HANNOVER RE Remuneration report
2023
Introduction
The remuneration report describes the structure and system of the remuneration for the Executive Board and Supervisory Board and provides detailed information about the individual remuneration and other benefits of present and former members of the Executive Board and Supervisory Board of Hannover Rück SE that are granted and owing to them for their work in the 2023 financial year.
The report was drawn up by the Executive Board and Supervisory Board of the company in conformity with the requirements of § 162 Stock Corporation Act (AktG), fulfils the recommendations and suggestions of the German Corporate Governance Code (DCGK) as amended on 28 April 2022 and takes account of relevant regulatory provisions.
The remuneration report was subjected to an audit, both formally and in terms of its content, by PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft that went above and beyond the requirements of § 162 Para. 3 Stock Corporation Act (AktG). Explanatory remarks on the remuneration system, which was adopted by the General Meeting 2021, are provided under the following link:https://www.hannover-re.com/1849339/remuneration-report-and-system
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Remuneration of the Executive Board
Overview of the remuneration system
The current remuneration system for the Executive Board has been in effect since 1 January 2021. It is in conformity with legal and regulatory requirements and the recommendations of the German Corporate Governance Code (DCGK) and was approved by the General Meeting of Hannover Rück SE on 5 May 2021 with a majority of 85.54%. The remuneration system is submitted to the General Meeting for approval if any material changes are made to the remuneration system, and at least every four years. In view of the General Meeting's approval of the remuneration report in 2023 with a majority of 90.84%, there was no reason to question or modify the remuneration system, its implementation or the nature of the reporting. Points made in discussions with investors had already prompted us in the previous year to present the application of the remuneration system in relation to variable remuneration in even greater detail in the remuneration report. In addition to the multi-year variable remuneration components paid out in 2023, we are again showing in this year's remuneration report the current status of payments due in the coming years from multi-year variable remuneration.
The remuneration system is transparently and comprehensibly structured overall and responds to the expectations of our investors and other key stakeholders. The remuneration consists of fixed (non-performance-based) and variable (performance-based) components. The considerable relevance of the variable remuneration and the reinforcement of the concept of "pay-for- performance" are front and centre in this regard. The variable remuneration is based on financial and non-financial perfomance criteria that are derived from the Hannover Re Group strategy and can be influenced by the Executive Board. The measurement of performance also takes account of sustainability criteria that promote sustainable and long-term growth in the value of the company. In addition, the remuneration of the Executive Board is closely aligned with the interests of our investors through a strong share correlation based on the use of a Performance Share Plan and relative measurement of the Hannover Re share's performance in comparison with our peers. Malus und clawback provisions make it possible to reduce or claw back variable remuneration components in the event of serious compliance violations. The claims to remuneration of the members of the Executive Board are linked to healthy and effective risk management.
The major elements of the remuneration system are summarised in the following overview::
Structure of the remuneration system
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Basic principles underlying the remuneration of the Executive Board
The strategy of the Hannover Re Group is geared to sustainable outperformance in the interests of the Group's stakeholders (in particular investors, clients and employees). In remunerating the Executive Board our focus is therefore on the principles of continuity, financial strength and profitability. With a rigorous underwriting policy, partnership-based customer relationships, a lean operating model and our highly efficient risk and capital management, we aim to preserve our outstanding position as one of the world's leading and most profitable reinsurance groups on an enduring basis and be the market leader in terms of profitability, earnings growth and cost efficiency. In our "Striving for sustainable outperformance", governance, risk management, compliance and corporate social responsibility constitute the foundations for our growth as a trusted global reinsurance partner.
Risk management and corporate social responsibility are defined more closely in specific strategies derived from the Group strategy. Further information is provided in our Group Annual Report 2023: with regard to the risk management system we would refer to the opportunity and risk report within the combined management report. For further information on corporate social responsibility and the compliance management system please see the combined non-financial statement. We also report on the basic principles of our corporate governance in a similarly entitled section of the Group Annual Report (link: https://www.hannover- re.com/199620/results-and-reports).
The remuneration of the Executive Board makes a substantial contribution to the advancement of our Group strategy and the long- term and sustainable development of the Hannover Re Group. The remuneration ensures a transparent, performance-related incentive, strongly focused on the company's long-term success, which in particular depends on financial and non-financial performance criteria derived from the Group strategy and on the performance of the Hannover Rück SE share, including in a relative comparison with our peers. An excessive risk appetite is thereby discouraged.
The members of the Executive Board are remunerated in light of the company's position and according to their performance and their scope of activity and responsibility. The requirements of the Stock Corporation Act (AktG), the provisions of Article 275 of Delegated Regulation (EU) 2015/35 with amendments by Delegated Regulation (EU) 2016/2283 and of the Insurance Supervision Act in conjunction with the Regulation on the Supervisory Law Requirements for Remuneration Schemes in the Insurance Sector (VersVergV) as well as the recommendations for the remuneration of the management board contained in Section G of the German Corporate Governance Code (DCGK) establish the regulatory framework.
In determining the remuneration for the Executive Board of Hannover Re, the Supervisory Board followed the guidelines set out below:
Guiding principles for the Executive Board remuneration of Hannover Re
Promoting the corporate strategy
Long-termism and sustainability
Pay-for-performance
Adequacy of remuneration
Linkage to shareholder interests
Allowance for market practice and regulatory compliance
Transparency
- Performance criteria derived from the corporate strategy
- Variable remuneration largely share-based with a multi-year orientation
- Sustainability targets (ESG) integrated into the measurement of variable remuneration
- Bulk of target direct remuneration comprised of variable remuneration components
- Adequate and ambitious defined performance criteria
- Variable remuneration can fluctuate between zero and a cap
- Remuneration of Executive Board members commensurate with the tasks and perfor- mance of the respective Board member and the position of the company
- Allowance for internal and external remuneration ratios
- Caps on the individual variable remuneration components and total remuneration
- Harmonisation of the interests of the Executive Board with those of our shareholders
- Malus and clawback provisions apply to entire variable remuneration
- Relative performance measurement creates incentives for long-term outperformance of our competitors on the capital market
- Allowance for current market practice of relevant peers in the Board remuneration
- Ensuring conformity with legal and regulatory requirements relevant to Hannover Re
- Ex-postdisclosure of target values and target attainment
- Ex-postdisclosure of the individual premium / deduction per Board member
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Remuneration structure
The idea of "pay for performance" and the long-term orientation are paramount concepts central to the remuneration system for the Executive Board of Hannover Re.
In order to reinforce the concept of pay-for-performance, the target direct remuneration (sum of fixed remuneration and target amounts of the variable remuneration components in the event of 100% target attainment) is comprised of 40% fixed remuneration and 60% variable remuneration components. The variable remuneration consists of a short-term incentive (STI) and a long-term incentive (LTI) with a performance period of four years.
The remuneration structure is geared to the sustainable and long-term development of the Hannover Re Group. The STI accounts for 40% of the variable remuneration components and thus contributes 24% to the target direct remuneration. The LTI, which accounts for a 60% share of the variable remuneration components, represents 36% of the target direct remuneration.
Structure of the target direct remuneration
Review of the adequacy of Executive Board remuneration
The remuneration of the members of the Executive Board is determined by the Supervisory Board on the basis of the remuneration system in accordance with the recommendations of the Standing Committee. When determining the remuneration of the members of the Executive Board, the Supervisory Board considers the responsibility and tasks of the individual members of the Executive Board, their individual performance, the economic situation and the success and future prospects of the company.
The customary nature of the remuneration in comparison to other similar companies (horizontal comparison) and in terms of the amount of remuneration as well as the remuneration structure within the company (vertical comparison) was reviewed by the Supervisory Board at its meeting on 8 November 2023. In accordance with the Stock Corporation Act (AktG) and the German Corporate Governance Code (DCGK), the review of the customary nature of the Executive Board's remuneration is to be conducted based on the criteria country, size and industry. Companies listed on the DAX and MDAX (with the exception of Hannover Rück SE) as at 1 July 2023 were therefore used on a combined basis as a primary peer group for the horizontal comparison of remuneration. As a further indication, the target direct remuneration of the Executive Board was also subjected to a horizontal comparison with an individual benchmark group comprised of relevant peers. This benchmark group is also used in the multi-year variable remuneration to measure the relative total shareholder return. The vertical comparison is based on the remuneration of the Executive Board relative to the remuneration of the upper level of management and the total workforce of Hannover Re in Germany. Both the status quo and the development over time of the remuneration ratios were taken into consideration. The Supervisory Board availed itself of the option to engage an external remuneration consultant - independent of the Executive Board and the company
- for the review of the adequacy of the Executive Board remuneration.
Determination of target remuneration
Every member of the Executive Board is given a contractual commitment to customary target remuneration. This is aligned with their scope of responsibility and with their expertise and experience that are relevant to the role.
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The fixed and variable remuneration components are balanced. The fixed component has a sufficiently large share in the target total remuneration that the company is able to apply a flexible bonus policy, including the possibility of not paying any variable remuneration at all. This means that members of the Executive Board have no incentive to enter into excessively high risks in the interest of higher bonus payments.
The following tables show the target remuneration for each member of the Executive Board for the 2023 financial year. The target remuneration encompasses the remuneration commitment for the financial year that is granted in the event of 100% target attainment.
Target remuneration in the event of 100% target attainment
Target remuneration | Jean-Jacques Henchoz | Sven Althoff |
(Chief Executive Officer) | (Board member with divisional responsibility / | |
since 1 April 2019 | Coordinator of the Property & Casualty | |
reinsurance business group) | ||
since 1 August 2014 |
Basic remuneration
Fringe benefits/non-cash benefits¹
Other²
Fixed remuneration components
One-year variable remuneration (STI)
Multi-year variable remuneration (LTI) (performance share awards 2023 / 2022)
Variable remuneration components
Total target remuneration
Service cost³
Target remuneration
2023 | 2022 | 2023 | 2022 | |||||||||||
in EUR | in EUR | in EUR | in EUR | |||||||||||
thousand | in % | thousand | thousand | in % | thousand | |||||||||
840.0 | 40% | 840.0 | 520.0 | 39% | 520.0 | |||||||||
12.0 | 1% | 14.2 | 16.5 | 1% | 16.8 | |||||||||
1,000.0 | ||||||||||||||
852.0 | 1,854.2 | 536.5 | 536.8 | |||||||||||
504.0 | 24% | 504.0 | 312.0 | 24% | 312.0 | |||||||||
756.0 | 36% | 756.0 | 468.0 | 36% | 468.0 | |||||||||
1,260.0 | 1,260.0 | 780.0 | 780.0 | |||||||||||
2,112.0 | 100% | 3,114.2 | 1,316.5 | 100% | 1,316.8 | |||||||||
118.2 | 151.9 | 54.4 | 76.5 | |||||||||||
Claude Chèvre | Clemens Jungsthöfel⁴ | |||||||||||||
(Board member with divisional responsibility) | (Chief Financial Officer) | |||||||||||||
since 1 November 2011 | since 1 September 2020 |
Basic remuneration
Fringe benefits/non-cash benefits¹
Fixed remuneration components
One-year variable remuneration (STI)
Multi-year variable remuneration (LTI) (performance share awards 2023 / 2022)
Variable remuneration components
Total target remuneration
Service cost³
2023 | 2022 | 2023 | 2022 | |||||||||||
in EUR | in EUR | in EUR | in EUR | |||||||||||
thousand | in % | thousand | thousand | in % | thousand | |||||||||
520.0 | 40% | 520.0 | 480.0 | 40% | 430.0 | |||||||||
15.9 | 1% | 16.0 | 8.9 | 1% | 9.0 | |||||||||
535.9 | 536.0 | 488.9 | 439.0 | |||||||||||
312.0 | 24% | 312.0 | 288.0 | 24% | 258.0 | |||||||||
468.0 | 36% | 468.0 | 432.0 | 36% | 387.0 | |||||||||
780.0 | 780.0 | 720.0 | 645.0 | |||||||||||
1,315.9 | 100% | 1,316.0 | 1,208.9 | 100% | 1,084.0 | |||||||||
76.4 | 106.6 | 60.4 | 84.5 | |||||||||||
- Costs for company car for business and personal use, insurance premiums and non-cash benefits are carried in the amounts calculated for tax purposes. Relocation costs, additional expenditures for maintaining a second household (to the extent incurred).
- The Supervisory Board gave Jean-Jacques Henchoz a contractual commitment to compensate the forfeiture of benefits from his previous employer in instalments. The compensatory payment in 2022 was the final instalment under this agreement and was also dependent upon reappointment effective 1 April 2022.
³ For details of the service cost see the table "Pension commitments"
- Clemens Jungsthöfel was contractually granted target remuneration by the Supervisory Board with effect from September 2023 as follows: basic remuneration = EUR 520 thousand, STI = EUR 312 thousand, LTI = EUR 468 thousand.
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Target remuneration | Dr. Klaus Miller |
(Board member with divisional responsibility) | |
since 1 September 2010 |
Sharon Ooi
(Board member with divisional responsibility) since 11 January 2023
Basic remuneration
Fringe benefits/non-cash benefits¹
Other²
Fixed remuneration components
One-year variable remuneration (STI)
Multi-year variable remuneration (LTI) (performance share awards 2023 / 2022)
Variable remuneration components
Total target remuneration
Service cost³
2023 | 2022 | 2023 | ||||||||
in EUR | in EUR | in EUR | ||||||||
thousand | in % | thousand | thousand | in % | ||||||
520.0 | 40% | 520.0 | 447.2 | 29% | ||||||
0.8 | 0% | 1.0 | 80.3 | 5% | ||||||
360.0 | 23% | |||||||||
520.8 | 521.0 | 887.5 | ||||||||
312.0 | 24% | 312.0 | 268.3 | 17% | ||||||
468.0 | 36% | 468.0 | 402.5 | 26% | ||||||
780.0 | 780.0 | 670.8 | ||||||||
1,300.8 | 100% | 1,301.0 | 1,558.3 | 100% | ||||||
71.1 | 89.3 | 0.0 | ||||||||
Target remuneration | Dr. Michael Pickel |
(Board member with divisional responsibility) | |
since 1 January 2000 |
Silke Sehm
(Board member with divisional responsibility) since 6 March 2019
2023
2022 | 2023 | 2022 |
Basic remuneration
Fringe benefits/non-cash benefits¹
Fixed remuneration components
One-year variable remuneration (STI)
Multi-year variable remuneration (LTI) (performance share awards 2023 / 2022)
Variable remuneration components
Total target remuneration
Service cost³
in EUR
thousand in %
520.0 39%
- 1%
312.0 24%
468.0 36%
780.0 | |
1,316.6 | 100% |
141.8
in EUR
thousand
520.0
14.8
534.8
312.0
468.0
780.0
1,314.8
190.1
in EUR
thousand
460.0
11.8
471.8
276.0
414.0
690.0
1,161.8
35.8
in %
40%
1%
24%
36%
100%
in EUR
thousand
430.0
11.0
441.0
258.0
387.0
645.0
1,086.0
138.6
- Costs for company car for business and personal use, insurance premiums and non-cash benefits are carried in the amounts calculated for tax purposes. Relocation costs, additional expenditures for maintaining a second household (to the extent incurred).
- The Supervisory Board gave Sharon Ooi a contractual commitment to compensate the forfeiture of benefits from her previous employer in instalments. An amount of EUR 300 thousand was paid out in January 2023 and a further EUR 180 thousand was / will be paid out in instalments of EUR 60 thousand each in December 2023 to December 2025.
³ For details of the service cost see the table "Pension commitments"
Pay ratios
In the year under review the target total remuneration of the Chief Executive Officer was 23 times (2022: 23 times) the target total remuneration of the average of all company employees (excluding the Executive Board). The target total remuneration of the average of all members of the Executive Board (excluding compensatory payment for forfeiture of benefits from a previous employer) was 15 times (2022: 15 times) the target total remuneration of the average of all employees (excluding the Executive Board). The target total remuneration of the average of all employees refers to the workforce of Hannover Re in Germany; it encompasses the personal expense (excluding expense for Executive Board remuneration) for wages and salaries and the variable salaries upon 100% target attainment on a full-time equivalent basis.
Adherence to maximum remuneration
The Supervisory Board has determined an upper limit for each member of the Executive Board based on the amount for the total of fixed remuneration, fringe benefits, STI and LTI as well as pension service cost ("maximum remuneration") in accordance with § 87a Para. 1 Sentence 2 No. 1 Stock Corporation Act (AktG). The maximum remuneration limits all payments that result from the commitment for a financial year, irrespective of the date of receipt. The maximum remuneration is EUR 5,000,000 for the Chief Executive Officer and EUR 3,000,000 for all other members of the Executive Board.
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It Is only possible to report definitively on adherence to the maximum remuneration for the 2023 financial year after the LTI tranche awarded for 2023 has been paid out, which will occur in 2028. Should the payment made from the LTI lead to the maximum remuneration being exceeded, the amount paid out will be reduced accordingly so as to ensure adherence to the maximum remu- neration.
Application of the remuneration system in the 2023 financial year
The following table provides an overview of the components of Hannover Re's remuneration system in the 2023 financial year and the associated targets:
Remuneration components and their target
Remuneration component / Remuneration condition
Fixed Remunerationcomponents | Fixed remuneration |
Fringe benefits | |
Pension scheme | |
Short-term | |
incentive (STI) | |
componentsremunerationVariable | |
Long-term | |
incentive (LTI) |
Measurement basis / parameter
The fixed remuneration is paid in cash in twelve equal monthly instalments.
Vehicle for business and personal use, accident, luggage and D&O insurance in an appropriate amount
Defined contribution commitment: annual funding contribution amounting to 25% of the defined measurement basis
Dr. Pickel: continuation of a defined benefit commitment
(legacy commitment): commitment to a pension calculated as a percentage of the pensionable fixed annual remuneration
Target bonus model
Performance criteria:
- Hannover Re Group RoE of the 2023 financial year
- Individual performance criteria of the 2023 financial year (financial and non-financial, including ESG targets)
Cap: 200% of the STI target amount
Performance Share Plan
("Hannover Re Performance Shares") Four-yearperformance period
LTI allocation value is dependent on the determined target attainment for:
- Hannover Re Group RoE of the 2023 financial year
- Individual performance criteria of the 2023 financial year Performance criteria:
- Performance of the Hannover Re share (plus dividends)
- Relative Total Shareholder Return (TSR) compared to rel- evant peers: Munich Re, Swiss Re, Everest Re, Reinsur- ance Group of America, SCOR)
Cap: 400% of the LTI target amount (max. 200% LTI allocation value + max. 200% measured by the relative TSR)
Goals
- Attracting and retaining the most suit- able Board members
- Remunerating the scope of responsi- bility, expertise and experience of the individual Board members
- Granting customary fringe benefits and pension schemes to attract and retain the most suitable Board mem- bers
- Incentivising attainment or outperfor- mance of the annual corporate and business group targets and remunera- tion of the individual contribution to the result and to sustainability
- Recognising the performance in the 2023 financial year
- Incentivising the creation of long-term shareholder value
- Motivating outperformance of peers
Subsequent adjustment of the target values / benchmark parameters for annual and multi-year bonus is excluded.
Further provisions
Maximum | Chief Executive Officer: EUR 5,000,000 | |
remuneration | Other Board members: EUR 3,000,000 | |
Malus and | Option of the Supervisory Board to partially or fully withhold | |
clawback | ("malus") or claim back ("clawback") the variable remunera- | |
tion in the event of gross misconduct or an incorrect consoli- | ||
dated financial statement | ||
In addition, reduction or elimination of the variable remunera- | ||
tion is possible if required by the regulator |
- Limiting the total remuneration promised for a financial year
- Fulfilment of regulatory standards of the Stock Corporation Act (AktG)
- Strengthening the position of the Su- pervisory Board in the event of severe compliance violations
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Fixed remuneration components
Fixed remuneration
The fixed remuneration is paid out in cash in twelve equal monthly instalments. It is aligned in particular with the scope of tasks and professional experience of the respective member of the Executive Board.
Fringe benefits
The members of the Executive Board additionally receive certain non-performance-based fringe benefits in the customary scope; these are reviewed at regular intervals. A vehicle is made available for company and personal use for the duration of the Board appointment. The member of the Executive Board is responsible for paying tax on the pecuniary advantage associated with personal use of the company car. In addition, the company grants the members of its Executive Board an appropriate amount of insurance protection under group policies (accident, luggage and D&O insurance).
If a new member of the Executive Board forfeits a bonus from their previous employer, sign-on or recruitment bonuses are paid in exceptional cases. Compensation for forfeited variable remuneration components from the previous employer is normally granted in multiple instalments and linked to payment conditions.
Retirement provision
With the exception of Dr. Pickel, whose annual pension is based on a final salary commitment, the members of the Executive Board have defined contribution commitments. Further information in this regard is provided in the subsection "Benefits on leaving the company".
Variable remuneration components
The variable remuneration components consist of a short-term incentive (STI), which is assessed on the basis of the respective financial year, and a long-term incentive (LTI) with a performance period of four years.
The performance criteria for measuring and evaluating target attainment are derived from Hannover Re's corporate strategy. To this end, the variable remuneration components are structured in such a way as to promote the long-term development of the Hannover Re Group. The following overview shows the close linkage between the performance criteria and other aspects of the variable remuneration and the corporate strategy and explains how the variable remuneration promotes Hannover Re's sustainable development.
The company does not, as a matter of principle, grant the members of the Executive Board any guaranteed variable remuneration.
Variable remuneration components
Remuneration component
Short-term
incentive
(STI)
Long-term
incentive
(LTI)
Performance criterion / aspect
Group RoE
Individual premium / deduction
Allocation value depending on STI target attainment
Share performance
Four-year performance period
Relative TSR
Strategy relevance / Promotion of long-term development
- RoE: one of Hannover Re's strategic KPIs
- Target value consistent with the target set for attainment of sustainable value creation
- Allowance for the individual contribution made by Board members and the results of the areas under their responsibility
- Allowance for sustainability risks and targets in Board remuneration
- Higher incentivising for target attainment in the STI
- Strengthening of the pay-for-performance concept
- Linkage of share performance and Board remuneration
- Harmonisation of the interests of the Board and those of shareholders
- Orientation towards long-term success and assuring the long-term development of Hannover Re
- Incentivising long-term outperformance of relevant peers on the capital market (2023: Munich Re, Swiss Re, Everest Re, Reinsurance Group of America, SCOR)
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Hannover Rück SE published this content on 15 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 April 2024 21:36:15 UTC.
