Funding of the Annual Performance Incentive and Leadership Performance Plan pools

The Compensation Committee focuses primarily on financial results and qualitative criteria in determining global variable compensation pools.

The Compensation Committee receives proposals from management requesting the total funding for variable compensation pools for both the API and the LPP. The management proposal for the annual API pool is based on the Group’s overall performance for the year. The LPP pool is reviewed in the context of sustainable business performance and affordability, but generally remains stable. The Compensation Committee considers these proposals and recommends a total pool to the full Board of Directors for approval. The Compensation Committee and the Chairman of the Board of Directors also propose an individual award for the Group CEO within this overall pool. The VAI is not funded as a separate pool, and the API pool will include amounts paid in cash as well as the amounts to be deferred into the VAI.

In 2012 Swiss Re introduced a three-step process based on business performance to determine the overall Group API pool. The process comprises a financial, a qualitative and an overall assessment. The financial assessment attributes equal weight to US GAAP income, EVM, economic net worth and return on equity measures both for the Group and each Business Unit individually. Additionally, multi-year comparisons and an assessment of the quality of earnings are also 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.

Group API pool funding process

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Group API Pool funding process (graphic)