Compensation decisions for employees

Payouts of variable compensation plans

Annual Performance Incentive

Swiss Re Group and Business Units

The Group delivered very strong US GAAP and solid economic results. All three Business Units contributed to this result. The underwriting performance of Property & Casualty Reinsurance and Corporate Solutions remained strong, reflecting the high quality of those portfolios. Life & Health Reinsurance exceeded its ROE targets after the management actions of 2014 addressing the pre-2004 US individual life business. Admin Re^® again generated significant gross cash for the Group.

US GAAP financial performance

Property & Casualty Reinsurance achieved an excellent result reflecting continued good underwriting performance supported by benign natural catastrophe experience and favourable prior-year development. Life & Health Reinsurance reported a strong operating result following the management actions addressing the pre-2004 US individual life business. The result benefited from lower interest charges and net realised gains.

Corporate Solutions delivered good results in 2015, reflecting continued profitable business performance across most lines of business and increased investment income. Premiums earned decreased slightly compared to 2014, driven by the challenging market, most notably in property in North and Latin America, and foreign exchange rate movements. After successful acquisitions and the start of new operations worldwide, Corporate Solutions continues to focus on expansion into primary lead and to further broaden the distribution network.

Admin Re^® reported strong results, driven by realised gains and one-off tax benefits. Gross cash generation was strong, with benefits from mortality assumption updates. Admin Re^® demonstrated strong progress against its strategy of being a leading closed life book consolidator in the UK through the acquisition of Guardian Financial Services (Guardian) and the migration of HSBC policies to Admin Re^® platforms.

For further details on the US GAAP financial performance, refer to the sections beginning with Group results in this Financial Report.

Economic value management financial performance

The economic results in 2015 reflected solid underwriting performance in Property & Casualty Reinsurance. The Life & Health Reinsurance underwriting result was also strong, driven by large transactions and favourable assumption changes. Corporate Solutions generated a small EVM new business loss more than offset by previous years’ business profit from favourable prior-year development from the two most recent underwriting years. Admin Re^® reported an EVM loss mainly driven by the provision for the expected loss on the Guardian transaction, although this transaction is expected to generate a positive contribution to economic net worth over time, supporting Swiss Re’s focus on long-term value generation. Investment activities generated an EVM loss mainly driven by losses in Principal Investments and the impact of credit spread widening on the broader fixed income portfolio, primarily in Life & Health Reinsurance and Admin Re^®, where the focus is steady income as opposed to managing short-term volatility.

For further details on the economic financial performance, refer to the EVM section of this Financial Report.

Qualitative and overall assessment

Qualitatively, Swiss Re has made some noticeable improvements in 2015. The new branding, mission and vision have positively redefined the Group. Employee Engagement Survey scores are in aggregate above relevant external benchmarks in the majority of the business and core IT capabilities are market leading. Client centric behaviour continues to improve in all areas and the business structure and organisational set-up position Swiss Re effectively for future challenges.

Both the Compensation Committee and the full Board of Directors assessed the overall performance of Swiss Re Group as having been markedly stronger in 2015 compared to 2014. Consequently, compensation pools for the Group Executive Committee and other employees were set at higher levels than in 2014.

Value Alignment Incentive

VAI performance is measured for the Group and each underlying business area. The performance factor for each participant is determined based on the business area that the participant was in at the time of award. In March 2015, the Group VAI 2011 (awarded in 2012) vested with a performance factor of 103%.

The VAI 2011 performance factor of 103%, which applies to all Group functions, was mainly driven by positive investment performance in 2012 and 2013 and partially offset by adverse business development in 2012 for the relevant performance year.

Leadership Performance Plan

The LPP award is generally part of total target compensation and is consistently linked to Swiss Re Group’s future achievement of multi-year performance conditions (ROE and relative TSR), keeping the focus on the long-term success of the company. Swiss Re made LPP grants in 2015 consistent with this rationale.

The LPP 2012 plan was granted on 1 April 2012 and vested on 31 March 2015. The RSU component is measured against an ROE performance condition. At the end of each year, the performance is assessed and one third of the RSUs are locked in within a range of 0% to 100%. At the end of the three-year period, the total number of units locked in vests. For the LPP 2012 the average performance factor for the RSUs was just under 100% for the three-year period.

The PSUs are based on relative TSR, measured against a pre-defined basket of peers and vest within a range of 0% to 200%. For the LPP 2012 the performance factor for the PSUs was 200% for the three-year period.

Aggregate variable compensation expense

The Compensation Committee takes its decisions to award variable compensation on an economic value basis at the time of grant. In the financial statements, the recognition of deferred compensation follows the accrual principles as defined under US GAAP. The financial statements reflect the aggregate value of variable compensation for the year under review as follows:

Aggregate compensation of the Swiss Re Group

The aggregate compensation for the performance years 2014 and 2015 for all employees was as follows:

As of 31 December 2015 Swiss Re Group employed 12 767 regular staff worldwide, compared to 12 224 employees at the end of 2014.

Aggregate compensation for Key Risk Takers

The aggregate compensation of the individuals that held a key risk-taking position during the performance years 2014 and 2015 was as follows: