Annual Report 2010 - Hannover Re

affiliated companies and the principles according to which this
remuneration is determined are described.
The remuneration report is based on the recommendations of
the German Corporate Governance Code and contains information
which forms part of the notes to the 2010 consolidated
financial statement as required by IAS 24 “Related Party Disclosures”.
The provisions of the Act on the Adequacy of Management
Board Remuneration (VorstAG) and of the Insurance
Supervision Act in conjunction with the Regulation on the Supervisory
Law Requirements for Remuneration Schemes in the
Insurance Sector (VersVergV) – which entered into force on
13 October 2010 – have been observed. In addition, we took
into account the more specific provisions of GAS 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 this remuneration report. Consequently,
no further explanation of the information discussed in this
remuneration report is provided in the notes.
Remuneration of the Executive Board
Structure of the remuneration received by the Executive
Board up to and including 2010
With this objective in mind, the remuneration system consists
of three components: fixed emoluments, a variable bonus as
well as a share-based remuneration component based on a
virtual stock option plan with a longer-term incentive effect
and risk element.
The fixed emoluments, paid in twelve monthly instalments, are
guided by the professional experience and area of responsibility
of the Board member in question.
The variable bonus is cash compensation geared to the result
of the financial year; half is based on the individual Board
member’s specific profit contribution (performance bonus)
and half on the net income generated by the Group as a whole
(profit bonus). With respect to the determination of the profit
bonus for the 2010 financial year, the Supervisory Board approved
inter alia the calculation of the earnings per share
(EPS) on a rolling three-year average, the capping of the profit
bonus to a maximum 1.5 times the average target EPS of the
last three financial years and the elimination of the guaranteed
portion of the profit bonus.
Responsibility
The Act on the Adequacy of Management Board Remuneration
stipulates that the full Supervisory Board shall determine
the amount of remuneration of the Executive Board of Hannover
Re. In the previous year the Supervisory Board had therefore
already amended the Rules of Procedure of the Standing
Committee with immediate effect. Pursuant to Item 3.2 of the
Rules of Procedure, the committee shall decide in lieu of the
Supervisory Board on the content, formation, modification and
termination of employment contracts with the members of the
Executive Board with the exception of remuneration-related
content. The latter shall be decided upon at a full meeting of
the Supervisory Board.
Objective
The purpose of the remuneration system for the Executive
Board is to recompense the members of the Executive Board
according to their scope of activity and responsibility and in
proportion to their tasks and performances as well as the position
of the company. In this context, an appropriate variable
portion of the total remuneration directly recognises the joint
and individual performance of the Executive Board as well as
the performance of the company. The variable remuneration
components have a multi-year assessment basis and thereby
support the sustainable development of the company.
The members of the Executive Board are also entitled to receive
stock appreciation rights under the virtual stock option
plan implemented in 2000 for certain members of the Group’s
management.
The content of the stock option plan is based solely on the
Conditions for the Granting of Stock Appreciation Rights. Under
these conditions, stock appreciation rights are awarded
separately for each financial year provided the internal and
external performance criteria defined in advance by the Supervisory
Board are met.
The internal performance criterion is satisfied upon achievement
of the target diluted earnings per share (EPS) calculated
in accordance with IAS 33 “Earnings per Share”. The external
performance criterion is the relative increase in the value of
the Hannover Re share. The benchmark used to measure this
increase in value is the weighted RBS Global Reinsurance Index.
The benchmarks cannot be retrospectively altered.
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. The amount paid out is limited to
a maximum calculated as a quotient of the total volume of
compensation to be granted in the allocation year and the
total number of stock appreciation rights awarded in the year
84 Management report enterprise management
Hannover Re Group annual report 2010