Annual Report 2010 - Hannover Re

Remuneration and shareholdings of the management boards of the parent company
With regard to this information please see in general the remuneration
report included as part of our Corporate Governance
report, in particular page 83 et seq.
The remuneration report is based on the recommendation of
the German Corporate Governance Code and contains information
which also forms part of the notes to the 2010 consolidated
financial statement as required by IAS 24 “Related
Party Disclosures”. In addition, we took into account the more
specific provisions of DRS 17 “Reporting on the Remuneration
of Members of Governing Bodies”. Under German commercial
law, too, this information includes data specified as mandatory
for the notes (§ 314 HGB) and the management report (§ 315
HGB). These details are discussed as a whole in the remuneration
report. Consequently, we have not provided any further
explanation in the notes.
7.3 Share-based payment
With effect from 1 January 2000 the Executive Board of
Hannover Re, with the consent of the Supervisory Board,
introduced a virtual stock option plan that provides for the
granting of stock appreciation rights to certain managerial
staff. The content of the stock option plan is based solely on
the Conditions for the Granting of Stock Appreciation Rights.
All the members of the Group’s management are eligible for
the award of stock appreciation rights. Exercise of the stock
appreciation rights does not give rise to any entitlement to
the delivery of Hannover Re stock, but merely to payment of
a cash amount linked to the performance of the Hannover Re
share. Recognition of transactions involving stock appreciation
rights with cash settlement is governed by the requirements
of IFRS 2 “Share-based Payment”.
Stock appreciation rights were first granted for the 2000 financial
year and are awarded separately for each subsequent
financial year (allocation year), provided the performance criteria
defined in the Conditions for the Granting of Stock Appreciation
Rights are satisfied.
The internal performance condition is achievement of the target
performance defined by the Supervisory Board, which is
expressed in terms of the diluted earnings per share calculated
in accordance with IAS 33 “Earnings Per Share” (EPS).
If the target EPS is surpassed or undershot, the provisional
basic number of stock appreciation rights initially granted is
increased or reduced accordingly to produce the EPS basic
number. The external performance criterion is the relative
development of the share price in the allocation year. The
benchmark used in this regard is the (weighted) RBS Global
Reinsurance Index. This index encompasses the performance
of listed reinsurers worldwide. Depending upon the outperformance
or underperformance of this index, the EPS basic
number is increased – albeit by at most 400% of the EPS basic
number – or reduced – although by no more than 50% of the
EPS basic number.
The maximum period of the stock appreciation rights is ten
years, commencing at the end of the year in which they are
awarded. Stock appreciation rights which are not exercised
by the end of the 10-year period lapse. Stock appreciation
rights may only be exercised after a waiting period and then
only within four exercise periods each year. For 40% of the
stock appreciation rights (first tranche of each allocation year)
the waiting period is two years; for each additional 20% of
the stock appreciation rights (tranches two to four of each
allocation year) the waiting period is extended by one year.
Each exercise period lasts for ten trading days, in each case
commencing on the sixth trading day after the date of publication
of the quarterly report of Hannover Re.
On 4 November 2009 the Supervisory Board of Hannover Re
decided to extend the waiting period applicable to members
of the Executive Board from two to four years for stock appreciation
rights granted from the 2010 allocation onwards;
on 23 November 2009 the Executive Board decided to extend
the waiting period accordingly for the other members of
the Group’s management. Upon expiry of this waiting period
a maximum 60% of the stock appreciation rights awarded
for an allocation year may be exercised. The waiting period
for each additional 20% of the stock appreciation rights
awarded for this allocation year to a member of the managerial
staff is one year.
Upon exercise of a stock appreciation right the amount paid
out to the entitled party is the difference between the basic
price and the current market price of the Hannover Re share
at the time of exercise. In this context, the basic price corresponds
to the arithmetical mean of the closing prices of the
Hannover Re share on all trading days of the first full calendar
month of the allocation year in question. The current market
price of the Hannover Re share at the time when stock appreciation
rights are exercised is determined by the arithmetical
mean of the closing prices of the Hannover Re share on the
178 Notes 7.3 Share-based payment
Hannover Re Group annual report 2010