Remuneration Report 2012

Transcription

1 Remuneration Report 2012

2 REMUNERATION REPORT 2012

3 Preface This remuneration report reviews developments in 2012 relating to remuneration at Achmea. It covers the main aspects of Achmea s remuneration policy, its underlying vision, adjustments to remuneration policy in 2012, the downward adjustment of the remuneration packages of Executive Board members and the key figures for the year. It also looks ahead to measures that will be implemented in The report complies with the regulations and guidelines issued by De Nederlandsche Bank (DNB) and the Authority for the Financial Markets (AFM), the European legislation and self-regulation codes such as the Banking Code (Code Banken) and the Insurers Code (Code Verzekeraars). Achmea considers that the report reflects the Group s identity, provides transparency for our stakeholders and facilitates evaluation by regulators. Policy development The changes made in 2011 on the basis of the Regulation on Sound Remuneration Policy (Regeling Beheerst Beloningsbeleid) pursuant to the Financial Supervision Act 2011 (Wet op het financieel toezicht, abbreviated in Dutch to Wft ) were implemented in 2012 both in the Netherlands and at our foreign subsidiaries. Adjustments were again made to the remuneration policy in For example, the Supervisory Board applied further downward adjustments to the remuneration packages of the Executive Board members. On the Remuneration Committee s recommendation and in close consultation with the Executive Board, the Supervisory Board applied similar downward adjustments to the remuneration packages of all senior management in early With these changes, following those made in 2010 and in 2011, recalibration of the employment terms is now complete. One of these changes was a substantial reduction in variable pay, with partial compensation in fixed salaries. Consistent with identity Achmea s remuneration policy is consistent with the Group s identity, vision and structure. Achmea puts the customer s interests first. It has cooperative shareholders who represent the customers and the customers interests. On that basis, the Group adopts a broad stakeholder approach: the formulation, implementation and assessment of corporate policy are informed by the interests of four stakeholder groups (customers, distribution partners, employees and shareholders). This combination of stakeholders reflects Achmea s social responsibility and the role it plays in society. Corporate social responsibility is therefore more than just an aspect of the Group s activities: it is an integral part of the entire operation. In conclusion, we note that the Supervisory Board Report chapter of Achmea s 2012 Annual Report includes a report on remuneration and related developments in Where necessary, this remuneration report refers to the Annual Report and vice-versa. Zeist, 29 April 2013 Willem van Duin Chairman Executive Board Erik van de Merwe Chairman Supervisory Board Achmea s remuneration policy is conducive to the achievement of its ambitions and complies strictly with the regulations, the main purpose of which is to avoid/ eliminate financial incentives that might encourage risktaking in operational and financial policy. 3

4 Contents 1. ACHMEA S REMUNERATION POLICY 1.1 ACHMEA S VISION OBJECTIVES OF ACHMEA REMUNERATION POLICY DEVELOPMENTS IN GOVERNANCE 2.1 THE SUPERVISORY BOARD AND ITS REMUNERATION COMMITTEE THE EXECUTIVE BOARD THE ROLE OF CONTROL FUNCTIONS REMUNERATION POLICY AND STRUCTURE BY ECHELON INTRODUCTION EXECUTIVE BOARD REMUNERATION POLICY FOR DIVISION CHAIRMEN REMUNERATION POLICY FOR DIRECTORS REMUNERATION POLICY FOR SENIOR MANAGERS/TOP SPECIALISTS REMUNERATION POLICY FOR STAFF COVERED BY THE CLA REMUNERATION POLICY FOR EXECUTIVE TEAMS OF FOREIGN ACHMEA SUBSIDIARIES REVIEW OF REVIEW BY BUSINESS UNIT 23 5

5 1. Achmea s remuneration policy 1.1 Achmea s vision The Achmea identity Achmea is a company with cooperative roots that go back to It is not a publicly listed company and profit is not an end in itself. Its business approach is primarily investment-driven, to safeguard continuity and create the value needed to achieve its long-term objectives in the interests of all stakeholders. Putting the customers interests first is an integral part of Achmea s vision, strategy and identity. The interests of shareholders and customers coincide, because the cooperative shareholders primarily represent the customers and their interests. Informed by that identity, Achmea employs a four-stakeholder model: 1. Customers Achmea aims to offer solutions that customers understand, choose and recommend. The customer always comes first. 2. Shareholders Within the constraints of its risk profile, Achmea seeks to achieve above-average performance so that it can invest in solutions for its customers and for society as a whole. It chooses long-term value creation in preference to shortterm profit maximisation. 3. Employees Achmea s staff are professional and committed. 4. Distribution partners Achmea works with strategic partners who put the customers interests first. Remuneration policy consistent with Achmea s identity Achmea s remuneration policy was adjusted in 2011 inter alia to comply with the Regulation on Sound Remuneration Policy pursuant to the Financial Supervision Act 2011 (Wft) and a number of changes were implemented in These are discussed in greater depth in chapter 3. The remuneration policy, including governance and procedures, is documented in detail. The remuneration policy is entirely consistent with Achmea s identity, strategy and ambition. The remuneration policy applies to the entire Achmea Group in the Netherlands, the holding company, the divisions and business units and the Dutch and foreign subsidiaries. This means that all parts of the Group are governed by the same guidelines and decision-making structure and are subject to the same supervision by Achmea. 1.2 Objectives of Achmea remuneration policy Achmea s remuneration policy seeks to achieve the folloing objectives and is based on the following principles: 1. The remuneration policy is consistent with our identity as a company that puts the customers interests first. Achmea aims to pursue a sound policy which avoids excessive or undesirable incentives. It must have a simple structure and be easily understood, with no room for incentives that are complex or obscure. The remuneration policy must balance the needs of both business and society, providing tangible and intangible employment terms which reflect that, for example by facilitating work/life balance and diversity.. 2. The remuneration policy must be sufficiently attractive to enable Achmea to recruit and retain talent. In terms of positioning, we aim for the median level from a total remuneration perspective, focusing not only on primary remuneration, but also taking into account fixed and variable remuneration and secondary and tertiary employment terms, including pensions. 3. The policy must ensure fair internal remuneration ratios, underpinned by an effective job evaluation system and supplemented where necessary with HR tools to reflect the (added) value of tasks, roles and/or individuals. This principle is clearly enshrined in our remuneration policy. Achmea s remuneration policy provides scope where necessary for variable remuneration, which may be desirable for certain groups of employees from the labour market perspective and may be helpful in matching performance to goals that are important to our stakeholders, thus contributing to continuity and value creation. The variable remuneration structure must never incentivise the taking of extra risks or the short-term maximisation of the individual s income. For that reason, variable remuneration is risk-adjusted to ensure that a 6

6 1. Achmea s remuneration policy balanced approach is taken to achieving performance targets. The agreed performance targets and objectives reflect the interests of our stakeholders and are both quantitative and qualitative. They take the form of clearly defined commercial results and development targets in such areas as leadership and employee involvement. The level of an individual s variable remuneration is also based on a carefully judged mix of Group-wide performance and performance at business unit and individual level, taking into account the company s risk profile. This is achieved by translating Achmea s strategy map to lower levels and ultimately to the individual and the contribution he or she must make to achieve the strategic objectives. The strategy map defines from six perspectives the permanent strategic objectives formulated to serve the interests of our stakeholders. Under Achmea s policy on variable remuneration, there may be special circumstances in which no variable remuneration is awarded and even some in which previously granted variable remuneration may be clawed back. Serious financial loss qualifies as a special circumstance. In that case, the Supervisory Board or Executive Board will use its powers to withhold the award of variable remuneration. As well as Achmea-specific circumstances, external factors such as new legislation or regulations and social developments may also lead to such a decision. As mentioned above, Achmea offers fair internal employment terms, which means that the employees who are eligible for variable remuneration may hold various posts. This group (excluding the members of the Executive Board) comprises a mix of commercial staff, senior managers, directors, risk management staff and financial specialists. Achmea staff whose incomes exceed the maximum limit under the collective labour agreement or CLA (excluding the members of the Executive Board) are eligible for variable remuneration under the Bonus Prohibition for State-supported Enterprises Act (Wet Bonusverbod Staatsgesteunde Ondernemingen). A small group of employees whose incomes are below the maximum CLA limit (commercial staff and financial specialists) also qualify for variable remuneration. In the light of the negative Group result, it was decided in 2012 to award no variable remuneration to Achmea s entire senior management for 2011 and to adjust downwards the variable remuneration for 2011 awarded to the small group of staff covered by the CLA who qualify for it. No profit share for 2011 was paid to staff covered by the CLA in On the basis of the Group result, for 2012 variable remuneration will be awarded to employees with incomes exceeding the CLA maximum and the executive teams of the foreign operating companies. will also be paid to a small group of employees with incomes within the CLA maximum. Awarding of variabele remuneration will only be final upon successful completion of relevant testing. Also for 2012, employees covered by the CLA will be eligible for profit sharing. All variable remuneration is based on a mix of results of the Group and the various business units and individual performance. An exception is employees of the Group s control functions, who receive no variable remuneration on the part which they oversee by virtue of their control function. Another exception is the Executive Board, the members of which receive no variable remuneration for 2012 because the Bonus Prohibition for State-supported Enterprises Act applies to them. Achmea Hypotheekbank issued a loan with state guarantee in 2009 and an amendment was adopted in 2012 under which such loans are deemed to be a form of state support, thus making the Bonus Prohibition for State-supported Enterprises Act applicable to the Executive Board. 1.3 Developments in 2012 Changes to remuneration policy in 2012 On a proposal of the Remuneration Committee and in consultation with the Executive Board, the Supervisory Board adjusted the Executive Board s remuneration downwards in The changes are discussed in chapter 3.1. In consultation with the Supervisory Board, the Executive Board also decided to apply a similar downward adjustment to other categories in the senior management. The changes applying to this group come into force on 1 January These changes reflect Achmea s ambition to be the most trusted insurer, its recognition of the need for cost 7

7 1. Achmea s remuneration policy reduction and society s changing views on this issue. De Friesland Zorgverzekeringen N.V. and Independer also joined the Achmea Group in The remuneration policies of De Friesland Zorgverzekeringen N.V. and Independer were reviewed and where necessary brought into line with Achmea s remuneration policy. Departures from the Achmea remuneration policy were assessed inter alia by Achmea s Risk & Compliance department and approved by the Remuneration Committee of the Supervisory Board. In the interests of completeness, we should note that variable remuneration is not part of De Friesland Zorgverzekeringen N.V. s remuneration policy. Independer has a share ownership plan for employees, which was assessed by Risk & Compliance, and this departure from Achmea s remuneration policy was agreed by the Remuneration Committee. Developments in the remuneration policy of foreign subsidiaries Achmea s remuneration policy also applies to the foreign subsidiaries. A start was made in 2012 on the further implementation of Achmea s remuneration policy at the foreign operating companies. Legal testing was performed for each country and, on the basis of the outcomes of this testing, the employment contracts of the executive team members were brought into line with Achmea s remuneration policy. Where necessary, the employment terms of the other personnel of the foreign operating companies will be brought into line in As a consequence, no variable remuneration has been awarded to the Executive Board for The Act on the Standardisation of the Remuneration of Senior Executives in the Public and Semi-Public Sector (Wet Normering bezoldiging Topfunctionarissen in de publieke/ semi-publieke sector, abbreviated in Dutch to WNT ) was adopted by the Senate on 13 November The WNT imposes a sectoral standard which applies to Achmea Zorgverzekeringen NV. Work is still in progress on defining the standard for The full implications of the WNT for Achmea are expected to be clarified in the course of The Rutte II coalition agreement contains concrete policy proposals which may affect remuneration policy with regard to variable remuneration in the financial sector, the WNT and pensions. Lastly, in the context of European legislation, the Alternative Investment Fund Managers Directive (AIFMD) for (new) investment institutions, which is expected to come into force on 1 July 2013, and will affect several Achmea business units. These developments will be discussed in the remuneration report for Legislative developments There were more changes in legislation and regulations applying to remuneration policy in 2012, at international, national and sectoral level. Achmea is closely monitoring these changes and where necessary will in principle bring its remuneration policy into line with the new requirements as soon as possible. The most relevant changes are listed below. The Bonus Prohibition for State-supported Enterprises Act (Wet Bonusverbod Staatsgesteunde ondernemingen), which came into force in 2012, is applicable to the members of Achmea s Executive Board. 8

8 2. Governance 2.1 The Supervisory Board and its Remuneration Committeee Scope Achmea s remuneration policy in the Netherlands and in other countries is set by the Supervisory Board. The Remuneration Committee of the Supervisory Board plays an important part in preparing, advising on and monitoring that policy. The role of the Supervisory Board and its Remuneration Committee is fully compliant with the guidelines provided by the Regulation on Sound Remuneration Policy pursuant to the Financial Supervision Act 2011 (Wft) and defined in the by-laws. There were no changes in 2012 compared with The same applies to the relationships with the remuneration committees of other Achmea business units. Achmea started revising its remuneration policy in 2010, when it decided to stop awarding (phantom) share options and made changes to the variable remuneration for the senior management, including the introduction of deferred variable remuneration. Further changes were made in 2011, more particularly changes required to comply with DNB s Regulation on Sound Remuneration Policy pursuant to the Financial Supervision Act 2011 (Wft). This regulation implemented the European Capital Requirements Directive III and the guidelines of the European Banking Authority (EBA), formerly the Committee of European Banking Supervisors (CEBS), and the guidelines issued by the CEBS on 10 December The (variable) remuneration structure for the Executive Board was adjusted downwards in This is discussed in greater depth in chapter 3.1. A similar downward adjustment was made on 1 January 2013 for the other segments of Achmea s senior management in the Netherlands. advice from remuneration experts. To assist them in performing their tasks, the members of the Supervisory Board of Achmea Group attend a number of special training or education meetings every year, covering such aspects as governance, risk management, Solvency II etc. Meetings are also held with external advisers on special themes. Relationship with control functions and local supervisory boards To assist it in performing its tasks, the Remuneration Committee of the Supervisory Board has direct access to the Group s control functions, via the chairman and/or secretary of the Remuneration Committee. Conversely, the group directors of the control functions within the Group, such as Internal Audit, Risk & Compliance and P&O, have a direct line if necessary to the chairman of the Remuneration Committee. The governance structure described above applies in principle to all parts of Achmea and both Dutch and foreign subsidiaries. Achmea s remuneration policy complies with the specific regulations which are applicable to the subsidiaries. For example, the insurance entities are governed by the Insurers Code and Achmea Bank and Staalbankiers are governed by the Banking Code. Some subsidiaries and associates have set up separate remuneration committees. Achmea s remuneration policy defines the responsibilities of local remuneration committees and their relationship with Achmea s Supervisory Board and its Remuneration Committee. In the event of any conflicts concerning or changes to the remuneration policy, the decision of (the Remuneration Committee of) Achmea s Supervisory Board will be final. 2.2 The Executive Board Expertise The Remuneration Committee ensures that the remuneration policy is updated to reflect any changes to legislation and regulations. The Committee keeps its knowledge up to standard with education and/or external Scope Within the Supervisory Board s general supervisory framework, the Executive Board has primary responsibility for Achmea s remuneration policy as it applies to the lower echelons. There were no changes in the Executive Boards 9

9 2. GOVERNANCE governance compared with As is only logical, the Executive Board has no control over its own remuneration. Expertise of Executive Board members To enable them to perform their tasks, the members of the Executive Board possess the specific expertise required for the fulfilment of the Executive Board s role. Relevant themes include governance, risk management, compliance and remuneration policy. The members undertake permanent education and hold meetings with internal and external advisers on special themes. 2.3 The role of control functions A number of control functions are involved in the governance of remuneration policy. As well as ensuring a good policy which is appropriate for an enterprise with Achmea s identity, their role is subject to rules of supervision and governance such as: the DNB Regulation on Sound Remuneration Policy pursuant to the Financial Supervision Act 2011 (Wft); the Governance Principles of the Dutch Association of Insurers (Insurers Code); the Banking Code of the Dutch Banking Association (Banking Code). The control functions have their own tasks and responsibilities which are separate from line management. Their tasks and responsibilities relating to the correct application of the remuneration policy, which are defined in writing in Achmea s remuneration policy, were unchanged compared with The Risk & Compliance, Personnel & Organisation, Internal Audit and Finance departments each have their own role to play. Coordination between these departments with regard to remuneration policy is via the Central Coordination Committee on Sound Remuneration Policy (abbreviated in Dutch to CCBB ). Internal Audit attends the CCBB s meetings as an observer. 10

10 3. Remuneration policy and structure by echelon This chapter discusses on a systematic basis the remuneration system for each echelon in the organisation. In this introduction we cover a number of aspects which are the same for all echelons. Fixed remuneration Achmea employs a job evaluation system which is widely used in the market to weigh and correctly classify jobs. A fixed salary is allocated to each classification on the basis of a general benchmark survey, such as that conducted by the Hay Group. On the basis of the Regulation on Sound Remuneration Policy pursuant to the Financial Supervision Act 2011 (Wft), additional requirements have to be met for the award of variable remuneration. Pursuant to the Bonus Prohibition for State-supported Enterprises Act, which became law in 2012, no variable remuneration can be awarded to Achmea s Executive Board while Achmea Hypotheekbank has state-guaranteed bonds in issue. : performance targets Performance targets are agreed each year with employees who are eligible for variable remuneration (all of the senior management and a small group of employees covered by the CLA) in accordance with a system which is defined in writing in Achmea s remuneration policy and to which risk adjustment is applied. The performancemeasurement system underlying the award of variable remuneration is in three parts: one part relates to the targets to be achieved at Group level; one part relates to targets applicable to the relevant business unit; one part relates to targets at an individual level. Performance against these targets is assessed together. The weighting of these targets varies. For the Executive Board and the directors and senior management of the control functions, the weighting is 50/50. To guarantee their objectivity, the members of the Executive Board and the senior management cadre of the control functions do not assess the targets for which they are responsible, so the Group-level part does not count for them. For employees in the senior management cadre the weighting is 30/30/40 and for the small group of employees under the CLA who are eligible for variable remuneration the weighting for 2012 is 20/40/40. The performance targets are defined using the SVM (stakeholder value management) map, on which targets are set from various stakeholder perspectives and key performance indicators (KPI s) and key risk indicators (KRI s) are identified. A balanced allocation is also made between short-term and long-term targets. In setting and assessing the targets, the focus is on long-term value creation. This is consistent with our identity and is based on our stakeholder model, as discussed in chapter 1, which is driven by the customers interests, various other stakeholder interests and risk management. The process of translating the SVM map into targets using KPIs and KRIs was refined and coordinated in : payment Part of the variable remuneration is deferred for five years. The control functions have an important role if variable remuneration is awarded. The variable remuneration component in that case is awarded at time t, in the year after the year in which the performance targets were agreed and set. is thus awarded in year t for performance targets set in year t-1. The variable remuneration is in two parts: 1. a cash portion paid immediately: 50% paid at time t, and 2. a deferred portion: 50% is conditionally awarded in the form of deferred remuneration, which is not vested and paid until year t+5 (five years after the conditional award), known as cliff vesting. At the time of payment, the variable remuneration awarded at time t is subjected to a sustainability test by the 11

11 3. Remuneration policy and structure by echelon Remuneration Committee of the Supervisory Board. This five-year deferral of part of the variable remuneration is two years longer than the minimum period required under the Regulation on Sound Remuneration Policy pursuant to the Financial Supervision Act 2011 (Wft). This deferral period has been chosen with a view to promoting staff retention and on grounds of consistency with Achmea s cooperative identity. The revised period and terms of deferred variable remuneration introduced in 2011 replaced the system of deferred variable remuneration introduced in early 2010, under which 50% of the variable remuneration was paid in equal instalments over three consecutive years. The new revised system was introduced in The conditionally awarded portions of deferred variable remuneration for 2009 and 2010 were based on the old system. No variable remuneration was awarded for 2011, but was awarded for The variable remuneration is in the form of a cash payment in all cases. Consistent with its principles of simplicity and transparency, Achmea does not pay variable remuneration in the form of nonfinancial compensation, pension benefits or non-cash financial instruments. Before variable remuneration is awarded, the relevant control functions as discussed in chapter 2 verify correct application of the remuneration policy, each proceeding on the basis of its own independent responsibility. : malus and clawback A clawback and malus policy applies to employees who are eligible for variable remuneration. This means that the Supervisory Board is authorised to reduce the variable remuneration based on performance targets for previous years (malus) or demand the refund of variable remuneration already paid (clawback). 3.1 Executive Board Fixed remuneration The job content and related responsibilities of the chairman, vice-chairman and members of the Executive Board determine the weighting of the position. Positions are weighted for aspects such as their impact and responsibility, the complexity of the management context in which the individual operates and the expertise the position requires. All the members of the Executive Board were designated as risk takers in 2011, in accordance with the definition used in the Regulation on Sound Remuneration Policy pursuant to the Financial Supervision Act 2011 (Wft). This was not changed in To determine the level of the position and the (fixed) remuneration, the Supervisory Board commissions a periodic benchmark survey, comparing the total remuneration with that for positions of comparable weighting in a comparable context. The peer group comprises comparable companies in the financial sector and outside. The peer group is selected each year on the basis of fixed criteria. The members of the peer group are companies domiciled in the Netherlands which operate both in the Netherlands and in other countries. : level After the variable remuneration had been brought into line with Achmea s updated identity in early 2010 and changes had been made to the performance evaluation system and form of payment in 2011, the ratio between fixed and variable income was revised in 2012 on the advice of Risk & Compliance. The same percentage for on-target performance now applies for the chairman, vice-chairman and members van the Executive Board: a maximum of 30% of the fixed annual salary (was formerly a maximum of 85%), depending on the achievement of predetermined performance targets. At the discretion of the Supervisory Board, a maximum of 15% extra may be awarded for very exceptional performance (outperformance). The variable remuneration component for outperformance is thus a maximum of 45% of the fixed annual income. This is well within the maximum 100% ceiling set by the Insurers Code and the Banking Code. This downward adjustment to the variable income of the Executive Board has been partly offset by an adjustment to fixed income. 12

12 3. Remuneration policy and structure by echelon The award process is in accordance with Achmea s remuneration policy and the Regulation on Sound Remuneration Policy pursuant to the Financial Supervision Act 2011 (Wft). However, under the Bonus Prohibition for State-supported Enterprises Act which was adopted in 2012, no variable remuneration can be awarded to Achmea s Executive Board while Achmea Hypotheekbank has state-guaranteed bonds in issue, Remuneration of Executive Board members in 2012, by position CHAIRMAN VICE- CHAIRMAN ( million) MEMBER Fixed income Variable income (paid immediately) Total Pension charges Total (including pension) Pensions The pension scheme for members of the Executive Board was downgraded in 2012 from a final-pay scheme to an average-pay scheme, the main elements of which are as follows: pension at age 65 average-pay scheme pension accrual at 2.25% per year of service contribution-free allowance of 15,759 (amount as at reference date ) surviving dependants pension of 70% of lifetime retirement pension Summary of Executive Board remuneration in 2012 Average remuneration of Executive Board members (excluding severance payments where applicable) ( million) Fixed income * Variable income (paid immediately) Variable income previous year (deferred payment) Total Pension charges Total (including pension) * restated to facilitate comparison 2 The pension charges exclude a non-recurring payment relating to the switch to an average-pay scheme. The figures are based on 4.5 Executive Board members because Mr. Van Rijckevorsel stood down in mid Other elements Car lease A leased car is part of the employment package of members of the Executive Board. The standard lease amount averages 2,975 per month, including fuel costs etc. The choice of leased car is subject to sustainability criteria, which means that the car must have an A, B or C energy label. Fixed expense allowance Members of the Executive Board qualify for a fixed expense allowance, consisting of a taxed and an untaxed portion. The taxed portion averages 8,700 per year per member and the untaxed portion is currently 1,200 per year. Life-course savings scheme Four members of the Executive Board benefit from a lifecourse savings scheme (levensloop-regeling). Two members of the Executive Board pay a contribution of 12% of their fixed salary and two pay contributions of 21,000 and 27,000, respectively. Other employment terms The other employment terms that apply to Dutch directors also apply to the members of the Executive Board. As with employees covered by the CLA, these include the staff mortgage scheme and the insurance product discount scheme. 13

13 3. Remuneration policy and structure by echelon Severance payments Members of the Executive Board appointed since 1 June 2008 qualify for a maximum severance payment of 12 months salary. Members appointed before that date retain the rights accrued under the previous system. As at 1 February 2013, this includes one contract of employment awarding a severance payment based on the number of years service, up to a maximum of 36 months. A transitional arrangement was agreed in 2012 under which the number of years service accrued by year-end 2012 is frozen and does not increase to the maximum of 36 months under the previous arrangement. The policy of not rewarding failure also applies to the severance payments to members of the Executive Board. Termination of previous arrangements In 2009 the Supervisory Board agreed a retention bonus with two members of the Executive Board, namely the chairman and vice-chairman, under which each qualified for a payment of 500,000 gross after three years on condition that they remained in post and continued to perform satisfactory. The Supervisory Board took that decision in 2009 to safeguard continuity in the exceptional circumstances facing the company. At the beginning of 2012, these conditions were met and the arrangement was terminated. years with the rates of pay in the external labour market, based on the findings of benchmark surveys conducted by external consultants such as Hay Group. Level The division chairmen are placed in Achmea band 1. Until 2012, there was no differentiation within this band and it consisted of only one scale. When the organisational changes were implemented on , greater differentiation was introduced in the weighting of the jobs of division chairmen. This differentiation in weighting was reflected in the introduction of three salary scales 1A, 1B and1c within Achmea band 1 as from The minimum and maximum in salary scale 1B are the same as for Achmea band 1 which applied until The minimum and maximum for scale 1C are lower than for 1B and the minimum and maximum for 1A are marginally higher than for 1B. The allocation of the division chairmen to Achmea bands is based on regular job evaluation. One division chairman is allocated to Achmea band 1A and the other division chairmen are allocated to Achmea bands 1B and 1C. Within Achmea band 1, the salary scales for bands 1A, 1B and 1C are as follows: 3.2 Remuneration policy for division chairmen Fixed remuneration Remuneration principles The job content and related responsibilities determine the weighting of the position of a division chairman. Positions are weighted by applying a classification system adopted by the Executive Board, based on job evaluation. They are weighted for aspects such as the impact/ responsibility of the post, the (professional) expertise required for the post, the (political/ management) context (and/or the potential for influencing that context), the potential risk of reputational damage and the organisational scope and complexity of leadership. This can be verified externally using the Hay job evaluation system. In principle, the salary scales are compared every two ACHMEA BAND 1 SCALE MIN MAX 3 1A B C Total fixed annual salaries in euros (gross amounts) as at 31 December 2012 on the basis of 40 hours per week including holiday allowance (8%) and yearend bonus (8.33%). This fixed gross salary is paid in 12 equal instalments (1/12 per month). The salary scales and actual salaries were last adjusted with effect from 1 December 2011 with the agreed increase (0.75%) under the Achmea CLA. There was no general CLA-based increase in the salaries of division chairmen in Changes in the actual salaries of division chairmen in 2012 related only to individual changes, such as the periodic increase on 1 January 2012 (see below) or interim promotions. Periodic increase A division chairman who has not yet reached the scale maximum is in principle eligible for an annual increase in 14

14 3. Remuneration policy and structure by echelon monthly salary. The amount of the salary increase depends on the chairman s performance. A division chairman who has reached the maximum for the scale to which he is allocated will as a rule receive no further individual increase while he is allocated to that scale except for general increases under the CLA or if the scale maximum is adjusted on the basis of the periodic benchmark survey. : level As well as fixed remuneration, Achmea also offers division chairmen the possibility of a variable remuneration component. In 2012, the variable remuneration component for division chairmen for on-target performance was still a maximum of 55% of the fixed annual income. Up to an additional 15% was available for exceptional performance (outperformance), potentially taking the variable remuneration component for outperformance up to a maximum of 70% of the fixed annual income. A policy change was announced in 2012, which would take effect in Consistent with the policy change made in 2012 with regard to the Executive Board, the maximum variable remuneration for division chairmen was also adjusted downwards with effect from 1 January The maximum variable remuneration for division chairmen was reduced to 25% for on-target performance, with scope for a maximum of an additional 10% in exceptional cases of outperformance. The maximum variable remuneration for 2013 is therefore 35% (2012: 70%). The reduction in the variable remuneration component will be partly offset in the fixed income. This downward adjustment was made on the recommendation of Risk & Compliance. To qualify for additional variable remuneration for outperformance, a minimum rating of exceeds the requirements in some areas (2) must be achieved. In cases of outperformance, the Executive Board is authorised to decide how much of the additional 15% (2013: additional 10%) is to be awarded as extra variable remuneration for outperformance. this chapter. All the other criteria relating to variable remuneration are also as described in the introduction. Pensions (incumbent division chairmen) As at 1 January 2012, the basic features of the pension scheme for division chairmen who joined Achmea before 1 September 2012 were as follows: indexed final-pay scheme; pensionable age 65 (also age at which pension accrual and funding end); pension accrual: 2% of pension base; surviving dependants pension: 70% of the retirement pension; temporary surviving dependants pension (risk basis): the maximum benefit pursuant to the Surviving Dependants Act (ANW) as at 1 January preceding the date of decease, disregarding the income test, less the benefit awarded to the surviving dependant under the ANW; orphans pension: 14% of the retirement pension; no own contribution; contribution-free allowance: 13,149 as at 1 January Under the transitional arrangements, individual division chairmen may still have rights under previous arrangements and previous agreements may still apply. Policy change in 2012 The Executive Board decided in 2012 that, with effect from 1 September 2012, the average-pay pension scheme for staff covered by the CLA and senior managers (see 3.1 for features of that scheme) would apply to new division chairmen and directors joining Achmea from outside. If individuals who were in Achmea service before 1 September 2012 are promoted, the pension scheme applicable to the individual will continue to apply for the time being. The Executive Board announced its intention in 2012 to introduce a new pension scheme for all Achmea employees as from 1 January This scheme will then apply to division chairmen, directors, senior managers and staff covered by the CLA. The award process for the payment of variable remuneration is as described in the introduction to 15

15 3. Remuneration policy and structure by echelon Other main elements Expense allowance VA fixed expense allowance is given to cover regularly recurring expenses. The expense allowance for division chairmen which applied in 2012 was set on 1 January 2009 at 4,500 per year, of which 4,176 per year can be considered as taxed, the untaxed portion having been determined by the Dutch Tax and Customs Administration. On the basis of its periodic review in 2012, the Tax and Customs Administration has ruled that this will remain unchanged in Leased car/ns (Dutch Railways) business card Division chairmen have the benefit of a leased car under the current leasing arrangements. Because Achmea seeks to promote sustainable mobility, drivers of leased cars are asked to strike a balance between journey time, cost and environmental impact when travelling on business. To help them strike this balance, Achmea provides a free business rail card for business use. Service anniversary bonuses Division chairmen completing 25 or 40 years service with Achmea or one of Achmea s legal predecessors receive a bonus of one month s or two months gross salary, respectively. This is not variable remuneration, but a bonus based on the length of service. Part of the bonus is paid net of tax, in accordance with the tax rules. Payment of training expenses The division chairman is responsible for acquisition and maintenance of the professional expertise and skills needed to perform and continue to perform his current and future functions. To encourage this, Achmea pays training expenses. All training expenses are reimbursed 100% if approved by the immediate superior. If the employee voluntarily leaves Achmea s service on his own initiative during or within two years of completing a training course, the payment is repayable unless agreed otherwise. Staff mortgage scheme and insurance product discount scheme Division chairmen qualify for the staff mortgage scheme and insurance product discount scheme which apply to staff covered by the CLA. Severance payments As from 1 October 2011, the severance payment for newly appointed division chairmen has been limited to a maximum of 12 monthly salaries. Incumbent division chairmen qualify for severance payments in accordance with the subdistrict court formula. The policy of not rewarding failure also applies. 3.3 Remuneration policy for directors Fixed remuneration Remuneration principles The job content and related responsibilities determine the weighting of the position of a director. The position is weighted by applying a classification system adopted by the Executive Board, based on job evaluation. Weighting is based on the same principles as for division chairmen (see previous section). This can be verified externally using the Hay job evaluation system. Level Directors are placed in one of three salary scales (2A, 2B or 2C) within Achmea band 2. The fixed annual salary is paid monthly in 12 equal instalments. SCALE SCALE MIN MAX 4 2A B C Gross annual salary in euros based on 40 hours per week, including holiday allowance and year-end bonus (reference date 31 December 2012). The salary scales were not changed in 2012 and no general CLA increase applicable to everyone was awarded. The last general CLA increase dates from 1 December 2011 (0.75%). There was no general CLA-based increase in the salaries of directors in Changes in the actual salaries of directors in 2012 related only to individual changes, such as the periodic increase on 1 January 2012 (see below) or interim promotions. 16

16 3. Remuneration policy and structure by echelon Periodic increase A director who has not yet reached the scale maximum is in principle eligible for an annual increase in monthly salary. The amount of the salary increase depends on the director s performance. A director who has reached the maximum for the scale to which he is allocated will as a rule receive no further individual increase while he is allocated to that scale except for general increases applicable to all employees or if the scale maximum is adjusted on the basis of the periodic benchmark survey. : level As well as fixed remuneration, Achmea also offers directors the possibility of a variable remuneration component. The maximum variable remuneration component for directors in 2012 was still 35% of the fixed annual income. Up to an additional 15% was available for exceptional performance (outperformance), potentially taking the variable remuneration component for outperformance up to a maximum of 50% of the fixed annual income. A policy change was announced in 2012, which would take effect in Consistent with the policy change made in 2012 with regard to the Executive Board, the maximum variable remuneration for directors was also adjusted downwards as it was for division chairmen with effect from 1 January The maximum variable remuneration for directors was reduced to 15% for on-target performance, with scope for a maximum of an additional 10% in exceptional cases of outperformance. The maximum variable remuneration for 2013 is therefore 25% (2012: 50%). The reduction in the variable remuneration component will be partly offset in the fixed income. To qualify for additional variable remuneration for outperformance, a minimum rating of exceeds the requirements in some areas (2) must be achieved. In cases of outperformance, the Executive Board is authorised to decide how much of the additional 15% (2013: additional 10%) is to be awarded as extra variable remuneration for outperformance. The award process for the payment of variable remuneration is as described in the introduction to this chapter. All the other criteria relating to variable remuneration are also as described in the introduction. Pensions (incumbent directors) As at 1 January 2012, the basic features of the pension scheme for directors who joined Achmea before 1 September 2012 were as follows: indexed final-pay scheme; pensionable age 65 (also age at which pension accrual and funding end); pension accrual: 2% of pension base times the number of years service; surviving dependants pension: 70% of the retirement pension; temporary surviving dependants pension (risk basis): the maximum benefit pursuant to the Surviving Dependants Act (ANW) as at 1 January preceding the date of decease, disregarding the income test, less the benefit awarded to the surviving dependant under the ANW; orphans pension: 14% of the retirement pension; no own contribution; contribution-free allowance: 13,149 as at 1 January Under the transitional arrangements, individual directors may still have rights under previous arrangements and previous agreements may still apply. Policy change in 2012 The Executive Board decided in 2012 that, with effect from 1 September 2012, the average-pay pension scheme for staff covered by the CLA and senior managers (see 3.1 for features of that scheme) would apply to new division chairmen and directors joining Achmea from outside. If individuals who were in Achmea service before 1 September 2012 are promoted, the pension scheme applicable to the individual will continue to apply for the time being. The Executive Board announced its intention in 2012 to introduce a new pension scheme for all Achmea employees as from 1 January This scheme will then apply to division chairmen, directors, senior managers and staff covered by the CLA. 17

17 3. Remuneration policy and structure by echelon Expense allowance A fixed expense allowance is given to cover regularly recurring expenses. The expense allowance for directors was set on 1 January 2009 at 3,000 per year, of which 2,618 per year can be considered as taxed, the untaxed portion having been determined by the Dutch Tax and Customs Administration. On the basis of its periodic review in 2012, the Tax and Customs Administration has ruled that this will remain unchanged in All other elements, such as the car lease scheme, service anniversary bonuses, training expenses, the staff mortgage scheme, the insurance product discount scheme and severance payments, are the same as for division chairmen, but the amounts payable under the car lease scheme are lower than for division chairmen. See the previous section. 3.4 Remuneration policy for senior managers/ top specialists Fixed remuneration Remuneration principles The job content and related responsibilities determine the weighting of the position of a senior manager/ top specialist. The position is weighted by applying a classification system adopted by the Executive Board, based on job evaluation. The remuneration principles for this target group are the same as for the target groups discussed above. The job evaluations can also be verified externally using the Hay job evaluation system. Level Senior managers/top specialists are allocated to four salary scales (3A, 3B, 3C or 3D) within Achmea band 3. The fixed annual salary is paid monthly in 12 equal instalments SCALE SCALE MIN MAX 5 3A B C D Gross annual salary in euros as at 31 December based on 40 hours per week, including holiday allowance and year-end bonus (reference date 31 December 2012). The salary scales were not changed in 2012 and no general CLA increase applicable to everyone was awarded. The last general CLA increase dates from 1 December 2011 (0.75%). There was no general CLA-based increase in the salaries of senior managers/top specialists in Changes in the actual salaries of senior managers/top specialists in 2012 related only to individual changes, such as the periodic increase on 1 January 2012 (see below) or interim promotions. Periodic increase An employee who has not yet reached the scale maximum is in principle eligible for an annual increase in monthly salary. The amount of the salary increase depends on the employee s performance. An employee who has reached the maximum for the scale to which he is allocated will as a rule receive no further individual increase while he is allocated to that scale except for general increases applicable to all employees or if the scale maximum is adjusted on the basis of the periodic benchmark survey. Promotion When promoted, the employee receives a periodic increase consistent with the assessment of meets the requirements and the salary scale to which the employee is allocated after promotion. This periodic increase is awarded up to the maximum salary for the Achmea band to which the employee is allocated after promotion. : level As well as fixed remuneration, Achmea also offers its senior managers/top specialists the possibility of a variable remuneration component. The maximum variable remuneration component for senior managers/ top specialists in 2012 was 25% of the fixed annual income. Up to an additional 10% was available for exceptional performance (outperformance), potentially taking the variable remuneration component for outperformance up to a maximum of 35% of the fixed annual income. To qualify for additional variable remuneration for outperformance, a minimum rating of exceeds the requirements in some areas (2) must be achieved. In cases of outperformance, 18

18 3. Remuneration policy and structure by echelon the Executive Board is authorised to decide how much of the additional 10% is to be awarded as extra variable remuneration for outperformance. A policy change was announced in 2012, which would take effect in Consistent with the policy change made in 2012 with regard to the Executive Board as it was for division chairmen and directors the maximum variable remuneration for senior managers/top specialists was also adjusted downwards or more than halved with effect from 1 January The maximum variable remuneration for senior managers and top specialists was reduced to 10% for on-target performance, with scope for a maximum of an additional 5% in exceptional cases of outperformance. The maximum variable remuneration for 2013 is therefore 15% (2012: 35%). The reduction in the variable remuneration component will be partly offset in the fixed income. The award process for the payment of variable remuneration is as described in the introduction to this chapter. All the other criteria relating to variable remuneration are also as described in the introduction. Pensions The pension scheme under the CLA applies to senior managers/top specialists. The basic features of the pension scheme (as at 1 January 2012) were as follows: indexed average-pay scheme; pensionable age 65; various transitional arrangements; pension accrual: 2% per year of the applicable pension base for that year; surviving dependants pension (including additional surviving dependants pension or ANW hiaat); orphans pension; own contribution: maximum 6% of the pension base; contribution-free allowance for retirement pension commencing at age 65: 15,643. The Executive Board announced its intention in 2012 to introduce a new pension scheme for all Achmea employees as from 1 January This scheme will then apply to division chairmen, directors, senior managers and staff covered by the CLA. Other main elements Expense allowance A fixed expense allowance is given to cover regularly recurring expenses. The expense allowance for senior managers/top specialists was set on 1 January 2009 at 2,500 per year, of which 2,014 per year can be considered as taxed, the untaxed portion having been determined by the Dutch Tax and Customs Administration. On the basis of its periodic review in 2012, the Tax and Customs Administration has ruled that this will remain unchanged in All other elements, such as the car lease scheme, service anniversary bonuses, training expenses, the staff mortgage scheme, the insurance product discount scheme and severance payments, are the same as for directors and division chairmen, but the amounts payable under the car lease scheme are lower than for directors and division chairmen. See the previous sections. 3.5 Remuneration policy for staff covered by the CLA Fixed remuneration Remuneration principles Employees receive a fixed monthly salary, an annual holiday allowance and a year-end bonus. Any profit distribution in June will depend on the decision of the Executive Board. The job content determines the weighting of the position and thus the salary scale to which the position is allocated. Each position is allocated on the basis of a job description and the application of the job level matrix, which is based on the job evaluation method developed by Bureau Berenschot. Level Staff covered by the CLA are allocated to 11 salary scales designated by the letters A K. Each salary scale has a minimum and a maximum. The maximum is in principle achievable by every employee. The speed at which an employee rises through the salary scale to the maximum depends on his or her performance and assessment. 19

19 3. Remuneration policy and structure by echelon SCALE SCALE MIN MAX 6 A B C D E F G H I J K Annual salaries based on 36-hour week (reference date ). There was no change in 2012 and no increase was awarded under the CLA in Periodic increase Periodic increases are awarded on 1 January if the employee concerned entered into a contract of employment with Achmea before 1 September of the previous year. The amount of the periodic increase depends on the employee s assessment and the salary scale to which the employee is allocated. For the purposes of assessing the employee s performance, targets for development, competences and results are agreed at the beginning of each year. The customers interests are a key factor in setting these targets, especially for employees whose jobs involve customer contact. Whether or not the employee qualifies for variable remuneration plays no part in this process. Promotion On promotion (appointment to a different and more heavily weighted position which is allocated to a higher salary scale), the employee receives a periodic increase consistent with an assessment of all agreed targets exceeded and with the salary scale to which the employee was allocated before the promotion. Periodic promotionrelated increases are awarded up to the maximum salary in the salary scale to which the employee is allocated after promotion. framework (CLA article 7.10) Achmea offers the possibility of variable remuneration to a small group of employees who are covered by the Achmea CLA. Achmea concluded a new CLA with the trade unions in 2011, which ran from 1 June 2011 until 1 June 2012 and included changes to bring the provisions of the CLA relating to variable pay into line with sound remuneration policy and the requirements of the regulators. In the new CLA on which agreement was reached at the end of 2012 and which runs until 1 June 2013, article 7.10 is virtually unchanged. The variable remuneration percentage is determined on the basis of the results achieved. In all cases, the customers interests are a key factor in agreeing the targets and determining the extent to which the agreed targets have been met. The following weightings are applied to reflect stakeholders interests: 1. Achmea s results (20%); 2. division s results (40%); 3. achievement of individual targets (40%). Current local variable remuneration rules for divisions within the CLA framework The variable remuneration rules for divisions are based on the CLA framework and comprise the following elements: Scope The categories of employees, based on job level, who can qualify for variable remuneration are defined. Level The rules set the maximum achievable variable remuneration as a percentage of the annual salary as defined in the CLA. Award The rules state that the variable remuneration must be based on targets agreed annually in advance, which must be SMART (Specific, Meaningful, Achievable, Reliable and Timely). The rules define how the agreed targets correspond to a predetermined number of points. The number of points achieved determines the variable 20

20 3. Remuneration policy and structure by echelon remuneration percentage. The achievement of targets is measured on a sliding scale. P&O carries out annual checks on the variable remuneration awarded to staff covered by the CLA. Risktakers The staff covered by the CLA include a small number of individuals who are classed as risk takers. Additional provisions apply to risk takers, as defined in the Regulation on Sound Remuneration Policy pursuant to the Financial Supervision Act 2011 (Wft). These provisions are embodied in outline in the Achmea CLA. 3.6 Remuneration policy for executive teams of foreign Achmea subsidiaries General The remuneration policy of the foreign operating companies is based on Achmea s remuneration policy, which is defined in writing. Governance of the remuneration policy for the executive teams of the foreign operating companies is also included in the European Governance Guide. The way in which the foreign operating companies implement Achmea s remuneration policy is discussed below. Fixed remuneration The remuneration of the members of the executive teams of all operating companies is evaluated periodically, weighting the management positions using a job grading system similar to that used by Achmea, and compared with the rest of the relevant market using the Hay job evaluation method. On the basis of the business plans approved by the Executive Board, the targets for the coming year are set which the executive team of the operating company must achieve. This ensures that the agreed targets for the members of the executive team of the operating company are consistent with Achmea s identity and the operating company s objectives which are based on it. Before these targets are set, ex ante target criteria are defined by Risk Management to ensure that the targets are consistent with Achmea s risk appetite. The targets are in three parts, with each part contributing a fixed percentage of the total variable remuneration: 1. Achmea s results (20%); 2. the operating company s results (40%); 3. success in achieving the individual targets (40%). The Achmea stakeholder model (strategy map) is also reflected in the targets set for foreign operating companies. of executive teams: award At the beginning of the year, when the results of the previous year are known, the targets are evaluated by the foreign operating companies. Before variable remuneration is awarded for the target year, the control functions concerned perform an ex post check against Group and operating company targets. The maximum percentage of variable remuneration that can be awarded varies from one operating company to another and is measured against the local remuneration benchmark for each country. Achmea s Executive Board sets the variable remuneration and may reduce or withhold it. Form of payment of variable remuneration until 2011 The variable remuneration is paid in the year of award. Up to the date of payment of variable remuneration for 2010 (where awarded), it was in the form of a financial benefit paid immediately in cash. for risk takers brought into line as from 2012 performance assessment With regard to the performance criteria (targets) agreed in 2012, the variable remuneration for risk takers in other countries was awarded and paid in accordance with the Regulation on Sound Remuneration Policy pursuant to the Financial Supervision Act 2011 (Wft) as embodied in Achmea s remuneration policy, including deferral. The guidelines for risk takers (including the members of the executive teams) are therefore identical to the variable Remuneratie Raport Achmea