8-KMaterial AgreementsOther Events

ARCH CAPITAL GROUP LTD. 8-K Report, Material Agreement (Mar 1, 2006)

Filed March 1, 2006For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) filed this Form 8-K on March 1, 2006, primarily detailing executive and non-employee director compensation adjustments and a partial dividend declaration for preferred shares. For executive officers, the company approved annual incentive bonuses totaling $6.03 million for 2005 performance and granted approximately $17.4 million in share-based awards, comprising options and restricted shares, under its long-term incentive plan. Notably, base salaries for executive officers remained unchanged from 2005 levels. The company also updated its Incentive Compensation Plan by setting an overall maximum payout limit of 15% of pre-tax profit per segment for underwriting years and clarifying carry-forward provisions. Additionally, non-employee director compensation saw an increase in annual retainer fees and audit committee member fees, effective from the 2006 annual shareholder meeting. Finally, ACGL declared a one-time partial dividend of $2,666,667 on its 8.00% Non-Cumulative Preferred Shares, Series A, payable in May 2006.

Key Highlights

  • 1Executive officers received $6.03 million in annual incentive bonuses for 2005 performance.
  • 2Aggregate of 298,250 share-based awards (260,000 options, 38,250 restricted shares) granted to executive officers.
  • 3Executive officers' base salaries remained unchanged from 2005 levels.
  • 4Stock options granted to executives have an exercise price of $56.27 and vest over three years.
  • 5Incentive Compensation Plan amended to cap segment payouts at 15% of pre-tax profit and clarify carry-forward rules.
  • 6Annual cash retainer for non-employee directors increased to $50,000 (from $40,000), with an option to receive shares.
  • 7Audit Committee chairman and member fees significantly increased, reflecting enhanced responsibilities.
  • 8A one-time partial dividend of $2,666,667 declared on Series A Preferred Shares, payable May 15, 2006.

Frequently Asked Questions

Executive officers were awarded $6.03 million in annual incentive bonuses for 2005 performance. In addition, they received share-based awards totaling 298,250 units, consisting of stock options and restricted shares, under the company's long-term incentive plan.

The annual cash retainer for non-employee directors has been increased from $40,000 to $50,000, with an option to receive this retainer in ACGL common shares. Fees for audit committee members and the audit committee chairman have also seen substantial increases to reflect enhanced responsibilities.

Arch Capital Group declared a one-time partial dividend of $2,666,667 on its 8.00% Non-Cumulative Preferred Shares, Series A. This dividend covers the period from February 1, 2006, to March 31, 2006, and is scheduled to be paid on May 15, 2006, to shareholders of record as of May 1, 2006.

Yes, the Incentive Compensation Plan was amended. Key changes include the addition of an overall maximum payout limit for each segment at 15% of the segment's pre-tax profit for a given underwriting year, and clarifications regarding the treatment of amounts that can be carried forward to future underwriting years.