UVE corporate governance and 2009 summary

• Directors were paid $80,000 in 2009, I'd say about average for the size of the company. It was all paid in cash (no stock awards) unfortunately.
• Bradley Meier, Chairman, CEO and President, is the founder of the company. Four other directors/executive officers have been with the company for at least 12 years. Meier owns almost 18 million shares, or 45% of the total shares outstanding. As a group, the directors and executive officers own 57.5%.
• The company used a compensation consultant company to analyze and compare compensation for UVE management versus other similar insurance and growth companies. It found that UVEs CEO, COO and CFO compensation ranked above the 90th percentile versus the comparative companies. UVE believes this is reasonable as the consultant found that UVEs performance (5 year net revenue growth, 5 year total shareholder return and 3 year net income increase) was also above the 90th percentile, and net margin was in the top quartile.
• The employment agreements with the CEO, CFO and COO provide for an automatic 20% increase in base salary every year. In 2009, the CEO received over $1.3M and the COO over $900K. Compare these salaries to the CEO of AAON, Norman Asbjornson. AAON has a market cap almost twice as large as UVE ($412M vs. $204M). According to AAONs 2009 proxy statement, Asbjornson's base salary was less than $300K. I realize it's not fair to only compare UVE to AAON base salaries, but still, it's hard not to.
• The CEO and COO receive non-equity incentive compensation based on a percentage of pretax net income. This amounted to almost $2M for the CEO and $1.5M for the COO in 2009.
• The company does not provide its executives any qualified or nonqualified pension plans, supplemental executive retirement plans, deferred compensation plans or other forms of compensation for retirement, besides the standard 401K matching contributions provided to all employees.
• The proxy statement noted that the company overpaid incentive compensation to Meier and the COO in the fourth quarter of 2009 by $217K and $163K, respectively. The amounts were repaid to the company in February, 2010. I wonder how something like this happens?

So, all in all, I'm not impressed with the structure of the compensation of executives and directors. I find the base salaries to be too large, and too much of the overall compensation comes from cash. I do like the founder of the company is still running the company, and they have been returning cash to shareholders via dividends - while it's not paid consistently, over the past year it totaled $0.44/share or about a 9% yield.

I was also very disappointed with the results from 2009's fourth quarter, which is probably affecting my sentiments towards their compensation. I'm hoping the fourth quarter was just an anomaly and things will turn back positive when first quarter results are announced, which should be soon.