Note 14 Share-based payments

As of 31 December 2011 and 2012, the Group had the share-based compensation plans described below.

Total compensation cost for share-based compensation plans recognised in net income was USD 52 million and USD 69 million in 2011 and 2012, respectively. The related tax benefit was USD 16 million and USD 17 million, respectively.

Stock option plans

Stock option plans include a fixed-option plan and an additional grant to certain members of executive management. No options were granted under these plans from 2007 onwards. Under the fixed-option plan, the exercise price of each option is equal to the market price of the shares on the date of the grant. Options issued vest at the end of the fourth year and have a maximum life of ten years.

A summary of the activity of the Group’s stock option plans is as follows:



Weighted average exercise price in CHF

Number of options

Outstanding as of 1 January


2 363 734

Options sold


–187 350

Options forfeited or expired


–1 217 482

Outstanding as of 31 December 


958 902

Exercisable as of 31 December 


958 902

The following table summarises the status of stock options outstanding as of 31 December 2012:


Range of exercise
prices in CHF

Number of

Weighted average remaining contractual life in years

Weighted average exercise price in CHF

67 - 83

818 902



93 - 100

140 000



67 - 100

958 902



All stock options outstanding are also exercisable and the status of these exercisable options is reflected in the table above. The fair value of each option grant was estimated on the date of grant using a binomial option-pricing model.

Restricted shares

The Group issued 14 834 and 38 930 restricted shares to selected employees in 2011 and 2012, respectively. Moreover, as an alternative to the Group’s cash bonus programme, 425 154 and 275 309 shares were issued during 2011 and 2012, respectively, which are not subject to forfeiture risk.

A summary of the movements in shares relating to outstanding awards granted under the restricted share plans for the year ended 31 December 2012 is as follows:



Number of shares

Weighted average
grant date fair value in CHF

Non-vested at 1 January 

780 188



314 239


Delivery of restricted shares

–608 055


Outstanding as of 31 December 

486 372


The weighted average fair value of restricted shares, which equals the market price of the shares on the date of the grant, was CHF 48 and CHF 50 in 2011 and 2012, respectively.

Board level Performance Share Plan

In 2009 and 2010, the Group granted a share plan for the Chairman and Vice Chairman of the Board of Directors. The Group did not grant a further plan in 2011 and 2012. The plans have a requisite service period of three years and are settled in shares. The plans are measured based on Swiss Re’s Total Shareholder Return (TSR), representing the share price performance plus paid dividend in any performance period, against a selected peer group. The final number of shares to be released upon vesting can vary between 0% and 150% of the original grant. The fair value of the 2009 and 2010 plans was based on the share price as of the date of grant, which was CHF 36.00 and CHF 53.60, respectively. The 2009 plan vested in 2012. Under the 2010 plan 83 957 units were issued and the same number of units remains outstanding as of 31 December 2012.

Long-term Incentive Plan

Between 2006 and 2011, the Group annually granted a Long-term Incentive plan (LTI) to selected employees with a three-year vesting period. The requisite service period as well as the maximum contractual term for each plan was three years and the final payment, if any, occured at the end of this performance measurement period. The plan included a payout factor which was derived from Return on Equity (ROE) and Earnings per Share (EPS) targets over the vesting period. The payout ratio can vary between 0 and 2 and the final payment for each plan depends on whether the performance targets have been achieved over the plan period. The fair value of the plans are based on stochastic models which consider the likelihood of achieving performance targets and the impact of dividends.

The 2009 LTI grant was settled in shares in March 2012. The payout factor was driven by average ROE and EPS compound annual growth over the vesting period. Each of the plan grants that was outstanding as of 31 December 2012 is described below.

The LTI plans granted in 2010 and 2011 are expected to be settled in shares in March 2013 and March 2014, respectively. The payout factors are driven by average ROE and average EPS over the vesting period. The share price used for measurement is based on the date of grant and was CHF 48.15 and CHF 39.39 for the 2010 and 2011 plans, respectively.

Leadership Performance Plan

During 2011 the Compensation Committee reviewed the existing long-term incentive scheme, and, in March 2012, the LTI was replaced by a new plan called the Leadership Performance Plan (LPP). The LPP plans granted in 2012 and 2013 are expected to be settled in shares, and the requisite service as well as the maximum contractual term is three years. At grant date the award is split into two equal underlying components, a Restricted Share Unit (RSU) and a Performance Share Unit (PSU). The RSU component is measured against a RoE performance condition and will vest within a range of 0–100%. The PSU is based on relative total shareholder return, measured against a pre-defined basket of peers and will vest within a range of 0–200%. The fair values of both components are measured separately, based on stochastic models.

Value Alignment Incentive

In 2009, the Group issued a compensation plan to selected employees. The plan had a requisite service period of three years and was paid out in cash. The payout was based on a three-year risk free interest rate, the Swiss Re share price performance and dividend yield over the vesting period. The plan was settled in 2012 with no further plans outstanding as of 31 December 2012.

Unrecognised compensation costs

As of 31 December 2012, the total unrecognised compensation cost (net of forfeitures) related to non-vested, share-based compensation awards was USD 53 million and the weighted average period over which that cost is expected to be recognised was 1.9 years.

The number of shares authorised for the Group’s share-based payments to employees was 11 351 951 and 8 172 503 as of 31 December 2011 and 2012, respectively.

Employee Participation Plan

The Group’s employee participation plan consists of a savings scheme lasting two or three years. Employees combine regular savings with the purchase of either actual or tracking options. The Group contributes to the employee savings over the period of the plan.

At maturity, either the employee receives shares or cash equal to the accumulated savings balance, or the employee may elect to exercise the options.

In 2011 and 2012, 1 878 895 and 1 664 419 options, respectively, were issued to employees and the Group contributed USD 77 million and USD 41 million, respectively, to the plan.