Report from the Compensation Committee
Swiss Re is committed to a compensation framework that is balanced and performance-oriented and that aligns the interests of employees and shareholders.
During the past year, the Compensation Committee continued to monitor the alignment of Swiss Re’s compensation framework with shareholders’ interests and with our long-term business and risk strategy.Jacques de Vaucleroy
Chair Compensation Committee
As the Chair of Swiss Re’s Compensation Committee, I am pleased to share with you Swiss Re’s Compensation Report for the financial year ended 31 December 2019.
Swiss Re’s vision “we make the world more resilient” is supported by our mission – to create smarter solutions for our clients through new perspectives, knowledge and capital. The combination of these strengths makes Swiss Re a partner of choice for our clients. At the same time, Swiss Re wants to be an employer of choice for our employees. Its compensation framework is therefore designed to attract, motivate and retain the qualified talent the Group needs to succeed globally while providing superior returns to our shareholders. During the past year, the Compensation Committee monitored:
- The alignment of Swiss Re’s compensation framework with shareholders’ interests and with our long-term business and risk strategy.
- The effectiveness of the current performance measurement approach (ie performance achievements at the business and individual level against the goals set for the year, including behaviour and risk aspects), which determines compensation outcomes.
- The competitiveness of compensation for the Board of Directors, Group Executive Committee (Group EC) and other key executives.
- Legal and regulatory developments, including the compliance of the Board of Directors and Group EC compensation with the Ordinance against Excessive Compensation at Public Corporations (Ordinance).
Furthermore, the Compensation Committee conducted a self-assessment on its own effectiveness.
On behalf of the Compensation Committee, I would like to acknowledge the strong shareholder support at the Annual General Meeting (AGM) 2019. Swiss Re’s shareholders approved all compensation-related motions and, like in prior years, the 2018 Compensation Report received a positive outcome in the consultative vote.
Through discussions with regulators, key investors and proxy advisors, Swiss Re identified potential enhancements to its compensation disclosure. As a result, the 2019 Compensation Report contains additional information, particularly in the area of realised compensation for the Group Chief Executive Officer (Group CEO).
Group business performance 2019
Key considerations for annual compensation decisions continue to cover a combination of US GAAP and Economic Value Management (EVM) based business results, qualitative factors and Swiss Re’s pay-for-performance approach. Compensation decisions were made considering Swiss Re’s overall performance for the reporting year in which the Group’s US GAAP and economic performance was negatively impacted by higher-than-expected natural catastrophe and man-made losses as well as by increased claims in US casualty, partially offset by a strong investment result.
- Property & Casualty Reinsurance’s reported US GAAP and economic result reflects the large natural catastrophe events, man-made losses and measures to address ongoing trends in US casualty.
- Life & Health Reinsurance met its return on equity target and delivered a strong EVM new business profit.
- Corporate Solutions’ US GAAP and economic results were heavily impacted by natural catastrophe and man-made losses, mainly from prior accident years related to the recent deterioration in the US casualty business, resulting in an overall loss for the year.
- Life Capital’s US GAAP result reflected a charge related to the agreement to sell ReAssure. Gross cash generation was strong, mainly driven by proceeds from the sale of subordinated bonds issued by ReAssure and the sale of a 10% stake in ReAssure to MS&AD Insurance Group Holdings Inc.
Group Annual Performance Incentive 2019
In years with relatively benign natural catastrophe experience, variable compensation payouts were positive but not excessive. Conversely, in adverse environments, the negative impact shall be substantive but also proportionate, given the need to carefully manage key talent retention risk and the Group’s willingness to underwrite risk. Swiss Re’s US GAAP performance was below target, but higher than last year. This backdrop, in conjunction with the qualitative performance assessment, led the Compensation Committee and the Board of Directors to grant variable compensation payouts that are below target levels.
Swiss Re’s compensation framework is designed to promote long-term sustainable performance for the Group and its shareholders through a mix of fixed and variable compensation components. It comprises fixed components such as base salary, pension and other benefits, as well as a combination of variable short- and long-term incentives, as outlined later in this Compensation Report.
The Compensation Committee continues to review and monitor the compensation framework of Swiss Re, considering business strategy, targets, sustainability and Environmental, Social and Governance (ESG) considerations, risk awareness and corporate values. External factors with respect to regulatory requirements and legal developments, the international context in which we operate and relevant market data are also taken into account.
There were no material changes to our compensation framework in relation to the year 2019.
The Compensation Committee remains committed to recommending compensation policies and programmes to the Board of Directors that support our business strategy and align the interests of our employees with those of our shareholders. We are therefore keen to maintain regular interactions with shareholders and other key stakeholders.
Consistent with last year and in line with our Articles of Association, shareholders will again be asked to approve the following amounts:
- Maximum aggregate amount of compensation for the members of the Board of Directors for the term of office from the AGM 2020 to the AGM 2021.
- Maximum aggregate amount of fixed compensation and variable long-term compensation for the members of the Group EC for the financial year 2021.
- Aggregate amount of variable short-term compensation for the members of the Group EC for the financial year 2019.
Separately from this and as in the past, shareholders will also be asked to support this Compensation Report in a consultative vote. The Compensation Committee is satisfied that this Compensation Report complies with applicable laws, rules and regulations and provides a comprehensive view of the compensation framework at Swiss Re and the 2019 compensation decisions.
Zurich, 19 March 2020
Jacques de Vaucleroy
Chair Compensation Committee