Annual Report 2010 - Hannover Re

motivation, customer satisfaction, business results). The targets
agreed upon with Managing Directors in the treaty and
regional departments are split equally into economic targets
for their department and individual targets. Of the variable
remuneration received by General Managers in the treaty
and regional departments, one quarter is based on the department’s
economic targets and three quarters derive from
individual targets. The economic targets agreed upon for
the departments encompass the combined ratio, contribution
margin (DB) level 5 and IVC in non-life reinsurance and
the premium growth, underwriting result and IVC in life and
health reinsurance.
In the service departments the agreements on targets consisted
entirely of individual targets in the year under review.
This is, however, only intended to be a temporary state of affairs.
It is envisaged that the MbO agreements for managers
in the service departments will in future have a 25% linkage
to corporate objectives and/or department goals.
The Management-by-Objectives process is overseen by Human
Resources Management and Group Controlling Services;
approval of the degree of goal accomplishment is subject to
the approval of the full Executive Board.
For staff on the level of Manager or higher we introduced
a remuneration model linked to the company’s success in
2004, namely the Group Performance Bonus (GPB). This tool
is geared to the minimum return on equity of 750 basis points
above the risk-free interest rate and the return on equity actually
generated. For those participating in the GPB 14.15
monthly salary payments are guaranteed; a maximum of 16.7
salary payments is attainable. Since its launch the maximum
amount of the GPB was paid out in 2006, 2007 and 2009.
Forecast
Economic development
It is to be expected that the recovery in the global economy
will continue in 2011. In this context, the inconsistent picture
across regions – moderate growth in the industrial nations,
vigorous growth in emerging markets – is likely to remain
unchanged. In countries whose economic recovery was not
hampered by structural problems, the crisis-induced slump
has been largely made good. Consequently, economic growth
here is likely to slow somewhat in 2011. In countries experiencing
structural problems, on the other hand, the available
options for delivering economic stimuli are largely exhausted.
Here, the necessary consolidation efforts are expected to
prove a drag on the pace of expansion. All in all, global output
in 2011 is likely to show a low single-digit percentage increase.
Such forecasts are, however, subject to risks: particularly
notable threats to the development of the world economy
could derive from the protracted tension on European government
bonds markets as well as from another sharp correction
in real estate prices in the United States or China.
The economic rally in the United States will be exposed to
considerable risks in the current year owing to ongoing structural
problems. With both earnings and sales prospects under
strain, especially for small and mid-sized enterprises, the
speed with which equipment spending is stepped up could
come under pressure. Given the minimal economic growth
impetus, the prevailing exceptionally high level of unemployment
will probably drop only slightly; the ifo-Institute estimates
the average jobless rate in 2011 at 9.5%. GDP is forecast
to rise by 1.7% in 2011.
Management report
In Germany, on the other hand, the outlook for economic
growth is positive. Favourable earnings prospects, job security
and low interest rates will likely encourage private consumption
and housing investment. Corporate spending should
also increase. Yet the economic momentum in Germany will
probably be considerably less pronounced in 2011 than in
2010. Global economic stimuli will be weaker and foreign
trade is expected to make just a modest contribution to the
increase in real gross domestic product. What is more, the
federal government is steering towards a course of consolidation,
which will also have a restraining effect. All in all, real
GDP as calculated by the ifo-Institute is likely to increase by
2.4% in 2011. Manufacturing output in Germany should
therefore again surpass the European average in the coming
year.
Hannover Re Group annual report 2010
Forecast Management report
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