introduction george quinn, group cfo - swiss re group1bfbb983-e6c4-4b7a...annual report, annual and...

AGM briefing 2014

• Introduction George Quinn, Group CFO

• Update on compensation framework Nigel Fretwell, Group CHRO

• Dividend proposal George Quinn, Group CFO

• Elections, Articles of Association Felix Horber, Company Secretary

• Questions & answers

Today’s agenda

2

AGM briefing 2014

Introduction

George Quinn, Group CFO

3

AGM briefing 2014

1. Annual Report, annual and consolidated financial statements for the 2013 financial year

1.1 Consultative vote on the Compensation Report 1.2 Approval of the Annual Report, annual and consolidated financial statements for the 2013

financial year

2. Allocation of disposable profit

3. Withholding tax exempt repayment of legal reserves from capital contributions

3.1 Ordinary dividend by way of a withholding tax exempt repayment of legal reserves from capital contributions of CHF 3.85 per share and a prior reclassification into other reserves

3.2 Special dividend by way of a withholding tax exempt repayment of legal reserves from capital contributions of CHF 4.15 per share and a prior reclassification into other reserves

4. Discharge of the members of the Board of Directors (BoD)

Overview (I) Focus of this call is on four distinct AGM agenda topics

4

AGM briefing 2014

5. Elections

5.1 Board of Directors and Chairman of the Board of Directors 5.1.1 Re-election of Walter B. Kielholz and election as Chairman of the BoD 5.1.2 Re-election of Raymund Breu 5.1.3 Re-election of Mathis Cabiallavetta 5.1.4 Re-election of Raymond K.F. Ch’ien 5.1.5 Re-election of Renato Fassbind 5.1.6 Re-election of Mary Francis 5.1.7 Re-election of Rajna Gibson Brandon 5.1.8 Re-election of C. Robert Henrikson 5.1.9 Re-election of Hans Ulrich Maerki 5.1.10 Re-election of Carlos E. Represas 5.1.11 Re-election of Jean-Pierre Roth 5.1.12 Election of Susan L. Wagner 5.2 Compensation Committee 5.2.1 Election of Renato Fassbind 5.2.2 Election of C. Robert Henrikson 5.3.3 Election of Hans Ulrich Maerki 5.3.4 Election of Carlos E. Represas 5.3 Election of the Independent Proxy 5.4 Re-election of the Auditor

6. Amendment of the Articles of Association (AoA)

Overview (II) Focus of this call is on four distinct AGM agenda topics

5

AGM briefing 2014

Update on Compensation Framework

Nigel Fretwell, Chief Human Resources Officer

6

AGM briefing 2014

• In early 2013, Swiss Re finished implementing the recommendations from the 2011 compensation framework review. The aim of this review had been to further strengthen the link between pay and performance. 2013 saw the following interventions:

– Further embedding of the two-dimensional Performance Management system ('what' and 'how'), ensuring an effective balance between measuring the achievement of performance objectives and the demonstration of appropriate behaviours

– Successful introduction of the Target Annual Performance Incentive (API) for all eligible staff (communication of targets) with the first large scale API pay-out against targets in March/April 2014

– Introduction of the Global Share Participation Plan (GSPP), to further strengthen shareholder alignment amongst employees

• Other key interventions in 2013 included:

– Analysis and preparation for the implementation of the Minder Ordinance (discussed later)

– For the Leadership Performance Plan (LPP) and starting with the LPP 2014 award:

Introduction of an additional two-year holding period for members of the Group Executive Committee (EC) and Group Management Board (GMB)

Updated vesting curve on the Performance Share Unit (PSU) component with vesting beginning only at median (previously this was at the 35th percentile)

2013 Compensation Key Developments

7

AGM briefing 2014

• Swiss Re continues the established practice of proactively engaging with investors, proxy advisors and regulators to review and discuss the compensation framework

• Two key issues were highlighted as being of concern relating to the LPP:

– pay for performance link (vesting for below median performance under the PSU)

– plan duration (set at 3 years)

• Swiss Re considered this feedback and adjustments were made to the LPP 2014 award:

– For members of the Group EC and GMB plan duration is now five years (three year vesting period and an additional two year holding requirement)

– Shifting the approach used for setting the PSU vesting curve and raising the minimum vesting threshold to median

Swiss Re continues to reflect on key investor and proxy advisor input

8

AGM briefing 2014

Overview of Swiss Re's Compensation Framework

9

AGM briefing 2014

Variable compensation directly linked to performance 70% of Group EC's compensation is variable (of which 2/3 deferred)

10

AGM briefing 2014

• Compensation decisions consider financial (including quality of earnings) as well as qualitative performance: Different to 2012, the Group CEO's 2013 performance was assessed and rewarded based on a full 12 months in the role. Overall Group EC

compensation was approximately 10% lower than 2012

2013 business performance strong, but compensation levels remain broadly similar to 2012

11

Group CEO compensation Group EC compensation

AGM briefing 2014

Pay for performance A large part of executive compensation is deferred; 40% of BoD compensation is delivered in blocked shares

12

AGM briefing 2014

• The table below shows the dispersal of Group income to key stakeholders (employees, government and shareholders)

Attribution of Group income to various stakeholders is monitored

Split of 2013 Group Income

13

AGM briefing 2014

Dividend proposal

George Quinn, Group CFO

14

AGM briefing 2014

• Strong capital position allows Swiss Re to continue to pay an attractive dividend and take advantage of business growth opportunities

• Therefore the BoD proposes to the AGM – To increase regular dividend to CHF 3.85 per share and pay out a special

dividend of CHF 4.15 per share

– Both dividends to be paid in the form of withholding tax exempt distributions of legal reserves from capital contributions; such reserves totalling CHF 5.2bn as at 31 December 2013 (as confirmed by the Swiss Federal Tax Authority)

Withholding tax exempt repayment of legal reserves from capital contributions

Swiss Re's dividend policy

Highest priority on growing our regular dividend with long-term earnings; at a minimum we aim to maintain the regular dividend

Business growth where it meets our profitability requirements

15

AGM briefing 2014

Elections and amendments of Articles of Association (AoA)

Felix Horber, Company Secretary

16

AGM briefing 2014

Re-election of Walter B. Kielholz and election as Chairman of the BoD BoD member since 1998, Chairman of the BoD since 2009 Chairman of the Chairman's and Governance Committee Swiss Re's CEO 1997 - 2002

Re-election of Raymund Breu, BoD member since 2003 Member of the Finance and Risk Committee and Member of the Investment Committee CFO of Novartis 1996 - 2010

Re-election of Mathis Cabiallavetta, BoD member since 2008 Vice Chairman of the BoD since 2009 Chairman of the Finance and Risk Committee as well as the Investment Committee and member of the Chairman’s and Governance Committee CEO/Chairman of UBS AG, Vice Chairman of Marsh & McLennan 2001 - 2004

Re-election of Raymond K.F. Ch’ien, BoD member since 2008 Member of the Audit Committee and Member of the Investment Committee Group Managing Director of Lam Soon Hong Kong Group 1984 - 1997 and Chairman of CDC Corporation 1999 - 2011

Elections to the Board of Directors (1/3) Re-elections and election of a new member

17

AGM briefing 2014

Re-election of Renato Fassbind and election to compensation committee BoD member since 2011, Vice Chairman of the BoD since 2012 Member of the Chairman's and Governance, Audit and Compensation Committee; CFO of Credit Suisse Group 2004 - 2010

Re-election of Mary Francis, BoD member since 2013 Member of the Finance and Risk Committee Director General of Association of British Insurers 1999 - 2005, non-executive director of Bank of England 2001 - 2007, Aviva plc BoD member 2005 - 2012

Re-election of Rajna Gibson Brandon, BoD member since 2000 Member of the Finance and Risk Committee and Member of the Investment Committee Professor of Finance at the University of Geneva and Director of the Geneva Finance Research Institute

Re-election of C. Robert Henrikson and election to compensation committee BoD member since 2012, Chairman of the Compensation Committee Member of the Chairman's and Governance Committee Member of the Finance and Risk Committee Chairman and Chief Executive Officer of MetLife, Inc. 2006 - 2011


18

AGM briefing 2014

Re-election of Hans Ulrich Maerki and election to compensation committee BoD member since 2007, Member of the Compensation Committee and Member of the Finance and Risk Committee Chief Executive Officer of IBM EMEA 2003 - 2005

Re-election of Carlos E. Represas and election to compensation committee BoD member since 2010 Member of the Compensation Committee Chairman of the Board of Nestlé Group Mexico from 1983 - 2010

Re-election of Jean-Pierre Roth, BoD member since 2010 Member of the Investment Committee Chairman of the Governing Board of the Swiss National Bank 2001 - 2009

Election of Susan L. Wagner, US citizen Co-founder and Director of BlackRock, Inc., where she served as Vice Chairman and member of the Global Executive and Operating Committees before retiring in mid-2012 She currently serves on the Boards of BlackRock, Inc., DSP BlackRock (India), Wellesley College and the Hackley School


19

AGM briefing 2014

• On 1 January 2014, the Ordinance Against Excessive Compensation in Public Corporations of 20 November 2013 (hereinafter "the Ordinance") became effective, subject to transitional provisions. It implements the “Minder” popular initiative and the respective Article 95 (3) of the Swiss Federal Constitution, which was approved in a vote by the Swiss people and Cantons in March 2013

• The Ordinance requires, among other things, the following to be laid down in the AoA: – limitations regarding employment and mandate agreements with BoD and EC members

– external mandates of BoD and EC members

– limitations on loans and credits granted to BoD and EC members

– an annual binding shareholder vote on the compensation of the members of the BoD and EC

– the main tasks and responsibilities of the Compensation Committee (CC)

– the principles of performance- and equity-based compensation of BoD and EC members

• Despite a two-year transition period, the BoD proposes amending the AoA already at this year’s AGM to correspond to best corporate governance standards. The suggested amendments fully meet the Ordinance’s requirements

Amendments of Articles of Association Introduction

20

AGM briefing 2014

• The Ordinance requires that the Shareholders' Meeting elects annually and individually

– the members of the BoD

– the Chairman of the BoD

– the members of the Compensation Committee (CC)

– the Independent Proxy

• The Ordinance requires the Shareholders' Meeting to approve the compensation of

– the BoD

– the Group EC

Technical amendments (1/9)

Article 7 – Powers of the Shareholders' Meeting

21

AGM briefing 2014

• The Ordinance prohibits going forward the representation of shareholders at the Shareholders' Meeting

– by a corporate body (Organvertretung) or

– by proxies for deposited shares (Depotvertretung)

• The Ordinance also requires the election of the Independent Proxy for a term of office until completion of the next ordinary Shareholders' Meeting (incl. re-election, removal and vacancy)


Article 11 – Right to vote and shareholder proxies

22

AGM briefing 2014

• The Ordinance requires the Shareholders' Meeting to elect annually and individually the members of the BoD and the Chairman of the BoD for a term of office until completion of the next ordinary Shareholders' Meeting

• Also includes provisions in relation to removal of members and vacancy of the Chairman as well as possibility to have a full-time or part-time Chairman


Article 14 – Members and term of office of the BoD

23

AGM briefing 2014

• The BoD continues to constitute itself, save for the Chairmanship of the BoD and the members of the CC, who are elected by the Shareholders' Meeting

• Election of one or more Vice-Chairmen continues to be possible


Article 15 – Organisation

24

AGM briefing 2014

• The BoD must prepare a separate and audited Compensation Report

• Revision of Article 16 complements the catalogue of non-transferable and inalienable duties of the BoD with the duty to draft up a Compensation Report

• The first Compensation Report in the new form will have to be drawn up for the AGM 2015


Article 16 – Duties and powers

25

AGM briefing 2014

• Delegation of powers to one or several persons or BoD committees continues to be possible

• Wording of the existing Article 17 has been revised formally without changing the provision materially


Article 17 – Delegation of powers

26

AGM briefing 2014

• The Ordinance requires companies to include in their AoA in relation to agreements with members of the BoD and the EC

– the maximum duration of fixed-term agreements

– the maximum termination notice of indefinite agreements and

– both may not exceed 12 months


Article 25 – Agreements with members of the BoD and the EC

27

AGM briefing 2014

• Number of permissible additional mandates of members of the BoD and of the EC in a supreme governing body of a legal entity which is required to be registered in the commercial register or a corresponding register of a foreign jurisdiction must be included in the AoA

• Limitations:

– BoD: ten (10) additional mandates thereof no more than four (4) additional mandates in listed companies

– EC: five (5) additional mandates, thereof no more than one (1) additional mandate in a listed company

• Special rules for mandates at Swiss Re's request and mandates in associations, charitable organizations, foundations, trusts, employee welfare foundations, investment companies, equity partnerships or limited liability partnerships


Article 26 – External mandates

28

AGM briefing 2014

• AoA have to include the amount of potential credits and loans to be granted to members of the EC in order to be permissible

• Credits and loans can be granted at employee conditions

• The total amount is capped at CHF 3 million per member of the EC


Article 27 – Credits and loans

29

AGM briefing 2014

• The Ordinance requires that

– the Shareholders' Meeting elects annually and individually the members to the CC for a term of office until completion of the next ordinary Shareholders' Meeting

– the principles of the tasks and responsibilities of the CC must be described in the AoA

• The CC's main responsibility is

– support the BoD in establishing and reviewing Swiss Re’s compensation strategy and guidelines

– preparing the BoD proposals to the Shareholders' Meeting regarding the compensation of the BoD and the EC

• Responsibility for all decisions regarding the overall compensation policy as well as the compensation amounts remains with the full BoD, subject to further delegation to CC

• Article 19 provides for independent members of BoD to be part of the CC

Compensated-related amendments (1/4) Article 19 – Compensation Committee

30

AGM briefing 2014

• Annual, separate vote with binding effect on the aggregate amounts of compensation of the BoD and the EC and inclusion of say on pay regime in the AoA required

• Proposed Swiss Re say on pay regime envisages a first differentiated vote at the AGM 2015:

– Prospective vote on aggregate compensation for the period from AGM to AGM for members of the BoD

– Shareholder approval of EC compensation split into two separate votes:

– Prospective vote on aggregate fixed and long-term compensation for the financial year following the AGM

– Retrospective vote on the aggregate short-term compensation for the financial year preceding the AGM

• Compensation actually paid or granted to be disclosed in a separate and audited Compensation Report

• In case of a no vote, the BoD is required to prepare another proposal, taking into account all relevant factors and submit it again to shareholder approval (at the same AGM, at an EGM or at the following AGM)

Compensated-related amendments (2/4)

Article 22 – Approval of compensation by the Shareholders’ Meeting

31

AGM briefing 2014

• Supplementary amount for changes in the EC permissible, if

– there is a prospective vote; and

– approved budget is not sufficient to compensate a new joiner to the EC

• The “reserve” amount is available to fund compensation of a person who becomes a member of the EC or is being promoted within the EC during the compensation period already approved, i.e., until the end of the respective financial year

• Additional amount per compensation period and member may not exceed 20% of the aggregate amounts of compensation of the EC which were last approved prospectively by the Shareholders' Meeting

• Once approved, the compensation paid out of such additional amount does not require further approval by the Shareholders' Meeting


Article 23 – Supplementary amount for changes in the EC

32

AGM briefing 2014

• AoA must include the principles of performance- and equity-based compensation of the BoD and EC members and they address the following:

– Design of the compensation system and the nature and form of compensation paid

– BoD members shall only receive a fixed compensation with a significant pre-determined portion of blocked registered shares and EC members shall receive a fixed compensation and a variable compensation comprising short- or long-term compensation elements

– Compensation may be paid or granted in the form of cash, registered shares, financial instruments or units, in kind or in the form of other types of benefits

– BoD or the CC may further establish share-based plans in which EC members may participate

– BoD or the CC to determine performance metrics, respective target levels (including multipliers thereof and potential caps of such multipliers), achievement of performance metrics, adequate vesting, blocking, exercise or forfeiture conditions

– Short- and long-term compensation elements are as a rule governed by performance metrics as described further in the AoA (achievement of such metrics for short-term compensation elements is as a rule measured during a one-year period and of long-term compensation elements as a rule during a perennial period)

• Principles are kept generic providing a foundation for a broad range of possible compensation systems, rendering disclosure in the compensation report therefore very important


Article 24 – Principles of compensation of the BoD and of the EC

33

AGM briefing 2014

Q&A

34

AGM briefing 2014

Investor Relations contacts Hotline E-mail +41 43 285 4444 [email protected] Eric Schuh Ross Walker Chris Menth +41 43 285 4708 +41 43 285 2243 +41 43 285 3878

Simone Lieberherr Simone Fessler +41 43 285 4190 +41 43 285 7299

Corporate calendar & contacts

Corporate calendar 11 April 2014 150th Annual General Meeting Zurich 7 May 2014 First Quarter 2014 results Conference call 3 July 2014 Investors' Day London 6 August 2014 Second Quarter 2014 results Conference call 7 November 2014 Third Quarter 2014 results Conference call

35

AGM briefing 2014 36

AGM briefing 2014

Cautionary note on forward-looking statements

Certain statements and illustrations contained herein are forward-looking. These statements (including as to plans objectives, targets and trends) and illustrations provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or current fact. Forward-looking statements typically are identified by words or phrases such as “anticipate“, “assume“, “believe“, “continue“, “estimate“, “expect“, “foresee“, “intend“, “may increase“ and “may fluctuate“ and similar expressions or by future or conditional verbs such as “will“, “should“, “would“ and “could“. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Swiss Re’s actual results of operations, financial condition, solvency ratios, liquidity position or prospects to be materially different from any future results of operations, financial condition, solvency ratios, liquidity position or prospects expressed or implied by such statements or cause Swiss Re to not achieve its published targets. Such factors include, among others: • further instability affecting the global financial system and developments related

thereto; • deterioration in global economic conditions; • Swiss Re’s ability to maintain sufficient liquidity and access to capital markets,

including sufficient liquidity to cover potential recapture of reinsurance agreements, early calls of debt or debt-like arrangements and collateral calls due to actual or perceived deterioration of Swiss Re’s financial strength or otherwise;

• the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, credit spreads, currency values and other market indices, on Swiss Re’s investment assets;

• changes in Swiss Re’s investment result as a result of changes in its investment policy or the changed composition of its investment assets, and the impact of the timing of any such changes relative to changes in market conditions;

• uncertainties in valuing credit default swaps and other credit-related instruments; • possible inability to realise amounts on sales of securities on Swiss Re’s balance

sheet equivalent to their mark-to-market values recorded for accounting purposes; • the outcome of tax audits, the ability to realise tax loss carryforwards and the

ability to realise deferred tax assets (including by reason of the mix of earnings in a jurisdiction or deemed change of control), which could negatively impact future earnings;

• the possibility that Swiss Re’s hedging arrangements may not be effective; • the lowering or loss of one of the financial strength or other ratings of one or more

Swiss Re companies, and developments adversely affecting Swiss Re’s ability to achieve improved ratings;

• the cyclicality of the reinsurance industry; • uncertainties in estimating reserves; • uncertainties in estimating future claims for purposes of financial reporting,

particularly with respect to large natural catastrophes, as significant uncertainties may be involved in estimating losses from such events and preliminary estimates may be subject to change as new information becomes available;

• the frequency, severity and development of insured claim events; • acts of terrorism and acts of war; • mortality, morbidity and longevity experience; • policy renewal and lapse rates; • extraordinary events affecting Swiss Re’s clients and other counterparties,

such as bankruptcies, liquidations and other credit-related events; • current, pending and future legislation and regulation affecting Swiss Re or its

ceding companies, and the interpretation of legislation or regulations by regulators;

• legal actions or regulatory investigations or actions, including those in respect of industry requirements or business conduct rules of general applicability;

• changes in accounting standards; • significant investments, acquisitions or dispositions, and any delays,

unexpected costs or other issues experienced in connection with any such transactions;

• changing levels of competition; and • operational factors, including the efficacy of risk management and other

internal procedures in managing the foregoing risks.

These factors are not exhaustive. Swiss Re operates in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forward-looking statements. Swiss Re undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. This communication is not intended to be a recommendation to buy, sell or hold securities and does not constitute an offer for the sale of, or the solicitation of an offer to buy, securities in any jurisdiction, including the United States. Any such offer will only be made by means of a prospectus or offering memorandum, and in compliance with applicable securities laws.

37

introduction george quinn, group cfo - swiss re group1bfbb983-e6c4-4b7a...annual report, annual and...

Documents