Assurant 2005 Annual Report Download - page 24

The Committee determined that annual bonuses payable under the EMIP for 2004 would be conditioned upon net operating income for the
Company as a whole and, for executives serving in an operating business segment, net operating income attributed to the relevant business
segment. The Committee provided that actual bonuses would vary depending on the extent to which actual performance meets, exceeds, or falls
short of the applicable performance goals. Performance against the criteria was measured on a five-point scale, as follows:
Based upon the Company’s performance in 2004, bonuses based upon the net operating income of the Company as a whole were paid out
at an amount equal to 1.72 times target bonus. Total bonuses paid to the named executive officers for 2004 is reported in the “bonus”
column of
the Summary Compensation Table.
In determining net operating income for the purpose of measuring 2004 performance under the EMIP, the Compensation Committee
adjusted the calculation of Company net operating income in order to exclude the distortive impact of the Company’
s removal of excess capital
from its Puerto Rican subsidiary, as permitted by the new American Jobs Creation Act of 2004. In addition, the Committee adjusted the net
operating income for the Assurant Solutions business segment and the Company as a whole in order to exclude the distortive impact of excess
catastrophic losses incurred due to the number and severity of Atlantic hurricanes in 2004. Minor adjustments were also made to the Company
and certain business segments in order add back certain real estate joint venture depreciation expenses, external compliance costs related to
Section 404 of the Sarbanes-Oxley Act, and certain branding costs, and to subtract excess investment income allocation. The aggregate effect
of these adjustments was to increase the net operating income calculated for purposes of measuring 2004 performance for the Company and
two business segments, and to slightly decrease the net operating income for the remaining two business segments. Without these adjustments
to exclude the financial impact of these items, bonuses based upon the net operating income of the Company as a whole would have been paid
out at an amount equal to 0.53 times target bonus.
Long-Term Incentives. The Compensation Committee granted two types of long-term incentive awards to executives in 2004:
The Compensation Committee established the size and other terms of the restricted stock awards by considering recommendations from
outside compensation consultants based upon long-term compensation reported by peer companies in the insurance and financial services
industry. Shares of restricted stock issued to executives in 2004 are scheduled to vest in three annual installments, subject to acceleration upon
the death or disability of the executive, or the termination of his or her employment without cause or for good reason within two years after a
change of control of the Company. The value of restricted stock granted to named executive officers for 2004 is reported in the “
restricted stock
awards” column of the Summary Compensation Table.
Awards under the Assurant Appreciation Incentive Rights Plan are based upon the appreciation in value of incentive units of the Company
and each of its operating business segments. Eligible participants employed by the Company receive 75% of their awards in Company
incentive rights and 25% of their awards in operating business segment incentive rights. Conversely, an eligible employee of an operating
business segment receives 25% of his or her award in Company incentive rights and 75% of his or her award in operating business segment
incentive rights. Each incentive right represents the right to the appreciation in value of an incentive unit. Each Company incentive unit
originally represented one ten millionth (.0000001) of the entity value of the Company, and each operating business segment incentive unit
represented one ten millionth of the entity
18
Level of Performance
Bonus Value
Distinguished
2.0 x target bonus
Commendable
1.5 x target bonus
Competent
1.0 x target bonus
Adequate
0.5 x target bonus
Provisional
0.0 x target bonus
•
Restricted Stock, issued under the Assurant Long
-
Term Incentive Plan (the
“
LTIP
”
),
and
•
Appreciation Rights, issued under the Assurant Appreciation Incentive Rights Plan (the
“
AAIR
”
)