Image: Klaus Ohlenschläger / dpa Picture Alliance
Munich Re
Remuneration system for the Board of Management as of 1 January 2021
Disclaimer: This document is based on a resolution by the Supervisory Board. The remuneration system will be part of the agenda at the Annual General Meeting of Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München ("Munich Re") on 28 April 2021.
Content
1. | Remuneration system for the Board of Management | p. 3 |
2. | ESG criteria | p. 5 |
3. Success and performance criteria | p. 6 | |
4. | Malus/Clawback | p. 7 |
2
Relative share | Component | Performance criteria | Target corridor | Evaluation | Payment | Further components | ||||||||
(Form, time) | ||||||||||||||
~ 49% | Basic remuneration | ▪ | Function | - | - | Cash | Shareholding obligation | |||||||
remuneration | ~ 1% | ▪ | Responsibility | remuneration, | (Share Ownership Guidelines) | |||||||||
Regular fringe benefits/remuneration in kind | As of 1 January 2021, no employer-financedpension scheme for new members of the | ▪ | 5-yearbuild-up phase or | |||||||||||
▪ | Length of service on | monthly | ▪ | 100% of the annual gross | ||||||||||
Board | basic remuneration | |||||||||||||
▪ During the period of service | ||||||||||||||
on the BoM | ||||||||||||||
Fixed | Board of Management and members of the Board of Management who were members of | 2 years if service on the | ||||||||||||
the Board before 2021 and decided within the scope of their voting rights to switch to the | BoM commenced before | |||||||||||||
new system | 2019 | |||||||||||||
▪ Obligation to provide proof | ||||||||||||||
~ 15% | Annual bonus | IFRS consolidated result | Scaling | Achievement of | Overall performance | Cash | Assessment of | |||||||
(AB) | 0-100% /100-200% | annual target | assessment for AB + MYB | remuneration, | appropriateness of total | |||||||||
(bonus-malus aspects) | in the year after | remuneration | ||||||||||||
0% = | T - (2*X) €bn | the one-year | ▪ | in comparison with the | ||||||||||
100% = | T | Adjustment of target | plan term | market | ||||||||||
200% = T + X €bn | achievement by Supervisory | → DAX30 companies | ||||||||||||
Board, taking into account | ▪ | within the company | ||||||||||||
T = Target in €bn | individual and collective | → upper management and | ||||||||||||
remuneration | evaluation) | ~ 35% | (MYB) | X = Deviation in €bn | Munich Re | management performance | remuneration, | staff overall | ||||||
0 - 200% | other boards | |||||||||||||
(T and X to be | (also over time) | |||||||||||||
determined annually) | ➢ | Loading/reduction of up | ||||||||||||
Multi-year bonus | Total Shareholder Return | Linear scaling | Performance of | to 10 pp on the basis of | Cash | In the case of seats held on | ||||||||
Variable | (100% | ESG criteria | ||||||||||||
(TSR) of Munich Re shares | shares in | ➢ | Loading/reduction of up | in the year after | → remuneration for board | |||||||||
Term: 4 years | in comparison with a | 0% = lowest TSR in | comparison with | to 10 pp on the basis of | the four-year | memberships must be paid over | ||||||||
defined peer group | peer group | peer group | success- and | plan term | to the Company | |||||||||
performance-related | ||||||||||||||
(Peer group: Allianz, AXA | 200% = highest TSR | Severance payment cap | ||||||||||||
criteria (including | ||||||||||||||
Generali, Hannover Re, | in peer group | situation, success and | → two years' total remuneration, | |||||||||||
SCOR, Swiss Re, Zurich | future prospects of the | no more than remaining term of | ||||||||||||
Insurance Group) | Company) | the Board member's contract if | ||||||||||||
this term is shorter | ||||||||||||||
Subsequent adjustment of target values or comparative | In the event of post- | |||||||||||||
parameters excluded | contractual non-competition | |||||||||||||
agreement | ||||||||||||||
100% | Target overall remuneration (total remuneration for 100% evaluation of the variable remuneration components) | → severance payments are | ||||||||||||
taken into account in | ||||||||||||||
The defined maximum remuneration for the BoM function groups Chair (€9.5m) and ordinary member (€7.0m) limits the overall remuneration (including irregular/event-related | compensation for the period of | |||||||||||||
fringe benefits, e.g. removal costs, compensation for bonuses forfeited by previous employers) allocable to a financial year. | competitive restriction | 3 | ||||||||||||
Annual bonus - Change of scaling
New scaling as of 2021
Rationale for change of scaling
- Linear scaling always appears appropriate when business-inherent earnings volatilities are symmetrical in nature. At Munich Re, however, they are highly asymmetrical.
- The asymmetry in earnings is mainly driven by:
- The natural asymmetry of the business model - positive deviations are limited, negative deviations can be much more pronounced
- Munich Re Group's steering approach - Particularly prudent reserving methods
- Therefore, the former scaling will be replaced by a new scaling where the range between 0% and 100% will be twice as high as the one between 100% and 200%.
4
Criteria for the evaluation of overall performance (1/2):
Stronger focus on ESG topics with precise criteria
ESG criteria (loading/reduction of up to 10 percentage points)
Ecological aspects
- Reduction of the CO2 footprint in line with Munich Re's climate strategy (covering assets, liabilities and own emissions)
Governance-related aspects
- Leadership skills
- Diversity
- Adherence to guidelines/ compliance requirements
- Appropriate establishment of governance functions
ESG criteria
(individual
and collective management performance)
Social aspects
- Access to healthcare and corporate health initiatives
- Training costs and days
- Sickness rate
5
Criteria for the evaluation of overall performance (2/2):
Discretionary evaluation of success and performance using adequate criteria
Success and performance criteria (loading/reduction of up to 10 percentage points)
Collective management performance
- Result of field of business (reinsurance and/or primary insurance)
-
Reaction to special market circumstances and unforeseeable
developments
-
Reaction to special market circumstances and unforeseeable
Situation, success and future prospects of the Company
- Financial situation of the Company
- Short-termand long-term profit prospects
- Market environment (interest rates, situation in the industry, etc.)
Success and performance criteria
Individual management performance
- Result of division/divisional unit, contribution to overall performance
- Personal performance (qualitative and/or quantitative)
- Consideration of special market circumstances or unexpected developments
- Implementation of strategy, improvements in organisation and processes, innovation
6
Malus/Clawback
Current malus regulations sufficient - no introduction of a clawback clause
- No (legal) obligation to introduce a clawback clause (German Corporate Governance Code: malus or clawback)
- Malus mechanisms are included in the evaluation of overall performance (AB and MYB)
- Severe compliance breaches generally entail termination for good cause and can also be sanctioned within the current system
- In many cases, severe compliance breaches imply a provable (appraisable) damage for which an action can be filed pursuant to Section 93 of the German Stock Corporation Act (AktG)
- Forfeiture of bonuses not yet paid in the case of termination for good cause for all members of the Board of Management
- Risk of a compliance clawback: invalidity, as such a clause would barely meet the (German) legal requirements related to General Terms and Conditions of contracts
- Compliance clawback can endanger long-term corporate management by avoiding value-creating but potentially higher-risk opportunities
7
Attachments
- Original document
- Permalink
Disclaimer
Munich Re Group - Münchener Rück AG published this content on 12 January 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 January 2021 13:29:01 UTC