Annual Report 2010 - Hannover Re

The Annual General Meeting of Hannover Re held on 12 May
2006 resolved by a voting majority of 85.5% to avail itself
until 31 December 2010 of the option contained in the Act
on the Disclosure of Management Remuneration (VorstOG)
not to specify the remuneration of the Executive Board on an
individualised basis by name.
Retirement provision
The pension agreements between members of the Executive
Board and Hannover Re with a contract date prior to 2009
contain commitments to an annual retirement pension calculated
as a percentage of the fixed annual remuneration (defined
benefit). Depending upon the contract date, the target
pension is at most 50% or 65% of the monthly fixed salary
payable on reaching the age of 65. For contracts from 2009
onwards commitments exist on the basis of a defined contribution
scheme. The annual funding contribution for these
contracts is paid by the company in an amount of 25% of the
pensionable income (fixed annual emoluments as at 1 July
of each year). Under both contract variants (defined benefit
and defined contribution) income received from other sources
while the pension is being drawn is taken into account pro rata
or in full in certain circumstances (e.g. in the event of incapacity
for work or termination of the contract of employment prior
to age 65, receipt of disability benefits or previously earned
pension payments).
There were eight (five) individual commitments to active
Board members in the year under review. An amount of EUR
2.9 million (EUR 1.5 million) was allocated to the provision
for pensions in the year under review. The provision stood at
EUR 11.3 million (EUR 8.4 million) as at 31 December 2010.
In addition, contributions to a pension fund in an amount of
EUR 0.06 million (EUR 0.05 million) were paid.
The pension payments to former members of the Executive
Board and their surviving dependants, for whom thirteen (thirteen)
pension commitments existed, totalled EUR 1.3 million
(EUR 1.3 million) in the year under review. Altogether, an
amount of EUR 15.5 million (EUR 13.8 million) has been set
aside for these commitments.
Sideline activities of the members of the Executive Board
The members of the Executive Board require the approval
of the Supervisory Board to take on sideline activities. This
ensures that neither the remuneration granted nor the time
required for this activity can create a conflict with their responsibilities
on the Executive Board. If the sideline activities
involve seats on supervisory boards or comparable control
boards, these are listed and published in the Annual Report
of Hannover Re. The remuneration received for such seats at
Group companies is deducted when calculating the variable
bonus and shown separately in the table.
Structure and system of Executive Board remuneration
from 2011 onwards
The remuneration model for the Executive Board of Hannover
Re was subject to further revision as a consequence of regulatory
developments. These amendments, which were undertaken
with the assistance of an independent firm of consultants
specialising in the field of remuneration systems, ensure that
the total remuneration and the split into fixed and variable
components conform to regulatory requirements – especially
the provisions of the Act on the Adequacy of Management
Board Remuneration (VorstAG) and the Regulation on the Supervisory
Law Requirements for Remuneration Schemes in the
Insurance Sector (VersVergV) – and are both competitive and
in line with market standards.
The revised remuneration model for the Executive Board
comes into effect on 1 January 2011 and contains the following
new features worthy of special note:
• measurement of the profit bonus according to the return on
equity generated by Hannover Re (instead of the previous
measurement based on EBIT and EPS), giving due consideration
to the cost of capital,
• explicit allowance for the business group development in
the performance bonus in the form of the business group
IVCs (Intrinsic Value Creation being a tool of value-based
management used to measure the accomplishment of longterm
objectives),
• integration of a bonus bank for the partial deferment of payment
over three years
• issue of virtual Hannover Re Share Awards as a participation
component with a deferment in payment of four years
(instead of the previously used virtual stock option plan).
The following tables provide an overview of the structure of
the Executive Board’s remuneration applicable from 1 January
2011 onwards, as approved by the Supervisory Board at its
meeting on 8 November 2010 on the recommendation of the
Standing Committee.
Management report
Hannover Re Group annual report 2010
enterprise management Management report
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