Stephen Varga

About Stephen Varga

Stephen A. Varga is Vice President, Management Information Systems (MIS) at Safety Insurance Group (SAFT), appointed August 6, 2014, after holding various IT roles since joining the company in 1992; he is 57 and has 32 years of service at Safety as of the 2025 proxy . Safety’s long-term shareholder performance provides context for incentive alignment: cumulative TSR from IPO (Nov 22, 2002) to Dec 31, 2024 was 1,428%; 2024 combined ratio was 101.1%, with non-GAAP operating EPS of $4.16 and EBIT-style metric (“earnings before interest, taxes, changes in unrealized gains on equity securities and credit loss expense”) of $86.4M, funding 2024 annual bonuses at 139% of target .

Past Roles

External Roles

• No external directorships or outside roles disclosed for Mr. Varga in the proxy .

Fixed Compensation

Performance Compensation

Annual Incentive (Non-Equity)

Plan ranges: Threshold 50% of target; Maximum 150% of target; other executive officers’ payout opportunity: 30% / 60% / 90% of salary (threshold/target/max) .

Long-Term Incentive (Equity)

2024 LTI grants to Mr. Varga:

• Time-based shares: 2,234; Performance-based shares: 2,594; Total shares: 4,828; Grant date fair value: $425,000 .

2022–2024 performance award outcome (cycle granted 2/23/2022, paid in 2025):

Mr. Varga 2022 cycle shares (target vs earned):

Restricted stock vested in FY 2024:

Equity Ownership & Alignment

Outstanding unvested equity at 12/31/2024 (Mr. Varga):

Insider transactions (Form 4):

Notes: Safety prohibits hedging/pledging; insider sales typically occur via pre-approved plans coincident with vesting/withholding .

Employment Terms

Change-in-Control (double-trigger) and severance:

• Company uses double-trigger vesting acceleration (change-in-control plus termination) for equity awards; no tax gross-ups on excise taxes; equity plan prohibits option repricing and share recycling .
• Executive employment agreements renewed for 2025; non-compete/non-solicit provisions; defined Cause, Good Reason, Material Breach; change-in-control defined; severance multiples: CEO/CFO 3×; other NEOs 2× base + most recent annual bonus; life/health benefits continuation (2 years for other NEOs) .

Estimated incremental payments for Mr. Varga (assuming event on 12/31/2024):

Clawback: Dodd-Frank Section 10D-compliant policy adopted Aug 2023; applies to current/former Section 16 officers; mandates recovery of erroneously awarded incentive-based compensation upon “Big R” or “little r” restatements; no enforcement discretion .

Say-on-Pay & Compensation Peer Group

• Say-on-Pay: 97.7% support in 2024, indicating strong shareholder endorsement of pay design .
• Base salaries targeted at ~50th percentile of peer group; CEO’s pay mix 72% “at-risk” per benchmarking; executives received 3.75% cost-of-living increases in 2024 (except CEO) .
• 2024 compensation peer group (15 companies): American Coastal, Argo Group, Donegal, Employers, HCI Group, Heritage Insurance, Horace Mann, Mercury General, NI Holdings, Palomar, RLI, Selective Insurance, Skyward Specialty (new in 2024), United Fire Group, Universal Insurance Holdings; certain prior peers removed due to size/market cap changes .

Compensation Structure Analysis

• Year-over-year mix (Mr. Varga): Time-based stock awards $168,750 (2022) → $180,000 (2023) → $191,250 (2024); Performance-based stock awards $206,250 (2022) → $220,000 (2023) → $233,750 (2024); Annual cash incentive $142,080 (2022) → $0 (2023) → $288,650 (2024); “All other” comp $228,538 (2022) → $89,480 (2023) → $179,613 (2024) .
• Shift toward performance shares remains material: 55% of 2024 LTI delivered in performance shares with 60% combined ratio / 40% TSR weighting and strict caps; no option repricing; no excise tax gross-ups; robust clawback and ownership guidelines .
• Annual incentive plan revised May 8, 2024: removal of per-participant max cap, removal of outdated 162(m) references, flexibility to add objectives; 2024 CEO payout opportunity adjusted to benchmarks; other executives’ thresholds/targets maintained (30/60/90%) .

Equity Ownership & Alignment Details

Employment Terms

• Annual contracts renewed through Dec 31, 2025 for Mr. Varga; eligible for cost-of-living salary adjustments and annual bonus at Board/Committee discretion .
• Non-compete/non-solicit and confidentiality obligations included; definitions of Cause, Good Reason, Material Breach detailed in proxy .

Risk Indicators & Red Flags

• Hedging/pledging prohibited; trading pre-clearance required for covered persons; prohibited short sales/options/margin; whistleblower protections specified .
• No related party transactions reported for 2024; audit committee independence affirmed; robust governance processes and committee structures .
• Equity plan prohibits option repricing without stockholder approval; double-trigger change-in-control vesting reduces single-trigger windfalls .

Investment Implications

• Alignment: Significant unvested equity (time- and performance-based) plus strict ownership guidelines and clawback policy align Mr. Varga’s incentives with underwriting profitability (combined ratio) and TSR; no hedging/pledging permitted .
• Retention risk: Material deferred comp (EICP $1.75M balance) and ongoing vesting schedules create retention anchor; severance economics under change-in-control provide downside protection but require termination, preserving shareholder optionality .
• Trading signals: Periodic sales coincide with vesting/withholding and automatic sales, consistent with 10b5-1 practice rather than discretionary selling; no options, limiting leverage-induced selling pressure .
• Performance sensitivity: Annual bonus fully tied to EBIT-style profitability; long-term awards linked to combined ratio and TSR with TSR cap—compensation is sensitive to underwriting discipline and capital allocation that drives TSR .