Compensation framework for Group EC members
The Group CEO and the other members of the Group EC are remunerated under the same compensation framework and guiding principles as all other Swiss Re employees. The Group CEO and the other members of the Group EC are paid a fixed base salary and are eligible to receive variable compensation in the form of API, VAI as well as LPP.
For the members of the Group EC including the CEO in 2012, the total of the aggregate Target APIs are CHF 15.8 million (capped at 3 x annual base salary) and the aggregate Target LPP award is CHF 12.4 million.
The Compensation Committee assesses the performance of the Group CEO and the Group EC members against a set of quantitative and qualitative objectives. The main financial performance indicators are based on the Group’s economic profit, net income, return on equity, earnings per share and cost targets. The qualitative criteria include client service quality, franchise building, leadership and talent management as well as risk and control related behaviour objectives in areas vital to the overall success of the Group. These objectives are agreed at the beginning of the year and are aligned with the Group’s financial plan.
The external adviser, Mercer, conducts an annual review of the total compensation for the Group EC relative to a group of reference companies in the financial services industry to ensure that market competitiveness is maintained. This peer group consists of the following globally active primary insurance and reinsurance firms: Ace LTD, Aegon NV, Allianz SE, The Allstate Corporation, Aviva PLC, AXA SA, ING Groep NV, Metlife Inc, Muenchener Rueckversicherungs-Gesellschaft AG, PartnerRe Ltd, Prudential Financial Inc, QBE Insurance Group Ltd, SCOR SE and Zurich Insurance Group AG.
The Group CEO and the other Group EC members have standard employment contracts with maximum notice periods of 12 months and without severance payment agreements. There are no specific “change in control” or retention agreements in place with members of the Group EC, aside from those provisions applicable to all Swiss Re employees. Executives are covered by the Group’s standard defined-contribution pension plan.
Stock Ownership Guidelines
With effect from 1 January 2010, the Compensation Committee established stock ownership guidelines which articulate the levels of stock ownership expected of the members of the Group EC and the GMB. The guidelines are designed to increase the alignment of individual members of management with shareholders and demonstrate that Swiss Re executives bear the same risks as other shareholders.
The guidelines define target ownership by role and the ownership levels required are outlined below:
- Group CEO – 3x annual base salary
- Group EC members – 2x annual base salary
- GMB members – 1x annual base salary
Members have a five-year timeframe to achieve these targets. In addition, because Swiss Re believes that a meaningful stock ownership position is essential, restrictions on the cash portion of API delivered will apply if these levels are not met within a specified timeframe.
Discontinued compensation plans
Long-Term Incentive (LTI)
Until 2011, a different vintage of the Long-Term Incentive (LTI) plan was awarded to employees. There are still two vintages of awards outstanding under this plan, vesting in March 2013 and 2014.
The LTI awards vest after three years and are paid in Swiss Re shares, provided the performance thresholds are met. For each LTI plan year, final payment, if any, occurs at the end of the respective three-year performance measurement period. The plan includes a payout factor which can vary between 0 and 2, driven by average return on equity (RoE) and earnings per share (EPS) over the vesting period. The final payment in respect of each plan year will depend on whether performance targets, expressed by average RoE and EPS, have been achieved over the plan period, as well as the share price at conclusion.