Document

.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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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under §240.14a-12
 
MGIC Investment Corporation
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
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[ ]
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
 
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MGIC Investment
Corporation
 

        March 20, 2020



Dear Shareholder:

It is my pleasure to invite you to attend our Annual Meeting of Shareholders to be held at 9:00 a.m. on Thursday, April 23, 2020, at our headquarters in Milwaukee, Wisconsin.

At our meeting, we will ask shareholders to vote on the following matters:

Notice of 2020
Annual Meeting
and
Proxy Statement
 
•    election of thirteen directors,
•    an advisory vote to approve our executive compensation,
• approval of the MGIC Investment Corporation 2020 Omnibus Incentive Plan,
•    ratification of PricewaterhouseCoopers LLP's appointment as our independent registered public accounting firm for 2020, and
•    any other matters that properly come before the meeting.

We may also report on our business, which in 2019, produced exceptional financial results. Our results are described in this Proxy Statement and in our Annual Report to Shareholders.
2019 Annual Report
to Shareholders
 
Your vote is important. Even if you plan to attend the meeting, we encourage you to vote as soon as possible. You may vote by telephone, online or by mail. Please read our Proxy Statement for more information about our meeting and the voting process.
 
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Timothy J. Mattke
Chief Executive Officer



IMPORTANT VOTING INFORMATION

If you hold your shares in “street name,” meaning your shares are held in a stock brokerage account or by a bank or other nominee, you will have received a voting instruction form from that nominee containing instructions that you must follow in order for your shares to be voted. If you do not transmit your voting instructions before the Annual Meeting, your nominee can vote on your behalf only on the matter considered to be routine, which is the ratification of the appointment of our independent registered public accounting firm.

The election of directors, advisory vote to approve our executive compensation, and vote to approve our 2020 Omnibus Incentive Plan are NOT considered routine. Your nominee is not permitted to vote on your behalf on such matters unless you provide specific instructions by following the instructions from your nominee about voting your shares. For your vote to be counted on such matters, you will need to communicate your voting decisions to your broker, bank or other nominee before the date of the Annual Meeting.


Your Participation in Voting the Shares You Own is Important

Voting your shares is important to ensure that you have a say in the governance of MGIC Investment Corporation. Please review the proxy materials and follow the relevant instructions to vote your shares. We hope you will exercise your rights and fully participate as a shareholder in MGIC Investment Corporation.


More Information is Available

If you have any questions about the proxy voting process, please contact the broker, bank or other nominee through which you hold your shares. The Securities and Exchange Commission (“SEC”) also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about voting at annual meetings. Additionally, you may contact our Investor Relations personnel at (414) 347-6480.


 
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 2020
 
 
Our Proxy Statement and 2019 Annual Report to Shareholders are available at https://materials.proxyvote.com/552848. Your vote is very important. Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible. You may vote your shares via telephone, online, or by completing, signing, dating and returning your proxy card or voting instruction form in the pre-addressed envelope provided. No postage is required if your proxy card or voting instruction form is mailed in the United States. If you attend the meeting and are a holder of record entitled to vote, you may vote in person, even if you have previously voted by telephone, online or by mailing your proxy card. If you hold your shares through an account with a brokerage firm, bank or other nominee, please follow the instructions you receive from them to vote your shares.
 





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MGIC INVESTMENT CORPORATION



NOTICE OF ANNUAL MEETING OF SHAREHOLDERS


To Our Shareholders:

The Annual Meeting of Shareholders of MGIC Investment Corporation will be held at 270 East Kilbourn Avenue in Milwaukee, Wisconsin, on April 23, 2020, at 9:00 a.m., to vote on the following matters:

(1)
Election of the thirteen directors named in the Proxy Statement, each for a term ending at the Annual Meeting in 2021;

(2)    An advisory vote to approve our executive compensation;

(3)    Approval of our 2020 Omnibus Incentive Plan;

(4)
Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2020; and

(5)    Any other matters that properly come before the meeting.

Only shareholders of record at the close of business on March 6, 2020, will be entitled to vote at the Annual Meeting and any postponement or adjournment of the meeting.

 
By Order of the Board of Directors
 
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Paula C. Maggio, Secretary
 
March 20, 2020







 YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY VOTE VIA TELEPHONE, ONLINE
OR BY COMPLETING, SIGNING, DATING AND RETURNING
YOUR PROXY CARD OR VOTING INSTRUCTION FORM



TABLE OF CONTENTS
 
 
 
 
 
 
 
 
Leadership Transition
 
 
 
 
 
2019 Grants of Plan-Based Awards
 
Outstanding Equity Awards at 2019 Fiscal Year-End
 
2019 Stock Vested
 
Pension Benefits at 2019 Fiscal Year-End
 
 
 
2019 CEO Pay Ratio
 
 
Delinquent Section 16(a) Reports
Item 3 - Approval of the MGIC Investment Corporation 2020 Omnibus Incentive Plan
 
Proposed Terms of the 2020 Omnibus Incentive Plan
 
Shareholder Vote Required
Item 4 – Ratification of Appointment of Independent Registered Public Accounting Firm
Appendix A – Glossary of Terms and Acronyms
Appendix B – Explanation and Reconciliation of Non-GAAP Measures
Appendix C  – MGIC Investment Corporation 2020 Omnibus Incentive Plan 
Appendix C - 1



PROXY SUMMARY

This summary highlights information contained elsewhere in our Proxy Statement and does not contain all of the information you should consider. Please review the Company’s complete Proxy Statement before voting. Please refer to our Glossary of Terms and Acronyms in Appendix A to this Proxy Statement for definitions of certain capitalized terms.


VOTING MATTERS AND BOARD RECOMMENDATIONS
Proposal
Voting Matter
More Information
Board Vote Recommendation
1
Election of Thirteen Director Nominees
Page 26
FOR each Director Nominee
2
Advisory Vote on Executive Compensation
Page 29
FOR
3
Approval of 2020 Omnibus Incentive Plan
Page 68
FOR
4
Ratification of Independent Registered Public Accounting Firm
Page 78
FOR

OUR 2019 BUSINESS STRATEGIES AND HIGHLIGHTS

Through our subsidiary, Mortgage Guaranty Insurance Corporation ("MGIC"), we are a leading provider of mortgage insurance to lenders throughout the United States and to Fannie Mae and Freddie Mac (the “GSEs”). Our 2019 business strategies were to 1) prudently grow insurance in force, 2) pursue new business opportunities that meet our return objectives, 3) preserve and expand our role and that of the private mortgage insurance industry in housing finance policy, 4) manage and deploy capital to optimize the creation of shareholder value and 5) expand and develop the talents of our co-workers. As we discuss in the Compensation Discussion & Analysis section of this Proxy Statement, the compensation of our NEOs is directly tied to our financial performance and performance against these business strategies.

In 2019, we continued to deliver outstanding results for our shareholders, with revenues of $1.2 billion, net income of $673.8 million and strong performance against the following metrics. These metrics, among others, were considered when determining the 2019 bonuses of our NEOs.

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(1)
This is a non-GAAP measure of performance. For a description of how we calculate this measure and for a reconciliation of this measure to its nearest comparable GAAP measure, see Appendix B to this Proxy Statement.
(2)
Direct new insurance written (before the effects of reinsurance).
(3)
Direct primary insurance in force (before the effects of reinsurance), which is an important driver of our future premiums.


MGIC Investment Corporation – 2020 Proxy Statement │ 1


PROXY SUMMARY

In addition to strong performance against financial metrics, we also performed well relative to our business strategies, including those listed below.

Business Strategy
 
Results
Capital Position - Manage and deploy capital to optimize creation of shareholder value.
»
Executed a $316 million insurance linked note transaction, our second such post-financial crisis transaction, which provides an alternative source of capital, and enables the Company to enhance its returns and better manage its risk profile.
Increased dividends from MGIC to our holding company from $220 million in 2018 to $280 million in 2019.
Re-started the payment of quarterly dividends by our holding company, after having suspended such payments during the financial crisis.
Repurchased 8.7 million shares of our common stock, returning $114 million to shareholders.
MGIC received an upgrade in its financial strength rating from Moody's Investors Service (from Baa2 to Baa1).
Developing Co-Workers - Develop and diversify the talents of co-workers.
»
Executed on the Company's succession plan for key roles in the organization, including Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer and Chief Risk Officer, promoting all such officers from within the organization.
Delivered training workshops designed to build strategic capabilities which enhance performance.
Continued to enhance career developments, talent analytics and financial health capabilities for employees.
Role in Housing Finance Industry - Preserve and expand the role of the Company and private mortgage insurance in housing finance policy.
»
Held leadership roles in key trade association working groups.                              
Continued to enhance the reputation of the Company and the industry relative to changing housing finance policy and a broader role for private mortgage insurance.


ENVIRONMENTAL, SOCIAL AND GOVERNANCE HIGHLIGHTS

We have always been committed to helping people live better lives through attainable homeownership and we have been a generous, committed and responsible citizen of our own home, Milwaukee.  We are proud that our commitment to these values has been recognized through the following awards:

2019 Top 100 Workplaces in Southeastern Wisconsin winner (Journal Sentinel, Inc.).  MGIC has been the recipient of this award for ten consecutive years, one of only 13 companies to have achieved this. 
2018 Well Workplace Platinum Award (Wellness Council of America).  The Platinum Award is the highest honor presented and is awarded to an organization recognized for its leadership and innovative commitment to the health and well-being of its employees.  MGIC was one of 10 companies nationwide to receive the Platinum Award.
Eddy Award (Pension & Investments).  MGIC was recognized with a 2019 first place award for “Pre-Retirement Preparation for Employees.” 

You can read more about our focus on and commitment to ESG initiatives in our 2020 Environmental, Social and Governance Report published on our website. We are not including the information contained in that report as a part of, or incorporating it by reference into, this Proxy Statement.



2 │ MGIC Investment Corporation – 2020 Proxy Statement


PROXY SUMMARY


OUR BOARD NOMINEES

Name
Age(1)
Director Since
Primary Occupation
Independent
Committee
Memberships
Daniel A. Arrigoni
69
2013
Former President and CEO
of U.S. Bank Home Mortgage Corp.
ü
• Audit
• Risk Management
C. Edward Chaplin
63
2014
Corporate Director; Former President and CFO of MBIA Inc.
ü
• Risk Management
• Securities Investment
Curt S. Culver
67
1999
Chairman of the Board
Former CEO of MGIC Investment Corp.
 
• Executive
Jay C. Hartzell ª
50
2019
Dean of the McCombs School of Business at the University of Texas at Austin
ü

• Audit
• Risk Management
Timothy A. Holt ª
66
2012
Corporate Director; Former SVP and Chief Investment Officer of Aetna, Inc.
ü
• Audit
• Securities Investment (C)
Kenneth M. Jastrow, II
72
1994
Lead Independent Director
Corporate Director and Private Investor; Former Chairman & CEO
of Temple-Inland Inc.
ü
• Executive
• MDNG * (C)
Jodeen A. Kozlak
56
2018
Founder and CEO of Kozlak Capital Partners, LLC. Former Global SVP of Human Resources of Alibaba Group
ü

• MDNG *
• Securities Investment
Michael E. Lehman ª
69
2001
Special Advisor to the Chancellor of the University of Wisconsin and Interim Chief Operating Officer of the Wisconsin School of Business; Former EVP and CFO of Sun Microsystems, Inc.
ü
• Audit (C)
• MDNG *
Melissa B. Lora ª
57
2018
Corporate Director; Former President of Taco Bell International
ü

• Audit
• MDNG*
Timothy J. Mattke
44
2019
CEO of MGIC Investment Corp.
 
• Executive (C)
Gary A. Poliner
66
2013
Corporate Director; Former President of The Northwestern Mutual Life Insurance Company
ü
• Audit
• Risk Management (C)
• Securities Investment
Sheryl L. Sculley ª
67
2019
Corporate Director, Former City Manager of the City of San Antonio, Texas
ü

• Audit
• Securities Investment
Mark M. Zandi
60
2010
Chief Economist of Moody's
Analytics, Inc.
ü
• Risk Management
ª
=
Audit Committee Financial Expert
*
=
Management Development, Nominating and Governance Committee
C
=
Committee Chair
(1)
 
As of March 6, 2020


MGIC Investment Corporation – 2020 Proxy Statement │ 3


PROXY SUMMARY

COMPENSATION HIGHLIGHTS

Pay Mix. At-risk performance-based compensation represented a large percentage of our CEOs' 2019 total direct compensation (TDC): it represented 86.4% of our former CEO's actual TDC and 61.7% of our current CEO's actual TDC. Excluding the time-vested long-term equity awards granted to our current CEO upon his election to that position (discussed below under "Leadership Transition" in our CD&A), which are not part of our standard long-term equity program, 80% of our current CEO's actual 2019 TDC was at-risk performance-based compensation.


Former CEO 2019 Pay Mix (% of TDC)
At-Risk Performance-Based Pay: 86.4%
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Current CEO 2019 Pay Mix (% of TDC)
At-Risk Performance-Based Pay: 61.7%
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Recent Changes. At our 2017, 2018 and 2019 Annual Meetings, more than 95% of the Say on Pay votes cast were in support of the compensation of our NEOs. We view these voting results as confirmation of shareholder support of our executive compensation program and made few changes for 2018 and 2019. However, in response to feedback from an advisor to certain of our shareholders, we reduced the number of metrics used to determine the 2018 and 2019 bonuses of our NEOs to five from ten that we had used in 2017. For more information about the metrics used to determine bonuses, see "Components of our Executive Compensation Program – Annual Bonus" in our CD&A.





4 │ MGIC Investment Corporation – 2020 Proxy Statement



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MGIC Investment Corporation
P.O. Box 488
MGIC Plaza, 270 East Kilbourn Avenue
Milwaukee, WI 53201


PROXY STATEMENT

Our Board of Directors is soliciting proxies for the Annual Meeting of Shareholders to be held at 9:00 a.m., Thursday, April 23, 2020, at 270 East Kilbourn Avenue, Milwaukee, Wisconsin, and at any postponement or adjournment of the meeting. In this Proxy Statement we sometimes refer to MGIC Investment Corporation as “the Company,” “we” or “us.” This Proxy Statement and the enclosed form of proxy are being mailed to shareholders beginning on March 20, 2020. If you have any questions about attending our Annual Meeting, you can call our Investor Relations personnel at (414) 347-6480.


ABOUT THE MEETING AND PROXY MATERIALS

What is the purpose of the Annual Meeting?

At our Annual Meeting, shareholders will act on the matters outlined in our notice of meeting preceding the Table of Contents, including election of the thirteen directors named in the Proxy Statement, an advisory vote to approve our executive compensation, approval of our 2020 Omnibus Incentive Plan, ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2020, and any other matters that properly come before the meeting. In addition, management will report on our performance during the last year and, after the meeting, respond to questions from shareholders.


Who is entitled to vote at the meeting?

Only shareholders of record at the close of business on March 6, 2020, the record date for the meeting, are entitled to receive notice of and to participate in the Annual Meeting. For each share of Common Stock for which you were shareholder of record on that date, you are entitled to one vote on each matter considered at the meeting. On the record date, 340,860,286 shares of Common Stock were entitled to vote.


What is a proxy?

A proxy is another person you legally designate to vote your shares. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card.


How do I vote my shares?

“Street Name” Holders: If you hold your shares in “street name,” meaning your shares are held in a stock brokerage account or by a bank or other nominee, your broker, bank or nominee has enclosed or provided a voting instruction form for you to use to direct the broker, bank or nominee how to vote your shares. Certain of these institutions offer telephone and online voting.


MGIC Investment Corporation – 2020 Proxy Statement │ 5


ABOUT THE MEETING AND PROXY MATERIALS


Shareholders of Record: If you are a shareholder of record, meaning your shares are registered directly in your name with American Stock Transfer & Trust Company, LLC, our stock transfer agent, you may vote your shares in one of three ways:
By Telephone — Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States, or 1-718-921-8500 from other countries, and follow the instructions. Have your proxy card available when you call.
Online — Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page.
By Mail — You may submit a proxy by completing, signing and dating your proxy card and mailing it in the accompanying pre-addressed envelope.
If you attend the meeting, you may withdraw your proxy and vote your shares in person.

Participants in our Profit Sharing and Savings Plan: If you hold shares as a participant in our Profit Sharing and Savings Plan, you may instruct the plan trustee how to vote those shares in any one of three ways:

By Telephone — Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States, or 1-718-921-8500 from other countries, and follow the instructions. Have your proxy card available when you call.
Online — Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page.
By Mail — You may submit a proxy by completing, signing and dating your proxy card and mailing it in the accompanying pre-addressed envelope.
The plan trustee will vote shares held in your account in accordance with your instructions and the plan terms. The plan trustee will only vote the shares for you if your instructions are received at least three business days before the Annual Meeting date.

Please contact our Investor Relations personnel at (414) 347-6480 if you would like information about attending the Annual Meeting and voting in person. At our meeting, you may be asked to show some form of identification (such as your driver's license).


Can I change my vote after I return my proxy card?

Yes. If you are a shareholder of record, you can revoke your proxy by advising our corporate Secretary in a writing that is received by her at any time before your shares are voted, by granting a new proxy with a later date, or by voting in person at the meeting. If your shares are held in street name by a broker, bank or nominee, or in our Profit Sharing and Savings Plan, you must follow the instructions of the broker, bank, nominee or plan trustee on how to change your vote.


How are the votes counted?

A quorum is necessary to hold the meeting and will exist if a majority of the 340,860,286 shares of Common Stock entitled to vote as of the record date are represented, in person or by proxy, at the meeting. Votes cast by proxy or in person at the meeting will be counted by American Stock Transfer & Trust Company, LLC, which has been appointed by our Board to act as inspector of election for the meeting. All shares voted by proxy are counted as present for purposes of establishing a quorum, including those that abstain or as to which the proxies contain “broker non-votes” as to one or more items.

“Broker non-votes” occur when a broker or other nominee does not vote on a particular matter because the broker or other nominee does not have authority to vote without instructions from the beneficial owner of the shares and has not


6 │ MGIC Investment Corporation – 2020 Proxy Statement


ABOUT THE MEETING AND PROXY MATERIALS

received such instructions. Broker non-votes will not be counted as votes for or against any matter. Brokers and other nominees have discretionary authority to vote shares without instructions from the beneficial owner of the shares only for matters considered routine. For the 2020 Annual Meeting, nominees will only have discretionary authority to vote shares on the ratification of the appointment of the independent registered public accounting firm without instructions from the beneficial owner.


What are the Board’s recommendations?

Our Board of Directors recommends a vote FOR all of the nominees for director (Item 1), FOR approval of our executive compensation (Item 2), FOR approval of our 2020 Omnibus Incentive Plan (Item 3) and FOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2020 (Item 4).

If you sign and return a proxy card or voting instruction form without specifying how you want your shares voted, the named proxies will vote your shares in accordance with the recommendations of the Board for all Items and in their best judgment on any other matters that properly come before the meeting.


Will any other items be acted upon at the Annual Meeting?

The Board does not know of any other business to be presented at the Annual Meeting. No shareholder proposals will be presented at this year’s Annual Meeting.


What are the deadlines for submission of shareholder proposals for the next Annual Meeting?

Shareholders may submit proposals on matters appropriate for shareholder action at future Annual Meetings by following the SEC’s rules. Proposals intended for inclusion in next year’s proxy materials must be received by our Secretary no later than November 20, 2020.

Under our Amended and Restated Bylaws (“Bylaws”), a shareholder who wants to bring business before the Annual Meeting that has not been included in the proxy materials for the meeting, or who wants to nominate directors at the meeting, must be eligible to vote at the meeting and give written notice of the proposal to our corporate Secretary in accordance with the procedures contained in our Bylaws. For the 2021 Annual Meeting, the notice must be received by the Secretary no later than February 3, 2021, and no earlier than January 9, 2021. For director nominations, the notice must comply with our Bylaws and provide the information required to be included in the Proxy Statement for individuals nominated by our Board. For any other proposals, the notice must describe the proposal and why it should be approved, identify any material interest of the shareholder in the matter, and include other information required by our Bylaws.


Who pays to prepare, mail and solicit the proxies?

We will pay the cost of soliciting proxies. In addition to soliciting proxies by mail, our employees may solicit proxies by telephone, email, facsimile or personal interview. We have also engaged D.F. King & Co., Inc. to provide proxy solicitation services for a fee of $14,000, plus expenses such as charges by brokers, banks and other nominees to forward proxy materials to the beneficial owners of our Common Stock.



MGIC Investment Corporation – 2020 Proxy Statement │ 7



STOCK OWNERSHIP

The following table shows the amount of our Common Stock held by persons who were beneficial owners of more than 5% of our shares as of December 31, 2019, based on information filed with the SEC. The "Percent of Class" reflects the percentage of our Common Stock outstanding as of March 6, 2020 represented by such shares.
Name
Shares Beneficially Owned
 
Percent of Class

The Vanguard Group, Inc.(1)
100 Vanguard Boulevard, Malvern, PA 19355
35,323,266
 
10.4
%
BlackRock, Inc.(2)
55 East 52nd Street, New York, NY 10055
17,966,749
 
5.3
%
(1)
The Vanguard Group, Inc. reported ownership as of December 31, 2019, on behalf of itself and certain subsidiaries. It reported that it had sole dispositive power for 35,134,288 shares and shared dispositive power for 188,978 shares. It further reported that it had sole voting power for 184,013 shares and shared voting power for 54,502 shares.
(2)
BlackRock, Inc. reported ownership as of December 31, 2019, on behalf of itself and certain subsidiaries. It reported that it had sole dispositive power for 17,966,749 shares and shared dispositive power for no shares. It further reported that it had sole voting power for 16,459,007 shares and shared voting power for no shares.



8 │ MGIC Investment Corporation – 2020 Proxy Statement


STOCK OWNERSHIP

The following table shows the amount of our Common Stock beneficially owned by each of our directors, director nominees and NEOs, and by all directors and executive officers as a group, as of March 6, 2020. Unless otherwise noted, the persons listed in the table have sole voting and investment power over their shares.
Name of Beneficial Owner
Common Stock Owned Directly(1)
Common Stock Owned Indirectly(2)
Restricted Stock and Common Stock Underlying RSUs(3)
Total Number of Shares Beneficially Owned
Director Deferred Stock Units / Additional Underlying Units
Total Shares Beneficially
Owned Plus Underlying Units
Daniel A. Arrigoni

25,000


25,000

7,394(4)

32,394

Cassandra C. Carr
5,000



5,000

30,711(4)

35,711

C. Edward Chaplin
10,000



10,000

50,727(4)

60,727

Curt S. Culver
11,504

1,238,818


1,250,322

7,394(4)

1,257,716

Jay C. Hartzell




9,240(4)

9,240

Timothy A. Holt
20,000



20,000

75,217(4)

95,217

Kenneth M. Jastrow, II
1,146


31,552

32,698

37,947(4)

70,645

Jodeen A. Kozlak




13,322(4)

13,322

Michael E. Lehman
26,939


3,050

29,989

8,794(4)

38,783

Melissa B. Lora




22,474(4)

22,474

Gary A. Poliner




126,372(4)

126,372

Sheryl L. Sculley




9,240(4)

9,240

Mark M. Zandi




49,477(4)

49,477

Timothy M. Mattke
327,321

873


328,194

615,600(5)

943,794

Salvatore A. Miosi
169,602

2,416


172,018

483,600(5)

655,618

Nathaniel H. Colson
4,875



4,875

135,782(5)

140,657

James J. Hughes

178,759


178,759

371,100(5)

549,859

Paula C. Maggio
3,712



3,712

241,334(5)

245,046

Patrick Sinks(7)
632,946

10,706


643,652

658,000(5)

1,301,652

Stephen Mackey
56,007



56,007


56,007

All Directors and Executive Officers as a Group (20 Persons)
617,358

1,445,866

34,602

   2,097,826(6)

2,506,925

4,604,751

(1)
Includes shares for which investment power is shared as follows: all directors and executive officers as a group — 29,389.
(2)
Includes:
Shares held in our Profit Sharing and Savings Plan as follows: Mr. Sinks — 10,706; Mr. Mattke — 873; Mr. Miosi — 2,416; and all executive officers as a group — 3,289 (Mr. Sinks was not an executive officer as of March 6, 2020).
Shares held by a family trust affiliated with: Mr. Arrigoni — 25,000; Mr. Culver — 981,755; Mr. Hughes — 178,759; and all directors and executive officers as a group — 1,185,514.
Shares held by a Foundation for which Mr. Culver has no pecuniary interest but shares voting and dispositive power — 257,063.
(3)
Includes:
Shares underlying RSUs that were issued to our non-management directors pursuant to our former RSU award program (See “Compensation of Directors — Former RSU Award Program” in our 2015 Proxy Statement filed with the SEC on March 24, 2015 (“our 2015 Proxy Statement”)) and could be settled in shares of Common Stock within 60 days of the record date as follows: Mr. Jastrow — 3,050 and Mr. Lehman — 3,050. Directors have neither voting nor investment power over the shares underlying any of these units.
19,769 shares underlying RSUs that are held by Mr. Jastrow under the Deposit Share Program for Non-Employee Directors under our 2002 Stock Incentive Plan (See “Compensation of Directors — Former Deposit Share Program” in our 2015 Proxy Statement) and could be settled in shares of Common Stock within 60 days of the record date. Mr. Jastrow has neither voting nor investment power over the shares underlying any of these units.
6,733 shares of restricted stock that Mr. Jastrow held under the Deposit Share Program for Non-Employee Directors under our 1991 and 2002 Stock Incentive Plans. Mr. Jastrow has sole voting power and no investment power over these shares.
2,000 shares held by Mr. Jastrow under our 1993 Restricted Stock Plan for Non-Employee Directors. (See “Compensation of Directors — Former Restricted Stock Plan” in our 2015 Proxy Statement). Mr. Jastrow has sole voting power and no investment power over these shares.


MGIC Investment Corporation – 2020 Proxy Statement │ 9


STOCK OWNERSHIP

(4)
Represents share equivalents held under our Deferred Compensation Plan for Non-Employee Directors (See “Compensation of Directors — Deferred Compensation Plan and Annual Grant of Share Units” below) over which the directors have neither voting nor investment power. For all directors as a group — 448,309.
(5)
Represents shares underlying stock-settled RSUs that cannot be settled in Common Stock within 60 days of the record date. For all executive officers as a group — 2,058,616.
(6)
As of March 6, 2020, no individual director or executive officer beneficially owned more than 1% of the Common Stock outstanding, and all directors and executive officers as a group beneficially owned less than 1% of the shares of Common Stock outstanding.
(7)
Reflects ownership as of retirement date of January 31, 2020, adjusted to reflect known March 4, 2020 vesting of RSUs.




10 │ MGIC Investment Corporation – 2020 Proxy Statement



CORPORATE GOVERNANCE AND BOARD MATTERS

The Board of Directors oversees the management of the Company and our business. The Board selects our CEO and in conjunction with our CEO selects the rest of our senior management team, which is responsible for operating our business.


Corporate Governance Guidelines and Code of Business Conduct

The Board has adopted Corporate Governance Guidelines, which set forth a framework for our governance. The Guidelines cover the Board’s composition, leadership, meeting process, director independence, Board membership criteria, committee structure, succession planning and director compensation. Among other things, the Board meets in executive session outside the presence of any member of our management after at least two Board meetings annually at which directors are present in person and at any additional times determined by the Board or the Lead Director. Mr. Jastrow presides at these sessions and has served as the Board’s Lead Director since the position was created in October 2009. See “ — Board Leadership” for information about the Lead Director’s responsibilities and authority. The Corporate Governance Guidelines provide that a director shall not be nominated by the Board for re‑election if at the date of the Annual Meeting of Shareholders, the director is age 74 or more. The Corporate Governance Guidelines also provide that a director who retires from his principal employment or joins a new employer shall offer to resign from the Board. Unless the Board determines that a Chief Executive Officer who is Chairman of the Board should continue as Chairman of the Board after his or her tenure as Chief Executive Officer, a director who is an officer of the Company or a subsidiary and leaves the Company shall resign from the Board. In 2014, the Board determined that Mr. Culver should become non-executive Chairman of the Board upon retirement from his position as Chief Executive Officer in 2015. In connection with Mr. Sinks stepping down from his role as our President and Chief Executive Officer in 2019 and his 2020 retirement from the Company, in 2019, Mr. Sinks resigned from the Board.

We have a Code of Business Conduct emphasizing our commitment to conducting our business in accordance with legal requirements and high ethical standards. The Code applies to all employees, including our executive officers, and specified portions are applicable to our directors. Certain portions of the Code that apply to transactions with our executive officers, directors, and their immediate family members are described under “Other Matters – Related Person Transactions” below. These descriptions are subject to the actual terms of the Code.

Our Corporate Governance Guidelines and our Code of Business Conduct are available on our website (http://mtg.mgic.com) under the “Leadership & Governance; Documents” links. Written copies of these documents are available to any shareholder who submits a written request to our Secretary. We intend to disclose on our website any waivers from, or amendments to, our Code of Business Conduct that are subject to disclosure under applicable rules and regulations.


Director Independence

Our Corporate Governance Guidelines regarding director independence provide that a director is not independent if the director has any specified disqualifying relationship with us. The disqualifying relationships are equivalent to those of the independence rules of the New York Stock Exchange (“NYSE”), except that our disqualification for board interlocks is more stringent than under the NYSE rules. Also, for a director to be independent under the Guidelines, the director may not have any material relationship with us. For purposes of determining whether a disqualifying or material relationship exists, we consider relationships with MGIC Investment Corporation and its consolidated subsidiaries.

The Board has determined that all of our directors except for Mr. Culver, our former CEO, and Mr. Mattke, our current CEO, are independent under the Guidelines and the NYSE rules. The Board made its independence determinations by considering whether any disqualifying relationships existed during the periods specified under the Guidelines and the NYSE rules. To determine that there were no material relationships, the Board applied categorical standards that it had adopted and incorporated into our Corporate Governance Guidelines. All independent directors met these standards.


MGIC Investment Corporation – 2020 Proxy Statement │ 11


CORPORATE GOVERNANCE AND BOARD MATTERS

Under these standards, a director is not independent if payments under transactions between us and a company of which the director is an executive officer or 10% or greater owner exceeded the greater of $1 million or 1% of the other company’s gross revenues. Payments made to and payments made by us are considered separately, and this quantitative threshold is applied to transactions that occurred in the three most recent fiscal years of the other company. Also under these standards, a director is not independent if during our last three fiscal years the director:

was an executive officer of a charity to which we made contributions,
was an executive officer or member of a law firm or investment banking firm providing services to us, or
received any direct compensation from us other than as a director, or if during such period a member of the director’s immediate family received compensation from us.

In making its independence determinations, the Board considered payments we made to Moody’s Analytics (of which Dr. Zandi is an executive officer) for research and subscription services for Moody’s Economy.com and related publications, and payments to Moody’s Investors Service for credit rating services. These transactions were below the quantitative threshold contained in our Corporate Governance Guidelines and were entered into in the ordinary course of business by us, Moody’s Analytics and Moody’s Investors Service.


Board Leadership

Mr. Culver serves as non-executive Chairman of the Board and Mr. Jastrow serves as Lead Director. Under this structure, the Chairman chairs Board meetings, where the Board discussion includes strategic and business issues. The Board believes that this approach makes sense at this time because Mr. Culver, as our former CEO, is very familiar with our business and strategic plans as reviewed by the Board. Mr. Culver has been with us since 1985, and served as Chief Executive Officer from 2000 until his retirement in 2015, when he became our non-executive Chairman of the Board.

Because the Board also believes that strong, independent Board leadership is a critical aspect of effective corporate governance, the Board maintains the position of Lead Director. The Lead Director is an independent director selected by the independent directors. Mr. Jastrow has served as the Lead Director since the position was established in 2009. The Lead Director’s responsibilities and authority include:

presiding at all meetings of the Board at which the Chairman is not present;
having the authority to call and lead executive sessions of directors without the presence of any director who is an officer (or if determined by the Board, a former officer) (the Board meets in executive session after at least two Board meetings each year);
serving as a conduit between the CEO and the independent directors to the extent requested by the independent directors;
serving as a conduit for the Board’s informational needs, including proposing topics for Board meeting agendas; and
being available, if requested by major shareholders, for consultation and communication.

The Board believes that a leader intimately familiar with our business and strategic plans serving as Chairman, together with an experienced and engaged Lead Director, is the most appropriate leadership structure for the Board at this time. The Board reviews periodically the structure of the Board and the Board’s leadership.


Communicating with the Board

Shareholders and other interested persons can communicate with members of the Board, non-management members of the Board as a group or the Lead Director, by sending a written communication to our Secretary, addressed to: MGIC Investment Corporation, Secretary, P.O. Box 488, Milwaukee, WI 53201. The Secretary will pass along any such communication, other than a solicitation for a product or service, to the Lead Director.


12 │ MGIC Investment Corporation – 2020 Proxy Statement


CORPORATE GOVERNANCE AND BOARD MATTERS

Director Selection

The Board believes that the Board, as a whole, should possess a combination of skills, professional experience, and diversity of backgrounds necessary to oversee our business. In addition, the Board believes there are certain attributes every director should possess, as reflected in the Board’s membership criteria. Accordingly, the Board and the Management Development, Nominating and Governance Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and our current and future needs.

The Management Development, Nominating and Governance Committee is responsible for developing Board membership criteria and recommending these criteria to the Board. The criteria, which are set forth in our Corporate Governance Guidelines, include an inquiring and independent mind, sound and considered judgment, high standards of ethical conduct and integrity, well-respected experience at senior levels of business, academia, government or other fields, ability to commit sufficient time and attention to Board activities, anticipated tenure on the Board, and whether an individual will enable the Board to continue to have a substantial majority of independent directors. In addition, the Management Development, Nominating and Governance Committee in conjunction with the Board periodically evaluates the composition of the Board to assess the skills and experience that are currently represented on the Board, as well as the skills and experience that the Board will find valuable in the future. The Management Development, Nominating and Governance Committee seeks a variety of occupational and personal backgrounds on the Board in order to obtain a range of viewpoints and perspectives and enable the Board to have access to a diverse body of talent and expertise relevant to our activities. The Committee’s and the Board’s evaluation of the Board’s composition enables the Board to consider the skills and experience it seeks in the Board as a whole, and in individual directors, as our needs evolve and change over time and to assess the effectiveness of the Board’s efforts at pursuing diversity. In identifying director candidates from time to time, the Management Development, Nominating and Governance Committee may establish specific skills and experience that it believes we should seek in order to constitute a balanced and effective board.



MGIC Investment Corporation – 2020 Proxy Statement │ 13


CORPORATE GOVERNANCE AND BOARD MATTERS

The table below summarizes certain skills and experiences considered important by the Board and how those skills and experiences are represented in the board members standing for election at the Annual Meeting of Shareholders.
Skills and Experience
Relevance to MGIC
Board Composition
Accounting
We operate in a complex financial and regulatory environment.
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Chief Executive Officer
Experience at the highest level of an organization provides expertise that will foster participation in the development and implementation of the Company's business strategies.
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Financial
Knowledge of finance or financial reporting and experience with debt and capital markets transactions is important to executing our business strategies.
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Human Resources
As a financial services firm, human capital represents an important asset. Knowledge of human resources matters is important to executing our business strategies.
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Insurance
Insurance industry experience provides understanding of our business and strategies.
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Investments
We manage a large and long-term investment portfolio to support our obligations to pay future claims of our policyholders.
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Public Company Executive Experience
As a complex, publicly-held company, practical insight into shareholder concerns and governance matters is important.
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Regulatory / Public Affairs
Our business requires compliance with a variety of federal, state and GSE requirements, and involves relationships with various government and non-government organizations.
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Housing Markets / Risk Management
A main component of our business involves taking and managing risk associated with the housing markets.
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Technology / Cyber
We continue to undergo a business process transformation involving upgrades to our technology and to manage our cybersecurity risks.
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We have continued to refresh and diversify our Board over the last five years as four new independent directors joined our Board, two directors did not stand for re-election, our new CEO joined the Board and our former CEO retired from the Board. Ms. Carr is not standing for re-election at our 2020 Annual Meeting due to the age-related retirement policy in our Corporate Governance Guidelines. The following charts reflect the tenure, ages and diversity of the board members standing for election at the Annual Meeting of Shareholders.
 
https://cdn.kscope.io/5ad2b80b33a8f9054d2277e811a81203-chart-f5cebe63465359ecbcfa05.jpghttps://cdn.kscope.io/5ad2b80b33a8f9054d2277e811a81203-chart-6ac9dc939ee95e70a7da05.jpghttps://cdn.kscope.io/5ad2b80b33a8f9054d2277e811a81203-chart-7e41cd051aaf5d09adba05.jpg
 


14 │ MGIC Investment Corporation – 2020 Proxy Statement



COMMITTEE MEMBERSHIP AND MEETINGS

The Board of Directors held six meetings during 2019. Each director serving in 2019 attended at least 75% of the meetings of the Board and committees of the Board on which he or she served. The Annual Meeting of Shareholders is scheduled in conjunction with a Board meeting and, as a result, directors are expected to attend the Annual Meeting. All of our directors serving on the Board at that time attended the 2019 Annual Meeting of Shareholders.

The Board has five standing committees: Audit; Management Development, Nominating and Governance; Risk Management; Securities Investment; and Executive. Information regarding these committees is provided below. Each of the Audit; Management Development, Nominating and Governance; Risk Management and Securities Investment Committees consists entirely of independent directors and the charters for those committees are available on our website (http://mtg.mgic.com) under the “Leadership & Governance; Documents” links. Written copies of these charters are available to any shareholder who submits a written request to our Secretary. The functions of the Executive Committee are established under our Bylaws and are described below.

Current committee membership and the number of 2019 committee meetings are set forth below.
 
Audit
Executive
Management Development, Nominating and Governance
Risk Management
Securities Investment
Daniel A. Arrigoni
 
 
 
Cassandra C. Carr(1)
 
 
 
C. Edward Chaplin
 
 
 
Curt S. Culver
 
 
 
 
Jay C. Hartzell
 
 
 
Timothy A. Holt
 
 
 
C
Kenneth M. Jastrow, II
 
C
 
 
Jodeen A. Kozlak
 
 
 
Michael E. Lehman
C
 
 
 
Melissa B. Lora
 
 
 
Timothy J. Mattke
 
C
 
 
 
Gary A. Poliner
 
 
C
Sheryl L. Sculley
 
 
 
Mark M. Zandi
 
 
 
 
2019 Meetings
14
0
4
4
6
C = Chairman
 
 
 
 
 
(1) Ms. Carr is not standing for re-election at our 2020 Annual Meeting of Shareholders.


Audit Committee

The Audit Committee assists the oversight by the Board of Directors of the integrity of MGIC Investment Corporation’s financial statements; the effectiveness of its system of internal controls; the qualifications, independence and performance of its independent accountants; the performance of its internal audit function; and its compliance with legal, regulatory and non-financial GSE requirements. The Committee supports the Board’s role in overseeing the risks facing the Company, as described in more detail below under “Board Oversight of Risk.”

All members of the Audit Committee meet the heightened independence criteria that apply to Audit Committee members under SEC and NYSE rules. The Board has determined that Messrs. Hartzell, Holt and Lehman and Mses. Lora and Sculley are “audit committee financial experts” as defined in SEC rules.



MGIC Investment Corporation – 2020 Proxy Statement │ 15


COMMITTEE MEMBERSHIP AND MEETINGS


Management Development, Nominating and Governance Committee

The Management Development, Nominating and Governance Committee is responsible for overseeing our executive compensation program, including approving corporate goals relating to compensation for our CEO, determining our CEO’s annual compensation and approving compensation for our other senior executives. The Committee also makes recommendations to the Board regarding the compensation of directors. The Committee may delegate its responsibilities to subcommittees of the Committee.

The Committee receives information that includes: detailed breakdowns of the compensation of the NEOs, the amount, if any, that our NEOs realized in at least the previous five years pursuant to sales of shares awarded under equity grants; the total amount of stock and RSUs held by each NEO (RSUs are sometimes referred to in this Proxy Statement as “restricted equity”); and the other compensation information disclosed in this Proxy Statement under the SEC’s rules. The Committee supports the Board’s role in overseeing the risks facing the Company, as described in more detail below under “Board Oversight of Risk.”

The Committee has retained Frederic W. Cook & Co. (the “Compensation Consultant”), a nationally recognized executive compensation consulting firm, to advise it. The Committee retains the Compensation Consultant to, among other things, help it evaluate and oversee our executive compensation program and review the compensation of our directors. The scope of the Compensation Consultant’s services during 2019 is described under “Role of the Compensation Consultant” in our Compensation Discussion and Analysis below. In providing its services to the Committee, the Compensation Consultant regularly interacts with our senior management. The Compensation Consultant does not provide any services to us, other than the consulting services noted above. The Committee has assessed the independence of the Compensation Consultant pursuant to SEC and NYSE rules and concluded that its work for the Committee does not raise any conflict of interest.

The Committee also evaluates the annual performance of the CEO, oversees the CEO succession planning process, and makes recommendations to the Board to fill open director and committee member positions. In addition, the Committee reviews our Corporate Governance Guidelines and oversees the Board’s self-evaluation process. Finally, the Committee identifies new director candidates through recommendations from Committee members, other Board members and our executive officers, and will consider candidates who are recommended by shareholders.

Shareholders may recommend a director candidate for consideration by the Committee by submitting background information about the candidate, a description of his or her qualifications and the candidate’s consent to being recommended as a candidate. If the candidate is to be considered for nomination at the next annual shareholders meeting, the submission must be received by our corporate Secretary in writing no later than November 20, 2020. Information on shareholder nominations is provided under “About the Meeting and Proxy Materials” in response to the question “What are the deadlines for submission of shareholder proposals for the next Annual Meeting?”

The Committee evaluates new director candidates under the criteria described under “Director Selection” as well as other factors the Committee deems relevant, through background reviews, input from other members of the Board and our executive officers, and personal interviews with the candidates attended by at least the Committee Chair. The Committee will evaluate any director candidates recommended by shareholders using the same process and criteria that apply to candidates from other sources.

All members of the Management Development, Nominating and Governance Committee meet the heightened independence criteria that apply to compensation committee members under SEC and NYSE rules.


Risk Management Committee

The Risk Management Committee assists the Board in overseeing the Company's enterprise risk management framework, including the Company's risk appetite on an enterprise-wide basis, and in overseeing certain key risks, including mortgage


16 │ MGIC Investment Corporation – 2020 Proxy Statement


COMMITTEE MEMBERSHIP AND MEETINGS

credit risk. In connection with its oversight of mortgage credit risk, the Committee monitors the performance of the Company's insured books of business and the principal factors affecting their performance; it discusses the Company's products, including premium rates, returns, underwriting guidelines and quality controls, and external reinsurance programs; and it reviews the insurance operating environment, including the state of local and regional housing markets, competitive forces affecting the Company, the Company’s relationships with residential mortgage lenders and mortgage investors, regulatory and GSE capital requirements, and lender, GSE and government programs. The Risk Management Committee supports the Board’s role in overseeing other risks facing the Company, as described in more detail below under “Board Oversight of Risk.”


Securities Investment Committee

The Securities Investment Committee oversees management of our investment portfolio and the investment portfolios of the Company’s employee benefit plans by those persons (employees of the Company or external asset managers) who are managing such assets on a day-to-day basis. The Committee also makes recommendations to the Board with respect to our retirement benefit plans that are available to employees generally, capital management (other than external reinsurance), including repurchase of common stock and debt, and external funding. Finally, the Committee supports the Board’s role in overseeing the risks facing the Company, as described in more detail below under “Board Oversight of Risk.”


Executive Committee

The Executive Committee provides an alternative to convening a meeting of the entire Board should a matter arise between Board meetings that requires Board authorization. The Committee is established under our Bylaws and has all authority that the Board may exercise with the exception of certain matters that under the Wisconsin Business Corporation Law are reserved to the Board itself.


Board Oversight of Risk

Our senior management is charged with identifying and managing the risks facing our business and operations. The Board of Directors is responsible for oversight of how our senior management addresses these risks to the extent they are material. In this regard, the Board seeks to understand the material risks we face and to allocate, among the full Board and its committees, responsibilities for overseeing how management addresses the risks, including the risk management systems and processes that management uses for this purpose. Overseeing risk is an ongoing process. Accordingly, the Board periodically considers risk throughout the year and also with respect to specific proposed actions.

The Board implements its risk oversight function both as a whole and through delegation to various committees. These committees meet regularly and report back to the full Board. The following four committees play significant roles in carrying out the risk oversight function.

The Management Development, Nominating and Governance Committee evaluates the incentives and risks associated with our compensation philosophy and programs, and oversees operational risks related to human resources.

The Risk Management Committee assists the Board in overseeing the Company's enterprise risk management framework, including the Company's risk appetite on an enterprise-wide basis, and in overseeing the following key Company risks: Mortgage Credit; Capital Risk related to the required amount of capital; non-investment portfolio counterparty risk; model risk; operational risk related to underwriting, servicing, claims, risk and sales; and macroeconomic business risk.



MGIC Investment Corporation – 2020 Proxy Statement │ 17


COMMITTEE MEMBERSHIP AND MEETINGS

The Securities Investment Committee oversees risks related to our investment portfolio and capital management, which includes market risk; investment portfolio counterparty risk; capital risk related to our capital structure, access to capital and credit rating; and liquidity risk.

The Audit Committee oversees our processes for assessing risks (other than risks overseen by other committees) and the effectiveness of our system of internal controls. In performing this function, the Audit Committee considers information from our independent registered public accounting firm and internal auditors and discusses relevant issues with management, the Internal Audit Director and the independent registered public accounting firm. The Audit Committee assists the Board in overseeing compliance risk; cybersecurity risk; and operational risk related to information systems, finance and legal matters. In addition, the Audit Committee meets with the Chief Risk Officer and the Chairman of the Risk Management Committee to discuss and review in a general manner the Risk Management Committee's oversight of the Company's enterprise risk management framework.

We believe that our leadership structure, discussed in “Board Leadership” above, supports the risk oversight function of the Board. Our former CEO serves as Chairman of the Board and has a wealth of experience with the risks of our Company and industry. Our current CEO is a director who keeps the Board informed about the risks we face. In addition, independent directors chair the various committees involved with risk oversight and there is open communication between senior management and directors.


18 │ MGIC Investment Corporation – 2020 Proxy Statement



NOMINEES FOR DIRECTOR
For Term Ending at the Annual Meeting in 2021

Each nominee listed below is a director of the Company who, with the exception of Dr. Hartzell and Ms. Sculley, was previously elected by the shareholders. Dr. Hartzell and Ms. Sculley were introduced to the Board by an independent director, and were elected by the Board on October 23, 2019. In evaluating incumbent directors for renomination to the Board, the Management Development, Nominating and Governance Committee has considered a variety of factors. These include the Board membership criteria described under “Director Selection” above and past performance on the Board based on any feedback from other Board members.

Information about our directors, all of whom are standing for election, appears below. The biographical information is as of March 6, 2020, and for each director includes a discussion about the skills and qualifications that the Board views as supporting the director’s continued service on the Board.

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DANIEL A. ARRIGONI
Director Since: 2013
Age: 69
Committees: Audit Committee; Risk Management Committee

Daniel A. Arrigoni was President and Chief Executive Officer of U.S. Bank Home Mortgage Corp., one of the largest originators and servicers of home loans in the U.S., until his retirement in 2013. Prior to his retirement, Mr. Arrigoni also served as an Executive Vice President of U.S. Bank, N.A. Mr. Arrigoni led the mortgage company for U.S. Bank and its predecessor companies since 1996. Mr. Arrigoni has over 40 years of experience in the residential mortgage and banking industries.

Mr. Arrigoni brings to the Board a broad understanding of the mortgage business and its regulatory environment, skill in assessing and managing credit risk, and significant finance experience, each gained from his many years of executive management in the residential mortgage and banking industries.


 
 
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C. EDWARD CHAPLIN
Director Since: 2014           
Age: 63
Committees: Risk Management Committee; Securities Investment Committee

C. Edward Chaplin was President and Chief Financial Officer at MBIA Inc., a provider of financial guarantee insurance and the largest municipal bond-only insurer, from 2008 until 2016, and remained with MBIA as Executive Vice President until his January 1, 2017 retirement. He joined MBIA in 2006 as its Chief Financial Officer, after having served as a member of its Board of Directors from 2003 until 2006. Prior to joining MBIA, Mr. Chaplin was Senior Vice President and Treasurer of Prudential Financial Inc., a firm he joined in 1983 and for which he held various senior management positions, including Regional Vice President of Prudential Mortgage Capital Company. Mr. Chaplin also serves on the Board of Brighthouse Financial, Inc., a provider of life insurance and annuity products in the U.S.

Mr. Chaplin brings to the Board a deep understanding of the insurance and real estate industries, management and leadership skills, and financial expertise.


 
 


MGIC Investment Corporation – 2020 Proxy Statement │ 19


NOMINEES FOR DIRECTOR

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CURT S. CULVER
Chairman of the Board
Director Since: 1999
Age: 67
Committees: Executive Committee

Curt S. Culver was our Chairman of the Board from 2005 until his retirement as our Chief Executive Officer in 2015. He has served as our non-executive Chairman of the Board since 2015. He was our Chief Executive Officer from 2000 and was the Chief Executive Officer of Mortgage Guaranty Insurance Corporation (“MGIC”) from 1999, in both cases until his retirement, and he held senior executive positions with us and MGIC for more than five years before he became Chief Executive Officer. He is also a director of Wisconsin Energy Corporation and its subsidiary Wisconsin Electric Power Company.

Mr. Culver brings to the Board extensive knowledge of our business and operations and a long-term perspective on our strategy.
 
 
 
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JAY C. HARTZELL
Director Since: 2019
Age: 50
Committees: Audit Committee; Risk Management Committee

Jay C. Hartzell is Dean of the McCombs School of Business at the University of Texas at Austin, a position he has held since 2016. He joined the University of Texas in 2001 and held several key administrative roles at the McCombs School before being named Dean, including Senior Associate Dean for Academic Affairs, Chair of the Finance Department, and Executive Director of the School’s Real Estate Finance and Investment Center. Prior to joining the University of Texas, Dr. Hartzell taught at the Stern School of Business at New York University.

As a senior university administrator and an experienced academic, Dr. Hartzell provides our Board with expertise on business organization, governance, real estate finance and corporate finance matters.



 
 


20 │ MGIC Investment Corporation – 2020 Proxy Statement


NOMINEES FOR DIRECTOR

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TIMOTHY A. HOLT
Director Since: 2012 
Age: 66
Committees: Audit Committee; Securities Investment Committee (Chair)

Timothy A. Holt was an executive committee member and Senior Vice President and Chief Investment Officer of Aetna, Inc., a diversified health care benefits company, when he retired in 2008 after 30 years of service. From 2004 through 2007, he also served as Chief Enterprise Risk Officer of Aetna. Prior to being named Chief Investment Officer in 1997, Mr. Holt held various senior management positions with Aetna, including Chief Financial Officer of Aetna Retirement Services and Vice President, Finance and Treasurer of Aetna. Mr. Holt also serves as a director of Virtus Investment Partners, Inc. From January 2014 to February 2017, he served as a director of StanCorp Financial Group, Inc., which was a publicly-traded insurance products company until it was acquired in March 2016.

Mr. Holt brings to the Board investment expertise, skill in assessing and managing investment and credit risk, broad-based experience in a number of areas relevant to our business, including insurance, and senior executive experience gained at a major public insurance company.


 
 
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KENNETH M. JASTROW, II
Lead Director
Director Since: 1994
Age: 72
Committees: Management Development, Nominating & Governance Committee (Chair); Executive Committee

Kenneth M. Jastrow, II has served as our Lead Director since October 2009. He is a corporate director and private investor. During 2007-2015, he served as a non-executive Chairman of the Board of Forestar Group Inc., which engaged in various real estate and natural resource businesses. During 2000-2007, Mr. Jastrow served as Chairman and Chief Executive Officer of Temple-Inland Inc., a paper and forest products company, which during Mr. Jastrow’s tenure also had interests in real estate and financial services. Mr. Jastrow is also a director of KB Home and Genesis Energy, LLC, the general partner of Genesis Energy, LP, a publicly-traded master limited partnership.

Mr. Jastrow brings to the Board senior executive and leadership experience gained through his service as chairman and chief executive officer at a public company with diversified business operations in sectors relevant to our operations; experience in the real estate, mortgage banking and financial services industries; and knowledge of corporate governance matters gained through his service as a non-executive chairman and on public company boards.


 
 


MGIC Investment Corporation – 2020 Proxy Statement │ 21


NOMINEES FOR DIRECTOR

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JODEEN A. KOZLAK
Director Since: 2018
Age: 56

Committees: Management Development, Nominating & Governance Committee; Securities Investment Committee

Jodeen A. Kozlak is the founder of Kozlak Capital Partners, LLC, a private consulting firm, and has served as its CEO since 2017. Ms. Kozlak previously served as the Global Senior Vice President of Human Resources of Alibaba Group, a multinational conglomerate (2016-2017). Ms. Kozlak also previously served as the Executive Vice President and Chief Human Resources Officer of Target Corporation, one of the largest retailers in the U.S. (2007-2016), and held other senior leadership roles in her 15-year career there. Prior to joining Target, Ms. Kozlak was a partner in a private law practice. Ms. Kozlak also serves on the Board of Directors of C.H. Robinson Worldwide, Inc.

Ms. Kozlak brings to the Board significant executive management experience. Through her service as Executive Vice President and Chief Human Resources Officer at a Fortune 100 company, Ms. Kozlak has developed significant knowledge and expertise in the area of human capital development and a deep understanding of executive compensation within a public company.
 
 
 
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MICHAEL E. LEHMAN
Director Since: 2001
Age: 69
Committees: Audit Committee (Chair); Management, Development, Nominating and Governance Committee

Michael E. Lehman has served the University of Wisconsin in various capacities since March 2016, currently as Special Advisor to the Chancellor and Interim Chief Operating Officer of the Wisconsin School of Business, and previously as Interim Vice Provost for Information Technology, Chief Information Officer and Interim Vice Chancellor for Finance and Administration. He had previously been a consultant (2014-2016); Interim Chief Financial Officer at Ciber Inc., a global information technology company (2013-2014); Chief Financial Officer of Arista Networks, a cloud networking firm (2012-2013); and Chief Financial Officer of Palo Alto Networks, a network security firm (2010-2012). Earlier in his career, he was the Executive Vice President and Chief Financial Officer of Sun Microsystems, Inc., a provider of computer systems and professional support services. During the past five years, Mr. Lehman also served as a director of Solera Holdings, Inc., until it was acquired by a private company.

Mr. Lehman brings to the Board financial and accounting knowledge gained through his service as chief financial officer of a large, multinational public company; skills in addressing the range of financial issues facing a large company with complex operations; senior executive and operational experience; as well as technology and cybersecurity experience.


 
 


22 │ MGIC Investment Corporation – 2020 Proxy Statement


NOMINEES FOR DIRECTOR

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MELISSA B. LORA
Director Since: 2018
Age: 57
Committees: Audit Committee; Management Development, Nominating and Governance Committee

Melissa B. Lora was President of Taco Bell International, a segment of Taco Bell Corp., which is a subsidiary of Yum! Brands, Inc., one of the world’s largest restaurant companies, from 2013 until her retirement in 2018. Ms. Lora previously served in various roles at Taco Bell Corp., including Global Chief Financial and Development Officer (2012-2013), Chief Financial and Development Officer (2006-2012) and Chief Financial Officer (2001-2006). Ms. Lora also serves as Lead Independent Director for KB Home and as a director of ConAgra Brands, Inc.

Ms. Lora brings to the Board substantial executive management experience, including in financial and marketing matters, gained while serving in several executive roles for a Fortune 500 company.
 
 
 
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TIMOTHY J. MATTKE
Director Since: 2019
Age: 44
Committees: Executive Committee (Chair)

Timothy J. Mattke has been our Chief Executive Officer since 2019. He served as our Executive Vice President and Chief Financial Officer from 2014 to 2019, and our Controller from 2009 to 2014. Before then, he held other positions within the Accounting and Finance Departments. Before joining the Company in 2006, Mr. Mattke had been with PricewaterhouseCoopers LLP.

Mr. Mattke brings to the Board extensive knowledge of our industry, business and operations; financial acumen; a long-term perspective on our strategy; and the ability to lead our Company as the mortgage finance system and the mortgage insurance industry evolve.
 
 
 
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GARY A. POLINER
Director Since: 2013
Age: 66
Committees: Risk Management Committee (Chair); Audit Committee; Securities Investment Committee 

Gary A. Poliner was President of The Northwestern Mutual Life Insurance Company (“Northwestern Mutual”), the nation’s largest direct provider of individual life insurance, and a member of its Board of Trustees, until his retirement from that company in June 2013, after more than 35 years of service. He was named President of Northwestern Mutual in 2010. Mr. Poliner also held various other senior-level positions at Northwestern Mutual, including Chief Financial Officer (2001-2008) and Chief Risk Officer (2009-2012). During a portion of 2016, Mr. Poliner served as a consultant for the Janus Funds, and since June 2016 he has served as an Independent Trustee of the Janus Funds (60 funds).

Mr. Poliner brings to the Board a breadth of executive management experience in the insurance business, including risk management, and financial and insurance regulatory expertise.


MGIC Investment Corporation – 2020 Proxy Statement │ 23


NOMINEES FOR DIRECTOR

 
 
 
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SHERYL L. SCULLEY
Director Since: 2019     
Age: 67
Committees: Audit Committee; Securities Investment Committee

Sheryl L. Sculley is the former City Manager of the City of San Antonio Texas, the Chief Executive Officer of the municipal corporation, a position she held from 2005 until her retirement in April 2019. Prior to serving in that role, Ms. Sculley had been the Assistant City Manager (Chief Operating Officer) of Phoenix, Arizona from 1989 until 2005, the City Manager (Chief Executive Officer) of Kalamazoo, Michigan from 1984 until 1989 and in other city management roles before then.

Ms. Sculley’s experience as a Chief Executive Officer leading large municipalities provides our Board with expertise on management, investment, financial and human resources matters.


24 │ MGIC Investment Corporation – 2020 Proxy Statement


NOMINEES FOR DIRECTOR


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MARK M. ZANDI
Director Since: 2010      
Age: 60
Committees: Risk Management Committee

Mark M. Zandi, since 2007, has been Chief Economist of Moody’s Analytics, Inc., where he directs economic research. Moody’s Analytics is a leading provider of economic research, data and analytical tools. It is a subsidiary of Moody’s Corporation that is separately managed from Moody’s Investors Service, the rating agency subsidiary of Moody’s Corporation. Dr. Zandi is a trusted adviser to policymakers and an influential source of economic analysis for businesses, journalists and the public, and he frequently testifies before Congress on economic matters.

Dr. Zandi, with his economics and residential real estate industry expertise, brings to the Board a deep understanding of the economic factors that shape our industry. In addition, Dr. Zandi has expertise in the legislative and regulatory processes relevant to our business.




MGIC Investment Corporation – 2020 Proxy Statement │ 25



ITEM 1 – ELECTION OF DIRECTORS

Item 1 consists of the election of directors. The Board, upon the recommendation of the Management Development, Nominating and Governance Committee, has nominated Daniel A. Arrigoni, C. Edward Chaplin, Curt S. Culver, Jay C. Hartzell, Timothy A. Holt, Kenneth M. Jastrow, II, Jodeen A. Kozlak, Michael E. Lehman, Melissa B. Lora, Timothy J. Mattke, Gary A. Poliner, Sheryl L. Sculley and Mark M. Zandi for re-election to the Board to serve until our 2021 Annual Meeting of Shareholders. If any nominee is not available for election, proxies will be voted for another person nominated by the Board or the size of the Board will be reduced.


Shareholder Vote Required

Our Articles of Incorporation contain a majority vote standard for the election of directors in uncontested elections. Under this standard, each of the thirteen nominees must receive a “majority vote” at the meeting to be elected a director. A “majority vote” means that when there is a quorum present, more than 50% of the votes cast in the election of the director are cast “for” the director, with votes cast being equal to the total of the votes “for” the election of the director plus the votes “withheld” from the election of the director. Therefore, under our Articles of Incorporation, a “withheld” vote is effectively a vote “against” a nominee. Broker non-votes will be disregarded in the calculation of a “majority vote.” Any incumbent director who does not receive a majority vote (but whose term as a director nevertheless would continue under Wisconsin law until his successor is elected) is required to send our Board a resignation. The effectiveness of any such resignation is contingent upon Board acceptance. The Board will accept or reject a resignation in its discretion after receiving a recommendation made by our Management Development, Nominating and Governance Committee and will promptly publicly disclose its decision regarding the director’s resignation (including the reason(s) for rejecting the resignation, if applicable).

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE THIRTEEN NOMINEES. SIGNED PROXY CARDS AND VOTING INSTRUCTION FORMS WILL BE VOTED FOR THE NOMINEES UNLESS A SHAREHOLDER GIVES OTHER INSTRUCTIONS ON THE PROXY CARD OR VOTING INSTRUCTION FORM.




26 │ MGIC Investment Corporation – 2020 Proxy Statement



COMPENSATION OF DIRECTORS

Non-Employee Director Compensation Program

Under our Corporate Governance Guidelines, compensation of non-employee directors is reviewed periodically by the Management Development, Nominating and Governance Committee. Mr. Mattke is our CEO and receives no additional compensation for service as a director, and he is not eligible to participate in any of the following programs or plans.

The following table describes the components of the non-employee director compensation program in effect during 2019.
Compensation Component
 
Compensation
Annual Retainer – Chairman of the Board
 
$250,000, which may be elected to be deferred and either converted into cash-settled share units or credited to a bookkeeping account to which interest is credited.
Annual Retainer – Non-Chairman Directors
 
$150,000, which may be elected to be deferred and either converted into cash-settled share units or credited to a bookkeeping account to which interest is credited.
Annual Retainer – Equity
 
$100,000 in cash-settled RSUs that vest immediately but are not settled for approximately one year. Such settlement may be deferred at the option of the director.
Annual Retainer – Lead Director
 
$25,000
Annual Retainer – Committee Chair
 
$25,000 for the Audit Committee
$25,000 for the Management Development, Nominating and Governance Committee
$15,000 for other committees
(1)
Annual Retainer – Committee Member
 
$15,000 for Audit Committee
$5,000 for other committees
(1)
Meeting Fees (after 5th meeting)(2)
 
$5,000 for Board meetings
$3,000 for Committee meetings
Stock Ownership Guidelines
 
Ownership of 25,000 shares of Common Stock, including deferred share units that have vested or are scheduled to vest within one year. Directors are expected to meet the guideline within five years of joining the Board.(3)
Expense Reimbursement
 
Subject to certain limits, we reimburse directors, and for meetings not held on our premises, their spouses, for travel, lodging and related expenses incurred in connection with attending Board and Committee meetings.
Directors & Officers Insurance
 
We pay premiums for D&O liability insurance under which the directors are insureds.
(1)
Excludes the Executive Committee. Other than the Executive Committee, directors who are members of management do not serve on any committees but may attend committee meetings.
(2)
After a non-management director attends five Board meetings in a given year, he or she is paid $5,000 for each subsequent Board meeting attended in that year. After a non-management director attends five meetings of a particular committee in a given year, he or she is paid $3,000 for each subsequent meeting of that committee attended in that year. However, directors are paid for attendance at only one committee meeting on any given day, regardless of the number of meetings attended on that day. Meetings of the Board of MGIC (or Committees of its Board) that are not held in conjunction with meetings of the Board of the Company (or Committees of its Board) are counted to determine meeting fees.
(3)
Each of our non-employee directors satisfies this guideline.

Deferred Compensation Plan and Annual Grant of Share Units. Under the Deferred Compensation Plan for Non-Employee Directors (the “Deferred Compensation Plan”), our non-employee directors can elect to defer payment of all or part of their retainers and meeting fees until the director’s death, disability, termination of service as a director or to another date specified by the director. A director who elects to defer payments may have his or her deferred compensation bookkeeping account credited quarterly with interest accrued at an annual rate equal to the six-month U.S. Treasury Bill rate determined


MGIC Investment Corporation – 2020 Proxy Statement │ 27


COMPENSATION OF DIRECTORS

at the closest preceding January 1 and July 1 of each year, or may elect to have the payments deferred during a quarter translated into share units. Each share unit is equal in value to one share of our Common Stock and is ultimately settled only in cash. Such payment will be based on the stock’s average closing price for the five consecutive trading days preceding the payment date(s). If a director defers payments into share units, dividend equivalents in the form of additional share units are credited to the director’s account as of the date of payment of cash dividends on our Common Stock.

Under the Deferred Compensation Plan, we also provide to each director the annual equity retainer described above, which is a grant of cash-settled share units. In January 2019, each of our non-management directors was granted share units valued at $100,000, which vested immediately and were settled on February 14, 2020, unless the director elected a later settlement date. The directors could elect to receive payment for vested units in up to ten annual installments beginning shortly after departure from the Board, or on another date specified by the director that was after February 14, 2020. In all cases, the payment was or will be based on the stock’s average closing price for the five consecutive trading days preceding the payment date(s). Dividend equivalents in the form of additional share units are credited to the director’s account as of the date of payment of cash dividends on our Common Stock.


2019 Director Compensation

The following table shows the compensation paid to each of our non-management directors in 2019. Mr. Mattke, our CEO, and Mr. Sinks, our former CEO, were also directors in 2019 but received no compensation for service as a director.
Name
 
Fees Earned or
Paid in Cash
($)
(1)  
 
Total Stock Awards
($)
(2)
 
Total
($)
Daniel A. Arrigoni
 
202,000
 
100,000
 
302,000
Cassandra C. Carr
 
165,000
 
100,000
 
265,000
C. Edward Chaplin
 
168,000
 
100,000
 
268,000
Curt S. Culver
 
255,000
 
100,000
 
355,000
Jay C. Hartzell
 
42,500
 
26,600
 
69,100
Timothy A. Holt
 
206,000
 
100,000
 
306,000
Kenneth M. Jastrow, II
 
205,000
 
100,000
 
305,000
Jodeen A. Kozlak
 
168,000
 
100,000
 
268,000
Michael E. Lehman
 
206,000
 
100,000
 
306,000
Melissa B. Lora
 
202,000
 
100,000
 
302,000
Gary A. Poliner
 
211,000
 
100,000
 
311,000
Sheryl L. Sculley
 
42,500
 
26,600
 
69,100
Mark M. Zandi
 
160,000
 
100,000
 
260,000
(1)
The following directors elected to defer certain fees shown in this column into share units as described under " — Non-Employee Director Compensation Program — Deferred Compensation Plan and Annual Grant of Share Units" above: Ms. Kozlak elected to defer $61,333 of the fees and received 4,591 share units; and Mr. Poliner elected to defer $26,000 of the fees and received 1,932 share units.
(2)
The amount shown in this column for each director represents the grant date fair value of the annual share unit granted to non-employee directors in 2019 under our Deferred Compensation Plan, computed in accordance with FASB Accounting Standard Codification (“ASC”) Topic 718. The value of each share unit is equal to the value of our Common Stock on the grant date. See “— Non-Employee Director Compensation Program — Deferred Compensation Plan and Annual Grant of Share Units” above for more information about these grants.
Mr. Jastrow had 2,000 unvested stock awards outstanding as of December 31, 2019, which represents shares held under our 1993 Restricted Stock Plan for Non-Employee Directors
The aggregate number of vested and unvested stock awards outstanding as of March 6, 2020, for each director, is described under “Stock Ownership” above.


28 │ MGIC Investment Corporation – 2020 Proxy Statement



ITEM 2 – ADVISORY VOTE TO APPROVE OUR EXECUTIVE COMPENSATION

At our 2017 Annual Meeting, we held a non-binding, advisory shareholder vote on the frequency of future advisory shareholder votes on the compensation of our NEOs. Our shareholders expressed a preference that advisory shareholder votes on the compensation of our NEOs be held on an annual basis and, as previously disclosed, the Company continued the policy to hold such votes annually. Accordingly, as required by Section 14A of the Securities Exchange Act of 1934, we are asking shareholders to approve, on an advisory basis, the compensation of our NEOs as disclosed under the compensation disclosure rules of the SEC, including the CD&A, the compensation tables and any related material contained in this Proxy Statement.

We strongly believe you should approve our compensation in light of the factors discussed in the Executive Summary to the CD&A.

While this vote is advisory and is not binding, the Board and the Committee will review and consider the voting results when making future decisions regarding compensation of our NEOs. See “Investor Outreach and Consideration of Last Year’s ‘Say on Pay’ Vote” in the Executive Summary to our CD&A.

Shareholder Vote Required

Approval of the compensation of our NEOs requires the affirmative vote of a majority of the votes cast on this matter. Abstentions and broker non-votes will not be counted as votes cast.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE COMPENSATION OF OUR NEOs. SIGNED
PROXY CARDS AND VOTING INSTRUCTION FORMS WILL BE VOTED FOR THE
APPROVAL OF THE EXECUTIVE COMPENSATION UNLESS A SHAREHOLDER GIVES
OTHER INSTRUCTIONS ON THE PROXY CARD OR VOTING INSTRUCTION FORM.




MGIC Investment Corporation – 2020 Proxy Statement │ 29



COMPENSATION DISCUSSION AND ANALYSIS

In this CD&A, we describe the objectives and components of our executive compensation program for our NEOs, and how we make compensation decisions. Please refer to our Glossary of Terms and Acronyms in Appendix A to this Proxy Statement for definitions of certain capitalized terms.

In July 2019, the Board of Directors elected Timothy J. Mattke as our Chief Executive Officer. Mr. Mattke has served the Company since 2006, most recently as Executive Vice President and Chief Financial Officer. Mr. Mattke succeeded Patrick Sinks, who had served the Company for 41 years, most recently as President and Chief Executive Officer. In July 2019, the Board also elected Salvatore A. Miosi as President and Chief Operating Officer, and Nathaniel H. Colson as Executive Vice President and Chief Financial Officer. Mr. Miosi has served the Company since 1988, most recently as MGIC's Executive Vice President – Business Strategies & Operations. Mr. Colson has served the Company since 2014, most recently as MGIC's Vice President – Finance.

In connection with the leadership transition, the Committee of the Board adjusted these three executives’ compensation as discussed below under "Leadership Transition." When discussing the compensation of our CEO in this CD&A, unless otherwise indicated, we are referring to the compensation of our current CEO.

Our 2019 NEOs are shown in the table below:

Name
Title (as of December 31, 2019)
Timothy J. Mattke
Chief Executive Officer
Salvatore A. Miosi
President and Chief Operating Officer
Nathaniel H. Colson
Executive Vice President and Chief Financial Officer
James J. Hughes
Executive Vice President – Sales and Business Development*
Paula C. Maggio
Executive Vice President, General Counsel and Secretary
Patrick Sinks
Vice Chairman (July 25, 2019 January 31, 2020) and Former President and Chief Executive Officer (stepped down from position July 25, 2019)
Stephen C. Mackey
Former Executive Vice President and Chief Risk Officer (through May 6, 2019)
* Position is held with Mortgage Guaranty Insurance Corporation, a wholly owned subsidiary of the Company, and not with the Company.




30 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION DISCUSSION & ANALYSIS — Executive Summary

EXECUTIVE SUMMARY

Key Takeaways

Our 2019 financial and business performance was outstanding
Adjusted net operating income per diluted share for 2019 was $1.84, up 3.3% from 2018 ($1.78), with adjusted net operating income of $669.7 million, up slightly from 2018 ($668.7 million).(1)  Adjusted net operating income was a component of ROE, one of the financial performance measures that determined payouts under our 2019 annual bonus program, as described below under "Components of our Executive Compensation Program – Annual Bonus."
ROE for 2019 continued to be strong at 18.1%.(1)
New insurance written was $63.4 billion in 2019, up more than 25% from 2018 ($50.5 billion), and was one of the financial metrics that determined payouts under our 2019 bonus program. Aided in part by our new insurance written, our book of direct primary insurance in force, an important driver of our future revenue, grew by more than 6% in 2019.
Our GAAP book value per share grew by more than 23% in 2019. Growth in adjusted book value per share is used to determine vesting of our long-term equity awards. For a reconciliation of GAAP book value per share to the adjusted book value per share used to determine vesting of our long-term equity awards, see Appendix B.

Adjusted Net Operating Income
per Diluted Share(1) 
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Return on Equity(1) 
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(1)    Adjusted net operating income and adjusted net operating income per diluted share are non-GAAP measures of performance. For a description of how we calculate these measures and for a reconciliation of these measures to their nearest comparable GAAP measures, see Appendix B. For purposes of our 2019 bonus program, ROE is calculated as adjusted net operating income, divided by beginning shareholders' equity, excluding accumulated other comprehensive income (loss).


MGIC Investment Corporation – 2020 Proxy Statement │ 31


Executive Summary — COMPENSATION DISCUSSION & ANALYSIS

New Insurance Written(1) 
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GAAP Book Value Per Share(2) 
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(1)    Direct new insurance written (before the effects of reinsurance).
 
(2)    For a reconciliation of the book value per share shown above to the book value per share used to determine vesting of our long-term equity awards, see Appendix B.

The 2019 performance-based compensation we awarded to our NEOs was aligned with shareholder interests
Annual Bonus. Our NEOs' 2019 bonuses depended on performance against five performance metrics; each of those metrics was tied to our business strategies and aligned with shareholder interests.
 
The following two financial performance metrics had a total weight of 75% in determining the bonuses:
 
 
Return on Equity(1) had a weight of 45%. Full credit under the bonus calculation required a 21% ROE.
 
 
New Insurance Written had a weight of 30%. NIW received credit under the bonus calculation only if its expected risk-adjusted return on capital exceeded the Company's hurdle rate.
 
Three business performance objectives, discussed below under "Components of our Executive Compensation Program – Bonus," had a total weight of 25%. Each objective is directly related to our business strategies and strong performance is expected to lead to an increase in shareholder value over the long-term.
Long-Term Equity Awards. Our long-term equity awards:
 
Promote a long-term focus because cliff vesting occurs only after three years for the CEO, President and all EVPs.
 
Are aligned with shareholder interests because the ultimate value of any shares that vest will depend on our total shareholder return performance over the vesting period.
 
Reward multi-year performance because those awarded in our standard granting cycle require the Company to achieve a 16.4% compound annual growth in adjusted book value per share for full vesting.(1)
Performance-Based Compensation. As discussed below under "Components of our Executive Compensation Program," performance-based compensation represents the majority of our NEOs' TDC.
(1)
For purposes of the bonus calculation, ROE is calculated as adjusted net operating income divided by beginning shareholders' equity, excluding accumulated other comprehensive income (loss). Adjusted net operating income and adjusted book value per share are non-GAAP financial measures. For a description of how we calculate these measures and for a reconciliation of these measures to their nearest comparable GAAP measures, see Appendix B to this Proxy Statement.


32 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION DISCUSSION & ANALYSIS — Shareholder Outreach

Shareholder Outreach and Consideration of Last Year’s “Say on Pay” Vote

In each of the last two years, we have invited shareholders owning 70% of our stock to meet with us to discuss topics such as performance against our business strategies; environmental, social and governance ("ESG") matters; and our executive compensation program (and have met with shareholders owning 23% and 12% of our stock in 2019 and 2020, respectively). We value the views of our shareholders and intend to continue to engage with them and solicit their feedback. At the suggestion of our shareholders, we have made improvements to our executive compensation program over the past several years and have enhanced our environmental, social and governance ("ESG") reporting by publishing on our website our first ESG report.

At each of the 2017, 2018 and 2019 Annual Meetings, more than 95% of the Say on Pay votes cast were in support of the compensation of our NEOs. The Committee views these voting results as confirmation of shareholder support of our executive compensation program.


Compensation-Related Corporate Governance Policies and Best Practices

We have many compensation-related governance policies and best practices that we believe align our executive compensation with shareholder interests:
Stock Ownership Guidelines
è
Our stock ownership guidelines require our CEO to own Company stock equal in value to at least six times his base salary, and require our other NEOs to own Company stock equal in value to at least three times their base salaries. See "Other Aspects of our Executive Compensation Program" below for more information about the guidelines.
Post-Vesting
Stock Holding Requirements
è
Our NEOs and other executive officers are required to hold, for one year after vesting, the lower of 25% of shares that vest under equity awards and 50% of the shares that were received by the officer after taking account of shares withheld to cover taxes. Apart from what is required, we have had a culture of stock retention by senior executives. Excluding shares withheld from equity awards for income tax withholding, none of our current NEOs has sold our stock while an NEO. Upon Mr. Sinks stepping down from his role as our CEO, he sold a portion of his holdings in our stock; however, at year-end, his holdings still amounted to more than twelve times his base salary.
No Hedging, Pledging or
10b5-1 Plans
è
Our policies prohibit directors, NEOs, other officers and certain employees from entering into hedging transactions referencing the Company’s equity securities, holding Company securities in a margin account, or pledging Company securities as collateral for a loan. They also prohibit the use by those individuals of plans created pursuant to Rule 10b5-1 of the Securities Exchange Act which may otherwise have allowed such persons to sell our stock while in possession of material non-public information about us. For more information, see "Other Aspects of our Executive Compensation Program – Hedging, Pledging and 10b5-1 Plan Prohibitions" below.
High Percentage of Performance-Based Compensation
è
86% of our former CEO's actual 2019 TDC and 62% of our current CEO's actual 2019 TDC was tied to achievement of pre‑set performance goals. Excluding the time-vested long-term equity awards granted to our current CEO upon his election to that position (discussed below under "Leadership Transition"), which are not part of our standard long-term equity program, 80% of our current CEO's actual 2019 TDC was tied to achievement of pre-set performance goals.
Limited Perquisites
è
Our perquisites are very modest, ranging between approximately $800 and $7,600 in 2019 for our current NEOs.


MGIC Investment Corporation – 2020 Proxy Statement │ 33


Governance Policies and Best Practices — COMPENSATION DISCUSSION & ANALYSIS

Effective Use
of Equity Compensation with Low Burn Rate
and Dilution
è
The total equity awards granted to all participants under our 2015 Omnibus Incentive Plan in each of 2019 and January 2020 represented between approximately 0.5% and 0.6% of our outstanding shares at the prior December 31. The Company's dilution from outstanding awards was in the 10th percentile among all companies in the Benchmarking Peer Group (calculated as outstanding equity awards on December 31, 2019, as a percentage of weighted average total shares outstanding). Based on a “burn rate” methodology that uses the average of the total awards granted (after applying a multiple of 2.5 for RSUs versus options) and the weighted average number of shares outstanding during each of the last three completed years, our three-year average annual “burn rate” for 2017-2019 was approximately 1.2%.
Limited Change in Control Benefits
è
“Double trigger” is generally required for any benefits to be paid.
Equity awards may vest upon a change in control only if the Committee determines that the awards will not be assumed or replaced.
Cash severance does not exceed 2 times base salary plus bonus plus retirement plan accrual.
There is no excise tax gross-up provision.
Employment Agreements
è
None; we only provide the limited provisions referred to above that are effective after a change in control.
“Clawback” Policy
è
Our “clawback” policy applies to cash incentive compensation as well as equity award compensation received by our NEOs and other executive officers.
Compensation Consultant
è
The Compensation Consultant is retained by the Committee and performs no services for the Company, other than the consulting services to the Committee regarding executive compensation and non-employee director compensation.
Compensation Risk Evaluation
è
Annually, the Committee reviews an executive compensation risk evaluation designed to ensure that our compensation programs do not motivate excessive risk-taking and are not reasonably likely to have a material adverse effect on the Company.
Omnibus Incentive Plan
è
Our 2015 Omnibus Incentive Plan, approved by shareholders, and our 2020 Omnibus Incentive Plan, proposed for approval by shareholders at the 2020 meeting of shareholders, contain the following provisions:
•    No granting of stock options with an exercise price less than the fair market value of the Company’s common stock on the date of grant;
•    No re-pricing (reduction in exercise price) of stock options and no exchange of underwater stock options for another award or for cash, without shareholder approval;
•    No inclusion of reload provisions in any stock option grant;
•    No payment of dividends on performance-vested RSUs before they are vested;
•    No payment of dividends on time-vested RSUs before they are vested (2020 Plan only);
•    No single trigger vesting of awards upon a change in control in which the awards are assumed or replaced;
•    No recycling of shares withheld for tax purposes upon vesting; and
•    No Committee discretion to accelerate vesting of awards, except under certain limited instances like death, disability and retirement.


34 │ MGIC Investment Corporation – 2020 Proxy Statement



OBJECTIVES OF OUR EXECUTIVE COMPENSATION PROGRAM

In setting compensation, the Committee focuses on Total Direct Compensation (TDC), which consists of base salary, bonus (or non-equity incentive compensation) and equity awards (valued at their grant date value reported in the SCT).
The objectives of our executive compensation program are to:

Attract and retain high-quality executives. We want a competitive pay opportunity that provides for:
base salaries that are near the median of our Benchmarking Peers, and
bonus and long-term equity awards that, when performance is strong, move TDC above the median of our Benchmarking Peers to motivate and reward strong performance.

Align executive compensation with long-term shareholder interests. We align compensation and long-term shareholder interests by:
linking executive compensation to Company and executive performance; and
paying a substantial portion of TDC in:
§
bonuses that are at-risk and are based on specific goals that align payouts with Company performance, with quantitative financial metrics accounting for 75% of the bonus calculation and qualitative business goals, directly related to our business strategies, accounting for 25% of the bonus calculation; and
§
long-term equity awards, with vesting based on a three-year quantitative performance goal that aligns payouts with Company performance and whose value directly reflects our stock price. All of the long-term equity awards granted to our then-NEOs in our standard granting cycle in each of January 2018, 2019 and 2020, were 100% performance-vested and only vest after a three-year performance period. As described below under "Leadership Transition," in July 2019, certain NEOs received a one-time grant of RSUs that time-vest only after a three-year employment period.


HOW WE MAKE COMPENSATION DECISIONS

Role of the Management Development, Nominating and Governance Committee

The Committee, which consists solely of independent directors, is responsible for overseeing the development and administration of our executive compensation program. The Committee approves the compensation of our CEO and our other senior executives, and performs other tasks including:  
Reviewing and approving bonus and equity compensation goals and objectives;
Evaluating performance in light of these goals and objectives; and
Evaluating the competitiveness of the CEO’s total compensation package.

The Committee also supports the Board’s role in overseeing the risks facing the Company, as described in more detail above under “Committee Membership and Meetings — Board Oversight of Risk.”

The Committee is supported in its work by our CEO, our Chief Human Resources Officer, our General Counsel and the Committee’s Compensation Consultant, as described below. Our Chairman of the Board, who retired as our CEO in 2015 but now is not a member of our management, regularly participates in meetings of the Committee.



MGIC Investment Corporation – 2020 Proxy Statement │ 35


How We Make Compensation Decisions — COMPENSATION DISCUSSION & ANALYSIS

Role of the Compensation Consultant

The Committee has retained Frederic W. Cook & Co., a nationally recognized executive compensation consulting firm, to advise it. While our Chief Human Resources Officer coordinates its assignments, the Compensation Consultant reports directly to the Committee; the Committee retains authority to approve the compensation of the Compensation Consultant, determine the nature and scope of its services and evaluate its performance. The Compensation Consultant provides no services to the Company other than the consulting services to the Committee regarding executive compensation and non-executive director compensation. The Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant attends meetings of the Committee, as requested.

The Committee retains the Compensation Consultant to help it evaluate and oversee our executive compensation program and to periodically review the compensation of our directors. In connection with our executive compensation program, the Compensation Consultant provides various services to the Committee, including advising the Committee on the principal aspects of our executive compensation program and evolving industry practices and providing market information and analysis regarding the competitiveness of our program, including its relationship to performance.

The Compensation Consultant's work for the Committee during 2019 and early 2020 included:
An evaluation of NEO compensation compared to Benchmarking Peers;
Advice related to compensation adjustments made in connection with our leadership transition;
Advice about the annual bonus plan, including the goals and target performance incorporated into the formula that is used to determine payouts;
Advice about the long-term equity incentive program, including the level of awards granted under the program and the vesting provisions;
Advice regarding “best practice” compensation practices;
Review and analysis of our peer group used to evaluate our executive compensation;
Simulations of quantitative pay-for-performance models and review of policy statements of a leading proxy governance firm;
An evaluation of the costs and provisions of change in control benefits for executives;
Review of drafts of the CD&A and related compensation tables for the Proxy Statement; and
An evaluation of compensation for the non-employee directors compared to our Benchmarking Peers.

The Committee has assessed the independence of the Compensation Consultant pursuant to SEC and NYSE rules and concluded that its work for the Committee does not raise any conflict of interest.


Role of Officers

While the Committee is ultimately responsible for making all compensation decisions affecting our NEOs, our CEO participates in the process because the Committee views his input as necessary given his close day-to-day association with the other NEOs and his knowledge of our operations. Among other things, our CEO makes recommendations on the components of compensation for the NEOs, other than himself. Our CEO does not participate in the portions of Committee meetings regarding the review of his own performance or the determination of the amounts of his compensation or when the Committee members meet among themselves.

Our Chief Human Resources Officer and our General Counsel also participate in the Committee’s compensation process. Our Chief Human Resources Officer is responsible for coordinating the work of the Compensation Consultant for the Committee and the annual preparation of an executive compensation risk evaluation. He maintains knowledge of executive


36 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION DISCUSSION & ANALYSIS — How We Make Compensation Decisions

compensation trends, practices, rules and regulations and works with our General Counsel on related legal and tax compliance matters as well as on other matters related to executive compensation. The Committee receives information from management that includes: detailed breakdowns of the compensation of the NEOs; the amount, if any, that our NEOs realized during the period they were NEOs from sales of stock received upon vesting of equity awards; the total amount of stock and RSUs held by each NEO; and the other compensation information disclosed in this Proxy Statement.


BENCHMARKING

To provide the Committee with a framework for evaluating compensation levels for our NEOs against market practices, the Compensation Consultant periodically prepares reports analyzing compensation data for our Benchmarking Peers. In addition, each year we provide the Committee with information regarding market trends and expected executive base salary changes for the coming year. The compensation surveys that we reviewed and, with the concurrence of the Compensation Consultant, summarized in the aggregate for the Committee in connection with establishing base salaries for 2019 were published by AON Hewitt, Mercer Consulting, Willis Towers Watson and World at Work.

Changes to our Peer Group

The U.S. mortgage insurance industry has only six public companies, including us. Therefore, the Committee has found it necessary to include companies from outside the mortgage insurance industry when constructing our group of Benchmarking Peers. Historically, surety and title insurers have been included in the group because, like mortgage insurers, they have significant exposure to the residential real estate market.

Two of our peers merged in 2018, decreasing the size of our peer group to thirteen companies. At the recommendation of the Compensation Consultant, the Committee chose to maintain our peer group for purposes of benchmarking 2019 and 2020 executive compensation.



MGIC Investment Corporation – 2020 Proxy Statement │ 37


Benchmarking — COMPENSATION DISCUSSION & ANALYSIS

Why the selected peers are appropriate for benchmarking purposes

Our Benchmarking Peer Group is shown below. We believe these companies are appropriate for benchmarking our executive compensation for the reasons shown in the table below.
MGIC Peer Group
 
Mortgage Insurer - Direct Competitor(1)
Direct Exposure to Residential Real Estate Market
Industry in which we Compete for Talent
Chose us as a Peer
Business
Ambac Financial Group, Inc.
 
 
X
X
X
Financial Guaranty Insurer
Arch Capital Group Ltd.
 
X
X
X
 
Includes Mortgage Insurer
Assured Guaranty Ltd.
 
 
X
X
X
Financial Guaranty Insurer
Essent Group Ltd.
 
X
X
X
X
Mortgage Insurer
Fidelity National Financial Inc.
 
 
X
X
 
Title Ins & Other R.E. Services
First American Fin'l Corp.
 
 
X
X
 
Title Ins & Other R.E. Services
Flagstar Bancorp Inc.
 
 
X
X
 
Mortgage Orig & Svg; Banking
Genworth Financial Inc.
 
X
X
X
X
Includes Mortgage Insurer
MBIA Inc.
 
 
X
X
X
Financial Guaranty Insurer
NMI Holdings Inc.
 
X
X
X
X
Mortgage Insurer
Ocwen Financial Corp.
 
 
X
X
X
Mortgage Svg & Lending
PennyMac Fin'l Services Inc.
 
 
X
X
X
Mortgage Svg & Lending
Radian Group Inc.
 
X
X
X
X
Mortgage Insurer
(1)
Parent companies of direct competitors whose overall results are principally or significantly impacted by these competitors.

As shown in the table below, we are reasonably comparable in terms of market capitalization, revenues and CEO TDC to the companies in our Benchmarking Peer Group.
MGIC Percentile Rank Versus Benchmarking Peer Group
 
12/31/19 Market Capitalization
64th
2019 Revenue
51st
Current CEO TDC(1)
19th
Former CEO TDC(1)
24th
(1)
Represents the annualized 2019 TDC for our current CEO for the period of time he was CEO; 2019 TDC for our former CEO; and 2018 TDC for our Benchmarking Peer Group because that was the latest TDC information available when this report was prepared.


Why we do not include property and casualty insurers in our Benchmarking Peer Group
A leading proxy advisory service compares our CEO's compensation to the compensation of CEOs in a peer group that it constructs for us. That peer group includes a number of property and casualty insurers. We do not include property and casualty insurers in our Benchmarking Peer Group because those companies: (1) are not subject to residential mortgage risk or the residential real estate market to the same extent as are we or our Benchmarking Peers, (2) are not the companies with which we compete for executive talent, and (3) do not select us as a benchmarking peer. In addition, we do not believe comparing us to that peer group is appropriate because we are generally larger in market capitalization and revenues: as of December 31, 2019, our market capitalization was in the 92nd percentile of the proxy advisory service-constructed peer group (2.2 times the median) and our revenues were in the 56th percentile of that group.


38 │ MGIC Investment Corporation – 2020 Proxy Statement



LEADERSHIP TRANSITION

As discussed in the introduction to this CD&A, in July 2019, the Board of Directors elected Timothy J. Mattke as our Chief Executive Officer, Salvatore A. Miosi as our President and Chief Operating Officer, and Nathaniel H. Colson as our Executive Vice President and Chief Financial Officer.

In determining the compensation adjustments to be made in connection with the leadership transition, the Committee consulted with the Compensation Consultant. Based on its prior work with the Committee regarding the Company’s compensation program and design, including benchmarking, and internal pay equity considerations, the Compensation Consultant recommended and the Committee approved the following compensation adjustments:

The Committee reaffirmed the Company's fundamental compensation program, consisting of a base salary administered within a base salary range with a midpoint near the median level of an executive's Benchmarking Peer Group counterparts, an annual incentive opportunity based on objective financial and operational performance criteria, and long-term equity awards consisting of performance-based RSUs.
Effective upon their promotions, the Committee adjusted base salaries and maximum potential annual bonuses for Messrs. Mattke, Miosi and Colson, to be more competitive with their new roles: Salaries and maximum bonuses were increased to $775,000 and 3x, $620,000 and 2.75x, and $275,000 and 1.8x for Messrs. Mattke, Miosi and Colson, respectively.
In connection with the leadership transition, the Committee also granted, to the following executives, a one-time award of RSUs that cliff vest in July 2022, which are designed for retention and to provide additional alignment with shareholders: Mr. Mattke – 75,000 RSUs; Mr. Miosi – 60,000 RSUs; Mr. Colson – 20,000 RSUs and Mr. Hughes – 37,500 RSUs.
As part of our succession plan, Mr. Sinks played a critical role by acting as Vice Chairman during his tenure in that position. This helped to ensure a smooth transition of his prior responsibilities as CEO to Mr. Mattke. For the five months that Mr. Sinks served as our Vice Chairman during 2019, he continued to participate in our executive compensation program at the same base salary and potential annual bonus levels.


COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM

Each of the components of our executive compensation is discussed below. To meet our objective of aligning compensation and shareholder interests, our executive compensation program includes an annual bonus program that is tied to performance against the Company's business strategies, and long-term equity awards with vesting tied to growth in the Company's adjusted book value per share and whose ultimate value reflects our stock price. As shown in the charts below, performance-based, at-risk compensation represented a large percentage of our CEO's 2019 total direct compensation (TDC): it represented 86.4% of our former CEO's actual 2019 TDC and 61.7% of our current CEO's actual 2019 TDC. Excluding the time-vested long-term equity awards granted to our current CEO at the time of his election to that position, which are not part of our standard long-term equity program, 80% of our current CEO's actual 2019 TDC was performance-based and at-risk.



MGIC Investment Corporation – 2020 Proxy Statement │ 39


Components — COMPENSATION DISCUSSION & ANALYSIS

Former CEO 2019 Pay Mix (% of TDC)
At-Risk Performance-Based Pay: 86.4%
https://cdn.kscope.io/5ad2b80b33a8f9054d2277e811a81203-chart-e908703331d48909f1ba05.jpg


 
Current CEO 2019 Pay Mix (% of TDC)
At-Risk Performance-Based Pay: 61.7%*
https://cdn.kscope.io/5ad2b80b33a8f9054d2277e811a81203-chart-dd457d207687f5596e4a05.jpg
* Excluding the time-vested long-term equity awards granted to our current CEO upon his election to that position, which are not part of our standard long-term equity program, 80% of our current CEO’s actual 2019 TDC was performance-based and “at-risk.”



Base Salary

Our general philosophy is to target base salary range midpoints for our executive officers near the median levels of their Benchmarking Peer Group counterparts. In considering any change to our CEO’s compensation, including base salary, the Committee takes into account market competitiveness, tenure in position and its evaluation of his performance. Such evaluation is based in part on a CEO evaluation survey completed by each non-management director. Subjects covered by the evaluation include financial results, leadership, strategic planning, succession planning, community and industry involvement, and communications and relations with the Board. Base salary changes for our other NEOs are recommended to the Committee by the CEO based on his evaluation of each NEO’s performance and the base salary surveys referred to under “Benchmarking” above. The Committee approves changes in salaries for NEOs after taking into account the CEO’s recommendations and the Committee's independent judgment regarding the NEOs gained through the Committee’s general contact with them, including contact through Board meetings.

In early April 2019, each of our then-NEOs at that time received a merit salary increase of approximately 3%. In connection with the leadership transition in July 2019, Messrs. Mattke, Miosi, and Colson received promotional salary adjustments.

See "Leadership Transition" above for a discussion of salary adjustments made upon the promotion of Messrs. Mattke, Miosi and Colson to their current roles.


Annual Bonus

Our bonus program is designed to strongly align pay delivery with our performance, as defined by achievement of our annual financial goals and business objectives.

Maximum Bonus Opportunity. In determining TDC opportunity, the Committee has weighted bonus opportunities more heavily than base salaries because bonuses are more directly linked to Company performance. Bonus opportunity generally represents a multiple of the base salary amount approved by the Committee in January that becomes effective in March or April of the year for which the bonuses are awarded. Such base salary amounts will not be the same as the base salary amounts disclosed in the SCT due to the effects of the March or April pay increases and variability in the number of pay periods in each calendar year. Messrs. Mattke, Miosi and Colson were each promoted during 2019; their bonus multiples were prorated for the time they were in each of their positions during 2019.


40 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION DISCUSSION & ANALYSIS — Components — Annual Bonus

Maximum Bonus Opportunity (Multiple of Base Salary)
Executive
Before July 2019
Leadership Transition
After July 2019
Leadership Transition
Prorated
Timothy J. Mattke
2.25
3.00
2.56
Salvatore A. Miosi
2.25
2.75
2.46
Nathaniel H. Colson
0.60
1.80
1.10
James J. Hughes
2.25
2.25
2.25
Paula C. Maggio
1.80
1.80
1.80
Patrick Sinks
3.00
3.00
3.00


As shown in the table below, our CEO's maximum bonus opportunity is in line with our Benchmarking Peers' practices.
CEO Maximum Bonus Opportunity (Multiple of Base Salary)
 
Benchmarking Peer Group (source: 2019 Proxy Statements)
MGIC
25th percentile
Median
75th percentile
3.00
2.63
3.00
3.64



Calculation of 2019 Bonus. As shown in the table below, the bonus formula for 2019 had two financial performance goals (with a total weight of 75%) and three business objectives (with a total weight of 25%). Each business objective is directly related to our business strategies and strong performance is expected to lead to an increase in shareholder value over the long-term. Threshold, target and maximum performance levels were established for each financial performance goal. Actual performance at such levels would result in 0%, 50% and 100% achievement, respectively, for that goal, with actual achievement between these levels calculated by interpolation. The percentages determined by the Company’s actual 2019 performance for each financial performance goal were multiplied by assigned weights to determine a weighted score for that goal. For the business objectives, the Committee reviewed management’s written report of the Company’s activities with respect to each objective and the related score, which was accepted by the Committee.



MGIC Investment Corporation – 2020 Proxy Statement │ 41


Components — Annual Bonus — COMPENSATION DISCUSSION & ANALYSIS

2019 Bonus Percentage
 
 
 
 
 
 
 
 
 
 
Maximum Possible Score (Weight)
 
Weighted Score
 
2019 Performance Levels
Actual 2019
 
 
Threshold
Target
Maximum
Score
Financial Performance Goals:
 
 
 
 
 
 
 
Return on Equity
10.0%
13.5%
21.0%
18.1%
60

48.4

 
New Insurance Written (billions)
$42.0
$52.0
$55.0
$64.9
40

40.0

 
Total
 
 
 
 
100
%
88.4

 
Times: Total Weight of Financial Performance Goals
 
 
 
 
X 75%

66.3
%
 
 
 
 
 
 
 
 
Business Objectives:
 
 
 
 
 
 
 
Capital Position
For a discussion of performance against these business objectives, see "Performance Against Business Objectives"
 
 
 
Manage Role of MI in Housing Policy
 
 
 
Develop Co-Workers
 
 
 
Total
 
 
 
 
100
%
80.0

 
Times: Total Weight of Business Objectives
 
 
 
 
X 25%

20.0
%
2019 Bonus Percentage
 
 
86.3
%

The aggregate weighted financial and business performance scores resulted in a preliminary bonus percentage of 86.3%. The Committee has discretion to adjust the preliminary bonus percentage up or down by as much as 10 percentage points, but did not do so. Each executive who was an NEO at year-end received 86.3% of his or her maximum bonus, as prorated based on the date of the leadership transition discussed above. The CEO recommends to the Committee a bonus for each of the other NEOs, which takes into account the bonus formula and the CEO’s evaluation of each NEO’s performance. The Committee, which has regular contact with the NEOs through their interaction with the Board, accepted the CEO’s recommendation and approved bonuses for the other NEOs.

Included in the payments to be made to Mr. Mackey, upon his separation of service from the Company, was an amount equal to the then-forecasted 2019 bonus percentage, pro-rated for his employment period in 2019. That amount is included in "All Other Compensation" in the Summary Compensation Table.



42 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION DISCUSSION & ANALYSIS — Components — Annual Bonus

Performance Against Business Objectives. As shown in the table below, in 2019, the Company achieved favorable results against the business objectives used to determine the 2019 bonuses of our NEOs.

Business Objective
 
Results
Capital Position - Manage and deploy capital to optimize creation of shareholder value.
»
Executed a $316 million insurance linked note transaction, our second such post-financial crisis transaction, which provides an alternative source of capital, and enables the Company to enhance its returns and better manage its risk profile.
Increased dividends from MGIC to our holding company from $220 million in 2018 to $280 million in 2019.
Re-started the payment of quarterly dividends by our holding company, after having suspended such payments during the financial crisis.
Repurchased 8.7 million shares of our common stock, returning $114 million to shareholders.
MGIC received an upgrade in its financial strength rating from Moody's Investors Service (from Baa2 to Baa1).
Developing Co-Workers - Develop and diversify the talents of co-workers.
»
Executed on the Company's succession plan for key roles in the organization, including Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer and Chief Risk Officer, promoting all such officers from within the organization.

Delivered training workshops designed to build strategic capabilities which enhance performance.

Continued to enhance career developments, talent analytics and financial health capabilities for employees.
Role in Housing Finance Industry - Preserve and expand the role of the Company and private mortgage insurance in housing finance policy.
»
Held leadership roles in key trade association working groups.                              
Continued to enhance the reputation of the Company and the industry relative to changing housing finance policy and a broader role for private mortgage insurance.

Setting Our Financial Performance Goals. The Committee chose return on equity and new insurance written as the financial performance goals used in the 2019 bonus plan to provide an incentive for bottom line and top line growth and for consistency with the 2018 bonus plan. In 2017 and 2019, our Investor Relations department engaged a consulting firm to conduct an investor perception study for us. In 2017 most investors (60-65%) responding to the survey indicated that they consider return on equity and book value growth rate to be the most appropriate measures of performance for the Company. In 2019, investors indicated they consider those metrics to be among the top three most important metrics, but also indicated that risk-adjusted return on capital (RAROC) over the estimated life of a book of insured business was an appropriate measure. These results confirmed to us the appropriateness of our use, for our bonus plan, of the return on equity metric and the RAROC hurdle rate associated with our NIW metric. It also confirmed the appropriateness of our use, for vesting of long-term equity awards, of a book value growth metric. Following is a description of how the performance levels for our bonus plan's financial goals were established.


Return on Equity ("ROE")
As noted above, two of the objectives of our executive compensation program are to link compensation to Company performance and to design incentives so that the TDC of our NEOs moves above the median of our Benchmarking Peers when performance is strong. When the Committee established the ROE performance levels for the 2019 bonus plan, it considered those objectives. The amount by which each of the Company's threshold, target and maximum ROE performance levels exceeded the average ROE earned by its Benchmarking Peers, as well as the Company's cost of capital, confirmed the Committee's January 2019 view that the ROE performance levels were appropriately rigorous.


MGIC Investment Corporation – 2020 Proxy Statement │ 43


Components — Annual Bonus — COMPENSATION DISCUSSION & ANALYSIS

ROE Performance Levels for Company's Bonus Plan Compared to Benchmarks
 
Company's Threshold ROE (for no bonus payout)(1)
10.0
%
Company's Target ROE (for 50% bonus payout)(1)
13.5
%
Company's Maximum ROE (for 100% bonus payout)(1)
21.0
%
Average 2018 ROE of Company's Benchmarking Peers(2)
8.8
%
(1)
For purposes of the bonus plan, we calculate ROE as adjusted net operating income, divided by beginning shareholders' equity, excluding accumulated other comprehensive income (loss). Adjusted net operating income is a non-GAAP measures of performance. For a description of how we calculate this measure and for a reconciliation of this measure to its nearest comparable GAAP measures, see Appendix B.
(2)
Represents 2018 Net income available to common shareholders, adjusted (from Bloomberg), divided by beginning shareholders' equity, excluding accumulated other comprehensive income (loss).

The Company's 2019 target ROE of 13.5% (for 50% bonus payout) and maximum ROE of 21.0% (for 100% bonus payout) are reasonable compared to the Company's 2018 actual ROE, after adjusting to reflect the increase in beginning shareholders' equity before accumulated other comprehensive income (loss) ($3.7 billion in 2019 vs. $3.2 billion in 2018) and to reflect the 2018 favorable development experienced in our loss reserves associated with insured mortgages that became delinquent prior to January 1, 2018 (no amount of favorable loss reserve development was forecast to occur in 2019). For year-over-year comparison purposes, these adjustments reduce 2018 actual ROE from 20.9% to 14.5%.

In determining the bonus percentage, the Committee considers significant events that occurred during a performance period and may revise performance metrics if the Committee expects that such significant events will have a substantial effect on the performance metrics. The Company engaged in a stock repurchase program in 2019, however, that program did not have an effect on the Company's ROE metric because ROE is calculated as adjusted net operating income, divided by beginning shareholders' equity (which is not affected by share repurchases).


New Insurance Written ("NIW") (billions)
MGIC 2019 NIW Performance Levels (billions)
Threshold (for no bonus payout)
Target (for 50% bonus payout)
Maximum (for 100% bonus payout)
$42
$52
$55

Our 2019 NIW target performance level of $52 billion (for 50% bonus payout) was set slightly above our 2018 actual NIW of $50.5 billion, while the maximum performance level required an 8.9% increase over our 2018 actual NIW. In establishing this level of NIW, the Committee evaluated our prior year's results, including that our 2018 actual NIW was at the highest level since 2007 and increased by $1.4 billion over 2017 (a 2.9% increase). The increase in the target performance level, after such results in 2018, reflects the Committee's focus on ensuring that the goal are appropriately rigorous.


44 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION DISCUSSION & ANALYSIS — Components — Annual Bonus


CEO 2019 Bonus Alignment and Benchmarking Results. The following chart illustrates that our CEO's bonuses have been reasonable when viewed in relationship to the strong growth in the Company's adjusted net operating income and the five-year increase in our stock price. The high volatility of our stock price (its three year, monthly beta was in the top 35% of the Russell 3000 in December 2019 and our stock previously had the second highest beta in that index) makes it problematic to evaluate pay for performance alignment for us by measuring stock price performance over a single year.

 
https://cdn.kscope.io/5ad2b80b33a8f9054d2277e811a81203-bonusalignment2.jpg
 
 
Notes: (1) Adjusted net operating income (loss) is a non-GAAP financial measure. For a description of how we calculate this measure and for a reconciliation of this measure to its nearest comparable GAAP measure, see Appendix B to this Proxy Statement.
(2) For comparability between periods, the bonuses of our former and current CEOs are provided.
 

The following chart demonstrates that the Company's ROE continued to exceed the average ROE of its Benchmarking Peers and the peer group constructed for the Company by a leading proxy advisory service. The Company's 2019 ROE was in the 57th percentile of its Benchmarking Peers and in the 69th percentile of the proxy advisory service-constructed peer group. The chart also demonstrates the reasonableness of our current CEO's compensation, in terms of dollars of pretax income earned by the Company per dollar of TDC earned by our current CEO, when compared to the average for those same peer groups. The Company's 2019 pretax income per dollar of our CEO's 2019 TDC was in the 89th percentile of the Benchmarking Peers and in the 95th percentile of the proxy advisory service-constructed peer group.

https://cdn.kscope.io/5ad2b80b33a8f9054d2277e811a81203-chart-2e69248f8ba154f6b9aa05.jpg
 
Note: Reflects 2019 ROE for all companies, as reported by Bloomberg, which differs from the calculation of ROE for bonus purposes. Pretax Income per dollar of TDC reflects 2019 pretax income for all companies, annualized 2019 TDC data for our current CEO for the time he was in that position, and 2018 TDC data for the peer groups because that was the latest TDC information available when this report was prepared.
 


MGIC Investment Corporation – 2020 Proxy Statement │ 45


Components — Long-Term Equity — COMPENSATION DISCUSSION & ANALYSIS

Long-Term Equity Awards

Background Considerations. Consistent with our belief that there should be a strong link between earned compensation and long-term performance, long-term equity awards provide one of our most significant TDC opportunities. We emphasize this component of our executive compensation program because it aligns executives’ interests with those of shareholders by linking compensation to both company performance and total shareholder return, while fostering a long-term planning horizon and supporting the retention of our leadership team. Performance-based long-term equity awards at their grant date value represented 51% of the 2019 TDC of our former CEO, 27% of the 2019 TDC of our current CEO, and averaged 37% of the 2019 TDC of our other current NEOs. Time-vested long-term equity awards at their grant date represented 23% of the 2019 TDC of our current CEO, and averaged 22% of the 2019 TDC of our other current NEOs who received them. Excluding the time-vested long-term equity awards granted in connection with our leadership transition discussed above, which are not part of our standard long-term equity program, 35% of the 2019 TDC of our current CEO and, on average, 45% of the 2019 TDC of our other current NEOs was in the form of performance-based long-term equity awards.

Our CEO's long-term equity awards have traditionally been in line with our Benchmarking Peers' practices. The following table shows how the Company's grant date value of long-term equity awards to our CEO compares to the awards to the CEOs of our Benchmarking Peer Group. As a result of our stock price volatility, the date on which equity awards are made significantly affects the calculation of total compensation in the SCT and, as a result, the analysis of pay for performance alignment. As noted above, our stock’s volatility is the top 35% of stocks in the Russell 3000, and has been the second highest in that index. For example, based on the high and low closing prices of our stock during 2019, the SCT value of our former CEO’s 2019 equity grant would have ranged between the 5th and 28th percentile of 2018 long-term incentive compensation among our Benchmarking Peer Group.

MGIC's CEO Long-Term Equity Awards - Percentile Rank Among our Benchmarking Peers
 
Target # of RSUs Granted(1)
Grant Date Value
MGIC Grant Date Stock Price
MGIC Percentile Rank
2017 Long-Term Equity Awards
243,320
$2,532,961
     $10.41
44th
2018 Long-Term Equity Awards
264,880
$4,187,753
     $15.81
26th
2019 Long-Term Equity Awards - Former CEO
287,000
$3,375,120
     $11.76
7th(2)
2019 Long-Term Equity Awards - Current CEO
173,400
$2,144,934
     $12.37(3)
1st(2)
(1)
Represents a portion of the RSUs granted, calculated based on the probable outcome of the applicable performance conditions as of the grant date.
(2)
2018 awards as reported in 2019 proxy statements are used for Benchmarking Peers because that is the most recent information that is available.
(3)
Represents the weighted average stock price on the two dates on which awards were granted.

Below is a discussion of our 2019 long-term equity awards and a discussion of our 2018 and 2017 long-term equity awards, which is provided for comparison purposes and because a portion of the long-term equity awards granted in those years either vested based on 2019 performance or remain outstanding.

2019 Long-Term Equity Awards

2019 Cliff BV Awards. To align our long-term equity awards with the interests of shareholders, 100% of the long-term equity awards granted in January 2019 to our then-NEOs and executive officers (Messrs. Mattke, Miosi, Hughes, Sinks and Mackey and Ms. Maggio) are performance-based and cliff vest after three years based on percentage achievement of a three-year cumulative adjusted book value ("ABV") per share growth goal. A 16.4% compound annual growth in ABV (or $6.02 per share growth) is required for 100% vesting. No growth in ABV would result in 0% vesting. The actual vesting percentage is determined by interpolation based on where the actual growth in ABV per share falls between $0.00 and $6.02.



46 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION DISCUSSION & ANALYSIS — Components — Long-Term Equity

Book value growth was chosen as the performance goal, in part because of its simplicity and relevance to management and investors. Book value growth measures cumulative build-up of equity in the Company; we believe its use as a metric aligns executive compensation with the financial strength of the Company. As noted above, most investors responding to an investor perception study performed for us indicated that they consider book value growth to be among the most appropriate measures of performance for the Company. These results confirmed to us the appropriateness of our use of a book value growth metric for vesting of long-term equity awards.

ABV per share is a non-GAAP financial measure. For a description of how we calculate this measure for each equity award and a reconciliation of this measure to its nearest comparable GAAP measure, see Appendix B to this Proxy Statement.

2019 Cliff Time-Vested Awards. In July 2019, we executed on our leadership transition and promoted internal candidates to the positions of CEO (Mr. Mattke); President and Chief Operating Officer (Mr.  Miosi); and Chief Financial Officer (Mr. Colson). In connection with the management realignment, the Committee, after consulting with our Compensation Consultant, made the one-time grant of cliff vested restricted stock units described above under "Leadership Transition." Those RSUs vest in July 2022, subject to continued employment with the Company, and are reflected in the 2019 Grants of Plan Based Awards Table.

2019 Other Awards. In January 2019, prior to his becoming an NEO, Mr. Colson was awarded a combination of BV Awards and Time Vested Awards, consistent with the grant-type mix and design terms for awards provided to participants at the Vice president level. Vesting of the BV Awards, which represent 60% of the long-term equity awards granted to Mr. Colson in January 2019, will occur over a three-year period, based on achievement of the same three-year cumulative ABV per share growth goal that was used for 2019 Cliff BV Awards to NEOs. However, partial vesting of the BV Awards to Mr. Colson may occur annually (up to a maximum of 1/3 for the first year and 2/3 for the first and second years combined) based on progress against the three-year cumulative goal. The actual vesting percentage is determined by interpolation based on where the actual growth in ABV per share falls between $0.00 and $6.02. The Time-Vested Awards, which represent 40% of the long-term equity awards granted to Mr. Colson in January 2019, will vest ratably in each of the three years after grant, subject to continued employment with the Company.

2018 and 2017 Long-Term Equity Awards.

2018 and 2017 Cliff BV Awards. These were awarded in January 2018 and January 2017 to then-NEOs and executive officers (Messrs. Mattke, Miosi, Hughes, Sinks and Mackey) and each cliff vest after three years based on achievement of a three-year cumulative ABV per share growth goal. A 16.4% and 13.5% compound annual growth in ABV is required for 100% vesting of the 2018 and 2017 long-term equity awards, respectively. No growth in ABV would result in 0% vesting. The actual vesting percentage is determined by interpolation based on where the actual growth in ABV per share falls between $0.00 and $4.98 for the 2018 awards, and between $0.00 and $3.56 for the 2017 awards.

2018 and 2017 Time Vested Awards. In July 2018, upon her joining the Company, Ms. Maggio was awarded a one-time long-term equity award of 20,000 RSUs, which will vest ratably in each of the three years after grant, subject to continued employment with the Company. In each of January 2017 and 2018, prior to his becoming an NEO, Mr. Colson was awarded a long-term equity award of 2,000 RSUs, which will vest ratably in each of the three years after grant, subject to continued employment with the Company.


MGIC Investment Corporation – 2020 Proxy Statement │ 47


Components — Long-Term Equity — COMPENSATION DISCUSSION & ANALYSIS


The table below shows:
the three-year cumulative goal for vesting of the 2019, 2018 and 2017 Cliff BV Awards, and
the growth in ABV per share as of the end of 2019, as calculated for the awards;
2020 vesting percentage for the 2017 awards; no 2018 or 2019 grants will vest until the end of their three-year performance period

Growth in Adjusted Book Value per Share for 2019, 2018 and 2017 Cliff BV Awards
 
 
3-year Cumulative Goal
2017-2019 Actual Growth
2018-2019 Actual Growth
2019 Actual Growth
Vesting %
2019 Equity Awards
$6.02
 
 
$1.96
 
2018 Equity Awards
$4.98
 
$3.58
 
 
2017 Equity Awards
$3.56
$4.26
 
 
100%

With respect to all of the long-term equity awards, dividends are not paid currently, but when awards vest, a payment is made equal to the dividends that would have been paid during the performance period for those vested awards.


Pension Plan

Our executive compensation program includes a qualified pension plan and a supplemental executive retirement plan. We believe retirement plans are an important element of a competitive compensation program. These plans compute retirement benefits based only on current cash compensation (salary and annual bonus) and therefore do not include long-term incentives that can result in substantial increases in pension value. We also offer a broad-based 401(k) plan to which we make contributions in cash. A description of our pension plan can be found following the table titled “Pension Benefits at 2019 Fiscal Year-End” in “Compensation and Related Tables” below.

Perquisites

To avoid an entitlement mentality, the perquisites we provide are minimal, ranging from $800 to $7,600 in 2019 for our current NEOs. The 2019 perquisites included club dues and expenses, a parking space at our headquarters and spousal travel in connection with conferences and Board meetings.


 

OTHER ASPECTS OF OUR EXECUTIVE COMPENSATION PROGRAM

No Employment Agreements

Our CEO and other NEOs do not have employment agreements other than those discussed below that become effective upon a change in control. The Company entered into a Separation Agreement with Mr. Mackey effective May 14, 2019 and described in our Current Report on Form 8-K filed with the SEC on May 17, 2019.

Stock Ownership by Named Executive Officers

Stock Ownership Guidelines. We have stock ownership guidelines for our executive officers to encourage them to maintain an ownership interest in the Company and to mitigate potential risks from incentive arrangements. Stock considered owned consists of shares owned outright by the executive (including shares in the executive's account in our 401(k) plan), and unvested RSUs projected to vest within one year.



48 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION DISCUSSION & ANALYSIS — Other Aspects

The stock ownership guidelines require ownership of stock valued at six times base salary for our CEO and stock valued at three times base salary for the other NEOs. Until the guideline is met, an NEO must not dispose of the portion of shares received upon vesting of equity awards equal to the lower of 25% of the shares that vested and 50% of the shares that were received by the NEO after taking account of shares withheld to cover taxes.

The table below shows the guidelines, shares considered owned as of December 31, 2019 for purposes of the guidelines, and the multiple of base salary represented by that ownership for our current CEO and all other current NEOs.
 
Guideline
(value of shares)
Actual Ownership
(value at 12/31/19)
Actual Ownership
as a Multiple of
Base Salary
CEO
$4,650,000
$5,353,738
6.9
Total Other Current NEOs
$5,197,200
$6,627,677
3.8

Equity Holding Post-Vesting Requirement. A portion of equity awards granted to our NEOs and other executive officers must not be sold for one year after vesting. The number of shares that must not be sold is the lower of 25% of the shares that vested and 50% of the shares that were received by the officer after taking account of shares withheld to cover taxes. The holding period may end before one year if the officer is no longer required to report their equity transactions to the SEC. The holding period does not apply to involuntary transactions, such as would occur in a merger, and for certain other dispositions.

Excluding shares withheld from equity awards for income tax withholding, none of our current NEOs has sold our stock while an NEO. Upon Mr. Sinks stepping down from his role as our CEO, he sold a portion of his holdings in our stock; however, as of December 31, 2019, his holdings still amounted to more than twelve times his base salary.

Hedging, Pledging and 10b5-1 Plan Prohibitions

Our hedging policy applies to our directors, NEOs, all other officers and certain other employees (generally, those who have regular access to material nonpublic information about the Company that gets incorporated into the Company’s periodic releases and reports), as well as their family members and entities that they control or influence. Under our hedging policy, the covered individuals/entities may not enter into hedging transactions designed to hedge or offset a decrease in the value of "Company Securities" or of vested or unvested restricted stock units (whether cash- or stock-settled). The definition of "Company Securities" includes the Company's common stock, options to purchase common stock, units in the MGIC stock fund within the Company's Profit-Sharing and Savings Plan, and convertible debentures, as well as derivative securities that are not issued by the Company, such as exchange-traded put or call options or swaps relating to the Company's securities. The hedging policy includes the following non-exhaustive list of examples of prohibited hedging transactions: forward sale contracts, equity swaps and credit defaults swaps relating to Company Securities. Financial instruments that hedge general industry risk or whose underlying security is that of an unrelated company are specifically not prohibited.

Under our pledging policy, the same individuals/entities who are subject to our hedging policy may not hold Company Securities in a margin account or pledge Company Securities as collateral for a loan. Our insider trading policy prohibits the use by those individuals/entities of plans created pursuant to Rule 10b5-1 of the Securities Exchange Act which, for example, may otherwise have allowed such persons to sell our stock while in possession of material undisclosed information about us.

“Clawback” Policy

Under our “clawback” policy, the Company will seek to recover from any NEO or other executive officer, to the extent the Committee deems appropriate, amounts associated with cash incentive compensation that was earned and equity awards that vested based on achievement of a performance goal if a subsequent financial restatement shows that such compensation should not have been paid.


MGIC Investment Corporation – 2020 Proxy Statement │ 49


Other Aspects — COMPENSATION DISCUSSION & ANALYSIS


Change in Control Provisions

Each of our NEOs is a party to a Key Executive Employment and Severance Agreement with us (a “KEESA”), as described in the section titled “Potential Payments Upon Termination or Change-in-Control – Change in Control Agreements” below. No executive officer has an employment or severance agreement, other than a KEESA. The period for which our KEESAs provide employment protection ends on the third anniversary of the date of a change in control. Our KEESAs provide for a cash payment in two lump sums (or one lump sum if neither the Company nor any affiliate’s stock is publicly traded) only after both a change in control and a specified employment termination (a “double trigger”). Our KEESAs also provide for "double trigger" vesting of equity awards: there must be a change in control and an employment termination.

The agreements for our outstanding equity awards provide that the equity will not vest upon a change in control if the Committee reasonably determines in good faith prior to the occurrence of the change in control that the awards will be assumed or replaced by the employee’s employer immediately following the change in control with an alternative award meeting specified requirements.

Our KEESAs do not contain a gross-up by the Company for any excise tax payments resulting from payments upon a change in control. For participants with KEESAs effective on or after October 23, 2014, and/or who have reached age 62, payments under the KEESAs, or under any other agreement with or plan of the Company, are capped by reducing such payments to an amount that will not trigger payment of federal excise taxes on such payment. For participants with KEESAs effective before October 23, 2014, and who are younger than age 62, payments under the KEESAs, or under any other agreement with or plan of the Company, are similarly reduced only if the resulting after-tax value to the participant of the total payments upon a change in control is greater than the after-tax value to the participant if the cash payments were not so reduced with the participant responsible for the excise taxes.

For additional information about our KEESAs, see “Compensation and Related Tables – Potential Payments Upon Termination or Change-in-Control – Change in Control Agreements” below.

Tax Deductibility Limit

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation in excess of $1 million paid during a year to certain "covered employees," generally including our NEOs. We expect the portion of 2019 compensation exceeding $1 million for income tax purposes that we provide to our "covered employees" will not be deductible. The Committee considered the impact of this Internal Revenue Code rule in developing, implementing and administering our compensation program for 2019.

Prior to the enactment of the Tax Act, Section 162(m) generally exempted qualifying performance-based compensation from the $1 million annual deduction. The Tax Act included "grandfather" rules that apply to certain written binding contracts in effect as of November 2, 2017. Although the rules allowing this exemption are complex, we believe that a portion of our equity awards granted in 2017 qualify as tax-deductible. However, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and related regulations, and the fact that such regulations and interpretations may change from time to time (with potentially retroactive effect), there is no certainty that compensation intended by the Committee to satisfy the requirements for deductibility under Section 162(m) will be deductible.

The Committee will continue to consider the deductibility of compensation in light of the revisions to Code Section 162(m) by the Tax Act; however, the primary goals of the executive compensation program are to attract and retain high-quality executives and to align compensation with long-term shareholder interests.

In making decisions about executive compensation, we also consider the impact of other regulatory provisions, including the provisions of Section 409A of the Internal Revenue Code regarding non-qualified deferred compensation and the change in control provisions of Section 280G of the Internal Revenue Code.



50 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION DISCUSSION & ANALYSIS — Other Aspects

Process for Approving Compensation Components

The Committee's practice for many years has been to make equity awards and approve new salaries and bonuses at its meeting in late January, which normally follows our determination of earnings for the prior year. The Committee also may approve changes in compensation at other times throughout the year. In July 2019, the Committee approved compensation changes in connection with the management succession discussed in the introduction to this CD&A.

The Committee has not adjusted executive officers' future compensation based upon amounts realized or forfeited pursuant to previous equity awards.


COMPENSATION COMMITTEE REPORT

Among its other duties, the Committee assists the oversight by the Board of Directors of MGIC Investment Corporation’s executive compensation program, including approving corporate goals relating to compensation for the CEO and senior officers, evaluating the performance of the CEO and determining the CEO’s annual compensation and approving compensation for MGIC Investment Corporation’s other senior executives.

The Committee reviewed and discussed with management the foregoing Compensation Discussion and Analysis. Based upon this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in MGIC Investment Corporation’s Proxy Statement for its 2020 Annual Meeting of Shareholders.

Members of the Management Development, Nominating and Governance Committee:
Kenneth M. Jastrow, II, Chair
Cassandra C. Carr
Jodeen A. Kozlak
Michael E. Lehman
Melissa B. Lora



MGIC Investment Corporation – 2020 Proxy Statement │ 51



COMPENSATION AND RELATED TABLES

Summary Compensation Table

The following provides certain information about the compensation of our NEOs in 2017 through 2019. Other tables that follow provide more detail about the specific types of compensation.

Name and
Principal Position
Year
Salary
($)
Stock Awards(1)
($)
Non-Equity Incentive Plan Compensation(2)
 ($)
Change in Pension Value and Nonqualified Deferred Compensation Earnings(3)
($)
All Other Compensation(4)
($)
Total
($)
Timothy Mattke(5)
2019
645,873

2,144,934

1,474,000

504,486

24,950

4,794,243

     Chief Executive
2018
542,119

1,435,801

1,106,000

54,457

15,100

3,153,477

Officer
2017
526,327

868,444

966,800

396,358

14,850

2,772,779

Salvatore Miosi(5), (6)
2019
495,593

1,947,384

1,082,500

507,286

24,950

4,057,713

President and
2018
398,550

1,435,801

813,000

84,115

15,100

2,746,566

Chief Operating Officer
 
 
 

 
 
 
Nathaniel Colson(5), (6)
2019
206,180

374,593

223,100

14,822

8,808

827,503

Executive Vice
 
 
 

 
 
 
President and Chief
 
 
 

 
 
 
Financial Officer
 
 
 

 
 
 
James Hughes(7)
2019
421,500

1,651,059

825,200

558,689

24,950

3,481,398

Executive Vice
2018
408,769

1,435,801

834,000

126,953

15,100

2,820,623

President - Sales &
2017
365,081

868,444

729,000

469,507

14,850

2,446,882

Bus. Development
 
 
 

 
 
 
Paula Maggio(6)
2019
409,062

1,157,184

640,600

39,438

24,950

2,271,234

Executive Vice
 
 
 


 
 
 
President and
 
 
 


 
 
 
     General Counsel
 
 
 


 
 
 
Patrick Sinks(5)
2019
895,304

3,375,120

2,336,800

909,738

24,950

7,541,912

Vice Chairman
2018
868,635

4,187,753

2,311,300

588,738

15,100

7,971,526

 
2017
843,000

2,532,961

2,065,500

1,577,483

14,850

7,033,794

Stephen Mackey(8)
2019
204,151

1,157,184


61,492

483,294

1,906,121

Former Executive
2018
460,765

1,435,801

940,000

49,299

24,500

2,910,365

Vice President and
2017
447,373

868,444

801,500

52,884

24,050

2,194,251

Chief Risk Officer
 
 
 
 
 
 
 

(1)
Our equity awards are granted under programs described in "Components of our Executive Compensation Program — Long-Term Equity Awards” in our CD&A. The amounts shown in this column represent the grant date fair value of the restricted equity awards granted to NEOs in the years shown, computed in accordance with FASB ASC Topic 718. The fair value of restricted equity is based on the closing price of our Common Stock on the NYSE on the date of grant. In 2019, this was $12.37 (on a weighted average basis) for our CEO; and ranged from $11.76 to $13.99 (on a weighted average basis) for our other NEOs; in 2018, it was $15.81; and in 2017, it was $10.41. In accordance with the rules of the SEC, all of the figures in this column represent the value at the grant date based upon the probable outcome of the applicable performance conditions as of the grant date. If the full value of the applicable awards for 2019, 2018 and 2017 were shown, assuming the highest levels of the applicable performance conditions were achieved, rather than an amount based upon the probable outcome of the applicable performance conditions, then the amounts shown would have been:



52 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION AND RELATED TABLES — Summary Compensation Table

 
Name
2019
2018
2017
 
Timothy Mattke
$
2,398,950

$
1,669,536

$
1,099,296

 
Salvatore Miosi
2,201,400

1,669,536

See Note (6)

 
Nathaniel Colson
388,056

See Note (6)

See Note (6)

 
James Hughes
1,905,075

1,669,536

1,099,296

 
Paula Maggio
1,411,200

See Note (6)

See Note (6)

 
Patrick Sinks(7)
4,116,000

4,869,480

3,206,280

 
Stephen Mackey(8)
1,411,200

1,669,536

1,099,296


Our standard terms for stock awards provide that separation from service with the Company results in forfeiture of the awards. In connection with Mr. Mackey's separation from service, the Company waived the forfeiture of Mr. Mackey's 2017 stock award; Mr. Mackey's 2018 and 2019 stock awards were forfeited. The value of Mr. Mackey's 2017 award when the forfeiture was waived, based on the probable outcome of the applicable performance conditions and the closing price of our Common Stock on the NYSE on that date, had increased from $868,444 to $1,156,257. The award remains subject to the performance condition described in "Components of our Executive Compensation Program - 2018 and 2017 Long-Term Equity Awards" in our CD&A.

(2)
Our 2019 bonus program is described in "Components of our Executive Compensation Program — Annual Bonus” in our CD&A. The percentage of the maximum bonuses paid was calculated based on a formula that compares actual performance to threshold, target and maximum performance achievement levels for two different financial performance goals (each with specific weights and in total weighted 75%) and a subjective assessment of performance against three different business objectives. Our 2018 and 2017 bonus programs were structurally similar to the 2019 bonus program; however the 2017 program considered a greater number of financial performance goals and business objectives. All goals for the 2017-2019 bonus programs were considered and approved by the Management Development, Nominating and Governance Committee.

(3)
The Company does not maintain a nonqualified deferred compensation plan for its employees. The amounts shown in this column reflect, if positive, the sum of (a) the aggregate change in present value of accumulated pension benefits during the year pursuant to our Pension Plan and our Supplemental Executive Retirement Plan (“SERP”) when retirement benefits are also provided under the SERP, and (b) distributions the named executive officer received from our Qualified Pension Plan or SERP during the year.

The aggregate change in present value of accumulated pension benefits represents:

(a)
For other than Mr. Colson, Ms. Maggio and Mr. Mackey, the difference between (a) the present value of the annual pension payments that the named executive officer would be entitled to receive beginning at age 62, or current age if older than 62, and continuing for his life expectancy determined at the end of the year shown and by assuming that the officer’s employment with us ended on the last day of the year shown, and (b) the same calculation done as if the officer’s employment had ended one year earlier.

(b)
For Mr. Colson and Ms. Maggio, the difference between (a) the present value as of December 31, 2019 of the accumulated benefit under the "Cash Component" (described following the table titled “Pension Benefits at 2019 Fiscal Year-End") of our Pension Plan, and (b) the same calculation as of the prior year-end.

(c)
For Mr. Mackey, the difference between (a) the sum of (I) the distribution Mr. Mackey is expected to receive from the Pension Plan on February 1, 2020, and (II) the distribution Mr. Mackey received from the SERP in 2019, and (b) the present value as of December 31, 2018 of the accumulated benefit under the "Cash Component."

(d)
For all years shown, the change in the present value of accumulated pension benefits between years represents the net result of (a) the officer being one year closer to the receipt of the pension payments, which generally means the present value is higher, and the annual pension payment (for Mr. Colson, Ms. Maggio and Mr. Mackey, their accumulated benefit) is higher due to the additional benefit earned because of one more year (in the case of Mr. Mackey, a partial year) of employment; (b) a change in actuarial assumptions used to calculate the benefit, primarily changes in the discount rate used to calculate the present value at the end of each of those years; (c) a decrease for the effect of distributions that the NEOs received from our Qualified Pension Plan or SERP; (d) an increase for (I) in the case of Mr. Sinks and Mr. Mattke, in-service distributions received from our SERP to pay their portion of social security taxes and related income tax from such distributions, and (II) in the case of Mr. Mackey, a lump-sum distribution from the SERP. For each NEO, the change for 2019, 2018 and 2017 consists of:


MGIC Investment Corporation – 2020 Proxy Statement │ 53


Summary Compensation Table — COMPENSATION AND RELATED TABLES


 
 
2019
2018
2017
 
Name
Change in
Actuarial
Assumptions
Change Due to Other Factors
Change in
Actuarial
Assumptions
Change Due to Other Factors
Change in
Actuarial
Assumptions
Change Due to Other Factors
 
Timothy Mattke
$
336,693

$
167,793

$
(219,652
)
$
274,109

$
173,042

$
223,316

 
Salvatore Miosi
297,162

210,124

(208,703
)
292,818

See Note (6)

See Note (6)

 
Nathaniel Colson
6,503

8,319

See Note (6)

See Note (6)

See Note (6)

See Note (6)

 
James Hughes
318,594

240,095

(237,244
)
364,197

222,500

247,007

 
Paula Maggio
4,607

34,831

See Note (6)

See Note (6)

See Note (6)

See Note (6)

 
Patrick Sinks
669,333

240,405

(522,207
)
1,110,945

570,271

1,007,212

 
Stephen Mackey
5,960

55,532

(2,083
)
51,382

6,401

46,483


See Note 11 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ending December 31, 2019 for additional information regarding the assumptions made in arriving at these amounts.

See information following the table titled “Pension Benefits at 2019 Fiscal Year-End” below for a summary of our Pension Plan and our SERP.

(4)
Amounts in this column for 2019, for other than Mr. Mackey, consist of matching 401(K) contributions and discretionary retirement plan contributions. For Mr. Mackey, the amount reflects $458,344 of severance paid in 2019 in connection with his separation from service with the Company, and a matching 401(k) contribution and discretionary retirement plan contribution of $24,950.

(5)
In July 2019, Mr. Sinks stepped down as our President and CEO, but agreed to remain with the Company until January 31, 2020 in the position of Vice Chairman.

In July 2019, Mr. Mattke, our former Executive Vice President and Chief Financial Officer, was promoted to Chief Executive Officer; Mr. Miosi, our former Executive Vice President–Business Strategies & Operations, was promoted to President and Chief Operating Officer; and Mr. Colson, our former Vice President–Finance, was promoted to Executive Vice President and Chief Financial Officer.

(6)
No compensation data is provided for the years prior to Mr. Miosi, Mr. Colson or Ms. Maggio becoming an NEO.

(7)
NEO holds this position with Mortgage Guaranty Insurance Corporation, a wholly owned subsidiary of the Company, and not with the Company.

(8) Mr. Mackey departed the Company in May 2019. His "salary" amount includes the payment of $23,920 he received for his accrued but unused vacation time.






54 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION AND RELATED TABLES — Grants of Plan-Based Awards

2019 Grants of Plan-Based Awards

The following table shows the grants of plan-based awards to our NEOs in 2019.



 
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
(1)
Estimated Future Payouts
Under Equity Incentive
Plan Awards
(2)
All Other Stock Awards
Grant Date
Fair Value
of Stock
and Option Awards
(3)
($)
Name
Grant Date
Type of Award
Target
($)
Maximum
($)
Target
(#)
Maximum
(#)
(#)
Timothy Mattke
1/21/2019
Annual Bonus Incentive(1)
854,041

1,708,081

 
 
 
 
 
1/21/2019
RSUs-Cliff Perf. Vest(4)
 
 
98,400

120,000

 
1,157,184

 
7/25/2019
RSUs-Cliff Time Vest(5)
 
 
 
 
75,000

987,750

Salvatore Miosi
1/21/2019
Annual Bonus Incentive(1)
627,158

1,254,317

 
 
 
 
 
1/21/2019
RSUs-Cliff Perf. Vest(4)
 
 
98,400

120,000

 
1,157,184

 
7/25/2019
RSUs-Cliff Time Vest(5)
 
 
 
 
60,000

790,200

Nathaniel Colson
1/21/2019
Annual Bonus Incentive(1)
129,251

258,503

 
 
 
 
 
1/21/2019
RSUs-Perf. Vest(6)
 
 
5,215

6,360

 
61,331

 
1/21/2019
RSUs-Time Vest(7)
 
 
 
 
4,240

49,862

 
7/25/2019
RSUs-Cliff Time Vest(5)
 
 
 
 
20,000

263,400

James Hughes
1/21/2019
Annual Bonus Incentive(1)
478,125

956,250

 
 
 
 
 
1/21/2019
RSUs-Cliff Perf. Vest(4)
 
 
98,400

120,000

 
1,157,184

 
7/25/2019
RSUs-Cliff Time Vest(5)
 
 
 
 
37,500

493,875

Paula Maggio
1/21/2019
Annual Bonus Incentive(1)
371,160

742,320

 
 
 
 
 
1/21/2019
RSUs-Cliff Perf. Vest(4)
 
 
98,400

120,000

 
1,157,184

Patrick Sinks
1/21/2019
Annual Bonus Incentive(1)
1,353,900

2,707,800

 
 
 
 
 
1/21/2019
RSUs-Cliff Perf. Vest(4)
 
 
287,000

350,000

 
3,375,120

Stephen Mackey(8)
1/21/2019
Annual Bonus Incentive(1)
538,200

1,076,400

 
 
 
 
 
1/21/2019
RSUs-Cliff Perf. Vest(4)
 
 
98,400

120,000

 
1,157,184


(1)
Our Non-Equity Incentive Plan Awards are described in "Components of our Executive Compensation Program — Annual Bonus” in our CD&A. This table does not include a "threshold" column because under our 2019 Non-Equity Incentive Awards, a zero payout was possible if threshold performance targets were not achieved. Messrs. Mattke, Miosi and Colson were each promoted during 2019; the amounts shown in this column have been calculated based on their prorated salaries and bonus multiples for the time they were in each of their positions during 2019.

(2)
Our Equity Incentive Plan Awards are described in “Components of our Executive Compensation Program - 2019 Long-Term Equity Awards” in our CD&A. This table does not include a "threshold" column because under our 2019 Long-Term Equity Awards, a zero payout is possible for performance vested awards if no adjusted book value per share growth is achieved, and a zero payout is possible for time vested awards if the NEO departs before vesting.

(3)
All of the figures in this column represent the value of stock unit awards at the grant date based upon the probable outcome of the applicable performance conditions as of the grant date. The grant date fair value is based on the NYSE closing price on the day the award was granted or the prior day if the NYSE was closed on the day the award was granted.

(4)
These are the Cliff BV Awards described in “Components of our Executive Compensation Program - 2019 Long-Term Equity Awards” in our CD&A.

(5)
These are the one-time Cliff Time Vested Awards described in “Components of our Executive Compensation Program - 2019 Long-Term Equity Awards” in our CD&A that were awarded in connection with the execution of our leadership transition.



MGIC Investment Corporation – 2020 Proxy Statement │ 55


Grants of Plan-Based Awards — COMPENSATION AND RELATED TABLES

(6)
These are the BV Awards described in "Components of our Executive Compensation Program - 2019 Long-Term Equity Awards” in our CD&A.

(7)
These are the Time Vested Awards described in “Components of our Executive Compensation Program - 2019 Long-Term Equity Awards” in our CD&A.

(8)
Our standard terms for stock awards provide that separation from service with the Company results in forfeiture of the awards. In connection with Mr. Mackey’s separation from service, the Company waived the forfeiture of Mr. Mackey’s 2017 stock award; Mr. Mackey’s 2018 and 2019 stock awards were forfeited. The value of Mr. Mackey’s 2017 award when the forfeiture was waived, based upon the probable outcome of the applicable performance conditions and the closing price of our Common Stock on the NYSE on that date, had increased from $868,444 to $1,156,257.  The award remains subject to the performance condition described in “Components of our Executive Compensation Program - 2018 and 2017 Long-Term Equity Awards” in our CD&A.





56 │ MGIC Investment Corporation – 2020 Proxy Statement


COMPENSATION AND RELATED TABLES — Outstanding Equity Awards

Outstanding Equity Awards at 2019 Fiscal Year-End

The following table shows our NEOs’ equity awards outstanding on December 31, 2019.

 
 
 
 
 
Equity Incentive Plan Awards
Name
Number of Shares or
Units That Have Not Vested
(1) 
(#)
 
Market Value of Shares or Units That Have Not Vested(2)
($)
 

Number of Unearned Shares, Units or
Other Rights That Have Not Vested
(3)
(#)
 
Market or Payout
Value of Unearned Shares, Units or Other Rights That Have Not Vested
(2)
($)
Timothy Mattke
75,000

 
1,062,750

 
328,440

 
4,653,995

Salvatore Miosi
60,000

 
850,200

 
328,440

 
4,653,995

Nathaniel Colson
26,242

 
371,849

 
6,214

 
88,052

James Hughes
37,500

 
531,375

 
328,440

 
4,653,995

Paula Maggio
13,334

 
188,943

 
117,240

 
1,661,291

Patrick Sinks

 

 
957,950

 
13,574,152

Stephen Mackey

 

 
105,600

 
1,496,352


(1)
Consists of:

(a)
Cliff Time Vested RSUs awarded in July 2019 to Messrs. Mattke (75,000), Miosi (60,000), Colson (20,000) and Hughes (37,500) in connection with our CEO succession and management realignment. Those RSUs vest in July 2022, subject to continued employment with the Company, and are not subject to performance targets.

(b)
Time Vested RSUs awarded in July 2018 to Ms. Maggio (13,334), upon her joining the Company and prior to her becoming an NEO. Those awards vest in July in each of the first three years f