission by our employees of concerns regarding, among other things, questionable accounting or auditing matters. Such communications may be confidential or anonymous, and may be e-mailed, submitted in writing, or reported by phone through various internal and external mechanisms as provided on the our internal website. Additional procedures by which internal communications may be made are provided to each employee.

        Our Code of Business Conduct and Ethics prohibits any employee or director from retaliating or taking any adverse action against anyone for raising or helping to resolve an integrity concern.

Succession Planning

        Our Board of Directors, primarily through the Compensation Committee, assesses succession planning for management and leadership, with a primary focus on succession in the event of the unexpected incapacity of our Chairman of the Board of Directors, Chief Executive Officer and President. Our Corporate Governance Guidelines provide that our Chairman of the Board of

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Directors, Chief Executive Officer and President should at all times make available to our Board, on a confidential basis, his recommendations and evaluations of potential successors.

Share Ownership Guidelines

        Both our non-employee directors as well as our senior executives (which we define as our Chief Executive Officer and each of his direct reports and includes all of our named executive officers) are required to maintain certain ownership levels of common shares during their service.

        Each director and senior executive is required to own a minimum number of our common shares with an aggregate value equal to the following (or such lesser amount as the director or senior executive may have been granted to date):

 

Position


Minimum Value of Common Shares Held

 

Director

  Five times annual cash compensation  

 

Chief Executive Officer

  Six times annual base salary    

 

Other Senior Executives

  Two times annual base salary  

        Furthermore, each director and senior executive must hold at least 50% of the common shares that we issue to that individual until he or she satisfies the applicable share ownership threshold, less any shares used to satisfy tax obligations arising from receiving common shares from us.

        For the purposes of our share ownership guidelines, restricted common shares and restricted common share units subject to time-based vesting are treated as shares held by a director or senior executive. However, unvested performance-based restricted common shares and restricted common shares units are not treated as being owned until they are earned and vested.

        Our non-employee directors and executive officers are also subject to our insider trading policy, which prohibits transactions in our securities outside of "window" periods (except pursuant to previously adopted, approved Rule 10b5-1 plans), including short sales on our shares, or the purchase or sale of options, puts, calls, straddles, equity swaps, or other derivative securities that are directly linked to our equity.

        Our Compensation Committee retains discretion to waive non-compliance with our share ownership guidelines in light of an individual director's particular facts and circumstances from time to time.

        As of December 31, 2020, our Chief Executive Officer, each of our senior executives and each member of our Board of Directors have met the applicable share ownership guidelines. Our directors are expected to satisfy their share ownership guidelines through their annual equity compensation grants in respect of their Board service.

No Hedging Policy

        Members of our Board of Directors, our executives and all other Company employees are prohibited from hedging their ownership or offsetting any decline in the market value of our common shares, including by trading in publicly-traded options, puts, calls or other derivative instruments related to our common shares.

Compensation Committee Interlocks and Insider Participation

        Roy J. Kasmar, Douglas J. Pauls and William Spiegel served as the members of our Compensation Committee during 2020. No member of our Compensation Committee is an officer or employee of our Company. None of our executive officers serves, or in the past year has served, as

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a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving on our Board of Directors or Compensation Committee.

Availability of Committee Charters; Corporate Governance Guidelines; and Code of Business Conduct and Ethics

        A copy of each of our Board committee charters, Corporate Governance Guidelines and Code of Business Conduct and Ethics is published on our website at www.essentgroup.com. Our Bye-laws are filed with the SEC and can be found on the SEC's website at www.sec.gov. Each of these documents is available in print to any shareholder upon request by writing to our Secretary at Essent Group Ltd., Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. Our Board of Directors regularly reviews corporate governance developments and modifies our committee charters and key practices and policies as our Board believes to be warranted.

Communications with our Board of Directors and Non-Employee Directors

        Any shareholder or other interested party that desires to communicate directly with our Board of Directors, any committee of the Board of Directors or our non-employee directors as a group may do so by addressing the communication in care of our Secretary at Essent Group Ltd., Clarendon House, 2 Church Street, Hamilton HM11, Bermuda with a request to forward the communication to the intended recipient. The Secretary's office opens all such correspondence and forwards it to the relevant director or group of directors, except for items unrelated to the functions of the Board, including business solicitations or advertisements.

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Board of Directors' Role in Risk Oversight

        Our Board of Directors as a whole has responsibility for risk oversight, with reviews of certain areas being conducted by the relevant committees of the Board that report on their deliberations to the full Board. The oversight responsibility of our Board of Directors and its committees is enabled by management reporting processes that are designed to provide visibility to the Board about the identification, assessment and management of critical risks and management's risk mitigation strategies. These areas of focus include competitive, economic, operational, financial (accounting, credit, liquidity and tax), legal, regulatory, compliance and reputational risks. Our Board of Directors and its committees oversee risks associated with their respective principal areas of focus, as summarized below.

    Audit Committee   Risks and exposures associated with financial matters, particularly financial reporting, tax, accounting, disclosures, compliance, internal control over financial reporting, financial policies and credit and liquidity matters and our enterprise risk management program.    
   
    Compensation Committee   Risks and exposures associated with executive compensation programs and arrangements, including incentive plans, and leadership and succession planning.    
   
    Nominating, Governance and Corporate Responsibility Committee   Risks and exposures associated with corporate governance and sustainability.    
   
    Risk Committee   Risks associated with insurance and investment portfolios and investment guidelines, including credit, underwriting, pricing risk, market risk and liquidity risk.    
   
    Technology, Innovation and Operations Committee   Risks and exposures related to technology, innovation, data security and data privacy, and operations-related matters.    
 

        We maintain an internal disclosure committee consisting of certain members of our executive management and senior employees. The disclosure committee meets at least quarterly to bring together representatives from our core business functions and employees involved in the preparation of our financial statements so that the group may discuss any issues of which the members are aware that should be considered for disclosure in our public SEC filings. The disclosure committee reports to our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer.

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Director Compensation

        The Compensation Committee reviews and establishes the compensation of our non-employee directors. Our director compensation program is designed to compensate our non-employee directors for their service to the Company and the level of responsibility they have assumed in today's corporate governance environment.

        Our Compensation Committee retains the services of an independent compensation consultant, Korn Ferry, to review our non-employee director compensation program in comparison with market data. Each year the Compensation Committee, based on information provided by the independent compensation consultant, reviews the total annual compensation of the non-employee directors, with a goal of positioning director compensation at the median of our peer group at that time (for additional information regarding our peer group see below under "Executives and Executive Compensation—Compensation Discussion and Analysis—Peer Group Composition" on page 43). In August 2019, the Compensation Committee asked Korn Ferry to re-evaluate the compensation that we pay to our Board of Directors. Based on information provided by Korn Ferry, the Compensation Committee approved modest changes to our non-employee director compensation program commencing in 2020 in order to bring certain elements of the program closer in line with competitive market practices while continuing to position total annual compensation at the median of our peer group. Commencing in 2020, the annual cash retainer payable to each non-employee director was increased from $115,000 to $125,000 and the value of the annual equity award to be granted to each non-employee director was increased from $115,000 to $125,000.

        The compensation arrangements for the non-employee directors of the Board for 2020 are described below. Mr. Casale, the Chairman of the Board of Directors and our President and Chief Executive Officer, does not receive additional compensation for serving as a member of our Board of Directors.

   

       

 

Annual Cash Retainer

  $ 125,000  

 

Additional Annual Cash Retainer for Board Committee Chairpersons:

         

 

Audit Committee

  $ 25,000  

 

Compensation Committee

  $ 25,000    

 

Nominating and Corporate Governance Committee

  $ 15,000  

 

Technology, Innovation and Operations Committee

  $ 20,000    

 

Risk Committee

  $ 20,000  

 

Additional Annual Cash Retainer for Lead Independent Director

  $ 25,000    

 

Annual Equity Award(1)

  $ 125,000  

(1)
Award delivered in the form of restricted common share units granted under the Essent Group Ltd. 2013 Long-Term Incentive Plan, or 2013 Plan, on the date of our annual general meeting of shareholders, that vests on the first anniversary of the grant date. If a non-employee director joins our Board of Directors after the grant date for the annual equity award, such director will receive a prorated award based on the date that he or she joined our Board.

        Our non-employee directors are required to maintain certain ownership levels of our common shares during their service as described above on page 27.

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        The following table sets forth compensation earned by our non-employee directors during the year ended December 31, 2020:

 

Name







Fees
Earned or
Paid in
Cash
($)








Stock
Awards
($)(1)






Option
Awards
($)








Non-Equity
Incentive
Plan
Compensation
($)













Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings
($)











All Other
Compensation
($)(2)





Total
($)


 

Jane P. Chwick

  145,000   125,012         2,689   272,701  

 

Aditya Dutt

    125,000     125,012                 2,689     252,701    

 

Robert Glanville

  140,000   125,012         2,689   267,701  

 

Angela L. Heise

    125,000     125,012                 2,689     252,701    

 

Roy J. Kasmar

  150,000   125,012         2,689   277,701  

 

Allan Levine(3)

    57,083                     127,309     184,393    

 

Douglas J. Pauls

  150,000   125,012         2,689   277,701  

 

William Spiegel

    165,000     125,012                 2,689     292,701    

(1)
The amounts reported in this column represent the aggregate grant date fair value of the restricted common share units granted in 2020 computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. For additional information, including a discussion of the assumptions used to calculate these values, see Note 10 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020. On May 6, 2020, each of our continuing non-employee directors received 4,766 restricted share units in respect of their Board service through our 2021 Annual General Meeting of Shareholders. All of such restricted share unit awards remained outstanding on December 31, 2020.

(2)
Represents the value of dividend equivalent rights credited in respect of unvested restricted common share unit awards pursuant to the terms of the applicable award agreements in connection with the payments of our quarterly dividends in the amount of $0.16 per share on March 20, 2020, June 12, 2020, September 10, 2020 and December 10, 2020.

(3)
Mr. Levine's was appointed to our Board of Directors on August 4, 2020. On May 6, 2020, Mr. Levine received 4,766 restricted share units in respect of his service on the board of directors of one of our subsidiaries. Because this award was issued before Mr. Levine became a member of our Board of Directors, the value of the award is reflected in the "All Other Compensation" column.

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Executives and Executive Compensation

Current Executive Officers

        The following are biographical summaries of our executive officers, except for Mr. Casale, whose biography is included in the section entitled "The Board of Directors and its Committees—Information Concerning Directors" above. Our executive officers are appointed by our Board of Directors and serve until their successors have been duly appointed and qualified or their earlier resignation or removal.

Lawrence E. McAlee

GRAPHIC
Senior Vice President and Chief Financial Officer since 2009
Age 57

 
BACKGROUND

Mr. McAlee has over 25 years of experience in the areas of finance, accounting, controls and risk management. Between 2002 and 2009, Mr. McAlee held a series of senior management positions at Sovereign Bancorp, Inc., including serving as its chief accounting officer, general auditor and chief enterprise risk management officer. Prior to joining Sovereign, Mr. McAlee was a partner with Arthur Andersen LLP. Mr. McAlee holds a BS in accounting from St. Joseph's University and is a certified public accountant.

 

Vijay Bhasin

GRAPHIC
Senior Vice President and Chief Risk Officer since 2009
Age 56

 
BACKGROUND

Mr. Bhasin has significant mortgage finance industry expertise, including multiple senior management positions specializing in mortgage risk. From 2006 to 2008, Mr. Bhasin served as a managing director of Countrywide Financial Corporation and Bank of America, with responsibility for economic capital assessment, asset liability management, counterparty credit risk measurement and structured credit analytics. Earlier in his career, Mr. Bhasin held management positions with the Federal Home Loan Mortgage Corporation (Freddie Mac), including serving as vice president overseeing development and implementation of a variety of mortgage credit and prepayment models. He has also held research positions with the Federal National Mortgage Association (Fannie Mae) and the Board of Governors of the Federal Reserve System. Mr. Bhasin holds a BS in mechanical engineering from the National Institute of Technology, Kurukshetra, India, an MBA in finance and marketing from Southern Illinois University, and a PhD in finance from Indiana University, Bloomington.

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Jeff R. Cashmer

GRAPHIC
Senior Vice President and Chief Business Officer of Essent Guaranty, Inc., our mortgage insurance subsidiary, since 2009
Age 50

 
BACKGROUND

Mr. Cashmer has more than 20 years of experience in mortgage finance, mortgage insurance and business development. From 2006 to 2009, Mr. Cashmer held several management positions with Radian Guaranty Inc., a mortgage insurance company, including most recently as Radian's executive vice president and chief operating officer, with responsibility for all operations, pricing and sales functions. He has also held other management positions within the mortgage insurance industry, including business development, capital markets, international business and strategic planning. Mr. Cashmer also worked at Household Finance Corporation, with roles in underwriting and quantitative marketing analytics. Mr. Cashmer holds a BS in finance from Illinois State University and an MBA from DePaul University's Kellstadt Graduate School of Business.

 

Christopher G. Curran

GRAPHIC
Senior Vice President of Corporate Development since 2011
Age 56

 
BACKGROUND

Mr. Curran has more than 25 years of experience in mortgage banking and financial services in the areas of financial management, pricing, asset valuation, capital markets, operations and originations. Prior to working for Essent, Mr. Curran served as senior vice president of pricing and operations for Radian Guaranty, Inc., where he also led the capital markets group. He has also served in a variety of leadership positions with JP Morgan Chase and Advanta Corp. at both the corporate and business levels. Mr. Curran's areas of responsibility included residual and mortgage servicing valuation, investor relations, corporate development, secondary marketing and corporate controller. He began his career as a certified public accountant with Arthur Andersen LLP, specializing in financial services and securitization. Mr. Curran holds a BS in accounting from LaSalle University.

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Mary Lourdes Gibbons

GRAPHIC
Senior Vice President, Chief Legal Officer and Assistant Secretary since 2008
Age 59

 
BACKGROUND

Ms. Gibbons has more than 25 years of experience in the mortgage industry. From 2003 to 2008, Ms. Gibbons served as chief legal officer of Wilmington Finance, Inc., a mortgage lender. Ms. Gibbons began her career at the U.S. Bankruptcy Court and White and Williams LLP, a law firm. Ms. Gibbons' mortgage-related experience includes senior roles at ContiMortgage Corp. and Advanta Mortgage Corp. Ms. Gibbons holds a BS in marketing from St. Joseph's University and a JD from The Delaware Law School.

 

Joseph Hissong

GRAPHIC
Senior Vice President and the President of Essent Reinsurance Ltd., our Bermuda-based reinsurance company, since 2015
Age 57

 
BACKGROUND

Mr. Hissong has over 25 years of experience, specializing in strategy development and executing upon new business initiatives associated with international reinsurance transactions and strategic investment opportunities. From 2013 to 2015, Mr. Hissong was president of Cartesian Re Management Company, an insurance linked securities manager. Prior to joining Cartesian Re, Mr. Hissong worked for PartnerRe, Ltd. from 2003 to 2013, most recently as its executive director and head of private equity/strategic investments, where he sponsored PartnerRe's original investment in Essent. Earlier in his career, Mr. Hissong served as a managing director of Swiss Re Financial Services Group and as a partner in the law firm LeBoeuf, Lamb, Greene & MacRae LLP. Mr. Hissong holds a BS in mathematics and philosophy from Fordham University and a JD from the University of Chicago Law School.

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David B. Weinstock

GRAPHIC
Vice President and Chief Accounting Officer since 2009
Age 56

 
BACKGROUND

Mr. Weinstock has over 25 years of experience in the areas of finance, accounting and controls. Between 1998 and 2009, Mr. Weinstock held a series of senior management positions at Advanta Corp., including serving as its chief accounting officer and vice president of investor relations. Prior to joining Advanta, Mr. Weinstock was a senior manager at Arthur Andersen LLP. Mr. Weinstock holds a BS in accounting from The Pennsylvania State University and is a certified public accountant.

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Compensation Discussion and Analysis

        This Compensation Discussion and Analysis (CD&A) describes our executive compensation programs, including the oversight of such programs by our Compensation Committee and the rationale and processes used to determine the compensation for the Company's named executive officers ("NEOs") and provides a detailed description of those programs. This CD&A, which may include forward-looking statements, should be read together with the compensation tables and related disclosures that follow this section.

        This discussion focuses on the compensation provided to the Company's NEOs during 2020, who were:

      Name
Title

 

 

GRAPHIC

 

Mark A. Casale

 

Chairman of the Board of Directors, President and Chief Executive Officer

 

 

GRAPHIC

 

Lawrence E. McAlee

 

Senior Vice President and Chief Financial Officer

 

 

GRAPHIC

 

Vijay Bhasin

 

Senior Vice President and Chief Risk Officer

 

 

GRAPHIC

 

Jeff R. Cashmer

 

Senior Vice President and Chief Business Officer

 

 

GRAPHIC

 

Christopher G. Curran

 

Senior Vice President, Corporate Development

Executive Summary

        As discussed above on page 3 under "Proxy Statement Summary—COVID-19 and its Impact on our Business", 2020 was a challenging year due to the impact of COVID-19 on our economy, our communities and our lives. We believe that we entered 2020 from a position of strength, with the primary facets of our buy, manage and distribute operating model of capital generation, risk based pricing and programmatic reinsurance firmly in place. It is these strengths that provide us confidence in managing our franchise during this unprecedented period.

        The COVID-19 pandemic had a material impact on our 2020 financial results. While uncertain, the future impact of the COVID-19 pandemic on our business, results of operations, financial condition and liquidity may also be material. Our named executive officers and other senior

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management of the Company have provided strong leadership throughout the crisis caused by the COVID-19 pandemic:

    We operationalized our pandemic plan, which we have had in place as part of our comprehensive business continuity program for a number of years. A substantial majority of our workforce began working remotely on March 16, 2020. Through the use of technology, our team was successfully able to service our customers and execute on an exceptionally large volume of new business resulting largely from historically low mortgage rates in 2020. We reopened several of our office locations in September 2020 on a fully voluntary basis to provide our employees an in-office option, implementing new health and safety policies and practices including temperature scanning, face masks requirements, staggered shifts, upgraded cleaning practices, social distancing requirements and contact tracing.

    In response to the pandemic, we were able to analyze potential risks and raise pricing quickly and tighten credit through our engine, EssentEDGE. While operating largely remotely for a substantial portion of the year, we generated record volume of $108 billion of NIW in 2020, with a weighted average FICO of 749 and a weighted average loan-to-value ratio of 91%, compared to $63.5 billion of NIW, with a weighted average FICO of 744 and a weighted average loan-to-value ratio of 92% in 2019.

    To strengthen our financial position and flexibility, in June 2020 we raised approximately $440 million through a public equity offering.

    In October 2020, we amended and increased the amount committed under our credit facility by $125 million, which now provides access to $300 million of undrawn capacity, and extended the maturity of the facility to October 2023.

    We completed two insurance-linked note ("ILN") transactions and one excess of loss transaction with a panel of reinsurers providing access to $950 million dollars of excess of loss reinsurance protection.

    As a result of these transactions, and including the $728 million in operating cash flow that we generated in 2020, we increased and enhanced our capital and liquidity resources by over $2.2 billion dollars during 2020. As of December 31, 2020, we had a Private Mortgage Insurer Eligibility Requirements ("PMIERs") excess of $1.2 billion along with $563 million of cash and investments at our holding company.

    We grew book value per share over 10% in 2020. Given the confidence in our business model, during 2020 we maintained a quarterly dividend to shareholders and most recently, our Board of Directors approved a $0.16 dividend per share paid in March 2021.

        Consistent with prior years, our pay program continued to consist of three key elements significantly weighted to pay-for-performance: base salary and annual cash incentive tied to key operational and strategic goals; and long-term incentive awards linked to our common shares. As discussed below, the impact of the COVID-19 pandemic on our business impacted our financial performance in 2020, which impacted the amount of the annual cash incentive awards to our named executive officers for the year.

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Essent's 2020 Performance

  New Insurance Written    

Increased new insurance written, or NIW, to $108 billion in 2020—an increase of $44.4 billion, or 69.8%, from the $63.6 billion in NIW that we generated in 2019.

 
    Diluted Earnings Per Share      

$3.88 per share for the year ended December 31, 2020.

   
  Return on Average Equity    

Return on average equity for the year ended December 31, 2020 was 12.1%.

 
    Bermuda-Based Reinsurance Business      

As of December 31, 2020, Essent Reinsurance Ltd. provided insurance and reinsurance in connection with government-sponsored enterprises (GSEs) and other risk share transactions covering approximately $1.42 billion of risk, an increase of 58.2% over 2019. Essent Reinsurance Ltd. also continues to reinsure 25% of our US-based mortgage insurance business.

   
  Risk Mitigation    

$495.9 million of aggregate excess of loss reinsurance coverage on an existing portfolio of mortgage insurance policies written in 2019 that was fully collateralized at inception by insurance linked notes issued by Radnor Re 2020-1 Ltd., a newly formed unaffiliated special purpose insurer domiciled in Bermuda.

 
     

$55.1 million of aggregate excess of loss reinsurance coverage with a panel of reinsurance companies for the same 2019 portfolio providing coverage pari-passu to the coverage provided by Radnor Re 2020-1 Ltd.

 
     

$399.2 million of aggregate excess of loss reinsurance coverage on an existing portfolio of mortgage insurance policies written in 2019 and 2020 that was fully collateralized at inception by insurance linked notes issued by Radnor Re 2020-2 Ltd., a newly formed unaffiliated special purpose insurer domiciled in Bermuda.

 
    Other Highlights      

Raised approximately $440 million through a public offering in June 2020 of 13.8 million common shares to strengthen our capital resources and provide financial flexibility.

   
           

Amended our credit facility to increase the committed capacity by $125 million to $625 million and extending the maturity date to October 2023.

   
           

Payment of quarterly dividends of $0.16 per share.

   

Executive Compensation Highlights

        Consistent with our emphasis on performance-based compensation (see "—Compensation Philosophy" below), the actual incentive compensation paid to our named executive officers for 2020 was at target. The Compensation Committee of our Board of Directors, which we refer to as the "Compensation Committee" or the "Committee" in this CD&A, awarded each of our named executive officers at-target incentive compensation under our annual bonus plan for 2020, representing 100% of the annual incentive compensation targets for each of our named executive officers.

        The Compensation Committee, with the assistance of its independent compensation consultant, engages in an ongoing review of our executive compensation program to determine that it supports the competitive compensation philosophy established by the Committee and

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ultimately serves the interests of our shareholders. For 2020, the Committee followed a similar process as it has used in prior years:

    Process used for compensation determinations.  The Committee reviewed external market data presented by its independent compensation consultant to aid it in setting market-based compensation levels. The committee also considered individual and Company performance, skill sets, experience, leadership, growth potential and other business needs as well as current best practices and developments when making compensation decisions.

    Total target cash compensation.  Total target cash compensation for 2020 continued to be targeted around the 25th percentile of our peer group (see "—Compensation Objectives and Principles" on page 43 for additional information).

    Annual equity compensation.  We continued to make annual long-term equity incentive grants to our Chief Executive Officer and other named executive officers.

        As a result of this review, the Compensation Committee decided not to make any changes to the base salary, target annual incentive or target long-term incentive awards of our named executive officers for 2020.

        In February 2021, the Compensation Committee made the following changes to the compensation of each of Mr. McAlee and Mr. Curran:

    the annual base salary of each of Mr. McAlee and Mr. Curran was increased to $500,000, effective January 1, 2021; and

    the target long term equity incentive award for each of Mr. McAlee and Mr. Curran was set at 200% of annual base salary, with 50% of such award being subject to performance- and time-based vesting and 50% of such award being subject to time-based vesting over a three-year period.

        Commencing with the performance-based long term incentive awards issued to each of the named executive officers in 2021, the Compensation Committee adopted new performance standards based on a combination of growth in adjusted book value per share and the Company's total shareholder return relative to that of the members of the S&P 1500 Financials Index, in each case measured over a three year period. The maximum number of shares that the named executive officers may earn under these new awards is 200% of the target number of shares subject to the award.

        In February 2021, the Compensation Committee also approved an amendment to the performance- and time-based long term equity incentive awards granted to each of the named executive officers in each of March 2019 and February 2020 to provide that such awards will no longer be subject to the achievement of the compounded annual book value per share growth metrics and will be subject to only service-based vesting. As a result, the unvested shares subject to the amended 2019 and 2020 awards will vest on March 1, 2022 and March 1, 2023, respectively, subject to the continued service requirements and other terms and conditions set forth in the applicable award agreements, without taking into consideration any performance metrics. The Compensation Committee believes that the unprecedented circumstances of the COVID-19 pandemic warranted this amendment, and in making this decision considered, among other things, that the performance criteria were established before the onset of the COVID-19 pandemic and the need to address retention concerns resulting from the COVID-19 pandemic's impact on the Company's long-term incentive compensation program.

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Advisory Vote on Compensation

        At our 2020 Annual General Meeting of Shareholders, our "say on pay" proposal resulted in a favorable vote from approximately 98% of the shares cast. Based on investor feedback, the continued high percentage of support was due to the appropriateness of the overall design of our compensation programs and our regular communications with our shareholders and responsiveness to shareholder feedback obtained through our regular engagement process. After consideration of the shareholder input we received, which in general supported the structure and design of our compensation plans and programs, particularly our emphasis on long-term equity awards, as well as our strong performance and management's and the compensation committee's assessment of the continuing success of our compensation programs, the compensation committee determined that the overall design of our compensation programs during 2020 would be maintained consistent with immediate past years. The Compensation Committee will continue to work to ensure that our executive officers' interests are aligned with our shareholders' interests to support long-term value creation and continue to strengthen the Company.

Executive Compensation Best Practices

        We maintain strong compensation governance practices that we believe support our pay-for-performance principles and align management incentives with the interests of our shareholders. We have adopted a number of "best practices" with respect to executive compensation, including:

    What We Do
  What We Don't Do
      A significant portion of target annual compensation for our named executive officers is "at-risk" compensation, including performance-based incentive and long-term equity-based awards.         No significant perquisites.    
      Maintain robust share ownership guidelines.       No special retirement plans for our named executive officers.  
      Double-trigger equity vesting in respect of time-based restricted common shares upon a change in control.         No re-pricing of stock options without shareholder approval.    
      Prohibit employees from hedging the value of our common shares.       No tax gross-ups on excise taxes.  
      Retain an independent compensation consultant to review our executive compensation program and practices.         No dividends or dividend equivalents are paid in respect of unearned performance-based restricted common shares.    
      Engage with our shareholders.        
      Design our executive compensation programs to manage business and operational risk and to discourage short-term risk taking at the expense of long-term results.                

Compensation Philosophy

        Our compensation philosophy centers upon:

    attracting and retaining industry-leading talent to maximize shareholder value creation over the long-term by targeting compensation levels that are competitive when measured against other companies within our industry;

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    emphasizing performance-based compensation that appropriately rewards our executives for delivering financial, operational and strategic results that meet or exceed pre-established goals, as reflected in our performance-based annual incentive program as well as through the use of restricted common shares subject to performance-based vesting in our long-term incentive program;

    rewarding individual performance and contribution to our success; and

    aligning the interests of our executives with those of our shareholders and the long-term interests of the Company through equity ownership requirements and grants of equity-based awards.

Executive Compensation Participants

Compensation Committee—Role and Permitted Members

        The Compensation Committee oversees the compensation and benefit programs of our executive officers. The Committee is responsible for ensuring that our compensation policies and practices support the successful recruitment, development, and retention of executive talent and leadership required to achieve our business objectives. The responsibilities of the Compensation Committee include:

    approving the goals and objectives relating to our Chief Executive Officer's compensation, evaluating the performance of our Chief Executive Officer in light of such goals and objectives, and setting the compensation of our Chief Executive Officer based on this evaluation;

    approving the salaries and annual incentive awards of our other executive officers who report directly to our Chief Executive Officer, including each of our senior vice presidents as well as our vice president and chief accounting officer, taking into account the recommendation of our Chief Executive Officer and such other information as the compensation committee believes appropriate;

    administering our equity incentive plans, including authorizing restricted common shares, restricted common share units, performance units, options and other equity-based awards under these plans;

    retaining and terminating, in its sole discretion, third party consultants to assist in the evaluation of director and executive compensation (with sole authority to approve any such consultant's fees and other terms of engagement); and

    assessing the appropriate structure and amount of compensation for our directors.

        The Compensation Committee is made up entirely of "independent" directors, consistent with the current listing standards of the NYSE. Each member of the Committee also qualifies as a "non-employee director" as defined under Section 16 of the Securities Exchange Act of 1934.

Role of Management and Chief Executive Officer in Compensation Decisions

        The Compensation Committee strongly believes in aligning the interests of our executives with those of our shareholders through an executive compensation program designed with input from our Chief Executive Officer who is in regular dialogue with the committee and, as appropriate, the committee's independent compensation consultant, regarding internal, external, cultural, business and motivational challenges and opportunities facing us and our executive talent. To that end, our management team analyzes, with assistance from the Committee's independent compensation consultant, trends and may recommend improvements to the compensation programs.

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        Our Compensation Committee seeks the views of our Chief Executive Officer in setting and administering our executive compensation programs. In particular, at the beginning of each year, Mr. Casale, the Chairman of our Board of Directors and our Chief Executive Officer, oversees the development of corporate and individual goals for purposes of annual and long term compensation of each of our named executive officers (other than himself). These goals are derived from our corporate business plan and include both quantitative measurements and qualitative considerations selected to reinforce and enhance achievement of our operating and growth objectives. The Compensation Committee reviews these goals with Mr. Casale, adopts revisions it deems appropriate and determines the final goals for compensation.

        Following the end of each year, Mr. Casale reviews with the Compensation Committee the achievement of corporate, business unit/regional and individual goals and the performance of each named executive officer (other than himself) and presents his recommendations (without any recommendation as to his own compensation) regarding base salary adjustments, annual bonus, and long-term equity awards for our named executive officers (other than his own) to ensure alignment of shareholder interests with each executive's goals as well as to reward the executive for their performance. Although the Committee receives management's input with respect to executive compensation, all decisions regarding compensation for our named executive officers are made by the Committee. With respect to the non-quantitative performance measures applicable to our named executive officers, the Compensation Committee relies heavily on the views of Mr. Casale (other than as to himself). As our Chief Executive Officer, Mr. Casale oversees the day to day performance of the other named executive officers. As such, our Compensation Committee believes that he is well positioned to evaluate their performance and make recommendations as to their overall compensation.

Independent Compensation Advisor

        The Compensation Committee has the power to hire and fire independent compensation consultants, legal counsel, or financial or other advisors as it may deem necessary to assist it in the performance of its duties and responsibilities, without consulting or obtaining the approval of management of the Company. The Committee recognizes the importance of objective, independent expertise and advice in carrying out its responsibilities. The Compensation Committee continued to retain Korn Ferry as its independent compensation consultant through 2020. Korn Ferry reports directly to, and is directly accountable to, the Committee, and the committee has the sole authority to retain, terminate and obtain the advice of Korn Ferry at the Company's expense. The Compensation Committee selected Korn Ferry as its consultant because of its expertise and reputation and the fact that Korn Ferry has no other ties to management that could jeopardize its fully independent status, and has strong internal governance policies that help ensure that it maintains its independence. The Compensation Committee partnered with Korn Ferry throughout 2020 on executive compensation matters, including a review of the Company's compensation programs. The Committee, with the assistance of its independent compensation consultant, monitors market compensation practices and developments, as well as the appropriateness of the various components of the executive pay program, as our business progresses and evolves with anticipated growth and changing market conditions.

        The Compensation Committee annually assesses the independence of Korn Ferry pursuant to the rules of the SEC and the listing standards of the NYSE rules. In performing the annual independence assessment, the Committee considers various factors bearing on adviser independence, including the nature and amount of work performed for the Committee during the year, the nature of any unrelated services performed for the Company, the amount of fees paid for those services in relation to the firm's total revenues, the adviser's policies and procedures designed to prevent conflicts of interest, and the existence of any business or personal relationship that could

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impact the adviser's independence. Pursuant to SEC and NYSE rules, the Committee assessed the independence of Korn Ferry and determined that Korn Ferry's work for the committee has not raised any conflicts of interest. During 2020, we paid Korn Ferry approximately $62,000 in fees for its services to the Compensation Committee relating to executive and director compensation.

Peer Group Composition

        In making compensation decisions, the Compensation Committee considered competitive market data presented by its independent compensation consultant, including data derived from a peer group of companies approved by the committee.

        In selecting peers, the Compensation Committee seeks to maintain consistency from year to year, to the extent appropriate, and the Compensation Committee's intention is to update its peer group every other year (other than for events potentially calling for the immediate elimination of a peer group member, such as a merger, acquisition or bankruptcy of a peer group member). The Compensation Committee selected the members of this peer group based on the consideration of the size (measured by both revenue and market capitalization), industry, organizational complexity of each company, the companies that we compete with for experienced executives, and the recommendations of its independent compensation consultant.

        The Compensation Committee elected to continue to use the same peer group for purposes of evaluating compensation for 2020 that was used in 2019, consisting of the following 14 publicly traded companies:

Arch Capital Group Ltd.

Assured Guaranty Corporation

Fidelity National Financial Inc.

First American Financial Corp.

Genworth Financial Inc.

Markel Corporation

MGIC Investment Corp.

 

Nationstar Mortgage Holdings Inc.

NMI Holdings, Inc.

PennyMac Financial Services, Inc.

Radian Group Inc.

RenaissanceRe Holdings Ltd.

Stewart Information Services Corp.

W. R. Berkley Corp.

Compensation Objectives and Principles

        The Compensation Committee believes that the establishment and maintenance of a competitive executive compensation program is in the best interests of our shareholders. Consistent with our compensation philosophy, the executive compensation program approved by the Compensation Committee is designed to facilitate the attraction and retention of top-caliber talent and to align the interests of our executives with those of our shareholders. For our fiscal year 2020:

    target cash compensation of our named executive officers was determined to target generally the 25th percentile of our peer group (see "—Peer Group Composition" above); and

    annual incentive opportunities for our named executive officers as a percentage of base salary were determined to target the 50th percentile (median) relative to our peer group.

Elements of Compensation

        In accordance with our overall compensation philosophy and program, executives are provided with a mix of base salary, annual incentives, long-term incentives, and retirement and welfare benefits. Our compensation philosophy places a greater portion of the potential compensation for each named executive officer "at risk" such that compensation will vary based on performance. The

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following table describes key elements of compensation and the philosophy behind providing each such element:

  Compensation Element
Description
Philosophy Behind
Providing
Compensation Element



    Annual Compensation:      
    Annual Base Salary  

Fixed component of annual cash compensation that reflects expertise and scope of responsibilities

 

Attract and retain key talent

Provide financial certainty and stability

Recognition of individual performance

   
    Performance-Based Annual Incentive  

Cash bonus plan based on performance relative to Company and individual objectives.

 

Incentivize and motivate our named executive officers to meet or exceed our pre-established annual performance goals

Attract and retain key talent

Reward team success

Align named executive officers' and shareholders' interests

Discourages excessive risk taking

 
    Long-Term Compensation:            
    Long-Term Incentive Program  

A long-term incentive program using time-vested and performance-based restricted common share awards, with performance-vested awards subject to a multi-year performance period

 

Foster a focus on long-term Company performance and long-term success

Attract and retain key talent

Align named executive officers' and shareholders' interests

Discourages excessive risk taking

 
    Other Executive Benefits:            
    Retirement Programs  

Participation in a 401(k) defined contribution plan, including a matching contribution of 100% of a participant's contribution up to 5% of the participant's compensation

 

Attract and retain key talent

Provide income security for retirement

 
    Perquisites  

Financial planning services

Diagnostic wellness examinations

 

Assist with financial planning needs so executives can better focus on key responsibilities

Allow executives to focus on general health and well being

   

        The Compensation Committee reviews all elements that collectively contribute to total compensation rather than any specific formula to determine the allocation between performance-based and fixed compensation in making its decisions each year. This process ensures that judgments made in respect of any individual element of compensation are taken in the context of the total compensation that an individual receives, particularly the balance between base salary, annual incentives and long-term incentives.

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Base Salary

        Base salaries are an important element of compensation and provide our executive officers with a fixed rate of cash compensation that is "non-variable" during the relevant period. In determining base pay, our compensation committee considers the executive's responsibilities, growth potential, individual performance against predetermined objectives, base salary competitiveness as compared to the external market, and our operating performance.

        Although the Compensation Committee targeted base salary for 2020 at the 25th percentile of our peer group (see "—Peer Group Composition" above), actual base salary may be above or below that percentile based on the Committee's review of the underlying scope of a named executive officer's responsibilities, individual performance and experience, internal pay equity, and retention concerns. The Compensation Committee strives to maintain base salaries at levels that will attract top talent, while linking a significant portion of an executive's total compensation opportunity to our success.

        The annual base salaries for our named executive officers for 2020 were:

 

Name

 

2020
Base Salary


 

Mark A. Casale

  $ 925,000  

 

Lawrence E. McAlee

  $ 400,000    

 

Vijay Bhasin

  $ 450,000  

 

Jeff R. Cashmer

  $ 450,000    

 

Christopher G. Curran

  $ 400,000  

Performance-Based Annual Incentive Compensation

        Our Board of Directors approved, and our shareholders first adopted, the Essent Group Ltd. Annual Incentive Plan in 2013, which we refer to as the "Annual Plan." The Annual Plan was re-approved by our shareholders at our 2017 Annual General Meeting of Shareholders.

        In 2020, incentive awards were made under our annual leadership bonus program pursuant to the Annual Plan. The Annual Plan is intended to advance the interests of the Company and its shareholders by:

    providing those employees designated by the compensation committee, which may include our named executive officers, senior vice presidents, other senior executives, and other employees, incentive compensation tied to pre-established performance goals;

    identifying and rewarding superior performance;

    providing competitive compensation to attract, motivate, and retain outstanding employees who achieve superior performance for us; and

    fostering accountability and teamwork throughout the Company.

        In accordance with the terms of the Annual Plan, the Compensation Committee established our fiscal year (which coincides with the calendar year) as the performance period, designated those executives eligible to participate, set the level of potential awards and determined the financial targets or other performance measures which, if attained, result in payment of awards under our annual leadership bonus program for 2020 (the "performance goals").

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Performance Targets for Past Year/Performance Period

        The table below sets forth each named executive officer's 2020 threshold, target and maximum annual incentive opportunities under our annual leadership bonus program, expressed as a percentage of base salary.

 

2020 Annual Incentive Opportunity Expressed as a Percentage of Base Salary


 

Name

    Threshold     Target     Maximum    

 

Mark A. Casale

  120 % 160 % 280 %  

 

Lawrence E. McAlee

    75 %   100 %   175 %  

 

Vijay Bhasin

  75 % 100 % 175 %  

 

Jeff R. Cashmer

    75 %   100 %   175 %  

 

Christopher G. Curran

  75 % 100 % 175 %  

        The weighting of corporate and individual performance goals for annual incentive compensation opportunities varies among our named executive officers.

 

2020 Annual Incentive Opportunity—Weighting of Goals


 

Name

    Corporate Goals     Individual Goals    

 

Mark A. Casale

  100 %  

 

Lawrence E. McAlee

    50 %   50 %  

 

Vijay Bhasin

  50 % 50 %

 

Jeff R. Cashmer

    75 %   25 %  

 

Christopher G. Curran

  50 % 50 %  

        We believe that our corporate and individual goals in concert help ensure that executives are focused on creating long-term value for our shareholders by effectively growing in a profitable manner with an emphasis on the long-term prospects of the Company.

        With respect to corporate goals, the annual incentive opportunity for 2020 was designed to focus our named executive officers on both quantitative and qualitative financial and strategic goals. The following table summarizes the corporate performance goals for 2020 applicable to our named executive officers. Management and the compensation committee view the substance and nature of the subjective corporate-level strategic accomplishments to be proprietary and sensitive.

        The performance goals were set by the Compensation Committee in February 2020, before the onset of the COVID-19 pandemic, and other than electing in August 2020 to change the weighting of the goals relating to diluted earnings per share (to 25% from 35%) and strategic accomplishments (to 20% from 10%), the corporate performance goals for 2020 were not adjusted to reflect the impact of COVID-19 on our business.

 

2020 Annual Incentive Plan Performance Goals


 

Goal

  Weighting   Threshold   Target   Maximum   Actual    

 

New insurance written

  30%   $45.5 billion   $52.5 billion   $63.0 billion   $108 billion  

 

Diluted earnings per share

  25%   $5.50   $6.00   $6.25   $3.88    

 

Return on average equity for the year ended December 31, 2020

  25%   17.5%   18.5%   19.5%   12.1%  

 

Strategic accomplishments

  20%   as determined by the Compensation Committee    

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        In determining the annual incentive award for each of our named executive officers (other than Mr. Casale), the Compensation Committee considered the achievement of the following individual performance goals:

Name
Individual Performance Goals
Lawrence E. McAlee  

Evaluate opportunities to enhance yield on investment portfolio.

 

Support the Company's credit risk transfer efforts through a combination of insurance-linked notes, excess of loss reinsurance and quota share reinsurance.

 

Evaluate capital plan regarding capital distributions, reinvestment/allocation to other strategies, and liquidity.

 

Continue to collaborate with the Company's IT function regarding cloud migration and cybersecurity.

 

Support debt, equity and merger and acquisition activity as needed.

Vijay Bhasin  

Support the deployment and operation of the Company's risk-based pricing engine.

   

Refine internal pricing and risk modeling.

   

Develop enhanced automated underwriting processes.

   

Support proactive outreach campaigns targeting the GSE, FHFA and Treasury.

   

Support projects related to managing uncertainties relating to COVID-19, including underwriting, pricing, reserving and counterparty risk management.

Jeff R. Cashmer  

New insurance written for 2020 in line with corporate performance goal.

 

Execute on market segmentation/classification initiative.

 

Increase number of quotes, unique users and unique branch submitters to the Company's risk-based pricing engine.

 

Optimize business development organization and expenses.

Christopher G. Curran  

Lead the Company's credit risk transfer efforts through a combination of insurance-linked notes, excess of loss reinsurance and quota share reinsurance.

   

Enhance internal corporate development processes.

   

Execute on the Company's equity investor relations communication plan.

   

Develop and implement proactive outreach campaigns targeting the GSE, FHFA and Treasury.

   

Proactively engage rating agencies regarding the Company's reinsurance strategies.

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        Based on the achievement of corporate and, as applicable, individual performance goals, the Compensation Committee approved annual incentive awards in the following amounts for each of our named executive officers, all of which was paid in cash.

Name






Target
Annual
Incentive
Bonus - 2020








Annual
Incentive
Bonus
Award - 2020






% of
Target


Mark A. Casale

  $ 1,480,000   $ 1,480,000   100 %

Lawrence E. McAlee

  $ 400,000   $ 400,000     100 %

Vijay Bhasin

  $ 450,000   $ 450,000   100 %

Jeff R. Cashmer

  $ 450,000   $ 450,000     100 %

Christopher G. Curran

  $ 400,000   $ 400,000   100 %

Long-Term Equity Incentive Compensation

        Through our long-term equity incentive program, we provide our senior executives, including each of our named executive officers, the opportunity to earn equity awards which are in part contingent on the attainment of multi-year performance goals. Our long-term equity incentive awards provide balanced equity incentives that reward executive focus on delivering both financial results and long-term growth. Equity-based compensation is used in order to facilitate retention, provide long-term motivation and focus our executives on increasing shareholder value. In addition, we believe that our long-term equity incentive compensation program balances the risks associated with short-term incentive compensation that may reward behavior with short-term benefits that may be less beneficial over the long-term. The target long-term equity incentive awards are designed to achieve, when combined with the executive's base salary and target annual incentive compensation opportunity, total compensation at approximately the 50th percentile of comparable positions at peer group companies (see "—Peer Group Composition" above).

        For 2020, the target annual long term equity incentive award for each of Messrs. McAlee, Bhasin, Cashmer and Curran were set at 150%, 200%, 200% and 200%, respectively, of his annual base salary, with 50% of such award being subject to performance- and time-based vesting (75% for Mr. Casale) and 50% being subject to time-based vesting (25% for Mr. Casale) over a three-year period.

        The following table sets forth the annual long term equity incentive awards granted to our named executive officers in 2020:

Name







Restricted
Shares
Subject to
Time-Based
Vesting











Restricted
Shares
Subject to
Time- and
Performance-
Based Vesting









Total
Restricted
Shares
Granted
 

Mark A. Casale

  20,199   60,596   80,795  

Lawrence E. McAlee

    5,823     5,823     11,646  

Vijay Bhasin

  8,735   8,735   17,470  

Jeff R. Cashmer

    8,735     8,735     17,470  

Christopher G. Curran

  7,764   7,764   15,528  

        The time-vested restricted common shares vest in equal annual installments during the three-year period commencing on March 1, 2020, subject to the executive's continuous employment through each such vesting date. The performance-vested shares become earned upon

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the Company's achievement of the compounded annual book value per growth percentage set out in the following table (with straight line interpolation between the respective levels) during the three-year performance period commencing on January 1, 2020, and any earned shares will vest on March 1, 2023, subject to the executive's continuous employment through such date:

Performance Level






Compounded
Annual Book
Value Per
Share Growth








Restricted
Common
Shares
Earned(*)




  <13 % %

Threshold

    13 %   10 %

  14 % 35 %

    15 %   60 %

  16 % 85 %

Maximum

    >17 %   100 %

(*)
In the event that the compounded annual book value per share growth falls between the performance levels shown above, the restricted common shares earned will be determined on a straight line basis between the respective levels.

        As discussed above, in February 2021 the Compensation Committee approved an amendment to the performance- and time-based long term equity incentive awards granted to each of the named executive officers in 2019 and 2020 to provide that such awards will no longer be subject to the achievement of the compounded annual book value per share growth metrics and will be subject to only service-based vesting. As a result, the unvested shares subject to the amended 2019 and 2020 awards will vest on March 1, 2022 and March 1, 2023, respectively, subject to the continued service requirements and other terms and conditions set forth in the applicable award agreements, without taking into consideration any performance metrics. The Compensation Committee believes that the unprecedented circumstances of the COVID-19 pandemic warranted this amendment, and in making this decision considered, among other things, that the performance criteria were established before the onset of the COVID-19 pandemic and the need to address retention concerns resulting from the COVID-19 pandemic's impact on the Company's long-term incentive compensation program.

        All outstanding restricted common shares are eligible to participate in our quarterly dividends, with any dividends in respect of unvested shares retained by the Company until such time, if ever, as the underlying share is vested. Retained dividends made in cash will be deemed reinvested in notional common shares ("dividend equivalent rights") such that upon release and distribution of such retained dividend to the award holder, the executive will be entitled to receive on the date of such release an amount of cash or the number of whole shares or a combination thereof, as determined by our Compensation Committee, the aggregate fair value of which will be equal to the fair market value of the notional common share to which such released retained dividends relate.

Other Elements of Compensation

        As described below, we also provide certain retirement benefits and welfare benefits to our named executive officers.

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Retirement Benefits

        Our eligible employees, including each of our named executive officers, are eligible to participate in a tax-qualified 401(k) retirement plan. In addition to being able to make contributions (up to tax law limits), participants are eligible for a Company matching contribution of 100% on their contributions up to 5% of their eligible compensation effective January 1, 2020. The matching contribution is provided on the same basis to our named executive officers as all other employees who participate in the plan. The amounts contributed to the 401(k) plan on behalf of each of the named executive officers are listed in the Summary Compensation Table elsewhere in this proxy statement.

Perquisites

        We do not have a formal perquisite policy and do not emphasize special perquisites for our executive officers, although the Compensation Committee periodically reviews perquisites for our named executive officers. Rather, there are certain specific perquisites we have agreed to compensate particular executives based on their specific situations. In particular, each of our named executive officers is entitled to participate in the Company's financial counseling and diagnostic wellness programs as in effect from time to time.

Medical and Other Welfare Benefits

        Our named executive officers, along with all of our other employees, are eligible to participate in medical, dental, life, accidental death and disability, long-term disability, short-term disability, and other employee benefits. The purpose of these plans is to provide competitive benefits to our employees and to help to attract and retain employees by offering a comprehensive package of benefits.

Termination, Severance and Change in Control Benefits

        The employment agreements with each of our named executive officers provide severance payments and benefits upon certain qualifying terminations of employment. In addition, upon certain qualifying terminations following, or in some circumstances upon the occurrence of, a change in control, our named executive officers may be entitled to receive certain vesting of their outstanding restricted common share awards pursuant to the terms of their respective employment agreement or the terms of our equity incentive plans.

        Based on the input of its independent compensation consultant, the Compensation Committee determined that these arrangements are appropriate and that the payments and benefits provided for under these arrangements upon certain qualifying terminations of employment or in connection with a change in control are consistent with market practice and essential in attracting and retaining key talent. In addition, the change in control provisions are significant to ensure that we have the continued attention and dedication of our executives during circumstances that could result in a change in control. These provisions are further described beginning on page 59 ("—Potential Payments and Benefits upon Termination or Change in Control").

Impact of FASB ASC Topic 718

        The accounting standards applicable to the various forms of long-term incentive plans under FASB ASC Topic 718 is one factor that the compensation committee and the Company consider in the design of long-term equity incentive programs. Other factors include the link to the performance that each vehicle provides, the degree of upside leverage and downside risk inherent in each vehicle, the impact on dilution and overhang that the vehicles have, and the role that each vehicle has in the attraction, retention, and motivation of our executive and key employee talent.

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The Company and its external financial advisors consider FASB ASC Topic 718 expense to ensure that it is reasonable, but expense will not be the most important factor in making decisions about awards under long-term incentive plans.

Tax Considerations and Deductibility of Compensation

        The deductibility of compensation paid to any person who served as our Chief Executive Officer or Chief Financial Officer at any point during the fiscal year, any other person who is among the three highest compensated officers for the fiscal year and any other person who was a covered employee for any fiscal year beginning after December 31, 2016 is generally limited under Section 162(m) of the US Tax Code to the extent it exceeds $1 million in a given year. Our compensation philosophy strongly emphasizes performance-based compensation for our executive officers, which historically minimized the consequences of the Section 162(m) limit on deductibility. Regardless, the committee believed and continues to believe that the tax deduction limitation should not compromise its ability to design and maintain executive compensation arrangements necessary to attract and retain strong executive talent. Accordingly, achieving the desired flexibility in the design and delivery of compensation may result in compensation that in certain cases is not deductible for federal income tax purposes.

Share Ownership Guidelines

        Both our non-employee directors as well as our senior executives (which we define as our Chief Executive Officer and each of his direct reports and includes all of our named executive officers) are required to maintain certain ownership levels of common shares during their service (see "Corporate Governance—Share Ownership Guidelines" on page 27 for additional information).

No Hedging Policy

        Our named executive officers are prohibited from hedging their ownership or offsetting any decline in the market value of our common shares, including by trading in publicly-traded options, puts, calls or other derivative instruments related to our common shares.

Compensation Committee Report

        We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on our review and discussion with management, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

        Compensation Committee of the Board of Directors

    Roy J. Kasmar, Chairman
    Douglas J. Pauls
    William Spiegel

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Summary Compensation Table

        The following table sets forth information regarding the compensation awarded to, earned by, or paid to our named executive officers in fiscal years 2020, 2019 and 2018.

Name and Principal Position

Year


Salary
($)




Bonus
($)





Stock
Awards(1)
($)






Option
Awards
($)







Non-Equity
Incentive Plan
Compensation(2)
($)









Nonqualified
Deferred
Compensation
Earnings
($)








All Other
Compensation(3)
($)




Total
($)
 
Mark A. Casale   2020   925,000     4,162,558     1,480,000     210,743   6,778,301  
Chairman of the Board of   2019   925,000     4,570,553     2,412,500     148,372   8,056,425  
Directors, President and Chief   2018   900,000     3,600,069     2,160,000     41,946   6,702,015  
Executive Officer                                      
Lawrence E. McAlee     2020     400,000         600,002         400,000         58,900     1,458,902  
Senior Vice President and Chief     2019     400,000         642,851         600,000         68,391     1,711,242  
Financial Officer     2018     400,000         600,027         640,000         54,463     1,694,490  
Vijay Bhasin   2020   450,000     900,054     450,000     46,037   1,846,091  
Senior Vice President and Chief   2019   450,000     964,234     675,000     45,256   2,134,490  
Risk Officer   2018   450,000     900,040     720,000     11,000   2,081,040  
Jeff R. Cashmer     2020     450,000         900,054         450,000         55,187     1,855,241  
Senior Vice President and Chief     2018     450,000         964,234         562,500         32,537     2,009,271  
Business Officer     2017     450,000         900,040         720,000         18,670     2,088,710  
Christopher G. Curran   2020   400,000     800,003     400,000     49,628   1,649,631  
Senior Vice President, Corporate   2019   400,000     854,889     600,000     28,315   1,883,204  
Development   2018   400,000     600,027     700,000     30,029   1,730,056  

(1)
The amounts reported in this column represents the aggregate grant date fair value of the share awards computed in accordance with FASB ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions, if applicable. The value of restricted common shares that are subject to both time- and performance-based vesting conditions has been computed assuming the probable outcome of the performance conditions on the date of grant, which is also the highest level of performance for such awards. For additional information, including a discussion of the assumptions used to calculate these values, see "—Outstanding Equity Awards at Fiscal Year-End" below and Note 10 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.

(2)
The amounts reported in this column represent the annual bonuses earned by our named executive officers pursuant to our Annual Plan. For additional information regarding our Annual Plan, see "Compensation Discussion and Analysis—Elements of Compensation—Performance-Based Annual Incentive Compensation" above.

(3)
The amounts reported in this column for 2020 include: (a) financial planning services and reimbursed legal fees of $33,024, $23,459, $9,150 and $3,150 paid on behalf of each of Messrs. Casale, McAlee, Cashmer and Curran, respectively; (b) matching 401(k) contributions of $14,250 on behalf of each of Messrs. Casale, McAlee, Bhasin, Cashmer and Curran; and (c) $7,730 and $5,895 paid on behalf of Mr. Casale and Mr. Curran, respectively, under the Company's diagnostic wellness program. In addition, in connection with the payments of our quarterly dividends in the amount of $0.16 per share on March 20, 2020, June 12, 2020, September 10, 2020 and December 10, 2020, our named executive officers were credited with dividend equivalent rights in respect of their unvested restricted common share awards pursuant to the terms of the applicable award agreements. The values of such dividend equivalent rights granted for each of the named executive officers is as follows: Mr. Casale: $155,739; Mr. McAlee: $21,191; Mr. Bhasin $31,787; Mr. Cashmer: $31,787; and Mr. Curran: $26,333.

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Grants of Plan Based Awards Table

        The following table sets forth information regarding grants of plan-based awards to our named executive officers for the year ended December 31, 2020.

   


Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards(1)







Estimated Future
Payouts Under
Equity Incentive
Plan Awards(2)









All Other
Stock
Awards:
Number of
Shares of









Grant Date
Fair Value
of Stock
and Option
 
               

 

Grant
Date




Threshold
($)




Target
($)




Maximum
($)




Threshold
(#)




Maximum
(#)




Stock or
Units (#)



Awards
($)(3)
 

Mark A. Casale

    1,110,000   1,480,000   2,590,000          

  2/12/2020 (4)           20,199   1,040,652  

  2/12/2020         6,060   60,596     3,121,906  

Lawrence E. McAlee

        300,000     400,000     700,000                  

    2/12/2020 (4)                       5,823     300,001  

    2/12/2020                 582     5,823         300,001  

Vijay Bhasin

    337,500   450,000   787,500          

  2/12/2020 (4)           8,735   450,027  

  2/12/2020         874   8,735     450,027  

Jeff R. Cashmer

        337,500     450,000     787,500                  

    2/12/2020 (4)                       8,735     450,027  

    2/12/2020                 874     8,735         450,027  

Christopher G. Curran

    300,000   400,000   700,000          

  2/12/2020 (4)           7,764   400,001  

  2/12/2020         776   7,764     400,001  

(1)
Represents the threshold, target and maximum value of annual incentive awards that could have been earned by our named executive officers under our annual leadership bonus program pursuant to our Annual Plan for the year ended December 31, 2020. For a discussion of the terms of our annual leadership bonus program and Annual Plan and the amounts earned thereunder by the named executive officers for 2020, see "—Compensation Discussion and Analysis—Elements of Compensation—Performance-Based Annual Incentive Compensation" above.

(2)
The restricted common shares (plus any dividend equivalents received prior to vesting) are eligible to become earned as set forth in the table below based upon achievement of our compounded annual book value per share growth percentage during the three-year performance period commencing January 1, 2020. All restricted common shares that are earned will vest on March 1, 2023, subject to the executive's continuous employment through the applicable date.
 

Performance Level






Compounded
Annual Book
Value Per
Share Growth








Restricted
Common
Shares
Earned(*)




 

    

  <13 % %
 

Threshold

    13 %   10 %
 

  14 % 35 %
 

    15 %   60 %
 

  16 % 85 %
 

Maximum

    >17 %   100 %

    (*)
    In the event that the compounded annual book value per share growth falls between the performance levels shown above, the restricted common shares earned will be determined on a straight line basis between the respective levels.

In February 2021, the Compensation Committee approved an amendment to provide that these awards will no longer be subject to the achievement of the compounded annual book value per share growth metrics and will be subject to only service-based vesting. As a result, the unvested shares subject to these awards will vest on March 1, 2023, subject to the continued service requirements and other terms and conditions set forth in the applicable award agreements, without taking into consideration any performance metrics.

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(3)
The amounts reported in this column represent the aggregate grant date fair value of the share awards granted in 2020, computed in accordance with FASB ASC Topic 718. The value of restricted common shares that are subject to both time- and performance-based vesting conditions has been computed assuming the probable outcome of the performance conditions on the date of grant. For additional information, including a discussion of the assumptions used to calculate these values, see "—Outstanding Equity Awards at Fiscal Year-End" below and Note 10 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.

(4)
Represents time-based vesting restricted common shares granted to each of our named executive officers under our long-term equity incentive program. The time-based vesting restricted common shares (plus any dividend equivalents received prior to vesting) vest in three equal annual installments on each of March 1, 2021, 2022 and 2023, subject to the executive's continuous employment through each such date.

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Narrative Disclosure to Summary Table and Grants of Plan-Based Award Table

Executive Employment Agreements

        Certain of the compensation awarded to, earned by, or paid to our named executive officers reflected in the Summary Compensation Table and the Grants of Plan-Based Awards Table above is provided pursuant to employment arrangements entered into with us and/or our affiliates.

        The current employment agreement with each of Messrs. Casale, McAlee, Bhasin, Cashmer and Curran has an initial term which expired on November 5, 2016 and automatically extends for successive one-year periods, unless at least 120 days prior to the expiration of the then current term either party to the agreement provides the other party with written notice of its intention not to renew the agreement.

        Under the terms of each executive's respective employment agreement, Messrs. Casale, McAlee, Bhasin, Cashmer and Curran are each entitled to annual base salaries, currently $925,000, $500,000, $450,000, $450,000 and $500,000, respectively.

        Each of our named executive officers are also eligible to receive an annual bonus based upon the achievement of corporate and individual performance objectives. Mr. Casale is entitled to a target annual bonus, currently equal to 160% of his annual base salary, while each of Messrs. McAlee, Bhasin, Cashmer and Curran are entitled to a target annual bonus, currently equal to 100% of his respective annual base salary. For a discussion of our annual bonus plan, see "—Compensation Discussion and Analysis—Elements of Compensation—Performance-Based Annual Incentive Compensation" above. Pursuant to the employment agreements with our named executive officers, no less than 50% of any bonus will be paid in cash. For 2020, all of such annual bonuses payable to our named executive officers were paid solely in cash.

        Each of our named executive officers is also eligible to participate in our long-term incentive program. Pursuant to their employment agreements, each of our named executive officers is entitled to a target opportunity under our long-term incentive program. See "—Compensation Discussion and Analysis—Elements of Compensation—Long-Term Equity Incentive Compensation" above for additional information.

        Our named executive officers are also entitled to participate in health, insurance, retirement and other benefits on no less favorable terms to similarly situated employees.

        For a discussion of the severance pay and other benefits to be provided in connection with a termination of employment and/or a change in control under these employment arrangements, see "—Potential Payments upon Termination or Change in Control" below.

Indemnification

        Our Bye-laws provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Bermuda law.

        We have entered into agreements to indemnify each of our directors and officers. These agreements provide for indemnification of our directors and officers to the fullest extent permitted by applicable Bermuda law against all expenses, including attorneys' fees, judgments, fines and settlement amounts incurred by any such person in actions or proceedings, including actions by us or in our right, arising out of such person's services as our director or officer, any of our subsidiaries or any other company or enterprise to which the person provided services at our request.

        We believe that these bye-law provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.

        We also maintain standard policies of insurance that provide coverage (i) to our directors and officers against losses arising from claims made by reason of breach of duty or other wrongful act, and (ii) to us with respect to indemnification payments that we may make to such directors and officers.

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Outstanding Equity Awards at Fiscal Year-End

        The following table sets forth the outstanding equity awards of our common shares held by each of our named executive officers as of December 31, 2020.

 
Stock Awards  
         

Name




Grant
Date








Number of
Shares or
Units that
have not
Vested
(#)(1)













Market
Value of
Shares or
Units that
have not
Vested
($)(2)



















Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights that
have not
Vested
(#)(1)

























Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares, Units
or Other
Rights that
have not
Vested
($)(2)
 

Mark A. Casale

  2/12/2020 (3) 20,567   888,493      

  2/12/2020 (3)     61,700   2,665,435  

  3/20/2019 (4)     78,025   3,370,673  

  2/6/2019 (5) 17,340   749,078      

  2/7/2018 (6) 6,827   294,941      

  2/7/2018 (6) 61,426 (7) 2,653,585      

Lawrence E. McAlee

    2/12/2020 (3)   5,929     256,136          

    2/12/2020 (3)           5,929     256,136  

    3/20/2019 (4)           7,498     323,922  

    2/6/2019 (5)   4,999     215,963          

    2/7/2018 (6)   2,276     98,314          

    2/7/2018 (6)   6,825 (7)   294,853          

Vijay Bhasin

  2/12/2020 (3) 8,894   384,226      

  2/12/2020 (3)     8,894   384,226  

  3/20/2019 (4)     11,247   485,861  

  2/6/2019 (5) 7,498   323,922      

  2/7/2018 (6) 3,415   147,515      

  2/7/2018 (6) 10,238 (7) 442,279      

Jeff R. Cashmer

    2/12/2020 (3)   8,894     384,226          

    2/12/2020 (3)           8,894     384,226  

    3/20/2019 (4)           11,247     485,861  

    2/6/2019 (5)   7,498     323,922          

    2/7/2018 (6)   3,415     147,515          

    2/7/2018 (6)   10,238 (7)   442,279          

Christopher G. Curran

  2/12/2020 (3) 7,905   341,515      

  2/12/2020 (3)     7,905   341,515  

  3/20/2019 (4)     9,997   431,881  

  2/6/2019 (5) 6,666   287,950      

  2/7/2018 (6) 2,276   98,314