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13 Compensation, participations and loans of members of governing bodies

The section below is in line with articles 663b^bis and 663c para. 3 of the Swiss Code of Obligations, which require disclosure of the elements of compensation paid to Swiss Re’s Board of Directors and Group Executive Committee (Group EC), as well as their shareholdings and loans.

Compensation for acting members of governing bodies

Article 663b^bis of the Swiss Code of Obligations requires disclosure of total compensation paid to members of the Board of Directors and the Group EC. Compensation to members of the Board of Directors and the highest paid member of the Group EC are shown by individual. For a description of the compensation elements of this, see Compensation.

Compensation of the Group EC

Aggregate compensation for members of the Group EC was:

The table above covers payments to 12 members in 2013, of whom all were employed for the full year. The 2012 payments cover 16 members, of whom seven were employed for the full year.

The fair value of the Value Alignment Incentive (VAI) is based on the nominal amount of the grant. Subsequently, a disbursement factor, which can vary between 50% and 150%, is applied based on the economic results of the Group. The VAI disclosed in the table above assumes a disbursement factor of 100% at grant date. For a description of the VAI plan see Value Alignment Incentive.

In 2012, the previous Long Term Incentive plan (LTI) was replaced by the Leadership Performance Plan (LPP). The LPP grants made in 2012, 2013 and 2014 are generally expected to be settled in shares. For LPP 2012, 2013 and 2014 the vesting and performance measurement period is three years. For LPP 2014, an additional two year holding requirement applies for all Group EC and GMB members. At grant, the award is split equally into two underlying components: Restricted Share Units (RSU) and Performance Share Units (PSU). The RSU component is measured against a RoE performance condition and will vest within a range of 0–100%. The PSU component 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. For further information on the LPP award, see Leadership Performance Plan.

For US GAAP and statutory reporting purposes, VAI and long-term incentive awards are accrued over the period during which they are earned. For the purpose of the disclosure required of this note, the value of awards granted is included as compensation in the year of performance, for the years 2013 and 2012 respectively.

Each member of the Group EC (including the Group CEO) participates in a defined contribution pension scheme. The funding of pension benefits shown in the table above reflects the actual employer contributions.

Highest paid member of the Group EC

In 2013, Michel M. Liès, CEO, was the highest paid member of the Group EC. The compensation of the Group CEOs for the respective periods was:

Compensation of the Board of Directors

Group fees for the members of the Board of Directors are delivered as 60% in cash and a mandatory 40% in Swiss Re shares with a four-year blocking period.

The share prices as of 12 April 2012 of CHF 57.15 and as of 9 April 2013 of CHF 78.10 were used for calculating the number of shares awarded to the members of the Board of Directors based on the amount of the fee for 2012 and 2013, respectively.

Individual compensation for the members of the Board of Directors was:

In 2009 and 2010, the Chairman and the then Vice Chairman received half of their fees in the form of a three-year performance share plan and the balance in cash. The performance share plan is measured against total relative shareholder return (TSR). The 2009 and 2010 performance shares were granted at a reference price of CHF 36.00 and CHF 53.60, respectively. The final number of shares released after three years could vary between 0% and 150% depending on the relative total shareholder return against a peer group. The Group did not grant a performance share plan from 2011 onwards. The plans were settled in 2012 and 2013 respectively.

Compensation of former members of governing bodies

In 2012, in the context of the outstanding mortgages and loans not at market rates for former members as well as of risk benefits, the equivalent of approximately CHF 60 000 was provided to three former members of the Group EC as a benefit in kind. No other compensation was paid to former members of the Group EC in 2012.

During 2013, payments in the total amount of CHF 1.1 million were made to seven former members of the Group EC. This amount includes a pro-rata base salary payment, company contributions to social security and pension systems paid by Swiss Re in line with applicable laws, benefits in the context of the outstanding mortgages and loans not at market rates, risk benefits as well as company commitments for tax related services.

Group EC and Board of Directors share ownership, options and related instruments

Share ownership

The disclosure below is in line with article 663c para. 3 of the Swiss Code of Obligations, which requires disclosure of share ownership, options and related instruments individually for each member of the Board of Directors and the Group EC.

The number of shares held as of 31 December were:

Restricted shares

Swiss Re grants restricted share units on an ad hoc basis that are subject to a vesting period with a risk of forfeiture during the vesting period.

The following unvested restricted shares were held by members of the Group EC as of 31 December:

The remaining restricted share units granted to Moses Ojeisekhoba, CEO Reinsurance Asia, vest in 2014. For the years ended 31 December 2012 and 2013, the members of the Board of Directors did not hold any restricted shares.

Performance shares

In 2009 and 2010, the Chairman and the then Vice Chairman received half their fees in the form of a performance share plan with a three-year vesting period. The Group did not grant any such plans from 2011 onwards.

The number of performance units outstanding as of 31 December 2012 were 55 971 for Walter B. Kielholz, Chairman, and 27 986 for Mathis Cabiallavetta, Vice Chairman. The plan vested in 2013 and therefore no more units were outstanding as of 31 December 2013.

Vested options

The following vested options were held by members of Group governing bodies as of 31 December:

The vested options held by members of Group governing bodies as of 31 December 2012 and 2013 will expire between 2013–2015 and 2014–2015, respectively. The underlying exercise price for the outstanding option series has been adjusted for the special dividend payout in 2013.

The stock options shown in the table above for the members of the Board of Directors were awarded at a period when the recipients were still members of Swiss Re’s executive management.

Loans to members of governing bodies

The following tables provides an overview of loans to members of governing bodies as of 31 December:

The loan shown in the table above for the member of the Board of Directors was established when the recipient was still a member of Swiss Re’s executive management.

In general, credit is secured against real estate or pledged shares. The terms and conditions of loans and mortgages are typically the same as those available to all employees of the Swiss Re Group in their particular locations to the extent possible. For example, in Switzerland fixed-rate mortgages have a maturity of five years and interest rates that correspond to the five-year Swiss franc swap rate plus a margin of 10 basis points.

Swiss based variable-rate mortgages have no agreed maturity dates. The basic preferential interest rates equal the corresponding interest rates applied by the Zurich Cantonal Bank minus one percentage point. To the extent that fixed or floating interest rates are preferential, such values were factored into the compensation sums given to the governing body members.

Related parties transactions

Disclosure in this note covers members of the Group EC and the Board of Directors as indicated, and for both includes related parties to the extent applicable. Such related parties cover spouses, partners, children and other dependents or closely linked persons. In 2013, no compensation was paid to any related party.