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The key principles of Board of Management remuneration are as follows:
There are four main remuneration components. Each has approximately the same weighting within annual target remuneration:
The target compensation of each variable component does not exceed the base salary, with the total target variable compensation not exceeding three times the base salary. In addition Allianz offers pensions/similar benefits and perquisites.
Base salary is the fixed remuneration component and is expressed as an annual cash sum, paid in twelve monthly installments.
Variable remuneration is designed to balance short-term performance, longer-term 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 Management. These are documented for the upcoming financial year. Every three years the MTB sustainability criteria are set for the following mid-term 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 remuneration components is related to performance and can vary between 0% and 150% of the respective target values. If performance was rated at 0% no variable component would be granted.
Consequently, the minimum total direct compensation for a regular member of the Board of Management equals the base salary of 750,000 euros (excluding perquisites and pension contributions). The maximum total direct compensation (excluding perquisites and pension contributions) is 4.125 million euros: base salary 750,000 euros plus 3.375 million euros (150% of the sum of all three variable compensation components at target).
The CEO’s maximum total direct compensation (excluding perquisites and pension contributions) is 6.188 million euros: base salary 1.125 million euros plus 5.063 million euros (150% of the sum of all three variable compensation components at target).
Variable compensation components:
Under the “Inclusive Meritocracy” approach, the cultural change element of the Renewal Agenda, Group related targets account for 50% (equally divided between annual operating profit and annual net income). The other 50% are linked to individual performance, which consists of quantitative and qualitative criteria.
For members of the Board of Management with business division responsibilities, respective quantitative targets comprise operating profit, net income, Property-Casualty revenues and Life New Business Value.
For members of the Board of Management with a functional focus, the divisional quantitative targets are determined based on their key responsibilities.
The Chairman of the Allianz SE Board of Management does not have divisional quantitative targets.
In all cases, the personal contribution to the Renewal Agenda is assessed alongside behavioral aspects. The latter is framed in a common standard ("People Letter") designed to drive cultural change across the Group, namely:
To support the assessment of People Letter behaviors, a so-called "multi-rater" process has been introduced. Each member of the Board of Management collects feedback from the Chairman of the Allianz SE Board of Management, the other Board members and direct reports. The resulting analysis supports the assessment of the behavioral part of performance and additionally provides a sound basis for feedback and personal development discussions.
Health indicators (aligned with the Renewal Agenda):
Equity-related remuneration (long-term): A virtual share award, known as “Restricted Stock Units” (RSUs). The grant value of the RSUs allocated equals the annual bonus of the performance year. The number of RSUs allocated is derived from dividing the grant value by the fair market value of an RSU at the time of grant. The reward is granted in the fiscal year that follows the year under review.
Following the end of the four-year vesting period, the company makes a cash payment based on the number of RSUs granted and the ten-day average Xetra closing price of the Allianz stock following the annual financial media conference in the year of expiry of the respective RSU plan. The RSU payout is capped at 200% above grant price to avoid extreme payouts. The relevant share price used to determine the final number of RSUs granted and the 200% cap is only available after sign-off by the external auditors. Outstanding RSU holdings are forfeited should a Board member leave at his/her 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 cancellation of variable remuneration may occur if the supervisory authority (BaFin) requires this in accordance with its statutory powers.
The structure, weighting and level of remuneration is decided by the Supervisory Board. Remuneration survey data of DAX 30 companies and international insurance peers is provided by external consultants.
Compensation levels are usually around the third quartile of this group, which we deem appropriate given the relative size, complexity and sustained performance of Allianz within that peer group. The structure of Allianz Group’s total remuneration is more strongly weighted to variable, longer-term components than in other DAX 30 companies.
Remuneration and benefit arrangements are also periodically compared with best practices.
The Supervisory Board takes remuneration levels within the Group into account when reviewing the adequateness and the appropriateness of the remuneration of the Board of Management.
The remuneration of the Board of Management is decided upon by the entire Supervisory Board based on proposals prepared by the Personnel Committee. If required, outside advice is sought from independent external consultants. The Personnel Committee and the Supervisory Board consult with the Chairman of the Board of Management as appropriate in assessing the performance and remuneration of members of the Board of Management. The Chairman of the Board of Management is not present when his own remuneration is discussed.
Further information regarding the remuneration structure as well as the individual remuneration for the members of the Board of Management in 2016 can be found in the Remuneration Report of our Annual Report.
Information about the total remuneration of the Board of Management and the Allianz Equity Incentive Plan (AEI) is provided in the appendix to our Annual Report.
Allianz Equity Incentive Program
The Allianz Group Annual Report is available as PDF and in the Allianz Investor Relations App.