the variable remuneration reflect longerterm performance. One third is a deferred payout after three years based on a sus tainability assessment covering the threeyear period. The other third rewards sustained performance through share price devel opment with a deferred payout after five years.
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Alignment with shareholder interests: 25 % of total target direct remuneration is dependent upon share price performance. The structure, weighting and level of remuneration is decided by the Supervisory Board. Remuneration survey data is provided by external consultants. The peer group consists primarily of other DAX 30 com panies. Compensation levels usually vary between the median and around the third quartile of this group. The structure of Allianz Group’s total remuneration is more strongly weighted to variable, longerterm components than in other DAX 30 companies. Remu neration and benefit arrangements are also periodically compared with best practices. The Supervisory Board takes remuneration levels within the Group into account when assessing the appropriateness of the remuneration of the Board of Management.REMUNERATION STRUCTURE,
COMPONENTS AND TARGET SETTING PROCESS
There are four main remuneration components. Each has approxi mately the same weighting within annual target remuneration: base salary, annual bonus, annualized midterm bonus (MTB) and equity related remuneration. The target compensation of each variable component does not exceed the base salary, with the total target vari able compensation not exceeding three times the base salary. In addition Allianz offers pensions/similar benefits and perquisites.
Base salary
Base salary is the fixed remuneration component and is expressed as an annual cash sum, paid in twelve monthly installments.
Variable remuneration
Variable remuneration aims to balance shortterm performance, longerterm success and sustained value creation.
Each year, the Supervisory Board agrees on performance targets for the variable remuneration with the members of the Board of Man agement. These are documented for the upcoming financial year. Every three years the MTB sustainability criteria are set for the follow ing midterm period.
All variable awards are made under the rules and conditions of the “Allianz Sustained Performance Plan” (ASPP) which consists of the equally weighted components below. The grant of variable remu neration components is related to performance and can vary between 0 % and 165 % of the respective target values. For a regular member of the Board of Management with a base salary and target variable com pensation of € 700 THou for each variable remuneration component the minimum payout is € 700 THou if the performance was rated with 0 % and no variable component was granted. The maximum total direct compensation (excluding perquisites) is € 4,165 THou if the
Annual Report 2013 Allianz Group
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performance reached the 165 % cap: base salary € 700 THou + 165 % of € 2,100 THou (= total of the three variable compensation components at target).
Variable compensation components:
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Annual bonus (shortterm): A cash payment which rewards the achievement of quantitative and qualitative targets for the respective financial year and is paid the year following the per formance year. Quantitative targets represent 75 % and consist of 50 % Group targets (equally split between annual operating profit and annual net income) and 25 % divisional targets. For the divisional targets a new split was introduced for 2013: 10 % annual operating profit, 10 % annual net income and 5 % dividend. Quantitative targets for board members with a functional focus are determined based on their key responsibilities. Qualitative targets reflect the specific individual priorities for 2013 per member of the Board of Management.ILLUSTRATION Of THE PROCESS AND THE UNDERLYING TIMELINE Of THE MTB CYCLE, fROM TARGET SETTING TO fINAL PERfORMANCE ASSESSMENT1 € THOU 20132 20142 20152 20163 Dec 2012 Accrual 930 Sustainability criteria setting for the three-year performance period Initial accrued amounts ± Sustainability assessment = Final payout Total 2,100 Accrual 620 Accrual 550 Accrual 930 Accrual 620 Accrual 550 Notional accruals 0 % 165 % Min: 0 Max: 3,465 Target: 2,100
Sustainability criteria setting Performance period Sustainability assessment & payout
Year 1 Year 2 Year 3
1 Example based on target values of a regular member of the Board of Management with an annual target
of € 700 THOU for the MTB. Accrual is only a notional indication. 2 Actual accrual for the MTB (mid-term) usually equals the annual bonus payout of the respective financial year. Since the performance assessment and the final payout occur after completion of the performance cycle this value is only a notional indication.
3 Final payout is subject to the sustainability assessment of the Supervisory Board and may vary within the full range between 0 % – 165 % of the cumulative target values independent of the notional accruals.
The performance of the Chairman is determined by the average target achievement of the other Board of Management members and can be adjusted by the Supervisory Board based on the Chairman’s personal performance.
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MTB (midterm): A deferred award which reflects the achieve ment of the annual targets by accruing an amount identical to the annual bonus. The actual award is subject to a threeyear sustainability assess ment and is paid at the end of a threeyear performance cycle. The following criteria are considered:−
adjusted capital growth vs. planned development in light of risk capital employed (adjusted capital essentially represents the fair value of the shareholders’ equity)−
balance sheet strength, i.e. development of solvency capital−
comparison with peers−
“partner of choice” for stakeholdersB Corporate Governance
27 Corporate Governance Report 32 Statement on Corporate Management
pursuant to § 289a of the HGB
34 Takeover-related Statements and Explanations
37 Remuneration Report
Annual Report 2013 Allianz Group 39
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Equityrelated remuneration (longterm): A virtual share award, known as “Restricted Stock Units” (RSus). RSus are granted after the end of the financial year with the annual bonus performance determining the value of the equity grant. The 165 % cap of the annual bonus also applies to the RSu grant value, which must not exceed € 1,155 THou for a regular member of the Board of Management with a € 700 THou target. The number of RSus granted results from dividing the grant value by the value of an RSu at the time of grant. Following the end of the fouryear vest ing period, the company makes a cash payment based on the number of RSus granted and the market price of the Allianz share at that time. To avoid extreme payouts, the RSu payout is capped at 200 % above grant price.1In accordance with the RSu rules, outstanding holdings are for feited should a Board member leave at their own request or be terminated for cause.
Variable remuneration components may not be paid, or payment may be restricted in the case of a breach of the Allianz Code of Conduct, risk limits or compliance requirements. Additionally, a reduction or abandonment of variable remuneration may occur if the supervisory authority (BaFin) requires this in accordance with its statutory powers.