Mac Armstrong
Palomar HoldingsAbout Mac Armstrong
Mac Armstrong is Palomar’s founder, Chief Executive Officer (since February 2014), and Chairman (since June 2020); age 50; A.B. from Princeton University. He previously served as President, CFO, and COO of Arrowhead General Insurance Agency, led the sale to Brown & Brown in 2012, and held roles at Spectrum Equity Investors and Alex. Brown & Sons/BT Alex. Brown Inc. . Board committee memberships: Sustainability, Enterprise Risk Management, and Investment; he is not independent, with a Lead Independent Director structure and six of seven directors independent mitigating dual-role concerns . Pay vs performance shows PLMR TSR rising from $100 to $209.13 over 2020–2024, net income increasing to $117.6M, and Adjusted ROE at 22.2% in 2024, underscoring alignment with shareholder value creation .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Arrowhead General Insurance Agency | President; previously CFO and COO | 2009–2012 | Led the sale of Arrowhead to Brown & Brown in Jan 2012 . |
| Spectrum Equity Investors | Led insurance investing practice | N/A | Private equity insurance investing leadership . |
| Alex. Brown & Sons/BT Alex. Brown Inc. | Investment banker | N/A | Capital markets and advisory experience . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Cloverlay Investment Management LLC | Board of Advisors member | N/A | Private equity advisory perspective . |
| The Bishop’s School | President, Board of Trustees | N/A | Governance leadership in education . |
Fixed Compensation
| Year | Base Salary ($) | Target Bonus % | Target Bonus ($) | Notes |
|---|---|---|---|---|
| 2024 | 1,000,000 | 150% | 1,500,000 | Salary increased from $850,000 in 2023 (+17.6%) to align with market . |
| 2024 (actual paid) | 997,115 | — | — | Summary Compensation Table salary . |
| 2025 | 1,250,000 | 175% | Up to 200% of target (max), or 350% of salary | New employment agreement effective 1/1/2025 . |
Performance Compensation
2024 Annual Incentive Plan (AIP) Metrics and Outcomes
| Metric | Weighting | Threshold ($mm) | Target ($mm) | Maximum ($mm) | Actual Result ($mm) | Payout as % of Target |
|---|---|---|---|---|---|---|
| Pre-Tax Adjusted Net Income (ANI) | 40% | 120.6 | 141.9 | 163.2 | 168.8 | 200.0% |
| Pre-Tax ANI Before Catastrophe Losses | 40% | 127.0 | 149.4 | 171.8 | 196.7 | 200.0% |
| Individual MBOs | 20% | Individual Goals | Individual Goals | Individual Goals | Achieved at target | 100% |
- Actual bonus paid to Armstrong in 2024: $2,692,212 cash (Non-Equity Incentive Plan Compensation) .
Long-Term Incentives (Structure and 2024 Grants)
- Mix: 50% PSUs, 50% RSUs; three-year vesting; PSUs based on 70% Adjusted ROE (3-year measurement) and 30% Gross Written Premiums (1-year measurement) .
- 2024 grants to Armstrong (grant date 1/29/2024): 14,360 RSUs ($884,863 grant date fair value) and PSUs with target 14,360 (max 28,720; $884,863 grant date fair value) .
| Grant Type | Grant Date | Shares (Target) | Shares (Max) | Grant Date Fair Value ($) | Vesting |
|---|---|---|---|---|---|
| RSU | 1/29/2024 | 14,360 | N/A | 884,863 | 1/3 on each of 1st, 2nd, 3rd anniversary . |
| PSU | 1/29/2024 | 14,360 | 28,720 | 884,863 | 3-year service; performance on GWP (FY) and Adjusted ROE (3-yr) . |
Equity Ownership & Alignment
Beneficial Ownership (as of April 1, 2025)
| Holder | Shares Held Directly | Indirect (Armstrong Family Trust) | Options Exercisable ≤60 days | RSUs Vesting ≤60 days | Total Beneficially Owned | Ownership % |
|---|---|---|---|---|---|---|
| Mac Armstrong | 67,138 | 402,388 | 241,489 | 6,250 | 717,265 | 2.7% (based on 26,734,469 outstanding) |
- Anti-hedging and anti-pledging: Executives and directors are strictly prohibited from hedging or pledging Palomar stock, short sales, derivatives, or margin accounts; robust blackout policy in place .
- Stock ownership guidelines: CEO 6x base salary; other executives 3x; directors 5x cash retainer; 5-year compliance period; performance awards excluded until earned; in-the-money options excluded from count (effective 2024) .
Outstanding Equity Awards (as of Dec 31, 2024)
| Award Type | Grant Date | Exercisable Options (#) | Unexercisable Options (#) | Exercise Price ($) | Expiration | Unvested RSUs/PSUs (#) | Market Value ($) |
|---|---|---|---|---|---|---|---|
| Stock Option | 4/16/2019 | 206,310 | — | 15.00 | 4/16/2029 | — | — |
| Stock Option | 9/8/2020 | 3,638 | — | 98.95 | 9/8/2030 | — | — |
| Stock Option | 1/27/2021 | 10,077 | — | 97.87 | 1/27/2031 | — | — |
| Stock Option | 2/1/2021 | 8,000 | — | 106.60 | 2/1/2031 | — | — |
| PSUs/RSUs | 7/15/2021 (supplemental) | — | — | — | — | 268,750 | 14,407,531 |
| Stock Option | 1/26/2022 | 13,043 | 421 | 49.53 | 1/26/2032 | 16,192 | 1,691,254 |
| PSUs/RSUs | 1/31/2023 | — | — | — | — | 31,457 | 3,285,684 |
| PSUs/RSUs | 1/29/2024 | — | — | — | — | 39,772 | 4,154,185 |
- Vesting design: Options generally vest 25% after 1 year, then monthly over 24 months; RSUs vest ratably over 3 years; PSUs require ~3 years of service and performance achievement; annual stock option grants ceased in 2023 in favor of 50/50 PSU/RSU mix .
Employment Terms
- New employment agreement (effective Jan 1, 2025) extends term through Jan 1, 2029 with potential one-year renewals thereafter .
- Compensation terms: Base salary $1,250,000; target bonus 175% of base (max payout 200% of target = 350% of salary); annual LTI target value 300% of base salary .
- Severance (termination without cause or for good reason): 200% of base salary plus 200% of target bonus; up to 24 months COBRA reimbursements; acceleration of unvested equity awards (other than PSUs) that would have vested in 12 months; PSUs vest to the portion that would have been earned and vested in the next 12 months; subject to release and adherence to non-solicitation .
- Change-in-control (CIC) double-trigger: If terminated without cause or for good reason within 3 months prior to or 18 months following a CIC, 100% acceleration of outstanding equity awards (other than PSUs), with all or a portion of PSUs vesting per award terms .
- Potential payments (illustrative at Dec 31, 2024): Outside CIC total $9,738,212; CIC total $15,978,886; death/disability $5,030,817 .
| Scenario (Dec 31, 2024) | Cash Severance ($) | Non-Equity Incentive Pay ($) | Stock Options ($) | PSUs ($) | RSUs ($) | Medical Benefits ($) | Total ($) |
|---|---|---|---|---|---|---|---|
| Termination without Cause or Good Reason | 2,000,000 | 3,000,000 | 23,121 | 563,717 | 4,120,657 | 30,817 | 9,738,212 |
| Qualifying Termination in Connection with a CIC | 2,000,000 | 3,000,000 | 23,121 | 3,400,370 | 7,524,578 | 30,817 | 15,978,886 |
| Death or Disability | 2,000,000 | 3,000,000 | — | — | — | 30,817 | 5,030,817 |
- Clawback policy: Expanded in 2023 to comply with SEC rules; no “at fault” requirement; applies to current/former executives; triggers include both material and non-material restatements and other events; recovery of cash and performance equity .
- No tax gross-ups on CIC payments; no single-trigger CIC benefits; no repricing of underwater options without shareholder approval .
Board Governance
- Board service history: Director since 2014; Chairman since 2020; Class III director nominated for term expiring in 2028 .
- Committees: Sustainability, Enterprise Risk Management, Investment .
- Independence: Not independent; board has Lead Independent Director and holds quarterly executive sessions without management; 6 of 7 directors are independent .
- Declassification: Board moving to annual elections beginning 2027 with phased approach through 2029 .
Compensation Program Design, Peer Benchmarking, and Say‑on‑Pay
- Pay-for-performance program; majority of CEO pay is at risk; 3+ year vesting; performance equity; independent Compensation Committee and consultant (Pay Governance) .
- 2024 peer group (16 companies) included Kinsale Capital Group, RLI Corp., Skyward Specialty Insurance, Safety Insurance Group, Lemonade, Universal Insurance Holdings, and others .
- 2025 peer group revamped (17 companies) adding Assured Guaranty, First American Financial, Selective Insurance Group, White Mountains Insurance Group, Skyward Specialty, Trupanion, and others to reflect PLMR size/performance .
- 2024 say‑on‑pay approval over 94%; shareholders supported maintaining the program in 2025 .
Related Party Transactions and Other Governance
- Related party: Jake Armstrong (brother) served as EVP, Operations in 2024; total compensation elements disclosed; Board has a related person transaction policy overseen by Audit Committee .
- Audit oversight: Audit Committee confirmed auditor independence and recommended EY inclusion in 10‑K; directors receive no additional compensation if employees (Armstrong’s director compensation covered as NEO) .
Multi‑Year CEO Compensation Summary
| Year | Salary ($) | Stock Awards ($) | Option Awards ($) | Non‑Equity Incentive Compensation ($) | All Other Compensation ($) | Total ($) |
|---|---|---|---|---|---|---|
| 2024 | 997,115 | 1,769,726 | — | 2,692,212 | 10,350 | 5,469,403 |
| 2023 | 850,000 | 1,308,212 | — | 1,373,258 | 9,900 | 3,541,369 |
| 2022 | 850,000 | 1,069,353 | 268,418 | 803,406 | 9,150 | 3,000,327 |
Pay vs Performance (2020–2024)
| Year | CEO SCT Total ($) | CEO Compensation Actually Paid ($) | Avg SCT Total (Non‑CEO NEOs) ($) | Avg Compensation Actually Paid ($) | PLMR TSR ($ of $100) | NASDAQ Insurance Index TSR ($ of $100) | Net Income ($000s) | Adjusted ROE (%) |
|---|---|---|---|---|---|---|---|---|
| 2024 | 5,469,403 | 19,217,308 | 1,656,528 | 3,529,139 | 209.13 | 156.55 | 117,573 | 22.2% |
| 2023 | 3,541,369 | 4,787,065 | 1,041,504 | 1,366,774 | 109.92 | 126.13 | 79,201 | 21.9% |
| 2022 | 3,000,327 | (1,497,733) | 774,572 | 519,793 | 89.44 | 104.75 | 52,170 | 18.3% |
| 2021 | 19,246,249 | 16,982,053 | 3,486,487 | 2,279,277 | 128.28 | 114.26 | 45,847 | 13.8% |
| 2020 | 1,063,612 | 5,720,732 | 686,310 | 1,683,012 | 175.96 | 100.95 | 6,257 | 2.6% |
Compensation Structure Analysis
- Increased at‑risk pay mix and cessation of annual stock option grants in 2023, shifting to PSUs/RSUs, elevates performance linkage and reduces option‑related overhang risk .
- Enhanced stock ownership multiples (CEO 6x; executives 3x; directors 5x) and strict anti‑hedging/anti‑pledging improve alignment and reduce leverage‑linked selling pressure .
- No single‑trigger CIC, no tax gross‑ups, and robust clawback provisions reduce shareholder‑unfriendly outcomes and enhance accountability .
Risk Indicators & Red Flags
- Pledging/hedging prohibited; option repricing prohibited without shareholder approval; strong say‑on‑pay support (>94% in 2024) .
- Related party employment (brother as EVP) disclosed and subject to policy oversight; monitor for potential perceived conflicts .
- Dual-role CEO/Chair with not-independent status; mitigants include Lead Independent Director, majority independent board, and executive sessions without management .
Compensation Committee and Benchmarking
- Committee members: Richard H. Taketa (Chair), Thomas Bradley, Daina Middleton, Martha Notaras; fully independent; consultant Pay Governance provides benchmarking and program advice .
- Peer group revised in 2025 to reflect PLMR’s growth and performance, broadening to 17 insurers across specialty, P&C, and related services .
Investment Implications
- Strong pay‑for‑performance alignment: AIP metrics tied to pre‑tax ANI and catastrophe‑adjusted ANI paid at maximum in 2024, reflecting robust underwriting and investment performance; PSUs tied to Adjusted ROE/GWP further incentivize capital‑efficient growth .
- Retention risk appears contained: Multi‑year vesting, double‑trigger CIC acceleration, and elevated ownership requirements encourage tenure; significant unvested PSU/RSU value creates retention equity “handcuffs” .
- Selling pressure risk is structurally limited by anti‑pledging/hedging and blackout policies; however, monitor Form 4 activity for opportunistic sales around vest dates given sizable scheduled RSU/PSU vesting stacks .
- Governance watch: CEO/Chair dual role persists; mitigated by independent oversight and declassification by 2027–2029; related party employment is disclosed but modest in size—continue to track Audit Committee enforcement of policy .
- 2025 comp increases (salary + AIP targets) raise fixed cash cost but maintain majority at‑risk mix; ongoing shareholder support (>94% say‑on‑pay) reduces risk of pay backlash .