Annual Performance Incentive
The API is a performance-based, variable component of compensation. Combined with the base salary, it provides competitive total cash compensation when both business and individual performance targets are achieved.
Swiss Re operates a Target API (TAPI) system along with a performance management framework that provides equal weighting to results-oriented and behavioural-related performance criteria for all employees. API is awarded for both objectives achieved and the demonstration of desired behaviours.
A TAPI is set based on multiple factors, but primarily on the role being performed and market benchmarks. Similar to the determination of the base salary, the employee’s total compensation and overall pay-mix are taken into account when setting the TAPI. The possible payout for the API ranges from 0 to 2 × TAPI.
For Group EC members an additional cap applies which is 3 × annual base salary.
In 2017, for the members of the Group EC including the Group CEO, the total of the aggregate TAPIs amounted to CHF 16.42 million. For the Group CEO the TAPI was CHF 2.25 million for the same year.
Swiss Re uses a three-step process to assess business performance to help determine the overall Group API pool. The process comprises a financial, a qualitative and an overall assessment. The financial assessment covers four equally weighted performance factors: return on equity (ROE), net operating margin, EVM profit (% of economic net worth) and economic net worth growth measured for both the Group and each Business Unit individually. Also, multi-year comparisons and an assessment of the quality of earnings are considered. The chart below gives more detail on the criteria used to determine the size of the pool.
The Business Units then allocate their pools following a similar assessment.
API is generally settled in cash. When the total API level for an employee exceeds a pre-defined amount, the award is split into two components: an immediate cash incentive payment (cash API) and a deferred API (VAI).
Employees can invest some or all of their cash API in shares under the Incentive Share Plan (ISP).
Forfeiture of unsettled awards and clawback provisions for settled awards apply in a range of events, enabling Swiss Re to seek repayment where appropriate. Examples of such events are acts which can be considered as malfeasance, fraud or misconduct.