Compensation context and highlights in 2012
Pay for performance
In addition to fixed compensation, Swiss Re rewards employee performance through short-term and long-term incentives. For senior executives, a substantial part of total compensation is performance related and deferred, as shown in the chart below. For the members of the Group Executive Committee (Group EC), more than 70% of their compensation is variable.
Total Compensation 2012
| Download |
|
|
Fixed |
Variable/performance-related |
of which deferred | ||
| |||||
|
All employees |
69% |
31% |
23% | ||
|
Group EC1 |
28% |
72% |
63% | ||
|
Group CEO |
25% |
75% |
70% | ||
1 Including CEO
The Compensation Committee also monitors how compensation moves with specific business metrics including net income and EVM profit.
| Download |
|
USDm (unless otherwise stated) |
2010 |
2011 |
change |
2012 |
change | ||||||
| |||||||||||
|
US GAAP Net income |
863 |
2 626 |
204% |
4 201 |
60% | ||||||
|
EVM profit |
1 327 |
–1 704 |
– |
4 152 |
– | ||||||
|
Dividend payments to shareholders (CHF)2 |
2.75 |
3.00 |
9% |
3.50 |
17% | ||||||
|
Financial Strength Rating (Standard Poor’s) |
A+ |
AA– |
|
AA– |
| ||||||
|
Total equity |
26 906 |
31 287 |
16% |
34 026 |
9% | ||||||
|
Number of employees |
10 362 |
10 788 |
|
11 193 |
| ||||||
|
Aggregate compensation for all employees (CHF) |
1 884 |
1 775 |
–6% |
2 032 |
14% | ||||||
|
Group EC members3 |
8 |
9 |
|
16 |
| ||||||
|
Aggregate Group EC compensation (CHF)1 |
40 |
35 |
–13% |
50 |
43% | ||||||
In 2012, Swiss Re generated a US GAAP net income of USD 4.2 billion and an Economic Value Management (EVM) profit of USD 4.2 billion.
The 2011 total variable compensation pool was lowered based on the overall business results. In the context of Swiss Re’s strong 2012 business results and based on the performance in 2012, the Company elected to increase the total variable compensation pool.
Key developments
Activities in 2012
Changes in the Compensation Framework
- We continued the compensation framework review initiated in 2011 through 2012 and into 2013, as outlined in the 2011 report.
- We reviewed and updated how we fund and allocate the API pools as described in chapter Annual Performance Incentive.
- In 2012, Swiss Re introduced the concept of Target API, along with a revised Performance Management framework, ensuring a balance between performance objectives, achievements and desired appropriate risk-taking (see chapter Annual Performance Incentive).
- These changes make the way we determine and allocate API pools more transparent, thus forging a stronger link between variable compensation, individual performance and business performance.
- Swiss Re awarded its first grant under the new Leadership Performance Plan (LPP) in March 2012. Further details are in chapter Leadership Performance Plan.
- We reviewed the Employee Share Purchase Plan (EPP) with the aim of consolidating, as far as appropriate, its previous variations into one global plan. Further details are in chapter Base salary and benefits.
- The Compensation Committee strengthened the benefits governance and conducted a review of the benefits framework.
Specific Compensation Plans
- While the Asset Management VAI is based in the first instance on EVM results, additional targets and nonfinancial performance factors are also taken into consideration. The payout factor is still a linear function that ranges from 50% to 150%.
Regulatory oversight
- Swiss Re continued to work closely with the Swiss Financial Market Supervisory Authority FINMA. In 2012, this included submitting our annual compensation table and updating our internal framework to clarify hedging prohibitions.
- We have monitored developments in Solvency II regulation and have completed the alignment of our compensation framework with its current draft requirements.
Annual General Meeting
- As in previous years, the Compensation Report 2011 was subject to a consultative vote. At the Annual General Meeting on 13 April 2012, the report was approved by 81% of shareholder votes (up from 76% in 2011).
- At the Annual General Meeting on 13 April 2012, C. Robert Henrikson was elected to the Board of Directors and became Chairman of the Compensation Committee.