Value Alignment Incentive
Purpose
The VAI is the mandatory deferred portion of the API which introduces a time component to the performance-based, variable compensation. This supports the Group’s business model by aligning a portion of variable compensation with sustainable long-term results. The aim is to ensure that the ultimate value of the deferred variable compensation is affected by the longer-term performance of the relevant Business Unit and the Group.
Plan duration
The VAI supports a longer-term perspective by linking awards to performance over a three-year period.
Performance measurement
The performance measurement calculation uses the three-year average of the published EVM previous years’ business profit margin.
EVM is Swiss Re’s proprietary integrated economic valuation and steering framework, consistently measuring performance across all businesses (please refer to the EVM section of this Financial Report).
A higher EVM previous years’ business profit margin (for all prior underwriting years) results in a higher performance factor. Conversely, a lower EVM previous years’ business profit margin results in a lower performance factor. The performance factor is a linear function, whereby payout generally ranges from 50% to 150%.
Structure
The higher the API granted, the greater the amount of compensation that remains at risk through deferral into the VAI, as shown in the table below.
|
Deferral into VAI |
|---|---|
Group CEO |
50% of API |
Other Group EC members |
45% of API |
Other key executives |
40% of API |
All other employees |
50% of the API amount exceeding USD 100 000 with a minimum deferral amount of USD 5 000 at USD 100 000 and up to a maximum of 40% of API |
Funding
The VAI is not funded as a separate pool. The Group API pool includes amounts paid in cash and amounts to be deferred into the VAI.
Settlement
At the end of the deferral period, the VAI is settled in cash. For the full three-year performance measurement period, forfeiture conditions apply.
Additionally, clawback provisions apply in a range of events as defined in the VAI plan rules (please refer to Long-term compensation termination and clawback provisions in this Financial Report for details on termination and clawback provisions).
For VAI performance outcomes over past years, please refer to Performance outcomes 2019 in this Financial Report.
Value Alignment Incentive
