(A) How did QBE’s performance affect remuneration in 2014?

The incentive structure and financial targets are approved annually by the Remuneration Committee. The achievement of ROE and TSR outcomes have been the primary measures for at-risk remuneration purposes, demonstrating an alignment of profit growth over time and incentive awards for Group executives.

The table below shows Group ROE and divisional RoAC performance for incentive purposes for 2014.

ROE / ROAC PERFORMANCE NORTH

AMERICAN

OPERATIONS OPERATIONS EUROPEAN

AUSTRALIAN & NEW ZEALAND

OPERATIONS ASIA PACIFIC OPERATIONS LATIN AMERICAN OPERATIONS GROUP

Performance 3.0% 15.5% 22.4% 15.1% (15.7)% 8.1%

% achievement of target – 135.0% 130.0% 30.0% – 33.3% The table below shows the performance and total 2014 STI outcomes (both the cash and deferred portions) achieved by Group executives as at 31 December 2014.

CURRENT EXECUTIVES

PERFORMANCE AS A % OF TARGET TARGET STI ACTUAL STI OUTCOME 1

GROUP

ROE DIVISIONAL ROAC SCORECARD BALANCED TOTAL STI OUTCOME REMUNERATION % OF FIXED REMUNERATION % OF FIXED US$000 TOTAL STI CASH US$000 STI DEFERRED US$000

Group head office

John Neal 33.3% N/A 100.0% 46.7% 133.0% 62.2% 1,172 586 586 Jason Brown 2 _33.3% _N/A _106.3% _55.7% _100.0% _47.9% ₂₁₉ ₁₄₇ ₇₂

Patrick Regan 2 _33.3% _N/A _115.0% _56.7% _110.0% _62.3% ₅₀₆ ₃₃₉ ₁₆₇

Mike Emmett 2,3 _33.3% _N/A _115.0% _49.7% _100.0% _49.7% ₃₈₉ ₂₆₀ ₁₂₉

Jenni Smith 33.3% N/A 110.0% 48.7% 100.0% 48.7% 319 214 105

Divisional

David Duclos 33.3% 0.0% 112.5% 32.5% 100.0% 32.5% 332 222 110 Colin Fagen 33.3% 130.0% 120.0% 99.0% 100.0% 99.0% 890 596 294 David Fried 33.3% 30.0% 103.0% 45.6% 100.0% 45.6% 353 236 117 Richard Pryce 33.3% 135.0% 110.0% 99.5% 100.0% 99.5% 1,299 870 429

1 The STI award is calculated as a percentage of fixed remuneration as at 31 December 2014, except for David Fried for whom fixed remuneration is calculated using his fixed remuneration as CEO, Asia Pacific Operations up to 14 August and his fixed remuneration as CEO, Emerging Markets from 15 August 2014.

2 The STI awards for Jason Brown, Patrick Regan and Mike Emmett reflects the portion of 2014 they were in their role.

3 In addition, in 2014, Mike Emmett was awarded a completion bonus of $365,000 in accordance with a contractual entitlement from his previous role as Group Head of Operational Transformation.

O th er in for m at ion

6

F in an cial R ep o rt

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B us in ess rev iew

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H ig h lig h ts & o v ervi ew

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D ire ct o rs ' R ep o rt

4 (B) Measuring performance

In 2014, QBE introduced a balanced scorecard of individual key performance indicators (KPIs) to ensure that a broader view of performance and specific strategic priorities are considered when assessing performance and incentive outcomes. All executives have 20% of their STI outcome determined with reference to individual KPIs (40% for the former Group CFO, Neil Drabsch reflecting the specific priorities set for him following his agreement to defer his retirement by 12 months).

The scorecard is aligned to QBE’s business plans and measures objectives which support the elements of our value creation model. The balanced scorecard for each executive is reviewed by the Remuneration Committee to ensure they are appropriate. The table below sets out a summary of the key objectives for the Group Chief Executive Officer for 2014. The objectives for other executives are consistent.

VALUE CREATION

COMPONENT 2014 OBJECTIVES OUTCOME COMMENTS

Profitable growth

and diversification  Develop long-term opportunities and drive growth in Asia Pacific and Latin America

 Identify and progress major new business opportunities

 Slightly below

target _ Asia Pacific growth strategy on track _{Latin America results impacted by adverse} prior accident year development in workers’ compensation portfolio

Leadership in our

core business  Achieve profitable growth in line with corporate ambition  Manage potential M&A activity

and non-core or

underperforming businesses in line with business strategy

 Slightly below

target  Opportunities for growth limited in challenging markets  Strong progress on sale of Australian and

US agency businesses

Operational excellence – global reach and scale

 Continue operational transformation  Continue to improve

reinsurance program  Achieve major trading partner

growth and profitability targets  Global Operating Model

objectives

 At target  Solid delivery of transformation objectives for expense management and procurement strategy

 Delivered improved reinsurance structure  Continued to develop strong relationships with major trading partners. No growth in GWP achieved

 Established Global Operating Model. Implementation in progress

Financial strength

and flexibility  Demonstrate improvements in risk, capital and investment management

 Above target  Maintained Standard & Poor’s A+ and A.M. Best A insurer financial strength rating  Strong progress made against revised

capital benchmarks

World class talent

and leadership _ Demonstrate QBE values _{Continue to develop mentoring}

and leadership programs  Improve employee engagement  Continue to develop diversity

and inclusion plans

 Support talent framework and succession planning

 At target  Leadership initiatives on track  Achieved targets of 20% of senior

executive positions held by women across all divisions and exceeded target of 25% in Group head office

 Employee engagement results below desired level

(B) Measuring performance

VALUE CREATION

COMPONENT 2014 OBJECTIVES OUTCOME COMMENTS

Profitable growth

and diversification  Develop long-term opportunities and drive growth in Asia Pacific and Latin America

 Identify and progress major new business opportunities

 Slightly below

target _ Asia Pacific growth strategy on track _{Latin America results impacted by adverse} prior accident year development in workers’ compensation portfolio

Leadership in our

core business  Achieve profitable growth in line with corporate ambition  Manage potential M&A activity

and non-core or

underperforming businesses in line with business strategy

 Slightly below

target  Opportunities for growth limited in challenging markets  Strong progress on sale of Australian and

US agency businesses

Operational excellence – global reach and scale

 Continue operational transformation  Continue to improve

reinsurance program  Achieve major trading partner

growth and profitability targets  Global Operating Model

objectives

 At target  Solid delivery of transformation objectives for expense management and procurement strategy

 Delivered improved reinsurance structure  Continued to develop strong relationships with major trading partners. No growth in GWP achieved

 Established Global Operating Model. Implementation in progress

Financial strength

and flexibility  Demonstrate improvements in risk, capital and investment management

 Above target  Maintained Standard & Poor’s A+ and A.M. Best A insurer financial strength rating  Strong progress made against revised

capital benchmarks

World class talent

and leadership _ Demonstrate QBE values _{Continue to develop mentoring}

and leadership programs  Improve employee engagement  Continue to develop diversity

and inclusion plans

 Support talent framework and succession planning

 At target  Leadership initiatives on track  Achieved targets of 20% of senior

executive positions held by women across all divisions and exceeded target of 25% in Group head office

 Employee engagement results below desired level

For 2014, the Board approved a balanced scorecard outcome of 20% for the Group CEO, being two thirds of the maximum opportunity.

In document Made possible by QBE. QBE Insurance Group Annual Report 2014 (Page 85-87)