Hanover — The Upper Valley is not a place where business executives, even highly successful ones, earn Wall Street-level paydays.

White Mountains Insurance in Hanover is an exception. 

The insurance holding company founded by the legendary late insurance executive Jack Byrne paid its departing chief executive Ray Barrette a cash retirement separation agreement of $21.3 million last year, according to the company’s recent proxy statement sent to shareholders.

The payment, which was made in lieu of Barrette’s uninvested performance shares and restricted shares in the company, was in addition to a base salary of $91,200 and a bonus of $187,500 for the final two months of the year he was employed at the company, the proxy disclosed.

But White Mountains also noted that a sizable number of shareholders disapproved of the company’s proposed compensation plan for executives and as a result it would weigh those concerns in the future. 

The proxy reported that 32 percent of White Mountains’ shareholders last year voted against the company’s “say on pay” proposal to approve compensation for top executives. So-called “say on pay” provisions giving shareholders a voice on approving pay level for executive were required under the Dodd-Frank Act signed into law in the aftermath of the financial crisis that began in 2007.

At White Mountains’ 2017 annual meeting, “although a meaningful majority of shareholders voted in favor of the ‘say on pay’ proposal, (nonetheless) a reasonable minority of owners voted against the proposal,” the proxy said. A committee on the board “took account of shareholders feedback and these vote levels and, in the future, will strongly consider them when determining the appropriateness and amounts of any future separation payments to executives.”

Barrette, who with his wife, Cynthia, were major donors for the Barrette Center for the Arts at Northern Stage in White River Junction, retired from White Mountains in March, 2017, after 10 years as chief executive. He was succeeded by G. Manning Rountree, who had been president of White Mountains Capital and WM Advisors before the board tapped him for the top job at the company.

White Mountains officials did not respond to requests for comment.

White Mountains primarily invests for the long term in property and casualty and reinsurance companies but in recent years has sold off a number of its holdings, realizing $1.4 billion in “transaction gains” that has poured cash into the company. The company recently said it ended 2017 with $2.1 billion in capital that it is looking to “deploy” into other investments.

The company is not for mom and pop stock investors: a single share of White Mountains recently has traded for around $857 per share, up from $581 per share five years ago. White Mountains has been continually buying back its own stock since 2010, shrinking the number of shares available for purchase and paying handsome rewards to shareholders. Earlier this month it commenced the repurchase of another 500,000 shares at a range between $825 and $875 per share. 

Domiciled in Bermuda in order to make it easier to operate in overseas insurance markets, White Mountains’ executive offices are in Hanover, although most of the company’s 276 employees work in other locations. When Byrne started the company, its offices were in Norwich on the second floor in a former residence across the street from Dan & Whit’s.

Last year, White Mountains sold specialty insurer OneBeacon Insurance Group to Intact Financial for $1.7 billion in cash, providing net cash proceeds to White Mountains of $1.3 billion, the company said. 

But the sale of OneBeacon, along with several other insurance industry related companies in recent years, has left White Mountains a smaller enterprise, which means “low single digit” growth “at least in the short term” in the company’s adjusted book value per-share, a financial yardstick by which insurance firms are measured.

As a result, White Mountains said in its proxy, a committee of the board “took account of the stage of transition of the company” and adjusted downward the longterm incentive plan and upwards performance targets for executives during the company’s current “performance share cycle.”

Other ex-White Mountains executives who received substantial payouts upon leaving the company last year were David Foy, former executive and chief financial officer, who received a total of $8.9 million in compensation; T. Michael Miller, former chief executive of OneBeacon Insurance Group — one of the insurance businesses White Mountains sold in 2017 — who received a total of $6.3 million; and David Linker, former president of WM Advisers, who received a total of $4.2 million.

Although all the former executives except Barrette earned hefty $500,000 annual salaries and more than an equal amount in bonuses, the vast majority of their compensation payouts were due to stock rewards which are tied to long term financial performance of the company.

“Our executive compensation policies are designed with the primary goal of maximizing shareholder value over long periods of time,” White Mountains explained in the proxy. 

A committee of the board, which sets compensation policy, “has established base salaries and target annual bonuses for our executives that tend to be lower than those paid by comparable property and casualty insurers and reinsurers, while granting the bulk of an executive’s target compensation as long-term incentive compensation,” according to the proxy.

Rountree, the new chief executive who succeeded Barrette in March of last year, earned total compensation of $6.6 million in 2017, of which all but $5.5 million was in stock awards. Reid Campbell, who was named executive vice president and CFO to succeed Foy, received a total of $6.4 million in compensation, of which $5 million was in stock rewards.

In addition, Robert Seelig, executive vice president and chief counsel, received total compensation of $4.8 million, of which $3.8 million was in stock rewards and J. Brian Palmer, managing director and chief accounting officer, received $2 million, about half in stock rewards.

For the year ended Dec. 31, White Mountains reported total revenue of $373.8 million, up from $157.7 million from the year before. The company reported net income from continuing operations of $15.6 million, compared to a loss from continuing operations in 2016 of $114.4 million.

John Lippman can be reached at jlippman@vnews.com.

]]>