SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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REINSURANCE GROUP OF AMERICA,
INCORPORATED
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NOTICE OF THE ANNUAL MEETING OF
THE SHAREHOLDERS OF
REINSURANCE GROUP OF AMERICA, INCORPORATED
Chesterfield, Missouri
April 8, 202113, 2023
To the Shareholders of Reinsurance Group of America, Incorporated:
The Annual Meeting of the Shareholders of Reinsurance Group of America, Incorporated (the "Company") will be held virtuallyat the Company's principal executive offices located at 16600 Swingley Ridge Road, Chesterfield, Missouri 63017 on May 19, 2021,24, 2023, commencing at 2:00 p.m. CDT. Due to health and safety concerns regarding the COVID-19 pandemic, this year the Company will be hosting the Annual Meeting live via the Internet. To attend the Annual Meeting via the Internet please visit www.virtualshareholdermeeting.com/RGA2021. Information on how to participate in this year's virtual meeting can be found on page 109. At this meeting only holders of record of the Company's common stock at the close of business on March 29, 202131, 2023 will be entitled to vote, for the following purposes:
1.To elect twelveeleven directors for terms expiring in 2022;2024;
2.To vote on the frequency of the shareholders' advisory vote regarding approval of the Company's compensation for named executive officers on a non-binding, advisory basis;
3.To vote to approve the compensation of the Company's named executive officers on a non-binding, advisory basis;
3.To vote to approve amendments to the Company's Flexible Stock Plan;
4.To vote to approve amendments to the Company's Flexible Stock Plan for Directors;
5.To vote to approve the Company's Amended & Restated Phantom Stock Plan for Directors;
6.To ratify the appointment of Deloitte & Touche LLP as the Company's independent auditor for the year ending December 31, 2021;2023; and
7.5.To transact other business, if any, properly brought before the meeting.
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REINSURANCE GROUP OF AMERICA, INCORPORATED |
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| J. Cliff Eason,Stephen T. O’Hearn, Chair of the Board |
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| William L. Hutton, Secretary |
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COVID-19 ImpactShareholder Engagement and ResponseBoard Responsiveness | |
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| TABLE OF CONTENTS | |
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Proposed Amendment to Flexible Stock Plan for Directors | |
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PROXY STATEMENT SUMMARY
These proxy materials are being provided to you because the Board of Directors is soliciting your proxy to vote your shares at the Company's 20212023 Annual Shareholders' Shareholders’Meeting. This summary highlights information contained elsewhere in this proxy statement ("Proxy Statement"). This summary does not contain all of the information that you should consider and you should read the entire Proxy Statement carefully before voting. Page references are supplied to help you find additional information in this Proxy Statement. This Proxy Statement and the related proxy materials were first made available to shareholders and on the Internet on April 8, 2021.13, 2023.
Annual Shareholders' Meeting
Time: May 19, 2021,24, 2023, 2:00 p.m., Central time
Place: Virtual live meeting will be held at www.virtualshareholdermeeting.com/RGA202116600 Swingley Ridge Road, Chesterfield, Missouri 63017
Record Date: Close of business on March 29, 202131, 2023
Voting Matters and Board Recommendations
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| Proposal | Board Recommendation | Voting Options | Vote Required to Adopt the Proposal | More Information |
| 1. | Election of Directors | FOR all nominees | For, against or abstain for each nominee | If a quorum is present, the vote required
to elect each director is a majority of the
common stock represented in person or by
proxy at the Annual Meeting. | |
| 2. | Shareholders' AdvisoryFrequency of Shareholders’ Vote on Executive Compensation | FORANNUAL | For, against1 year, 2 years, 3 years or abstain | If a quorum is present, the vote required
to approve Item 2 is a majority of the common stock represented in person or by proxy at the Annual Meeting. | |
| 3. | Shareholders’ Advisory Vote on Executive Compensation | FOR | For, against or abstain | If a quorum is present, the vote required
to approve this Item is a majority of the common
stock represented in person or by
proxy at the Annual Meeting. | |
3.4. | Amendments to Flexible Stock PlanRatification of Appointment of Independent Auditor | FOR | For, against or abstain | If a quorum is present, the vote required
to approve this Item is a majority of the common
stock represented in person or by
proxy at the Annual Meeting.
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4. | Amendment to Flexible Stock Plan for Directors | FOR | For, against or abstain | If a quorum is present, the vote required
to approve this Item is a majority of the common
stock represented in person or by
proxy at the Annual Meeting. | |
5. | Approval of Amended & Restated Phantom Stock Plan for Directors | FOR | For, against or abstain | If a quorum is present, the vote required
to approve this Item is a majority of the common
stock represented in person or by
proxy at the Annual Meeting. | |
6. | Ratification of Appointment of Independent Auditor | FOR | For, against or abstain | If a quorum is present, the vote required
to approve this Item is a majority of the common
stock represented in person or by
proxy at the Annual Meeting. | |
See "Additional Information - Voting" (page 11085) for additional information. |
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How to Cast Your Vote
Your vote is important. Please cast your vote and play a part in the future of the Company. Shareholders of record, who hold shares registered in their names with the Company's transfer agent, can vote by:
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Internet at www.proxyvote.com | calling 1-800-690-6903 toll-free from the U.S. or Canada | mail return the signed proxy card |
Board Responsiveness
The Board of Directors was disappointed by the 2022 shareholder advisory vote on executive compensation ("Say on Pay"). In response to the results of the Say on Pay vote at the 2022 Annual Meeting, we reached out to investors earlier than in prior years to receive and incorporate feedback into the discussions and decisions of the Human Capital and Compensation Committee (the "Committee") for 2023. In the fall and winter of 2022, we contacted shareholders collectively representing 64% of outstanding shares and had substantive conversations with shareholders representing 34% of outstanding shares. The Chair of the Committee participated in several discussions with shareholders, and in a conversation with Institutional Shareholder Services.
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| Offered engagement with approximately | Direct one-on-one discussions with approximately | HC&C Committee Chair participated in calls with stockholders representing approximately |
| 64% | 34% | 29% |
| of outstanding shares | of outstanding shares | of outstanding shares |
In these conversations, shareholders overwhelmingly expressed strong support and appreciation for our executive compensation philosophy, as well as an understanding of the rationale for the actions by the Committee in light of the impact of COVID-19 on our business. The following table summarizes feedback we received from shareholders, our actions in response, as well as the impact of those actions:
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Board Nominees (page 2Shareholder Feedback("What We Heard") | Our Action ("What We Did") | Impact of Action ("Why This is Important") |
| 2021 One-time Grants | While expressing a preference for avoidance of one-time grants, shareholders understood the rationale for the one-time grants we made in 2021, and wanted to understand the Committee's approach to future extraordinary circumstances. | The Compensation Committee affirmed its commitment to not make discretionary, one-time awards to our named executive officers like those made in 2021 in response to the COVID-19 pandemic, absent extraordinary circumstances as determined by the Board. | Aligns with our Executive Compensation Philosophy, and clarifies our approach to extraordinary circumstances. |
| Pay-for-Performance | Shareholders expressed preference for emphasis on performance-based equity. | Increased performance contingent ("PCS") awards as a percentage of long-term incentive ("LTI") awards. For 2023: | Ensures that executives’ long-term interests as well as equity payouts earned are closely aligned with long-term Company performance. |
| Ms. Manning – 100% of LTI awards in PCS; Mr. Cheng – 75% of LTI awards in PCS; and Other NEOs – 60% of LTI awards in PCS. |
| Shareholders expressed preference for multi-year performance periods. | Returned to our historical practice of 3-year performance metrics for 2022-2024 and 2023-2025 PCS Plans in line with our commitment in 2022; we intend to retain this structure. | Extends performance periods to 3 years, and focuses executives on long-term shareholder value creation. |
| Shareholders expressed preference for incorporating peer-relative performance metrics. | Adopted a relative total shareholder return modifier for our 2022-2024 PCS; we retained this modifier for the 2023-2025 PCS awards. | Enhances performance equity design to better align outcomes with outperformance relative to peers. |
| Disclosure | Shareholders encouraged additional transparency regarding award metrics. | Updated disclosure of award metrics to provide additional transparency; Enhanced disclosure of the Strategic Scorecard metrics and evaluation methodology. | Increases transparency of disclosure. |
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| Name | Director Since | Independent | Election for Term Ending | Committee Memberships1 |
| Pina Albo | 2019 | Yes | 2022 | Compensation
Investment
Nominating and Governance |
| Christine R. Detrick | 2014 | Yes | 2022 | Compensation
Nominating and Governance, Chair |
| J. Cliff Eason | 1993 | Yes | 2022 | None |
| John J. Gauthier | 2018 | Yes | 2022 | Audit
Investment, Chair
Risk |
| Patricia Guinn | 2016 | Yes | 2022 | Audit, Chair
Investment
Risk |
| Anna Manning | 2016 | No | 2022 | None |
| Hazel M. McNeilage | 2018 | Yes | 2022 | Compensation, Chair
Nominating and Governance |
| Stephen O'Hearn | 2020 | Yes | 2022 | Audit
Investment
Risk |
| Frederick J. Sievert | 2010 | Yes | 2022 | Compensation
Investment
Nominating and Governance |
| Shundrawn Thomas | 2021 | Yes | 2022 | None |
| Stanley B. Tulin | 2012 | Yes | 2022 | Audit
Investment
Risk, Chair |
| Steven C. Van Wyk | 2019 | Yes | 2022 | Audit
Risk |
1AsThe Company announced the appointment of April 1, 2021.Tony Cheng as President of the Company, effective January 4, 2023. At that time, the Company also announced that Anna Manning, our Chief Executive Officer, would retire on December 31, 2023, to be succeeded by Mr. Cheng.
Board Updates
Board and Committees (page 17)
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| Number of Members1 | Percent Independent | Number of Meetings in 2020 |
| Full Board | 12 | 92% | 9 |
| Audit | 5 | 100% | 8 |
| Compensation | 4 | 100% | 6 |
Finance, Investment and Risk Management2 | 0 | n/a | 5 |
Investment2 | 6 | 100% | 2 |
| Nominating and Governance | 4 | 100% | 8 |
Risk2 | 5 | 100% | 2 |
1As of April 1, 2021.
2In July 2020,•Khanh T. Tran was appointed to the Board approvedas an independent director, effective July 1, 2022. Mr. Tran is the splitretired President and Chief Executive Officer of Aviation Capital Group LLC, and previously held various executive positions with Pacific Life.
•As previously announced, J. Cliff Eason, independent Chair, retired from the Board as of December 31, 2022.
•Independent director Stephen T. O'Hearn was appointed Chair of the Finance, InvestmentBoard on January 1, 2023.
•In connection with his appointment as Company President and Risk Management Committee into two separate committees,as part of executive succession planning, Mr. Cheng was appointed to the Investment Committee andBoard on January 4, 2023.
•On March 9, 2023, Ng Keng Hooi informed the Risk Committee.Board that he will not stand for re-election at the Annual Meeting. Mr. Ng's decision not to stand for re-election is not the result of any dispute or disagreement with the Company, the Company's management or the Board on any matter relating to the Company's operations, policies or practices.
Board Diversity Snapshot
*As of February 1, 2021.
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| Name | Director Since | Independent | Election for Term Ending | Committee Memberships |
| Pina Albo | 2019 | Yes | 2024 | Human Capital and Compensation
Investment
Nominating and Governance |
| Tony Cheng | 2023 | No | 2024 | None |
| John J. Gauthier | 2018 | Yes | 2024 | Audit
Investment, Chair
Risk |
| Patricia L. Guinn | 2016 | Yes | 2024 | Audit, Chair
Investment
Risk |
| Anna Manning | 2016 | No | 2024 | None |
| Hazel M. McNeilage | 2018 | Yes | 2024 | Human Capital and Compensation, Chair
Nominating and Governance |
| George Nichols III | 2022 | Yes | 2024 | Human Capital and Compensation
Nominating and Governance |
| Stephen O'Hearn (Chair) | 2020 | Yes | 2024 | None |
| Shundrawn Thomas | 2021 | Yes | 2024 | Human Capital and Compensation
Nominating and Governance, Chair |
| Khanh T. Tran | 2022 | Yes | 2024 | Audit
Investment
Risk, Chair |
| Steven C. Van Wyk | 2019 | Yes | 2024 | Audit
Risk |
Board and Committees (page 17) | | | | | | | | | | | |
| Number of Members | Percent Independent | Number of Meetings in 2022 |
| Full Board | 12 | 83% | 8 |
| Audit | 4 | 100% | 8 |
| Human Capital and Compensation | 5 | 100% | 7 |
| Investment | 4 | 100% | 4 |
| Nominating and Governance | 5 | 100% | 5 |
| Risk | 4 | 100% | 4 |
| As of April 1, 2023. | | | |
Board Diversity Snapshot
As of April 1, 2023.
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Governance Facts (page 1312) |
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| Board Composition and Structure: | |
| Size of Board | 12*12 |
| Number of Independent Directors | 11*10 |
New Directors Appointed in Last 5 YearsSince 2019 | 68 |
| All Committees Comprised Entirely of Independent Directors | Yes |
| Independent Chair | Yes |
| Separate Chair and CEO | Yes |
| Board and Committee Assessments | Yes |
| Accountability to Shareholders: | |
| Annual Director Elections | Yes |
| Majority Voting for Director Elections | Yes |
| Proxy Access | Yes |
| Supermajority Vote Provisions | No |
| Shareholder Rights Plan (Poison Pill) | No |
| Advisory Vote on Executive Compensation | Annual |
| Alignment of Interests with Shareholders: | |
| Robust Stock Ownership Guidelines for Directors and Executive Officers | Yes |
| Restrictions on Hedging and Pledging of Company Shares for Directors and Employees | Yes |
| Executive Incentive Recoupment (Clawback) Policy | Yes |
| As of April 1, 2023. | |
*As of February 1, 2021
COVID-19 Impact and Response (page 28)Paying for Performance
The COVID-19 pandemic and the response thereto has had a significant impact on the Company and its clients as well as the Company’s employees and the communities where they live and work.in recent years. The “COVID-19"COVID-19 Impact and Response”Paying for Performance" section in the Compensation Discussion and Analysis ("CD&A") describes the impact of the COVID-19 pandemic on the Company and actions taken by the Human Capital and Compensation Committee (the “Committee”"Committee") took in 2021 to ensure that employees, including our named executive officers and other employees, remained motivated and incentivized on a forward-looking basis. That discussion:
•Summarizeslight of the Company’spandemic and specific challenges to the life insurance industry. The following is a summary of that discussion.
Recent Company Performance
In 2020, 2021 and 2022, RGA absorbed an estimated $2.4 billion of COVID-19 related impacts. Despite the magnitude of COVID-19 claims paid during this three-year period, the underlying strength of our business allowed RGA to produce meaningful earnings throughout the pandemic. More importantly, our resilient business model enabled our client partners to support their policyholders amid widespread uncertainty and loss.
The following table summarizes key financial results as impactedfor the years 2019 through 2022, including the estimated impact of COVID-19 on results:
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| Year | Pre-tax adjusted operating income1 | COVID-19 Impact2 | Adjusted operating income per share1 | COVID-19 Impact2 | Trailing 12 month adjusted operating return on equity1 | COVID-19 Impact2 |
| 2019 | $1,099 million | - | $13.35 | - | 10.5% | - |
| 2020 | $627 million | $590 million | $7.54 | $6.80 | 5.7% | 5.0% |
| 2021 | $121 million | $1,362 million | $1.13 | $15.20 | 0.8% | 10.1% |
| 2022 | $1,261 million | $447 million | $14.43 | $5.02 | 10.3% | 1.5% |
1See "Use of Non-GAAP Financial Measures" on page 89 for reconciliations from GAAP figures to adjusted operating figures. |
2COVID-19 impact estimates include mortality and morbidity claims of approximately $720 million in 2020, with offsetting impacts from longevity of approximately $33 million, and approximately $97 million of expense savings, all tax effected at 24%. COVID-19 impact estimates include mortality and morbidity claims of approximately $1,416 million in 2021 and $453 million in 2022, with offsetting impacts from longevity of approximately $54 million in 2021 and $6 million in 2022; all tax effected at 24%. |
During 2020 and 2021, the Company delivered strong profitability, excluding COVID-19 impacts, and continued to add to the underlying earnings power of the business by deploying a record amount of capital into in-force and other transactions in 2021. This helped to generate record profitability in 2022 and the Company expects to deliver additional profitability in the future.
COVID-19 Impact on Compensation
As disclosed in the proxy statements for the previous two annual meetings of shareholders, the COVID-19 pandemic;pandemic had a significant impact on compensation, including:
•DescribesWhile compensation decisions were made too early in 2020 for the Company to fully ascertain the significant impact of those financialCOVID-19 on Company performance, salaries and incentive targets for senior executives were held flat in 2021.
•The 2020 and 2021 Company-wide Annual Bonus Plan ("ABP") results on the Company’s compensation programs;both paid out below target, at 80.0% and 81.1% of target, respectively.
•Shows realizable pay for Ms. Manning, our PresidentPerformance Contingent Share ("PCS") awards granted in 2018, 2019 and Chief Executive Officer, without the one-time actions taken by the Committee; and
•Details one-time actions taken by the Committee2020 all had a 0% payout primarily as a result of COVID-19.
Certain of this information has previously been reported pursuantCOVID-19 and the Committee's decision to a Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 15, 2021.
2020 Financial Results
While the Company experienced strong results for the year from many businesses, profitability was significantly impacted by an estimated $720 million of COVID-19 related mortality and morbidity claims for the year, partially offset by savings of approximately $33 million relatedmake no adjustments to the Company’s longevity businessperformance metrics and $97 milliongoals to PCS awards that were already outstanding. Historically, PCS grants represented 75% of expense savings, giving an estimated overall pre-tax impact of approximately $590 million. This resulted in a 43.5%equity grants for our named executive officers.
•The decline in the Company’s adjusted operating earnings per share1 from $13.35 in 2019 to $7.54 in 2020. The Company estimates 2020 after tax COVID-19 related impacts2 to be approximately $6.80 per share. The following compares Company performance in 2019 to 2020 for key financial metrics:
Adjusted Operating EPS1 Pre-Tax Adjusted Operating Income1 Trailing 12 Month Adjusted Operating ROE1
COVID-19 Impacts to Compensation
2020 Annual Bonus Plan. AsCompany's stock price eliminated the value of December 31, 2020, 3,249 employees, representing over 94% of total Company employees participate in our Annual Bonus Plan ("ABP"). Further, the vast majority of participants in the plan are in non-executive roles, with 86% of participants in the ABP not participating in the Flexible Stock Plan.
As a result of the Company’s 2020 financial performance, the weighted average for the portion of the ABP determined by the Company’s overall performance was 22.6% of target and the Company’s total payout for all participants under the ABP would have been $62.1 million absent any adjustment, a decrease of 22.9% over the prior year. These results are summarized below:
1 See “Use of Non-GAAP Financial Measures” on page 115 for reconciliations from GAAP figures to adjusted operating figures.
2 Including mortality and morbidity claims with offsetting impacts from longevity and expense savings and tax effected at 24%.
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| Annual Bonus Plan (based only on overall Company financial performance) |
| Performance Measures and Goals | Minimum | 2020 Target | Maximum | Numerical Results | Weight | Payout Percent |
Adjusted Operating Income Per Share1 | $12.94 | $13.91 | $14.88 | $7.54 | 50.0% | 0.0% |
Book Value Per Share Excluding AOCI1 | $136.80 | $144.00 | $151.20 | $132.33 | 25.0% | 0.0% |
| New Business Embedded Value | $325.00 | $580.00 | $835.00 | $561.20 | 15.0% | 14.4% |
Annual Adjusted Consolidated Revenue1 | $14,121.00 | $14,864.00 | $15,607.00 | $14,595.88 | 10.0% | 8.2% |
Unadjusted Payout2 | | | | | | 22.6% |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. 2See "COVID-19 Impact and Response" on page 28 for additional information. |
Performance Contingent Shares. Each year, after approval by the Committee, the Company grants performance contingent share (“PCS”) awards to the named executive officers and certain other executives. These PCS awards represent 75% of the total target long term incentive award of each executive. The remaining 25% of target long term incentive compensation is delivered as share-settledrecently granted stock appreciation rights ("SARs"). Each PCS grant coversAs of March 2021, all SARs granted from 2017 to 2019 were under water.
As a three-year performance periodresult of this unprecedented situation and payouts are tied toas disclosed in the achievement of predetermined corporate financial performance goals over the period. The PCS performance measures are cumulative over the three-year period.
Because of the impact of the COVID-19 pandemic on the Company’s 2020 financial results, Company financial performanceproxy statements for the 2018-2020 PCS performance period was belowprevious two annual meeting of shareholders, in March 2021 the threshold required for payment with respect to each of the three metrics, resulting in a zero payout overall. The results are summarized below:
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| 2018-2020 Performance Contingent Share Program |
| Metric | Actual Results | % of Target Payout |
Three-Year Adjusted Operating Return on Equity1 (33.5%) | 8.9% | 0% |
Three-Year Adjusted Operating Income1 (33.5%) | $2,138.2 | 0% |
Three-Year Book Value Per Share, excluding AOCI1 (33.0%) | $130.60 | 0% |
Payout2 | 0% |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. 2See "COVID-19 Response" on page 28 for additional information. |
Given that the PCS performance measures are cumulative over the three-year period, the Company estimates with a high degree of confidence that the 2020 financial results also eliminate the possibility of any future payments under the PCS awards granted for both the 2019-2021 performance period and the 2020-2022 performance period.
Realizable CEO Pay Absent One Time Committee Actions
The following table displays the targeted total direct compensation (base salary + annual bonus plan + performance contingent shares + stock appreciation rights) for Ms. Manning as compared to the total actual or “realized” compensation received or receivable in respect of the previous four years, absent one-time actions by the Committee. The Committee believes that this table provides a more accurate description of Ms. Manning’s compensation, as compared to the Summary Compensation Table and Outstanding Equity Awards at 2020 Year End tables provided under “Compensation Tables and Other Matters – Executive Compensation Tables” because such tables do not take into account actual or expected payouts of equity awards.
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| REALIZABLE CEO PAY |
| Target Pay1 | Realized Actual Pay2 |
| Year | Base Salary | Target Bonus $ | Target LTI | Target Total Compensation | Base Salary3 | Bonus Payout | Realizable/Realized LTI | Actual Total Compensation |
| 2020 | $1,030,000 | $1,854,000 | $5,750,000 | $8,634,000 | $1,030,000 | $419,746 | $0 | $1,449,746 |
| 2019 | $1,030,000 | $1,545,000 | $4,500,000 | $7,075,000 | $1,025,385 | $2,144,954 | $0 | $3,170,339 |
| 2018 | $1,000,000 | $1,500,000 | $3,750,000 | $6,250,000 | $992,308 | $1,308,840 | $0 | $2,301,148 |
| 2017 | $950,000 | $1,235,000 | $3,245,000 | $5,430,000 | $950,000 | $2,400,574 | $2,107,976 | $5,458,550 |
| Average 2017 - 2020 | $1,002,500 | $1,533,500 | $4,311,250 | $6,847,250 | $999,423 | $1,568,529 | $526,994 | $3,094,946 |
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1 Average of base salary earned, target ABP opportunity, and long-term incentive value granted from 2017 through 2020.
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2 Average of base salary earned, actual ABP payout received (before any adjustment, for the 2020 payout) , the value of vested/exercised long-term incentive awards, and the estimated current value of unvested/unexercised long-term incentive awards granted from 2017 through 2020, calculated as: • Vested/exercised stock options and PCS units are valued at time of vesting or exercise, using a performance factor of 131.5% for the completed 2017-2019 cycle, and a factor of 0% for the 2018-2020 cycle. PCS payouts include reinvestment of additional units received as dividend-equivalents. • Unvested/unexercised stock options are valued using $115.90, the closing price of RGA's shares on December 31, 2020. • Open-cycle PCS units are included assuming 0% forecast payouts for the for 2019-2021 and 2020-2022 cycles. |
3 Realized base salary differs from Target base salary due to salary increases, if any, effective in March of each year. |
The substantial magnitude of the difference between target pay and realized pay for Ms. Manning results from the combination of the COVID-19 pandemic’s impact on the Company’s 2020 financial results and the following aspects of the Company’s incentive plans: all plan metrics are absolute, rather than relative to the Company’s peers; the relatively narrow ranges between payout thresholds and targets; the high weighting (75% of target) of the PCS grants as a component of equity incentive awards; and targets for each PCS grant are cumulative over the 3 year performance period.
Actions Taken in Response to COVID-19
Base Salary. The Committee has determined that there will be no 2021 merit increases to base salary for senior executives, including the Company’s named executive officers.
Annual Bonus Plan. Based on its evaluation of 2020 financial results, the Committee determined that the impact of the pandemic caused a significant decrease in payouts under the ABP and that this result did not properly represent the performance of employees in mitigating the impact on the Company of the pandemic and positioning the Company for post-pandemic success. In response, the Committee considered several potential actions in light of our core Company principles and determined that it was in the best interest of the Company and its shareholders that a one-time exercise of discretion be applied with respect to the 2020 ABP that would positively impact the outcome for the Company’s employees. The Committee believes the distinctive nature of the COVID-19 pandemic warrants this unique action. The one-time modification to the ABP:
•Modified the 2020 ABP awards to increase the amount of cash available in the ABP pool by $11.8 million, for a total pool of $74.0 million. The Company estimates that, absent the impact of the COVID-19 pandemic, the 2020 ABP bonus pool would have been approximately $88 million.
•Ensured that executives received on average smaller awards compared to their targets while non-executive employees received on average payouts closer to the target amount for such awards. The Committee also adopted guidelines for the allocation of the $11.8 million increase in the ABP pool, which focused on employees whose ABP payouts would otherwise be particularly impacted by the overall Company result (22.6% of target) and/or business unit results significantly affected by the COVID-19 pandemic, while capping adjustments for executives.
The Committee believes that its exercise of the one-time discretion over the ABP better aligns pay and performance for Company employees as compared to the ABP formulaic outcome.
Equity Compensation. With regard to equity incentives, in which 449 employees participated as of December 31, 2020, the Committee decided that it would make no change to any prior equity awards granted as such modifications would not be consistent with our compensation philosophy. The Committee determined that a one-time equity award to named executive officers and other executives who participate in the Flexible Stock Plan was necessary for the engagement
of our executive team to advance our strategic objectives and to recognize the performance of our leaders in navigating the Company through the COVID-19 pandemic. Absent this additional one-time equity award,
Realized and Realizable CEO Pay
Given the impacts to total realized compensation on the Company’s executive officers are material and long-lasting, presenting significant challenges in the retention and engagementdesign of key talent, as demonstrated above under “Realizable CEO Pay Absent One Time Committee Actions.” The Committee believes that this one-time grant better aligns pay and performance for participants in the Flexible Stock Plan.
For the named executive officers, the one-time equity award consists of two components of equal size: a performance share unit (“PSU”) grant and a restricted share unit (“RSU”) grant. Awards for otherour long-term incentives, Company executives are described below in "Compensation Discussion & Analysis."
The PSU awards will fully vest (i.e., “cliff vest”) for individuals employed with the Company on December 31, 2022 and pay out in shares of the Company’s common stock. Vesting of the PSU awards is subject to a performance condition which requires the Company to achieve financial results that are within a pre-determined range for at least two of the following measures during each of 2021 or 2022: adjusted operating return on equity; adjusted operating income; or book value per share, excluding AOCI. The plan metrics require robust financial performance when considering the ongoing impacts of the COVID-19 pandemic, with 2022 reflecting financial performance that aligns with a pre-pandemic business environment. If the performance condition isdo not met, there will be no payout under the award. Achieving this performance condition will causerealize the full value of their target total direct compensation opportunity unless the award to vest. No additional amounts will be paid if Company performancemeets or exceeds critical financial and strategic objectives, and the financial goals.
Company's stock price appreciates. The Committee also made a one-time grantbelieves the realizable compensation (as defined below) for our executives, including that for our CEO, Ms. Manning, more accurately describes the compensation they actually realize, as compared to the named executive officersamounts in the Summary Compensation Table and Outstanding Equity Awards at 2022 Year End Table, because such tables do not take into account the actual or expected payouts of RSUs. equity awards.
The RSUfollowing table displays Ms. Manning's target total direct compensation and realizable compensation since she became CEO at the beginning of 2017. "Target total direct compensation" is comprised of:
•base salary;
•annual bonus plan (ABP) grants;
•restricted share unit grants;
•performance contingent awards will fully vest (i.e., “cliff vest”) for individuals employed with grants; and
•stock appreciation rights grants.
"Realizable compensation" is comprised of:
•actual annual base salary received;
•ABP payouts received; and
•the Company onestimated value of vested and unvested equity awards as of December 31, 2022 and pay out in shares2022.
Over the six-year period detailed below, Ms. Manning's average realized/realizable compensation is 84% of her target compensation, compared to a total shareholder return of 26% over the Company’s common stock.same time period for the Company's shareholders.
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | REALIZABLE CEO PAY | | Target Pay1 | Realized/Realizable Actual Pay2 | | Year | Base Salary | Target Bonus $ | Target LTI | One-Time LTI | Target Total Compensa-tion | Base Salary | Bonus Payout | Realizable/Realized Regular LTI | One-Time LTI | Actual Total Compensa-tion | | 2022 | $1,030,000 | $2,060,000 | $6,250,000 | $0 | $9,340,000 | $1,030,000 | $3,374,547 | $8,070,854 | $0 | $12,475,401 | | 2021 | $1,030,000 | $1,854,000 | $5,750,000 | $7,000,000 | $15,634,000 | $1,030,000 | $1,504,315 | $5,288,079 | $7,709,803 | $15,532,197 | | 2020 | $1,030,000 | $1,854,000 | $5,750,000 | $0 | $8,634,000 | $1,030,000 | $1,390,500 | $2,312,205 | $0 | $4,732,705 | | 2019 | $1,030,000 | $1,545,000 | $4,500,000 | $0 | $7,075,000 | $1,025,385 | $2,144,954 | $0 | $0 | $3,170,339 | | 2018 | $1,000,000 | $1,500,000 | $3,750,000 | $0 | $6,250,000 | $992,308 | $1,308,840 | $0 | $0 | $2,301,148 | | 2017 | $950,000 | $1,235,000 | $3,245,000 | $0 | $5,430,000 | $950,000 | $2,400,574 | $2,451,100 | $0 | $5,801,674 | | Avg. 2017 - 2022 | $1,011,667 | $1,674,667 | $4,874,167 | N/A | $8,727,167 | $1,009,616 | $2,020,622 | $3,020,373 | N/A | $7,335,577 | 1Average of base salary earned, target ABP opportunity, and long-term incentive value granted from 2017 through 2022. | 2Average of base salary earned, actual ABP payout received, the value of vested/exercised long-term incentive awards, and the estimated current value of unvested/unexercised long-term incentive awards granted from 2017 through 2022, calculated as: | | ● | Vested/exercised stock appreciation rights (SARs) and performance contingent shares (PCS) units are valued at time of vesting or exercise, using a performance factor of 131.5% for the completed 2017-2019 cycle, and a factor of 0% for the 2018-2020, 2019-2021 and 2020-2022 cycles and a performance factor of 100% for the one-time performance share unit (PSU) award. PCS and PSU payouts include reinvestment of additional units received as dividend-equivalents. | | ● | Unvested/unexercised SARs are valued based on the spread value between the exercise price and $142.09, the closing price of RGA's shares as of December 31, 2022. | | ● | Open-cycle performance contingent awards are included assuming target (100%) payouts for the 2021-2023 and 2022-2024 PCS cycles. |
The table above shows that, including the one-time LTI equity award and the zero payouts for the 2018-2020, 2019-2021 and 2020-2022 PCS awards, Ms. Manning's average actual realizable compensation over her six-year tenure as CEO was 84% of target. The Committee believes this is a reasonable outcome that appropriately balances Ms. Manning's exceptional leadership with the impact of the COVID-19 pandemic on shareholder returns. In what is a long-term business, the Committee believes that the strong financial results in 2022 demonstrate the underlying strength of the Company's franchise, which has been preserved and strengthened by Ms. Manning's leadership.
The Committee believes that the Company's strong performance in 2022, despite a $447 million impact on pre-tax adjusted operating income due to COVID-19, supports the Committee's decision to make the one-time grant of equity to Ms. Manning and other executives, in addition to the following considerations:
•the Company's strong economic performance prior to the COVID-19 pandemic, the results of which were negated in performance-based long-term incentive awards that would have paid-out during the pandemic; •Ms. Manning's leadership during the COVID-19 pandemic, which helped the Company generate meaningful new business during the pandemic and strongly positions the Company for future success; •the Committee's recognition that the design of certain elements of the Company's incentive compensation program (e.g., using absolute financial metrics, not comparing results to Company peers, and relatively narrow ranges between minimum, target and maximum payout thresholds for the financial metrics that determine payouts) did not fairly compensate employees during stress scenarios such as a pandemic; and •the desire to retain Ms. Manning and other senior executives receiving the one-time equity award.
Five Elements of Executive Compensation (page 43) |
| | | | | | | | | | | | | | | | | |
| Element | Form | Key FeaturesFive Elements of Executive Compensation (page 36) |
1. | | | | | |
| Element | Form | Key Features |
| 1. | Base Salary | Cash | ● | Fixed compensation intended to attract and retain top talent. |
| ● | Generally, we target base salary around the median of our peer companies, but this varies with individual skills, experience, responsibilities, performance and performance.location. |
2020 |
| ● | Represents approximately 27%23.8%* of the average named executive officer target total compensation for 2020.2022. |
20212. | Annual Bonus
Plan | Cash | ● | Serves as an annual performance incentive to achieve established business goals. |
| ● | No increase in base salary for any of our senior executives in 2021, including our named executive officers. |
2. | Annual Bonus
Plan | Cash | ● | Intended to motivate annual performance with respect to key financial and other metrics. |
● | Tied to one or more of the following factors: overall Company performance, performance of the participant's division or business unit and individual performance. |
| ● | Performance goals established in the first quarter of each year with financial goals of each business unit aligning to corporate goals. |
| ● | Payouts range from 0% of target payout to 200% of target payout, depending on performance. |
2020 |
| ● | In 2020, theThe Annual Bonus Plan company-wide financial objectives were measured using the following components: (i) adjusted operating income per share; (ii) book value per share excluding accumulated other comprehensive income;strategic scorecard; (iii) new business embedded value;value and (iv) annual adjusted consolidated revenue. |
● | The Compensation Committee used discretion to authorize a one-time modification to the 2020 plan due to the impact of the COVID-19 pandemic on the Company's financial performance. Payouts were capped using a tiered approach. |
● | Represents approximately 25%* of named executive officer target total compensation for 2020. |
2021 |
● | The Compensation Committee replaced the book value excluding other comprehensive income performance metric (with a weighting of 25%) in the 2021 ABP with a strategic scorecard. The scorecard will beis an assessment of performance in select key focus areas, including: leadership; strategy; expense and headcount management;including strategy execution; cybersecurity and data privacy; diversity, equityloss prevention; DEI and inclusion; and environmental, social and governance.ESG. |
3.● | Performance
Contingent
AwardsRepresents 28.5%* of the average named executive officer target total compensation for 2022. |
| 3. | EquityPerformance
Contingent
Awards | ●Equity | Intended● | Serves as a performance incentive to motivate performance with respect to keyachieve established long-term financial measures and align our executives'executives’ interests with those of our shareholders. |
| ● | Performance goals established at the beginning of each three yearthree-year cycle and fully vest after three years. |
| ● | Payouts range from 0% of target payout to 200% of target payout, depending on Company performance. |
2020 |
| ● | For awards granted in 2020, performance contingent share ("PCS") payouts were based on the following measures: (i) three-year adjusted operating return on equity; (ii) three-year adjusted operating income; and (iii) three-year book value per share, excluding accumulated other comprehensive income. |
● | Due to the impact of the COVID-19 pandemic on the Company’sCompany's 2020 and 2021 financial results, Company financial performance for the 2018-2020, PCS2019-2021 and 2020-2022 performance periodcontingent share ("PCS") performance periods was below the threshold required for payment with respect to each of the three metrics, resulting in a zero payout overall.overall for each of these three performance cycles. |
| ● | PCS grants represent 50% of long-term incentive compensation grants for 2021 and 2022. For the 2023 PCS grants, PCS represents 100% of the long term compensation grant for the CEO, 75% for the President and 60% for all other named executive officers. |
| ● | For 2022 and 2023 grants, the Company is measuring financial performance over a three-year period, consistent with historical practice. Performance is based on (i) three-year average adjusted return on equity and (ii) three-year book value per share, excluding accumulated other comprehensive income, growth rate. Results may be modified up or down by a maximum of 10% based on three-year relative total shareholder return. Targets established for the 2022 grant have been adjusted for impacts of Long-Duration Targeted Improvements ("LDTI") under new GAAP accounting rules effective January 1, 2023. |
| ● | Performance contingent awards represented approximately 36%23.9%* of the average named executive officer target total compensation for 2020.2022. |
2021 |
●4. | As a result of: (i) the COVID-19 pandemic’s impact on the Company’s 2020 financial performance, (ii) the financial metrics being established prior to the pandemic, (iii) the cumulative nature of the financial metrics for each PCS plan cycle, and (iv) the degree of stretch performance that is built into the PCS performance metrics, the Company estimates with a high degree of confidence that payouts for the PCS cycles ending in 2021 and 2022 will also be zero. |
● | The Committee changed the time period for measurement of PCS performance metrics for the 2021 grants. Rather than measuring Company financial performance on a cumulative basis over a three-year period as done with previous grants, specific financial performance metrics were established for each of 2021 and 2022, with 2023 serving as a time vesting period. |
● | Beginning in 2021, PCS grants will represent 50% of long-term incentive compensation granted to named executive officers. |
● | The Compensation Committee authorized a one-time equity award grant of performance share units ("PSU") for the named executive officers and other plan participants. |
| | | | | | | | | | | | | | | | | |
4. | Stock Based
Awards | Equity | ● | Intended to motivate performance, promote appropriate risk-taking, align our named executive officers' long-term interests with shareholders' interests and promote retention. |
| ● | Stock appreciation rights vest 25% per year, on December 31 of the fourth year of grant (25% per year).each year. |
2020● | Restricted Share Units cliff-vest after a three year period. |
| ● | Stock appreciation rightsRestricted share units represented approximately 12%11.9%* of the average named executive officer target total compensation for 2020.2022. |
2021 |
| ● | Beginning in 2021, 25% of long-term incentive compensation for named executive officers and other plan participants will be in the form of RSUs, with such awards cliff-vesting after a three year period. Stock appreciation rights grants have represented 25%11.9%* of long-term incentivethe average named executive officer target total compensation grants in prior years and that amount will remain unchanged.for 2022. |
●5. | Due to the impact of COVID-19 on the Company's financial performance, the Compensation Committee granted the named executive officers and other plan participants a one-time grant of RSUs. The RSU awards will fully vest (i.e., “cliff vest”) for individuals employed with the Company on December 31, 2022 and pay out in shares of the Company’s common stock. |
5. | Retirement and Pension Benefits | Deferred Cash | ● | Intended to provide a competitive level of post-employment income as part of a total rewards package that supports our ability to attract and retain key members of our management. |
| ● | In the U.S. and Canadian retirement and pension benefits differ, but generally, there are two types of plans: qualified plans and non-qualified plans. |
● | ● | Qualified plans are provided to eligible employees up to specified maximum amounts as determined by federal tax authorities. |
● | ● | Non-qualified plans are provided to eligible employees who earn compensation above the maximum amounts established by federal tax authorities. |
| ● | Hong Kong retirement and pension benefits are split between: (i) a mandatory provident fund where employees and employer contribute up to a maximum amount;amount and (ii) a supplementary fund for compensation in excess of the maximum amount applicable to the mandatory provident fund benefit. |
| *Calculation excludes pension and retirement benefits. Average percentages are rounded. |
The performance contingent awards and the stock-based awards described above collectively form the Company's long-term incentive ("LTI") plan. For 2021 and 2022, the LTI grants for named executive officers comprised of 50% PCS, 25% RSUs and 25% SARs. For 2023, the LTI was allocated as follows:
•100% PCS for Ms. Manning;
•75% PCS and 25% SARs for Mr. Cheng; and
•60% PCS, 20% RSUs and 20% SARs for all other named executive officers.
The structure of the 2023 LTI award for Ms. Manning took into consideration that 2023 will be her last year as Chief Executive Officer.
PROXY STATEMENT
INFORMATION ABOUT THE ANNUAL MEETING
The Board of Directors of Reinsurance Group of America, Incorporated (the "Company") is making this proxy solicitation in connection with the Company's 20212023 Annual Meeting of Shareholders to be held at 2:00 p.m. CDT on May 19, 2021,24, 2023, and all adjournments and postponements thereof. The Company is first making available the Company's Annual Report to Shareholders for the year ended December 31, 20202022 and this Proxy Statement on April 8, 2021.13, 2023.
The solicitation will primarily be by Internet and mail and the expense thereof will be paid by the Company. In addition, proxies may be solicited by directors, officers or employees of the Company in person, or by telephone, facsimile transmission or other electronic means of communication. To aid in the solicitation of proxies, we have retained MacKenzie Partners, which will receive a fixed fee of approximately $15,000, in addition to the reimbursement of out-of-pocket expenses, for its performance of certain administrative services related to the solicitation. MacKenzie Partners will not make any recommendation to the shareholders regarding the approval or disapproval of any voting matters.
The close of business on March 29, 202131, 2023 has been fixed as the record date for the determination of the Company shareholders entitled to vote at the Annual Meeting. As of the record date, approximately 67,985,24366,540,466 shares of common stock were outstanding and entitled to be voted at the Annual Meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING
The Company's Notice of Annual Meeting, 20212023 Proxy Statement and 20202022 Annual Report to Shareholders are available on the Company's website at www.rgare.com. Information on our website does not constitute part of this Proxy Statement.
BOARD OF DIRECTORS
ITEM 1 – ELECTION OF DIRECTORS
The first item to be acted upon at the Annual Meeting is the election of all twelve of our directorsthe following director nominees to the Company's Board of Directors, each with a term ending at the Company's 20222024 annual meeting of shareholders:
| | | | | | | | |
| Name | Director Since | Independent |
| Pina Albo | 2019 | Yes |
Christine R. DetrickTony Cheng | 20142023 | YesNo |
J. Cliff Eason | 1993 | Yes |
| John J. Gauthier | 2018 | Yes |
| Patricia L. Guinn | 2016 | Yes |
| Anna Manning | 2016 | No |
| Hazel M. McNeilage | 2018 | Yes |
| George Nichols III | 2022 | Yes |
| Stephen O'Hearn (Chair) | 2020 | Yes |
Frederick J. SievertShundrawn Thomas | 20102021 | Yes |
Shundrawn ThomasKhanh T. Tran | 20212022 | Yes |
Stanley B. Tulin | 2012 | Yes |
| Steven C. Van Wyk | 2019 | Yes |
The Board nominates each of these individuals for election at the Annual Meeting. Each nominee is currently a member of the Board. All director nominees stand for election for a one-year term. Should any one or more of the nominees be unable or unwilling to serve (which is not expected), the proxies will be voted for such other person or persons as the Board may recommend unless such proxies are marked otherwise.
Appointment of New
Changes in Directors
Effective OctoberJuly 1, 2020, Stephen2022, Khanh T. O'HearnTran was appointed to the Board of Directors. Mr. O'Hearn, 60,Tran was the Global LeaderPresident and Chief Executive Officer of the Insurance Practice of PricewaterhouseCoopers ("PwC") from 2015 to 2020 and part of PwC's extendedAviation Capital Group LLC, a top 10 global leadership team. He spent 38 years with PwC and has 26 years experience as an audit partner, serving a variety of clientscommercial aviation leasing company until his retirement in the financial services industry.2020.
Effective February 1, 2021, Shundrawn ThomasJanuary 4, 2023, Tony Cheng was appointed to the Board of Directors. Mr. Thomas, 47,Cheng is the Company's President of Northern Trust Asset Management (NTAM), a leading global investment manager. He also servesand is expected to become the Company's Chief Executive Officer upon Ms. Manning's retirement on December 31, 2023.
On March 9, 2023, Ng Keng Hooi informed the Company that he will not stand for re-election as a member of the executiveBoard at the annual meeting of shareholders. Mr. Ng's decision not to stand for re-election is not the result of any dispute or disagreement with the Company, the Company's management group of publicly traded Northern Trust Corporation.
Upcoming Appointment
On September 9, 2020,or the Board announced that Keng Hooi Ng would be joiningon any matter relating to the Board, effective June 1, 2021, which follows the completion of a previous post-retirement commitment. Mr. Ng, 65, was Group Chief Executive and President of AIA Group Limited (“AIA Group”) from 2017 to May 2020, and most recently served as Senior Advisor. From 2010 to 2017, Mr. Ng served as Regional ChiefCompany's operations, policies or practices.
Executive at AIA Group. He joined AIA Group from Great Eastern Holdings, Singapore where he was Group Chief Executive. Prior to that position,Board Chair
As previously reported, Mr. Ng was with Prudential plc for almost 20 years.
Limited Waiver of Mandatory Retirement
On February 21, 2020, the Board of Directors approved a limited waiver of the mandatory retirement age set forth in the Board’s Corporate Governance Guidelines (the "Guidelines") for J. Cliff Eason retired as Chair of the Board. The limited waiver allows Mr. Eason to continue to serveBoard on the Board, if elected by the Company’s shareholders, until December 31, 2022. The Board approvedmember Stephen T. O'Hearn assumed the limited waiver to allow additional time forduties of Chair of the Board to select a successor Board Chair and to implement a transition of the Chair’s responsibilities to the successor. Mr. Eason and Ms. Manning, President and Chief Executive Officer of the Company, were excused from the Board’s deliberations on the limited waiver and abstained from the vote.
The Guidelines provide that it is the Board’s policy that a director resigns effective December 31 of the year in which the director attains the age of 73. Mr. Eason turned 73 in 2020 and the limited waiver will allow Mr. Eason to continue to serve on the Board for up to an additional two years if elected by the Company’s shareholders.January 1, 2023.
Director Nominees
The Board currently has twelve directors.directors, eleven of which are standing for election at the Annual Meeting. All director nominees stand for election for a one-year term. Certain information with respect to the director nominees proposed by the Company is set forth below.
Vote Required
If a quorum is present, the vote required to elect each director is a majority of the common stock represented in person or by proxy at the annualAnnual Meeting. The Company recommends a vote FOR all nominees for election to the Board.
| | | | | |
| Pina Albo | |
| Business Experience: Ms. Albo is the Chief Executive Officer of Hamilton Insurance Group (“Hamilton”("Hamilton"), a Bermuda-based holding company for Hamilton Re, a global specialty insurer and property and casualty reinsurer. Prior to joining Hamilton, she spent 25 years at Munich Re, starting as a claims expert and holding increasingly senior positions that culminated in roles as President, Reinsurance Division, Munich Re America and later Member of the Board of Executive Management. She began her career as a lawyer after having earned law degrees in both Canada and France. Ms. Albo currently sits onserves as Chair of the board of directors for the Association of Bermuda Insurers and Reinsurers and serves as Deputy Chair.Reinsurers. |
| Chief Executive Officer of Hamilton Insurance Group | Age: 57 60 Director since: 2019 Independent |
Christine R. Detrick | | | | | |
| Tony Cheng | |
| Business Experience:Ms. Detrick Mr. Cheng is President of Reinsurance Group of America, Incorporated. Prior to being named President in January 2023, Mr. Cheng was Executive Vice President, Head of EMEA, Asia, and Australia for RGA Reinsurance Company, providing executive oversight for the Company's EMEA, Asia and Australia operations. Mr. Cheng joined RGA in 1997 as Chief Actuary of Malaysian Life Reinsurance Group Berhad. In 2004, he was named Chief Executive Officer of the Hong Kong office, responsible for all business activity in Hong Kong and Southeast Asia, and in 2011, he was named Senior Vice President, Asia. Mr. Cheng received a Bachelor of Economics (B.Ec.) degree from Macquarie University in Sydney, Australia and an M.B.A. from Washington University in St. Louis's John M. Olin School of Business. He is a Fellow of the Institute of Actuaries of Australia (FIAA). An active participant and past President of the Actuarial Society of Hong Kong, he has also served as a Director/Partner, Leadercouncil member for the Society and as a past Chair of Americas Financial Services Practice,its Experience and Senior Advisor of Bain & Company, Inc., a global management consulting firm, from 2002 to 2012. Before joining Bain, Ms. Detrick served for 10 years at A.T. Kearney, Inc., a global management consulting firm, including as memberLife Committees. |
President of the Board of Directors, Management Committee member, Global Leader of the Financial Services Practice and Leader, Eastern U.S. Profit Center. Prior to those roles, she was a founding partner of First Financial Partners, a venture capital firm specializing in savings and loan institutions, from 1988 to 1992, and served as Chief Executive Officer for St. Louis Bank for Savings. Ms. Detrick is currently a member of the board of Hartford Mutual Funds, where she serves on the Nominating and Governance Committee and as Chair of the Investment Committee. Ms. Detrick is also a member of the board of Charles River Associates, where she serves on the Nominating and Governance and Compensation Committees. Ms. Detrick formerly served on the boards of Forethought Financial Group, Inc., a private life insurance carrier, and Forest City Realty Trust, a publicly traded real estate company. |
Former Director and Head of Americas Financial Services Practice of Bain & Company Inc. | Age: 6249 Director since: 2014 2023 Independent
|
J. Cliff Eason (Chair) | |
| Business Experience: Mr. Eason is Chair of the Company's Board of Directors and was President and CEO of Southwestern Bell Telephone, SBC Communications, Inc. ("SBC") from September 2000 through January 2001. Mr. Eason previously served as President, Network Services from 1999 through 2000; President, SBC International, from 1998 until 1999; President and CEO of Southwestern Bell Telephone Company ("SWBTC") from 1996 until 1998; President and CEO of Southwestern Bell Communications, Inc. from 1995 through 1996; President of Network Services of SWBTC from 1993 through 1995; and President of Southwestern Bell Telephone Company of the Midwest from 1992 to 1993. He held various other positions with SBC and its subsidiaries prior to 1992. Mr. Eason was a director of Williams Communications Group, Inc. until his retirement in January 2001. Mr. Eason served as a director of Mercantile Bankcorp from 1993 to 1995.
|
Retired President and CEO of Southwestern Bell Telephone, SBC Communications, Inc. | Age: 73
Director since: 1993
IndependentNot independent
|
| | | | | |
| John J. Gauthier |
|
| Business Experience:Mr. Gauthier was the Chief Investment Officer of Allied World Assurance Company Holdings, AG, a global provider of insurance and reinsurance solutions, from 2008 to 2018. Mr. Gauthier also served as President of Allied World Financial Services Company, Inc. from 2012 until his retirement in 2018. Before joining Allied, Mr. Gauthier was a Managing Director with Goldman Sachs Asset Management, a division of Goldman Sachs & Co. Prior to Goldman Sachs, he was with Conning Asset Management and General Reinsurance/New England Asset Management and The Travelers. Mr. Gauthier holds a B.S. in computer information systems from Quinnipiac University and an M.B.A. in finance from The Wharton School, University of Pennsylvania. He is a Chartered Financial Analyst (CFA). He is Principal at JJG Advisory, LLC, a consulting business and at Talcott Capital Advisors, LLC, an investor advisory business. He serves on the board of directors of Crescent Acquisition CorpThe Hartford Funds Group and Middlesex Health System, Inc. |
| Retired CIO of Allied World Assurance Company Holdings, AG and Retired President of Allied World Financial Services Company, Inc. | Age: 59 61 Director since: 2018 Independent |
| Patricia L. Guinn |
|
| Business Experience: Ms. Guinn was the Managing Director of Risk and Financial Services and a member of the executive leadership team at Towers Watson from 2010 until her retirement in 2015. Previously, she served as a Member of the Board and the Managing Director of Risk and Financial Services at Towers Watson's predecessor company, Towers Perrin. Overall, she has over 40 years of experience in the insurance industry. Ms. Guinn is a member of the board of directors of AssetMark Financial Holdings, Inc., its and Constellation Insurance Holdings; she chairs the audit committee (chair) and is a member of the compensation committee.committee of each. She is an Association Member of BUPA.BUPA and advisory board member of EOS Ventura Partners. She previously served on the board of Allied World Assurance Company Holdings AG. Additionally, Ms. Guinn is a fellow of the Society of Actuaries, a member of the American Academy of Actuaries and also a Chartered Enterprise Risk Analyst. |
| Retired Managing Director of Risk and Financial Services at Towers Watson | Age: 63 68 Director since: 2016 Independent |
| Anna Manning | |
| Business Experience: Experience:Prior to becoming President of the Company in December 2015 and Chief Executive Officer in 2017, Ms. Manning held the position of Senior Executive Vice President, Structured Solutions, which included the Company's Global Financial Solutions and Global Acquisitions businesses. Prior to assuming this role, Ms. Manning spent four years as Executive Vice President, U.S. Markets. Ms. Manning joined the Company in 2007, and shortly thereafter assumed the role of Executive Vice President and Chief Operating Officer for the International Division. Prior to joining RGA, Ms. Manning spent 19 years in actuarial consulting at Tillinghast Towers Perrin, following an actuarial career in the Canadian marketplace at Manulife Financial from 1981 until 1988. She holds a B.Sc. in Actuarial Science from the University of Toronto, is a Fellow of the Canadian Institute of Actuaries and a Fellow of the Society of Actuaries. Ms. Manning is a member of the Board of Trustees at Washington University in St. Louis, a member of the BJC HealthCare Board of Directors and a member of St. Louis's Civic Progress. |
President and Chief Executive Officer of the Company | Age: 6264 Director since: 2016 Not independent |
| | | | | |
| Hazel M. McNeilage | |
| Business Experience: Ms. McNeilage was the Regional Managing Director, EMEA, for Northern Trust Corporation’sCorporation's Asset Management division from 2015 to 2018 and a Director of Northern Trust Global Investment Ltd. Prior to joining Northern Trust, Ms. McNeilage held a variety of roles with Northill Capital Partners from 2012 to 2015, including interim CEO for one of Northill’sNorthill's affiliates. Prior to that, she spent two years as Head of Funds Management for QIC, a major sovereign wealth fund based in Australia. From 2001 to 2009 Ms. McNeilage was with Principal Global Investors, during which she served in leadership positions around the world and was a member of several boards. Prior to Principal, Ms. McNeilage spent more than a decade with Towers Perrin (now Willis Towers Watson), including a three-year term on its board of directors. Ms. McNeilage received a Bachelor of Science from the University of Lancaster, England, with majors in Mathematics, Economics, and Operations Research. She is a Fellow of the Institute and Faculty of Actuaries, a Fellow of the Institute of Actuaries of Australia, and a Board Leadership Fellow of the National Association of Corporate Directors (U.S.). Ms. McNeilage holds certificates in cybersecurity from both Carnegie Mellon University and Harvard University. Ms. McNeilage also serves on the Board of Directors of Everest Re Group, Ltd (NYSE: RE) and Alvarium Tiedemann Holdings, Inc. (NASDAQ: ALTI). |
| Retired Regional Managing Director, EMEA of Northern Trust Asset Management | Age: 63 66 Director since: 2018 Independent |
| | | | | |
| George Nichols III | |
| Business Experience:Mr. Nichols currently serves as the President and CEO for the American College of Financial Services, the nation's largest nonprofit educational institution devoted to financial services. Previously, he spent 17 years at New York Life, holding principal roles in sales, strategic initiatives and public policy. Mr. Nichols served as executive vice president of Governmental Affairs and was named to the Executive Management Committee. Prior to joining New York Life, Mr. Nichols was the first Black insurance commissioner for the Commonwealth of Kentucky, leading the regulation of the Commonwealth's $10 billion insurance industry. Mr. Nichols sits on the Boards of Mainline Health and Republic Bank. He currently serves as Chair of the Board of Trustees for City Year and is a member of the Board of Regents for Western Kentucky University. |
| President and Chief Executive Officer, The American College of Financial Services | Age: 62 Director since: 2022 Independent |
| | | | | |
| Stephen O'Hearn (Chair) | |
| Business Experience:Mr. O’Hearn was employed by PricewaterhouseCoopers (PwC) for 38 years. Most recently, he served as the Global Insurance Leader from 2015 to 2020, during which time he also served on PwC's financial services leadership team and the firm's extended global leadership team. A trained accountant, Mr. O’Hearn has 26 years of experience as an audit partner, serving a variety of clients in the financial services industry, including many of the world's leading insurers. In 2001, Mr. O’Hearn moved from Milwaukee to Tokyo with the PwC Insurance Practice, and in 2005 became leader of the New York Insurance Practice. In 2012, he moved to Zurich and assumed the role of EMEA Insurance Leader and was named Global Insurance Leader in 2015. In 2018, he moved to Munich for additional client responsibilities until his retirement from PwC in 2020. Mr. O’Hearn attended The University of Notre Dame, graduating summa cum laude in 1982. He is a Certified Public Accountant in the U.S. He served on the Board of the International Insurance Society 2009 to 2018 and was chairman of the finance committee for the first five years of his tenure. Mr. O'HearnO’Hearn is a Governor and Chairman of the Audit Committee of Junior Achievement Worldwide. |
| Retired Global Leader, Insurance Practice at PricewaterhouseCoopers | Age: 60 62 Director since: 2020 Independent
|
| | | | | |
Frederick J. Sievert |
|
| Business Experience: Mr. Sievert was President of New York Life Insurance Company from 2002 through 2007. Mr. Sievert shared responsibility for overall company management in the Office of the Chairman from 2004 until his retirement in 2007. He joined New York Life in 1992 as Senior Vice President and Chief Financial Officer. In 1995, he was promoted to Executive Vice President and was elected to the Board of Directors in 1996. In addition, he was President and a member of the board of New York Life Insurance and Annuity Corporation, served as Chairman of the Board of NYLIFE Insurance Company of Arizona, and served on the Board of Directors for Max New York Life, the company's joint venture in India, Siam Commercial New York Life, the joint venture in Thailand and the company's South Korea operation. Prior to joining New York Life, Mr. Sievert was a senior vice president for Royal Maccabees Life Insurance Company, a subsidiary of the Royal Insurance Group of London, England. Mr. Sievert currently serves as a director of CNO Financial Group, Inc.
|
Retired President of New York Life Insurance Company | Age: 73
Director since: 2010
Independent |
| | | | | |
| Shundrawn Thomas | |
| Business Experience:Experience: Mr. Thomas 47, is a co-founder and managing partner of The Copia Group, LLC, a private equity firm. Until, June 1, 2022, he was President of Northern Trust Asset Management (NTAM), a leading global investment manager. He ismanager, and was a member of the executive management group of publicly traded Northern Trust Corporation, and collaboratescollaborating with the CEO, board, and executive team to develop and refine corporate strategy business strategy, and governance. He also leads due diligence for potential acquisition targets. Mr. Thomas holds a bachelor’sbachelor's degree in accounting from Florida A&M University, where he graduated magna cum laude and an MBA from the University of Chicago Booth School of Business, with concentrations in accounting and finance. He also holds series 7 and 63 securities licenses. |
President of Northern Trust Asset ManagementCo-Founder and Managing Partner, The Copia Group, LLC | Age: 47 49 Director since:2021 Independent |
Stanley B. TulinKhanh T. Tran | |
| Business Experience:Mr. Tulin joined AXA Equitable in 1996 as Senior Executive ViceTran was the President and CFO. He served on the AXAChief Executive Officer of Aviation Capital Group Executive Committee from 2000 through 2006. FollowingLLC, a global commercial aviation leasing company until his retirement in 2006,2020. Previously, he spent 25 years with the life insurance and annuity company Pacific Life, during which time he served in a number of senior executive roles, including President, Chief Investment Officer, Chief Financial Officer, and Treasurer. Mr. Tulin consulted for AXA Financial,Tran graduated from Whittier College in Whittier, California, with a Bachelor of Arts (B.A.) in economics and political science. He also has an M.B.A. with a focus on finance and marketing from UCLA Anderson School of Management. Mr. Tran has served on several corporate boards, including CIT Group, Inc. for five years. In his positions at AXA, he gained extensive experience in acquisitions, Aviation Capital Group LLC, Pacific Life Insurance Company, and divestitures, consolidated risk management and financial communications. In 1998, he was named Vice Chairman and a directorScottish Re. He is currently on the Board of AXA Equitable, while remaining CFO of AXA Financial. Prior to that position, he was Executive Vice President and CFO of AXA Financial. Prior to joining AXA Equitable, Mr. Tulin served as Co-Chairman of Coopers & Lybrand's Insurance Industry Practice group and was partAdvisors of the ActuarialGeorge L. Argyros School of Business and Strategic Planning Group at Milliman & Robertson, Inc. for 17 years. Mr. TulinEconomics, Chapman University, in Orange, California and is a fellow of the Society of Actuaries and a member of the American AcademyFinance Committee for the Semester at Sea Board of Actuaries.Trustees. Mr. Tran is a champion of leadership, diversity, equity, and inclusion: in 2019, he founded and is currently chairman emeritus of the Orange County, California chapter of Ascend Leadership, the largest Pan-Asian professional membership organization in North America, dedicated to driving workplace and societal impact by developing, elevating and increasing Pan-Asian executive leaders. |
Retired Vice ChairmanPresident and CFOChief Executive Officer of AXA Financial, Inc. and its principle insurance subsidiary, AXA Equitable Life Insurance CompanyAviation Capital Group LLC | Age: 71 66 Director since: 2012 2022 Independent |
| Steven C. Van Wyk | |
| Business Experience:Mr. Van Wyk is the Group Chief Information Officer of HSBC Bank and is based in London. Prior to joining HSBC in December 2020, Mr. Van Wyk was the Chief Information Officer and Head of Technology & Innovation at PNC Financial Services Group, Inc., where he was responsible for all aspects of technology and innovation across the bank. Prior to his roles at PNC, Mr. Van Wyk served as CIO of ING Insurance Americas from 2006 to 2007 before becoming CIO/COO of ING Bank and ING Group Amsterdam from 2008 to 2013. From 1996 to 2006, Mr. Van Wyk served in various roles, including Vice President - Strategic Information Technology, Managing Director, CIO and COO of the Individual Investor Group of Morgan Stanley. Mr. Van Wyk holds a B.A. in Business Management and Accounting from Central University of Iowa and is a Certified Public Accountant (CPA), Certified Internal Auditor (CIA) and a Series 27 Financial/Operations Principal. |
| Group Chief Information Officer of HSBC Bank PLC | Age: 6264 Director since:2019 Independent |
DIRECTOR QUALIFICATIONS AND NOMINATION
Qualifications of Directors & Nominees
TheEach of the members of the Board of Directors is made up of twelve individuals, each withstanding for election have a valuable core set of skills, talents and attributes that make them appropriate for our Company's Board as a whole. When searching for new Board candidates, the Nominating and Governance Committee considers the evolving needs of the Company's global business and searches for Board candidates who fill any current or anticipated future needs or gaps in skills, experience and overall Board composition. As determined by our Board and the Nominating and Governance Committee, all of our directors and director candidates possess the following qualifications:
| | | | | |
| |
| DIRECTOR QUALIFICATION CRITERIA |
| Director Qualification | Description |
| Financial Literacy | Directors and candidates should be "financially literate" as such qualification is interpreted by the Board in its business judgment. |
Leadership
Experience | Directors and candidates should possess significant leadership experience, such as experience in business, finance/accounting, financial services regulation, education or government, and shall possess qualities reflecting a proven record of accomplishment and ability to work with others. |
Commitment to
Our Values | Directors and candidates should be committed to promoting the Company's financial success and preserving and enhancing our business and ethical reputation, as embodied in our codes of conduct and ethics. |
Absence of
Conflicting
CommitmentsIndependence | Directors and candidates should not have any conflicts of interest or other commitments that would prevent such director from fulfilling the obligations of a director. |
Reputation and
Integrity | Directors and candidates should be of high repute and recognized integrity and not have been convicted in a criminal proceeding (excluding traffic violations and other minor offenses). Such personDirectors and candidates will not have been found in a civil proceeding to have violated any federal or state securities or commodities law and will not be subject to any court or regulatory order or decree limiting his or her business activity, including in connection with the purchase or sale of any security or commodity. |
Knowledge and
Experience | Directors and candidates should possess knowledge and experience that will complement that of other directors and promote the creation of shareholder value. |
| Diversity | Directors and candidates should reflect a diversity of viewpoints, background, work and other experiences (including military service), and other demographics, such as race, gender identity, ethnicity, sexual orientation, culture and nationality. |
| Other Factors | Directors and candidates should have such other qualifying and desirable characteristics as identified by the Nominating and Governance Committee from time to time. |
Other areas of expertise or experience are desirable given our Company's global reinsurance business and operations, such as: life insurance, actuarial science, financial services, information technology, cybersecurity, data privacy and security, international markets, operations, capital markets, investments, banking, risk management, human capital management, ESG, DEI and public company service and actuarial science.service. The process undertaken by the Nominating and Governance Committee in recommending qualified director candidates is described under "Shareholder Nominations and Proxy Access."
Director Skills Matrix
All of our directors bring significant executive leadership, management and industry expertise derived from their careers and professions. When considering whether our current directors have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of the Company's business and structure, the Nominating and Governance Committee and the Board of Directors focus on the diversity of experience of the directors, illustrated in the skills matrix below and director biographies above. These diverse experiences are apparent in Board deliberations, during which multiple perspectives are considered in developing dynamic solutions to achieve our strategic priorities to drive sustainable returns and strengthen the balance sheet.
Because the table below is a summary, it does not include all offocuses only on the key skills, experiences, qualifications, and diversity that each director offers.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Director Qualifications, Attributes and Skills | Eason (Chair)Albo | AlboCheng | DetrickGauthier | GauthierGuinn | GuinnManning | ManningMcNeilage | McNeilageNichols |
O'Hearn (Chair) | Sievert
Thomas
| ThomasTran | Tulin | Van Wyk |
Senior Leadership Experience. Significant leadership experience, including serving as a CEO, senior executive, division president or functional leader within a complex corporate entityentity. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● |
Corporate Governance & Public Company Board. Experience in public company corporate governance related issues, policies and practices, shareholder relations, financial reporting and compliance, strategic planning and risk oversight. | ● | | ● | ● | ● | ● | | ● | ● | ● | ● | ● |
Financial Literacy. Knowledge of finance or financial reporting, complex financial management, capital allocation, experience with debt/capital market transactions and mergers and acquisitionsacquisitions. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● |
Industry Knowledge. Experience in the Company’sCompany's businesses and industries including traditional individual and group life and health, disability and critical illness reinsurance and financial services, such as longevity reinsurance, asset-intensive reinsurance, financial reinsurance and stable value productsproducts. | ● | ● | | ● | ● | | ● | ● | ● | | ● | ● | | ● | |
Risk Assessment and Management. Experience identifying and prioritizing a spectrum of risks and managing and overseeing complex risk management mattersmatters. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● |
Investments. Experience in investment policy and strategy, global asset/liability management, research and strategy development, portfolio construction, and risk managementmanagement. | | | ● | ● | ● | | ● | | ● | ● | ● | |
International. Experience doing business internationally or focused on international issues and operations and exposure to markets, environments, economic conditions and cultures outside the U.S. associated with a global workforce and international business activitiesactivities. | ● | ● | ● | ● | ● | ● | ● | ● | ● | | ● | | ● | ● |
Government/Regulatory. Experience in government and regulatory affairs, and regulated industries, including as part of a business and/or through positions with government organizations or regulatory bodiesbodies. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● |
Technology and Cybersecurity. Knowledge and experience implementing technology strategies, understanding of emerging technologies and cybersecurity risks, issues and protections; long-term systems planning and strategystrategy. | | | ● | | | | | | ● | | | ● | | ● |
Human Capital Management. Talent acquisition, development, engagement and retention; wellness and benefits; diversity, equity and inclusion; director, CEO and senior executive succession planningplanning. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● |
ESG and Sustainability. Knowledge of and experience with environmental, social and governance issues, trends, disclosures and practices, corporate citizenship and behavior, sustainable business model and strategystrategy. | ● | | ● | ● | ● | | | ● | ● | ● | ● | ● | |
Shareholder Nominations and Proxy Access
As described in our Corporate Governance Guidelines, the Nominating and Governance Committee will consider shareholder nominations for directors who meet the notification, timeliness, consent and information requirements of our Articles of Incorporation and Bylaws.
The Company's Amended and Restated Bylaws (the "Bylaws") permit a shareholder, or a group of up to 20 shareholders, owning at least three percent (3%) of the Company's outstanding stock continuously for at least three (3) years to nominate and include in the Company's annual meeting proxy materials director nominees constituting up to the greater of two directors or twenty percent of the members of the Board; provided that the shareholders and nominees satisfy the requirements specified in the Bylaws.
The Committee makes no distinctions in evaluating nominees for positions on the Board based on whether or not a nominee is recommended by a shareholder, provided that the procedures with respect to nominations referred to above are followed. Potential candidates for nomination as directors must provide written information about their qualifications and participate in interviews conducted by individual Board members, including the Board chair and relevant committee chairs. Candidates are evaluated using the criteria adopted by the Board to determine their qualifications based on the information supplied by the candidates and information obtained from other sources. The Nominating and Governance Committee will recommend candidates to the Board for election as directors for approval, only if the Committee determines, in its judgment, that they have the specific minimum qualifications described above.
In order forFor a shareholder to nominate a candidate for director under our Articles of Incorporation and Bylaws, timely notice of intent to nominate and all requisite information must be given to us in advance of the meeting. Such notice must be given not less than 120 nor more than 150 days prior to the anniversary of the date we commenced mailing of our proxy materials in connection with our most recent annual meeting of shareholders.
The shareholder filing the notice of nomination must describe various matters as specified in our Articles of Incorporation and Bylaws, including such information as name, address, occupation and all direct and indirect ownership interests, derivative interests, short interests, other economic incentives and rights to vote any shares of any security of the Company and other material interests in the Company. Shareholders nominating directors must disclose: the same information about a proposed director nominee that would be required if the director nominee were submitting a proposal; any other information that would be required to be disclosed in a proxy statement in a contested election pursuant to the Securities Exchange Act of 1934; any material relationships between the shareholder proponent and the director nominees; and, at the Company's request, any other information that would enable the Board to determine a nominee's eligibility to serve as a director, including information relating to the proposed nominee's independence or lack thereof.
Shareholders who intend to solicit proxies in reliance on the SEC's universal proxy rules for director nominees submitted under the advance notice requirements of our Bylaws must comply with the Bylaws and Rule 14a-19 under the Securities Exchange Act of 1934. See "Additional Information - Shareholder Proposals and Universal Proxy Nominations" for additional information.
DIRECTOR COMPENSATION
The Human Capital and Compensation Committee (the "Committee") reviews director compensation periodically and recommends changes to the Board, when it deems appropriate, based on a variety of factors, including guidance and market information provided to the Committee by an independent compensation consultant. The Committee also reviews the responsibilities of directors
generally, the responsibilities of Board and committee chairs and market practices. The Board reviews the recommendations of the Compensation Committee and provides final approval for the form and amount of director compensation. Directors who also serve as employees of the Company do not receive payment for services as a director.
20202022 Director Compensation. Based on recommendations from Steven Hall &Meridian Compensation Partners ("SH&P"Meridian"), ourthe Committee's independent compensation consultant, atand review and discussion by the time, 2018-2020Committee in July 2021, director compensation was set on a triennial basis, which aimed to align director compensation with projected medianpay levels of selected
peer companies during the second year of the triennial period. SH&Pand program design will be reviewed every two years, effective in 2022. Meridian analyzed director compensation programs and pay levels among the 200 largest public companies basedCompany's peer group and recommended targeted compensation in line with the United States over the prior three-year period. The Committee targeted director compensation during the second yearprojected median of the triennial period (2019) at a level nearpeer group. Meridian advised that the median peer companies at that time. This approach resulted in slight overpayment as compared to the peer group in the first year after enactment (2018), which should be offset by anticipated underpayment as compared to the peer group in the third year (2020). The Company’sCompany's director compensation program was alsogenerally aligned with market practices by allocating a majority of director compensation in the form of equity. Meridian recommended, and the Committee approved, the following changes for the 2022 program: a $5,000 increase to the annual equity withretainer effective in May 2022 for directors, a $5,000 increase in the cash/annual equity mix weighted slightly more toward stock compared to director compensationretainer for the Chair of the companiesBoard in May 2023 and eliminating the peer group.
2021 Director Compensation. In lightspousal travel reimbursement program for the October board meetings typically held at one of the COVID-19 pandemic, director compensation for 2021 will remain unchanged from 2020 levels. The decision was discussed and approved byCompany's global locations.
Effective January 1, 2022 the Compensation Committeechair of the Cyber & Technology Subgroup received a retainer of $22,500, in January 2021.recognition of the time the chair devotes to this subgroup.
Information regarding the retention of SH&PMeridian can be found under "Compensation Discussion and Analysis -– Executive Compensation Process -– Compensation Consultant" in our 2019 Proxy Statement.below. Information regarding the 2021 peer companies used in October 2017 to set 2018-20202022 director compensation can be found under "Compensation Discussion and Analysis -– Executive Compensation Process -– Competitive Marketplace Assessment" in our 2018 Proxy Statement.Statement for our 2021 annual meeting of shareholders.
2020
2023 Director Compensation. As per the changes approved by the Committee in 2021, the Chair of the Board will receive a $5,000 increase in the annual equity retainer in May 2023. Otherwise, no changes were made to director compensation in 2023.
2022 Director Compensation
During 2020,2022, Ms. Manning was the only director employed by the Company, and the other directors were not employees of our Company or any subsidiary ("non-employee directors"). During 2020 and for 2021,2022, compensation to our non-employee directors consisted of the following elements:
2022 DIRECTOR COMPENSATION STRUCTURE
| | | | | | | | |
| Annual Retainer | |
| Chair of the Board | $215,000 |
| All other independent directors | $115,000 |
| Committee Chair Additional Retainer | |
| Audit Committee Chair | $27,500 |
| Cyber & Technology Subgroup Chair | | $22,500 |
| Human Capital and Compensation Committee Chair | $22,500 |
Finance, Investment and Risk Management Committee Chair1
| $22,500 |
Investment Committee Chair1 | $22,500 |
| Nominating and Governance Committee Chair | $22,500 |
Risk Committee Chair1 | $22,500 |
| Subgroup Member Retainer | |
| Transaction Review Subgroup | $10,000 |
| Cyber & Technology Subgroup | $10,000 |
Annual Stock Grants21 | |
| Chair of the Board | $280,000 |
| All other independent directors | $150,000155,000 |
1In July 2020, the Board approved the split of the Finance, Investment and Risk Management Committee into two separate committees, the Investment Committee and the Risk Committee.
2Number of shares issued is based upon the fair market value of the stock on the date of the grant.
We also reimburse directors for reasonable out-of-pocket expenses incurred in connection with attending and participating in Board and Committee meetings and director education programs. The Company also matches charitable donations made by each director in an amount up to $1,500 each year.
20202022 DIRECTOR COMPENSATION
| | Name | Name | Fees Earned or Paid in Cash1 | Stock Awards2 | All Other
Compensation | Total | Name | Fees Earned or Paid in Cash1 | Stock Awards2 | All Other Compensation3 | Total |
| Pina Albo | Pina Albo | $115,000 | $149,983 | --- | $264,983 | Pina Albo | $115,000 | $154,944 | $— | $269,944 |
| Christine R. Detrick | $147,500 | $149,983 | --- | $297,483 | |
| J. Cliff Eason | J. Cliff Eason | $215,000 | $279,986 | --- | $494,986 | J. Cliff Eason | $215,000 | $279,989 | $— | $494,989 |
| John J. Gauthier | John J. Gauthier | $136,250 | $149,983 | --- | $286,233 | John J. Gauthier | $147,500 | $154,944 | $— | $302,444 |
| Patricia L. Guinn | Patricia L. Guinn | $152,500 | $149,983 | --- | $302,483 | Patricia L. Guinn | $152,500 | $154,944 | $— | $307,444 |
| Hazel M. McNeilage | Hazel M. McNeilage | $125,000 | $149,983 | --- | $274,983 | Hazel M. McNeilage | $147,500 | $154,944 | $1,500 | $303,944 |
| Ng Keng Hooi | | Ng Keng Hooi | $115,000 | $154,944 | $— | $269,944 |
| George Nichols III | | George Nichols III | $115,000 | $154,944 | $— | $269,944 |
| Stephen O'Hearn | Stephen O'Hearn | $66,250 | --- | $66,250 | Stephen O'Hearn | $138,125 | $154,944 | $— | $293,069 |
| Frederick J. Sievert | $147,500 | $149,983 | --- | $297,483 | |
| Stanley B. Tulin | $147,500 | $149,983 | --- | $297,483 | |
| Shundrawn Thomas | | Shundrawn Thomas | $138,125 | $154,944 | $— | $293,069 |
| Khanh T. Tran | | Khanh T. Tran | $135,000 | $— | $1,500 | $136,500 |
| Steven C. Van Wyk | Steven C. Van Wyk | $125,000 | $149,983 | --- | $274,983 | Steven C. Van Wyk | $137,500 | $154,944 | $— | $292,444 |
1.This column reflects the retainer and fees earned in 20202022 for Board and committee service. The 20202022 cash retainer was paid in May 20202022 to all directors, other than Mr. O'Hearn.Tran. Mr. O'HearnTran joined the Board on Octobereffective July 1, 20202022 and the cash payment made to him consists of a prorated portion of: (i) the annual cash retainer and (ii) the annual stock grant to directors, paid in cash rather than equity because of the timing of Mr. O'HearnTran joining the Board. Ms. Albo and Mr.Messrs. Ng and Van Wyk elected to defer their retainers into the Phantom Stock Plan for Directors.
2.This column reflects: (i) the award of 1,6891,280 shares (3,153(2,313 shares in the case of Mr. Eason) of common stock on May 20, 2020,25, 2022, at a closing market price of $88.80.$121.05. Mses. Albo and McNeilage and Messrs. SievertNg, O'Hearn, and
Van Wyk elected to defer their stock awards under the Flexible Stock Plan for Directors into the Phantom Stock Plan for Directors.
Director Stock Retention Policy
Our3.This column reflects director stock retention policy provides that, subject to certain exceptions for tax obligations and estate planning purposes, a non-employee member of the Board of Directors may not transfer any shares ofparticipation in the Company's common stockMatching Gifts program which he or she received as compensation for service on the Board of Directors until the value of the total shares heldsupports eligible participants in their personal philanthropic and charitable giving by the director equals or exceeds five times the amount of the annual cash retainer paidproviding a limited dollar-for-dollar match (up to such director.
Directors' Phantom Shares
Non-employee directors may elect to receive phantom shares by deferring all or a portion of their annual compensation (including the stock portion)$1,500 per calendar year). A phantom share is a hypothetical share of our common stock based upon the fair market value of the common stock at the time of the grant. Phantom shares granted prior to January 1, 2016 are not distributed until the director ceases to serve on the Board, at which time the Company will issue cash or shares of common stock in an amount equal to the value of the phantom shares. Effective January 1, 2016, directors may elect to receive distributions of deferred shares after five or seven years or at retirement pursuant to a post-deferral election. Distributions can be either via shares or cash and may be paid as a single payment or in five substantially similar annual installments.
Since phantom shares can be distributed in cash instead of stock, they are not included as shares beneficially owned by the directors under the beneficial ownership table (page 66). Several directors have elected to participate in the deferral option and the following table illustrates their accumulated phantom share balance as of December 31, 2020:
PHANTOM SHARE OWNERSHIP
| | | | | |
Name | Phantom Shares |
Pina Albo | 1,689 |
J. Cliff Eason | 30,240 |
Patricia L. Guinn | 1,869 |
Hazel M. McNeilage | 2,678 |
Frederick J. Sievert | 5,323 |
Steven C. Van Wyk | 1,689 |
CORPORATE GOVERNANCE
OVERVIEW
We believe that sound principles of corporate governance are a key element of our business. We expect all directors, officers and employees to conduct business in compliance with the guidelines described below and we survey compliance with these policies on an annual basis.
Governance Guidelines and Charters
We have adopted the following governance policies and guidelines:
•a Code of Conduct, which applies to all employees and officers of the Company and its subsidiaries;
•a Directors' Code of Business Conduct and Ethics, which applies to directors of the Company and its subsidiaries;
•a Financial Management Code of Professional Conduct, which applies to our President and Chief Executive Officer, President, Chief Financial Officer, Corporate Controller, primary financial officers in each business unit and all professionals in finance and finance-related departments; and
•Corporate Governance Guidelines, which applyapplies to the Board of Directors.entire Company.
We intend to satisfy any disclosure obligations under Item 5.05 of Form 8-K by posting on our website information about amendments to, or waivers from, any provision of the Financial Management Code of Professional Conduct that applies to our President and Chief Executive Officer, President, Chief Financial Officer or Corporate Controller.
The Board of Directors has also adopted charters for the Audit, Human Capital and Compensation, Investment, Nominating and Governance and Risk Committees, as well as its subgroups.
Director Independence
In accordance with the Corporate Governance Guidelines, the Board undertook reviews of director independence in February 2020March 2022 and February 2021.March 2023. During these reviews, the Board received a report from the Company's General Counsel noting that there were no transactions or relationships between the Company or its subsidiaries and any of the non-employee directors, nor any member of
such director's immediate family. The purpose of this review was to determine whether any of those directors had a material relationship with the Company that would preclude such director from being independent under the listing standards of the New York Stock Exchange ("NYSE") or our Corporate Governance Guidelines.
As a result of this review, the Board affirmatively determined, in its judgment, that each of the non-employee directors are independent of the Company and its management under the applicable standards. In 2020,2022, only Ms. Manning, then our President and Chief Executive Officer, was not an
independent director. As of January 4, 2023, Mr. Cheng, our President, joined the Board. Thus, in 2023, both Ms. Manning and Mr. Cheng are not independent directors.
Board Diversity
The Board believes that it is essential that directors representrepresenting diverse perspectives, skills and experience.experience are essential for ensuring the Company's long-term success and stability. When evaluating the various qualifications, experiences and backgrounds of Board candidates, the Board reviews and discusses many aspects of diversity such as gender, race, national origin, education, professional experience, geographic representation, ethnicity and differences in viewpoints and skills. To the extent possible, director recruitment efforts include several of these factors and the Board strives to recruit candidates that enhance the Board's diversity. Currently, 33% of the members of the Board are female and 42% are racially or ethnically diverse (based on U.S. standards).
Board Leadership Structure
In recognition of the differences between the two roles and in order to maximize effective Board leadership, our Company has separatedmaintained the positionseparate positions of Chief Executive Officer ("CEO") and Chair of the Board since we became a public company in 1993. The Board regularly reviews its leadership structure, together with corporate governance trends and developments, to ensure that the current leadership structure strikes an appropriate balance for the Company and its stakeholders, and promotes the long-term interests of shareholders. Upon such review, and in light of the Company's 30 year history of having a separate CEO and Board Chair, the Board continues to believe that the current structure remains in the best interest of the Company and its shareholders. Mr. O'Hearn was appointed Board Chair effective January 1, 2023 following the retirement of the prior Chair, Mr. Eason, on December 31, 2022.
The Board believes the Board Chair and CEO have distinct responsibilities. The CEO is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while theCompany.
The Chair of the Board Board:
•provides guidance to the CEO, CEO;
•sets the agenda for Board meetings, meetings;
•presides over meetings of the full Board and Board;
•presides at the regularly scheduled executive sessions of the independent directors;
•has the duty to advise the CEO of any information needs that the Board may have; and
•has the ability to retain legal, accounting or other advisors in connection with executive sessions of the independent directors.
Director Orientation and Continuing Education
Each new director participates in an orientation program which includes, among others, meetings with each of the Board members and the Company's executive officers to become generally familiar with the Company's strategic plans, business segments and corporate functions, significant financial, accounting and risk management issues, and compliance and ethics programs and policies. New directors also meet with the Company's internal and independent auditors.
In addition, each director is expected to maintain the necessary level of expertise to perform the responsibilities of a director. Each director is encouraged to pursueparticipate in periodic continuing education programs to assist the director in maintaining the necessary level of expertise. The Company maintains a director portal of information, which includes considerable resources for director professional development and a calendar of major events for virtual and in-person programs.
The Board's Role in Risk Oversight
The Company incurs a variety of risks as an inherent part of serving our clients’ needs, including risks related to insurance, investments, capital, liquidity, personnel, reputation, strategy and operations. Given the nature of the Company's business and the inherent risks associated with our operations, effective risk management is of significant importance to our overall operations. We have designed an Enterprise Risk Management ("ERM") Program and related policies in order to monitor, evaluate and manage the principal risks the Company assumes in its business activities. The Company's primary objective is managing our business, and the associated risks, in order to balance serving the interests of our clients, their policyholders and customers, regulatory bodies, our investors, our employees and other relevant constituencies. We strive to manage our business in a safe and responsible manner to fulfill our purpose of making financial protection accessible to all.
The Board is responsible, and has an active and ongoing role, as a whole and also atfor overseeing the committee and subgroup level, in overseeing management of the Company's risks.most significant risks, including setting the types and levels of risk the Company is willing to take, and holds senior management accountable for implementing the ERM Program. This oversight is exercised by the full Board, as well as each Committee and subgroup, primarily through its Risk Committee. The Risk Committee receives regular reports and assessments from senior Company management, who is responsible for the day-to-day identification, assessment and monitoring of the risks the Company faces. The Company's Global Chief Risk Officer reports to the Chief Executive Officer and has direct access to the Board through the Risk Committee, with formal reporting occurring quarterly. Management reports describe the Company's key risk exposures and include quantitative and qualitative assessments and information about breaches, exceptions and waivers from the ERM Program.
While the full Board retains oversight of risk, it also utilizes its committees to oversee particular areas of Company risk. Allocation of oversight responsibility to a particular committee is determined based on the expertise of committee members, the overall level of Company risk and other factors evaluated by the Board for each category of risk. Committee chairs regularly report to the full Board regarding specific categories of risks discussed during committee meetings. Issues related to risk that are brought to the attention of the full Board may be addressed in several ways, including the establishment of a focused subgroup tasked with addressing the issue, or the Board may request that senior management more frequently address the issue with the full Board. The following table summarizes each committee's general responsibilities regardingfor risk oversight.
| | | | | | | | | | | | | | | | | |
| BOARD COMMITTEE RISK OVERSIGHT |
| Committee of the Board | Areas of Risk Oversight | Additional Information |
| Audit | Accounting, andlegal, financial reporting risk, ethics and compliance mattersrisks. | Reviews reports on ethics and compliance matters each quarter relating to accounting, financial reporting and internal control risks; assists in monitoring, controlling and minimizing the Company's major financial risk exposuresexposures. |
| Human Capital and Compensation | Risks relating to the Company's employeeworkforce, including incentive compensation policies, practices, plans, recruitment, retention and arrangementsperformance management. | Oversees the management of human capital and compensation risks, including executive retention and recruitment and succession planningemployee development, performance management and pay equity. |
| Investment | Financial and investment risksrisks. | Reviews the quality, performance and risk characteristics of the Company’sCompany's investment portfolios, strategies and policies relating to securities and other investments with material risk implications. |
| Nominating and Governance | Risks associated with corporate governance, ESG, the independence of the Board of Directors, leadership development and director and CEO succession planningplanning. | Oversees risks related to governance matters and risks related to the board'ssuch as board leadership and structure, (successionsuccession planning, board retention, refreshment, development independence and potential conflicts of interest)independence; ESG and the Company's ESG strategyDEI strategy. |
| Risk | EnterpriseOversight of all Company risks, as well as enterprise risk management and assessmentassessment. | Reviews, oversees, monitors and, when appropriate, approves the Company's programs,ERM Program and related policies and strategies relating to enterprisestrategies; establishes risk limits and consults with management on risk identification, measurement and monitoring processes and programs. |
In addition, the
The Board has established several subgroups with more focused risk oversight responsibilities. The Transaction Review GroupSubgroup liaises with management to review significant transactions to ensure alignment with the Company’sCompany's strategies and risk philosophies. The Cyber and Technology Subgroup oversees and monitors the risks associated with the Company's technology programs and policies, including overall risk appetite and key risk indicators, established by the Company for identifying, measuring, mitigating, managing, reporting, and testing cybersecurity, data privacy, and technology related business continuity risks.Both subgroups are fully comprised of independent directors.
Given the long-term nature of the Company's business, the Board, its committees and subgroups, and management regularly evaluate risk over the short-, intermediate-, and long-terms in line with the ERM Program. The ERM Program establishes the principles used to effect risk management enterprise-wide, and also provides clarity on the roles and activities across the Company.The Company utilizes a rating system that reflects the nature of the risk and changes in risks over time, that quantifies those risks (to the extent applicable) and evaluates the effects of the risk mitigants available to the Company.Management also utilizes a risk rating system to categorize audit findings and risk incidents to help allocate internal resources and track remediation efforts.In monitoring these remediation efforts, the Company tracks and evaluates the effectiveness of risk mitigations that it implements. The Company and its management participate in industry bodies and consult with external experts as needed to help analyze and classify Company risks.
The Company completes regular reviews of its risk environment, including formal reviews on a semi-annual basis and quarterly reviews of rating agency and economic capital calculations and monitoring of key risk indicators.Internal risk committees composed of senior management personnel also meet several times per year to review risks within the purview of each such committee.Additionally, the Company undertakes a thorough annual process in the following areas:
•Review, from both "bottom-up" and "top-down" perspectives, to identify new or rapidly evolving risks and necessary preventive or remedial actions.
•Risk culture survey measuring the health of the Company's risk culture.
•Review of risk limits.
•Own Risk and Solvency Assessment, which summarizes the results of the Company's analysis of its current and future risks and is reported to certain U.S. insurance regulators.
Risk Considerations in our Compensation Program
The Human Capital and Compensation Committee considers the(the "Committee") oversees risks associated with our compensation policies and practices with respect to both executive compensation and compensation generally. practices.The Compensation Committee considerskeeps in view the Company's long-standing culture which emphasizesof incremental continuous improvement and sustained long-term shareholder value creation, and ensures that these factors are reflected in the design of the Company's compensations plans. plans adequately reflect this culture.Our compensation program is structured so that a considerable amount of our incentive-eligible employees' compensation is tied to the long-term health of the Company.We avoid the type of disproportionately large annual incentives that could encourage employees to take risks that may not be in our shareholder's long-term interests, and we weigh ourweight management's incentive compensation toward profitability and long-term performance.We believe this combination of factors best encourages our executives and other employees to manage the Company in a prudent manner with a focus on increasing long-term shareholder value.Furthermore, as described in "Compensation Discussion and Analysis" below, the Compensation Committee may exercise full discretion and include subjective considerations in its incentive compensation decisions.
While a significant portion of our executive compensation plan is performance-based, we do not believe that our program encourages excessive or unnecessary risk-taking.Informed risk-taking is a fundamental and necessary part of our business, and our Compensationthe Committee focuses on aligning the Company's
compensation policies with the Company's long-term interests and avoiding short-term rewards for management decisions that could pose long-term risks to the Company.The following policies and practices emphasize the Compensation Committee's focus on balancing riskappropriate risk-taking with reward:
| | | | | | | | |
| Risk Balancing Practices and Policies |
| Annual Bonus Plan | ● | Our Annual Bonus Plan ("ABP") is designed to reinforce our pay-for-performance culture by making a significant portion of management's annual compensation variable. |
| ● | ABP awards are either based solely on Company results or on a combination of Company, business unit and/or individual performance. |
| ● | The ABP aligns annual cash compensation with our short-term business strategies and the targets reflect our short-term goals for adjusted operating income per share, book value per share excluding accumulated other comprehensive income ("AOCI"),strategic scorecard, new business embedded value and annual adjusted consolidated revenue. Starting in 2021, the book value per share excluding AOCI metric was replaced with a strategic scorecard. |
| ● | The Compensation Committee sets award levels with a minimum level of performance that must be met before any payment can be made. |
| ● | To further ensure that there is not a significant incentivereduce any incentives for unnecessary risk-taking, we cap the payout of these awards at 200% of the target and the Compensation Committee has discretion to reduce or eliminate an ABP payment, if appropriate. |
| Performance Contingent Awards | ● | Our performance contingent share ("PCS") grants are a three-year performance-driven incentive program that reinforces our intermediate-term strategic, financial and operating goals. |
| ● | The Compensation Committee sets award levels with a minimum level of performance that must be met before any payment can be made. |
| ● | To further ensure that there is not a significant incentive for unnecessary risk-taking, we cap the payout of these awards at 200% of target. |
| ● | In 2020, we measured2022 and 2023 grants were determined by Company financial performance for the PCS grantsover a three-year period, based on (i) three-year average adjusted operating return on equity (33.5%), three-year adjusted operating income (33.5%) and (ii) three-year book value per share, excluding AOCI (33%).accumulated other comprehensive income, growth rate. Results may be modified up or down by no more than 10% based on three-year relative total shareholder return. |
● | For in 2021, specific financial performance metrics were established for each of 2021 and 2022; with 2023 serving as a time vesting period. Like previous grants, the awards will be subject to a three-year vesting period. The financial performance metrics for 2021 and 2022 both require robust growth over 2020 and 2021, respectively, with 2022 reflecting financial performance that aligns with a pre-pandemic business environment. |
● | Performance share units ("PSUs") awarded in 2021 as part of the one-time special grant will cliff-vest for individuals employed with the Company on December 31, 2022 and pay out in shares of Company common stock. Vesting of the PSU awards is subject to a performance condition which requires the Company to achieve financial results that are within a pre-determined range for at least two of the following measures during each of 2021 or 2022: adjusted operating return on equity; adjusted operating income; or book value per share excluding AOCI. If performance conditions are not met, there will be no payout under the award. No additional amounts will be paid if Company performance exceeds the financial goals. |
| Stock Appreciation Rights | ● | We believe that Stock Appreciation Rights ("SARs") provide an appropriate vehicle for providing long-term incentives to management because of the economic tie to shareholder value. |
| ● | We believe annualAnnual grants of SARs allow us to reward the achievement of long-term goals and are part of our strategy to achieve an appropriate balance between the overall risk and reward for short, intermediate and long-term incentive opportunities. |
| ● | The vesting schedule for SARs grants is four years, 25% of which vests at the end of each year. Upon vesting, the SARs are settledbecome exercisable by recipients in the equivalent value of unrestricted shares of common stock. |
| Restricted Share Units | ● | Our annual restricted stock units (“RSUs”("RSUs") are a three-year time vested incentive award with final value tied solely to the Company’sCompany's stock price. The one-time special RSUs granted in 2021price, fully vestvesting at the end of a two yearsuch three-year period. Upon vesting, RSUs are settled in the equivalent value of unrestricted shares of common stock. |
| ● | We use RSUs to balance the performance-based elements of our long-term incentive plan and to better align our award mix with the external market |
| Share Ownership Guidelines | ● | Our share ownership guidelines require members of senior management to hold a specified number of shares of Company stock which is based on a multiple of base salary tied to the level of their role and responsibility in the organization. |
| ● | Share ownership requirements ensure that our senior management has a significant amount of value tied to long-term holdings in Company stock and align their interests with those of our shareholders. |
| Executive Incentive Recoupment Policy | ● | Our Executive Incentive Recoupment Policy permits the Company to recoup all or a portion of incentive awards paid to certain executives upon the occurrence of certain recoupment events. |
| ● | Such events include: (i) a financial restatement due to the material noncompliance with any financial reporting requirement under the federal securities laws; (ii) receiving an incentive award based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; (iii) causing injury to the interests or business reputation of the Company or of a business unit whether due to violations of law, regulatory sanctions or otherwise and (iv) a material violation of the Company's Code of Conduct. |
| ● | The Compensation Committee has express authority to interpret and administer the policy, implement various remedies based on the circumstances triggering the recoupment and make all determinations with respect to the policy in its sole discretion. |
| ● | The Company expects to either amend the existing Executive Incentive Recoupment Policy or adopt a new policy in order to comply with upcoming New York Stock Exchange listing standards to be adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and related SEC regulations. |
| Combination of Performance Metrics | ● | We use a combination of performance metrics in determining our executives' performance-based compensation that motivate our executives to achieve performance that is in line with the best interests of the Company and our shareholders. |
| ● | By using a variety of performance metrics in our compensation programs, we mitigate the risk that our executives would be motivated to pursue results with respect to one performance measure to the detriment of the Company as a whole. |
| Independent Compensation Consultant | ● | The Compensation Committee benefits from its use of an independent compensation consulting firm which provides no other services to the Company. |
Communications with the Board of Directors
Any shareholder who wishes to communicate with any of the Company's directors, the Chair of the Board, committee chairs, or the independent directors as a group, may mail correspondence to the attention of the Board Secretary at the headquarters of the Company. The process for communicating with the Board requires that the General CounselSecretary make a record of the receipt of any such communications. All appropriate communications will be delivered to the specified recipient(s) in a timely manner.
Director Commitments
The Board's Corporate Governance Guidelines provide that directors are encouraged to limit the number of other public company boards on which they serve, taking into account the requirements of time, participation and attendance that multiple board service entails. Additionally, the Board encourages directors with full-time employment or other obligations to ensure that they have sufficient time to devote to the Board in light of their obligations to the Company and their other commitments. The Board believes that all of the director nominees are in compliance with this policy.
Director Access to Management and to Outside Advisors
Directors have full and free access to officers and employees of the Company. Any meetings or contacts that a director wishes to initiate may be arranged through the CEO or the Corporate Secretary; provided, that, using his or her best judgment to assure that any such contact would not be disruptive to the business operations of the Company, a director may contact an officer or employee directly, if he or she wishes to do so.
The Board and each committee may obtain advice and assistance from outside advisors as the Board or committee may determine necessary or advisable in connection with the discharge of its duties and responsibilities. Any such advisor may, but need not be, otherwise engaged by the Company for any other purpose. The Company shall pay the fees and costs of any outside advisor including, without limitation, usual and customary expenses and charges, as such compensation shall be determined and agreed by the Board or committee.
Board Meetings
The Board of Directors held a total of nineeight meetings during 2020.2022. Each director attended at least 75%100% of the meetings of the Board and committees on which he or she served during 2020.2022. We do not have a policy with regard to attendance by directors at the Annual Meeting of Shareholders. TheMr. Eason, then Chair of the Board, virtually attended the 20202022 Annual Meeting of Shareholders.
BOARD COMMITTEES
From January, 2020 through July, theThe Board of Directors had fourhas five committees: (i) Audit Committee, (ii) Human Capital and Compensation Committee, (iii) Finance, Investment and Risk Management Committee, (the "FIRM Committee") and (iv) Nominating and Governance Committee. In July 2020, the Board approved the split of the FIRM Committee into two separate committees, the Investment Committee, and the(v) Risk Committee.
Currently, the Board of Directors has the following committees:
•Audit Committee;
•Compensation Committee;
•Investment Committee;
•Nominating and Governance Committee; and
•Risk Committee.
The Board has also organized two subgroups of directors who meet periodically with members of Company management regarding topics related to their designated oversight responsibilities. The Transaction Review subgroup discusses and reviews significant acquisition opportunities being considered by the Company. The Cyber & Technology subgroup assists the Board in fulfilling the Board’sBoard's responsibility for oversight of cybersecurity, data privacy and technology related business continuity risks. Information about committee membership, independence, qualifications, roles and responsibilities is provided below.
BOARD COMMITTEE MEMBERSHIP1
| | | | | | | | | | | | | | | | | | | | |
| Director | Independent | Audit | Compensation | Investment2 | Nominating and Governance | Risk2 |
| Pina Albo | yes | | member | member | member | |
| Christine R. Detrick | yes | | member | | chair | |
| John J. Gauthier | yes | member | | chair | | member |
| Patricia L. Guinn | yes | chair | | member | | member |
| Hazel M. McNeilage | yes | | chair3 | | member | |
| Stephen O'Hearn | yes | member | | member | | member |
| Frederick J. Sievert | yes | | member3 | member | member | |
| Stanley B. Tulin | yes | member | | member | | chair |
| Steven C. Van Wyk | yes | member | | | | member |
| Number of Meetings in 2020 | | 8 | 6 | 2 | 8 | 2 |
1As of April 1, 2021
2In July 2020, the Board approved the split of the Finance, Investment and Risk Management Committee into two separate committees, the Investment Committee and the Risk Committee. The Finance, Investment and Risk Management Committee met 5 times in 2020 prior to its dissolution.
3Effective January 1, 2021, Ms. McNeilage was appointed Chair of the Compensation Committee, taking over the role from Mr. Sievert, who remains a member of the committee. | | | | | | | | | | | | | | | | | | | | |
| Director | Independent | Audit | Human Capital and Compensation | Investment | Nominating and Governance | Risk |
| Pina Albo | yes | | member | member | member | |
| John J. Gauthier | yes | member | | chair | | member |
| Patricia L. Guinn | yes | chair | | member | | member |
| Hazel M. McNeilage | yes | | chair | | member | |
| Ng Keng Hooi | yes | | member | | member | |
| George Nichols III | yes | | member | | member | |
| Shundrawn Thomas | yes | | member | | chair | |
| Khanh T. Tran | yes | member | | member | | chair |
| Steven C. Van Wyk | yes | member | | | | member |
| Number of Meetings in 2022 | | 8 | 7 | 4 | 5 | 4 |
| As of April 1, 2023. | | | | | | |
At this time, Ms. Manning and Messrs. EasonO'Hearn and ThomasCheng do not serve on any Board committees.
2021 Board Committee Changes
Effective January 1, 2021, Ms. McNeilage was appointed Chair of the Compensation Committee, taking over the role from Mr. Sievert, who remains a member of the committee.
Effective April 1, 2021, Mr. O'Hearn was appointed as a member of the Audit, Investment and Risk Committees.
Board Committee Roles & Responsibilities
There are five standing committees of the Board. The Board has adopted written charters for each committee, which are available on our website at www.rgare.com. Each of the committees consists solely of directors who have been determined by the Board to be independent in accordance with SEC regulations, NYSE listing standards, and the Company’sCompany's director independence standards.standards set forth in the Corporate Governance Guidelines. The following describes the roles, responsibilities and independence standards of each committee.committee:
AUDIT COMMITTEE
| | | | | | | | |
| Roles and Responsibilities |
| ● | Responsible for the appointment, compensation, retention and oversight of the work of our independent auditor. |
| ● | Oversees our accounting and financial reporting processes and policies and the integrity of our financial statements. |
| ● | Supervises the adequacy of our internal controls over financial reporting and disclosure controls and procedures. |
| ● | Pre-approves audit, audit-related and non-audit services to be performed by the Company's independent auditor. |
| ● | Reviews reports concerning significant legal and regulatory matters. |
| ● | Reviews the plans and performance of our internal audit function. |
| ● | Oversees the Company's ethics and compliance policies. |
| ● | Reviews and discusses our filings on Forms 10-K and 10-Q, including the financial information in those filings. |
| | | | | | | | |
| Independence and Financial Literacy |
| ● | The Board has determined that the members are "independent" within the meaning of SECSecurities and Exchange Commission regulations applicable to audit committees and NYSE listing standards. |
| ● | The Board has determined that all of the members have accounting and related financial management expertise within the meaning of NYSE listing standards. |
| ● | The Board has determined that all the members are qualified as audit committee financial experts within the meaning of Securities and Exchange Commission regulations. |
| | |
| | | | | | | | |
| HUMAN CAPITAL AND COMPENSATION COMMITTEE |
| Roles and Responsibilities |
| ● | Establishes and oversees our general compensation, benefit programs and benefit programs.human capital matters. |
| ● | Reviews and approves the performance and compensation of the CEO, other named executive officers and members of our senior management. |
| ● | Sets performance measures and goals and reviews the attainment of goals under performance-based incentive compensation plans. |
Independence● | Oversees key issues, policies and programs relating to the Company's workforce, including recruitment, engagement, retention, development and performance management. |
| Independence |
| ● | The Board of Directors has determined that all of the Committee's members are independent within the meaning of NYSE listing standards. |
| ● | For purposes of its independence determination, the Board considered the enhanced independence standards for compensation committees under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 which are required by the SEC for the listing standards of national securities exchanges. |
| Interlocks and Insider Participation |
| ● | The members of the Human Capital and Compensation Committee are not and have never been officers or employees of the Company or any of its subsidiaries. |
| ● | No directors or executive officers of our Company serve on the compensation committee of another company of which a member of our Human Capital and Compensation Committee is an officer. |
| | |
| INVESTMENT COMMITTEE |
| Roles and Responsibilities |
| ● | Assists the Board in connection with its oversight responsibilities for the Company's investment policies, practices, programs, procedures and strategies, including asset, liability and risk management guidelines, limits and procedures. |
| ● | Reviews the quality, performance and risk characteristics of the Company's investment portfolios, and the alignment of assets with mandate guidelines, including duration, designed to alightalign the asset portfolio with corresponding liabilities. |
| ● | Reviews strategies and policies relating to various categories of securities and other investments, including derivatives, and other tools and capabilities, with material risk implications. |
| Independence |
| ● | The Board of Directors has determined that all of the Committee's members are independent. |
| | |
| NOMINATING AND GOVERNANCE COMMITTEE |
| Roles and Responsibilities |
| ● | Develops and implements policies and practices relating to corporate governance. |
| ● | Reviews and monitors implementation of our Corporate Governance Guidelines and other governance policies. |
| ● | Identifies individuals qualified to become members of the Board, consistent with the criteria established by the Board; develops and reviews background information on candidates for the Board; and makes recommendations to the Board regarding such candidates. |
| ● | Prepares and supervises the Board's annual review of director independence and the performance of self-evaluations conducted by the Board and committees. |
| ● | Oversees the succession planning process for our CEO, which includes reviewing development plans for potential successors and development and periodic review of the Company's plans for CEO succession in various circumstances. Evaluates potential internal and external successors for other executive and senior management positions. |
Independence● | Oversees the Company's environmental, social, and governance risks. |
| Independence |
| ● | The Board of Directors has determined that all of the Committee's members are independent within the meaning of NYSE listing standards. |
| | |
| | | | | | | | RISK COMMITTEE |
RISK COMMITTEE |
| Roles and Responsibilities |
| ● | AssistAssists the Board with its oversight responsibilities by promoting appropriate practices regarding risk management. |
| ● | ReviewReviews and overseeoversees management's enterprise risk management programs and policies, and monitormonitors risks relating to the Company's business, operations, compliance, reputation and ethics. |
| Independence |
| ● | The Board of Directors has determined that all of the Committee's members are independent. |
| | |
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
The Company does not have any agreements, transactions or any relationships with related persons such as directors, nominees, executive officers or immediate family members of such individuals. At least annually, we review all relationships between the Company and our directors and executive officers and their immediate family members to determine whether such persons have a direct or indirect material interest in any transaction with us.
Our Global Legal Services staff is primarily responsible for developing and implementing processes and controls to obtain information from the directors, nominees and executive officers with respect to related person transactions. If such a transaction arose, our Global Legal Services staff would determine, based on the facts and circumstances, whether we or a related person has a direct or indirect material interest in the transaction. As required under SEC rules, related person transactions that are determined to be directly or indirectly material to us would be disclosed in the proxy statement or other SEC filings.
The Board has adopted a policy as part of its Corporate Governance Guidelines that requires advance approval by the Board before any of the following persons knowingly enter into any transaction with the Company or any of our subsidiaries or affiliates through which such person receives any direct or indirect financial, economic or other similar benefit or interest. The individuals covered by the policy include any:
• director,director;
• nominee for director,director;
• executive officer,officer;
• holder of more than 5% of our voting securities,securities;
• immediate family member of such a person, as that term is defined in the policy,policy; and
•charitable entity or organization affiliated with such person or any immediate family member of such person.
Transactions covered by the policy include any contract, arrangement, understanding, relationship, transaction, contribution or donation of goods or services, but excludes transactions with any charitable entity or organization affiliated with a director, nominee for director, executive officer, 5% security holder or any immediate family member of such a person if the amount involved is $2,500 or less. At this time, the Company is not involved in any transactions that would be covered by this policy.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Our Company and Board of Directors believe that creating long-term value for our shareholders implicitly requires enacting and executing sustainable business practices and strategies that while delivering competitive returns, also take into accountinclude consideration of environmental, social, and governance ("ESG") issues. Effectively addressingimpacts by the Company as well as how ESG issues is a key part of building a great company, and doing so means having strongconsiderations impact the Company. Strong governance, effective management systems and robust controls.controls are core to the Company. We strive to govern the
Company in a sustainable manner that recognizes these concerns alongsideESG matters are integral to our long-term operational goals and strategies. We understand that we have a responsibility to monitor and control our ecologicalenvironmental and societal impact and adopt responsible practices on environmental, social and governance issues together withas an integral part of our obligations regarding corporate strategy, risks, opportunities, and performance.
The Company's Board of Directors plays an active role in ESG oversight. In 2020,2022, the Board and its committees discussed and provided oversight of the Company’sCompany's ESG transparency, policies, strategy and goals, including community engagement, environmental sustainability of operations, the userole of ESG scores in investmentsinvestment decisions, and diversity, equity and inclusion programs. The Board recognizes that healthy
communities, sustainable operations, an inclusive and diverse workforce and responsible investment and data practices are important for the long-term success of the company.Company, and that we have a responsibility to support these issues and that these factors can provide RGA with risks and opportunities.
The Company's Environmental Social and Governance (ESG) Report offers additional information across the areas of: Business Ethics & Responsible Practices; Responsible Investment Approach; Sustainable Innovation for Social Impact; Culture of Care; and Environmental Stewardship. Our ESG Report can be found in the Investor section of our website at https://reinsurancegroupofamericainc.gcs-web.com. The contents of our ESG Report and related supplemental information are not incorporated by reference into this proxy statement or in any other report or document we file with the SEC.
Environmental
Sustainable Operations. The Company is committed to operating in an environmentally responsible manner and strives to be a good steward of the environment. Our headquarters, based in Chesterfield, Missouri, was constructed in line with LEED Gold requirements. The building was designed to be highly energy efficient and includes a unique curtain wall system with ceramic fitting, state of the art HVAC system and a window shade system that automatically adjusts to solar demand changes. The sophisticated building automation system collects information from hundreds of data points, signaling potential inefficiencies or alarms, and automatically adjusts or overrides programmed system functions to optimize operations for maximum energy, economic and environmental efficiencies. The building also has a rain water collection system which utilizes bio-retention ponds that naturally filter and clean the water runoff from the site. In addition, the landscaping was designed with native grasses and plants to minimize the use of irrigation.
Over the past few years we have undertaken a number of other initiatives that exemplify our commitment to the environment, such as developing employee-led "green" committees, reducing our paper consumption and implementing a robust recycling, and waste reduction and/or single-use plastics reduction programs, not only at our headquarters, but at many of our leased facilities, as well.
Climate Change. The impact of an increase in global average temperatures couldwill cause changes in weather patterns, resulting in more severe and more frequent natural disasters such as forest fires, hurricanes, tornadoes, floods and storm surges and may impact disease incidence and severity, food and water supplies and the general health of impacted populations. These climate change trends are expected to continue in the future and may impact nearly all sectors of the economy to varying degrees.
As such, climateClimate change risk is actively monitored.monitored with regards to our investment portfolio and potential impacts on mortality and morbidity. While the long-term impacts of climate change for the Company and our clients are unknown,subject to a variety of influences, as part of the ongoing monitoring and updating of RGA's emerging experience forthe Company's risks and exposure to anything that might change underlying mortality and morbidity trends, scenario reviews and planning are undertaken for various climate-change related events. The Company utilizes information derived from those scenario reviews and other sources to help inform the public of the challenges of climate change through research articles available on our website.
The Company is committed to operating in an environmentally responsible manner and strives to be a good steward of the environment. In 2022, the Company made the commitment to become net-zero in its scope 1 and scope 2 emissions globally by the end of 2026. Our headquarters, based in Chesterfield, Missouri, was constructed in line with LEED Gold requirements. The building was designed to be highly energy efficient and includes a variety of environmental features such as a state of the art HVAC and window shade system, a sophisticated building automation system, rain water collection system, and the landscaping was designed with native grasses and plants to minimize the use of irrigation. Many of the Company's other offices around the globe also are in buildings with environmental certifications.
Over the past few years we have undertaken a number of other initiatives that exemplify our commitment to the environment, including reducing our paper consumption and implementing a robust recycling and waste reduction and/or single-use plastics reduction programs, not only at our headquarters, but at many of our leased facilities, as well.
Social
As a leading global life and health reinsurer, the way we operate, the work we do, and the support we provide to our local communities can all be traced to a desire to extend and improve the individual lives we touch, whether directly or through our business and community partners.
Diversity, Equity and Inclusion (DEI). The CompanyBoard and Boardthe Company's senior management are committed to fostering a diverse and inclusive workplace that respects and embraces all of our employees. We strive to understand one another by providing a safe environment where individuals may share their stories and ideas, where learning is encouraged and one feels accepted and supported in our differences. We believe that diversity across the Company makes us more innovative, creative and ableenables us to anticipate and meet the needs of a diverse set of customers.fulfill our purpose - to make financial protection accessible to all.
The Company endeavorsCompany's DEI aim is to cultivate an open environmentevolve RGA workplaces and the communities in which the Company has a presence into more diverse, experiencesequitable and perspectives are welcomed. Our diversity, equity, and inclusion ("DEI") initiatives areinclusive environments. In alignment with our 5-year business plan, our Global DEI Strategy is focused in four areas: (i) proactively maintain an inclusive workplace environment through education, awareness
•Talent. To foster a workforce representing the local markets we serve and multicultural organization practices; (ii) increasing our diversity while developing, retainingto strengthen a culture that promotes equity and engaging our workforce; (iii) strengthening and sustaining RGA’s relationshipsopportunity for all;
•Communities & Partnership. To advance DEI in the communities where we operate as partwork, and within the financial services and insurance industries, through partnerships and philanthropy;
•Accountability & Measurement. To share progress against clearly established benchmarks and key performance measures that enable the enterprise to achieve meaningful progress; and
•Inclusive Workplace. To ensure employees are valued, feel a sense of our commitmentbelonging, are respected for their differences, and are encouraged and supported to corporate social responsibility; and (iv) ensuring shared accountability and responsibility throughout the organization for DEI efforts.reach their full potential.
Many actions have been undertaken overthroughout 2022 to improve diversity and promote equity and inclusion within the last yearCompany. As a result of our actions, we have seen improvement in representation in (i) women in Vice President and above roles throughout the world and (ii) people of color employed in the United States as demonstrated in the table below.
| | | | | | | | |
| Growth in Representation of Women Globally and U.S. POC | 2021 | 2022 |
| Female Representation (Total) | 48.6% | 47.7% |
| Female Representation (Leadership, VP+) | 24.0% | 27.8% |
| Female Representation (Mid-level Management +) | 31.8% | 32.3% |
| U.S. People of Color Representation (Total) | 18.0% | 19.2% |
Highlights of actions taken in 2022 to improve diversity and promote equity and inclusion within the Company including:include:
•Diversity and inclusion is a key area of focus for our learning and development strategies. In 2020, our employees completed various programs and trainings that addressed our commitment to diversity and inclusion, including Respect in the Workplace training, and Unconscious Bias training.
•In 2020, toWe continue to build on our strategy to develop a diverse and highly inclusive workforce, we implementedworkforce. We have a global council, comprised of senior executives to provide leadership and oversight to our overarching global DEI strategy and actions. We implementedsupport and maintain Regional Diversity, Equity and Inclusion Councils as a way for employees to champion strategies and engage in helping build a more diverse and inclusive organization at a local level. We also conducted a series of discussions to provide a place for employees to share their experiences and help shape the way we advance diversity and inclusion strategies in each region.
•In 2020, we conducted another global pay equity study, conducted by a third-party consultant, which analyzed the pay practices of all U.S. employees and all our employees working at non-U.S. locations with more than 50 employees (representing 90% of our employee's worldwide). We will continue to review pay equity annually, with a plan to expand our study to eventually cover all locations worldwide and will continue to address any issues that arise.
•We are committed to creating a workplace that reflects a broad range of diverse characteristics. Talent acquisition teams have partnered with local HR teams around the world to increase our presence at universities and industry events that focus on diverse hiring. We invest our efforts with organizations and activities where we can reach a spectrum of individuals such as those participating in the International Institute of Black Actuaries Summit, the DEI Expanding Opportunities in Insurance in the U.S. event sponsored by the American Council of Life Insurers and, in Japan, the Dive In Festival for diversity & inclusion in insurance, as well as expanding our online partnerships with organizations to reach diverse groups.
•Expanding DEI education through the creation of new learning resources, including introducing Blue Ocean Brain, a micro learning platform designed to educate employees on how to be more inclusive, and also educates employees on various aspects of diversity. We have over 1,800 unique learners engaged on the platform, consuming 3,100 pieces of content each month.
•Promoting more transparency of DEI initiatives and targets by broadly sharing our aspirational targets for representation, demonstrating our commitment to DEI. In our recent Company survey, 80% of survey respondents responded favorably that, "RGA Leadership is committed to diversity, equity, and inclusion." We also maintained accountability for DEI by including the Company's DEI initiatives as part of the strategic scorecard component of our Annual Bonus Plan.
•Launching 10 new Employee Resource Groups around the globe. These groups provide a forum for diverse talent to emerge and provide input and feedback to help strengthen a culture of inclusion. We have over 200 employees involved in either an employee resource group, community of care or a DEI Committee.
•Improving DEI data & analytics capabilities and provided a DEI dashboard to leaders to help track progress against the Company's 2026 DEI aspirations.
The Company is committed to gender and racial pay equity for all employees and has completed its fourth annual pay equity study. As in years past, the Company engaged an external consulting firm specializing in pay analysis to conduct the study. The following are key findings from the 2022 study:
•For all Company locations with 50 or more employees, when comparing pay levels for those in comparable roles, the average female-to-male pay ratio is 99.7%.
•In the United States, when using the same comparisons, the average non-Caucasian-to-Caucasian pay ratio is 100.3%.
We derive a great deal of strength from our globally diverse workforce. We have long been committed to cultivating an inclusive work environment for our employees, and ensuring our businesses are representative of the communities we serve. We will continue to prioritize our efforts in creating and sustaining a culture of diversity, equity and inclusion, both in our workplace and in the communities where we do business.
Human Capital Management. The Board believes that human capital management and succession planning, including diversity, equity and inclusion initiatives, are critical to the Company’sCompany's success. Our talent is our key point of differentiation in the market and a foundation of our success. Our investment in attracting, retaining, developing and retainingmotivating key talent is vital to the creation and protection of the Company's long-term shareholder value and is a high priority for our Board.
We seek to retain our employees through our culture, competitive compensation and benefits and challenginginteresting work experiences with increasing levels of responsibility. We must continue to attract, develop and retain exceptional talent in order to continue producing innovative solutions for clients. Our focus on employee retention has resulted in a three-year average annual voluntary attrition rate of 6.7% globally and our new-hire one-year total attrition rate is only 3%.7.1% globally.
Our Board’s
The Board's involvement in leadership development and succession planning is ongoing and the Board provides input on important decisions in these areas. The Board, the Human Capital and Compensation Committee and the Nominating and Governance Committee oversee these areas and are regularly updated on key talent indicators for the overall workforce, including recruiting, attrition, engagement and diversity, equity and inclusion.
COVID-19 Employee Safety and Well-Being. We responded to the COVID-19 pandemic with decisive and swift action in 2020 to ensure the safety of our most valuable asset, our employees. Over 95% of our global employees quickly became remote workers, and remote working in several geographies will continuecontinued to be the norm for at least part of 2021. Throughout 2020,2021 and 2022, we increasedmaintained our focus on the physical and mental well-being of our employees. We created and implemented a CareStrategy to ensure a sense of community and enhance collaboration among our global teams while working remotely and social distancing. Our Care Strategy addresses many diverse topics affecting our employees including health and wellness (professionally and personally), how to work effectively in a virtual workplace and how to manage dispersed teams.
For additional information on human capital management, refer to Item 1 of the Company's financial statements in the Form 10-K for the year ended December 31, 2020,2022, as filed with the SEC.
Charitable Giving and Volunteerism. We embrace our responsibility as a corporate leader in the communities in which we live and work. The Company participates in charitablephilanthropic activities relevant to our business and linked to our mission, vision and values. The Company and its employees regularly contribute to local, national and regional non-profit organizations that promote health, well-being, financial protection, and support for education in fields that expand the diversity of the talent pool entering the insurance industry. The Company makes contributions directly, but also a portion of those donations come from our Matching Gift Program, which enables employees to donate to the charity of their choice. We also encourage employee volunteerism with employee Volunteer Time Off, partnering with community service organizations to provide opportunities for employees to donate time and talents to assist neighbors in need.
In 2016, the Company established
The Company's charitable foundation, the RGA Foundation, to participateparticipates in charitable giving activities worldwide in the cities and regions where we are an active member of the community and in causes relevant to our business and linked to our mission, vision and values. The RGA Foundation funds charitable grants related to priority areas, which include advancements in health, longevity, medialmedical and mathematical education, community programs and disaster relief.
The Company is a co-founder of the Longer Life Foundation, a non-profit corporation, with Washington University in St. Louis. Each year, the Longer Life Foundation provides grants to support innovative independent research by scientific, medical and public health experts working to make discoveries that will improve long-term mortality, enhance longevity and promote healthier lives.
In 2020,the two decades since its inception, the Longer Life Foundation has funded more than 120 research projects, many of which expanded clinical knowledge in fields as diverse as longevity, genomics, obesity, older-age cognition, heart disease and cancer. More than 150 publications by foundation-funded researchers have been published in peer-reviewed scientific journals. The Longer Life Foundation is distinctive as an academic-corporate initiative to support fully independent research, the results of which are published for the benefit of the entire medical community.
The Longer Life Foundation advisory group comprises diverse university physicians and researchers, as well as medical directors and underwriting experts from the Company and other life insurance organizations; these individuals evaluate grant proposals and make recommendations to the RGA Foundation made $1.5 million in special contributions to support over two dozen charitable organizations that supported healthcare workers and low-income individuals who were affected by the COVID-19 pandemic. The RGA Foundation also made special matching contributions to charities that support racial justice efforts.foundation's Board of Governors for approval.
Industry Advancement. We believe strongly in the power of shared knowledge. Our employees are known industry-wide for leadership in industry organizations. The Company regularly releases research to advance the understanding of risk and improve the actuarial, underwriting, and claims disciplines.
The Company is a co-founder of the Longer Life Foundation ("LLF"), a non-profit corporation, with Washington University in St. Louis. Each year, LLF provides grants to support innovative independent research by scientific, medical and public health experts working to make discoveries that will improve long-term mortality, enhance longevity and promote healthier lives.
In the two decades since its inception, the LLF has funded more than 120 research projects, many of which expanded clinical knowledge in fields as diverse as longevity, genomics, obesity, older-
age cognition, heart disease and cancer. More than 150 publications by LLF-funded researchers have been published in peer-reviewed scientific journals. The LLF is distinctive as an academic-corporate initiative to support fully independent research, the results of which are published for the benefit of the entire medical community.
The LLF advisory group comprises diverse university physicians and researchers, as well as medical directors and underwriting experts from RGA and other life insurance organizations; these individuals evaluate grant proposals and make recommendations to the foundation's Board of Governors for approval.
Data Privacy & Information Security. Our Board recognizes the importance of maintaining the trust and confidence of our customers, clients, business partners and employees. As part of its objective, independent oversight of the key risks facing the Company, the Board devotes significant time and attention to data privacy, data and systems protection, including cybersecurity and information security risks. The Board and its Cyber & Technology subgroup oversee management's approach to policies, processes and practices sufficient to gauge and address data, cybersecurity and information security risks effectively.
In 2021, the Company established a Data and Analytics Ethics Framework and Guiding Principles and an oversight board to guide and oversee emerging issues in data and analytics ethics. This framework and board enhance the Company's ability to make ethical decisions about how data and analytics processes should be used to protect personal data and avoid unfair discrimination or improper use of data beyond what local regulations might dictate.
Governance
We believe that sound principles of corporate governance are a key element of our business, and the Board of Directors is deeply involved in providing continuing insight and clarity into our governance process. We expect all directors, officers and employees to conduct business in compliance with the various corporate governance documents and policies we have implemented and we survey compliance on an annual basis.
Board Structure and Composition. We believe that the structure, practices and composition of our Board enhances effectiveness. Our directors reflect a diverse set of experiences and skills that are relevant to our industry and long-term business strategy. 91%83% of the members of our Board are independent, 33% are female and 41%42% are female.racially or ethnically diverse (based on U.S. standards). Women serve in leadership roles as the chair of threetwo (out of five) of the Board's standing committees.committees and the chairs of two other Board committees are held by ethnically diverse directors. All the members of our Board stand for election annually, with a majority voting standard in uncontested director elections.
Governance Practices. Our approach to corporate governance integrates numerous effective components of good governance practices, including a strong ethical culture, a comprehensive enterprise risk management program, an ongoing shareholder engagement program, sound financial, regulatory and legal compliance functions and corporate social responsibility. Our governance strategy focuses on delivering long-term shareholder value. For more information on our governance practices, see "Corporate Governance - Overview" above.
Board Evaluations and Assessments. The Nominating &and Governance Committee supervises the Board's periodic self-evaluation assessment and annual review of director independence. In 2020, the Board and Nominating and Governance Committee continued implementation of the key findings from the 2019 assessment. That assessment emphasized topics and issues that were timely and relevant to the Board, such as: meeting agendas and materials; interactions and working relationships among directors and with the CEO and management; strategy execution and oversight of key risks; and Board and committee effectiveness.
The assessment is structured inusually developed internally with a typical structure focused on two sections: an "inward-looking" section, in which directors respond to questions directly relating to their roles on the Board; and an "outward-looking" section, which involves questions relating to the Board as a whole. After receiving a summary of the assessment results, our Board Chair conducts individual interviews with each director to discuss their responses, recommendations and concerns. This also allows directors an opportunity to raise sensitive subject matters in discussions with the Chair.
In certain years, an independent consultant is engaged to perform the assessment. In 2021, an independent consultant was engaged for this purpose and at the Board's request, the assessment included a specific focus on the Board's overall effectiveness, the functioning of the committees, and the contributions of each of the Board members. The robust process included development of interview questions, observation of Board and committee meetings, individual director interviews (including a peer review component), individual interviews of the executive management team, individual director feedback on the peer review component and a detailed final report with specific governance observations and recommendations.Responsible Investing
RGA believes that business opportunities facing our company must be evaluated alongside the social and environmental challenges facing our world. This approach not only supports RGA's mission and purpose, but it also makes good, long-term business sense. RGA integrates a defined environmental, social, and governance (ESG) investment philosophy into investment decisions to reflect company values and to promote the long-term health and financial security of communities and the environment. ESG issues increasingly influence traditional risk factors and can have significant impacts on long-term sustainability and resilience. Since its approval in 2021, RGA's ESG investment philosophy is being integrated into all of our investment decisions to reflect our company purpose, values, commitments, and belief that we have a responsibility to care for the long-term health and financial security of diverse communities and the environment.
In 2022, RGA outlined this philosophy for all stakeholders with the publication of the enterprise's inaugural ESG report, in alignment with the Task Force on Climate-related Financial Disclosures' (TCFD) framework for corporate reporting on climate-related risks and opportunities. The report defines ESG criteria within investment strategies, such as incorporating ESG within bond investing and analyzing sustainable value in real estate investments and presents RGA's approach to responsible investing for sustainable development. The philosophy and goals outlined in the ESG report, which included reducing the carbon intensity of the corporate bond portfolio and engaging with issuers on their sustainability efforts and increasing investments to support sustainable development goals, were reflected in the Investments team's activities in 2022. For example, RGA completely eliminated exposure to tobacco investments during the year, a step that reflects the organization's commitment to human health and longevity. In 2021 we made progress toward our carbon intensity reduction. During 2022 we developed tools and methods for portfolio decomposition to better understand the sources of the carbon intensity on a portfolio, sector and individual level. By monitoring forward looking indicators of carbon risk our investment process of decarbonization has become more robust. We also completed 25 progress reports evaluating portfolio companies with high ESG risk ratings. In addition, the Company ended 2022 holding $873 million in green, social, and sustainable bonds, compared to financial considerations and prudent diversification, we evaluate ESG criteria when making$472 million the year prior.
The investment decisions.team understands that ESG factors are an integral part ofcore to evaluating a Company's long-term viability, profit potential, and return on investment. We take a sector-by-sector and investment-by-
investment approach in order to partner with our research, analysis, decision making and ongoing monitoring of Company investments. We believe that good governance practices and a commitmentinvestees' not only to corporate responsibility can enhance investment opportunities and meaningfully affect investment performance.evaluate their current ESG activities, but also their efforts to transition to more sustainable impacts. The Company also believes long-term sustainability concernsmatters impact both investors and society and thus should be considered when making investment decisions. IncorporatingWhen making real estate investments, the Company employs a disciplined process that seeks to uncover opportunities, evaluate potential risks and effectively mitigate any risk to meet our investment objectives. ESG factorsanalysis is coreincorporated into our underwriting process when evaluating new commercial real estate mortgage and equity investments, as well as for monitoring throughout the lifecycle of each investment. Environmental assessments are conducted for each commercial property to understanding a company’s long-term viability, profitdetect any existing or potential future environmental, health or safety issues. Including ESG considerations as part of our underwriting and return on investment.due diligence process results in higher quality investments and generates greater risk-adjusted returns.
As part of the Company's commitment to social responsibility and environmental sustainability, we are committed to continuing and expanding socially and environmentally responsible investment policies within our investment portfolio and will look at other ways that our investments can help support healthier and more sustainable communities.
SHAREHOLDER ENGAGEMENT AND BOARD RESPONSIVENESS
Fostering long-term and institution-wide relationships with shareholders and maintaining their trust and goodwill is an important objective for our Company. We are committedTrack Record of Responsiveness to engaging in constructive and meaningful dialogueShareholder Feedback
| | | | | | | | | | | | | | | | | |
| RGA Shareholder Engagement Timeline |
| 2018 | 2019 | 2020 | 2021 | 2022 |
| Shareholder Accountability | Bylaws amendments: | | | | |
| Provide shareholder access to amend bylaws | | | | |
| Declassify the board | | | | |
| Eliminate 85% supermajority vote requirements | | | | |
| Adopt Proxy Access | | | | |
| Appointed Independent Directors | Gauthier | Albo | O'Hearn | Ng | Nichols |
| McNeilage | Van Wyk | | Thomas | Tran |
| Board Composition & Diversity | Avg. Board Tenure: 9 years | | | | Avg. Board Tenure: 3.6 years |
| Board Diversity: 33% | | | | Board Diversity: 75% |
| (as of January 1, 2018) | | | | (As of January 4, 2023) |
| Regular Shareholder Engagement | November 2017 | October 2019 | | March 2021 | May 2022 |
| May 2018 | November 2019 | | | December 2022 |
| Environmental, Social & Governance (ESG) | 1st reinsurer to receive regulatory approval for Binding Corporate Rules since the European Union's General Data Protection Regulation (GDPR) went into effect on May 25, 2018 | | Took extensive employee safety measures with onset of COVID-19 | Committed to Net Zero Scope 1 and Scope 2 emissions by 2026 | Published inaugural TCFD-aligned ESG Report with carbon footprint |
|
|
| Launched Employee Resource Groups (ERGs) to support inclusive culture | Added ESG and DEI metrics into ABP, as part of the Strategic Scorecard metric. | Adopted Portfolio Carbon Intensity Reduction targets |
|
| | | Committed to removing tobacco investments in our portfolio by year end |
| | | |
The Company follows a practice of ongoing engagement with our shareholders. We value shareholder views and insights and believe that positive, two-way conversation builds informed relationships that promote transparency and accountability.
In order to ensure that our Board and management understand and address the issues that are important toCommunication with our shareholders the Company has anoccurs through a variety of means, including meetings, investor presentations, our website and other social media, and publications we issue. Our Investor Relations function leads these ongoing proactive practice of discussingefforts, and specific shareholder outreach programs are held on a recurring basis to
discuss issues such as corporate strategy and financial performance, governance, executive compensation, socialESG and environmental concerns, as well as other important topics with significant shareholders. We consider feedback when gauging whether any changes are necessary in order to ensure that the Company is in line with market practice and guidelines. Depending on the topic, such discussions may include our President and CEO, Chief Financial Officer, Investor Relations Officer, General Counsel or other key memberstopics of management.interest to our shareholders.
In 2020, we conducted these meetings virtually throughout the year.Responding to Shareholder Say on Pay Feedback and input from our shareholders is formally reported to the Board of Directors on a quarterly basis.
The Board of Directors has also engaged a third party governance advisorwas disappointed by the 2022 shareholder advisory vote on executive compensation ("Say on Pay"), and the Board sought to help facilitate governanceengage in meaningful discussions with our shareholders to understand their voting decisions, their perspectives regarding the Company's compensation practices, and to discuss potential changes in our compensation programs and disclosures. These conversations, led by the Chair of our Human Capital and Compensation Committee (the "Committee"), provided valuable feedback that was shared with the Committee and the Board, and informed the deliberations of the Committee as it seeks to continuously strengthen the pay-for-performance linkage of our executive compensation program and incentives. In response to the results of the Say on Pay vote at the 2022 Annual Meeting, we reached out to investors earlier than in prior years to receive and incorporate feedback into the discussions and decisions of the Committee for 2023. In the fall and winter of 2022, we contacted shareholders collectively representing 64% of outstanding shares and had substantive conversations with shareholders representing 34% of outstanding shares. The Chair of the Committee participated in several discussions with shareholders, and addressin a conversation with Institutional Shareholder Services. For a full description of the shareholder outreach and Board responsiveness to the feedback we received, please see "Compensation Discussion and suggestions.Analysis - Shareholder Engagement and Board Responsiveness."
POLITICAL CONTRIBUTIONS
We have established policies and procedures governing the political activities of the Company and the political action committee sponsored by our Missouri operating company, RGA Reinsurance Company. Due to our position as a leading U.S.-based reinsurer in the global life and health reinsurance industry, we actively follow state, federal and international legislation and regulation. On both the state and federal levels, we actively participate in lobbying in the interest of protecting the rights of reinsurance companies and in the pursuit of staying competitive in global markets. Internationally, we work with our trade associations to follow and address issues regarding market access and trade, data transfer and other issues that impact the manner in which we do business in foreign jurisdictions.
Like many large organizations, we have a federal political action committee, created and administered under applicable federal law. RGA Reinsurance Company sponsors the RGA Reinsurance Company Federal Political Action Committee ("RGA PAC"), a non-partisan PAC formed under the federal election laws, which makes contributions to individual candidates pursuant to federal election laws. In appropriate circumstances the RGA PAC may also make contributions to the federal political action committees of industry trade associations in which the Company participates. All contributions are made with the Company's strategic goals in mind and are intended to support candidates and issues that are important to the Company and our clients.
The board of the RGA PAC is comprised of Company employees who are members of the RGA PAC. The RGA PAC board regularly reviews the Company's political and lobbying policies and reports of political contributions. The RGA PAC board is advised of the Company's ongoing political strategy as it
relates to overall public policy objectives for the next year and provides guidance to the RGA PAC. The RGA PAC files contributions and expenditure reports with the Federal Elections Commission, pursuant to federal regulations.
Under United States federal law, the Company may not contribute corporate funds or make in-kind contributions to candidates for federal office or to national party committees. In addition, our Code of Conduct ensures that no Company funds or assets are used for any candidate or nominee for political office, or for any political party or committee, except in compliance with specific Company policies and all applicable laws and regulations. When permitted, the Company makes political contributions to insurance and reinsurance trade associations that are permitted to contribute to individual candidates at the state level who understand the issues most important to us and our clients. We are generally not
permitted to make political contributions to candidates for public office in foreign countries and therefore, we do not make any such contributions.
COMPENSATION DISCUSSION AND ANALYSIS Our executive compensation program is designed to attract, motivate and retain senior level employees who direct and lead our business and to appropriately reward these individuals for their contribution to the business. Our Board of Directors has delegated to the Human Capital and Compensation Committee (the "Committee") the authority to establish and oversee our general compensation program, review the performance and approve the compensation of our Chief Executive Officer and review and approve the compensation of the other named executive officers and members of our senior management.management, including the named executive officers. The Compensation Committee also reviews and approves this Compensation Discussion and Analysis ("CD&A") regarding executive compensation for inclusion in this Proxy Statement. During 2020,2022, the Committee consisted of Mses. McNeilage (Chair) and Albo, and Messrs. Nichols, Ng and Thomas.
SHAREHOLDER ENGAGEMENT AND BOARD RESPONSIVENESS
Responding to Shareholder Say on Pay Feedback
In response to the results of the Say on Pay vote at the 2022 Annual Meeting, we reached out to investors earlier than in prior years to receive and incorporate feedback into the discussions and decisions of the Human Capital & Compensation Committee (the"Committee") for 2023. In the fall and winter of 2022, we contacted shareholders collectively representing 64% of outstanding shares and had substantive conversations with shareholders representing 34% of outstanding shares.The Chair of the Committee participated in several discussions with shareholders, and in a conversation with Institutional Shareholder Services.
| | | | | | | | |
| Offered engagement with approximately | Direct one-on-one discussions with approximately | HC&C Committee Chair participated in calls with stockholders representing approximately |
| 64% | 34% | 29% |
| of outstanding shares | of outstanding shares | of outstanding shares |
In these conversations, shareholders overwhelmingly expressed strong support and appreciation for our Executive Compensation Philosophy as well as an understanding of the rationale for the actions by the Compensation Committee consistedin light of Mr. Sievert (Chair) and Mses. Albo, Detrick and McNeilage.
the impact of the pandemic on our business. The discussion offollowing table summarizes feedback we received from shareholders, our compensation practices and related disclosures focus on the compensation of our named executive officers. This discussion is divided into the following sections:
| | | | | |
Compensation Disclosure Sections |
COVID-19 Impact and Response | |
Overview of Compensation Practices | |
Five Elements of Compensation | |
Executive Compensation Process | |
2020 Compensation Actions and Results | |
2021 Compensation Program | |
Executive Compensation Tables | |
Compensation Committee Report | |
Other Executive Compensation Matters | |
2020 Named Executive Officers
Choosing the right leadership for the Company is among the Board's most important responsibilities and both the Board and the Compensation Committee are committed to ensuring the Company's leadership team has the right talent, with compensation programs aligned to our strategy and pay aligned to performance and the creation of long-term shareholder value. For 2020, our named executive officers were as follows:
2020 NAMED EXECUTIVE OFFICERS
| | | | | |
Name | Title |
Anna Manning | President and Chief Executive Officer |
Todd C. Larson | Senior Executive Vice President, Chief Financial Officer |
Alain P. Néemeh | Senior Executive Vice President, Chief Operating Officer |
Leslie Barbi | Executive Vice President, Chief Investment Officer |
Tony Cheng | Executive Vice President, Head of Asia |
John P. Laughlin | Executive Vice President |
COVID-19 IMPACT AND RESPONSE
Introduction
The COVID-19 pandemic and theactions in response, thereto has had a significant impact on the Company and its clients, as well as the Company’s employees and the communities where they live and work. Throughout 2020, the Company’s operational and financial resilience was put to the test, and our employees and our business have responded by continuing to deliver on the Company’s promises to its clients, investors and communities. Despite absorbing an estimated $720 million in COVID-19-related claim costs, the Company generated pre-tax adjusted operating income3impact of $627 million in 2020, or $7.54 per share, down from the previous year’s $1,099 million, or $13.35 per share. The Company’s recurring revenue model proved resilient, producing record highs in annual net premiums of $11.7 billion and total revenues of $14.6 billion. Strong performance in several segments, including Global Financial Solutions across all regions, Asia Pacific across all product lines, and group and individual health operations in the U.S., offset underperformance in other areas, once again demonstrating the value of RGA’s diversified global platform.
The Company, through its employees, has taken action through the COVID-19 pandemic to manage risks associated with the pandemic and to position the Company for success through the remainder of COVID-19-related challenges and beyond. Examples of measures taken by the Company include:
•proactively addressing capital and liquidity needs;
•adapting the investment approach to both minimize downside risks and capture opportunities;
•dedicating medical, actuarial, and data science experts to develop and refine pandemic scenario models to inform active decision making;
•addressing pandemic related underwriting and claims management challenges in a way that both protected the Company and helped clients to continue to write business; and
•remaining actively engaged with clients and providing thought leadership to the industry.
These actions and others taken by the Company limited the downside risks related to the COVID-19 pandemic and positioned the Company strongly for the future.
Additionally, with respect to the Company’s employees and their safety and well-being, the Company responded to the pandemic with decisive and swift action to ensure the safety of our most valuable asset, our employees. Over 95% of its global employees quickly became remote workers, and remote working in several geographies will continue to be the norm for at least part of 2021. While where the Company’s employees work has changed, its employees continue to be committed and highly productive. Throughout 2020, the Company increased its focus on the physical and mental well-being of its employees. The Company created and implemented its Care Strategy to ensure a sense of community and enhance collaboration among its global teams while working remotely and social distancing. The Company’s Care Strategy addressed many diverse topics affecting the Company’s employees including health and wellness (professionally and personally), how to work effectively in a virtual workplace, and how to manage dispersed teams.
The Company is extremely proud of its employees, whose perseverance, dedication and flexibility have allowed the Company to fulfill our obligations and support clients throughout the pandemic. The Company’s operations continue to run smoothly and remain well-positioned for the long term.
After careful deliberation beginning at the inception of the COVID-19 pandemic and through March 2021, the Committee recognized that in light of the pandemic it needed to ensure that our
3See “Use of Non-GAAP Financial Measures” on page 115 for reconciliations from GAAP figures to adjusted operating figures.those actions:
employees remained motivated and rewarded for actions that create and protect long-term shareholder value. The Committee believes the distinctive nature of the COVID-19 pandemic warrants this unique action.
As the pandemic unfolded in 2020, it became clear that the Company’s 2020 financial performance was significantly impacted. The Compensation Committee evaluated several options, including making changes to incentive structures during 2020 following the onset of the pandemic. These evaluations were grounded in the Company’s “pay for performance” philosophy and were undertaken to ensure that the Company’s compensation program serves the best interests of the Company’s shareholders. The Committee also considered the significant and continuing uncertainty regarding the path of the COVID-19 pandemic. The Committee decided that no adjustments would be made to any existing long-term incentive awards and that it was more prudent to consider any adjustments after the performance period.
In this CD&A we have outlined the impact of the COVID-19 pandemic on the Company and actions the Committee took in 2021 to ensure that employees, including our named executive officers and other employees, remained motivated and incentivized on a forward-looking basis. The following discussion:
•Summarizes the Company’s 2020 financial results, as impacted by the COVID-19 pandemic;
•Describes the impact of those financial results on the Company’s compensation programs;
•Shows realizable pay for Ms. Manning, our President and Chief Executive Officer, without the one-time actions taken by the Committee; and
•Details one-time actions taken by the Committee as a result of COVID-19.
Certain of this information has previously been reported pursuant to a Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 15, 2021. Additional information about the Company’s compensation program is found in the remainder of this CD&A.
2020 Financial Results
While the Company experienced strong results for the year from many businesses, profitability was significantly impacted by an estimated $720 million of COVID-19 related mortality and morbidity claims for the year, partially offset by savings of approximately $33 million related to the Company’s longevity business and $97 million of expense savings, giving an estimated overall pre-tax impact of approximately $590 million. This resulted in a 43.5% decline in the Company’s adjusted operating earnings per share4 from $13.35 in 2019 to $7.54 in 2020. The Company estimates 2020 after tax COVID-19 related impacts5 to be approximately $6.80 per share.
The Company’s 2020 pre-tax adjusted operating income6 was $627 million, as compared to $1,099 million in 2019. The Company estimates that it absorbed approximately $590 million of COVID-19 related impacts4 in pre-tax adjusted operating income for 2020, representing 125% of the year-over-year decline.
The Company’s trailing 12-month adjusted operating return on equity4 for 2020 was 5.7%, as compared to 10.5% in 2019. The Company estimates that 2020 COVID-19 related impacts reduced adjusted operating return on equity by approximately 5.0%, representing 104% of the year-over-year decline.
4 See “Use of Non-GAAP Financial Measures” on page 115 for reconciliations from GAAP figures to adjusted operating figures.
5 Including mortality and morbidity claims with offsetting impacts from longevity and expense savings and tax effected at 24%.
6 See “Use of Non-GAAP Financial Measures” on page 115 for reconciliations from GAAP figures to adjusted operating figures.
Adjusted Operating EPS7 Pre-Tax Adjusted Operating Income7 Trailing 12 Month Adjusted Operating ROE7
COVID-19 Impacts to Compensation
2020 Annual Bonus Plan
3,249 employees, representing over 94% of total Company employees (as of December 31, 2020) participate in the ABP. Further, the vast majority of participants in the plan are in non-executive roles, with 86% of participants in the ABP not participating in the Flexible Stock Plan. The ABP provides annual cash incentive compensation based on one or more of the following factors: the Company’s overall financial performance, the financial performance of the participant’s division, business unit or department and individual performance. Overall Company financial performance must meet a certain minimum level of adjusted operating income per share (i.e., a “trigger”), as determined in advance by the Committee, before any awards are made under the ABP.
The ABP metrics, weightings and targets were established in early March 2020, before the global nature and severity of the COVID-19 pandemic was understood. These metrics and weighting are as follows:
2020 COMPANY ANNUAL BONUS PLAN METRICS
| | | | | | | | |
Component | Weight | Definition | | | |
Adjusted Operating Income Per Share1Shareholder Feedback
("What We Heard") | 50%Our Action ("What We Did") | Adjusted operating income per shareImpact of Action ("Why This is our net income per share from continuing operations less realized capital gains and losses and certain other non-operating items.Important") |
Book Value Per Share Excluding AOCI1
2021 One-time Grants | 25%While expressing a preference for avoidance of one-time grants, shareholders understood the rationale for the one-time grants we made in 2021, and wanted to understand the Committee's approach to future extraordinary circumstances. | Book value per share isThe Compensation Committee affirmed its commitment to not make discretionary, one-time awards to our named executive officers like those made in 2021 in response to the Company's total equity excluding Accumulated Other Comprehensive Income ("AOCI") dividedCOVID-19 pandemic, absent extraordinary circumstances as determined by total common stock outstanding.the Board. | Aligns with our Executive Compensation Philosophy, and clarifies our approach to extraordinary circumstances. |
New Business Embedded ValuePay-for-Performance | 15%Shareholders expressed preference for emphasis on performance-based equity. | New business embeddedIncreased performance contingent ("PCS") awards as a percentage of long-term incentive ("LTI") awards. For 2023: | Ensures that executives’ long-term interests as well as equity payouts earned are closely aligned with long-term Company performance. |
| Ms. Manning – 100% of LTI awards in PCS; Mr. Cheng – 75% of LTI awards in PCS; and Other NEOs – 60% of LTI awards in PCS. |
| Shareholders expressed preference for multi-year performance periods. | Returned to our historical practice of 3-year performance metrics for 2022-2024 and 2023-2025 PCS Plans in line with our commitment in 2022; we intend to retain this structure. | Extends performance periods to 3 years, and focuses executives on long-term shareholder value ("NBEV") iscreation. |
| Shareholders expressed preference for incorporating peer-relative performance metrics. | Adopted a measurerelative total shareholder return modifier for our 2022-2024 PCS; we retained this modifier for the 2023-2025 PCS awards. | Enhances performance equity design to better align outcomes with outperformance relative to peers. |
| Disclosure | Shareholders encouraged additional transparency regarding award metrics. | Updated disclosure of award metrics to provide additional transparency; Enhanced disclosure of the valueStrategic Scorecard metrics and evaluation methodology. | Increases transparency of the profits expected to emerge from new business net of the cost of supporting capital. NBEV is a forward-looking calculation that reflects the lifetime value created through new business sales. |
Annual Adjusted
Consolidated Revenue1
| 10% | Annual adjusted consolidated revenue is total revenues earned by the Company less any excluded transactions undertaken for capital management or risk management purposes during the annual performance period. For 2020, there were no excluded transactions. |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. |
COVID-19 IMPACT AND PAYING FOR PERFORMANCE
Recent Company Performance
In 2020, 2021 and 2022, RGA absorbed an estimated $2.4 billion of COVID-19 related impacts. Despite the magnitude of COVID-19 claims paid during this three-year period, the underlying strength of our business allowed RGA to produce meaningful earnings throughout the pandemic. More importantly, our resilient business model enabled our client partners to support their policyholders amid widespread uncertainty and loss.
The Company’sfollowing table summarizes key financial results for the years 2019 through 2022, including the estimated impact of COVID-19 on results:
| | | | | | | | | | | | | | | | | | | | |
| Year | Pre-tax adjusted operating income1 | COVID-19 Impact2 | Adjusted operating income per share1 | COVID-19 Impact2 | Trailing 12 month adjusted operating return on equity1 | COVID-19 Impact2 |
| 2019 | $1,099 million | - | $13.35 | - | 10.5% | - |
| 2020 | $627 million | $590 million | $7.54 | $6.80 | 5.7% | 5.0% |
| 2021 | $121 million | $1,362 million | $1.13 | $15.20 | 0.8% | 10.1% |
| 2022 | $1,261 million | $447 million | $14.43 | $5.02 | 10.3% | 1.5% |
1See "Use of Non-GAAP Financial Measures" on page 89 for reconciliations from GAAP figures to adjusted operating figures. |
2COVID-19 impact estimates include mortality and morbidity claims of approximately $720 million in 2020, with offsetting impacts from longevity of approximately $33 million, and approximately $97 million of expense savings, all tax effected at 24%. COVID-19 impact estimates include mortality and morbidity claims of approximately $1,416 million in 2021 and $453 million in 2022, with offsetting impacts from longevity of approximately $54 million in 2021 and $6 million in 2022; all tax effected at 24%. |
During 2020 financial performance exceededand 2021, the ABP “trigger”;Company delivered strong profitability, excluding COVID-19 impacts, and continued to add to the results were therefore as follows:underlying earnings power of the business by deploying a record amount of capital into in-force and other transactions in 2021. This helped to generate record profitability in 2022 and the Company expects to deliver additional profitability in the future. Highlights from 2022 include:
•Record adjusted operating income of $14.43 per diluted share.
•Trailing 12 months adjusted operating ROE of 10.3%.
•Strong organic new business activity, with premiums up 8.4% on a constant currency basis.
•Capital deployment of $430 million into in-force and other transactions.
•Total shareholder capital returns of $280 million, including $75 million in share repurchases.
Adjusted operating income per share met the minimum level required to trigger payouts under the ABP but did not meet the threshold amount for payment under such metric.
•Book value per share excluding AOCI results did not meet the threshold amount for payment.
•New business embedded value results ($561.2 million) were 96.8% of target ($580 million).
•Annualand adjusted consolidated revenue results ($14,595.88 million) were 98.2% of target ($14,864 million).
7operating ROE are non-GAAP financial measures. See “Use"Use of Non-GAAP Financial Measures”Measures" on page 11589 for reconciliations from GAAP figures to adjusted operating figures.
COVID-19 Impact on Compensation
As disclosed in the proxy statements for the previous two annual meetings of shareholders, the COVID-19 pandemic had a significant impact on compensation, including:
•While compensation decisions were made too early in 2020 for the Company to fully ascertain the significant impact of COVID-19 on Company performance, salaries and incentive targets for senior executives were held flat in 2021.
•The 2020 and 2021 Company-wide ABP results both paid out below target, at 80.0% and 81.1% of target, respectively.
•PCS awards granted in 2018, 2019 and 2020 all had a 0% payout primarily as a result of COVID-19 and the Committee's decision to make no adjustments to the performance metrics and goals to PCS awards that were already outstanding. Historically, PCS grants represented 75% of equity grants for our named executive officers.
•The decline in the Company's stock price eliminated the value of recently granted stock appreciation rights. As of March 2021, all SARs granted from 2017 to 2019 were under water.
As a result of this financial performance,unprecedented situation and as disclosed in the weighted averageproxy statements for the portionprevious two annual meeting of the ABP determined by the Company’s overall performance was 22.6% of target and the Company’s total payout for all participants under the ABP would have been $62.1 million absent any adjustment, a decrease of 22.9% over the prior year. These results are summarized below:
| | | | | | | | | | | | | | | | | | | | |
| Annual Bonus Plan (based only on overall Company financial performance) |
| Performance Measures and Goals | Minimum | 2020 Target | Maximum | Numerical Results | Weight | Payout Percent |
Adjusted Operating Income Per Share1 | $12.94 | $13.91 | $14.88 | $7.54 | 50.0% | 0.0% |
Book Value Per Share Excluding AOCI1 | $136.80 | $144.00 | $151.20 | $132.33 | 25.0% | 0.0% |
| New Business Embedded Value | $325.00 | $580.00 | $835.00 | $561.20 | 15.0% | 14.4% |
Annual Adjusted Consolidated Revenue1 | $14,121.00 | $14,864.00 | $15,607.00 | $14,595.88 | 10.0% | 8.2% |
| Unadjusted Payout | | | | | | 22.6% |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. |
Performance Contingent Shares
Each year, after approval by the Committee, the Company grants performance contingent share (“PCS”) awards to the named executive officers and certain other executives. These PCS awards represent 75% of the total target long term incentive award of each executive. The remaining 25% of target long term incentive compensation is delivered as share-settled Stock Appreciation Rights (SARs).
Each PCS grant covers a three-year performance period and payouts are tied to the achievement of pre-determined corporate financial performance goals over the period. The PCS performance measures are cumulative over the three-year period. Upon settlement, PCS awards are paidshareholders, in shares of Company common stock. Executives below the Senior Vice President level receive similar awards, which are settled in cash; the amount of cash payable is based on the Company’s stock price at settlement.
2018- 2020 PCS Awards. Metrics and weightings for the PCS awards granted for the 2018-2020 performance period were as follows:
2018-2020 PCS PERFORMANCE METRICS
| | | | | | | | |
Component | Weight | Definition |
Three-Year Adjusted Operating Return on Equity1
| 33.5% | This metric is calculated as cumulative Adjusted Operating Income (defined below) for the three-year period divided by average adjusted stockholders’ equity. Adjusted stockholders’ equity represents total stockholders’ equity excluding AOCI. The average of adjusted stockholders’ equity will use monthly data points during the 3-year measurement period. ROE, AOI and stockholders’ equity excluding AOCI are non-GAAP financial measures. |
Three-Year Adjusted Operating Income1
| 33.5% | This metric is calculated as net income excluding substantially all of the after-tax effect of net investment related gains and losses, changes in the fair value of certain embedded derivatives and related deferred acquisition costs, any net gain or loss from discontinued operations, the cumulative effect of any accounting changes occurring after the targets have been established, and other items that management and the Compensation Committee believe are not indicative of the Company’s ongoing operations. |
Three-Year Book Value per Share, Excluding AOCI1
| 33.0% | This metric is defined as adjusted stockholders’ equity divided by the end of period outstanding shares of the Company's common stock. Adjusted stockholders’ equity represents total stockholders’ equity excluding accumulated other comprehensive income (“AOCI”). Book value per share and adjusted stockholders’ equity excluding AOCI are non-GAAP financial measures. |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. |
Prior to the COVID-19 pandemic, the Company estimated, based on financial performance in 2018 and 2019, that the PCS awards granted for the 2018-2020 performance period would be slightly
below target payout. The following table shows Company results for 2018 and 2019 for each performance metric, as well as results needed to meet the minimum threshold for payment in 2020 and 2020 actual results:
| | | | | | | | | | | | | | | | | |
| 2018-2020 PCS RESULTS |
| Performance Measure | Weight | Threshold | Cumulative 2018 and 2019 Performance | 2020 Results Needed to Meet Threshold | 2020 Actual Results |
Three-Year Adjusted Operating Return on Equity1 | 33.5% | 9.5% | 10.4% | 7.6% | 5.8% |
Three-Year Adjusted Operating Income1 ($M) | 33.5% | $2,403.0 | $1,641.9 | $761.1 | $496.3 |
Three-Year Book Value per Share, Excluding AOCI1 | 33.0% | $138.31 | $129.81 | $154.28 | $132.33 |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. |
However, because of the impact of the COVID-19 pandemic on the Company’s 2020 financial results, Company financial performance for the 2018-2020 PCS performance period was below the threshold required for payment with respect to each of the three metrics, resulting in a zero payout overall. The results are summarized below:
| | | | | | | | | | | | | | | | | | | | |
| 2018-2020 PCS PAYOUT |
| Performance Measure | Weight | Threshold | Target | Maximum | Actual | Percentage of Target Payout |
Three-Year Adjusted Operating Return on Equity1 | 33.5% | 9.5% | 10.5% | 11.5% | 8.9% | 0% |
Three-Year Adjusted Operating Income1 ($M) | 33.5% | $2,403.0 | $2,597.9 | $2,792.7 | $2,138.2 | 0% |
Three-Year Book Value per Share, Excluding AOCI1 | 33.0% | $138.31 | $145.59 | $152.87 | $130.60 | 0% |
| Weighted Average | | | | | | 0% |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. |
2019-2021 and 2020-2022 PCS Awards. Given that the PCS performance measures are cumulative over the three-year period, the Company estimates with a high degree of confidence that the 2020 financial results also eliminate the possibility of any future payments under the PCS awards granted for both the 2019-2021 performance period and the 2020-2022 performance period.
The Company’s cumulative financial results through December 31, 2020 are significantly behind the amounts needed to achieve the minimum financial threshold for any of the three performance measures. To achieve the minimum threshold amount for any of the performance measures, the Company would need to significantly exceed its historical financial results. Even if the Company achieved the five-year high of 2016's adjusted operating return on equity of 11.2%, 2019’s historical high adjusted operating income of $852.9 million and 2019’s historical high book value per share, excluding AOCI, of $135.10 in each remaining year of the applicable performance periods, it would still not meet the minimum thresholds for payouts under the 2019-2021 and 2020-2022 PCS awards. Because of this, the Company has reversed all accruals relating to payouts under these awards.
The zero payout under the 2020 PCS awards and the fact that the Company estimates with a high degree of confidence that payouts for the PCS cycles ending in 2021 and 2022 will also be zero have created potential retention concerns for employees who no longer have significant amounts of forfeitable compensation.
Realizable CEO Pay Absent One Time Committee Actions
The following table displays the targeted total direct compensation (base salary + annual bonus plan + performance contingent shares + stock appreciation rights) for Ms. Manning as compared to the total actual or “realized” compensation received or receivable in respect of the previous four years, absent one-time actions by the Committee. The Committee believes that this table provides a more accurate description of Ms. Manning’s compensation, as compared to the Summary Compensation Table and Outstanding Equity Awards at 2020 Year End tables provided under “Compensation Tables and Other Matters – Executive Compensation Tables” because such tables do not take into account actual or expected payouts of equity awards.
As shown in the table, over the 2017-2020 period since Ms. Manning became CEO, average realized and realizable compensation is 45% of target compensation. All SARs awards granted in that period were underwater as of December 31, 2021. Ms. Manning’s PCS awards for 2018-2020 period paid out at zero and the Company estimates with a high degree of confidence that payouts for the 2019-2021 and 2020-2022 PCS cycles will also be zero.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| REALIZABLE CEO PAY |
| Target Pay1 | Realized Actual Pay2 |
| Year | Base Salary | Target Bonus $ | Target LTI | Target Total Compensation | Base Salary3 | Bonus Payout | Realizable/Realized LTI | Actual Total Compensation |
| 2020 | $1,030,000 | $1,854,000 | $5,750,000 | $8,634,000 | $1,030,000 | $419,746 | $0 | $1,449,746 |
| 2019 | $1,030,000 | $1,545,000 | $4,500,000 | $7,075,000 | $1,025,385 | $2,144,954 | $0 | $3,170,339 |
| 2018 | $1,000,000 | $1,500,000 | $3,750,000 | $6,250,000 | $992,308 | $1,308,840 | $0 | $2,301,148 |
| 2017 | $950,000 | $1,235,000 | $3,245,000 | $5,430,000 | $950,000 | $2,400,574 | $2,107,976 | $5,458,550 |
| Average 2017 - 2020 | $1,002,500 | $1,533,500 | $4,311,250 | $6,847,250 | $999,423 | $1,568,529 | $526,994 | $3,094,946 |
| | | | | | | | |
1 Average of base salary earned, target ABP opportunity, and long-term incentive value granted from 2017 through 2020. |
2 Average of base salary earned, actual ABP payout received (before any adjustment, for the 2020 payout) , the value of vested/exercised long-term incentive awards, and the estimated current value of unvested/unexercised long-term incentive awards granted from 2017 through 2020, calculated as: • Vested/exercised stock options and PCS units are valued at time of vesting or exercise, using a performance factor of 131.5% for the completed 2017-2019 cycle, and a factor of 0% for the 2018-2020 cycle. PCS payouts include reinvestment of additional units received as dividend-equivalents. • Unvested/unexercised stock options are valued using $115.90, the closing price of RGA's shares on December 31, 2020. • Open-cycle PCS units are included assuming 0% forecast payouts for the for 2019-2021 and 2020-2022 cycles. |
3 Realized base salary differs from Target base salary due to salary increases, if any, effective in March of each year. |
The substantial magnitude of the difference between target pay and realized pay for Ms. Manning results from the combination of the COVID-19 pandemic’s impact on the Company’s 2020 financial results and the following aspects of the Company’s incentive plans: all plan metrics are absolute, rather than relative to the Company’s peers; the relatively narrow ranges between payout thresholds and targets; the high weighting (75% of target) of the PCS grants as a component of equity incentive awards; and targets for each PCS grant are cumulative over the 3 year performance period.
Actions Taken in Response to COVID-19
Throughout 2020, the Committee monitored the impact of the COVID-19 pandemic on the Company’s 2020 financial results and related compensation plans to understand the impact of expected compensation outcomes across the employee base.
Both the ABP and the equity awards granted prior to 2021:
•were designed around absolute financial metrics,
•did not include metrics comparing the Company’s financial results to those of its peers,
•featured relatively narrow ranges between minimum, target and maximum payout thresholds for the financial metrics that determine payouts, and
•excluded purely time-based equity.
Additionally, the Company’s equity awards are either appreciation only-vehicles (i.e., SARs), or are performance-vested PCS awards. The PCS awards have historically represented 75% of equity grants for named executive officers and were constructed using cumulative financial metrics over a three-year period. Thus, poor performance in a single year significantly reduces or eliminates the value of awards granted in three separate awards cycles.
The Committee believes, based on advice received from its independent compensation consultant Meridian Compensation Partners, that the Company’s equity compensation program has included a higher percentage of performance-vested awards as compared to the Company’s peer group on average. Moreover, because the PCS program currently has no relative performance measurement
component, any outperformance compared to peers or industry would not be captured in PCS payouts. The Committee believes that one-time action by the Committee is necessary because the combination of these design elements and the impact of the COVID-19 pandemic disproportionately affects employee compensation which may negatively impact employee engagement and create talent retention issues and business continuity concerns.
Based on its evaluation of 2020 financial results, the Committee determined that the impact of the pandemic represented a significant decrease in payouts under the ABP that affected 3,249, or over 94% of, Company employees. In response, the Committee considered several potential actions in light of our core Company principles and determined that it was in the best interest of the Company and its shareholders that a one-time exercise of discretion be applied with respect to the 2020 ABP that would positively impact the outcome for the Company’s employees. The Committee believes the distinctive nature of the COVID-19 pandemic warrants this unique action.
With regard to equity incentives granted to 449 employees, the Committee decided that it would make no change to any prior equity awards granted as such modifications would not be consistent with our compensation philosophy. However, the Committee determined that some adjustment to the 2021 equity compensation was warranted based on:
•the uncertainty related to the length of the business recovery for the reinsurance industry,
•the zero payout under the 2020 PCS awards,
•that the Company estimates with a high degree of confidence that payouts for the PCS cycles ending in 2021 and 2022 will also be zero (see “COVID-19 Impacts to Compensation” section above), and
•that these PCS awards have historically comprised 75% of equity for these executives.
The Committee believes these compensation actions will foster the Company’s culture of trust and equity, which is considered instrumental in motivating Company employees to contribute to the Company’s future success, including continued navigation through the COVID-19 pandemic.
The Committee has also made certain design changes for the Company’s 2021 compensation program for the named executive officers and other Company employees. Those changes are discussed below and in more detail under “2021 Compensation Program.”
The actions taken by the Committee with respect to the Company’s five elements of compensation are as follows:
Compensation Element #1 – Base Salary
The Committee has determined that there will be no 2021 merit increases to base salary for senior executives, including the Company’s named executive officers.
Compensation Element #2 – Annual Bonus Plan
Most of the Company’s employees are eligible to receive awards granted under the ABP. Of the Company’s 3,451 employees as at December 31, 2020, 3,249 or 94% participate in the plan. The vast majority of participants in the plan are in non-executive roles, with 86% of participants in the ABP not participating in the Flexible Stock Plan.
With respect to the ABP, the Committee believes that the Company’s 2020 financial results do not represent the performance of employees across the Company in successfully navigating through the COVID-19 pandemic in 2020, nor do the results reflect the strong underlying performance of many areas of the Company’s business. Accordingly, inMarch 2021 the Committee approved a one-time modification to the 2020 ABP awards. The one-time modification to the 2020 ABP awards was designed to reward Company employees for their performance in 2020. As described below, the Committee designed the
payouts to ensure that executives received on average smaller awards compared to their targets while non-executive employees received on average payouts closer to the target amount for such awards. The Committee believes that its exercise of the one-time discretion over the ABP better aligns pay and performance for Company employees as compared to the ABP formulaic outcome.
Pursuant to the terms of the ABP, the Committee is permitted to make all decisions and determinations that may be required under the ABP, including the ability to use positive or negative discretion to modify the compensation payable upon attainment of performance goals. The Committee utilized that discretion to modify the 2020 ABP awards to increase the amount of cash available in the ABP pool by $11.8 million, for a total pool of $74.0 million. The Company estimates that, absent the impact of the COVID-19 pandemic, the 2020 ABP bonus pool would have been approximately $88 million.
The Committee also adopted guidelines for the allocation of the $11.8 million increase in the ABP pool, which focused on employees whose ABP payouts would otherwise be particularly impacted by the overall Company result (22.6% of target) and/or business unit results significantly affected by the COVID-19 pandemic, while capping adjustments for executives. These guidelines:
•Increased the Company’s overall performance metric from 22.6% of target to 80% of target, subject to the caveats described below.
•Based on input from Company management, increased business segment performance to 100% for segments that were materially impacted by COVID-19 claims, subject to the caveats described below. Results for these segments would have generally been at or above target, but for the impact of COVID-19 claims. Of the additional $11.8 million allocated to the ABP pool, $2.6 million was used to adjust payouts for these segments.
•Capped ABP payouts using a tiered approach, as follows:
◦Payouts to employees who do not receive long-term incentive awards under the Flexible Stock Plan are uncapped.
◦Payouts to named executive officers are capped at the greater of: (i) between 65% and 80% (individual caps vary by role) of the target award calculated using the adjusted Company overall performance metric; or (ii) 100% of the award calculated using the unadjusted Company overall performance metric and applicable unadjusted business segment performance metric.
◦Payouts to other Company executives who participate in the Flexible Stock Plan are also capped, with the cap percentage (as a portion of the target ABP award) increasing in tiers, so that lower level executives have a higher average ABP payout as a percentage of target. Such executives receive payouts equal to the greater of: (i) such cap of the target award calculated using the adjusted Company overall performance metric; or (ii) 100% of the award calculated using the unadjusted Company overall performance metric and applicable unadjusted business segment performance metric.
Using this approach, the average payout for all Company employees under the modified ABP is 104.2% of target and the average payout for named executive officers is 76.4% of target.
The following table shows amounts that would have been payable to the named executive officers pursuant to the ABP, both with and without the adjustments described above, as well as a comparison to the target 2020 ABP payout:
| | | | | | | | | | | | | | | | | |
| 2020 ABP PAYOUTS | |
| Named Executive Officer | 2020 Target ABP Payout | 2020 Unadjusted ABP Payout | 2020 Adjusted ABP Payout | 2020 % of Payout vs Target | 2020 Unadjusted ABP % of Target |
| Anna Manning | 1,854,000 | 419,746 | 1,390,500 | 75% | 23% |
| Todd C. Larson | 774,000 | 175,234 | 580,500 | 75% | 23% |
| Alain P. Néemeh | 774,000 | 175,234 | 580,500 | 75% | 23% |
| Leslie Barbi | 565,417 | 64,005 | 452,333 | 80% | 11% |
| John Laughlin | 615,000 | 139,236 | 399,750 | 65% | 23% |
Tony Cheng 1 | 368,395 | 384,126 | 384,126 | 104% | 104% |
1As a result of Company and business unit performance, Mr. Cheng’s unadjusted ABP payout was 104%, thus his award was not subject to adjustment. |
In addition, as described in “2021 Compensation Program” below, the Committee is replacing the “Book Value Excluding Other Comprehensive Income” metric in the 2021 ABP with a strategic scorecard. The scorecard will be based upon an assessment of performance in select key focus areas, including, but not limited to:
•Leadership;
•Strategy;
•Expense and headcount management;
•Cybersecurity and data privacy;
•Diversity, equity and inclusion; and
•Environmental, social and governance.
The Committee also removed the “trigger” for payout of awards under the ABP, which required overall Company financial performance to meet a certain minimum level before any awards are made under the ABP. The Committee believes that the threshold performance criteria for each ABP performance measure provides sufficient performance hurdles. Additionally, the ABP continues to provide that the Committee has the discretion to amend compensation payable under the ABP and the Committee may exercise such discretion to reduce ABP compensation if it believes Company results do not reflect Company performance or if payment would be misaligned with shareholder interests.
Compensation Element #3 – Performance Contingent Awards
The Company’s performance contingent share (“PCS”) program represents a significant portion of target compensation for the Company’s named executive officers and for other executives. As described below, payouts under each PCS award are determined by Company financial performance over a three-year period. Notwithstanding solid financial performance in 2018 and 2019, the PCS awards that vested in 2020 have a zero payout due to the impact of the COVID-19 pandemic on the Company’s financial metrics in 2020. As a result of: (i) the COVID-19 pandemic’s impact on the Company’s 2020 financial performance, (ii) the financial metrics being established prior to the pandemic, (iii) the cumulative nature of the financial metrics for each plan cycle, and (iv) the degree of stretch performance that is built into the performance metrics, the Company estimates with a high degree of confidence that payouts for the PCS cycles ending in 2021 and 2022 will also be zero.
2021 Special One-Time Award. The Committee determined that a one-time equity award to named executive officers and other executives who participate in the Flexible Stock Plan was necessary for the engagement of our executive team to advance our strategic objectives and to recognize the performance of our leaders in navigating the Company through the COVID-19 pandemic. Absent this additional one-time equity award, the impacts to total realized compensation on the Company’sCompany's executive officers arewould have been material and long-lasting, presenting significant challenges in the retention and engagement of key talent, as demonstrated abovebelow under “Realizable"Realized and Realizable CEO Pay Absent One Time
Committee Actions.”Pay." The Committee believes that this one-time grant better alignswas necessary to align pay and performance for participantsour executives given the unprecedented nature of the COVID-19 pandemic.
Realized and Realizable CEO Pay
Given the design of our long-term incentives, Company executives do not realize the full value of their target total direct compensation opportunity unless the Company meets or exceeds critical financial and strategic objectives, and the Company's stock price appreciates. The Committee believes the realizable compensation (as defined below) for our executives, including that for our CEO, Ms. Manning, more accurately describes the compensation they actually realize, as compared to the amounts in the Flexible Stock Plan.Summary Compensation Table and Outstanding Equity Awards at 2022 Year End Table, because such tables do not take into account the actual or expected payouts of equity awards.
For
The following table displays Ms. Manning's target total direct compensation and realizable compensation since she became CEO at the named executive officers, the one-time equity award consistsbeginning of two components of equal size: a performance share unit (“PSU”) grant and a 2017. "Target total direct compensation" is comprised of:
•base salary;
•annual bonus plan (ABP) grants;
•restricted share unit (“RSU”) grant.grants;
•performance contingent awards grants; and
•stock appreciation rights grants.
"Realizable compensation" is comprised of:
•actual annual base salary received;
•ABP payouts received; and
•the estimated value of vested and unvested equity awards as of December 31, 2022.
Over the six-year period detailed below, Ms. Manning's average realized/realizable compensation is 84% of her target compensation, compared to a total shareholder return of 26% over the same time period for the Company's shareholders.
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| REALIZABLE CEO PAY |
| Target Pay1 | Realized/Realizable Actual Pay2 |
| Year | Base Salary | Target Bonus $ | Target LTI | One-Time LTI | Target Total Compensa-tion | Base Salary | Bonus Payout | Realizable/Realized Regular LTI | One-Time LTI | Actual Total Compensa-tion |
| 2022 | $1,030,000 | $2,060,000 | $6,250,000 | $0 | $9,340,000 | $1,030,000 | $3,374,547 | $8,070,854 | $0 | $12,475,401 |
| 2021 | $1,030,000 | $1,854,000 | $5,750,000 | $7,000,000 | $15,634,000 | $1,030,000 | $1,504,315 | $5,288,079 | $7,709,803 | $15,532,197 |
| 2020 | $1,030,000 | $1,854,000 | $5,750,000 | $0 | $8,634,000 | $1,030,000 | $1,390,500 | $2,312,205 | $0 | $4,732,705 |
| 2019 | $1,030,000 | $1,545,000 | $4,500,000 | $0 | $7,075,000 | $1,025,385 | $2,144,954 | $0 | $0 | $3,170,339 |
| 2018 | $1,000,000 | $1,500,000 | $3,750,000 | $0 | $6,250,000 | $992,308 | $1,308,840 | $0 | $0 | $2,301,148 |
| 2017 | $950,000 | $1,235,000 | $3,245,000 | $0 | $5,430,000 | $950,000 | $2,400,574 | $2,451,100 | $0 | $5,801,674 |
| Avg. 2017 - 2022 | $1,011,667 | $1,674,667 | $4,874,167 | N/A | $8,727,167 | $1,009,616 | $2,020,622 | $3,020,373 | N/A | $7,335,577 |
1Average of base salary earned, target ABP opportunity, and long-term incentive value granted from 2017 through 2022. |
2Average of base salary earned, actual ABP payout received, the value of vested/exercised long-term incentive awards, and the estimated current value of unvested/unexercised long-term incentive awards granted from 2017 through 2022, calculated as: |
| ● | Vested/exercised stock appreciation rights (SARs) and performance contingent shares (PCS) units are valued at time of vesting or exercise, using a performance factor of 131.5% for the completed 2017-2019 cycle, and a factor of 0% for the 2018-2020, 2019-2021 and 2020-2022 cycles and a performance factor of 100% for the one-time performance share unit (PSU) award. PCS and PSU payouts include reinvestment of additional units received as dividend-equivalents. |
| ● | Unvested/unexercised SARs are valued based on the spread value between the exercise price and $142.09, the closing price of RGA's shares as of December 31, 2022. |
| ● | Open-cycle performance contingent awards are included assuming target (100%) payouts for the 2021-2023 and 2022-2024 PCS cycles. |
The PSUtable above shows that, including the one-time LTI equity award and the zero payouts for the 2018-2020, 2019-2021 and 2020-2022 PCS awards, will fully vest (i.e., “cliff vest”) for individuals employedMs. Manning's average actual realizable compensation over her six-year tenure as CEO was 84% of target. The Committee believes this is a reasonable outcome that appropriately balances Ms. Manning's exceptional leadership with the Company on December 31, 2022 and pay out in shares of the Company’s common stock. Vesting of the PSU awards is subject to a performance condition which requires the Company to achieve financial results that are within a pre-determined range for at least two of the following measures during each of 2021 or 2022: adjusted operating return on equity; adjusted operating income; or book value per share, excluding AOCI. The plan metrics require robust financial performance when considering the ongoing impactsimpact of the COVID-19 pandemic withon shareholder returns. In what is a long-term business, the Committee believes that the strong financial results in 2022 reflecting financial performance that aligns with a pre-pandemic business environment. Ifdemonstrate the performance condition is not met, there will be no payout under the award. Achieving this performance condition will cause the full valueunderlying strength of the award to vest. No additional amounts will be paid if Company performance exceeds the financial goals.Company's franchise, which has been preserved and strengthened by Ms. Manning's leadership.
The following table showsCommittee believes that the numberCompany's strong performance in 2022, despite a $447 million impact on pre-tax adjusted operating income due to COVID-19, supports the Committee's decision to make the one-time grant of equity to Ms. Manning and value of the PSU grantsother executives, in addition to the named executive officers, based on following considerations:
•the closing price of the Company’s common stock on the date of grant ($129.01 on March 11, 2021). The total value of the PSU awards granted (bothCompany's strong economic performance prior to named executive officers and other executives) is approximately $8 million.
| | | | | | | | |
| 2021 PSU GRANTS | | |
| Named Executive Officer | Number of PSUs awarded | PSU award value |
| Anna Manning | 27,130 | $3,500,000 |
| Todd C. Larson | 5,930 | $765,000 |
| Alain P. Néemeh | 6,201 | $800,000 |
| Leslie Barbi | 1,570 | $202,500 |
| Tony Cheng | 2,732 | $352,500 |
| John P. Laughlin | 4,147 | $535,000 |
The eight members of the Company’s executive committee that are not named executive officers will receive PSU awards with the same conditions as those received by the named executive officers.
2021-2023 PCS Grants. As described in more detail below under “2021 Compensation Program” below, the Committee changed the time period for measurement of PCS performance metrics for the 2021 grants. Rather than measuring Company financial performance on a cumulative basis over a three-year period as done with previous grants, specific financial performance metrics were established for each of 2021 and 2022. Like previous grants, the awards will be subject to a three-year vesting period, with 2023 serving as a time vesting period because of uncertainties regarding (i) the course of the COVID-19 pandemic, and (ii) accounting changes effective January 1, 2023 for publicly traded companiesthe results of which may resultwere negated in significant variability of reported earnings for companies with significant life reinsurance and annuity businesses. The financial performance metrics for 2021 and 2022 both require robust growth over 2020 and 2021, respectively, with 2022 reflecting financial performance that aligns with a pre-pandemic business environment.
Additionally, PCS grants have historically represented 75% ofperformance-based long-term incentive compensation grants for named executive officers. Beginning in 2021, PCS grants will represent 50% of such grants, withawards that would have paid-out during the remaining 50% of grants allocated 25% to restricted stock units and 25% to stock appreciation rights. The Committee believes this mix of equity awards retains an appropriate link between pay and performance, will allowpandemic;
•Ms. Manning's leadership during the COVID-19 pandemic, which helped the Company to better sustain retention needsgenerate meaningful new business during times of uncertaintythe pandemic and in down-markets, and is more aligned with competitive market practice.
Compensation Element #4 – Stock Based Awards
In addition to the PSU awards described above, the Committee made a one-time grant to the named executive officers of RSUs. The RSU awards will fully vest (i.e., “cliff vest”) for individuals employed withstrongly positions the Company on December 31, 2022 and pay out in sharesfor future success;
•the Committee's recognition that the design of certain elements of the Company’s common stock.Company's incentive compensation program (e.g., using absolute financial metrics, not comparing results to Company peers, and relatively narrow ranges between minimum, target and maximum payout thresholds for the financial metrics that determine payouts) did not fairly compensate employees during stress scenarios such as a pandemic; and
The following table shows •the number and value of the RSU grantsdesire to the named executive officers, based on the closing price of the Company’s common stock on the date of grant ($129.01 on March 11, 2021). The total value of the RSU awards granted (both to named executive officersretain Ms. Manning and other executives) is approximately $44 million.senior executives receiving the one-time equity award.
| | | | | | | | |
| 2021 RSU GRANTS | | |
| Named Executive Officer | Number of RSUs awarded | RSU award value |
| Anna Manning | 27,130 | $3,500,000 |
| Todd C. Larson | 5,930 | $765,000 |
| Alain P. Néemeh | 6,201 | $800,000 |
| Leslie Barbi | 1,570 | $202,500 |
| Tony Cheng | 2,732 | $352,500 |
| John P. Laughlin | 4,147 | $535,000 |
Members of the Company’s executive committee will receive RSU awards with the same conditions as those received by the named executive officers. Other Company executives who participate in the Flexible Stock Plan will receive RSU awards, either settled in shares of Company stock or cash depending on position.
In addition, as described in more detail below under “2021 Compensation Program,” beginning in 2021 the Committee will grant 25% of long-term incentive compensation in the form of RSUs, with such award cliff-vesting following a three-year period. Stock appreciation rights grants have represented 25% of long-term incentive compensation grants in prior years and that amount will remain unchanged.
Compensation Element #5 – Retirement and Pension Benefits
The Committee took no action with respect to retirement and pension benefits as a result of the COVID-19 pandemic.
OVERVIEW OF COMPENSATION PRACTICES
2022 Named Executive Officers
Choosing the right leadership for the Company is among the Board's most important responsibilities and both the Board and the Committee are committed to ensuring the Company's leadership team has the right talent, with compensation programs aligned to our strategy and pay aligned to performance and the creation of long-term shareholder value. For 2022, our named executive officers were as follows:
| | | | | |
| 2022 NAMED EXECUTIVE OFFICERS |
| Name | Title |
| Anna Manning | President and Chief Executive Officer until January 4, 2023, and Chief Executive Officer thereafter |
| Todd C. Larson | Senior Executive Vice President, Chief Financial Officer |
| Tony Cheng | Executive Vice President, Head of EMEA, Asia and Australia until January 4, 2023, and President thereafter |
| Leslie Barbi | Executive Vice President, Chief Investment Officer |
| Ronald Herrmann | Executive Vice President, Head of U.S. and Latin American Markets |
Appointment of Tony Cheng as President
On January 4, 2023, the Board announced the appointment of Mr. Cheng as President. Ms. Manning, Chief Executive Officer, relinquished the title of President on such date. The Board also announced that Ms. Manning is expected to retire and relinquish the title of Chief Executive Officer on December 31, 2023, at which time the Board plans to appoint Mr. Cheng as Chief Executive Officer.
Pursuant to an offer letter between the Company and Mr. Cheng, he will receive an annual salary of $750,000 as President.He will continue to participate in the Annual Bonus Plan and his target bonus will be 150% of his annual salary. In light of his expanded responsibilities, ABP goals will be established in his role as President. The offer letter also provides that Mr. Cheng will continue to participate in the Company's long-term incentive program and his target award grant for 2023 will be $2,062,500, allocated to 75% performance contingent shares ("PCS") and 25% stock appreciation rights ("SAR").
The offer letter provides that upon his appointment to Chief Executive Officer and subject to Board approval, Mr. Cheng's annual salary will increase to $950,000, his ABP target will increase to 175% of annual salary and his long-term incentive program target will be $5,700,000.
Our Compensation Philosophy and Objectives
The philosophy and objectives of our executive compensation programs are to:
•create incentives that will focus executives on, and reward for, increasing long-term shareholder value;
•reinforce our pay for performance culture by making a significant portion of compensation variable and based on Company and business unit performance;
•align the long-term financial interests of our executives with those of our shareholders through equity-based incentives and by building executive ownership in the Company; and
•provide competitive total compensation opportunities that will attract, retain and motivate high-performing executives.
In 2020,2022, we used the following performance measures to determine incentive compensation payouts under our Annual Bonus Plan:
•adjusted operating income per share;
•book value per share excluding accumulated other comprehensive income ("AOCI");strategic scorecard;
•new business embedded value; and
•adjusted operating revenue.
For the 2021 ABP, the Compensation Committee replaced the book value per share excluding AOCI metric with aThe strategic scorecard. The scorecard will be an assessment ofis designed to assess performance in select key focus areas, including, but not limited to:areas. For 2022, these were:
•leadership;strategy execution;
•strategy;
•expense and headcount management;
•cybersecurity and data privacy;loss prevention;
•diversity, equity and inclusion; and
•environmental, social and governance.
Specific goals and metrics were developed at the beginning of 2022 for each focus area. In 2020, shares granted under our Performance Contingent Share program usedFebruary 2023, achievements relative to these metrics were assessed by the following performance measures:Committee, based on feedback from management and the Board.
•three-year adjusted operating return on equity;
•three-year adjusted operating income;
•three-year book value per share, excluding AOCI.
For the 2021-2023 PCS program, due to the global pandemic and uncertain business environment, rather than measuring Company financial performance on a cumulative basis over a three-year period as done with previous grants, the Compensation Committee established specific financial performance metrics for each of 2021 and 2022; no2022, with 2023 serving as an additional time vesting period. PCS grants prior to 2021 measured financial metrics were set for 2023. Like previous grants, the awards will be subject toperformance over a three-year vestingperiod, but due to the global pandemic and uncertain business environment the Committee altered the measurement period for the 2021
grants only. In line with shareholder feedback, the grants made in March 2022 for the 2022-2024 PCS program returned to measuring financial performance over a three-year period.
Our grants of stock appreciation rights and restricted stock units are tied to the market price of the Company's common stock.
Compensation Program Practices
We have designed our compensation program to drive performance toward achievement of our short, intermediate and long-term goals and to increase long-term shareholder value, while appropriately balancing risk and reward. We regularly review our program to incorporate appropriate compensation practices, which currently include the following:
| | | | | |
| What We Do |
| ü | Pay-for-Performance.We have a pay-for-performance executive compensation structure that provides an appropriate mix of short, intermediate and long-term performance incentives, with emphasis on the creation of shareholder value. Our executive compensation is closely aligned with financial performance because the majority of the total compensation for our executives is earned only upon the achievement of corporate, business unit and/or individual performance goals. Other than base salary, we do not provide any fixed compensation. |
| ü | Use of Multiple Financial Performance Metrics.In 2020, ourOur incentive compensation programs utilized multiple financial performance metrics, including adjusted operating income per share, book value per share excluding accumulated other comprehensive income, new business embedded value and adjusted operating revenue for our Annual Bonus Plan and three-year adjusted operating return on equity three-year adjusted operating income and three-year book value per share excluding AOCI for our Performance Contingent Shares. These financial metrics are focused on performance and creation of long-term shareholder value. |
| ü | Compensation Benchmarking with Reference to Median.The Compensation Committee reviews publicly available information of peer companies to evaluate how our named executive officers' compensation compares to executives in similar positions at other companies and considers that information when establishing compensation. In most markets, we align our executive compensation target levels with the market median in order to retain current talent and attract new talent. |
ü
| Compensation Recoupment Policy. We have an Executive Incentive Recoupment Policy which permits the Company to recoup all or a portion of an incentive award paid to certain executives upon the occurrence of specified recoupment events, including a financial restatement and misconduct. We have incorporated the provisions of this policy into our Flexible Stock Plan and award agreements. The Company expects to either amend the existing Executive Incentive Recoupment Policy or adopt a new policy in order to comply with upcoming New York Stock Exchange listing standards to be adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and related SEC regulations. |
| ü | Stock Ownership Guidelines. To further align the long-term interests of our executives and our shareholders, we have robust stock ownership requirements for our executive officers. For additional information, see "Stock Ownership - Other Securities Ownership Information - Executive Stock Ownership Guidelines." |
| ü | Independent Compensation Consultant. The Compensation Committee benefits from its use of an independent compensation consulting firm which provides no other services to the Company. |
| ü | Compensation Committee Discretion. Our CompensationThe Committee has discretion to increase, reduce or eliminate any Annual Bonus Plan incentive award.
|
| ü | Programs Designed to Manage Dilution Efficiently. We design our long-term incentive programs to manage dilution through the use of stock-settled stock appreciation rights and net-settled options. |
| ü | Shareholder Value. We design our equity compensation programs to appropriately balance short, medium and long-term focus on key drivers of shareholder value creation. |
| | | | | |
| What We Don't Do |
| X | No U.S. and Canadian Employment Contracts. We do not have any employment or contractual pre-employment severance agreements for our U.S. and Canadian named executive officers and we only offer limited benefits on termination of employment. |
| X | Limited Perquisites. We do not offer our executives personal benefit perquisites, such as aircraft, cars or apartments and we do not reimburse our executives for personal benefit perquisites such as club dues or other social memberships, except in some foreign countries where such perquisites are required to maintain a local competitive position. |
| X | No Preferential Payments. We do not pay preferential or above market returns on executive deferred compensation. |
| X | Limited Benefits Upon Change in Control. We have limited benefits upon change in control and our Flexible Stock Plan does not require that awards automatically accelerate upon a change in control. |
| X | No Repricing of Grants. Our Flexible Stock Plan prohibits repricing for underwater stock options and stock appreciation rights. |
| X | No Golden Parachutes or Gross-Ups. We do not have any golden parachute agreements or tax gross-ups for severance payments with our executives. |
| X | No Speculative Trading. Our Insider Trading Policy prohibits employees and directors from short-selling Company securities, and strongly discourages the use of margin accounts, standing and limit orders or any other transaction where there is no control over the timing of purchases or sales which could result in a trade occurring at a time when the employee is aware of material non-public information or otherwise not permitted to trade. |
| X | No Unapproved Hedging.Our Insider Trading Policy prohibits employees and directors from engaging in hedging or monetization of Company securities, which can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forward contracts, equity swaps, collars and exchange funds. Exemptions to this general prohibition may be sought from the General Counsel on a case-by-case basis and are subject to pre-clearance. |
| X | Pledging Discouraged. Our Insider Trading Policy strongly discourages employees and directors from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan. |
Say on Pay Feedback from Shareholders
A primary focus of our Compensationthe Committee is whether the Company's executive compensation program serves the best interests of the Company's shareholders. At the Company's 20202022 Annual Meeting, our shareholders cast 98%62% of votes in support of the compensation program described in the proxy statement for that meeting. This is consistentThe Committee was disappointed with this result and sought to engage with shareholders as a result of this vote. Thus, the Company engaged in a shareholder outreach program as described under "Corporate Governance - Shareholder Engagement and Board Responsiveness" above. Prior to 2022, shareholder feedback on executive compensationSay on Pay at our previous annual meetings:meetings was uniformly positive as reflecting in the following table:
| | | | | |
| Annual Meeting Year | Percentage of Votes Cast in Favor of "Say on Pay" |
| 2020 | 98% |
| 2019 | 98% |
| 2018 | 98% |
| 2017 | 98% |
| 2016 | 98% |
| Five Year Average | 98% |
| | | | | |
| Annual Meeting Year | Percentage of Votes Cast in Favor of "Say on Pay" |
| 2021 | 95% |
| 2020 | 98% |
| 2019 | 98% |
| 2018 | 98% |
| 2017 | 98% |
| 2016 | 98% |
| 2015 | 98% |
| 2014 | 97% |
| 2013 | 99% |
| 2012 | 96% |
| Ten Year Average (excluding 2022) | 97.5% |
As part of its ongoing review of our executive compensation program, the Compensation Committee took the votesshareholder feedback into consideration, along with an overall review of the compensation program, when making compensation decisions for 20202022 and 2021.2023. Please see "Shareholder Engagement and Board Responsiveness" above.
Compensation Pay Mix
The following graph demonstrates 20202022 target compensation pay mix by elements* for each of our named executive officers:officers who continue to be employed by the Company:
| | | | | | | | | | | | | | |
| *Calculation excludes pension and retirement benefits. |
*Calculation excludes pension and retirement benefits.
FIVE ELEMENTS OF COMPENSATION
Compensation Elements
Our compensation program consists of the following five elements:
| | | | | | | | | | | | | | | | | |
| Element | Form | Key FeaturesFIVE ELEMENTS OF COMPENSATION |
1.Compensation Elements |
| Our compensation program consists of the following five elements: |
| Element | Form | Key Features |
| 1. | Base Salary | Cash | ● | Fixed compensation intended to attract and retain top talent. |
| ● | Generally, we target base salary around the median of our peer companies, but this varies with individual skills, experience, responsibilities, performance and performance.location. |
2020 |
| ● | Represents approximately 27%23.8%* of the average named executive officer target total compensation for 2020.2022. |
20212. | Annual Bonus
Plan | Cash | ● | Serves as an annual performance incentive to achieve established business goals. |
| ● | No increase in base salary for any of our senior executives in 2021, including our named executive officers. |
| | | | | | | | | | | | | | | | | |
2. | Annual Bonus
Plan | Cash | ● | Intended to motivate annual performance with respect to key financial and other metrics. |
● | Tied to one or more of the following factors: overall Company performance, performance of the participant's division or business unit and individual performance. |
| ● | Performance goals established in the first quarter of each year with financial goals of each business unit aligning to corporate goals. |
| ● | Payouts range from 0% of target payout to 200% of target payout, depending on performance. |
2020 |
| ● | In 2020, theThe Annual Bonus Plan company-wide financial objectives were measured using the following components: (i) adjusted operating income per share; (ii) book value per share excluding accumulated other comprehensive income;strategic scorecard; (iii) new business embedded value;value and (iv) annual adjusted consolidated revenue. |
● | The Compensation Committee used discretion to authorize a one-time modification to the 2020 plan due to the impact of the COVID-19 pandemic on the Company's financial performance. Payouts were capped using a tiered approach. |
● | Represents approximately 25%* of named executive officer target total compensation for 2020. |
2021 |
● | The Compensation Committee replaced the book value excluding other comprehensive income performance metric (with a weighting of 25%) in the 2021 ABP with a strategic scorecard. The scorecard will beis an assessment of performance in select key focus areas, including: leadership; strategy; expense and headcount management;including strategy execution; cybersecurity and data privacy; diversity, equityloss prevention; DEI and inclusion; and environmental, social and governance.ESG. |
3.● | Performance
Contingent
Awards | Equity | ● | Intended to motivate performance with respect to key financial measures and align our executives' interests with those of our shareholders. |
● | Performance goals established at the beginning of each three year cycle and fully vest after three years. |
● | Payouts range from 0% of target payout to 200% of target payout, depending on Company performance. |
2020 |
● | For awards granted in 2020, performance contingent share ("PCS") payouts were based on the following measures: (i) three-year adjusted operating return on equity; (ii) three-year adjusted operating income; and (iii) three-year book value per share, excluding accumulated other comprehensive income. |
● | Due to the impactRepresents 28.5%* of the COVID-19 pandemic on the Company’s 2020 financial results, Company financial performance for the 2018-2020 PCS performance period was below the threshold required for payment with respect to each of the three metrics, resulting in a zero payout overall. |
● | Performance contingent awards represented approximately 36%* ofaverage named executive officer target total compensation for 2020. |
2021 |
● | As a result of: (i) the COVID-19 pandemic’s impact on the Company’s 2020 financial performance, (ii) the financial metrics being established prior to the pandemic, (iii) the cumulative nature of the financial metrics for each PCS plan cycle, and (iv) the degree of stretch performance that is built into the PCS performance metrics, the Company estimates with a high degree of confidence that payouts for the PCS cycles ending in 2021 and 2022 will also be zero. |
● | The Committee changed the time period for measurement of PCS performance metrics for the 2021 grants. Rather than measuring Company financial performance on a cumulative basis over a three-year period as done with previous grants, specific financial performance metrics were established for each of 2021 and 2022, with 2023 serving as a time vesting period. |
● | Beginning in 2021, PCS grants will represent 50% of long-term incentive compensation granted to named executive officers. |
● | The Compensation Committee authorized a one-time equity award grant of performance share units ("PSU") for the named executive officers and other plan participants. |
4. | Stock Based
Awards | Equity | ● | Intended to motivate performance, promote appropriate risk-taking, align our named executive officers' interests with shareholders' interests and promote retention. |
● | Stock appreciation rights vest on December 31 of the fourth year of grant (25% per year). |
2020 |
● | Stock appreciation rights represented approximately 12%* of named executive officer target total compensation for 2020. |
2021 |
● | Beginning in 2021, 25% of long-term incentive compensation for named executive officers and other plan participants will be in the form of RSUs, with such awards cliff-vesting after a three year period. Stock appreciation rights grants have represented 25% of long-term incentive compensation grants in prior years and that amount will remain unchanged. |
● | Due to the impact of COVID-19 on the Company's financial performance, the Compensation Committee granted the named executive officers and other plan participants a one-time grant of RSUs. The RSU awards will fully vest (i.e., “cliff vest”) for individuals employed with the Company on December 31, 2022 and pay out in shares of the Company’s common stock.2022. |
| | | | | | | | | | | | | | | | | |
5.3. | Performance
Contingent
Awards | Equity | ● | Serves as a performance incentive to achieve established long-term financial measures and align our executives’ interests with those of our shareholders. |
| ● | Performance goals established at the beginning of each three-year cycle and fully vest after three years. |
| ● | Payouts range from 0% of target payout to 200% of target payout, depending on Company performance. |
| ● | Due to the impact of the COVID-19 pandemic on the Company's 2020 and 2021 financial results, Company financial performance for the 2018-2020, 2019-2021 and 2020-2022 performance contingent share ("PCS") performance periods was below the threshold required for payment with respect to each of the three metrics, resulting in a zero payout overall for each of these three performance cycles. |
| ● | PCS grants represent 50% of long-term incentive compensation grants for 2021 and 2022. For the 2023 PCS grants, PCS represents 100% of the long term compensation grant for the CEO, 75% for the President and 60% for all other named executive officers. |
| ● | For 2022 and 2023 grants, the Company is measuring financial performance over a three-year period, consistent with historical practice. Performance is based on (i) three-year average adjusted return on equity and (ii) three-year book value per share, excluding accumulated other comprehensive income, growth rate. Results may be modified up or down by a maximum of 10% based on three-year relative total shareholder return. Targets established for the 2022 grant have been adjusted for impacts of Long-Duration Targeted Improvements ("LDTI") under new GAAP accounting rules effective January 1, 2023. |
| ● | Performance contingent awards represented 23.9%* of the average named executive officer target total compensation for 2022. |
| 4. | Stock Based
Awards | Equity | ● | Intended to motivate performance, promote appropriate risk-taking, align our named executive officers' long-term interests with shareholders' interests and promote retention. |
| ● | Stock appreciation rights vest 25% per year, on December 31 of each year. |
| ● | Restricted Share Units cliff-vest after a three year period. |
| ● | Restricted share units represented 11.9%* of the average named executive officer target total compensation for 2022. |
| ● | Stock appreciation rights represented 11.9%* of the average named executive officer target total compensation for 2022. |
| 5. | Retirement and Pension Benefits | Deferred Cash | ● | Intended to provide a competitive level of post-employment income as part of a total rewards package that supports our ability to attract and retain key members of our management. |
| ● | In the U.S. and Canadian retirement and pension benefits differ, but generally, there are two types of plans: qualified plans and non-qualified plans. |
● | ● | Qualified plans are provided to eligible employees up to specified maximum amounts as determined by federal tax authorities. |
● | ● | Non-qualified plans are provided to eligible employees who earn compensation above the maximum amounts established by federal tax authorities. |
| ● | Hong Kong retirement and pension benefits are split between: (i) a mandatory provident fund where employees and employer contribute up to a maximum amount;amount and (ii) a supplementary fund for compensation in excess of the maximum amount applicable to the mandatory provident fund benefit. |
| *Calculation excludes pension and retirement benefits. Average percentages are rounded. |
The performance contingent awards and the stock-based awards described above collectively form the Company's long-term incentive ("LTI") plan. For 2021 and 2022, the LTI for named executive officers comprised of 50% PCS, 25% RSUs and 25% SARs. For 2023, the LTI was allocated as follows:
•100% PCS for Ms. Manning;
•75% PCS and 25% SARs for Mr. Cheng; and
•60% PCS, 20% RSUs and 20% SARs for all other named executive officers.
The structure of the 2023 LTI award for Ms. Manning took into consideration that 2023 will be her last year as Chief Executive Officer.
Compensation Element #1 - Base Salary
The Compensation Committee begins its annual review of base salary for the named executive officers and senior management through discussion with the CEO on the previous year's expectations and achievements for each executive and their pay histories. In addition, the Compensation Committee references the base salary pay levels as compared to similar roles at our peer companies, as well as relevant third party external market data for roles other than the CEO and CFO.companies. The annual base salary determinations for executives are typically effective in the first quarter of each year, on or about March 1, following the executive's annual performance review, which includes a discussion about individual results against
defined expectations. Adjustments to base salary are made periodically to recognize competitive changes, personal performance or change in position or responsibilities.
Compensation Element #2 - Annual Bonus Plan
Approximately 94%98% of our employees participateparticipated in our 2022 Annual Bonus Plan ("ABP"), which provides annual cash incentive compensation based on one or more of the following factors: the Company's overall performance, the performance of the participant's division, business unit or department and individual performance during the previous year. Under the ABP, participants may receive a cash bonus each year. Actual payouts are capped at 200% of target.
The ABP award is designed to serve as a short-term incentive. The target-level financial performance goals established by the Compensation Committee are intended to require substantial efforts by our management team toward our strategic goals, while at the same time they are intended to be within reach if such efforts are made and provide additional rewards for extraordinary achievement. The Compensation Committee establishes ABP objectives for the Company before the end of the first quarter each year and determines results and awards in March of the following year. In 2020,2022, ABP financial objectives arewere measured using the following components:
20202022 COMPANY ANNUAL BONUS PLAN METRICS
| | | | | | | | |
| Component | Weight | Definition |
Adjusted Operating Income Per Share1 | 50% | Adjusted operating income per share is our net income per share from continuing operations less realized capital gains and losses and certain other non-operating items. |
Book Value Per Share Excluding AOCI1
Strategic Scorecard | 25% | Book value per shareThe Strategic Scorecard is an annual assessment of accomplishments and progress on strategic non-financial goals and is comprised of the Company's total equity excluding Accumulated Other Comprehensive Income ("AOCI") divided by total common stock outstanding.following four categories: Strategy Execution; Cybersecurity and Data Loss Prevention; Environmental, Social and Governance (ESG) and Diversity, Equity and Inclusion (DEI). |
| New Business Embedded Value | 15% | New business embedded value ("NBEV") is a measure of the value of the profits expected to emerge from new business net of the cost of supporting capital. NBEV is a forward-looking calculation that reflects the lifetime value created through new business sales. |
Annual Adjusted Consolidated Revenue1 | 10% | Annual adjusted consolidated revenue is total revenues earned by the Company less any excluded transactions undertaken for capital management or risk management purposes during the annual performance period. For 2020, there were no excluded transactions. |
1See "Use of Non-GAAP Financial Measures" on page 11589 for reconciliations from GAAP figures to adjusted operating figures. |
The targets established by our Compensationthe Committee reflect our annual goals for these metrics. The allocation of ABP awards between individual, business unit and overall Company performance varies for each participant and is based on his or her job responsibilities. In general, allocations for business unit, departmental and individual performance are weighted more heavily for employees with less overall Company responsibility. In contrast, allocations for the Company's overall performance are weighted more heavily for senior executives because their roles involve greater Company-wide responsibility. Awards are based on a specific target percentage of salary, which varies for each participant.
Business unit results are based on each business unit's financial performance metrics. Individual performance results are measured by progress on major projects, productivity, leadership, client development or similar goals in which the employee played a major role. While we intend to tie individual performance to clearly articulated and objective measures, it is necessary and at times prudent for management to use a certain degree of discretion in evaluating individual results. Based on these criteria, the Compensation Committee approves a list of senior management participants, which includes (as applicable) individual incentive and/or business unit or division allocations, a minimum performance level that must be met before any payment can be made, as well as a target and a maximum.
Business unit results are based on each business unit's financial performance metrics. While we intend to tie individual performance to clearly articulated and objective measures, it is necessary and at times prudent for management to use a certain degree of discretion in evaluating individual results. We consider business unit and individual performance when evaluating total compensation and may from time to time establish a specific ABP allocation for a particular business objective or project. The types of individual performance that may be taken into consideration include contributions toward revenue growth, earnings per share, return on equity capital, expense management, operational activities, risk management or product or client development, as well as intangible items such as progress toward achievement of
strategic goals, leadership capabilities, development of staff or progress on major projects in which the individual holds a key role.
In March 2021,
The Strategic Scorecard is an annual assessment of accomplishments and progress on strategic non-financial goals in recognition of their importance to protecting, supporting, and enhancing the Compensation Committee replacedCompany's brand, client partnerships, regulatory position, and other organizational objectives. It has an overall weight allocation of 25% of the book value per share excluding AOCI metricCompany ABP, with the individual goal weighting as detailed below:
•Cybersecurity/Data Loss Prevention (20%). This goal focuses on enabling the business, navigating the regulatory landscape, managing cyber to an acceptable level of risk, and building a culture of privacy and security.
•Environmental, Social, and Governance (15%). The ESG category measures the Company's performance in executing a strategy and priorities for 2022 and beyond that address the Company's environmental impact, social responsibility, and governance policies.
•Diversity, Equity, and Inclusion (15%). The DEI component assesses efforts to foster a culture that embraces and accepts differences, empowers the workforce through education, and attracts, hires, and develops a diverse workforce.
•Strategy Execution (50%). This goal encompasses four areas where success is essential to the execution of the Company's five-year strategy:
1.Long-Duration Targeted Improvements ("LDTI"). Implementation of new accounting rules, which take effect January 1, 2023, and impact how we measure and report key financial metrics.
2.U.S. Pension Risk Transfer. This goal is linked to fully developing and deploying our capabilities to enable us to compete for business in the 2021 ABP withfuture.
3.Alternative Capital. This goal focuses on our ability to generate capital for new business through innovative transactions and alternative retrocessions.
4.Update Pricing Model. This goal is linked to a strategic scorecard. initiative designed to ensure that the Company's pricing framework and biometric assumptions enable decisions that are consistent with our risk appetite.
The scorecard will be an assessment ofStrategic Scorecard categories and Company performance in select key focus areas, including, but not limited to: leadership; strategy; expenseeach category were evaluated on a 1-5 scale, with "3" as meeting expectations, "1" as fully missing expectations, and headcount management; cybersecurity and data privacy; diversity, equity and inclusion; and environmental, social and governance.
"5" as fully exceeding expectations. The Committee also removed the “trigger” for payout of awards under the 2021 ABP, which requireddetermined an overall Company financial performance to meet a certain minimum level before any awards are made under the ABP. The Committee believes the thresholdsresult for each metric are sufficiently challenging so as to not require an overall trigger. In addition,goal and the total scorecard based on input from management and all Board members. The Committee's recommendation also required endorsement from the Board.
Additionally, we modify the calculation of Adjusted Operating Earnings Per Share and Adjusted Total Revenue for purposes of the ABP statesto exclude variable investment income ("VII") such as earnings from non-coupon investments, including joint ventures and limited partnerships, prepayment fees, and call premium and consent fees from fixed maturity investments under certain circumstances.We will make such an adjustment if VII fallsoutside of a range of -50% to +50% of variable investment income expected in our annual financial plan. The following is the 2022 plan and range of variable investment income which illustrate the amounts that thewould not be subject to such an adjustment:
| | | | | | | | | | | |
| (USD Millions) | 50% | Plan | 150% |
| Variable investment income | $101.2 | $202.4 | $303.6 |
The Committee has the discretion to amend compensation payable under the ABP and the Committee may exercise such discretion to reduce ABP compensation if it believes Company financial results do not appropriately represent Company performance and efforts or if payment would be misaligned with shareholder interests. We believe this creates better market alignment with the ABP design.
Compensation Element #3 - Performance Contingent Awards
Our Performance Contingent Awards are part of a performance-driven incentive program under our Amended & Restated Flexible Stock Plan ("Flexible Stock Plan"). The Flexible Stock Plan provides for the grant of performance contingent shares ("PCS"), performance share units ("PSUs"), stock options, stock appreciation rights ("SARs"), net-settled stock options, restricted stock, restricted stock units ("RSUs") and other stock basedstock-based awards, as well as cash awards, to our employees. Executives in leadership or senior management roles, or who are considered top subject matter experts within our Company, participate in this program.
Our PCS program represents a significant portion of target compensation for our named executive officers and for other senior executives. The PCS grants are designed to allow us to reward the
achievement of specific corporate financial performance goals with equity that is earned on the basis of Company performance.
We implemented our performance contingent award program because we believe it is consistent with our pay-for-performance compensation philosophy and achieving the financial performance necessary to increase shareholder value. We believe that the PCS grants require management to focus on growth and return on equity, while the SARs and RSUs are designed to focus attention on accomplishment of longer-term goals and the creation of long-term shareholder value.
The Compensation Committee annually evaluates the appropriate mix of pay elements in comparison to the market to remain competitive in our compensation practices and to best support our strategy. We also annually review the performance metrics in order to ensure they accurately align compensation with our intermediate-term goals and make changes or adjustments to such metrics when appropriate.
The following table describes the performance measures for the three-year performance period for PCS awards granted in 2017:
2017-2019 PCS PERFORMANCE METRICS
| | | | | | | | |
Component | Weight | Definition |
Three-Year Adjusted Operating Return on Equity ("ROE")1
| 33.5% | ROE is calculated as adjusted operating income divided by average shareholders' equity excluding Accumulated Other Comprehensive Income ("AOCI") for the three-year performance period. Adjusted operating income and equity excluding AOCI are non-GAAP financial measures. |
Three-Year Relative Return on Equity ("Relative ROE") | 33.5% | Relative ROE is the percentile ranking of the Company's ROE relative to the ROE of certain competitor companies over the same three-year performance period. |
Three-Year Adjusted Operating Revenue Growth Rate1
| 33.0% | Three-year adjusted operating revenue growth rate is the compounded average growth rate of the Company's consolidated adjusted operating revenue over the three-year performance period using the Company's annual consolidated adjusted operating revenue for the fiscal year immediately preceding the date of grant as the base year. |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. |
Beginning with the awards granted in 2018, the Compensation Committee approved three new metrics for the PCS program in order to better align executives' efforts and decisions with business results over the intermediate-term. The PCS performance awards granted in 2018 and onward are based on the following absolute metrics: (i) three-year adjusted operating return on equity; (ii) three-year adjusted operating income; and (iii) three-year book value per share, excluding AOCI. The following table describes these performance measures:
2018-2020 PCS PERFORMANCE METRICS
| | | | | | | | |
Component | Weight | Definition |
Three-Year Adjusted Operating Return on Equity1
| 33.5% | This metric is calculated as cumulative Adjusted Operating Income (defined below) for the three-year period divided by average adjusted stockholders’ equity. Adjusted stockholders’ equity represents total stockholders’ equity excluding AOCI. The average of adjusted stockholders’ equity will use monthly data points during the 3-year measurement period. ROE, AOI and stockholders’ equity excluding AOCI are non-GAAP financial measures. |
Three-Year Adjusted Operating Income1
| 33.5% | This metric is calculated as net income excluding substantially all of the after-tax effect of net investment related gains and losses, changes in the fair value of certain embedded derivatives and related deferred acquisition costs, any net gain or loss from discontinued operations, the cumulative effect of any accounting changes occurring after the targets have been established, and other items that management and the Compensation Committee believe are not indicative of the Company’s ongoing operations. |
Three-Year Book Value per Share, Excluding AOCI1
| 33.0% | This metric is defined as adjusted stockholders’ equity divided by the end of period outstanding shares of the Company's common stock. Adjusted stockholders’ equity represents total stockholders’ equity excluding accumulated other comprehensive income (“AOCI”). Book value per share and adjusted stockholders’ equity excluding AOCI are non-GAAP financial measures. |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. |
The Compensation Committee sets award levels with a minimum level of Company performance that must be met before any payment to the individual can be made, as well as a target and a maximum. We use linear interpolation to determine the percentage of the target when performance falls between the minimum, target or maximum performance levels. If we do not meet minimum performance goals, payouts under the awards will not be made. If we exceed those performance goals, payouts under the award can be as much as 200% of the targeted award opportunity. As the Compensation Committee considers the financial objectives for a particular performance period, targets are set at amounts or ranges that are generally consistent with our publicly disclosed growth rate goals. The Compensation Committee believes that achievement of the targets will require a high level of financial and operating performance and the goals and ranges established for all PCS grants are challenging but achievable.
PCS grants are not treated as outstanding shares until the performance results over the three-year performance period are calculated and payouts under the awards are made as determined and approved by the Compensation Committee. Payouts are made in common stock. Payment is also contingent upon the participant's employment status with the Company at the end of the three-year performance period.
As discussed below under "Executive Compensation Process - Competitive Marketplace Assessment," the Committee determines a target total compensation package for our named executive officers based on an analysis of competitive market conditions and overall Company performance. All participants are required to maintain an acceptable level of performance to be eligible to receive equity incentive awards. In March 2021,For the Compensation2021-2023 PCS program, the Committee changed the time period for measurement of PCS performance metrics for the 2021 grants only. Rather than measuring Company financial performance on a cumulative basis over a three-year period as was done with previous grants,established specific financial performance metrics were established for each of 2021 and 2022, with 2023 serving as aan additional time vesting period. Like previousPCS grants the awards will be subjectprior to 2021 measured financial performance over a three-year vesting period.period, but due to the global pandemic and uncertain business environment the Committee altered the measurement period for the 2021 grants only.
2021-2023 PCS PERFORMANCE METRICS (MEASURED IN EACH OF 2021 AND 2022 ONLY) | | | | | | | | |
| Component | Weight | Definition |
Adjusted Operating Return on Equity1 | 33.5% | This metric is is calculated as adjusted operating income for the applicable year divided by average adjusted stockholders' equity. Adjusted stockholders' equity represents total stockholders' equity excluding accumulated other comprehensive income. The average of adjusted stockholders' equity will use monthly data points during the one-year evaluation period. |
Adjusted Operating Income1 | 33.5% | This metric is calculated for the applicable year as net income excluding substantially all of the after-tax effect of net investment related gains and losses, changes in the fair value of certain embedded derivatives and related deferred acquisition costs, any net gain or loss from discontinued operations, the cumulative effect of any accounting changes occurring after the targets have been established, and other items that management and the Committee believes are not indicative of the Company's ongoing operations. |
Book Value per Share, Excluding AOCI1 | 33.0% | This metric is defined as adjusted stockholders' equity for the applicable year divided by the end of period outstanding shares of the Company's common stock. Adjusted stockholders' equity represents total stockholders' equity excluding accumulated other comprehensive income ("AOCI"). Book value per share and adjusted stockholders' equity excluding AOCI are non-GAAP financial measures. |
1See "Use of Non-GAAP Financial Measures" on page 89 for reconciliations from GAAP figures to adjusted operating figures. |
In March 2022, the Committee eliminated the Adjusted Operating Income metric from PCS grants represented 75%to remove overlap with the same metric in the Annual Bonus Plan. Going forward, the Company will use the two remaining metrics to measure PCS performance — three-year book value per share, excluding AOCI (50%) and average operating return on equity (50%). Additionally, the Committee has added a Relative Total Shareholder Return modifier, recognizing both the prevalence of relative total shareholder return metrics among the Company's peers and the importance of measuring the Company's performance against its peers. The Committee believes the addition of this modifier better aligns the Company's long-term incentive compensation program with market practices and reflects broader competition for investor capital. As such the metrics for PCS grants for named executive officers, whichthe 2022-2024 performance period are:
2022-2024 PCS PERFORMANCE METRICS
| | | | | | | | |
| Component | Weight | Definition |
Book Value per Share, excluding AOCI, Growth ("BVPS Growth")1 | 50.0% | BVPS Growth for each Performance Cycle is defined as the average of the annual growth rates in book value per share, excluding AOCI, for each year in the performance cycle. |
Average Operating Return on Equity ("Average ROE")1 | 50.0% | Average ROE for each Performance Cycle is defined as the average "Adjusted operating return, excluding standard adjustments, on equity (ex AOCI) - trailing 12 months" for each of the three years of the Performance Cycle. Standard adjustments identified are actuarial assumption reviews (e.g., mortality, morbidity, and lapse assumption changes and their impact on reserves and the carrying value of deferred acquisition costs), variable investment income outside of a range of -50% to +50% of income on these investments included in the three-year plan, and integration costs or other adjustments related to merger and acquisition activity. Standard adjustments represent a positive or negative impact to adjusted operating income. |
1See "Use of Non-GAAP Financial Measures" on page 89 for reconciliations from GAAP figures to adjusted operating figures. |
The Company's Relative Total Shareholder Return ranked against an established group of companies will modify the results of the above metrics up or down by a maximum of 10%. The established group of companies is a higher allocation of performance shares thandifferent from the average of our peer companies. In orderCompany's Peer Group and includes Life and Health Insurance peers that respond similarly to rebalance the award allocation and better align with peers, the 2021 PCS grants will represent 50% of such long-term incentive compensation grants, with the remaining 50% of grants allocated 25% to RSUs and 25% to SARs.macroeconomic environment.
For information on the one-time special awards granted in 2021, see "Compensation Discussion and Analysis - COVID-19 Impact and Response."
| | | | | |
| Relative TSR Modifier Peer Group |
| Aflac Incorporated | Manulife Financial Corporation |
| American Equity Investment Life Holding Company | MetLife, Inc. |
| Brighthouse Financial, Inc. | Primerica, Inc. |
| CNO Financial Group, Inc. | Principal Financial Group, Inc. |
| Globe Life Inc. | Prudential Financial, Inc. |
| iA Financial Corporation Inc. | Sun Life Financial Inc. |
| Lincoln National Corporation | Unum Group |
The Committee may remove a company from the established group due to events that have a substantial impact on their business, including bankruptcy, insolvency, merger or similar events that significantly change the operational scope of the company.
Award payouts are also subject to adjustment as a result of changes in the award's performance metrics related to the Company's adoption of Long-Duration Targeted Improvement accounting changes.
Compensation Element #4 - Stock Based Awards
Stock Appreciation Rights
Stock Appreciation Rights ("SARs") are granted annually under our Flexible Stock Plan to executives in leadership or senior management roles, or to employees considered top subject matter experts within the Company. The number of SARs granted annually is based on the grant recipient’srecipient's position and level of responsibility within the Company. The Compensation Committee considers compensation data of our peer companies and published surveys in determining the total target compensation, inclusive of SARs granted to our named executive officers and other participants. We believe this program focuses participants on our strategic and financial goals while aligning our executives’ interests with those of our shareholders and promoting retention. For more information on our peer companies, see "Executive Compensation Process - Competitive Marketplace Assessment."
The vesting schedule for SARs grants is four years, 25% of which vests on December 31 of each of the four years. The grant value of a SAR is equal to the NYSE closing price of the Company's common stock on the grant date of the award (i.e., the date of the March Compensation Committee meeting at which the Committee approves the grants), multiplied by a Black-Scholes Model factor (which calculates the current economic value of a SAR using assumptions that include exercise price, the term of the award, a risk-free rate of interest, dividend yield and observed market volatility). Upon vesting, the SARs become exercisable by recipients and upon exercise are settled in the equivalent value of unrestricted shares of common stock. The SARs expire 10 years after the grant date.
Restricted Stock Units
The Company grants non-qualified net-settled stock options for Canadian executives in lieu of SARs to alleviate certain negative tax consequences for these executives. These non-qualified net-settled stock options ("NSOs") are similar to SARs from the recipient's perspective, in that when exercised the executive receives a number of shares with a value equal to the spread between the strike price and the stock price at exercise (less withholdings). Upon net settlement, the NSOs are taxed as stock options under Canadian law, while SARs are taxed as ordinary income. NSOs and SARs have the same impact on the Company and thus, the issuance of these NSOs results in tax efficiencies for the executive with no increased costs for the Company or impact to share usage under the Flexible Stock Plan. For convenience, when we discuss SARs throughout this Proxy Statement, such discussion includes NSOs for our Canadian executives.
As described above in "Compensation Element #3 - Performance Contingent Awards," in March 2021, the Compensation Committee reduced the allocation to PCS and added an annual grant of restricted stock units ("RSUs") to executives in leadership or senior management roles, or to employees considered top subject matter experts within our Company under our Flexible Stock Plan. The number of RSUs granted annually will be based on the grant recipient's position and level of responsibility within the Company. The Compensation Committee considers compensation data of our peer companies and published surveys in determining the total target compensation, inclusive of RSUs, granted to our named executive officers and other participants. We believe this program aligns our executives' interests with those of our shareholders and promotes retention.
RSUs will vest on December 31st of the third year from grant. Upon vesting, the RSUs will beare settled usingin unrestricted shares of common stock.
The performance contingent awards and the stock-based awards described above collectively form the Company's long-term incentive ("LTI") plan. For information on2021 and 2022, the one-time special awards granted in 2021, see "Compensation DiscussionLTI for named executive officers comprised of 50% PCS, 25% RSUs and Analysis - COVID-19 Impact25% SARs. For 2023, the LTI was allocated as follows:
•100% PCS for Ms. Manning;
•75% PCS and Response."25% SARs for Mr. Cheng; and
•60% PCS, 20% RSUs and 20% SARs for all other named executive officers.
The structure of the 2023 LTI award for Ms. Manning took into consideration that 2023 will be her last year as Chief Executive Officer.
Compensation Element #5 - Retirement and Pension Benefits
We recognize the importance of providing comprehensive and cost-effective employee benefits to attract, retain and motivate employees. We offer our executives market competitive retirement programs as described below, including defined contribution savings plans, traditional defined benefit and hybrid defined benefit pension plans and an executive deferred savings plan. The Company reviews its retirement and pension benefits programs from time to time and makes adjustments to the design of
the programs as necessary to meet these objectives and to remain competitive. Because our named executive officers are residents of or previously accrued benefits in the United States, CanadianCanada and Hong Kong, residents, we have described the benefits in those jurisdictions below. In response to COVID-19, retirement and pension benefits remained unchanged from 2020.
Qualified and Registered Plans - U.S.
Savings Plan. U.S.-based employees of the Company may participate in a qualified 401(k) plan and make pre-tax or after-tax (Roth)and Roth elective deferrals to the plan ("Savings Plan"). Employees may contribute up to the maximum allowed by the U.S. Internal Revenue Code. The Company provides matching contributions on elective deferrals up to 5% annually. The Company also provides a 2% fixed employer contribution to employees who work at least 1,000 hours and are employed on December 31. In compliance with the U.S. Internal Revenue Code for 2020,2022, contributions to the Savings Plan cannot be made on cash compensation in excess of $285,000$305,000 and employee contributions were limited to a maximum of $26,000$27,000 ($19,50020,500 plus an additional $6,500 for those 50 years of age and older).
Employees hired on or after January 1, 2020 who participate in the Savings Plan will be eligible for a 5% Company-provided fixed employer contribution (instead of the 2% fixed employer contribution) if they work at least 1,000 hours and are employed on December 31.
As of December 31, 2020,2022, Ms. Manning, Mr. Larson, Ms. Barbi and Mr. LaughlinHerrmann participated in the U.S. Savings Plan.
Pension Plan. U.S. based employees, including certain named executive officers, participate in the RGA Performance Pension Plan ("Pension Plan"), a qualified defined benefit plan. The Pension Plan is a widely available retirement plan, for all full-time employees hired before January 1, 2020, thatand is intended to provide a source of income for employees during retirement. The Pension Plan provides a "Performance Pension Account Benefit," that is generally defined as a lump sum account balance payable on or after termination of employment. The account balance may be converted to an actuariallyactuarial equivalent annuity benefit.
Employees hired before January 1, 2020 are eligible to participate in the pension plan and accrue benefits under the Performance Pension Account Benefit (subject to the age and service requirements required by the plan to begin participation). Employees hired on or after January 1, 2020 are not eligible to participate in the Pension Plan. Employees rehired with the Company on or after that date will not be eligible to accrue further benefits in the Pension Plan.
As of December 31, 2020,2022, Ms. Manning and Messrs. Larson Laughlin and Cheng were eligible to receive the Performance Pension Account Benefit. Mr. Cheng does not accrue additional benefits under the plan since his transfer of employment outside of the U.S., but he is vested in a Performance Pension Account Benefit from his prior service in the U.S. and will accrue additional benefits under the plan when he relocates to the U.S.
Non-qualified and Supplemental Plans - U.S.
Non-qualified Augmented Plan. The Company's Augmented Benefit Plan ("Augmented Plan") is designed to restore benefits unavailable in the qualified Savings Plan and Pension Plan due to IRS compensation limitations for qualified plans, which was $285,000$305,000 for 2020.2022. The Augmented Plan provides U.S. based executives at the vice president level and above benefits based on an employee's annual cash compensation, in accordance with the Internal Revenue Code. The Augmented Plan
provides executives the opportunity to receive employer matching, employer non-elective contribution credits, and additional pension plan credits without regard to qualified plan limitations imposed by the IRS.
The Augmented Plan has two components: a 401(k) Savings component and a Pension component. All contributions to the Augmented Plan are made by the Company. The matching contribution credits in the 401(k) Savings component of the Augmented Plan are only made in the event
if an employee's compensation for the year has not otherwise been matched with a credit in the Executive Deferred Savings Plan.
The investment fund alternatives in the savings portion of the Augmented Plan are identical to the options in the qualified Savings Plan, except the Augmented Plan includes a fixed rate option, which offers a fixed interest rate set at the beginning of the plan year. The Company credits the employee's non-qualified deferred compensation account with the returns he or she would have received in accordance with the investment alternatives selected by the employee. The Company does not pay above-market or preferential earnings, compensation or returns under the Augmented Plan or any other plan. Distributions from the Augmented Plan cannot be made until the participant is no longer employed by the Company.
Non-qualified Executive Deferred Savings Plan. U.S. employees at the vice president level and above are eligible to participate in our Executive Deferred Savings Plan ("EDSP"), a non-qualified savings plan which allows employees to defer income, including ABP payments, without regard to qualified plan limitations. For the 20202022 plan year, eligible employees are able to defer up to 50% of their base salary and up to 75% of their ABP payments.
The Company credits EDSP accounts with matching contributions equal to the matching contributions unavailable to the employee under the Savings Plan (100% of total deferrals up to 5% of compensation in 2020)2022) due to IRS compensation limits in the Savings Plan. Employees cannot withdraw any amounts from EDSP balances until they are no longer employed by the Company or reach the designated distribution date selected by the employee at the time of their deferral election. With respect to these distributions, participants may elect to receive either a lump-sum payment or 2 to 15 annual installments.
The investment fund alternatives under the EDSP are identical to those in the Savings Plan, except the EDSP includes a fixed rate option, which offers a fixed interest rate set at the beginning of the plan year. The Company credits the participant's non-qualified deferred compensation account(s) with the returns he or she would have received in accordance with the investment alternatives selected by the employee. The Company does not pay above-market or preferential earnings, compensation or returns under EDSP or any other plan.
As of December 31, 2020,2022, Ms. Manning, Mr. Larson, Ms. Barbi and Mr. LaughlinHerrmann were eligible to participate in the EDSP.
Supplemental Payment Agreement. As previously disclosed, in a Current Report on Form 8-K filed on July 25, 2019, the Company agreed to provide a supplemental payment (the "Supplemental Payment") to Ms. Manning upon her retirement from the Company, as an acknowledgment of the financial implications on her retirement benefits with respect to her relocation to the U.S. from Canada in 2016. The Supplemental Payment is designed to supplement the post-retirement benefits she will receive under the Company's U.S. and Canadian retirement and savings plans in order to provide her with an aggregate financial value comparable to that which she would have received under the Company's U.S. retirement and savings plans had she worked in the U.S. for her entire career.
The Supplemental Payment will represent the difference between (i) the value of the Company-provided benefits that she would have received upon her retirement had she worked her entire career (starting upon her hire date in 2007 through retirement) in the U.S., and (ii) the value of Company-provided benefits that she will actually receive upon retirement from the Company. For this purpose, Company-provided benefits include any savings, pension or deferred compensation benefits funded by the Company based on her deferrals of pay, additional non-elective contributions to company
retirement accounts and any subsequent investment returns credited to those deferred compensation accounts based on contribution from the Company. The value of any salary deferrals by Ms. Manning, including any subsequent investment return credited to those retirement accounts for those salary deferrals, is not included in the calculation of the Supplemental Payment.
The Supplemental Payment will be made in U.S. dollars and is payable after Ms. Manning’sManning's retirement from the Company as a single lump sum payment.
Qualified and RegisteredCanadian Plans - Canada
Registered Pension Plan. All permanent Canadian employees are required to join the defined contribution plan on their date of hire. Each employee is required to contribute, by payroll deduction, an amount equal to 5%6% of their annual earnings (base salary and ABP payments), up to 50% of the maximum allowable limit per calendar year as set under the Canadian Income Tax Act. The Company contributes, on behalf of each employee, an amount equal to the required contribution of the employee, up to 50% of the maximum allowable limit per calendar year as set under the Canadian Income Tax Act. For 2020, the maximum allowable limit for combined employer and employee contributions is CAD $27,830. Employer contributions are immediately vested.
Effective January 1, 2021, the required employee contribution and matching Company contribution was increased to 6% of annual earnings, subject to the same limitations under the Canadian Income Tax Act described above.
Company and employee contributions cannot be accessed by the employee until an employee retires at age 55 or later. Voluntary contributions made by the employee above the required contribution level are permitted under the plan and the employee may withdraw such funds at any time. Upon termination or retirement and subject to applicable legislation and tax withholding, plan participants may purchase a deferred or immediate life annuity contract or transfer the value of the benefit to another registered pension plan, registered retirement savings plan or any form of registered retirement income fund.
In 2020, Mr. Néemeh participated in the Registered Pension Plan. Ms. Manning previously participated in the Registered Pension Plan before her relocation to the U.S., and she continues to maintain an accumulated balance of past employee and employer contributions.
Non-qualified and Supplemental Plans - Canada
Defined Benefit Supplemental Executive Retirement Plan. The Company offersoffered a defined benefit Supplemental Executive Retirement Plan ("DB SERP") in Canada to employees at the vice president level and above who are approved by senior management. This plan is closed to new participants. An employee must also participate in the Registered Pension Plan to participate in the DB SERP. The DB SERP offers a traditional defined benefit annuity to participants based on the average of their highest five consecutive years of compensation that is above certain compensation thresholds set out in the plan. The DB SERP benefit is calculated using a number of factors including the employee's years of credited service and average pensionable earnings, each determined on the date the employee ceases to be an executive in Canada or leaves the Company. Benefits are payable at the time an employee leaves the Company.
Effective January 1, 2020, no new executives may participate in the DB SERP. Executives hired on or after January 1, 2020 or who are promoted to an eligible executive position after January 1, 2020 will be eligible for a newly established defined contribution supplemental executive retirement plan offered by the Company. In addition, the DB SERP's accrual formula was changed so that service accruals after December 31, 2019 will accrue a smaller benefit on a participant's final average compensation above a certain level.
Effective January 1, 2021, the threshold for compensation eligible for the DB SERP was updated to mirror the threshold for the newly established defined contribution supplemental executive
retirement plan (defined below). Accruals in the DB SERP for any service on or after January 1, 2021 will be based on any compensation not eligible for the underlying Registered Plan benefit due to Canadian Income Tax Act contribution limitations.
An employee who retires on or after age 60 and has completed at least five years of uninterrupted employment with the Company is entitled to receive an annual supplementary allowance under the DB SERP. The allowance is a non-indexed pension that does not increase with inflation. The annual supplementary allowance payable is converted from the employee's accrued life annuity benefit to an actuarial equivalent lump sum or annuity with a term of 10 years of less. All benefits under the DB SERP are subject to applicable withholding tax and reporting pursuant to the Canadian Income Tax Act and other applicable law.
Under the DB SERP, an employee may elect to retire at age 50, provided the employee has completed at least five years of uninterrupted employment with the Company, and subject to a reduction of the employee's annuity benefit of 0.33% for each month by which the employee retires before age 60.
Defined Contribution Supplemental Executive Retirement Plan. The Company offers a defined contribution Supplemental Executive Retirement Plan (“DC SERP”) in Canada to employees at the vice president level and above and approved by senior management. Any employee hired or promoted on or after January 1, 2020 is eligible for participation in the DC SERP (and not eligible to accrue benefits in the DB SERP). An employee must also participate in the Registered Pension Plan to participate in the DC SERP.
The DC SERP provides an employer contribution credit of 10% applied to any compensation not eligible for the underlying Registered Plan benefit due to Canadian Income Tax Act contribution limitations. Contribution credits are made to a notional account that is invested at the direction of the plan participant. Notional accounts will have the same investment options as those offered in the Registered Pension Plan accounts.
Benefits offered in the DC SERP are subject to a 5-year cliff vesting requirement. The value of the accumulated notional account is generally eligible to begin payment after an employee terminates from the Company upon reaching early retirement eligible age of 55 via installments of 10 years or less. All benefits under the DC SERP are subject to applicable withholding tax and reporting pursuant to the Canadian Income Tax Act and other applicable law.
In 2020, none of the Named Executive Officers participated in the DC SERP plan.
Supplemental Retirement Plan - Hong Kong
The Company offers a supplemental retirement plan to all full-time regular employees in Hong Kong. The plan includes both a mandatory contribution component under the Hong Kong Mandatory Provident Fund ("MPF") system and a voluntary contribution as a supplementary retirement provided by the Company.
Under the plan, both the Company and Hong Kong employees are each required to make regular mandatory contributions calculated at 5% of the employee's relevant income to an MPF plan, subject to the minimum and maximum relevant income levels. The maximum relevant income level is capped at HK$HKD 30,000 per month in 2020.2022.
In addition to the mandatory portion, the Company makes contributions at a total of 10.8% of the base remuneration, up to a maximum amount, less any mandatory employer contributions. The
maximum amount for calculating the contributions is set at HK$HKD 2.5 million per annum. The benefit is subject to a vesting schedule associated with years of continuous service with the Company.
The Hong Kong supplementary retirement plan has a 10 year10-year graded vesting period. Contributions to this supplementary retirement fund are typically not available for use by employees, even after they terminate employment with the Company, until they reach age 65.
As of December 31, 2020,2022, Mr. Cheng participated in the Hong Kong supplementary retirement plan. Mr. Cheng is part of a separate subgroup for which the contributions made to the supplementary retirement fund are not limited to the maximum base salary limitation. The supplementary contribution for Mr. Cheng is based on his full base salary remuneration.
EXECUTIVE COMPENSATION PROCESS
The Role of the Compensation Committee
Our executive compensation program is evaluated and approved by the Compensation Committee with the objective of providing incentive-based compensation that aligns with the business goals of the Company and the interests of our shareholders. The Compensation Committee also determines the compensation of the Chief Executive Officer ("CEO") and evaluates and approves the compensation for the members of senior management of the Company, including our named executive officers.
Timing of Compensation Decisions
The Compensation Committee approves compensation for executive officers in March of each year. All compensation and incentive awards are made in consideration of market pay competitiveness and in comparison to peer company and published survey data.
In 2020,October 2021, the CompensationCommittee approved 2022 compensation for the executive officers other than the CEO, inclusive of base salary and targets for both bonus and long-term incentive awards. In February 2022, the Committee approved compensation for the CEO for 2022. In March 2022, the Committee approved the grants of PCS, RSU and SARs awards in March.SAR awards. Equity grants are effective on and have a grant date of the same day as the Compensation Committee meeting. The PCS awards are measured by financial performance over a three-year period. The strike price for grants of SARs is the NYSE closing price of our common stock on the day of the Compensation Committee meeting. This timing and process is designed to ensure that our fourth quarter earnings information (typically released in late January)January or early February) is fully disseminated to the market by the time the SARs strike price is determined.
Compensation ConsultantsConsultant
In forming its recommendations on our overall compensation program, the Committee annually engages an independent consulting firm to provide advice about competitive compensation practices and to determine how our executive compensation compares to that of other comparable companies, including selected publicly held insurance and reinsurance companies. In 2020,2022, Meridian Compensation Partners, LLC ("Meridian") served as independent advisor to the Compensation Committee.
The Committee directly engaged Meridian to advise and assist with decisions relating to our executive compensation program, including providing advice regarding incentive plan design, annual comprehensive competitive market studies, competitive compensation data for directors, technical advice on disclosure requirements relating to executive compensation and to apprise the Compensation Committee of compensation market practices. Meridian also performs competitive marketplaces assessments of our named executive officers, which includes a comparison to our peer companies and published survey data. Meridian will also periodically conduct reviews of our incentive plans to ensure a competitive position.
Other than work for the Compensation Committee, Meridian provides no other services to the Company or its affiliates. Additionally, the Company's Compensation Committee determined no conflicts of interest existed to prevent Meridian from serving as an independent advisor to the Compensation Committee.
Management Participation and Involvement in Compensation Decisions
Pursuant to the Compensation Committee charter, the Compensation Committee reviews and approves the compensation of our CEO, other named executive officers and senior management. The CEO plays a significant role in the compensation-setting process for the named executive officers (other than the CEO). The CEO and senior management play a significant role in setting compensation for management and all other employees. No member of management is involved in determinations regarding their own pay. The most significant aspects of management's role are:
•evaluating employee performance;
•recommending business performance targets, goals and objectives; and
•recommending salary levels, ABP and equity incentive award targets.
Our CEO and Chief Human Resources Officer work with the Compensation Committee chair to establish the agenda for Compensation Committee meetings. The Company prepares relevant information and reports for each Compensation Committee meeting. Our Chief Executive OfficerCEO participates in Compensation Committee meetings at the Compensation Committee's request to provide:
•background information regarding our strategic objectives;
•an evaluation of the performance of the senior management and direct reports; and
•compensation recommendations as to senior management and direct reports.
Our executives and other members of management are made available to Meridian or any other compensation consultant to provide information regarding position descriptions, compensation history and other information as requested, and to review draft results provided by Meridian.
Competitive Marketplace Assessment
In July 2020, we worked with Meridian to consolidateWe use our previousestablished peer groups into a single setgroup of peer companies in order to evaluate our compensation practices for purposes such as pay levels and payperformance design to determine competitivefor our named executive pay, identify differences from general industry market data and to provide benchmarks for setting an appropriate compensation structures.offices as well as director compensation.
| | | | | |
20202022 Peer Companies |
| Aflac, Incorporated | Globe Life, Inc.Lincoln National Corp. |
AmericanAssurant, Inc. | Manulife Financial Corp. |
| Brighthouse Financial, Inc. | Principal Financial Group, Inc. |
| CNO Financial Group, Inc. | Sun Life Financial, Inc. |
| Equitable Holdings, Inc. | The Hartford Financial Services Group, Inc. |
American National Insurance CompanyGlobe Life, Inc. | Lincoln National Corp.Unum Group |
Assurant,iA Financial Corporation Inc. | Principal Financial Group, Inc. |
Brighthouse Financial, Inc. | Sun Life Financial, Inc. |
CNO Financial Group, Inc. | Unum Group |
Equitable Holdings, Inc. | Voya Financial, Inc. |
| |
The Committee selected the members of the peer group from companies in the life and health insurance industry based on the size of these firms as compared to the Company. The Committee analyzed the peer group based on total revenue, market capitalization and total assets. The Committee believes the Company's relative size based on these metrics makes the peer group a good basis for helping the Committee assess appropriate levels of compensation for the Company's senior executives. The following table presents a summary of these metrics for the peer group as compared to the
Company: | | | | | | | | | | | |
| PEER GROUP METRICS |
| Total Revenue1 ($M) | Market Capitalization1 ($M) | Total Assets1 ($M) |
| 25th Percentile | $6,879 | $6,021 | $62,225 |
| Median | $11,642 | $9,391 | $139,335 |
| 75th Percentile | $17,427 | $23,225 | $251,225 |
| RGA | $16,258 | $9,497 | $84,706 |
| RGA Percentile Rank | 66% | 50% | 40% |
1Total Trailing 12-months Revenue and Total Assets are based on most recent annual or quarterly public disclosure as of December 31, 2022. Market Capitalization is presented as of December 31, 2022. |
Peer Company Changes
The Compensation Committee regularly reviews the companies we use to evaluate our compensation practices for purposes such as pay levels and pay design and performance comparisons.design. In
2020, 2022, Meridian performed an analysis onof the Company's previous Pay Level Peer Group and Pay Design Peer Group. Atrecommended the recommendationremoval of two companies due to acquisition and divestiture activities. American National was acquired in May 2022 and American Financial Group divested its annuity business and is now solely focused on property and casualty insurance. As a result, Meridian also recommended adding iA Financial and Manulife Financial Corporation into the Compensation Committee decided to consolidate the two groups into a single list of peer companies and discontinue the use of separate peer groups to assist in executive compensation comparisons. The Compensation Committee also removed Athene Holdings as a peer company and added Sun Life Financial, Inc. to this list of peer companies.
group. We review and update this information periodically in order to ensure that our peer company comparators remain appropriate in light of evolving practices with respect to peer determinations, mergers and acquisitions, divestitures, growth in our size and the size of those companies and other changes which might affect the appropriateness of a particular comparator.
How We Use Peer Company Data
When making determinations in 20202022 relating to base salary, target total cash compensation, intermediate and long-term incentives and target total direct compensation for our named executive officers, we used the competitive compensation analysis provided by Meridian as the beginning reference point. This analysis included a review and assessment of publicly disclosed compensation data for our peer companies, as well as additional industry-appropriate survey data. In most markets, we align our target executive compensation levels with the market median in order to retain current talent and attract new talent. In addition to a review of the competitive compensation data provided by Meridian, we also considered individual performance, internal pay equity among positions and levels and the relative importance of positions. We believe that the compensation strategy we established aligns our target compensation with the market median and should allow us to retain our current talent and attract new talent.
Please see "Five Elements of Compensation - Compensation Element #3 - Performance Contingent Awards" above for additional information on the peer group used for the Relative TSR modifier.
20202022 COMPENSATION ACTIONS AND RESULTS
Compensation Element #1 - Base Salary
In determining the base salaries of our named executive officers, the Compensation Committee considers internal equity, tenure, individual performance and our compensation compared to that of our peer companies, as well as published surveys. The Compensation Committee also considers recommendations submitted to it by our Chief Executive Officer for the other named executive officers.
2020 NAMED EXECUTIVE OFFICER BASE SALARIES
| | | | | | | | |
| Name | 2020 Base Salary | 2020 Percentage Increase |
| Anna Manning | $1,030,000 | 0.0% |
| Todd C. Larson | $645,000 | 7.5% |
| Alain P. Néemeh | $645,000 | 4.0% |
| Leslie Barbi | $575,000 | n/a1 |
| Tony Cheng | $613,9922 | 4.0% |
| John P. Laughlin | $615,000 | 3.4% |
1Ms. Barbi was not employed byThe Committee has reviewed and approved the Company the previous year.
2Mr. Cheng's baserelevant salary was converted to USD using an average annual foreign exchange rate.changes as follows: | | | | | | | | | | | | | | |
| | | | |
| 2022 AND 2023 NAMED EXECUTIVE OFFICER BASE SALARIES |
| Name | 2022 Base Salary | 2022 Percentage Increase | 2023 Base Salary | 2023 Percentage Increase |
| Anna Manning | $1,030,000 | 0.0% | $1,100,000 | 6.8% |
| Todd C. Larson | $675,000 | 4.7% | $700,000 | 3.7% |
Tony Cheng1 | $638,538 | 5.0% | $750,000 | 17.5% |
| Leslie Barbi | $600,000 | 4.3% | $625,000 | 4.2% |
| Ronald Herrmann | $630,000 | 5.0% | $650,000 | 3.2% |
1Mr. Cheng's 2022 base salary was converted to USD using an average annual foreign exchange rate. For 2023, effective with his promotion to President, his base salary is determined in USD. |
Compensation Element #2 - Annual Bonus Plan ("ABP")
20202022 Annual Bonus Plan Awards.Awards. In February 2020,2022, the Compensation Committee approved the performance goals and business criteria for the named executive officers under the ABP for 2020,2022, including the minimum, target and maximum ABP opportunities, as a percentage of base salary, as described in the table below. Overall Company financial performance must meet certain minimum
levels, as determined in advance by the Compensation Committee, before any payouts under the awards are made. The performance goals the Committee established were meant to require substantial efforts by our management team toward our strategic goals, but at the same time they were intended to be within reach if such efforts are made, and also provide additional rewards for extraordinary achievement. We believe that goals that are too difficult to attain would not have the effect of providing appropriate incentives. At the time the goals were set, COVID-19 was continuing to substantially impact Company results, with estimated COVID-19 related claims incurred for 2021 and the first quarter of 2022 of $1.4 billion and $310 million, respectively, and there was significant uncertainty regarding the ongoing impact of the pandemic on expected Company performance.
| | | | | | | | | | | | | | | | | | | | |
| Annual Bonus Plan (based only on overall Company financial performance) |
| Performance Measures and Goals | Minimum | 2020 Target | Maximum | Numerical Results | Weight | Payout Percent |
Adjusted Operating Income Per Share1 | $12.94 | $13.91 | $14.88 | $7.54 | 50.0% | 0.0% |
| 93.0% | | 107.0% | | | |
Book Value Per Share Excluding AOCI1 | $136.80 | $144.00 | $151.20 | $132.33 | 25.0% | 0.0% |
| 95.0% | | 105.0% | | | |
| New Business Embedded Value | $325.00 | $580.00 | $835.00 | $561.20 | 15.0% | 14.4% |
| 56.0% | | 144.0% | | | |
Annual Adjusted Consolidated Revenue1 | $14,121.00 | $14,864.00 | $15,607.00 | $14,595.88 | 10.0% | 8.2% |
| 95.0% | | 105.0% | | | |
Unadjusted Payout2 | | | | | | 22.6% |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. 2See "COVID-19 Impact and Response" on page 28 for additional information. |
| | | | | | | | | | | | | | | | | | | | |
| ANNUAL BONUS PLAN (BASED ON OVERALL COMPANY PERFORMANCE) |
| Performance Measures and Goals | Minimum | 2022 Target | Maximum | Numerical Results | Weight | Payout Percent |
| Adjusted Operating Income Per Share | $1.20 | $4.81 | $6.01 | $13.73 | 50.0% | 100.0% |
| 25.0% | | 125.0% | | | |
| Strategic Scorecard | 1.00 | 3.00 | 5.00 | 4.00 | 25.0% | 37.5% |
| 0.0% | 100.0% | 200.0% | | | |
| New Business Embedded Value | $375.00 | $680.00 | $985.00 | $671.50 | 15.0% | 14.8% |
| 55.0% | | 145.0% | | | |
| Annual Adjusted Consolidated Revenue | $14,360.0 | $15,955.0 | $17,551.0 | $16,197.8 | 10.0% | 11.5% |
| 90.0% | | 110.0% | | | |
Payout1 | | | | | | 163.8% |
1See "COVID-19 Impact and Paying for Performance" on page 29 for additional information. |
We limit the impact of variable investment income on the calculation of total adjusted revenue and EPS under the ABP by excluding earnings that are outside of a range of -50% to +50% from that assumed in our annual financial plan. For 2022, this adjustment decreased total adjusted revenue by approximately $60 million and decreased EPS by approximately $0.70 as variable investment income exceeded our expectations.
In March 2021,February 2023, the Compensation Committee approved the ABP awards for our named executive officers for 20202022 performance. Ms. Manning had ABP allocations based 100% on overall Company financial results. Messrs.Mr. Larson Néemeh and Laughlin had ABP allocations based 95% on overall Company financial results and 5% based on Cyber Mindset results for Finance and Corporate Development departments as well as individual performance. Mr. Cheng has ABP allocations based 50% on overall Company results, 45% based on Asia and EMEA segment results and 5% based on Cyber Mindset results for the segments as well as individual performance. Ms. Barbi had ABP allocations based 50% on overall Company financial results, and 45% on
departmental results (Investments), and 5% on Cyber Mindset results for Investments, as well as individual performance. Mr. ChengHerrmann had ABP allocations based 50% on overall Company financial results and45% on business unit results (Asia segment),(US Markets) and 5% Cyber Mindset results for US Markets, as well as individual performance. The weighted average of the Company-specific ABP financial performance metrics for 20202022 performance was 22.6%163.8%.
As described in "Compensation DiscussionIn 2022, a Cyber Mindset goal was added to the ABP to reinforce the criticality of data loss prevention and Analysis - COVID-19 Impactdata protection and Response"reflect the Compensation Committee applied its discretionCompany's increased focus on cybersecurity. The Cyber Mindset goal contained three metrics linked to ongoing Company-wide "phishing" simulations and adjusted ABP payouts for certain named executive officerstimely notifications of terminations, all to further the Company's protection against cybercriminals and other bad actors. Results were measured at both the Company employees. and Business Unit or Department level, with outcomes ranging from 162% to 189% of target.
As previously described on page 39 above, we adjust the calculation of Adjusted Operating Earnings Per Share and Adjusted Total Revenue for purposes of the ABP if our variable investment income falls outside of the predetermined range.In the aggregate for 2022, we reported variable investment income of $363.6 million, of which $60 million of which was excluded because of this adjustment.
As a result of this adjustment, for purposes of the ABP:
•$0.70 was excluded from Adjusted Operating Earnings Per Share, decreasing the total from $14.43 to $13.73; and
•$60 million was excluded from Adjusted Total Revenue, decreasing revenue from $16.26 billion to $16.20 billion.
The following table describes the minimum, target and maximum ABP opportunities for the named executive officers (as a percentage of base salary) as approved by the Compensation Committee in February 2020,March 2022, and the actual ABP payments for 20202022 performance, as approved by the Committee in March 2021:February 2023:
| | | | | | | | | | | | | | | | | | | | |
| 2020 INDIVIDUAL ANNUAL BONUS PLAN RESULTS |
| Name | ABP Threshold1 | ABP Target1 | ABP Maximum1 | 2020 Target ABP Award in Dollars | Actual ABP Percentage of Target for 2020 | Actual ABP Payment for 2020 |
| Anna Manning | 90% | 180% | 360% | $1,854,000 | 75.0% | $1,390,500 |
| Todd C. Larson | 60% | 120% | 240% | $774,000 | 75.0% | $580,500 |
| Alain P. Néemeh | 60% | 120% | 240% | $774,000 | 75.0% | $580,500 |
| Leslie Barbi | 50% | 100% | 200% | $565,417 | 80.0% | $452,333 |
| Tony Cheng | 30% | 60% | 120% | $368,395 | 104.0% | $384,126 |
| John P. Laughlin | 50% | 100% | 200% | $615,000 | 65.0% | $399,750 |
1Expressed as | | | | | | | | | | | | | | | | | | | | |
| 2022 INDIVIDUAL ANNUAL BONUS PLAN RESULTS |
| Name | ABP Threshold1 | ABP Target1 | ABP Maximum1 | 2022 Target ABP Award in Dollars | Actual ABP Percentage of Target for 2022 | Actual ABP Payment for 2022 |
| Anna Manning | 100% | 200% | 400% | $2,060,000 | 163.8% | $3,374,547 |
| Todd C. Larson | 65% | 130% | 260% | $877,500 | 165.0% | $1,448,070 |
| Tony Cheng | 50% | 100% | 200% | $642,050 | 164.1% | $1,053,366 |
| Leslie Barbi | 60% | 120% | 240% | $720,000 | 173.7% | $1,250,328 |
| Ronald Herrmann | 50% | 100% | 200% | $630,000 | 168.4% | $1,060,970 |
1Expressed as a percentage of base salary. |
The Committee approved the performance measures and ABP opportunities for 2023 (as a percentage of base salary.
salary) as follows:
| | | | | | | | | | | |
| 2023 ANNUAL BONUS PLAN OPPORTUNITIES |
| Name | ABP Threshold | ABP Target | ABP Maximum |
| Anna Manning | 100% | 200% | 400% |
| Todd C. Larson | 65% | 130% | 260% |
| Tony Cheng | 75% | 150% | 300% |
| Leslie Barbi | 100% | 200% | 400% |
| Ronald Herrmann | 50% | 100% | 200% |
Compensation Element #3 - Performance Contingent Awards
2017-2019 PCS Results. In February 2017, the Compensation Committee established theThe Company's performance contingent share ("PCS") program represents a significant portion of target and rangecompensation for the following Performance Contingent Share ("PCS")Company's named executive officers and for other executives. As described below, payouts under each PCS award are typically determined by Company financial performance measures: (i)over a three-year adjusted operating ROE; (ii) three-year Relative ROE and (iii) three-year revenue growth rate, for the period beginning in 2017 at levels that were consistent with our intermediate-term goals for those measures. The payout results for the 2017-2019 PCS grants were determined in late April 2020, once Relative ROE results for the cycle were determined, and payments were made in May 2020. The following table describes the PCS payouts for the 2017-2019 performance period:period.
2017-2019 PERFORMANCE CONTINGENT SHARE PAYOUT
| | | | | | | | | | | |
| Name | Percentage Payout | Number of Shares Acquired on Payout | Value Realized
on Payout |
|
| Anna Manning | 131.5% | 24,672 | $2,107,976 |
| Todd C. Larson | 131.5% | 4,745 | $405,413 |
| Alain P. Néemeh | 131.5% | 5,323 | $454,797 |
Leslie Barbi1 | — | — | — |
| Tony Cheng | 131.5% | 2,898 | $247,605 |
| John P. Laughlin | 131.5% | 4,144 | $354,063 |
1 Ms. Barbi was not employed by the Company when 2017-2019 PCS grants were made.
2018-2020 PCS Results. In February 2018, the Compensation Committee established the target and range for the following PCS performance measures: (i) three-year adjusted operating ROE; (ii) three-year adjusted operating income and (iii) three-year book value per share, excluding AOCI. These measures were set for the period beginning in 2018 at levels that were consistent with our intermediate-term goals for those measures. The performance period for the 2018 PCS grant began on January 1, 2018 and ended on December 31, 2020.
In February 2021, the Compensation Committee reviewed the results for the 2018-2020 performance period and determined that none of the metrics met the threshold level. The following table describes the goals established in February 2018 and actual results:
| | | | | | | | | | | | | | | | | | | | |
| 2018-2020 PCS RESULTS |
| Performance Measure | Weight | Threshold | Target | Maximum | Actual | Percentage of Target Payout |
Three-Year Adjusted Operating Return on Equity1 | 33.5% | 9.5% | 10.5% | 11.5% | 8.9% | 0% |
Three-Year Adjusted Operating Income1 ($M) | 33.5% | $2,403.0 | $2,597.9 | $2,792.7 | $2,138.2 | 0% |
Three-Year Book Value per Share, Excluding AOCI1 | 33.0% | $138.31 | $145.59 | $152.87 | $130.60 | 0% |
| Weighted Average | | | | | | 0% |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. |
For additional information, see "Compensation Tables and Other Matters - SARs and Option Exercises and Stock Vested in 2020."
2019-2021 2020-2022 PCS Awards. In March 2019, the Compensation Committee established the targets and ranges for the following PCS performance measures: (i) three-year adjusted operating return on equity; (ii) three-year adjusted operating income and (iii) three-year book value per share, excluding AOCI. These measures were set for the period beginning in 2019 at levels that are consistent with our intermediate-term goals for those measures. The performance period for the 2019 PCS grant began on January 1, 2019 and will end on December 31, 2021. The Company estimates with a high degree of
confidence that the 2020 financial results will eliminate the possibility of any future payments under the PCS awards granted for the 2019-2021 performance period.
2020-2022 PCS Awards.In early March 2020, before the global nature and severity of the COVID-19 pandemic was understood, the Compensation Committee established the targets and ranges for the following PCS performance measures: (i) three-year adjusted operating return on equity; (ii) three-year adjusted operating income and (iii) three-year book value per share, excluding AOCI. These measures were set for the period beginning in 2020 at levels that are consistent with our intermediate-term goals for each measure. The performance period for the 2020 PCS grant began on January 1, 2020 and ended on December 31, 2022.
In February 2023, the Committee reviewed the results for the 2020-2022 performance period and determined that none of the metrics met the threshold level. As a result of: (i) the COVID-19 pandemic's impact on the Company's 2020 and 2021 financial performance, (ii) the financial metrics being established prior to the pandemic, (iii) the cumulative nature of the financial metrics for each plan cycle and (iv) the degree of stretch performance that is built into the performance metrics, the payout for the PCS cycle ending in 2022 was zero. The following table describes the goals established in February 2020 and actual results:
| | | | | | | | | | | | | | | | | | | | |
| 2020-2022 PCS RESULTS |
| Performance Measure | Weight | Threshold | Target | Maximum | Actual | Percentage of Target Payout |
Three-Year Adjusted Operating Return on Equity1 | 33.5% | 9.5% | 10.5% | 11.5% | 5.1% | 0% |
Three-Year Adjusted Operating Income1 ($M) | 33.5% | $2,608.5 | $2,820.0 | $3,031.5 | $1,401.9 | 0% |
Three-Year Book Value per Share, Excluding AOCI1 | 33.0% | $154.66 | $162.80 | $170.94 | $139.32 | 0% |
| Weighted Average | | | | | | 0% |
1See "Use of Non-GAAP Financial Measures" on page 89 for reconciliations from GAAP figures to adjusted operating figures. |
2021-2023 PCS Awards. In March 2021, the Committee changed the time period for measurement of PCS performance metrics for the 2021 grants due to (i) the uncertain nature of the COVID-19 pandemic, and (ii) the inability at the time to reasonably determine metrics for a three-year plan given the pending implementation of Long-Duration Targeted Improvements in 2023. Rather than measuring Company financial performance on a cumulative basis over a three-year period as done with previous grants, specific financial performance metrics were established for each of 2021 and 2022, with 2023 serving as an additional time vesting period. The Committee established the targets and ranges for applicable annual PCS performance measures: (i) one-year adjusted operating return on equity; (ii) one-year adjusted operating income and (iii) one-year book value per share excluding AOCI. These measures
were set in the first quarter of 2021 for the applicable periods beginning in 2021 and 2022 respectively at levels that were the Committee's best estimate for stringent performance measures given significant uncertainty regarding the future development of the COVID-19 pandemic, the response thereto and related impacts on expected Company performance. The vesting period for the 2022 PCS grant began on January 1, 2021 and will end on December 31, 2022.2023.
In February 2023, the Committee reviewed the results for the 2021 and 2022 performance periods and determined: (i) for 2021, Adjusted Operating Return on Equity and Adjusted Operating Income did not meet minimum threshold levels and Book Value per Share, Excluding AOCI exceeded target; and (ii) for 2022, Adjusted Operating Return on Equity, Adjusted Operating Income and Book Value per Share, Excluding AOCI exceeded their respective targets. The following table describes the goals established in March 2021 and actual results:
| | | | | | | | | | | | | | | | | | | | |
| 2021-2023 PERFORMANCE CONTINGENT SHARE METRICS | | |
| 2021 Performance Measure | Weight | Threshold | Target | Maximum | Actual | Payout Percent |
Adjusted Operating Return on Equity1 | 33.5% | 2.7% | 5.7% | 7.2% | 0.08% | 0% |
Adjusted Operating Income1 ($M) | 33.5% | $258.2 | $516.3 | $645.4 | -$80.5 | 0% |
Book Value Per Share, Excluding AOCI1 | 33.0% | $122.18 | $135.75 | $142.54 | $139.53 | 51.4% |
| 2021 Total Result | | | | | | 51.4% |
| | | | | | | | | | | | | | | | | | | | |
| 2022 Performance Measure | Weight | Threshold | Target | Maximum | Actual | Payout Percent |
Adjusted Operating Return on Equity1 | 33.5% | 7.9% | 9.4% | 10.9% | 10.3% | 55.1% |
Adjusted Operating Income1 ($M) | 33.5% | $675.0 | $900.0 | $1,125.0 | $986.1 | 46.3% |
Book Value Per Share, Excluding AOCI1 | 33.0% | $129.93 | $144.37 | $151.59 | $146.22 | 41.4% |
| 2022 Total Result | | | | | | 142.9% |
1See "Use of Non-GAAP Financial Measures" on page 89 for reconciliations from GAAP figures to adjusted operating figures. |
The total performance factor for the 2021-2023 PCS performance metric is 97.2% which represents the average of the 2021 and 2022 results. The third year of these grants represents time vesting only and payouts will take place in the first quarter of 2024.
2021 One-Time Award. In March 2021, the Committee determined that a one-time equity award to named executive officers and other executives was necessary for the engagement of our executive team to advance our strategic objectives and to recognize the performance of our leaders in navigating the Company through the COVID-19 pandemic. Absent this additional one-time equity award, the impacts to total realized compensation on the Company's executive officers are material and long-lasting, presenting significant challenges in the retention and engagement of key talent, as demonstrated above under "COVID-19 Impact and Paying for Performance — Realized and Realizable CEO Pay." The Committee believes that this one-time grant better aligns pay and performance for participants in the Flexible Stock Plan.
For the named executive officers, the one-time equity award consists of two components of equal size: a performance share unit ("PSU") grant and a restricted share unit ("RSU") grant.
The PSU awards fully vested for individuals employed with the Company on December 31, 2022 and paid out in shares of the Company's common stock. Vesting of the PSU awards was subject to a performance condition which required the Company to achieve financial results that were within a pre-determined range for at least two of the six metrics used in the 2021-2023 PCS plan described in the "2021-2023 PCS Awards" section above. The plan metrics required robust financial performance when considering the ongoing impacts of the COVID-19 pandemic, with 2022 targets reflecting financial
performance that aligned with a pre-pandemic business environment. Achievement of the performance condition caused the full value of the award to vest at target. No additional amounts were paid due to Company performance exceeding the financial goals.
The RSU awards fully vested after two years for individuals employed with the Company on December 31, 2022 and were paid in shares of the Company's common stock. The following table describes payouts for the 2021 One-Time PSU and RSU awards for the named executive officers:
2021 ONE-TIME PSU AND RSU RESULTS | | | | | | | | |
| Name | Number of Shares of Common Stock PSUs Paid | Number of Shares of Common Stock RSUs Paid |
| Anna Manning | 27,130 | 27,130 |
| Todd C. Larson | 5,930 | 5,930 |
| Tony Cheng | 2,732 | 2,732 |
| Leslie Barbi | 1,570 | 1,570 |
| Ronald Herrmann | — | — |
2022-2024 PCS Award. In March 2022, the Committee established the targets and ranges for the following PCS performance measures: (i) three-year adjusted operating return on equity and (ii) three-year book value per share, excluding AOCI. These results may be modified up or down by a maximum of 10% based on three-year relative total shareholder return. The targets reflected significant uncertainty regarding future development of the COVID-19 pandemic, the response thereto and related impacts on expected Company performance. At the time of these grants, the COVID-19 Omicron variant was in its emergent phase and longer-term population or industry projections were not generally available. The Company estimatesmodeled a range of potential population impacts for 2022, 2023 and 2024 with a high degreeassumptions about infection rates, lethality and vaccination protection. Population impacts were translated based upon the Company's exposures and the material prior period claims impacts to the Company's operations. The Company estimated that it incurred approximately $1.4 billion and $310 million of confidence that the 2020 financial results will eliminate the possibility of any future payments under the PCS awards grantedCOVID-19 related impacts for the 2020-2022year ended December 31, 2021 and the first quarter ended March 31, 2022, respectively.
Additionally, pursuant to the terms of these grant agreements the Committee is required to adjust the target metrics for impacts of Long-Duration Targeted Improvements ("LDTI") under new GAAP accounting rules effective January 1, 2023. The following table describes the goals established in March 2022, as adjusted for impacts of LDTI:
| | | | | | | | | | | | | | |
| 2022-2024 PERFORMANCE CONTINGENT SHARE METRICS |
| Performance Measure | Weight | Minimum | Target | Maximum |
Book Value per Share, excluding AOCI, Growth ("BVPS Growth")1 | 50.0% | 2.4% | 4.7% | 5.9% |
Average Operating Return on Equity ("Average ROE")1 | 50.0% | 6.2% | 8.8% | 10.1% |
1See "Use of Non-GAAP Financial Measures" on page 89 for reconciliations from GAAP figures to adjusted operating figures. |
2023-2025 PCS Award. In March 2023, the Committee established the target and ranges for the following PCS performance period.measures: (i) three-year adjusted operating return on equity and (ii) three-year book value per share, excluding AOCI. These results may be modified up or down by a maximum of 10% based on three-year relative total shareholder return. These measures were set for the period beginning in 2023 at levels that are consistent with our intermediate term-goals for each measure. The performance period for the 2023 PCS grant began on January 1, 2023, and will end on December 31, 2025.
| | | | | | | | | | | | | | |
| 2020-2022 PERFORMANCE CONTINGENT SHARE METRICS |
| Performance Measure | Weight | Threshold | Target | Maximum |
Three-Year Adjusted Operating Return on Equity1 | 33.5% | 9.5% | 10.5% | 11.5% |
Three-Year Adjusted Operating Income1 ($M) | 33.5% | $2,608.5 | $2,820.0 | $3,031.5 |
Three-Year Book Value Per Share, Excluding AOCI1 | 33.0% | $154.66 | $162.80 | $170.94 |
1See "Use of Non-GAAP Financial Measures" on page 115 for reconciliations from GAAP figures to adjusted operating figures. |
| | | | | |
| 2023 PCS AWARDS | |
| Name | Number of PCS Granted1 |
| Anna Manning | 53,130 |
| Todd C. Larson | 8,804 |
| Tony Cheng | 11,182 |
| Leslie Barbi | 5,421 |
| Ronald Herrmann | 4,229 |
1Ms. Manning will receive 100% of her 2023 LTI in performance contingent shares. Mr. Cheng will receive 75% of his 2023 LTI award in performance contingent shares. Ms. Barbi, Messrs. Larson and Herrmann will receive 60% of their 2023 award in performance contingent shares. |
Compensation Element #4 - Stock Based Awards
20202022 SARs Grant. In March 2020,2022, the Compensation Committee approved the 20202022 annual Stock Appreciation Rights ("SARs") awards for our named executive officers and other company executives. The vesting schedule for the annual SARs grant is four years (vesting 25% at the end of each year). We made these grants because we believe that SARs are an appropriate vehicle for providing long-term value to participants because of the alignment to long-term shareholder value. The SARs granted on March 6, 202022, 2022 have a strike price of $117.85,$106.53, which was the closing price of our stock on the date the grants were approved. See "Compensation Tables and Other MattersProposals - Executive Compensation Tables - Grants of Plan-Based Awards in 2020"22" for a description of the 20202022 annual SARs grants.The following table describes the 20202022 annual SARs awards for the named executive officers, granted on March 6, 2020:22, 2022:
20202022 SARs GRANTS
| | | | | |
| Name | Number of SARs Granted |
| Anna Manning | 95,38851,146 |
| Todd C. Larson | 20,33012,152 |
Alain P. NéemehTony Cheng | 20,3306,306 |
| Leslie Barbi | 13,3549,820 |
Tony ChengRonald Herrmann | 8,127 |
John P. Laughlin | 12,243 |
*Mr. Néemeh received net-settled stock options in lieu of SARs.6,187 |
2022 RSU Grant. In March 2022, the Committee approved the 2022 annual Restricted Share Unit ("RSU") awards for our named executive officer and other company executives. The cliff-vesting schedule for the annual RSU grant is three years from January 1, 2022. The RSU awards will fully vest for individuals employed with the Company on December 31, 2024 and pay out in shares of the Company's common stock.
The following table describes the 2022 annual RSU awards for the named executive officers, granted on March 22, 2022:
2022 RSU GRANTS | | | | | |
| Name | Number of RSUs Granted |
| Anna Manning | 14,667 |
| Todd C. Larson | 3,485 |
| Tony Cheng | 1,808 |
| Leslie Barbi | 2,816 |
| Ronald Herrmann | 1,774 |
2023 SARs and RSU Grants. In March 2023, the Committee approved the 2023 annual SARs and RSU awards for the named executive officers, as follows:
2023 SARs AND RSU GRANTS | | | | | | | | |
| Name | Number of SARs Granted1 | Number of RSUs Granted1 |
| Anna Manning | — | — |
| Todd C. Larson | 8,602 | 2,935 |
| Tony Cheng | 10,924 | — |
| Leslie Barbi | 5,297 | 1,807 |
| Ronald Herrmann | 4,131 | 1,410 |
1 Ms. Manning will receive 100% of her 2023 LTI award in performance contingent shares. Mr. Cheng will receive 25% of his 2023 LTI award in stock appreciation rights. Ms. Barbi, Messrs. Larson and Mr. Herrmann will receive 20% of their 2023 LTI award in stock appreciation rights and 20% in restricted stock units |
As noted above, the performance contingent awards and the stock-based awards described above collectively form the Company's long-term incentive ("LTI") plan. For 2021 and 2022, the LTI for named executive officers comprised of 50% PCS, 25% RSUs and 25% SARs. For 2023, the LTI was allocated as follows:
•100% PCS for Ms. Manning;
•75% PCS and 25% SARs for Mr. Cheng; and
•60% PCS, 20% RSUs and 20% SARs for all other named executive officers.
The structure of the 2023 LTI award for Ms. Manning took into consideration that 2023 will be her last year as Chief Executive Officer.
Compensation Element #5 - Retirement and Pension Benefits
For 2020,2022, and in compliance with the terms of the plans described herein, our named executive officers received Company contributions, where applicable, based upon their completion of a year of credited service and compensation (base pay and ABP payments for U.S. and Canadian plans) earned. Additionally, the contributions made by the Company on their behalf were in compliance with the U.S. Internal Revenue Code for US executive officers, the Canadian Income Tax Act and other provincial legislation for the Canadian executive officers and the Basic Law of Hong Kong and the Hong Kong Mandatory Provident Fund Schemes Authority Ordinance (Cap 485) for the Hong Kong executive officers.
U.S. Plans
Under the qualified and non-qualified Pension Plans and Savings Plans, and assuming a retirement on December 31, 2020,2022, the named executive officers eligible to receive benefits are listed below:
Qualified and Non-qualified Pension Plans. As of the completion of 2020,2022, Ms. Manning and Messrs.Mr. Larson and Laughlin met the vesting requirements of the plans and are therefore eligible to receive their Performance Pension Account benefits in both the U.S. Pension Plan and the Augmented Benefit Plan upon the termination of their employment with the Company and in accordance with the terms of the plans. Mr. Cheng met the vesting requirements of the U.S. Pension Plan and is eligible to receive his Performance Pension Account benefit upon the termination of his employment with the Company in accordance with the terms of the plan.
Qualified and Non-qualified Savings Plans. As of the completion of 2020, Ms.2022, Mses. Manning and Messrs.Barbi, Mr. Larson and LaughlinMr. Herrmann met the vesting requirements of the plans and are therefore eligible to receive the benefits from both the U.S. Savings Plan and the Augmented Benefit Plan upon the termination of their employment with the Company in accordance with the terms of the plans.
Canadian Plans
As of the completion of 2020, Ms. Barbi had not fully met the vesting requirements of the plans and is therefore not eligible to receive full benefits from either the U.S. Savings Plan or the Augmented Benefit Plan upon termination of her employment with the Company in accordance with the terms of the plans.
Canadian Plans
Under the Registered Pension Plan and the DB SERP, and assuming a retirement on December 31, 2020, the Canadian named executive officers who would be eligible to receive benefits are listed below:
Registered Pension Plan. As of the completion of 2020,2022, Ms. Manning meets the vesting and early retirement eligibility requirements under the Registered Pension Plan and is eligible to receive the benefits in accordance with the plan guidelines. Mr. Néemeh does not yet meet the early retirement eligibility criteria.DB SERP.
Defined Benefit Supplemental Executive RetirementHong Kong Plan.
As of the completion of 2020, Ms. Manning and Mr. Néemeh meet the vesting and early retirement eligibility requirements and are eligible to receive the benefits in accordance with the plan guidelines. Effective January 1, 2020, no new executives may participate in the DB SERP.
Hong Kong Plan
As of the completion of 2020, 2022, Mr. Cheng met the vesting requirements of the plan and is therefore eligible to receive benefits from the employer voluntary contribution supplementary benefit fund upon the termination of his employment with the Company, in accordance with the terms of the plan. Mr. Cheng will be eligible to receive benefits from the employee and employer mandatory
contribution benefit fund upon his retirement, based on the provisions set forth in the Hong Kong Mandatory Provident Fund.
Other Retirement Benefits
Ms. Manning is eligible to receive the benefits provided in the Supplemental Payment Agreement, dated July 25, 2019, in accordance with the terms set out therein. Information on the Supplemental Payment Agreement can be found under "Compensation Element #5"Five Elements of Compensation - Retirement and Pension Benefits - Non-qualified and Supplemental Plans - U.S. - Supplemental Payment Agreement."
2021 COMPENSATION PROGRAM
Compensation Element #1 - Base Salary
Given the impact the COVID-19 pandemic had on the Company, management recommended and the Compensation Committee agreed to no salary increase for all senior level executives for 2021. In the first quarter of 2021, the Committee approved the following base salaries for 2021 for the named executive officers as listed below.
2021 NAMED EXECUTIVE OFFICER BASE SALARIES
| | | | | | | | |
| Name | 2021 Base Salary | 2021 Percentage Increase |
| Anna Manning | $1,030,000 | 0% |
| Todd C. Larson | $645,000 | 0% |
| Alain P. Néemeh | $645,000 | 0% |
| Leslie Barbi | $575,000 | 0% |
| Tony Cheng | $613,9921 | 0% |
1Mr. Cheng's base salary was converted to USD using an average annual foreign exchange rate.
Due to a role change, effective as of October 1, 2020, John Laughlin was no longer a Section 16 Reporting Person. On February 1, 2021, Mr. Laughlin changed roles; as a result, he will not be a named executive officer in 2021 and therefore, no forward looking information on Mr. Laughlin’s compensation for 2021 is provided in this section.
Compensation Element #2 - Annual Bonus Plan
The 2021 ABP objectives for Ms. Manning will be based 100% on overall Company-specific financial results. Messrs. Larson, and Néemeh will have ABP allocations based on overall Company financial results and individual performance. Ms. Barbi will have ABP allocations based on overall Company financial results and on departmental results (Investments), as well as individual performance. Mr. Cheng will have ABP allocations based on overall Company financial results and on business unit results for the Asia segment, as well as individual performance.
Company-specific financial performance metrics are measured 50% on adjusted operating earnings per share, 25% on a strategic scorecard, 15% on new business embedded value and 10% on total revenues. The strategic scorecard was introduced to eliminate the overlap of metrics used for both the ABP and PCS programs and to provide an element of discretion in to final payout decisions.
In the first quarter of 2021, the Compensation Committee approved the performance measures and ABP opportunities for 2021 (as a percentage of base salary), which were unchanged from 2020.
| | | | | | | | | | | |
| 2021 ANNUAL BONUS PLAN OPPORTUNITIES |
| Name | ABP Threshold | ABP Target | ABP Maximum |
| Anna Manning | 90% | 180% | 360% |
| Todd C. Larson | 60% | 120% | 240% |
| Alain P. Néemeh | 60% | 120% | 240% |
| Leslie Barbi | 50% | 100% | 200% |
| Tony Cheng | 30% | 60% | 120% |
Compensation Element #3 - Performance Contingent Awards
2021-2023 PCS Plan. In March 2021, the Compensation Committee established the targets and ranges for the following PCS performance measures: (i) adjusted operating return on equity; (ii) adjusted operating income and (iii) book value per share, excluding AOCI. These measures were set for discrete periods for 2021 and 2022, with a time vesting component for 2023, at levels that are consistent with our intermediate-term goals for each measure. The performance period for the 2021 PCS grant began on January 1, 2021 and will end on December 31, 2023. This is a one-time cycle design due to the uncertainty regarding the affects of the COVID-19 pandemic and will be revised for the cycle starting in 2022.
2021 PERFORMANCE CONTINGENT SHARE GRANTS
| | | | | |
Name | Number of PCS Granted |
Anna Manning | 22,285 |
Todd C. Larson | 4,750 |
Alain P. Néemeh | 4,750 |
Leslie Barbi | 3,120 |
Tony Cheng | 1,890 |
PCS grants have historically represented 75% of long-term incentive compensation grants for our named executive officers. Based on market data, this allocation to performance shares was higher than that of our peer companies. In order to rebalance the award allocation and better align with competitive market practice, the Compensation Committee decided to offer RSUs alongside PCS awards. Beginning in 2021, PCS grants will represent 50% of such long-term grants, with the remaining 50% of grants allocated 25% to RSUs and 25% to SARs.
In addition to the annual grants noted above, a one-time grant was made in 2021, see "Compensation Discussion and Analysis - COVID-19 Impact and Response" for additional information.
Compensation Element #4 - Stock Based Awards
2021 SARs Grant. In March 2021, the Compensation Committee approved the 2021 annual SARs awards for the named executive officers, as follows:
2021 SARs GRANTS
| | | | | |
Name | Number of SARs Granted |
Anna Manning | 41,154 |
Todd C. Larson | 8,771 |
Alain P. Néemeh | 8,771 |
Leslie Barbi | 5,762 |
Tony Cheng | 3,491 |
*Mr. Néemeh received net-settled stock options in lieu of SARs. |
The vesting schedule for the annual SARs grant is four years (vesting 25% at the end of each year). The SARs have a strike price of $129.01, which was the closing price of our stock on March 11, 2021 the date the grants were approved.
2021 RSUs Grant. In March 2021, the Compensation Committee approved the 2021 annual RSU awards for the named executive officers, as follows:
2021 RSU GRANTS
| | | | | |
Name | Number of RSUs Granted |
Anna Manning | 11,143 |
Todd C. Larson | 2,375 |
Alain P. Néemeh | 2,375 |
Leslie Barbi | 1,560 |
Tony Cheng | 945 |
In addition to the annual grants noted above, a one-time grant was made in 2021, see "Compensation Discussion and Analysis - COVID-19 Impact and Response" for additional information.
Compensation Element #5 - Retirement and Pension Benefits
In 2021, there will be no changes to retirement and pension benefits programs from the 2020 programs in response to COVID-19.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the portions of this Compensation Discussion and Analysis described in Regulation S-K Item 402(b) be included in this Proxy Statement. This report is provided by the following independent directors, who comprise the Committee as of the date of this Proxy Statement:
Hazel M. McNeilage, Chair
Pina Albo
Christine R. DetrickNg Keng Hooi
Frederick J. SievertGeorge Nichols, III
Shundrawn Thomas
OTHER EXECUTIVE COMPENSATION TABLES AND OTHER MATTERS
EXECUTIVE
ADDITIONAL COMPENSATION TABLESDISCLOSURES
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and
Principal Position
| Year
| Salary1
| Bonus2
| Stock Awards3
| Option Awards4
| Non-Equity Incentive Plan Compensation5
| Change in Pension Value and Nonqualified Deferred Compensation Earnings6
| All Other Compensation7
| Total
|
Anna Manning President and CEO | 2020 | $1,030,000 | --- | $4,312,485 | $1,444,174 | $1,390,500 | $617,725 | $249,349 | $9,044,233 |
| 2019 | $1,025,385 | --- | $3,375,029 | $989,547 | $2,144,954 | $404,102 | $177,258 | $8,116,275 |
| 2018 | $992,308 | --- | $2,812,518 | $1,017,261 | $1,308,840 | $375,734 | $193,761 | $6,700,422 |
Todd C. Larson Sr. EVP and CFO | 2020 | $636,346 | --- | $919,112 | $307,796 | $580,500 | $360,017 | $109,992 | $2,913,763 |
| 2019 | $596,154 | --- | $742,518 | $217,692 | $832,992 | $315,487 | $101,994 | $2,806,837 |
| 2018 | $566,538 | --- | $646,931 | $233,982 | $501,722 | $299,764 | $85,405 | $2,334,342 |
Alain P. Néemeh Sr. EVP and COO | 2020 | $640,833 | --- | $919,112 | $307,796 | $580,500 | $913,754 | $50,236 | $3,412,231 |
| 2019 | $616,667 | --- | $767,211 | $224,951 | $860,759 | $2,105,409 | $50,893 | $4,625,890 |
| 2018 | $597,250 | --- | $719,952 | $260,415 | $523,536 | $652,226 | $50,960 | $2,804,339 |
Leslie Barbi EVP & Chief Investment Officer | 2020 | $561,731 | --- | $603,746 | $202,180 | $452,333 | $0 | $302,721 | $2,122,711 |
Tony Cheng EVP, Head of Asia | 2020 | $609,766 | --- | $367,456 | $123,043 | $384,126 | $661 | $300,284 | $1,785,336 |
| 2019 | $580,299 | $800,000 | $352,086 | $103,222 | $477,421 | $634 | $288,940 | $2,602,602 |
John P. Laughlin EVP, GFS | 2020 | $611,154 | --- | $553,541 | $185,359 | $399,750 | $403,955 | $69,774 | $2,223,533 |
| 2019 | $591,924 | $1,000,000 | $535,537 | $157,014 | $1,008,025 | $465,909 | $76,250 | $3,834,659 |
| 2018 | $570,385 | --- | $517,484 | $187,178 | $816,914 | $416,198 | $61,362 | $2,569,521 |
| | | | | | | | | |
1.This column includes any amounts deferred at the election of the executive officers under the Company's Executive Deferred Savings Plan and retirement Savings Plan. For 2020, the base salary for Mr. Néemeh was determined in USD and converted to CAD on a monthly basis. For 2020, the base salary for Mr. Cheng was determined in HKD and converted to USD using an average monthly foreign exchange rate.
2.This column includes any amounts paid under Cash Retention Award Agreements. Pursuant to the terms of two Cash Retention Award Agreements, entered into separately between the Company and Messrs. Laughlin
and Cheng on January 9, 2015, Mr. Laughlin received a gross cash payment of $1,000,000 and Mr. Cheng received a gross cash payment of $800,000, less applicable withholding taxes and deductions, in January 2020, following the completion of their continuous employment terms, as set forth in the agreements.
3.This column represents the grant date fair value of PCS units granted in such year, using probable outcomes of performance conditions, in accordance with Accounting Standards Codification: 718 – Compensation – Stock Compensation ("ASC 718"). For additional information on the valuation assumptions, refer to note 17 of the Company's financial statements in the Form 10-K for the year ended December 31, 2020, as filed with the SEC. See also "Grants of Plan-Based Awards in 2020" for information on awards made in 2020. These amounts reflect the grant date fair value for these awards, and do not correspond to the actual value that may be recognized by the named executive officers.
Due to the impact of the COVID-19 pandemic on the Company’s 2020 financial results, Company financial performance for the 2018-2020 PCS performance period (awards granted in 2018) was below the threshold required for payment with respect to each of the three metrics, resulting in a zero payout overall. Additionally, As a result of: (i) the COVID-19 pandemic’s impact on the Company’s 2020 financial performance, (ii) the financial metrics being established prior to the pandemic, (iii) the cumulative nature of the financial metrics for each PCS plan cycle, and (iv) the degree of stretch performance that is built into the PCS performance metrics, the Company estimates with a high degree of confidence that payouts for the PCS awards granted in 2019 and 2020 will also be zero.
4.This column represents the grant date fair value of SARs granted in such year, in accordance with ASC 718. For additional information on the valuation assumptions, refer to note 17 of the Company's financial statements in the Form 10-K for the year ended December 31, 2020, as filed with the SEC. See also "Grants of Plan-Based Awards in 2020" for information on SARs granted in March 2020. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that may be recognized by the named executive officers.
5.Includes for all named executive officers, cash incentives earned for performance during each fiscal year and paid in March of the following year (including any incentives deferred at the election of the executive officers) under the Annual Bonus Plan.
6.This column represents the sum of the change in pension value in each fiscal year for each of the named executive officers. The increase in pension value for 2020 is attributable to additional service and compensation as well as an increase due to assumptions and age. The Company does not pay above-market or preferential earnings on any account balances; therefore, this column does not reflect any amounts relating to nonqualified deferred compensation earnings. See the "Pension Benefits in 2020" and "Nonqualified Deferred Compensation in 2020" tables for additional information.
The change in pension value for Mr. Néemeh represents the sum of the change in pension value in each fiscal year for the defined benefit supplemental executive retirement plan (Canadian DB SERP). The change in pension value for the RGA Canadian Defined Benefit Plan SERP is due to changes in interest rate assumptions, as well service accrual and changes in the average pensionable earnings. The accumulated value of the RGA Canadian Defined Benefit Plan SERP is calculated by converting the participant’s accrued annuity benefit under the plan to an actuarial equivalent present value amount as of the measurement date. The interest rate assumption used for this conversion has a material impact on the calculation. As a result, significant changes in interest rates from year to year can lead to material changes to the accumulated value of the benefit.
The change in pension value for Ms. Manning represents the sum of the change in pension value for the U.S. Pension Plans (which recognize only four years of service) as well as the RGA Canadian Defined Benefit Plan SERP. Ms. Manning has not accrued additional benefits under the RGA Canadian Defined Benefit Plan SERP plan since her transfer to the U.S. in April 2016. However, the present value of the plan benefit is affected by changes in interest rate assumptions.
For Ms. Manning, this column also includes the accrual value of a supplemental payment to be paid upon her retirement from the Company, as an acknowledgment of the financial implications on her retirement benefits with respect to her relocation to the U.S. from Canada in 2016. The supplemental payment represents the difference between (i) the value of the Company-provided benefits that she would have received upon her retirement had she worked her entire career (starting upon her hire date in 2007 through retirement) in the U.S., and (ii) the value of Company-provided benefits that she will actually receive upon retirement from the Company. For this purpose, Company-provided benefits include any savings, pension or deferred compensation benefits funded by the Company based on her deferrals of pay, additional non-elective contributions to company retirement accounts and any subsequent investment returns credited to those deferred compensation accounts based on contribution from the Company. The value of any salary deferrals
by Ms. Manning, including any subsequent investment return credited to those retirement accounts for those salary deferrals, is not included in the calculation of this supplemental payment. This payment will be a single lump sum payment made in U.S. dollars after Ms. Manning’s retirement from the Company. See "Compensation Element #5 - Retirement and Pension Benefits - Non-qualified and Supplemental Plans - U.S. - Supplemental Payment Agreement" for more information.
Mr. Cheng accrued a benefit in the U.S. pension plan prior to his transfer outside of the country in 2002. Mr. Cheng does not accrue additional benefits in the plan, but his Performance Pension Account continues to increase with interest each year.
7.Amount includes contributions by the Company to the officers' accounts in qualified and nonqualified plans for the 2020 plan year. Includes life insurance premiums paid by the Company on behalf of Ms. Manning in the amount of $11,951, Mr. Larson in the amount of $7,139, Ms. Barbi in the amount of $3,856 and Mr. Laughlin in the amount of $11,390. Amount also includes additional disability premiums paid by the Company on behalf of Mr. Néemeh in the amount of $33,675, as well as Company contributions of $10,240 to the Registered Pension Plan. Amount includes Company contributions on behalf of Mr. Cheng to the Mandatory Provident Fund in the amount of $65,855.
Includes $3,442 of payment to Ms. Manning attributable to correcting an underpayment for amounts paid to her in lieu of qualified and non-qualified defined contribution retirement plan contributions due to Ms. Manning's residency status waiting period.
Includes Company contributions for 2020 under the Savings Plan of $28,500 for Ms. Barbi and $19,950 for Ms. Manning and Messrs. Larson and Laughlin. Also includes Company contributions for 2020 under the Augmented Savings Plans of $57,799 for Ms. Manning, $23,687 for Mr. Larson, $38,434 for Mr. Laughlin, and $25,587 for Ms. Barbi. Includes Company matching contributions for 2020 under the Executive Deferred Savings Plan ("EDSP") of $144,498 for Ms. Manning and $59,217 for Mr. Larson.
In 2020, Mr. Cheng received a total of $227,130 for local allowances, of which $36,266 was for education and $190,864 was for housing. Allowances are benefits offered to select executives in Hong Kong and are reviewed on an annual basis to ensure compensation in Hong Kong remains market competitive. In 2020, Ms. Barbi received a signing bonus of $200,000 and a miscellaneous allowance (plus applicable gross ups) to support her relocation in the amount of $44,778.
For 2020, amount includes foreign tax preparation taxable benefit amount grossed up for taxes for Ms. Manning in the amount of $3,938. It also includes tax gross-ups in the amount of $5,977 related to foreign tax preparation and on the underpayment correction mentioned previously for Ms. Manning. Amount includes foreign tax preparation taxable benefit amount for Mr. Néemeh grossed up for taxes in the amount of $752. Amount also includes professional dues paid by the Company on behalf of Ms. Manning for $1,794, Mr. Néemeh for $833, and Mr. Cheng for $963. Amount also includes fees paid by the Company for parking for Mr. Néemeh in the amount of $4,737. Amount includes fees paid by the Company for club memberships including the use of a fitness facility for Mr. Cheng in the amount of $6,336.
Grants of Plan-Based Awards in 2020
This table provides the following information about equity and non-equity awards granted to the named executive officers in 2020: (1) the grant date; (2) the estimated future payouts under non-equity incentive plan awards, which consist of potential payouts under the Annual Bonus Plan award granted in 2020 for the 2020 performance period; (3) estimated future payouts under equity incentive plan awards, which consist of potential payouts under the PCS grants in 2020 for the 2020-2022 performance period; (4) all other option awards, which consist of the SARs granted to the named executive officers in 2020; (5) the strike price of the SARs granted, which reflects the closing price of Company stock on the date of grant and (6) the grant date fair value of each equity grant calculated under ASC 718.
GRANTS OF PLAN-BASED AWARDS IN 2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | Grant Date | Estimated Future Payments Under Non-Equity Incentive Plan Awards¹ | Estimated Future Payments Under Equity Incentive Plan Awards (Number of Shares)² | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options3
| Exercise of Base Price of Option Awards4
| Grant Date Fair Value of Stock and Option Awards5
|
| Threshold | Target | Maximum | Threshold | Target | Maximum |
| Anna Manning | 3/6/2020 | $927,000 | $1,854,000 | $3,708,000 | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | 18,297 | 36,593 | 73,186 | --- | --- | --- | $4,312,485 |
| --- | --- | --- | --- | --- | --- | --- | 95,388 | $117.85 | $1,444,174 |
| Todd C. Larson | 3/6/2020 | $387,000 | $774,000 | $1,548,000 | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | 3,900 | 7,799 | 15,598 | --- | --- | --- | $919,112 |
| --- | --- | --- | --- | --- | --- | --- | 20,330 | $117.85 | $307,796 |
| Alain P. Néemeh | 3/6/2020 | $387,000 | $774,000 | $1,548,000 | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | 3,900 | 7,799 | 15,598 | --- | --- | --- | $919,112 |
| --- | --- | --- | --- | --- | --- | --- | 20,330 | $117.85 | $307,796 |
| Leslie Barbi | 3/6/2020 | $282,787 | $565,574 | $1,131,148 | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | $2,562 | $5,123 | $10,246 | --- | --- | --- | $603,746 |
| --- | --- | --- | --- | --- | --- | --- | 13,354 | $117.85 | $202,180 |
| Tony Cheng | 3/6/2020 | $184,198 | $368,395 | $736,790 | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | 1,559 | 3,118 | 6,236 | --- | --- | --- | $367,456 |
| --- | --- | --- | --- | --- | --- | --- | 8,127 | $117.85 | $123,043 |
| John P. Laughlin | 3/6/2020 | $307,500 | $615,000 | $1,230,000 | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | 2,349 | 4,697 | 9,394 | --- | --- | --- | $553,541 |
| --- | --- | --- | --- | --- | --- | --- | 12,243 | $117.85 | $185,359 |
1. These columns reflect the potential value of the payment for 2020 performance under the ABP for each named executive if the minimum, target or maximum goals are satisfied. The potential payments are performance-driven and are therefore completely at risk. The performance measures, salary and ABP multiples for determining the payments are described in the CD&A. The ABP payment amount for actual 2020 performance was determined in March 2021 based on the metrics described in the CD&A and is included in the "Summary Compensation Table" in the column titled "Non-Equity Incentive Plan Compensation."2. This column reflects the number of PCS units granted in March 2020, which may convert into shares of Company stock at the end of the three-year performance period if the specified performance levels are achieved. The performance period commenced January 1, 2020 and ends December 31, 2022. If the threshold level of performance is met, the award of shares starts at 50% (target is 100% and maximum is 200%).
3. This column reflects the number of SARs granted in March 2020, which vest and become exercisable in four equal annual installments of 25%, beginning on December 31, 2020.
4. This column reflects the strike price per share of common stock for the SARs granted, which is the closing price of the common stock on March 6, 2020, the date the Compensation Committee approved the grants.
5. This column reflects the full grant date fair value of PCS units under ASC 718 and the full grant date fair value of SARs under ASC 718 granted to the named executive officers in 2020. See notes 3 and 4 of the "Summary Compensation Table" for a discussion of fair value calculation related to the PCS and SARs respectively. For PCS units with the grant date of March 6, 2020, fair value is calculated using the closing price of Company stock of $117.85. For SARs with a grant date of March 6, 2020, fair value is calculated using the Black-Scholes value of $15.14. For additional information on the valuation assumptions, refer to note 17 of the Company's financial statements in the Form 10-K for the year ended December 31, 2020, as filed with the SEC. These amounts reflect the grant date fair value, and do not correspond to the actual value that will be recognized by the named executive officers. For example, the PCS units are subject to specified performance objectives over the performance period, with 33.5% tied to Three-Year Adjusted Operating Return on Equity, 33.5% tied to Three-Year Adjusted Operating Income and 33% tied to Three-Year Book Value per Share, excluding AOCI.
Outstanding Equity Awards at 2020 Year-End
The following table provides information on the 2020 year-end holdings of SARs, stock options and PCS by our named executive officers. This table includes vested and unvested SARs and option awards and unvested PCS grants with performance conditions that have not yet been satisfied. The vesting schedule for each grant is described in the footnotes following this table, based on the grant date. The market value of the stock awards is based on the closing market price of Company stock as of December 31, 2020, which was $115.90. The PCS grants are subject to specified performance objectives over the performance period. For additional information about the option awards and stock awards, see the description of equity incentive compensation in the CD&A.
OUTSTANDING EQUITY AWARDS AT 2020 YEAR-END
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Option Awards1 | Stock Awards |
| Grant Date | Number of Securities of Underlying Unexercised Options (Exercisable)2
| Number of Securities Underlying Unexercised Options (Unexercisable)
| Equity Incentive Plan Awards: Number of Securities Underlying Unearned Options
| Option
Exercise
Price | Option
Expiration
Date | Number
of Shares
or Units
of Stock
That
Have Not
Vested
| Market
Value of
Shares or
Units or
Stock That
Have Not
Vested
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested3 | Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested3 |
| Anna Manning |
| 3/7/2014 | 5,514 | | | $78.48 | 3/7/2024 | | | | |
| 3/6/2015 | 8,340 | | | $90.06 | 3/6/2025 | | | | |
| 12/1/2015 | 153,453 | | | $93.21 | 12/1/2025 | | | | |
| 3/4/2016 | 26,681 | | | $93.53 | 3/4/2026 | | | | |
| 3/3/2017 | 27,919 | | | $129.72 | 3/3/2027 | | | | |
| 3/2/2018 | 21,012 | 7,004 | | $150.87 | 3/2/2028 | | | | |
| 3/1/2019 | 18,607 | 18,608 | | $145.25 | 3/1/2029 | | | 23,236 | $2,693,052 |
| 3/6/2020 | 23,847 | 71,541 | | $117.85 | 3/6/2030 | | | 36,593 | $4,241,129 |
| Todd C. Larson |
| 2/28/2012 | 7,324 | | | $56.65 | 2/28/2022 | | | | |
| 2/21/2013 | 7,799 | | | $58.77 | 2/21/2023 | | | | |
| 3/7/2014 | 3,848 | | | $78.48 | 3/7/2024 | | | | |
| 3/6/2015 | 3,926 | | | $90.06 | 3/6/2025 | | | | |
| 3/4/2016 | 9,669 | | | $93.53 | 3/4/2026 | | | | |
| 3/3/2017 | 5,369 | | | $129.72 | 3/3/2027 | | | | |
| 3/2/2018 | 4,833 | 1,611 | | $150.87 | 3/2/2028 | | | | |
| 3/1/2019 | 4,093 | 4,094 | | $145.25 | 3/1/2029 | | | 5,112 | $592,481 |
| 3/6/2020 | 5,082 | 15,248 | | $117.85 | 3/6/2030 | | | 7,799 | $903,904 |
| Alain P. Néemeh |
| 3/7/2014 | 5,514 | | | $78.48 | 3/7/2024 | | | | |
| 3/6/2015 | 8,340 | | | $90.06 | 3/6/2025 | | | | |
| 12/1/2015 | 102,302 | | | | $93.21 | 12/1/2025 | | | | |
| 3/4/2016 | 9,669 | | | $93.53 | 3/4/2026 | | | | |
| 3/3/2017 | 6,024 | | | $129.72 | 3/3/2027 | | | | |
| 3/2/2018 | 5,379 | 1,793 | | $150.87 | 3/2/2028 | | | | |
| 3/1/2019 | 4,230 | 4,230 | | $145.25 | 3/1/2029 | | | 5,282 | $612,184 |
| 3/6/2020 | 5,082 | 15,248 | | $117.85 | 3/6/2030 | | | 7,799 | $903,904 |
| Leslie Barbi |
| 3/6/2020 | 3,338 | 10,016 | | | $117.85 | 3/6/2030 | | | 5,123 | $593,756 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Tony Cheng |
| 3/6/2015 | 3,411 | | | $90.06 | 3/6/2025 | | | | |
| 3/4/2016 | 4,152 | | | $93.53 | 3/4/2026 | | | | |
| 3/3/2017 | 3,280 | | | $129.72 | 3/3/2027 | | | | |
| 3/2/2018 | 2,538 | 846 | | $150.87 | 3/2/2028 | | | | |
| 3/1/2019 | 1,941 | 1,941 | | | $145.25 | 3/1/2029 | | | 2,424 | $280,942 |
| 3/6/2020 | 2,031 | 6,096 | | | $117.85 | 3/6/2030 | | | 3,118 | $361,376 |
| John P. Laughlin |
| 2/22/2011 | 3,753 | | | $59.74 | 2/22/2021 | | | | |
| 2/28/2012 | 7,324 | | | $56.65 | 2/28/2022 | | | | |
| 2/21/2013 | 7,799 | | | $58.77 | 2/21/2023 | | | | |
| 3/7/2014 | 5,514 | | | $78.48 | 3/7/2024 | | | | |
| 3/6/2015 | 5,623 | | | $90.06 | 3/6/2025 | | | | |
| 3/4/2016 | 6,523 | | | $93.53 | 3/4/2026 | | | | |
| 3/3/2017 | 4,689 | | | $129.72 | 3/3/2027 | | | | |
| 3/2/2018 | 3,866 | 1,289 | | $150.87 | 3/2/2028 | | | | |
| 3/1/2019 | 2,952 | 2,953 | | $145.25 | 3/1/2029 | | | 3,687 | $427,323 |
| 3/6/2020 | 3,060 | 9,183 | | $117.85 | 3/6/2030 | | | 4,697 | $544,382 |
1. Prior to February 2011, the Company granted stock options as the form of our long-term equity incentive awards. The terms and conditions of the stock option grants are substantially similar to our SARs grants. The option awards also used an exercise price that was set at the closing price on the day of the award (the date of the February Compensation Committee meeting) and also expire 10 years after grant date. The vesting schedule for grants of stock options was five years, no portion of which vested in the first year, and 25% of which vested at the end of each of the four remaining years.
2. Stock options vest and become exercisable in four equal annual installments of 25%, on December 31 of the second, third, fourth and fifth years. SARs, which were first granted in 2011, generally vest over four years (25% of which vests at the end of each of the four years). The December 2015 SARs granted to Ms. Manning and Mr. Néemeh vest fully on November 30, 2020.
3. These columns reflect the number of shares and estimated market value of PCS grants. Given that the PCS performance measures are cumulative over the three-year period, the Company estimates with a high degree of confidence that due to the impact of the COVID-19 pandemic, the resulting 2020 financial results will eliminate the possibility of any future payments under the PCS awards granted for both the 2019-2021 performance period and the 2020-2022 performance period. However, SEC rules require disclosure of the number of shares and estimated market value of PCS grants based on the next higher performance measure (target or maximum) that exceeds the previous fiscal year's performance. Accordingly, the number of shares and estimated market value for the PCS grants made in 2019 are disclosed assuming they are awarded at the target (100%) level and the 2020 grants are disclosed assuming they are awarded at the target (100%) level. The market or payout value is estimated using the closing price, $115.90, of our common stock on December 31, 2020. The performance period for the 2019-2021 PCS grant is January 1, 2019 through December 31, 2021. The performance period for the 2020-2022 PCS grant is January 1, 2020 through December 31, 2022.
SARs and Option Exercises and Stock Vested in 2020
2020 SARs and Option Exercises. The following table provides information for the named executive officers regarding SARs and stock option exercises during 2020, including the number of shares acquired upon exercise and the value realized.
2020 SARS AND OPTION EXERCISES
| | | | | | | | | | | | | | |
| Option and SARs Awards1 | Stock Awards2 |
| Name | Number of
Shares Acquired
on Exercise | Value Realized
on Exercise | Number of
Shares Acquired
on Vesting | Value Realized
on Vesting |
| Anna Manning | — | — | 24,672 | 2,107,976 |
| Todd C. Larson | 5,753 | 535,662 | 4,745 | 405,413 |
| Alain P. Néemeh | — | — | 5,323 | 454,797 |
| Leslie Barbi | — | — | — | — |
| Tony Cheng | — | — | 2,898 | 247,605 |
| John P. Laughlin | 2,000 | 117,250 | 4,144 | 354,063 |
1. Mr. Larson exercised 5,753 options on February 12, 2020 with an average market price for the shares of $152.85. Mr. Laughlin exercised 1,000 options on November 25, 2020 with an average market price for the shares of $121.33 and 1,000 shares on December 30, 2020 with an average market price for the shares of $115.40.
2. These columns represent amounts paid for the settlement of our PCS awards for the 2017-2019 performance period, paid in 2020.
2017-2019 Performance Contingent Share Payout. The calculation of the PCS Relative ROE measure was dependent upon public availability of financial results from our peer companies. Therefore, the payout results for the 2017-2019 PCS grants were not determined until late April 2020 and payments were not made until May 2020, after the 2020 Proxy Statement was published. Therefore, we are disclosing information regarding that PCS payout in the following table:
2017-2019 PERFORMANCE CONTINGENT SHARE PAYOUT
| | | | | | | | | | | |
| Name | Percentage Payout | Number of Shares Acquired on Payout | Value Realized on Payout |
|
| Anna Manning | 131.5% | 24,672 | $2,107,976 |
| Todd C. Larson | 131.5% | 4,745 | $405,413 |
| Alain P. Néemeh | 131.5% | 5,323 | $454,797 |
Leslie Barbi1 | — | — | — |
| Tony Cheng | 131.5% | 2,898 | $247,605 |
| John P. Laughlin | 131.5% | 4,144 | $354,063 |
1 Ms. Barbi was not employed by the Company in 2017 when 2017-2019 PCS were awarded and therefore, she did not received any PCS payout in 2020.
Pension Benefits in 2020
RETIREMENT PLAN ACCUMULATED BENEFITS
| | | | | | | | | | | | | | |
| Name* | Plan Names | Years of
Service Credited | Present Value of Accumulated Benefit1 | Payments
During Last
Fiscal Year |
| Anna Manning | Performance Pension Plan | 4 | $119,968 | --- |
| Augmented Benefit Plan | 4 | $1,213,527 | --- |
| RGA Canada Defined Benefit Plan SERP | 9 | $2,261,464 | --- |
| Supplemental Payment | 14 | $186,000 | --- |
| Todd C. Larson | Performance Pension Plan | 25 | $452,803 | --- |
| Augmented Benefit Plan | 25 | $1,662,113 | --- |
| Alain P. Néemeh | RGA Canada Defined Benefit Plan SERP | 24 | $8,160,026 | --- |
| Tony Cheng | Performance Pension Plan | 3 | $17,160 | --- |
| John P. Laughlin | Performance Pension Plan | 25 | $608,686 | --- |
| Augmented Benefit Plan | 25 | $2,760,990 | --- |
| *Leslie Barbi is not eligible for the Performance Pension Plan or the pension element of the Augmented Benefit Plan. |
1.The accumulated benefit for the U.S. plans is based on service and compensation (as described above) considered by the plans for the period through December 31, 2020. The present value has been calculated assuming the earliest retirement age at which the participant can elect an unreduced benefit. For additional discussion of the assumptions, see note 10 of the Company's financial statements in the Form 10-K for the year ended December 31, 2020, as filed with the SEC. As described in such note, the interest assumptions for the qualified pension plan and the augmented benefit plan are 2.29% and 1.91%, respectively.
For Mr. Cheng, the Performance Pension Plan represents his accrued benefit in the U.S. pension plan prior to his transfer outside of the country in 2002. Mr. Cheng does not accrue additional benefits in the plan, but his Performance Pension Account continues to increase with interest each year. For Mr. Laughlin, the Augmented Benefit Plan includes additional amounts credited when he joined the company in 1995, payable as a monthly benefit at the later of age 65 or his retirement from the Company.
The accumulated benefit for the Supplemental Payment to Ms. Manning is calculated based on the actual retirement benefits accumulated by Ms. Manning to date, as well as a projection of her employer-provided retirement benefits had she been employed in the U.S. since her original hire date with the Company. The calculation of the accumulated value of the benefit is based on her actual earnings up through December 31, 2020, currency exchange rates effective for each year to convert her Canadian earnings to U.S. dollars, and assumed annual return on her defined contribution benefits of 4% before 2015 and 4.5% after 2016.
For Canadian executives participating in the RGA Canada Defined Benefit Plan SERP, the accumulated benefit is based on credited service and pensionable earnings up to December 31, 2020 (except for Ms. Manning for which earnings are credited up until her date of transfer to the U.S. in 2016). The present value of the accumulated benefit is calculated using an interest rate of 1.40% for the first 10 years and 2.90% thereafter.
Performance Pension Account Benefits
The Performance Pension Account Benefit payable to eligible employees, including certain executives, upon termination of employment is the sum of (1) and (2) as follows:
(1) Participants earn base credits for each Year of Accrual Service (as defined below) completed under the plan. The credit is a percentage of the employee's Final Average Annual Compensation (as defined below) based on the participant's age on January 1 of the Pension Plan year.
(2) Additional excess compensation credits are earned on Final Average Annual Compensation that is greater than 60% of the prevailing Social Security Wage Base (as defined below), rounded to the next $100.
See table below for detail on base and excess compensation credits.
| | | | | | | | |
Age on January 1 of the
Plan Year in which
the Year of Accrual Service is Earned | Base Credits - Percentage of Final
Average Annual Compensation Credited | Excess Compensation Credits - Percentage of Final Average Annual Compensation Credited |
| Up to 35 | 2% | 1% |
| 35 – 44 | 4% | 2% |
| 45 – 54 | 6% | 3% |
| 55 or over | 8% | 4% |
For certain Company employees who were employees prior to January 1, 1996, the Pension Plan provides a "Traditional Benefit" paid exclusively in the form of an annuity. None of our named executive officers have accrued a Traditional Benefit annuity in the Pension Plan.
The Pension Plan's Traditional Benefit required employees to reach age 55 with 10 years of service to be eligible for early retirement. Pension Plan participants with a Performance Pension Account Benefit may elect to receive their Performance Pension Account Benefit as a lump sum or an annuity at any time after termination of employment, subject to the three-year vesting requirement of the plan.
| | | | | |
PERFORMANCE PENSION ACCOUNT DEFINITIONS |
| Definition |
Final Average Annual Compensation | The average of compensation received (base salary and ABP award) during the 5 consecutive years of accrual service within the last 10 calendar year period immediately preceding termination of employment which produces the highest average amount (or during all the years of accrual service if less than 5). |
Year of Accrual Service | A year is credited for each plan year after an employee becomes a plan participant in which the participant is credited with at least 1,000 hours of service. |
Social Security Wage Base | For any year the maximum amount of compensation which may be considered wages for such year for purposes of assessing FICA (Federal Insurance Contributions Act) taxes. |
Nonqualified Deferred Compensation in 2020
2020 NONQUALIFIED DEFERRED COMPENSATION
| | | | | | | | | | | | | | | | | |
Name
| Executive Contributions in Last FY1 | Registrant Contributions in Last FY2 | Aggregate Earnings in Last FY3 | Aggregate
Withdrawals/
Distributions | Aggregate Balance at Last FYE4 |
| Anna Manning | $158,748 | $138,855 | $39,014 | $0 | $807,977 |
| Todd C. Larson | $73,467 | $80,320 | $68,987 | $0 | $918,359 |
| Leslie Barbi | $0 | $0 | $0 | $0 | $0 |
| John P. Laughlin | $0 | $79,819 | $194,776 | $(522,808) | $2,905,175 |
1. The amounts in this column are also included in the Summary Compensation Table in the "Salary" column (i.e., contributions to the EDSP).
2. The amounts in this column reflect 2019 contributions credited to the participant's account during 2020. For reasons related to the timing of the contributions, the amounts will not match the amounts in the Summary Compensation Table's "All Other Compensation" column, which are contributions for 2020 which are actually made in 2021.
3. Reflects earnings credited to the participant's account during 2020 in connection with the investment selections chosen from time to time by the participant.
4. The aggregate balance at last fiscal year-end column reflects the following amounts that were reported in the Summary Compensation Table in 2019 for Ms. Manning in the amount of $471,360 Mr. Larson in the amount of $695,585, Mr. Laughlin in the amount of $3,153,388. The amount reported in for Mr. Laughlin includes a dormant EDSP, which is a non-qualified deferred compensation plan assumed by the Company when Mr. Laughlin joined the Company in 1995. Participants are not allowed to make deferral contributions into this plan.
OTHER EXECUTIVE COMPENSATION MATTERS
Additional Compensation Disclosures
Generally No Employment or Severance Agreements. We do not have employment, severance or change-in-controlchange of control agreements with any of our U.S. or Canadian named executive officers. The Company has an employment agreement with Mr. Cheng, which is standard practice for international employees at his seniority in Hong Kong, but it does not entitle him to any severance or particular benefits upon termination or a change of control. The Company anticipates that the agreement with Mr. Cheng will be terminated upon his relocation to the U.S.
Perquisites. We do not provide personal-benefit perquisites to our U.S. and Canadian named executive officers or their families, such as airplanes, cars or apartments, and we do not reimburse these executive officers or any such employees for personal-benefit perquisites such as club dues or other social memberships. In some countries outside North America, it is our practice to provide remuneration and benefit packages that are competitive against the local or regional market to senior leaders, such as housing, club and car allowances. Executive officers and other employees may seek reimbursement for business-related expenses in accordance with our business expense reimbursement policy. Mr. Cheng received local market-competitive allowances for education and housing. The Company anticipates that Mr. Cheng will no longer receive these allowances upon his relocation to the U.S.
Compensation Recovery. Under the Sarbanes-Oxley Act, in the event ofupon misconduct that results in a financial restatement that would have reduced a previously paid incentive amount, we can recoup those improper payments from our Chief Executive Officer and Chief Financial Officer.
Additionally, our Executive Incentive Recoupment Policy permits the Company to recoup all or a portion of incentive awards paid to certain executives upon the occurrence of certain recoupment events. Such events include: (i) a financial restatement due to the material noncompliance with any financial reporting requirement under the federal securities laws; (ii) receiving an incentive award based on materially inaccurate financial statements or any other materially inaccurate performance; (iii) causing injury to the interests or business reputation of the Company or of a business unit; and (iv) a material violation of the Company's Code of Conduct. The Company can recoup incentive awards for up to four years following the payment of an award. The policy applies to an identified group of current and former officers and employees of the Company, as determined by the Board or the Compensation Committee from time to time based on position, responsibility, level, title, business unit and/or compensation. The Compensation Committee has express authority to interpret and administer the policy and to make all determinations with respect to the policy in its sole discretion. The Company expects to either amend the existing Executive Incentive Recoupment Policy or adopt a new policy in order to comply with upcoming New York Stock Exchange listing standards to be adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and related SEC regulations.
Deductibility of Compensation. Prior to 2018, Section 162(m) of the Internal Revenue Code limited a publicly held corporation’s ability to take a tax deduction for compensation paid to certain covered executive officers ("covered employees") in excess of $1 million. The exemption from Section 162(m)'s deduction limit for performance-based compensation was repealed pursuant to Tax Cuts and Jobs Act of 2017, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.
Notwithstanding changes to the tax deductibility requirements of Section 162(m), the Compensation Committee continues to believebelieves that a significant portion of our executive officers’ compensation should be tied to measures of performance of our business. While the Compensation Committee considers the tax deductibility of awards as one factor in determining executive compensation, it also looks at other factors in making its decisions and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not deductible for tax purposes. Further, the Compensation Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with the Company's business needs.
TERMINATION OR CHANGE OF CONTROL PAYMENTS
Termination or Change of Control Payments
As described above, the named executive officers generally do not have employment, severance or change of control agreements with the Company. The information below describes and quantifies
certain compensation that may or will become payable under existing plans and agreements if the named executive officer's employment had terminated on or by December 31, 2020,2022, due to a change of control, disability or death, given the executive's compensation and service levels as of such date and, when applicable, based on the Company's closing stock price on December 31, 20202022 or actual date of disability, death, etc. These benefits are in addition to benefits available generally to salaried employees such as distributions under the 401(k) and pension plans, retiree medical benefits, disability benefits and accrued vacation pay.
Change of Control. In connection with a change of control (as defined below), the Compensation Committee has the authority to fully vest any unvested stock options or SARs granted before the change of control if the Committee determines such vesting is necessary to protect the rights of the named executive officers and other executives following such change of control. Our Flexible Stock Plan and award agreements provide that the Compensation Committee may (i) accelerate the vesting periods, (ii) arrange for usthe Company to purchase the options so the named executive officer receives the value that he or she would have attained had the option been currently exercisable, (iii) make such adjustments to the options then outstanding as the Committee deems appropriate to reflect such change of control or (iv) cause the options then outstanding to be assumed, or new options substituted therefore, by the surviving corporation in such change. Our SARs agreements allow awards to automatically accelerate upon a change of control, subject in all cases to the Compensation Committee's authority to, among other actions, adjust such awards or cause them to be assumed by the surviving corporation in such change (as described above). In addition, our Flexible Stock Plan and PCS grant agreements provide that upon a change of control, as soon as practicable following the end of the applicable three-year performance period, we must deliver to the named executive officer the number of shares that coincides with the target award for each outstanding grant of PCS.
Disability or Death. If one of the named executive officers were to become disabled or die, the vesting of any unvested stock options and SARs granted before the date of such event may be accelerated in the Committee's sole discretion. In addition, he or she would receive a pro rata proportion of the shares of common stock that would have been issued under any award of PCS before 2023 at the end of the three-year performance period. Beginning in 2023, upon the death of a named executive officer, a pro rata proportion of the target payment will be paid within a reasonable amount of time. The pro rata proportion is determined based on the number of calendar months in the performance period during which he or she was employed, divided by 36 months (the total number of months in the three-year performance period). To the extent that the transfer of one of the named executive officers' stock options and SARS is permitted at death by the Flexible Stock Plan or under another agreement, (i) the named executive officer's stock options and SARs shall be transferable to the beneficiary, if any, designated on forms prescribed by and filed with the Committee and (ii) upon the death of the named executive officer, such beneficiary shall succeed to the rights of the deceased to the extent permitted by law and the Flexible Stock Plan. If no such designation of a beneficiary has been made, the named executive officer's legal representative shall succeed to the options and SARs, which shall be transferable by will or pursuant to laws of descent and distribution to the extent permitted by the Flexible Stock Plan or under another agreement.
Retirement. For grants awarded in 2018 and earlier, uponUpon the retirement (as defined below) of a named executive officer, unvested stock options and SARs may be accelerated in the Committee's sole discretion and in accordance with the vesting schedule and provisions specified in the respective option grant agreement(s). For grants awarded in 2019 and later, upon the retirement of a named executive officer, unvested stock options and SARs will vest 100% in accordance with the vesting schedule and provision specified in the respective grant agreement(s). Upon retirement, the pro rata distribution provisions described above under "Disability or Death" apply to any PCS grants. Due to the number of factors that affect the nature, amount and timing of the vesting and exercise of stock options or SARs, or the actual award following a PCS performance period, the amounts paid to or received by the named executive officer may differ and are undeterminableindeterminable until actually realized.
The named executive officers may participate in deferred compensation plans that permit deferral of certain compensation. They may also participate in our defined contribution and defined benefit retirement plans. The last column of the table under "Nonqualified Deferred Compensation in Fiscal 2020"2022" reports each named executive's aggregate balance atas of December 31, 2020,2022, under each
nonqualified deferred compensation or defined contribution plan. The named executive officers are entitled to receive the amount in their deferred compensation account in the event ofupon termination of employment or reaching a certain date selected by the executive at the time when they elect to defer compensation. The table under "Pension"Compensation Tables and Proposals - Executive Compensation Tables - Pension Benefits in Fiscal 2020"2022" describes the general terms of each pension plan in which the named executive officers participate, the years of credited service and the present value of each named executive officer's accumulated pension benefit.
Definitions. "Change of Control" is defined in our Flexible Stock Plan and, for this discussion, means (i) the acquisition, without Board approval, of more than 20% of ourthe Company's outstanding common shares through a tender offer, exchange offer or otherwise, (ii) ourthe Company's liquidation or dissolution following a sale or other disposition of all or substantially all of our assets, (iii) a merger or consolidation involving usthe Company which results in usthe Company not being the surviving corporation or (iv) a change in the majority of the members of ourthe Board of Directors during any two-year period not approved by at least two-thirds of the directors who were members at the beginning of the two-year period.
"Retirement" is defined in the respective equity incentive grant agreements and means termination of employment status after the participant has attained a combination of age and years of service that equals at least 65; provided that the maximum number of years of service credited for purposes of this calculation shall be ten. Thus, the named executive officers who satisfy the definition and are eligible for the benefits above associated with retirement as of December 31, 2020,2022, include Ms. Manning and Messrs. Larson and Laughlin.Mr. Larson.
The following table provides the value of equity awards that could accelerate and become exercisable or vested upon the occurrence of a change of control or if the named executive officer had become disabled or died as of December 31, 2020.2022. The value calculations are based upon our closing stock price as of December 31, 20202022 ($115.90)142.09) and in the case of options reflect the payment of the respective option exercise price.
VALUE OF EQUITY AWARDS UPON CERTAIN EVENTS
| Name
| Name
| Change of Control* | Disability or Death | Name
| Change of Control* | Disability or Death |
Options/SARs
| PCS/RSU
(full award at target) | Options/SARs
| PCS
(pro rata) | Options/SARs
| PCS/RSU
(full award at target) | Options/SARs
| PCS/RSU
(pro rata) |
| Anna Manning | Anna Manning | $0 | $9,094,789 | $0 | $5,364,525 | Anna Manning | $2,211,279 | $20,056,288 | $2,211,279 | $16,218,745 |
| Todd C. Larson | Todd C. Larson | $0 | $1,993,364 | $0 | $1,192,230 | Todd C. Larson | $504,675 | $4,448,696 | $504,675 | $3,562,424 |
| Alain P. Néemeh | $0 | $2,069,163 | $0 | $1,261,526 | |
| Tony Cheng | | Tony Cheng | $240,293 | $2,004,891 | $240,293 | $1,571,930 |
| Leslie Barbi | Leslie Barbi | $0 | $593,756 | $0 | $195,939 | Leslie Barbi | $380,519 | $2,816,365 | $380,519 | $2,133,901 |
| Tony Cheng | $0 | $903,325 | $0 | $568,492 | |
| John P. Laughlin | $0 | $1,369,243 | $0 | $863,490 | |
| * Payment upon a change of control is subject, in all cases, to the Compensation Committee's authority to, among other actions, adjust such awards or cause them to be assumed by the surviving corporation in such change (as described above). | |
| Ronald Herrmann | | Ronald Herrmann | $198,741 | $2,346,333 | $198,741 | $1,877,741 |
| *Payment upon a change of control is subject, in all cases, to the Committee's authority to, among other actions, adjust such awards or cause them to be assumed by the surviving corporation in such change (as described above). | | *Payment upon a change of control is subject, in all cases, to the Committee's authority to, among other actions, adjust such awards or cause them to be assumed by the surviving corporation in such change (as described above). |
|
PAY VERSUS PERFORMANCE
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K (the "pay versus performance rules"), we are providing information showing the relationship between executive compensation actually paid (as defined in the SEC rules) and the Company's financial performance. The Human Capital and Compensation Committee did not consider this disclosure when making compensation decisions. Further information about how we align executive compensation with Company performance can be found above under "Compensation Discussion and Analysis." For purposes of the disclosure below:
•Ms. Manning, our Chief Executive Officer, is the Company's principal executive officer ("PEO");
•"Compensation Actually Paid" ("CAP") adheres to the requirements set forth in Regulation S-K Item 402(v), which differs from the calculation methodology used to prepare the Summary Compensation Table and also do not reflect the actual amount of compensation earned by or paid to Ms. Manning or our other named executive officers during the applicable year;
•"TSR" is total shareholder return;
•The peer group used to calculate Peer Group TSR is the S&P Life & Health Insurance sub-index; and
•Trailing 12-month adjusted operating return on equity is the Company-selected performance measure.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| PAY VERSUS PERFORMANCE TABLE |
| Year | Summary Compensation Table Total for PEO1 | Compensation Actually Paid to PEO2 | Average Summary Compensation Table Total for Non-PEO Named Executive Officers3 | Average Compensation Actually Paid to Non-PEO Named Executive Officers4 | Value of initial fixed $100 investment based on: | Net Income7 (millions) | Company-Selected Performance Measure: Trailing 12 Month Adjusted Operating Return on Equity7 |
TSR5 | Peer Group TSR6 |
| 2022 | $11,354,662 | $19,808,104 | $3,114,364 | $4,238,584 | $93.97 | $136.53 | $623 | 10.3% |
| 2021 | $16,109,515 | $9,495,022 | $3,249,851 | $2,356,848 | $70.64 | $123.73 | $617 | 0.8% |
| 2020 | $9,044,233 | $(2,529,957) | $2,491,515 | $420,220 | $72.98 | $90.52 | $415 | 5.7% |
1The dollar amounts reported for Ms. Manning under "Summary Compensation Table Total" are the amounts of total compensation reported for Ms. Manning for each corresponding year in the "Total" column of the Summary Compensation Table as reflected on page 65. |
2The dollar amounts reported for Ms. Manning under "Compensation Actually Paid" represent the amount of compensation actually paid to Ms. Manning as computed in accordance with Item 402(v) of Regular S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Ms. Manning during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the adjustments in the table below were made to Ms. Manning's total compensation for each year to determine the compensation actually paid. See "Compensation Actually Paid to PEO" table below for additional information. |
3The dollar amounts reported under "Average Summary Compensation Total" for non-PEO NEOs represent the average of the amounts reported for the Company's named executive officers ("NEOs") as a group (excluding any individual serving as our CEO for such year) in the 'Total' column of the Summary Compensation Table in each applicable year. The names of the NEOs included for purposes of calculating the average amounts in each applicable year are as follows: (i) for 2022, Todd Larson, Tony Cheng, Leslie Barbi and Ronald Herrmann; (ii) for 2021, Todd Larson, Tony Cheng, Leslie Barbi, Ronald Herrmann and Alain Néemeh; and (iii) for 2020, Todd Larson, Tony Cheng, Leslie Barbi, Alain Néemeh and John Laughlin. |
4The dollar amounts reported under "Average Compensation Actually Paid" for non-PEO NEOs represent the average amount of compensation actually paid to the NEOs as a group (excluding the CEO), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the NEOs as a group during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the adjustments in the table below were made to the NEOs' total compensation for each year to determine the compensation actually paid. See "Compensation Actually Paid to non-PEO NEOs" table below for additional information. |
5Cumulative TSR is calculated by dividing the sum of the cumulative amount of dividends for the measurement of dividends for the measurement period, assuming dividend reinvestment and the difference between the Company's share price at the end and the beginning of the measurement period by the Company's share price at the beginning of the measurement period. |
6Represents the weighted peer group TSR, weighted according to the respective companies' stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the S&P Life & Health Insurance sub-index. |
7See "Use of Non-GAAP Financial Measures" on page 89 for reconciliations from GAAP figures to adjusted operating figures. |
| | | | | | | | | | | |
| COMPENSATION ACTUALLY PAID TO PEO |
| PEO |
| 2022 | 2021 | 2020 |
| Total Compensation as reported in Summary Compensation Table ("SCT") | $ | 11,354,662 | | $ | 16,109,515 | | $ | 9,044,233 | |
Minus Pension values reported in SCT | 501,924 | | 635,367 | | 617,725 | |
Minus Fair value of equity awards granted during fiscal year | 6,249,937 | | 12,750,138 | | 5,756,659 | |
Plus Pension value attributable to current year's service and any change in pension value attributable to plan amendments made in the current year | 426,251 | | 241,185 | | (71,386) | |
Plus Fair value of equity compensation granted in current year - value at end of year-end | 8,535,142 | | 10,027,648 | | 2,041,874 | |
Plus Fair value of equity compensation granted in current year - vesting date value | 767,810 | | 256,218 | | 680,625 | |
Plus Change in fair value for end of prior fiscal year to vesting date for awards made in prior fiscal years that vested during current fiscal year | 2,932,503 | | (3,696,844) | | (7,611,114) | |
Plus Change in fair value from end of prior fiscal year to end of current fiscal year for awards made in prior fiscal years that were unvested at end of current fiscal year | 2,543,597 | | (57,195) | | (239,804) | |
Plus Dividends or other earnings paid on stock or options awards in the covered fiscal year prior to the vesting date that are not otherwise included in the total compensation for the covered fiscal year | — | | — | | — | |
Plus Fair value of awards forfeited in current fiscal year determined at end of prior fiscal year | — | | — | | — | |
| Compensation Actually Paid to PEO | $ | 19,808,104 | | $ | 9,495,022 | | $ | (2,529,956) | |
| | | |
| COMPENSATION ACTUALLY PAID TO NON-PEO NEOS |
| non-PEO NEO Averages |
| 2022 | 2021 | 2020 |
| Total Compensation as reported in Summary Compensation Table ("SCT") | $ | 3,114,364 | | $ | 3,249,851 | | $ | 2,491,515 | |
Minus Pension values reported in SCT | 51,314 | | 110,121 | | 335,677 | |
Minus Fair value of equity awards granted during fiscal year | 1,052,880 | | 1,740,959 | | 897,828 | |
Plus Pension value attributable to current year's service and any change in pension value attributable to plan amendments made in the current year | (179) | | 103,422 | | (135,740) | |
Plus Fair value of equity compensation granted in current year - value at end of year-end | 1,404,214 | | 1,236,050 | | 318,452 | |
Plus Fair value of equity compensation granted in current year - vesting date value | 129,348 | | 39,781 | | 106,151 | |
Plus Change in fair value for end of prior fiscal year to vesting date for awards made in prior fiscal years that vested during current fiscal year | 360,646 | | (408,444) | | (1,091,662) | |
Plus Change in fair value from end of prior fiscal year to end of current fiscal year for awards made in prior fiscal years that were unvested at end of current fiscal year | 334,385 | | (12,731) | | (34,991) | |
Plus Dividends or other earnings paid on stock or options awards in the covered fiscal year prior to the vesting date that are not otherwise included in the total compensation for the covered fiscal year | — | | — | | — | |
Plus Fair value of awards forfeited in current fiscal year determined at end of prior fiscal year | — | | — | | — | |
| Average Compensation Actually Paid to non-PEO NEOs | $ | 4,238,584 | | $ | 2,356,849 | | $ | 420,220 | |
Financial Performance Measures
As described above under "Compensation Discussion and Analysis," the philosophy and objectives of our executive compensation programs include creating incentives that will focus executives on, and reward for increasing long-term shareholder value and aligning the long-term financial interests of our executives with those of our shareholders. As explained in "Compensation Discussion and Analysis," the most important financial measures used by the Company to link compensation actually
paid (as defined by SEC rules) to the Company's named executive officers for the most recently completed fiscal year to the Company's performance are:
•Trailing 12 Month Adjusted Operating Return on Equity;
•Revenue;
•Adjusted Earnings per Share;
•New Business Embedded Value; and
•Book Value per Share, excluding AOCI
Analysis of Pay versus Performance Table Information
As described in "Compensation Discussion and Analysis" above, the Company uses several measures to align executive compensation with Company performance. Not all of such measures are presented in the Pay versus Performance table above. Additionally, as discussed in "Compensation Discussion and Analysis," the Company's executive compensation philosophy generally seeks to incentivize long-term performance. Therefore, the Company does not specifically align performance measures with compensation that is actually paid (as defined by SEC rules) for any single year. In accordance with Item 402(v) of Regulation S-K, we are providing the following graphical descriptions showing certain information presented in the table above.
| | | | | | | | | | | | | | |
| *TSR figures represent cumulative amount of $100 invested in Company common stock on January 1, 2020. |
| | | | | | | | | | | | | | |
†See "Use of Non-GAAP Financial Measures" on page 89 for reconciliations from GAAP figures to adjusted operating figures. |
CEO Pay RatioPAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K (the "pay ratio rules"), we are providing information about the relationship of the annual total compensation of our employees and the annual total compensation of Ms. Anna Manning, our President and Chief Executive Officer (our "CEO"). during 2022. This regulation requires usthe Company to identify our median employee by using consistently applied compensation measures and then determine the ratio of our CEO's total annual compensation to the compensation of this employee. The pay ratio information included in this disclosure is a reasonable estimate calculated in a manner consistent with the pay ratio rules.
The pay ratio rules permit the use of a determined median employee for up to three years, unless there has been a meaningful change to a company'sthe Company's employee population, or a change in employee compensation arrangements such that such companythe Company believes would result in a significant modification to the pay ratio disclosure.
During the 2020 fiscal year,While there was no significant change in our employee population or employee compensation arrangements that we reasonably believe would result in a significant change to our pay ratio disclosure. Therefore,disclosure, we chosedecided to userecalculate the same median employee identified and disclosed indue to the Company's 2020 Proxy Statement.divestiture of a small subsidiary. This median employee was selected from those individuals whose compensation is determined by the Company, which includes all of our regular employees, temporary fixed-term employees, temporary student employees, interns and coopco-op employees who were working for the Company on October 31, 2020.
The total number of employees as of October 31, 2019 was determined to be 3,426 individuals working at our parent company and consolidated subsidiaries worldwide.
2022. As of October 31, 2020,2022, there were 3,6323,845 individuals working for the parent company and consolidated subsidiaries worldwide, a 6.0% change from the previous year. In addition, the 2020 median employee is still employed by the Company and such person's compensation did not materially change in 2020.worldwide.
We used base salary and ABP payments to calculate our median employee, as these compensation measures apply consistently to all employees, across all locations of our employee population. The base salary of any permanent full-time employee who did not work the full year was annualized. We did not make any cost-of-living adjustments for non-U.S. employees in determining each employees' annual compensation. For foreign employees, a year-to-date average exchange rate was used for base salary and the spot rate for March 1, 20202022 was used for the ABP payment.
We combined all of the elements of the median employee's compensation for 2020,2022, in accordance with the requirements of the pay ratio rules, resulting in annual total compensation of $117,324.$129,302. The annual total compensation of our CEO as reported in the Summary Compensation Table
included in this Proxy Statement, was $9,044,232$11,354,662 in 2020.2022. Based on this information, for 20202022 the ratio of the annual total compensation of our CEO as compared to our median employee was 77:88:1.
COMPENSATION TABLES AND PROPOSALS EXECUTIVE COMPENSATION TABLES
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and
Principal Position
| Year
| Salary1
| Bonus
| Stock Awards2
| Option Awards3
| Non-Equity Incentive Plan Compensation4
| Change in Pension Value and Nonqualified Deferred Compensation Earnings5 | All Other Compensation6
| Total
|
Anna Manning CEO | 2022 | $1,030,000 | — | $3,124,951 | $3,124,986 | $3,374,547 | $501,924 | $198,254 | $11,354,662 |
| 2021 | $1,030,000 | — | $6,375,029 | $6,375,109 | $1,504,315 | $635,367 | $189,695 | $16,109,515 |
| 2020 | $1,030,000 | — | $4,312,485 | $1,444,174 | $1,390,500 | $617,725 | $249,349 | $9,044,233 |
Todd C. Larson Sr. EVP and CFO | 2022 | $675,000 | — | $742,514 | $742,501 | $1,448,070 | $204,542 | $100,118 | $3,912,745 |
| 2021 | $645,000 | — | $1,377,827 | $1,377,799 | $628,017 | $305,797 | $93,685 | $4,428,125 |
| 2020 | $636,346 | — | $919,112 | $307,796 | $580,500 | $360,017 | $109,992 | $2,913,763 |
Tony Cheng President | 2022 | $638,538 | — | $385,319 | $385,254 | $1,053,366 | $714 | $306,421 | $2,769,612 |
| 2021 | $612,414 | — | $596,284 | $596,310 | $366,196 | $686 | $302,763 | $2,474,653 |
| 2020 | $609,766 | — | $367,456 | $123,043 | $384,126 | $661 | $300,284 | $1,785,336 |
Leslie Barbi EVP and Chief Investment Officer | 2022 | $600,000 | — | $599,977 | $599,989 | $1,250,328 | $— | $147,451 | $3,197,745 |
| 2021 | $575,000 | — | $605,057 | $605,068 | $808,278 | $— | $108,595 | $2,701,998 |
| 2020 | $561,731 | — | $603,746 | $202,180 | $452,333 | $— | $302,721 | $2,122,711 |
Ronald Herrmann EVP , Head of U.S. and Latin American Markets | 2022 | $624,231 | — | $377,968 | $377,997 | $1,060,970 | $— | $136,187 | $2,577,353 |
| 2021 | $600,000 | — | $359,938 | $359,963 | $662,706 | $— | $66,623 | $2,049,230 |
1.This column includes any amounts deferred at the election of the named executive officers under the Company's Executive Deferred Savings Plan and retirement Savings Plan. For 2022, the base salary for Mr. Cheng was determined in HKD and converted to USD using an average monthly foreign exchange rate.
2.This column represents the grant date fair value of PCS and PSU awards granted in such year, using probable outcomes of performance conditions, in accordance with Accounting Standards Codification: 718 – Compensation – Stock Compensation ("ASC 718"). For additional information on the valuation assumptions, refer to note 17 of the Company's financial statements in the Form 10-K for the year ended December 31, 2022, as filed with the SEC. See also "Grants of Plan-Based Awards in 2022" for information on awards made in 2022. These amounts reflect the grant date fair value for these awards, and do not correspond to the actual value that may be recognized by the named executive officers.
Due to the impact of the COVID-19 pandemic on the Company's 2020 and 2021 financial results, Company financial performance for the 2018-2020, 2019-2021 and 2020-2022 PCS performance periods was below the threshold required for payment with respect to each of the three metrics, resulting in a zero payout overall in 2020, 2021 and 2022 for these three award cycles.
3.This column represents the grant date fair value of SARs and RSUs granted in such year, in accordance with ASC 718. For additional information on the valuation assumptions, refer to note 17 of the Company's financial statements in the Form 10-K for the year ended December 31, 2022, as filed with the SEC. See also "Grants of Plan-Based Awards in 2022" for information on SARs granted in March 2022. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that may be recognized by the named executive officers.
4.Includes for all named executive officers, cash incentives earned for performance during each fiscal year and paid in March of the following year (including any incentives deferred at the election of the executive officers) under the Annual Bonus Plan.
5.This column represents the sum of the change in pension value in each fiscal year for each of the named executive officers. The increase in pension value for 2022 is attributable to service and compensation increases, offset in part by assumption changes from the prior year. The Company does not pay above-market or preferential earnings on any account balances; therefore, this column does not reflect any amounts relating to nonqualified deferred compensation earnings. See the "Pension Benefits in 2022" and "Nonqualified Deferred Compensation in 2022" tables for additional information.
The change in pension value for Ms. Manning represents the sum of the change in pension value for the U.S. Pension Plans as well as the RGA Canadian Defined Benefit Plan SERP. Ms. Manning has not accrued additional benefits under the RGA Canadian Defined Benefit Plan SERP plan since her transfer to the U.S. in April 2016. The change in pension value for the RGA Canadian Defined Benefit Plan SERP is due to changes in interest rate assumptions. The accumulated value of the RGA Canadian Defined Benefit Plan SERP is calculated by converting the participant's accrued annuity benefit under the plan to an actuarial equivalent present value amount as of the measurement date. The interest rate assumption used for this conversion has a material impact on the calculation. As a result, significant changes in interest rates from year to year can lead to material changes to the accumulated value of the benefit.
For Ms. Manning, this column also includes the accrual value of a supplemental payment to be paid upon her retirement from the Company, as an acknowledgment of the financial implications on her retirement benefits with respect to her relocation to the U.S. from Canada in 2016. The supplemental payment represents the difference between (i) the value of the Company-provided benefits that she would have received upon her retirement had she worked her entire career (starting upon her hire date in 2007 through retirement) in the U.S., and (ii) the value of Company-provided benefits that she will actually receive upon retirement from the Company. For this purpose, Company-provided benefits include any savings, pension or deferred compensation benefits funded by the Company based on her deferrals of pay, additional non-elective contributions to company retirement accounts and any subsequent investment returns credited to those deferred compensation accounts based on contribution from the Company. The value of any salary deferrals by Ms. Manning, including any subsequent investment return credited to those retirement accounts for those salary deferrals, is not included in the calculation of this supplemental payment. This payment will be a single lump sum payment made in U.S. dollars after Ms. Manning's retirement from the Company. See "Five Elements of Compensation - Compensation Element #5 - Retirement and Pension Benefits" for more information.
Mr. Cheng accrued a benefit in the U.S. pension plan prior to his transfer outside of the country in 2002. Mr. Cheng has not accrued additional benefits in the plan while he has been employed in Hong Kong, but will start accruing additional benefits in the plan upon his transfer back to the U.S. in 2023.
6.Amount includes contributions by the Company to the officers' accounts in qualified and nonqualified plans for the 2022 plan year. Includes life insurance premiums paid by the Company on behalf of Ms. Manning in the amount of $14,210, Mr. Larson in the amount of $8,906, Ms. Barbi in the amount of $6,623, and Mr. Herrmann in the amount of $7,139. Amount includes Company contributions on behalf of Mr. Cheng to the Mandatory Provident Fund in the amount of $68,962.
Includes Company contributions for 2022 under the Savings Plan of $30,500 for Ms. Barbi and Mr. Herrmann, $21,350 for Ms. Manning and Messrs. Larson. Also includes Company contributions for 2022 under the Augmented Savings Plans of $44,586 for Ms. Manning, $19,960 for Mr. Larson, $55,164 for Ms. Barbi and $49,097 for Mr. Herrmann. Includes Company matching contributions for 2022 under the Executive Deferred Savings Plan ("EDSP") of $111,466 for Ms. Manning, $49,901 for Mr. Larson, $55,164 for Ms. Barbi and $49,097 for Mr. Herrmann.
In 2022, Mr. Cheng received a total of $227,158 for local allowances, of which $37,221 was for education and $189,937 was for housing. Allowances are benefits offered to select executives in Hong Kong and are reviewed on an annual basis to ensure compensation in Hong Kong remains market competitive.
For 2022, amount includes foreign tax preparation taxable benefit amount grossed up for taxes for Ms. Manning in the amount of $4,968. Amount also includes professional dues paid by the Company on behalf of Ms. Manning for $1,674, Mr. Cheng for $3,062 and Mr. Herrmann of $355. Amount includes fees paid by the Company for club memberships including the use of a fitness facility for Mr. Cheng in the amount of $7,238.
Grants of Plan-Based Awards in 2022
This table provides the following information about equity and non-equity awards granted to the named executive officers in 2022: (1) the grant date; (2) the estimated future payouts under non-equity incentive plan awards, which consist of potential payouts under the Annual Bonus Plan award granted in 2022 for the 2022 performance period; (3) estimated future payouts under equity incentive plan awards, which consist of potential payouts under the PCS grants in 2022 for the 2022-2024 performance period; (4) all other option awards, which consist of the SARs and RSU awards granted to the named executive officers in 2022; (5) the strike price of the SARs granted, which reflects the closing price of Company stock on the date of grant and (6) the grant date fair value of each equity grant calculated under ASC 718.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GRANTS OF PLAN-BASED AWARDS IN 2022 |
| Name | Grant Date | Estimated Future Payments Under Non-Equity Incentive Plan Awards¹ | Estimated Future Payments Under Equity Incentive Plan Awards (Number of Shares)² | All Other Stock Awards: Number of Shares of Stock or Units3 | All Other Option Awards: Number of Securities Underlying Options4
| Exercise of Base Price of Option Awards5
| Grant Date Fair Value of Stock and Option Awards6
|
| Threshold | Target | Maximum | Threshold | Target | Maximum |
| Anna Manning | 3/22/2022 | $1,030,000 | $2,060,000 | $4,120,000 | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | 14,667 | 29,334 | 58,668 | --- | --- | --- | $3,124,951 |
| --- | --- | --- | --- | --- | --- | 14,667 | --- | --- | $1,562,476 |
| --- | --- | --- | --- | --- | --- | --- | 51,146 | $106.53 | $1,562,510 |
| Todd C. Larson | 3/22/2022 | $438,750 | $877,500 | $1,755,000 | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | 3,485 | 6,970 | 13,940 | --- | --- | --- | $742,514 |
| --- | --- | --- | --- | --- | --- | 3,485 | --- | --- | $371,257 |
| --- | --- | --- | --- | --- | --- | --- | 12,152 | $106.53 | $371,244 |
| Tony Cheng | 3/22/2022 | $321,025 | $642,050 | $1,284,100 | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | 1,808 | 3,617 | 7,234 | --- | --- | --- | $385,319 |
| --- | --- | --- | --- | --- | --- | 1,808 | --- | --- | $192,606 |
| --- | --- | --- | --- | --- | --- | --- | 6,306 | $106.53 | $192,648 |
| Leslie Barbi | 3/22/2022 | $360,000 | $720,000 | $1,440,000 | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | 2,816 | 5,632 | 11,264 | --- | --- | --- | $599,977 |
| --- | --- | --- | --- | --- | --- | 2,816 | --- | --- | $299,988 |
| --- | --- | --- | --- | --- | --- | --- | 9,820 | $106.53 | $300,001 |
| Ronald Herrmann | 3/22/2022 | $315,000 | $630,000 | $1,260,000 | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | 1,774 | 3,548 | 7,096 | --- | --- | --- | $377,968 |
| --- | --- | --- | --- | --- | --- | 1,774 | --- | --- | $188,984 |
| --- | --- | --- | --- | --- | --- | --- | 6,187 | $106.53 | $189,013 |
|
1. These columns reflect the potential value of the payment for 2022 performance under the ABP for each named executive if the minimum, target or maximum goals are satisfied. The potential payments are performance-driven and are therefore completely at risk. The performance measures, salary and ABP multiples for determining the payments are described in the CD&A. The ABP payment amount for actual 2022 performance was determined in March 2023 based on the metrics described in the CD&A and is included in the "Summary Compensation Table" in the column titled "Non-Equity Incentive Plan Compensation."
2. This column reflects the number of PCS units granted in March 2022, which may convert into shares of Company stock at the end of the three-year performance period if the specified performance levels are achieved. The performance period commenced January 1, 2022 and ends December 31, 2024. If the threshold level of performance is met, the award of shares starts at 50% (target is 100% and maximum is 200%).
3. This column reflects the number of RSUs granted in March 2022, which vest over a three-year period beginning January 1, 2022 and ends on December 31, 2024.
4. This column reflects the number of SARs granted in March 2022, which vest and become exercisable in four equal annual installments of 25%, beginning on December 31, 2022.
5. This column reflects the strike price per share of common stock for the SARs granted, which is the closing price of the common stock on March 22, 2022, the date the Committee approved the grants.
6. This column reflects the full grant date fair value of the performance contingent awards under ASC 718, the full grant date fair value of the RSUs and the SARs under ASC 718 granted to the named executive officers in 2022. See notes 3 and 4 of the "Summary Compensation Table" for a discussion of fair value calculation related to the performance contingent awards, RSUs and SARs respectively. For PCS awards with the grant date of March 22, 2022, the fair value is calculated using the closing price of Company stock of $106.53. For SARs with a grant date of March 22, 2022, fair value is calculated using the Black-Scholes value of $30.55. For additional information on the valuation assumptions, refer to note 18 of the Company's financial statements in the Form 10-K for the year ended December 31, 2022, as filed with the SEC. These amounts reflect the grant date fair value, and do not correspond to the actual value that will be recognized by the named executive officers. The PCS awards are subject to specified performance objectives over the applicable performance periods, the results of which will determine the amount of payouts, if any, under such awards.
Outstanding Equity Awards at 2022 Year-End
The following table provides information on the 2022 year-end holdings of SARs, RSUs, stock options and performance contingent awards by our named executive officers. This table includes vested and unvested SARs, RSUs and option awards and unvested performance contingent awards with performance conditions that have not yet been satisfied. The vesting schedule for each grant is described in the footnotes following this table, based on the grant date. The market value of the stock awards is based on the closing market price of Company stock as of December 31, 2022, which was $142.09. The performance contingent awards are subject to specified performance objectives over the performance period. For additional information about the option awards and stock awards, see the description of equity incentive compensation in the CD&A.
OUTSTANDING EQUITY AWARDS AT 2022 YEAR-END | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | Stock Awards |
| Grant Date | Number of Securities of Underlying Unexercised Options (Exercisable)1 | Number of Securities Underlying Unexercised Options (Unexercisable)
| Equity Incentive Plan Awards: Number of Securities Underlying Unearned Options
| Option
Exercise
Price | Option
Expiration
Date | Number of Shares or Units of Stock That Have Not Vested2 | Market Value of Shares or Units or Stock That Have Not Vested2 | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested3 | Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested3 |
| Anna Manning |
| 3/7/2014 | 5,514 | | | $78.48 | 3/7/2024 | | | | |
| 3/6/2015 | 8,340 | | | $90.06 | 3/6/2025 | | | | |
| 12/1/2015 | 153,453 | | | $93.21 | 12/1/2025 | | | | |
| 3/4/2016 | 26,681 | | | $93.53 | 3/4/2026 | | | | |
| 3/3/2017 | 27,919 | | | $129.72 | 3/3/2027 | | | | |
| 3/2/2018 | 28,016 | | | $150.87 | 3/2/2028 | | | | |
| 3/1/2019 | 37,215 | | | $145.25 | 3/1/2029 | | | | |
| 3/6/2020 | 71,541 | 23,847 | | $117.85 | 3/6/2030 | | | | |
| 3/11/2021 | 20,577 | 20,577 | | $129.01 | 3/11/2031 | 11,143 | $1,583,309 | 22,285 | $3,166,476 |
| 3/22/2022 | 12,787 | 38,360 | | $106.53 | 3/22/2032 | 14,667 | $2,084,034 | 29,334 | $4,168,068 |
| Todd C. Larson |
| 3/7/2014 | 3,848 | | | $78.48 | 3/7/2024 | | | | |
| 3/6/2015 | 3,926 | | | $90.06 | 3/6/2025 | | | | |
| 3/4/2016 | 9,669 | | | $93.53 | 3/4/2026 | | | | |
| 3/3/2017 | 5,369 | | | $129.72 | 3/3/2027 | | | | |
| 3/2/2018 | 6,444 | | | $150.87 | 3/2/2028 | | | | |
| 3/1/2019 | 8,187 | | | $145.25 | 3/1/2029 | | | | |
| 3/6/2020 | 15,247 | 5,083 | | $117.85 | 3/6/2030 | | | | |
| 3/11/2021 | 4,385 | 4,386 | | $129.01 | 3/11/2031 | 2,375 | $337,464 | 4,750 | $674,927 |
| 3/22/2022 | 3,038 | 9,114 | | $106.53 | 3/22/2032 | 3,485 | $495,184 | 6,970 | $990,367 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Tony Cheng |
| 3/6/2015 | 3,411 | | | $90.06 | 3/6/2025 | | | | |
| 3/4/2016 | 4,152 | | | $93.53 | 3/4/2026 | | | | |
| 3/3/2017 | 3,280 | | | $129.72 | 3/3/2027 | | | | |
| 3/2/2018 | 3,384 | | | $150.87 | 3/2/2028 | | | | |
| 3/1/2019 | 3,882 | | | $145.25 | 3/1/2029 | | | | |
| 3/6/2020 | 6,095 | 2,032 | | $117.85 | 3/6/2030 | | | | |
| 3/11/2021 | 1,745 | 1,746 | | $129.01 | 3/11/2031 | 945 | $134,275 | 1,890 | $268,550 |
| 3/22/2022 | 1,576 | 4,730 | | $106.53 | 3/22/2032 | 1,808 | $256,899 | 3,617 | $513,940 |
| Leslie Barbi |
| 3/6/2020 | 10,015 | 3,339 | | | $117.85 | 3/6/2030 | | | | |
| 3/11/2021 | 2,881 | 2,881 | | | $129.01 | 3/11/2031 | 1,560 | $221,660 | 3,120 | $443,321 |
| 3/22/2022 | 2,455 | 7,365 | | | $106.53 | 3/22/2032 | 2,816 | $400,125 | 5,632 | $800,251 |
| Ronald Herrmann |
| 12/1/2020 | | | | $121.33 | 12/1/2030 | 7,006 | | $995,483 | | |
| 3/11/2021 | 2,576 | 2,577 | | | $129.01 | 3/11/2031 | 1,395 | | $198,216 | 2,790 | $396,431 |
| 3/22/2022 | 1,546 | 4,641 | | $106.53 | 3/22/2032 | 1,774 | $252,068 | 3,548 | $504,135 |
1. SARs vest over four years (25% of which vests at the end of each of the four years).
2. These columns reflect the number of RSUs granted in March 2021, which fully vest on December 31, 2023, and the RSUs granted in March 2022, which fully vest on December 31, 2024.
3. These columns reflect the number of shares and estimated market value of PCS and PSU grants. Rather than measuring the 2021 - 2023 PCS grant performance metrics on a cumulative basis over a three-year period as done with previous grants, specific financial performance metrics were established for each of 2021 and 2022. Like previous grants, the awards will be subject to a three-year vesting period, with 2023 serving as an additional time vesting period. The 2021 one-time PSU awards fully vested on December 31, 2022, upon achievement of certain pre-determined measures during 2021 and 2022. The Company resumed measuring financial performance over a three-year period for the 2022 PCS awards. Targets established for the 2022 grant will be adjusted for impacts of Long-Duration Targeted Improvements ("LDTI") under new GAAP accounting rules effective January 1, 2023. The 2022 PCS are disclosed assuming they are awarded at the target (100%) level. The 2021 PCS and 2021 one-time PSU grants are disclosed assuming they are awarded at the target (100%) level. The market or payout value is estimated using the closing price, $142.09, of our common stock on December 31, 2022.
SARs and Option Exercises and Stock Vested in 2022
2022 SARs and Option Exercises. The following table provides information for the named executive officers regarding SARs and stock option exercises during 2022, including the number of shares acquired upon exercise and the value realized.
2022 SARS AND OPTION EXERCISES
| | | | | | | | | | | | | | |
| Option and SARs Awards1 | Stock Awards2 |
| Name | Number of
Shares Acquired
on Exercise | Value Realized
on Exercise | Number of
Shares Acquired
on Vesting | Value Realized
on Vesting |
| Anna Manning | — | — | — | — |
| Todd C. Larson | 7,799 | $513,798 | — | — |
| Tony Cheng | — | — | — | — |
| Leslie Barbi | — | — | — | — |
| Ronald Herrmann | — | — | — | — |
1. Mr. Larson exercised 7,799 options on August 09, 2022 with an average market price for the shares of $124.65.
2. These columns represent amounts paid for the settlement of our PCS awards for the 2019-2021 performance period, paid in 2022.
2019-2021 Performance Contingent Share Payout. In February 2019, the Committee established the target and range for the following PCS performance measures: (i) three-year adjusted operating ROE; (ii) three year adjusted operating income and (iii) three-year book value per share, excluding AOCI. These measures were set for the period beginning in 2019 at levels that were consistent with our intermediate-term goals for those measures. The performance period for the 2019 PCS grant began on January 1, 2019 and ended on December 31, 2021.
In February 2022, the Committee reviewed the results for the 2019-2021 performance period and determined that none of the metrics met the threshold level, resulting in no payouts under these awards.
Pension Benefits in 2022
RETIREMENT PLAN ACCUMULATED BENEFITS
| | | | | | | | | | | | | | |
| Name* | Plan Names | Years of
Service Credited | Present Value of Accumulated Benefit1 | Payments
During Last
Fiscal Year |
| Anna Manning | Performance Pension Plan | 6 | $185,472 | --- |
| Augmented Benefit Plan | 6 | $1,788,750 | --- |
| RGA Canada Defined Benefit Plan SERP | 9 | $1,478,141 | --- |
| Supplemental Payment | 16 | $1,350,000 | --- |
| Todd C. Larson | Performance Pension Plan | 27 | $533,232 | --- |
| Augmented Benefit Plan | 27 | $2,092,022 | --- |
| Tony Cheng | Performance Pension Plan | 3 | $18,560 | --- |
| *Ms. Barbi and Mr. Herrmann are not eligible for the Performance Pension Plan or the pension element of the Augmented Benefit Plan. |
1.The accumulated benefit for the U.S. plans is based on service and compensation (as described above) considered by the plans for the period through December 31, 2022. The present value has been calculated assuming the earliest retirement age at which the participant can elect an unreduced benefit. For additional discussion of the assumptions, see note 10 of the Company's financial statements in the Form 10-K for the year ended December 31, 2022, as filed with the SEC. As described in such note, the interest assumptions for the qualified pension plan and the augmented benefit plan are 4.98% and 4.92%, respectively.
For Mr. Cheng, the Performance Pension Plan represents his accrued benefit in the U.S. pension plan prior to his transfer outside of the country in 2002. Mr. Cheng is vested in a Performance Pension Account Benefit from his prior service in the U.S that continues to increase with interest each year. He will accrue additional benefits under the plan when he relocates to the U.S.
The accumulated benefit for the Supplemental Payment to Ms. Manning is calculated based on the actual retirement benefits accumulated by Ms. Manning to date, as well as a projection of her employer-provided retirement benefits had she been employed in the U.S. since her original hire date with the Company. The calculation of the accumulated value of the benefit is based on her actual earnings up through December 31, 2022, currency exchange rates effective for each year to convert her Canadian earnings to U.S. dollars, and assumed annual return on her defined contribution benefits of 4% before 2016, 4.5% for the Executive Deferred Savings Plan in 2016 and later, and 6% in the Augmented Savings and Savings Plan benefits in 2016 and later.
Ms. Manning's RGA Canada Defined Benefit SERP accumulated benefit is based on credited service and pensionable earnings effective as of her transfer to the U.S. in 2016. The present value of the accumulated benefit is calculated using an interest rate of 4.1% for the first 10 years and 4.5% thereafter.
Performance Pension Account Benefits
The Performance Pension Account Benefit payable to eligible employees, including certain executives, upon termination of employment is the sum of (1) and (2) as follows:
(1) Participants earn base credits for each Year of Accrual Service (as defined below) completed under the plan. The credit is a percentage of the employee's Final Average Annual Compensation (as defined below) based on the participant's age on January 1 of the Pension Plan year.
(2) Additional excess compensation credits are earned on Final Average Annual Compensation that is greater than 60% of the prevailing Social Security Wage Base (as defined below), rounded to the next $100.
See table below for detail on base and excess compensation credits:
| | | | | | | | |
| EXCESS COMPENSATION CREDITS |
Age on January 1 of the
Plan Year in which
the Year of Accrual Service is Earned | Base Credits - Percentage of Final
Average Annual Compensation Credited | Excess Compensation Credits - Percentage of Final Average Annual Compensation Credited |
| Up to 35 | 2% | 1% |
| 35 – 44 | 4% | 2% |
| 45 – 54 | 6% | 3% |
| 55 or over | 8% | 4% |
For certain Company employees who were employees prior to January 1, 1996, the Pension Plan provides a "Traditional Benefit" paid exclusively in the form of an annuity. None of our named executive officers have accrued a Traditional Benefit annuity in the Pension Plan.
Pension Plan participants with a Performance Pension Account Benefit may elect to receive their Performance Pension Account Benefit as a lump sum or an annuity at any time after termination of employment, subject to the three-year vesting requirement of the plan.
| | | | | |
| PERFORMANCE PENSION ACCOUNT DEFINITIONS |
| Definition |
| Final Average Annual Compensation | The average of compensation received (base salary and ABP award) during the 5 consecutive years of accrual service within the last 10 calendar year period immediately preceding termination of employment which produces the highest average amount (or during all the years of accrual service if less than 5). |
| Year of Accrual Service | A year is credited for each plan year after an employee becomes a plan participant in which the participant is credited with at least 1,000 hours of service. |
| Social Security Wage Base | For any year the maximum amount of compensation which may be considered wages for such year for purposes of assessing Federal Insurance Contributions Act (FICA) taxes. |
Nonqualified Deferred Compensation in 2022
| | | | | | | | | | | | | | | | | |
| 2022 NONQUALIFIED DEFERRED COMPENSATION |
Name
| Executive Contributions in Last FY1 | Registrant Contributions in Last FY2 | Aggregate Earnings in Last FY3 | Aggregate
Withdrawals/
Distributions | Aggregate Balance at Last FYE4 |
| Anna Manning | $201,932 | $149,135 | $65,562 | $— | $1,596,805 |
| Todd C. Larson | $65,151 | $65,485 | $(17,758) | $— | $1,275,351 |
| Leslie Barbi | $161,655 | $73,733 | $(20,433) | $— | $335,464 |
| Ronald Herrmann | $64,347 | $31,000 | $(6,746) | $— | $119,594 |
1. The amounts in this column are also included in the Summary Compensation Table in the "Salary" column (i.e., contributions to the Executive Deferred Savings Plan).
2. The amounts in this column reflect 2021 contributions credited to the participant's account during 2022. For reasons related to the timing of the contributions, the amounts will not match the amounts in the Summary Compensation Table's "All Other Compensation" column, which are contributions for 2022 which are actually made in 2023.
3. Reflects earnings credited to the participant's account during 2022 in connection with the investment selections chosen from time to time by the participant.
4. The aggregate balance at last fiscal year-end column reflects the following amounts that were reported in the Summary Compensation Table in 2021 for Ms. Manning in the amount of $1,180,176, Mr. Larson in the amount of $1,162,473, Ms. Barbi in the amount of $120,509, and Mr. Herrmann in the amount of $30,993.
ITEM 2 – FREQUENCY OF THE SHAREHOLDERS' ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") enables the Company's shareholders to vote, on an advisory or non-binding basis, on how frequently they would like to cast an advisory vote on the compensation of the Company's named executive officers. The frequency vote must be held at least once every six years. The Dodd-Frank Act requires companies to allow shareholders to consider whether they would prefer an advisory vote on named executive officer compensation every one, two, or three years.
The Board of Directors believes that conducting an advisory vote on executive compensation on an annual basis is appropriate for the Company and its shareholders and recommends that you vote for a one-year interval for the advisory vote on named executive officer compensation. The Board believes that shareholders should vote on named executive officer compensation every year so that they may annually provide us with their direct input. Setting a one-year period for holding this vote will enhance shareholder communication by providing a clear, simple means for the Company to obtain information on investor sentiment about our executive compensation philosophy, policies, and practices. In addition, an annual advisory vote on executive compensation is consistent with our policy of seeking input from, and engaging in discussions with, our stockholders on corporate governance matters and our executive compensation program.
While we believe than an annual vote is the best choice for us, you are not voting to approve or disapprove the Board's recommendation, but rather to make your own choice on preferred frequency by choosing the option of one year, two years, or three years or you may abstain from voting on this proposal. Our Human Capital and Compensation Committee values the views of our shareholders and understands that our shareholders may have different views as to the best approach for the Company. As required by the Dodd-Frank Act, this is an advisory vote, which means that this proposal is not binding on the Company. Our Board and Human Capital and Compensation Committee may decide that it is in the best interests of our shareholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by shareholders.
Vote Required
If a quorum is present, the vote required to approve this Item 2 is a majority of the common stock represented in person or by proxy at the Annual Meeting.
Recommendation of the Board of Directors
The Board of Directors recommends that shareholders approve an ANNUAL advisory vote on the compensation of the Company's named executive officers.
ITEM 23 – SHAREHOLDERS' ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act enables our shareholders to vote to approve, on an advisory basis (i.e., non-binding), the compensation of the named executive officers as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K (including in the Compensation Discussion and Analysis section, compensation tables and accompanying narrative disclosures).
The Company has a "pay-for-performance" philosophy that forms the foundation of all decisions regarding compensation of the named executive officers. This compensation philosophy, and the program structure approved by the Compensation Committee, is central to our ability to attract, retain and motivate individuals who can achieve superior financial results. Please refer to "Compensation Discussion and Analysis – Overview" of Compensation Practices" for an overview of the compensation of the named executive officers. A primary focus of the Compensation Committee is whether the Company's executive compensation program serves the best interests of the Company's shareholders. At the Company's 20202022 Annual Meeting, a significant majority (98% of votes cast on the proposal)62% of our shareholders approved the compensation program described in the proxy statement for that meeting. This is consistent withAs a result, the Company engaged in shareholder outreach efforts to obtain further feedback from our shareholders. Please see "Corporate Governance - Shareholder Engagement and Board Responsiveness" for a description of these outreach efforts. Prior to 2022, shareholder feedback at our previous annual meetings:meetings was uniformly positive as reflected in the following table:
| | SAY ON PAY VOTES | | SAY ON PAY VOTES |
| Annual Meeting Year | Annual Meeting Year | Percentage of Votes Cast in Favor of "Say on Pay" | Annual Meeting Year | Percentage of Votes Cast in Favor of "Say on Pay" |
| 2021 | | 2021 | 95% |
| 2020 | 2020 | 98% | 2020 | 98% |
| 2019 | 2019 | 98% | 2019 | 98% |
| 2018 | 2018 | 98% | 2018 | 98% |
| 2017 | 2017 | 98% | 2017 | 98% |
| 2016 | 2016 | 98% | 2016 | 98% |
| Five Year Average | 98% | |
| 2015 | | 2015 | 98% |
| 2014 | | 2014 | 97% |
| 2013 | | 2013 | 99% |
| 2012 | | 2012 | 96% |
| Ten Year Average (excluding 2022) | | Ten Year Average (excluding 2022) | 97.5% |
As part of its ongoing review of our executive compensation program, the Compensation Committee took the votes into consideration alongtogether with an overallthe feedback we received from our shareholder outreach efforts. This feedback was incorporated into the Committee's annual review of the compensation program, when making compensation decisions for 20202023. Input from our shareholders and 2021. The Compensation Committee determined thatactions taken by the Company's executive compensation philosophy, objectives and elements continue to be appropriate.Company as a result thereof are summarized in the following table:
| | | | | | | | | | | | | | |
| SHAREHOLDER FEEDBACK AND BOARD RESPONSIVENESS |
Shareholder Feedback ("What We Heard") | Our Action ("What We Did") | Impact of Action ("Why This is Important") |
| 2021 One-time Grants | While expressing a preference for avoidance of one-time grants, shareholders understood the rationale for the one-time grants we made in 2021, and wanted to understand the Committee's approach to future extraordinary circumstances. | The Compensation Committee affirmed its commitment to not make discretionary, one-time awards to our named executive officers like those made in 2021 in response to the COVID-19 pandemic, absent extraordinary circumstances as determined by the Board. | Aligns with our Executive Compensation Philosophy, and clarifies our approach to extraordinary circumstances. |
| Pay-for-Performance | Shareholders expressed preference for emphasis on performance-based equity. | Increased performance contingent ("PCS") awards as a percentage of long-term incentive ("LTI") awards. For 2023: | Ensures that executives’ long-term interests as well as equity payouts earned are closely aligned with long-term Company performance. |
| Ms. Manning – 100% of LTI awards in PCS; Mr. Cheng – 75% of LTI awards in PCS; and Other NEOs – 60% of LTI awards in PCS. |
| Shareholders expressed preference for multi-year performance periods. | Returned to our historical practice of 3-year performance metrics for 2022-2024 and 2023-2025 PCS Plans in line with our commitment in 2022; we intend to retain this structure. | Extends performance periods to 3 years, and focuses executives on long-term shareholder value creation. |
| Shareholders expressed preference for incorporating peer-relative performance metrics. | Adopted a relative total shareholder return modifier for our 2022-2024 PCS; we retained this modifier for the 2023-2025 PCS awards. | Enhances performance equity design to better align outcomes with outperformance relative to peers. |
| Disclosure | Shareholders encouraged additional transparency regarding award metrics. | Updated disclosure of award metrics to provide additional transparency; Enhanced disclosure of the Strategic Scorecard metrics and evaluation methodology. | Increases transparency of disclosure. |
We are asking our shareholders to approve the compensation of the named executive officers as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the "Compensation Discussion and Analysis" and "Compensation Tables and Other Matters"Proposals" discussions. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the named executive officers and the policies and practices described in this Proxy Statement. This vote is advisory and therefore not binding on the Company, the Compensation Committee or the Board of Directors. However, the Board and the Compensation Committee value the opinions of our shareholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will carefully consider those shareholders' concerns when making future compensation decisions for the named executive officers and will evaluate whether any actions are necessary to address those concerns.
Vote Required
If a quorum is present, the vote required to approve this Item 23 is a majority of the common stock represented in person or by proxy at the Annual Meeting.
Recommendation of the Board of Directors
The Board of Directors recommends that shareholders vote FOR the proposal to approve the compensation of the named executive officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.
EQUITY PLAN AMENDMENTS
ITEM 3 - APPROVAL OF AMENDMENT TO FLEXIBLE STOCK PLAN
The Company is seeking approval to amend our employee Flexible Stock Plan (as amended and restated, the "Flexible Stock Plan") to increase the number of shares authorized for issuance under the Flexible Stock Plan and extend the termination date. The Board of Directors originally adopted the Flexible Stock Plan in February 1993 and shareholders approved the Flexible Stock Plan on March 31, 1993. The Flexible Stock Plan has been approved by our shareholders and amended or amended and restated on a number of occasions, most recently in 2017.
Our Flexible Stock Plan provides for the grant of stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), performance shares and other stock based awards, as well as cash awards, to our employees, consultants, and independent contractors, in the sole discretion of the Compensation Committee of our Board of Directors (the “Committee”) (the "Participants"). As of March 31, 2021, approximately 497 employees participate in the Flexible Stock Plan and there were 390,920 shares remaining available for grants of awards under the Flexible Stock Plan.
The principal features of the Flexible Stock Plan, as amended, are described below. This description is subject to and qualified in its entirety by the full text of the Flexible Stock Plan, which was filed as Exhibit 10.9 to Annual Report on Form 10‐K for the fiscal year ended December 31, 2017, filed on February 27, 2018, and is incorporated herein by reference. The Form 10‐K and exhibits are available through our website (www.rgare.com) or at the SEC website (www.sec.gov/edgar). Information on such websites does not constitute part of this document. We will also provide a copy of the Flexible Stock Plan to shareholders free of charge upon written request to: Reinsurance Group of America, Incorporated, 16600 Swingley Ridge Road, Chesterfield, Missouri 63017, Attn: Corporate Secretary or by phone at (636) 736‐7000. The Board has approved the amendments to the Flexible Stock Plan, subject to shareholder approval at the 2021 Annual Meeting.
Proposed Amendments
The proposed amendments to the Flexible Stock Plan would increase the total number of shares authorized for issuance by 1,500,000 for a total of 16,460,077 shares. If our common stock is changed by reason of any extraordinary dividend, stock dividend, spin-off, split-up, spin-out, recapitalization, warrant or rights issuance or combination, exchange or reclassification of shares, merger, consolidation, reorganization, sale of substantially all assets or, in the sole discretion of the Committee, other similar or relevant event, then the number, kind and class of shares available for issuance under the Flexible Stock Plan or subject to any outstanding awards and the price thereof, as well as individual limitations under the Flexible Stock Plan, will be appropriately adjusted. If a stock option or SAR expires or is terminated, surrendered or cancelled without having been fully exercised, if restricted shares, restricted stock units ("RSUs") or performance shares are forfeited, or if any other grant results in any shares not being issued, the shares covered by such stock option or SAR, grants of restricted shares, RSUs, performance shares or other grants, as the case may be, shall be available again for use under the Flexible Stock Plan.In addition, shares tendered or withheld in payment of the exercise price for options, SARs or in satisfaction of withholding taxes for any awards shall be available again for use under the Flexible Stock Plan.
Currently, pursuant to the terms of our Flexible Stock Plan, it will terminate on May 23, 2022. The proposed amendment will amend Section 7.2 of the Flexible Stock Plan to extend the termination
date to May 19, 2026, the fifth anniversary of the date of shareholder approval of the proposed amendment at the 2021 Annual Meeting.
This description is subject to and qualified in its entirety by the full text of the proposed amendments to the Flexible Stock Plan, which are set forth in Appendix A to this Proxy Statement. Additions to the Flexible Stock Plan are indicated by underlining and deletions are indicated by strike-outs.
Equity Plan Analysis
Under the Flexible Stock Plan, a maximum of 14,960,077 shares are presently authorized for issuance from treasury stock or authorized but unissued shares. Under the current Flexible Stock Plan for Directors, a maximum of 282,500 shares are authorized for issuance.Under the current Phantom Stock Plan for Directors (together with the Flexible Stock Plan and the Flexible Stock Plan for Directors (the “Equity Plans”), a maximum of 130,000 shares are authorized for issuance. Set forth below is information regarding the status of the Equity Plans as of March 31, 2021:
| | | | | |
COMPANY EQUITY PLANS |
Type of Equity | Number |
Outstanding Options/SARs | 2,317,522 |
Weighted-Average Exercise Price of Outstanding Options/SARs1
| $105.48 |
Weighted-Average Remaining Contractual Life of Outstanding Options/SARs | 5.9 |
Outstanding Performance Contingent Units (at target performance level) | 458,991 |
Outstanding Restricted Stock Units | 386,355 |
Other Outstanding Full Value Awards | 43,488 |
Total Shares Outstanding under all Equity Plans | 3,206,336 |
Shares Remaining Available for Grant under all Equity Plans2
| 449,464 |
1 As of March 31, 2021, the closing price of a share of our common stock on the New York Stock Exchange was $126.05
2 Performance contingent unit awards reflected at target performance level.
Burn Rate & Overhang
In administering our equity compensation program, we consider both "burn rate" and "overhang" in evaluating the impact of the program on our shareholders.
Burn Rate. Our burn rate is equal to the number of shares subject to equity awards granted during a period, assuming the target payout for performance shares, divided by the undiluted weighted average number of common shares outstanding during the period. Burn rate measures the potential dilutive effect of annual equity grants. For 2020, our burn rate was 0.97% and our three-year average burn rate from 2018 through 2020 was 0.76%.
Overhang. Our overhang is equal to the number of shares subject to equity awards outstanding but not exercised, plus the number of shares available for future grants ("available equity award shares"), divided by total common shares outstanding plus the available equity award shares. Overhang measures the potential dilutive effect of outstanding equity awards and future awards available for grant. Our overhang as of March 31, 2021 was 5.0%. If we include the additional shares currently being requested under the proposed amendments to the Equity Plans in that calculation, then our overhang would be 6.9%.
We believe that our burn rate and overhang (with or without including the shares currently being requested under the proposed amendments to the Equity Plans) are reasonable in relation to companies in our industry and reflect a judicious use of equity for compensation purposes. We encourage our employees to hold their stock options and SARs for extended periods of time after
vesting. However, as a result, stock options and SARs remain in the overhang calculation for relatively long periods.
We expect the share reserve available following the approval of the amendments to the Flexible Stock Plan will provide us with enough shares for awards for approximately three years of equity grants, assuming we continue to grant awards consistent with our current practices and historical usage, as reflected in our historical burn rate. This is further dependent on the price of our common stock and hiring activity during the next few years and forfeitures of outstanding awards. Future circumstances may require us to change our current equity grant practices. We cannot predict our future equity grant practices, the future price of our common stock or our future hiring activity with any degree of certainty at this time, and the share reserve under the Flexible Stock Plan could last for a shorter or longer period of time.
Our Board of Directors believes that the increase in the number of shares authorized for issuance and the extension of the termination date under proposed the amendments to the Flexible Stock Plan are appropriate and will enhance our ability to continue to reward and provide incentives to our key employees as well as to attract and retain qualified employees. If the amendments to the Flexible Stock Plan are not approved, we may be unable to make planned grants to existing high-value employees and executives and anticipated new hires, which will put us at a significant competitive disadvantage compared to our peers.
Key Features of the Plan
Our Flexible Stock Plan includes the following provisions:
No Repricing or Cash Buyouts. The Flexible Stock Plan prohibits the reduction of the exercise price of stock options or SARs, including the cancellation, cash buyout, or option exchange of an underwater stock option or SAR, without shareholder approval.
No Discounted Options or SARs. Stock options and SARs may not be granted with exercise prices lower than the Fair Market Value (as defined below) of the underlying shares on the grant date (except if awards are assumed or substituted in connection with certain corporate transactions).
Minimum Vesting Requirements. All but 5% of the awards granted under the Flexible Stock Plan on or after May 23, 2017 will provide for a vesting period or performance period of at least one year following the date of grant; provided that (i) all awards of restricted stock and shares will become non-forfeitable after a minimum period of one year and (ii) the Committee, in its sole discretion, may accelerate the vesting of an award in the case of the Participant's death, disability or retirement or upon a Change of Control (as defined below).
No Automatic Grants. "Reload" or other automatic grants to participants are prohibited.
No Automatic Single Trigger Acceleration of Awards upon a Change of Control. In the event of a Change of Control (as defined below), the Committee may provide such protection as it deems necessary to maintain a Participant’s rights. The Flexible Stock Plan does not require that awards automatically accelerate upon the occurrence of a Change of Control.
No Dividend Payments for Unvested Awards, Options and SARs. The payment of dividend amounts attributable to an unvested award is not permitted during the period in which the award is unvested. Dividend payment amounts may be accumulated during the vesting period of an award and paid out only to the extent the award has vested. Additionally, Participants holding stock options or SARs do not receive dividends or dividend equivalents for any period prior to the exercise of the award. While restricted stock units and other awards may be granted with dividend equivalent rights, any dividend equivalents with respect to restricted stock units or other awards that are earned based on the achievement of performance goals will be accumulated until the underlying stock units are earned, and such dividend equivalents will not be paid if the performance goals are not satisfied.
Five Year Term. If this proposal is approved, the amendments to the Flexible Stock Plan will provide for termination of the plan on May 19, 2026, the fifth anniversary of the date of shareholder approval.
Clawback. Awards under the Flexible Stock Plan to senior executives are subject to our current Executive Incentive Recoupment Policy and any other applicable clawback policies of the Company.
Independent Administration. The Compensation Committee, an independent committee of the Board of Directors, will administer the Flexible Stock Plan.
No Evergreen Provision. There is no "evergreen" feature pursuant to which the shares authorized for issuance under the Flexible Stock Plan can be automatically increased.
No Tax Gross-ups. The Flexible Stock Plan does not provide for any tax gross-ups.
Description of Additional Plan Provisions
Under the Flexible Stock Plan, the Committee may award the following types of equity awards to Participants:
•stock options exercisable into shares of our common stock which may or may not qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
•SARs,
•restricted shares of our common stock,
•RSUs,
•performance shares,
•performance units,
•cash awards and
•other stock based awards and benefits.
The Flexible Stock Plan also allows for the grant of tandem awards, provided that only SARs may be issued in tandem with incentive stock options.
The Committee will administer the Flexible Stock Plan and currently consists of four independent directors. The Committee, by majority action, has discretionary authority to: (i) determine the individuals to whom benefits are granted and the type and amount of such benefits and the time of the grant, (ii) determine the terms, conditions, provisions and restrictions relating to each benefit granted, which need not be uniform among all Participants, (iii) interpret and construe the Flexible Stock Plan and all agreements evidencing grants of benefits pursuant to the Flexible Stock Plan, (iv) prescribe, amend and rescind rules and regulations relating to the Flexible Stock Plan, (v) determine the content and form of all agreements evidencing grants of benefits pursuant to the Flexible Stock Plan, (vi) determine all questions relating to benefits under the Flexible Stock Plan, (vii) make all determinations as to the right to Benefits under the Flexible Stock Plan, (viii) maintain accounts, records and ledgers relating to benefits, (ix) maintain records concerning the Committee’s decisions, (x) employ agents, attorneys, accountants or other persons for such purposes as the Committee considers necessary or desirable, (xi) take any action to maintain a Participant’s rights in the event of a change of control and (xii) do and perform all acts which the Committee may deem necessary or appropriate for the administration of the Flexible Stock Plan and to carry out the purposes of the Flexible Stock Plan.
The Committee generally makes its determinations after considering the recommendations of our Chief Executive Officer and management, its independent compensation consultant, information made available to the Committee and its judgment as to the best interests of the Company and our shareholders. In certain circumstances, the Committee may delegate all or any part of its authority under the Flexible Stock Plan to our employees or another Board committee to the extent permitted by law.
As provided in the Flexible Stock Plan, the Committee has complete discretion to determine the type and number of benefits granted to any Participant and the terms and conditions that attach to each grant. Such terms and conditions are not necessarily uniform among different Participants. The receipt by a Participant of one type of grant does not entitle the Participant to receipt of any other type of grant. Payment for shares of common stock purchased upon exercise of any option or any other benefit granted under the Flexible Stock Plan that requires payment by a Participant to us will be made in cash, or with the consent of the Committee, by the tender of shares of common stock having a Fair Market Value (as defined below) equal to the purchase price, or in other property, rights and credits, to the extent permitted by law, by net exercise, any combination of the foregoing, or any other method of payment authorized by the Committee in an individual award agreement.
Stock Options. The Committee may grant stock options, which entitle the Participant to purchase our common stock at a price established by the Committee, and that price will not be less than the Fair Market Value of our common stock on the date of the grant. "Fair Market Value" generally means the closing price of a share of our common stock on the New York Stock Exchange on a given date. The Committee determines the term of the stock options (which may not be longer than ten years from date of grant), including the times and conditions under which the options become exercisable. The maximum number of shares with respect to which options may be granted to any Participant in any one-year period may not exceed 200,000 shares. For purposes of the preceding sentence, shares of common stock covered by an option that is cancelled will count against such maximum number of shares. The maximum number of shares with respect to which incentive stock options are issuable to any Participant in any one year period after the effective date of the Flexible Stock Plan is 150,000 shares. In no event may options known as "reload options" be granted under the Flexible Stock Plan.
Stock Appreciation Rights. The Committee may grant SARs, which give the Participant a right to receive payment in an amount equal to the appreciation, if any, in the Fair Market Value of a share of our common stock from the date of the grant to the date of its payment. SARs may be granted in tandem with a stock option, in which case exercise of the option shall cause a correlative reduction in SARs standing to a Participant's credit which were granted in tandem with the option and the payment of SARs shall cause a correlative reduction in the shares under such option. Such payment can be made in cash, in common stock or in any combination of cash and common stock, as the Committee may determine. In practice, we have typically settled SARs awards with the equivalent value of unrestricted common stock. The maximum number of SARs that may be granted to any Participant in any one-year period is 200,000. For purposes of the preceding sentence, any SARs that are cancelled will count against the maximum number of SARs that may be granted to any Participant in any one-year period. In practice, we have typically granted SARs that do not completely vest until at least three years following the grant date.
Restricted Stock. The Committee may grant benefits under the Flexible Stock Plan in the form of restricted stock. Shares of restricted stock are issued and delivered at the time of the grant but are subject to forfeiture as provided in the Participant’s individual award agreement. The Participant is entitled to full voting rights with respect to the restricted stock. Dividend payment amounts may be accumulated during the vesting period of an award and paid out only to the extent the award has vested. The Participant cannot transfer shares of restricted stock until all restrictions have been satisfied. The maximum number of shares with respect to which restricted stock may be granted to any Participant in any one-year period is 200,000.
Restricted Stock Units. The Committee may grant benefits under the Flexible Stock Plan in the form of restricted stock units ("RSUs"). An RSU represents the Participant’s right to receive one share of our common stock on the scheduled vesting date or other specified payment date. RSUs are subject to vesting conditions as determined by the Committee and as provided in the Participant’s individual agreement. A Participant receiving RSUs will have no rights of a shareholder as to such RSUs until such time as shares of common stock are issued to the Participant. The maximum number of shares with respect to which RSUs may be granted to any Participant in any one-year period is 200,000.
Performance Shares. The Committee may grant benefits under the Flexible Stock Plan in the form of performance shares, denominated by the Company as performance contingent share ("PCS") units and performance share units ("PSU"). A performance share represents the Participant’s right to receive shares of our common stock or cash equal to the Fair Market Value of such shares at a future date in accordance with the terms of such grant. Generally, such right is based upon the attainment of targeted profit and/or performance objectives. The maximum number of shares with respect to which PCS unit may be granted to any Participant in any one-year period is 200,000.
Cash Awards. Cash Awards are benefits payable in cash. The Committee may grant Cash Awards at such times and in such amounts as it deems appropriate. The maximum amount of all cash awards that may be granted to any Participant in any one-year period is $2,000,000.
Other Stock Based Awards. The Committee may grant other types of stock based awards under the Flexible Stock Plan if the Committee believes that such benefits would further the purposes for which the Flexible Stock Plan was established. An "other stock based award" is an award that is valued in whole or in part by reference to, or is otherwise based on, our common stock. The maximum number of shares with respect to which any other stock based award may be granted to any Participant in any one-year period is 200,000, in the aggregate.
Change of Control. In the event of a Change of Control (as defined below) the Committee may provide such protection as it deems necessary to maintain a Participant’s rights. Generally, the vesting of awards will not automatically accelerate upon the occurrence of a Change of Control. The Committee may, among other things:
•accelerate the exercise or realization of any benefit,
•purchase a benefit upon the Participant’s request for cash equal to the amount which could have been attained upon the exercise or realization of the benefit had it been currently exercisable or payable,
•adjust the benefit as the Committee deems appropriate and
•cause the benefit to be assumed by the surviving corporation.
A "Change of Control" generally means: (i) the acquisition, without the approval of the Board of Directors, by any person or entity, other than the Company and certain related entities, of more than 20% of the outstanding shares of the Company’s common stock through a tender offer, exchange offer or otherwise; (ii) the liquidation or dissolution of the Company following a sale or other disposition of all or substantially all of the Company’s assets; (iii) a merger or consolidation involving the Company which results in the Company not being the surviving parent corporation or (iv) a change in the majority of the members of the Board of Directors during any two-year period that is not approved by at least two-thirds of the directors who were members of the Board of Directors at the beginning of the two-year period.
Term. As currently written, the Flexible Stock Plan will terminate on May 23, 2022. If the proposed amendments are approved, the Flexible Stock Plan will terminate on May 19, 2026, the fifth anniversary of the date of shareholder approval. Following such date no further awards may be granted under the Flexible Stock Plan (provided that any outstanding awards at such time shall remain in effect). The Board of Directors, in its sole discretion, may terminate the Flexible Stock Plan at any time and may amend or modify the plan at any time and from time to time. However, the Board of Directors may not amend the Flexible Stock Plan, without obtaining shareholder approval, in a manner: (i) which would cause options which are intended to qualify as incentive stock options to fail to so qualify, (ii) which would cause the plan to fail to meet the requirements of Rule 16b-3 of the Securities Exchange Act of 1934 or the Code or (iii) which would violate applicable law, regulations or stock exchange requirements. No amendment, modification or termination of the Flexible Stock Plan will adversely affect a Participant’s right to any award granted under the plan prior to such amendment or termination, except as otherwise provided in an agreement or required by law.
Modification of Awards. The Flexible Stock Plan permits the Committee to convert, modify, forfeit or cancel, in whole or in part, any award granted to the extent permitted in the Flexible Stock Plan or the applicable award agreement or with the consent of the Participant to whom such award was granted. The Committee may, for such consideration (if any) as it may deem adequate and with the prior consent of the Participant, modify the terms of any outstanding option or SAR; provided, however, that no option or SAR may be repriced, replaced or regranted through cancellation, or by lowering the exercise price of such option or SAR, and no option or SAR with an exercise price that exceeds Fair Market Value of a share of common stock shall be canceled, purchased or exchanged for a cash payment, without shareholder approval. Notwithstanding the foregoing, in the event of a corporate transaction (within the meaning of Treas. Reg. § 1.424-1(a)(3)), the Committee may provide for the assumption or substitution of outstanding options or SARs, provided that the requirements of Treas. Reg. § 1.424- 1(a) are satisfied with respect to incentive stock options, and the requirements of Treas. Reg. § 1.409A- 1(b)(v)(D) are satisfied with respect to all other options.
Performance Objectives
The Flexible Stock Plan permits the Committee, in its discretion, to condition any of the awards upon achievement of one or more performance goals. All Performance Shares will be subject to attainment of one or more pre-established performance objectives established by the Committee. Such performance objectives will be based upon any one or more of the following performance criteria relating to the Company or one or more of its divisions or subsidiaries:
•operating earnings or income; operating earnings or income per share; net income; total or net revenues; operating revenue; gross or net premiums; shareholder return and/or value; retained earnings; book value or book value per share; gross or net margin; profit returns and margins; operating or net cash flow; financial return ratios; return on equity or operating return on equity; return on average adjusted equity; relative return on equity; cumulative operating revenue growth rate; return on assets; return on invested capital; earnings per share growth; change in embedded value; new business embedded value;
•budget achievement; expenses; expense control; market capitalization; stock price; market share; working capital; cash available to Company from a subsidiary or subsidiaries; dividends; ratings; business trends; economic value added and
•product development; client development; leadership; project progress; project completion; quality; customer satisfaction; diversity and corporate governance.
The goals may be stated in terms of absolute levels or relative to another company or companies or to an index or indices or industry benchmarks, or relative to levels attained in prior years.
The Committee has determined to make such awards in accordance with the following procedures: "No later than the 90th day of each performance year, the Committee will establish an objective performance goal for that performance year and while the outcome of whether or not those goals will be achieved is substantially uncertain. However, in no event will such goals be established after 25% of the period of service to which the goals relate has elapsed. The Committee must certify the attainment of the applicable performance goal before an award is made. The Committee may decrease the actual award amount paid to a covered person for any performance year based on such secondary goals and considerations as may be determined by the Committee in its sole discretion."
The Committee may determine, prior to the date the performance criteria are established in writing, to provide for adjustment of the performance criteria to the extent permitted under Code Section 162(m), to account for the effects of: (i) acquisitions; divestitures; extraordinary dividends; stock split-ups; stock dividends or distributions; recapitalizations; warrants or rights issuances or combinations; exchanges or reclassifications with respect to any outstanding class or series of the Company’s common stock; (ii) a corporate transaction, such as any merger of the Company with another
corporation; any consolidation of the Company and another corporation into another corporation; any separation of the Company or its business units (including a spin-off, split-off or other distribution of stock or property by the Company); any reorganization of the Company (whether or not such reorganization comes within the definition of such term in Code Section 368); (iii) any partial or complete liquidation by the Company; sale of all or substantially all of the assets of the Company; (iv) the impact of changes in tax rates or currency fluctuations; unusual or non-recurring accounting impacts or changes in accounting standards or treatment; (v) expenditures outside of annual business plans; events such as plant closings, sales or closing of facilities or operations; business restructurings and (vi) unusual or extraordinary items. The performance criteria may be applicable to the Company and/or any of its subsidiaries or individual business units and may differ from participant to participant.
Benefits Granted Under the Plan
The benefits that will be awarded or paid under the Flexible Stock Plan cannot currently be determined. Such awards are within the discretion of the Committee, and the Committee has not determined future awards or who might receive them. Non-qualified stock options, grants of PCS units, SARs, restricted stock and restricted stock units are the forms of benefits that have previously been granted under the existing Flexible Stock Plan.
Pursuant to SEC rules, the following table sets forth the number of shares subject to options, SARs, PCS units and RSUs granted under the Flexible Stock Plan through December 31, 2020 that count against the maximum share authorization of the Flexible Stock Plan (see "Equity Plan Analysis" and "Burn Rate & Overhang" above). These share numbers do not take into account the effect of options that have been cancelled or that expired unexercised and do not reflect shares of restricted stock granted to participants under the Flexible Stock Plan. See "Compensation Tables and Other Matters - Grants of Plan-Based Awards in 2020" for a description and summary of the 2020 PCS and SARs grants to our Named Executive Officers and note 17 to the Company’s financial statements in our annual report on Form 10-K for the year ended December 31, 2020 for information regarding outstanding equity awards.
| | | | | |
CERTAIN AWARDS GRANTED UNDER THE FLEXIBLE STOCK PLAN |
| Number of Shares Subject to Options, Warrants and Rights1
|
Named Executive Officers: | |
Anna Manning | 562,139 |
Todd C. Larson | 220,792 |
Alain P. Néemeh | 348,118 |
Leslie Barbi | 18,477 |
Tony Cheng | 105,705 |
John P. Laughlin | 194,663 |
All current executive officers as a group (10 persons) | 1,994,551 |
Each Associate of any executive officer | — |
Each other person who received or is to receive 5% or more of the options, warrants or rights under the Flexible Stock Plan: | |
A. Greig Woodring | 1,531,641 |
All employees, including all current officers who are not executive officers, as a group | 11,849,365 |
1 Includes shares subject to options, SARs, PCS units and RSUs granted under the Flexible Stock Plan from original date of adoption through December 31, 2020. Excludes shares of restricted stock that have been granted under the Flexible Stock Plan.
Clawback
If a Participant is, or subsequently becomes, subject to our Executive Incentive Recoupment Policy, or a similar clawback policy that may be adopted in the future, all or a portion of each award
granted to such Participant will be subject to potential recoupment upon the occurrence of certain recoupment events.See "Compensation Tables and Other Matters - Other Executive Compensation Matters" in this Proxy Statement for additional details about our current recoupment policy.
Federal Income Tax Consequences
Stock Options. No income will be realized by a Participant on the grant of a stock option, and we will not be entitled to a deduction at such time.
Upon the exercise of a non-qualified option, the excess, if any, of the Fair Market Value of the stock on the date of exercise over the purchase price is ordinary income to the holder as of the date of exercise. We generally will be entitled to a deduction equal to such excess amount in the year of exercise. Any gain or loss upon a subsequent sale or exchange of the shares of common stock received upon such exercise is capital gain or loss, long-term or short-term depending on the holding period of the common stock.
Generally, a Participant does not recognize ordinary income at the time of exercise of an incentive stock option and no deduction is available to us, provided the stock option is exercised while the Participant is an employee or, in certain circumstances, for a limited period of time thereafter. If an incentive stock option is exercised after these periods, the exercise is treated for federal income tax purposes as the exercise of a non-qualified stock option. Also, incentive stock options are treated as non-qualified stock options to the extent such options (together with any other incentive stock options) first become exercisable in any calendar year for common stock having a Fair Market Value, determined as of the date of grant, in excess of $100,000.
If common stock acquired upon exercise of an incentive stock option is sold or exchanged more than one year after the date of exercise and more than two years from the date of grant, any gain or loss is long-term capital gain or loss. If common stock acquired upon exercise of an incentive stock option is disposed of prior to the expiration of these one-year or two-year holding periods (a "Disqualifying Disposition"), the Participant recognizes ordinary income at the time of the disposition, and we may claim a deduction, in an amount equal to the excess of the Fair Market Value of the common stock at the date of exercise over the exercise price. Any additional gain is treated as capital gain, long-term or short-term depending on how long the common stock was held. Where common stock is sold or exchanged in a Disqualifying Disposition (other than certain related-party transactions) for an amount less than its Fair Market Value at the date of exercise, any ordinary income recognized in connection with the Disqualifying Disposition is limited to the amount of gain, if any, recognized in the sale or exchange, and any loss is a long-term or short-term capital loss, depending on how long the common stock was held.
Although the exercise of an incentive stock option as described above does not generally produce ordinary income to the Participant, it does result in an increase in the Participant’s alternative minimum taxable income in an amount equal to the excess of the value of the common stock on the date of exercise over the exercise price and may result in an alternative minimum tax liability.
SARs. No income will be realized by a Participant upon the grant of an SAR, and the Company will not be entitled to a deduction at such time. Upon the exercise of an SAR, the excess, if any, of the Fair Market Value of the stock on the date of exercise over the Fair Market Value of the stock on the date of grant is ordinary income to the holder as of the date of exercise. We generally will be entitled to a deduction equal to such excess amount in the year of exercise.
Restricted Stock. Unless a timely 83(b) election is made, as described in the following paragraph, a Participant generally will not recognize taxable income upon the grant of restricted stock because the restricted stock generally will be nontransferable and subject to a substantial risk of forfeiture at the time of grant. A Participant will recognize ordinary income when the restrictions that impose a substantial risk of forfeiture of the shares of common stock or the transfer restrictions (collectively, the
"Restrictions") lapse. The amount recognized will be equal to the difference between the Fair Market Value of the shares at the time the Restrictions lapse and the original purchase price paid for the shares, if any. The ordinary income recognized by a Participant with respect to restricted stock will be subject to applicable tax withholding by us. If a timely 83(b) election has not been made, any dividends received with respect to common stock subject to the Restrictions will be treated as additional compensation income and not as dividend income.
A Participant may elect, pursuant to Section 83(b) of the Code, to recognize as ordinary income the Fair Market Value of the restricted stock upon grant, notwithstanding that the restricted stock would otherwise not be includable in gross income at that time. If the election is made within 30 days of the date of grant, then the Participant would include in gross income an amount equal to the difference between the Fair Market Value of the restricted stock on the date of grant and the purchase price paid for the restricted stock, if any. Any change in the value of the shares after the date of grant will be taxed as a capital gain or capital loss only if and when the shares are disposed of by the Participant. If the Section 83(b) election is made, the Participant’s holding period for capital gains begins on the date of grant.
The Section 83(b) election is irrevocable. If a Section 83(b) election is made and the Participant then forfeits the restricted stock, the Participant may not deduct as a loss the amount previously included in gross income. A Participant’s tax basis in shares of restricted stock received will be equal to the sum of the amount (if any) the Participant paid for the common stock and the amount of ordinary income recognized by the Participant as a result of making the Section 83(b) election or upon the lapse of the Restrictions. Unless a Section 83(b) election is made, the Participant’s holding period for the shares for purposes of determining gain or loss on a subsequent sale will begin on the date the Restrictions on the shares lapse. In general, we will be entitled to a deduction at the same time, and in an amount equal to, the ordinary income recognized by a Participant with respect to shares of restricted stock. If, subsequent to the lapse of the Restrictions on the shares, the Participant sells the shares, the difference, if any, between the amount realized from the sale and the tax basis in the shares of the Participant will be taxed as a capital gain or capital loss.
Restricted Stock Units. A Participant generally will not recognize income upon the grant of RSUs. Upon the vesting or payment of RSUs, a Participant will generally recognize ordinary income in an amount equal to Fair Market Value of the RSUs at that time, and we will be entitled to a corresponding deduction in an amount equal to the ordinary income recognized by the Participant. Upon selling any shares of common stock received by a Participant in payment of RSUs, the Participant generally will recognize a capital gain or capital loss.
Performance Shares. A Participant generally will not recognize taxable income upon the grant of a PCS award. Instead, a Participant will recognize as ordinary income, and we will have as a corresponding deduction, any cash delivered and the Fair Market Value of any common stock delivered in payment of an amount due under the PCS award. The ordinary income the Participant recognizes will be subject to applicable tax withholding by the Company. Upon selling any shares of common stock received by a Participant in payment of an amount due under a PCS award, the Participant generally will recognize a capital gain or loss in an amount equal to the difference between the sale price of the shares of common stock and the Participant’s tax basis in the shares of common stock.
Cash Awards. Awards payable in cash are includible in the Participant’s gross income when paid and deductible by us when paid or accrued.
Other Stock Based Awards. The tax consequences associated with any other stock based award will vary depending on the specific terms of the award, including whether the award has a readily ascertainable Fair Market Value, whether or not the award is subject to forfeiture provisions or restrictions on transfer, the nature of the property to be received by the Participant under the award, the applicable holding period and the Participant’s tax basis.
Section 409A of the Code. Pursuant to Section 409A of the Code, significant restrictions have been imposed on the ability to defer the taxation of compensation, including, without limitation, the deferral of income pursuant to some of the arrangements described herein. Violation of Section 409A of the Code triggers immediate inclusion in income and application of income and additional taxes.
Section 162(m) of the Code. Section 162(m) provides that no deduction will be allowed for certain remuneration with respect to a "covered employee" (as defined in the Code) to the extent such remuneration exceeds $1,000,000. Prior to 2018, Section 162(m) provided an exception from the deduction limit for compensation payable solely on account of the attainment of one or more performance goals, subject to certain requirements. This performance-based compensation exemption was repealed pursuant to the Tax Cuts and Jobs Act of 2017, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1,000,000 will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.
Section 280G of the Code and Section 4999 of the Code. Under Section 280G of the Code and Section 4999 of the Code, the Company is prohibited from deducting any “excess parachute payment” to an individual, and the individual must pay a 20% excise tax on any "excess parachute payment." An individual’s "parachute payments" which exceed his or her average annual compensation will generally be treated as "excess parachute payments" if the present value of such payments equals or exceeds three times the individual’s average annual compensation. A payment generally may be considered a "parachute payment" if it is contingent on a change in control of the Company.
Non-United States Taxpayers. If the Participant is subject to the tax laws of any country other than the United States, Participants are instructed to seek local tax and legal advice to determine the tax and legal consequences of any award received under the Flexible Stock Plan.
The foregoing statements are only a summary of certain federal income tax consequences of the Flexible Stock Plan and are based on our understanding of present federal tax laws and regulations.
Vote Required
If a quorum is present, the vote required to approve this Item 3 is a majority of the shares of common stock represented in person or by proxy at the Annual Meeting and entitled to vote thereon, which approval will also satisfy the requirement under NYSE rules that the proposal be approved by a majority of the votes cast.
Recommendation of the Board of Directors
The Board of Directors has approved the proposed amendments to the Flexible Stock Plan and recommends that shareholders vote FOR the proposal.
ITEM 4 - APPROVAL OF AMENDMENT TO FLEXIBLE STOCK PLAN FOR DIRECTORS
The Company is seeking approval to amend our Flexible Stock Plan for Directors (as amended and restated, the "Director Plan") to increase the number of shares authorized for issuance under the Director Plan. The Board of Directors originally adopted the Director Plan on January 1, 1997. The Director Plan was last approved by shareholders in 2017.
The Director Plan provides for the grant of stock options and other stock based awards to Non-Employee Directors of the Company (each, a "Participant"). A "Non-Employee Director" is a member of the Board who is not an officer or employee of the Company or any of its affiliates. As of March 2021, all eleven Non-Employee Directors participate in the Director Plan. Ms. Manning does not participate in the Director Plan because she is our President and Chief Executive Officer.
Under the Director Plan, a maximum of 282,500 shares are currently authorized for issuance. As of March 31, 2021, 244,216 shares have been exercised by or awarded to Participants, 38,284 shares remain available for grants of awards under the Director Plan and there were no options to purchase shares of common stock outstanding under the Director Plan.
The principal features of the Director Plan, as amended, are described below. This description is subject to and qualified in its entirety by the full text of the Director Plan, which was filed as Exhibit 10.11 to Annual Report on Form 10‐K for the fiscal year ended December 31, 2017, filed on February 27, 2018, and is incorporated herein by reference. The Form 10‐K and exhibits are available through our website (www.rgare.com) or at the SEC website (www.sec.gov/edgar). Information on such websites does not constitute part of this document. We will also provide a copy of the Director Plan to shareholders free of charge upon written request to: Reinsurance Group of America, Incorporated, 16600 Swingley Ridge Road, Chesterfield, Missouri 63017, Attn: Corporate Secretary or by phone at (636) 736‐7000. The Board has approved the amendments to the Director Plan, subject to shareholder approval at the 2021 Annual Meeting.
Proposed Amendment to the Plan
The proposed amendment to the Director Plan would increase the total number of shares authorized for issuance from 282,500 to 307,500. If the amendment is approved, the total number of shares represented by shares available for future grants (if ultimately issued) will represent approximately .09% of the Company's shares outstanding as of March 31, 2021.
If our common stock is changed by reason of any extraordinary dividend, stock dividend, spin-off, split-up, spin-out, recapitalization, warrant or rights issuance or combination, exchange or reclassification of shares, merger, consolidation, reorganization, sale of substantially all assets or, in the Board’s sole discretion, other similar or relevant event, then the number, kind and class of shares available for issuance under the Director Plan or subject to any outstanding awards and the price thereof, as well as individual limitations under the Director Plan, will be appropriately adjusted. If a stock option expires or is terminated, surrendered or cancelled without having been fully exercised, if restricted shares or performance units are forfeited, or if any other grant results in any shares not being issued, the shares covered by such stock option, grants of restricted shares, performance shares or other grants, as the case may be, shall be available again for use under the Director Plan. In addition, shares tendered or withheld in payment of the exercise price for options or in satisfaction of withholding taxes for any awards shall be available again for use under the Director Plan.
This description is subject to and qualified in its entirety by the full text of the proposed amendments to the Director Plan, which are set forth in Appendix B to this Proxy Statement. Additions to the Director Plan are indicated by underlining and deletions are indicated by strike-outs
The Board of Directors believes that the approval of the Director Plan is appropriate and will enhance our ability to continue to reward and provide incentives to Non-Employee Directors as well as to attract and retain qualified individuals to serve as directors of the Company.
Key Features of the Plan
Our Director Plan includes the following provisions:
No Repricing. The Director Plan prohibits the reduction of the exercise price of stock options or stock appreciation rights, including the cancellation, cash buyout or option exchange of an underwater stock option or stock appreciation right, without shareholder approval.
No Discounted Options. Stock options may not be granted with exercise prices lower than the Fair Market Value (as defined below) of the underlying shares on the grant date (except if awards are assumed or substituted in connection with certain corporate transactions).
No Automatic Grants. "Reload" or other automatic grants to participants are prohibited.
No Automatic Single Trigger Acceleration of Awards upon a Change of Control. In the event of a Change of Control (as defined below) the Board of Directors may provide such protection as it deems necessary to maintain a Participant’s rights. The Director Plan does not require that awards automatically accelerate upon the occurrence of a Change of Control.
No Dividend Payments for Unvested Awards. Grants of awards may include dividend equivalent payments or dividend credit rights. The payment of dividend equivalents or dividend credits attributable to an unvested award is not permitted during the period in which the award is unvested. Dividend equivalents or dividend credits may be accumulated during the vesting period of an award and paid out only to the extent an award has vested. Additionally, Participants holding options do not receive dividend equivalents or dividend credits for any period prior to the exercise of the option.
Limits on Awards to Non-Employee Directors. The awards granted to any Participant in any one-year period may not exceed $900,000.
Term. The Director Plan will terminate on May 23, 2027.
Discretionary Acceleration. The Board of Directors may accelerate the vesting of an award at any time.
No Evergreen Provision. There is no "evergreen" feature pursuant to which the shares authorized for issuance under the Director Plan can be automatically increased.
No Tax Gross-ups. The Director Plan does not provide for any tax gross-ups.
Description of Additional Plan Provisions
The Director Plan provides for benefits to be awarded to eligible Participants in the form of stock options, restricted stock, performance units and other stock based awards. Under the terms of the Plan, a Participant must be a Non-Employee Director at the time a benefit is granted.
The Board of Directors will administer the Director Plan. Subject to the terms of the Director Plan, the Board has the sole discretionary authority to:(i) determine the individuals to whom benefits are granted, and the type and amount of such benefits and the time of the grant; (ii) determine the terms, conditions, provisions and restrictions relating to each benefit granted, which need not be uniform among all Participants; (iii) interpret and construe the Plan and all agreements evidencing grants of benefits pursuant to the Plan; (iv) prescribe, amend and rescind rules and regulations relating to the Plan; (v) determine the content and form of all agreements evidencing grants of benefits pursuant to the Plan; (vi) determine all questions relating to benefits under the Plan; (vii) make all determinations as to the right to Benefits under the Plan; (viii) maintain accounts, records and ledgers relating to benefits; (ix) maintain records concerning the Board's decisions; (x) employ agents, attorneys, accountants or other persons for such purposes as the Board considers necessary or desirable; (xi) take any action to maintain a Participant's rights in the event of a change of control and (xii) do and perform all acts which the Board may deem necessary or appropriate for the administration of the Plan and to carry out the purposes of the Plan.
Stock Options. Under the Director Plan, the Board may grant stock options, which entitle the Participant to purchase our common stock at a price established by the Board, which price will not be less than the Fair Market Value of our Common Stock on the date of the grant. "Fair Market Value" generally means the closing price of a share of our common stock on the New York Stock Exchange on a given date. The Board determines the term of the stock options, including the times and conditions under which the options become exercisable. In no event may options known as "reload options" or other automatic grants to Participants be granted under the Director Plan.
Restricted Stock. The Board may grant benefits under the Director Plan in the form of restricted stock. Shares of restricted stock are issued and delivered at the time of the grant but are subject to forfeiture as provided in the grantee's individual award agreement. The grantee is entitled to full voting and dividend rights with respect to all shares of restricted stock from the date of grant; provided, however, that dividend payments may be accumulated during the vesting period and paid out only to the extent the restricted stock has vested. The restricted stock cannot be transferred until all restrictions have been satisfied.
Performance Units. The Board may grant benefits under the Director Plan in the form of performance units. A performance unit represents the right of a Participant to receive shares of common stock or cash equal to the Fair Market Value of such shares at a future date in accordance with the terms of such grant. In general, the number of performance units granted in lieu of the payment of a director's retainer or fees will equal the number of shares of common stock determined by dividing the amount of the applicable retainer or fee by the Fair Market Value of a share on the date of grant.
Other Stock Based Awards. The Board may grant other types of stock based awards under the Director Plan if the Board believes that such benefits would further the purposes for which the Director Plan was established. An "other stock based award" is an award that is valued in whole or in part by reference to, or is otherwise based on, our common stock.
Dividend Payments. Grants of awards may include dividend equivalent payments or dividend credit rights. The payment of dividend equivalents or dividend credits attributable to an unvested award is not permitted during the period in which an award is unvested. Dividend equivalents and dividend credits may be accumulated during the vesting period of the underlying award and paid out only to the extent the award has vested. Additionally, Participants holding options or SARs do not receive dividend equivalents or dividend credits for any period prior to the exercise of such option or SAR.
Change of Control. In the event of a Change of Control (as defined below) the Board may provide such protection as it deems necessary to maintain a Participant's rights. The Board may, among other things:
•accelerate the exercise or realization of any benefit,
•purchase a benefit upon the Participant’s request for cash equal to the amount which could have been attained upon the exercise or realization of the benefit had it been currently exercisable or payable,
•adjust the benefit as the Board deems appropriate and
•cause the benefit to be assumed by the surviving corporation.
Generally, awards will not automatically accelerate upon the occurrence of a Change of Control. A "Change of Control" generally means: (i) the acquisition, without the approval of the Board, by any person or entity, other than the Company and certain related entities, of more than 20% of the outstanding shares of common stock through a tender offer, exchange offer or otherwise; (ii) the liquidation or dissolution of the Company following a sale or other disposition of all or substantially all of its assets; (iii) a merger or consolidation involving the Company which results in the Company not being the surviving parent corporation or (iv) a change in the majority of the member of the Board of Directors during any two-year period not approved by at least two-thirds of the Directors who were members at the beginning of the two-year period.
Term. The Director Plan will terminate on May 23, 2027. The Board, in its sole discretion, may terminate the Plan at any time and may amend the Plan at any time and from time to time. However, the Board may not amend the Plan: (i) without the approval of the shareholders of the Company if shareholder approval would be required for such an amendment under the rules of the New York Stock Exchange or (ii) in a manner that would violate applicable law. In addition, no amendment or termination of the Plan will adversely affect a Participant's right to any benefit granted under the Plan prior to such amendment or termination.
Modification of Awards. The Director Plan permits the Board to convert, modify, forfeit or cancel, in whole or in part, any award granted to the extent permitted in the Plan or the applicable award agreement or with the consent of the Participant to whom such award was granted. The Board may, for such consideration (if any) as it may deem adequate and with the prior consent of the Participant, modify the terms of any outstanding stock option or SAR; provided, however, that no option or SAR may be repriced, replaced or regranted through cancellation, or by lowering the exercise price of such option or SAR, and no option or SAR with an exercise price that exceeds Fair Market Value of a share of common stock shall be canceled, purchased or exchanged for a cash payment, without shareholder approval. Notwithstanding the foregoing, in the event of a corporate transaction (within the meaning of Treas. Reg. § 1.424-1(a)(3)), the Board may provide for the assumption or substitution of outstanding options or SARs, provided that the requirements of Treas. Reg. § 1.409A- 1(b)(v)(D) are satisfied.
See "Equity Plan Analysis" and "Burn Rate & Overhang" sections under "Item 3 - Approval of Amendments to the Company’s Flexible Stock Plan" for additional information on the Company’s Equity Plans as of March 31, 2021.
Benefits Granted Under the Director Plan
The benefits that will be awarded or paid under the Director Plan cannot currently be determined. Awards granted under the Director Plan are within the discretion of the Board of Directors, and the Board has not determined future awards.
Pursuant to SEC rules, the following table sets forth the number of shares subject to options granted through December 31, 2020 that count against the maximum share authorization of the existing Director Plan (see "Equity Plan Analysis" and "Burn Rate & Overhang" sections under "Item 3 - Approval of Amendments to the Company’s Flexible Stock Plan" above). These share numbers do not take into account the effect of options that have been cancelled or that expired unexercised and do not reflect stock or other types of awards that have been granted to participants under the existing Director Plan. See "Director Compensation - 2020 Director Compensation" for a description and summary of the 2020 grants to non-employee directors and note 17 to the Company’s financial statements in our annual report on Form 10-K for the year ended December 31, 2020 for information regarding outstanding equity awards.
| | | | | |
OPTIONS GRANTED UNDER THE DIRECTOR PLAN |
| Number of Options Granted1
|
All current non-executive officer directors as a group (11 persons) | — |
Each nominee for election as a director: | |
Pina Albo | — |
Christine R. Detrick | — |
J. Cliff Eason | 17,933 |
John J. Gauthier | — |
Patricia L. Guinn | — |
Anna Manning2
| — |
Hazel M. McNeilage | — |
Stephen T. O'Hearn | — |
Frederick J. Sievert | — |
Shundrawn Thomas | — |
Stanley B. Tulin | — |
Steven C. Van Wyk | — |
Each Associate of any such director or nominee | — |
Each other person who received or is to receive 5% or more of the options, warrants or rights under the Plan: | |
Stuart Greenbaum | 17,933 |
William Peck | 17,933 |
1 Includes shares subject to options granted under the Director Plan from original date of adoption through December 31, 2020. Excludes awards in the form of shares of stock that have been granted under the Director Plan.
2 Ms. Manning does not participate in the Director Plan because she is our President and Chief Executive Officer.
Federal Income Tax Consequences
Stock Options. No income will be realized by a Participant on the grant of a stock option or upon the award of restricted stock, and the Company will not be entitled to a deduction at such time. Incentive stock options may not be granted under the Director Plan. Upon the exercise of a non-qualified option, the excess, if any, of the Fair Market Value of the stock on the date of exercise over the purchase price is ordinary income to the holder as of the date of exercise. The Company generally will be entitled to a deduction equal to such excess amount in the year of exercise.
Performance Units. A Participant will realize income as a result of an award of performance units at the time the award is issued or paid. The amount of income realized by the Participant will be equal to the Fair Market Value of the shares on the date of issuance, in the case of a stock award, and to
the amount of cash paid, in the event of a cash award. The Company will be entitled to a corresponding deduction equal to the income realized in the year of such issuance or payment.
Restricted Stock. Unless a timely 83(b) election is made, as described in the following paragraph, a Participant generally will not recognize taxable income upon the grant of restricted stock because the restricted stock generally will be nontransferable and subject to a substantial risk of forfeiture at the time of grant. A Participant will recognize ordinary income when the restrictions that impose a substantial risk of forfeiture of the shares of common stock or the transfer restrictions (collectively, the "Restrictions") lapse. The amount recognized will be equal to the difference between the Fair Market Value of the shares at the time the Restrictions lapse and the original purchase price paid for the shares, if any. The ordinary income recognized by a Participant with respect to restricted stock will be subject to applicable tax withholding by us. If a timely 83(b) election has not been made, any dividends received with respect to common stock subject to the Restrictions will be treated as additional compensation income and not as dividend income.
A Participant may elect, pursuant to Section 83(b) of the Code, to recognize as ordinary income the Fair Market Value of the restricted stock upon grant, notwithstanding that the restricted stock would otherwise not be includable in gross income at that time. If the election is made within 30 days of the date of grant, then the Participant would include in gross income an amount equal to the difference between the Fair Market Value of the restricted stock on the date of grant and the purchase price paid for the restricted stock, if any. Any change in the value of the shares after the date of grant will be taxed as a capital gain or capital loss only if and when the shares are disposed of by the Participant. If the Section 83(b) election is made, the Participant’s holding period for capital gains begins on the date of grant.
The Section 83(b) Election is Irrevocable. If a Section 83(b) election is made and the Participant then forfeits the restricted stock, the Participant may not deduct as a loss the amount previously included in gross income. A Participant’s tax basis in shares of restricted stock received will be equal to the sum of the amount (if any) the Participant paid for the common stock and the amount of ordinary income recognized by the Participant as a result of making the Section 83(b) election or upon the lapse of the Restrictions. Unless a Section 83(b) election is made, the Participant’s holding period for the shares for purposes of determining gain or loss on a subsequent sale will begin on the date the Restrictions on the shares lapse. In general, we will be entitled to a deduction at the same time, and in an amount equal to, the ordinary income recognized by a Participant with respect to shares of restricted stock. If, subsequent to the lapse of the Restrictions on the shares, the Participant sells the shares, the difference, if any, between the amount realized from the sale and the tax basis in the shares of the Participant will be taxed as a capital gain or capital loss.
Other Stock Based Awards. The tax consequences associated with any other stock based award will vary depending on the specific terms of the award, including whether the award has a readily ascertainable Fair Market Value, whether or not the award is subject to forfeiture provisions or restrictions on transfer, the nature of the property to be received by the Participant under the award, the applicable holding period and the Participant’s tax basis.
Section 409A of the Code. Pursuant to Section 409A of the Code, significant restrictions have been imposed on the ability to defer the taxation of compensation, including without limitation, the deferral of income pursuant to some of the arrangements described herein. Violation of Section 409A of the Code triggers immediate inclusion in income and application of income and additional taxes.
Section 280G of the Code and Section 4999 of the Code. Under Section 280G of the Code and Section 4999 of the Code, the Company is prohibited from deducting any "excess parachute payment" to an individual, and the individual must pay a 20% excise tax on any "excess parachute payment." An individual’s "parachute payments" which exceed his or her average annual compensation will generally
be treated as "excess parachute payments" if the present value of such payments equals or exceeds three times the individual’s average annual compensation. A payment generally may be considered a "parachute payment" if it is contingent on a change in control of the Company.
Non-U.S. Taxpayers. If the Participant is subject to the tax laws of any country other than the United States, the Participant should consult his or her own tax and legal advisors to determine the tax and legal consequences of any award received under the Director Plan.
The foregoing statements are only a summary of certain federal income tax consequences of the Director Plan and are based on our understanding of present federal tax laws and regulations.
Vote Required
If a quorum is present, the vote required to approve this Item 4 is a majority of the shares of common stock represented in person or by proxy at the Annual Meeting and entitled to vote thereon, which approval will also satisfy the requirement under NYSE rules that the proposal be approved by a majority of the votes cast.
Recommendation of the Board of Directors
The Board of Directors has approved the proposed amendment to the Flexible Stock Plan for Directors and recommends that shareholders vote FOR the proposal.
ITEM 5 - APPROVAL OF AMENDED & RESTATED PHANTOM STOCK PLAN FOR DIRECTORS
The Company is seeking approval to amend and restate our Phantom Stock Plan for Directors (as amended and restated, the "Phantom Plan") to increase the number of performance units authorized for issuance under the Phantom Plan and allow Directors to receive dividend equivalent payments or dividend credit rights on the performance units held in such Director’s Phantom Plan Account, consistent with our other equity plans. The Board of Directors originally adopted the Phantom Plan on April 13, 1994. The Phantom Plan was last amended and approved by shareholders in 2017.
The total number of performance units currently authorized for issuance under the Phantom Plan is 130,000 performance units. As of March 31, 2021, there were 20,290 performance units remaining available for grant under the Phantom Plan. Under the terms of the proposed Amended & Restated Phantom Stock Plan for Directors ("Amended & Restated Phantom Plan"), Non-Employee Directors of the Company (each, a "Participant") have the option to receive grants of performance units in lieu of the other compensation received for serving on the Board. A "Non-Employee Director" is a member of the Board who is not an officer or employee of the Company or any of its affiliates. As of March 2021, all eleven Non-Employee Directors are eligible to participate in the Phantom Plan. Ms. Manning is not eligible to participate in the Phantom Plan because she is our President and Chief Executive Officer.
The principal features of the current Phantom Plan and the proposed Amended & Restated Phantom Plan are described below. This description is subject to and qualified in its entirety by the full text of the Amended & Restated Phantom Plan, which is set forth, as amended, in Appendix C to this Proxy Statement. The Board has approved the Amended & Restated Phantom Plan, subject to shareholder approval at the 2021 Annual Meeting.
Proposed Amendments to the Phantom Plan
The proposed amendments to the Phantom Plan will increase the number of performance units authorized for issuance under the Phantom Plan from 130,000 to 155,000 performance units and allow Directors to receive dividend equivalent payments or dividend credit rights on the performance units held and accumulated in such Director’s Phantom Plan Account, consistent with our other equity plans. The Board of Directors believes that the approval of the Amended & Restated Phantom Plan is appropriate and will enhance the ability of the Company to continue to reward and provide incentives to Non-Employee Directors as well as to attract and retain qualified individuals to serve as Directors of the Company.
The full text of the Amended & Restated Phantom Plan is set forth, as amended, in Appendix C to this Proxy Statement. Additions to the Phantom Plan are indicated by underlining and deletions are indicated by strike-outs.
Description of Plan Provisions
Under the terms of the Amended & Restated Phantom Plan, Non-Employee Directors of the Company have the option to receive grants of performance units in lieu of the other compensation received for serving on the Board. A performance unit is a hypothetical share of our common stock based upon the Fair Market Value of our common stock at the time of the grant. "Fair Market Value" generally means the closing price of a share of our common stock on the New York Stock Exchange on a given date.
Currently, the Phantom Plan provides that the maximum number of performance units that may be granted is 130,000. If the proposed Amended & Restated Phantom Plan is approved, the maximum number of performance units that may be granted will be increased to 155,000. In the event of any
change in the outstanding shares of common stock by reason of an extraordinary dividend, stock dividend, spin-off, split-up, spin-out, recapitalization, warrant or rights issuance or combination, exchange or reclassification of shares, merger, consolidation, reorganization, sale of substantially all assets or, in the Board’s sole discretion, other similar or relevant event, the Board shall proportionately adjust, in an equitable manner, the number of performance units held by a Participant under the Amended & Restated Phantom Plan.
A Participant who elects to receive a grant of performance units in lieu of all or any portion of such Participant’s compensation for any year may elect to defer payment of such performance units: (i) for a period of five or seven years from the last day of the calendar year in which a performance unit is granted or (ii) to retirement. A Participant may elect to receive payment of performance units in a single lump sum payment or up to five substantially equal annual installment payments.
Performance units will be credited to an account established and maintained for a Participant. In general, a Participant will be credited a number of performance units annually equal to the number of full shares of common stock that the amount of deferred compensation would have purchased at Fair Market Value on the annual equity grant date. Partial performance units will not be allocated, and standard rounding will be applied to determine the number of full performance units. The account of a Participant will be the record of performance units granted to him or her under the Amended & Restated Phantom Plan and shall not be deemed to create a trust of any kind or a fiduciary relationship between the Company and a Participant or his or her beneficiary. Each allocation of performance units to a Participant, and the number and value of such performance units as of the date of allocation, shall be communicated annually to the Participant.
Under the terms of the Amended & Restated Phantom Plan, performance units are not transferable and Participants do not have the right to vote on account of any performance units.
At the end of the deferral period, the Company will issue, at its option, cash or shares of common stock in an amount equal to: (i) the total value of the performance units or one share of common stock for each performance unit, if the Participant has elected to receive payment in a single lump sum or (ii) the value of the performance units or one share of common stock for each performance unit being distributed in such installment, if the Participant has elected to receive payment in annual installments.
Generally, payment shall occur (or commence in the case of annual installments) on the date immediately following the last day of the applicable deferral period. However, for purposes of compliance with Section 409A of the Code, payment shall be deemed to be made upon the specified fixed date or payment event if the payment is made: (i) 30 days prior to the specified fixed payment date or event, (ii) a later date within the same calendar year as the specified fixed payment date or event or (iii) if later, by the 15th day of the third calendar month following the specified fixed payment date or event. However, in no event shall a Participant be permitted, directly or indirectly, to designate the taxable year of the payment. If a Participant ceases to be a director prior to the end of the deferral period, distribution will be made or commence at the time and in the form of payment elected or deemed to be elected at the time of the deferral.
The Board of Directors will administer the Amended & Restated Phantom Plan, which will terminate on May 23, 2027. The Board of Directors may amend or terminate the Amended & Restated Phantom Plan at any time, except that: (i) unless otherwise required by law, the rights of a Participant with respect to performance units granted before such amendment or termination may not be materially and adversely affected without the consent of the Participant and (ii) to the extent the approval of the Company's shareholders is required under applicable laws or regulations with respect to such amendment, the approval of the shareholders is appropriately obtained.
See “Equity Plan Analysis” and “Burn Rate & Overhang” sections under “Item 3 – Approval of Amendment to Flexible Stock Plan” for additional information on the Company’s Equity Plans as of March 31, 2021.
Benefits Granted Under the Amended & Restated Phantom Plan
The benefits to be received under the Amended & Restated Phantom Plan are not presently determinable. The following table sets forth benefits received under the Amended & Restated Phantom Plan through December 31, 2020. See "Director Compensation" for additional information regarding 2020 performance units granted under the existing Phantom Plan.
| | | | | |
SHARES DEFERRED UNDER THE PHANTOM PLAN |
| Number of Performance Units Received |
All current non-executive officer directors as a group (11 persons) | 109,710 |
Each nominee for election as a director: | |
Pina Albo | 1,689 |
Christine R. Detrick | — |
J. Cliff Eason | 30,240 |
John J. Gauthier | — |
Patricia L. Guinn | 1,869 |
Anna Manning1
| — |
Hazel M. McNeilage | 2,678 |
Stephen T. O’Hearn | — |
Frederick J. Sievert | 5,323 |
Shundrawn Thomas | — |
Stanley B. Tulin | — |
Steven C. Van Wyk | 1,689 |
Each Associate of any such director or nominee | — |
Each other person who received or is to receive 5% or more of the options, warrants or rights under the Phantom Plan: | |
Stuart Greenbaum | 16,352 |
1 Ms. Manning does not participate in the Phantom Plan because she is our President and Chief Executive Officer.
Federal Income Tax Consequences
Performance Units. A Participant will realize income as a result of an award of performance units at the time the award is issued or paid. The amount of income realized by the Participant will be equal to the Fair Market Value of the shares on the date of issuance, in the case of a stock award, and to the amount of cash paid, in the event of a cash award. The Company will be entitled to a corresponding deduction equal to the income realized in the year of such issuance or payment.
Section 409A of the Code. Pursuant to Section 409A of the Code, significant restrictions have been imposed on the ability to defer the taxation of compensation, including without limitation, the deferral of income pursuant to some of the arrangements described. Violation of Section 409A of the Code triggers immediate inclusion in income and application of income and additional taxes.
Section 280G of the Code and Section 4999 of the Code. Under Section 280G of the Code and Section 4999 of the Code, the Company is prohibited from deducting any "excess parachute payment" to an individual, and the individual must pay a 20% excise tax on any "excess parachute payment." An individual’s "parachute payments" which exceed his or her average annual compensation will generally be treated as "excess parachute payments" if the present value of such payments equals or exceeds three times the individual’s average annual compensation. A payment generally may be considered a “parachute payment” if it is contingent on a change in control of the Company.
Non-U.S. Taxpayers. If the Participant is subject to the tax laws of any country other than the United States, the Participant should consult his or her own tax and legal advisors to determine the tax and legal consequences of any award received under the Amended & Restated Phantom Plan.
The foregoing statements are only a summary of certain federal income tax consequences of the Amended & Restated Phantom Plan and are based on our understanding of present federal tax laws and regulations.
Vote Required
If a quorum is present, the vote required to approve this Item 5 is a majority of the shares of common stock represented in person or by proxy at the Annual Meeting and entitled to vote thereon, which approval will also satisfy the requirement under NYSE rules that the proposal be approved by a majority of the votes cast.
Recommendation of the Board of Directors
The Board of Directors has approved the Amended & Restated Phantom Stock Plan for Directors and recommends that shareholders vote FOR the proposal.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information regarding securities authorized for issuance under equity compensation plans:
| | | | | | | | | | | |
Plan Category | Number of securities to be issued
upon exercise of outstanding
options, warrants and rights | Weighted-average exercise
price of outstanding options,
warrants and rights | Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a)) |
| (a) | (b) | (c) |
Equity compensation plans approved by security holders | 2,578,6151
| $102.30 2, 3
| 1,146,7764
|
Equity compensation plans not approved by security holders | — | — | — |
Total | 2,578,6151
| $102.30 2, 3
| 1,146,7764
|
1Includes the number of securities to be issued upon exercises or settlement of Stock Appreciation Rights, Restricted Units, and Performance Contingent Units under the following plans: Flexible Stock Plan – 2,535,914; and Phantom Stock Plan for Directors – 42,701. The number of Performance Contingent Units represents the number of shares that would be issued based on target performance, reduced for cancellations and adjustments through December 31, 2020. The actual number of shares issued at the end of each performance period will range between 0% and 200% of the target number of units granted, based on a measure of the actual performance of the Company relative to stated goals.
2Does not include 291,129 performance contingent units outstanding under the Flexible Stock Plan or 4 phantom units outstanding under the Phantom Stock Plan for Directors because those securities do not have an exercise price (i.e. a unit is a hypothetical share of Company common stock with a value equal to the fair market value of the common stock)
3Reflects the blended weighted-average exercise price of outstanding options under the Flexible Stock Plan $102.30.
4Includes the number of securities remaining available for future issuance under the following plans: Flexible Stock Plan – 1,087,415; Flexible Stock Plan for Directors – 38,284; and Phantom Stock Plan for Directors – 21,077
AUDIT MATTERS
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed our 20202022 audited financial statements with Company executives. The Audit Committee also discussed with the independent registered public accounting firm the matters required to be discussed as required by auditing standards of the Public Company Accounting Oversight Board ("PCAOB"), SEC Rule 2-07 of Regulation S-X, Statement of Auditing Standards ("SAS") No. 114, "The Auditor's Communication With Those Charged With Governance." The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the PCAOB Rule 3526, and has discussed with those accountants their independence. Based on those reviews and discussions, the Audit Committee recommended to our Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2020,2022, for filing with the SEC. This report is provided by the following independent directors, who comprise the Audit Committee:
Patricia L. Guinn, Chair
John J. Gauthier
Stanley B. TulinKhanh T. Tran
Steven C. Van Wyk
ITEM 64 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
The final item to be acted upon at the Annual Meeting is the ratification of the appointment of Deloitte & Touche LLP and their related entities (collectively, "Deloitte") as the Company's independent auditor for the year ending December 31, 2021.2023. The Audit Committee has appointed Deloitte subject to shareholder ratification. Deloitte has served as independent auditor of the Company since 2000. Its long-term knowledge of the Company and its subsidiaries, combined with its insurance industry expertise, has enabled it to carry out its audits of the Company's financial statements with effectiveness and efficiency.
In considering Deloitte's appointment, the Audit Committee reviewed the firm's qualifications and competencies, including the following factors:
•Deloitte's status as a registered public accounting firm with the PCAOB, as required by Sarbanes-Oxley and the Rules of the PCAOB;
•Deloitte's independence and its processes for maintaining its independence;
•the results of the independent review of the firm's quality control system;
•the key members of the engagement team for the audit of the Company's financial statements;
•Deloitte's approach to resolving significant accounting and auditing matters including consultation with the firm's national office; and
•Deloitte's reputation for integrity and competence in the fields of accounting and auditing.
The Audit Committee assures the regular rotation of the audit engagement team partners as required by law. The Audit Committee approves Deloitte's audit and non-audit services in advance as required under Sarbanes-Oxley and SEC rules. Under procedures adopted by the Audit Committee, the Audit Committee reviews, on an annual basis, a schedule of particular audit services that the Company expects to be performed and an estimated amount of fees for each particular audit service. The Audit
Committee also reviews a schedule of audit-related, tax and other permitted non-audit services that the
Company may engage the independent auditor to perform and an estimated amount of fees for each of those services.
All audit related services, tax services and other services were pre-approved by the Audit Committee, which concluded that the provision of such services by Deloitte was compatible with the maintenance of that firm's independence in the conduct of its auditing functions. The Audit Committee has adopted a Pre-Approval Policy which provides for pre-approval of audit, audit-related and tax services on an annual basis and, in addition, individual engagements anticipated to exceed pre-established thresholds must be separately approved. The policy authorizes the Committee to delegate to one or more of its members pre-approval authority with respect to permitted services.
Representatives of Deloitte will attend the 20212023 Annual Meeting. They will have an opportunity to make a statement if they desire to do so and they will be available to respond to appropriate questions.
The aggregate fees billed to us for the years ending December 31, 20202022 and 20192021 by Deloitte are set forth below. These fees have been approved by the Company's Audit Committee in accordance with its Pre-Approval Policy.
AUDITOR FEES
| | Fee | Fee | Fiscal Year | Fee | Fiscal Year |
| 2020 | 2019 | 2022 | 2021 |
Audit Fees1 | Audit Fees1 | $11,105,907 | $10,733,066 | Audit Fees1 | $14,195,133 | $11,610,406 |
Audit Related Fees2 | Audit Related Fees2 | 795,074 | 774,015 | Audit Related Fees2 | 716,181 | 566,315 |
| Total audit and audit-related fees | 11,900,981 | 11,507,081 | |
| Total Audit and Audit-related Fees | | Total Audit and Audit-related Fees | $14,911,314 | $12,176,721 |
Tax Fees3 | Tax Fees3 | 383,606 | 243,103 | Tax Fees3 | 149,562 | 83,094 |
| Other | Other | — | — | | Other | — |
| Total Fees | Total Fees | $12,284,587 | $11,750,184 | Total Fees | $15,060,876 | $12,259,815 |
1. Includes fees for the audit of our Company's and its subsidiaries' annual financial statements, reviews of our quarterly financial statements, and Sarbanes-Oxley Section 404 attestation. Approximately $1.8 million of the total 2022 Audit Fees are related to the Company's adoption of the Long-Duration Targeted Improvement accounting changes.
2. Includes fees for services rendered by Deloitte for matters such as assistance with internal control reporting requirements, certain accounting consultations on potential acquisition, reinsurance transactions, new accounting standards and International Financial Reporting Standards, and services associated with SEC registration statements, periodic reports and securities offerings.
3. Includes fees for tax services rendered by Deloitte such as consultation related to tax planning and compliance.
Vote Required
If a quorum is present, the vote required to approve this Item 64 is a majority of the common stock represented in person or by proxy at the Annual Meeting.
Recommendation of the Board of Directors
The Board of Directors has approved the proposal regarding the appointment of Deloitte and recommends that shareholders vote FOR the proposal.
STOCK OWNERSHIP
SECURITIESBENEFICIAL OWNERSHIP OF DIRECTORS, MANAGEMENT AND CERTAIN BENEFICIAL OWNERSTABLE
The following table sets forth, as of December 31, 2020,2022, certain information with respect to: (1) each person known by us to be the beneficial owner of 5% or more of our outstanding common stock and (2) the ownership of common stock by (i) each of our directors and nominees, (ii) each of our named executive officers and (iii) all directors, nominees and executive officers as a group.
BENEFICIAL OWNERSHIP AS OF DECEMBER 31, 20202022
| | | | | | | | |
| Beneficial Owner | Amount and Nature of Beneficial Ownership1 | Percent of Class2 |
| Significant Shareholders | | |
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355 | 7,249,6143 | 10.85% |
Blackrock, Inc.
55 East 52nd Street
New York, NY 10055 | 6,785,12936,909,6874
| 10.0%10.30% |
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355 | 6,713,0604
| 9.9% |
FMR LLC
245 Summer Street
Boston, MA 02210 | 4,151,1836,005,6125
| 6.1%8.99% |
Harris Associates L.P.
11 South Wacker Drive, Suite 4600
Chicago, IL 60606 | 3.921.8786
| 5.8% |
| Directors, Nominees and Named Executive Officers: | | |
| Non-Employee Directors | | |
| Pina Albo | — | * |
Christine R. Detrick | 7,716 | * |
| J. Cliff Eason | 13,79918,356 | * |
| John J. Gauthier | 5,2057,6876 | * |
| Patricia L. Guinn | 5,6388,120 | * |
| Hazel M. McNeilage | 527 | * |
| Ng Keng Hooi | — | * |
| George Nichols III | 1,280 | * |
| Stephen O'Hearn (Chair) | — | * |
Frederick J. SievertShundrawn Thomas | 7,9122,382 | * |
Stanley B. TulinKhanh T. Tran | 10,020— | * |
| Steven C. Van Wyk | 989 | * |
| Named Executive Officers | | |
| Anna Manning | 340,381474,1807
| * |
| Todd C. Larson | 86,217102,6798
| * |
Alain P. NéemehTony Cheng | 186,43144,9319
| * |
| Leslie Barbi | 3,33816,92110
| * |
Tony ChengRonald Herrmann | 32,0274,12211
| * |
John P. Laughlin | 83,66412
| * |
All directors and executive officers as a group (26(23 persons) | 984,00313872,22112
| 1.45%1.31% |
*Less than 1%.
1. For purposes of this table, "beneficial ownership" is determined in accordance with Rule 13d-3 under the Exchange Act, pursuant to which a person or group of persons is deemed to have "beneficial ownership" of any shares of common stock that such person has the right to acquire within 60 days. For computing the percentage of the class of securities held by each person or group of persons named above, any shares which such person or persons has the right to acquire within 60 days (as well as the shares of common stock underlying fully vested stock options or SARs) are deemed to be outstanding for the purposes of computing the percentage ownership of such person or group but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person or group. No director, nominee or named executive officer owns more than 1% of our outstanding common stock.
2. Unless otherwise indicated, each named person has sole voting and investment power over the shares listed as beneficially owned and none of the shares listed are pledged as security.
3. As reported on Schedule 13G/A filed February 8, 2021,9, 2023, The Vanguard Group, Inc. and its affiliates have shared voting power over 31,555 shares, shared dispositive power over 97,230 shares, and sole dispositive power over 7,152,384 shares.
4. As reported on Schedule 13G/A filed January 23, 2023, Blackrock, Inc. and funds and accounts managed by Blackrock, Inc. and its subsidiaries have sole voting power over 6,614,703 shares and sole dispositive power over all the beneficially owned6,909,687 shares.
4. 5. As reported on Schedule 13G/A filed February 10, 2021, The Vanguard Group, Inc. shares dispositive9, 2023, FMR LLC and its affiliates have sole voting power of 59,484over 5,889,196 shares with certain of its subsidiaries, affiliates and other companies, including Vanguard Asset Management, Limited, Vanguard Fiduciary Trust Company, Vanguard Global Advisors, LLC, Vanguard Group (Ireland) Limited, Vanguard Investments Australia Ltd, Vanguard Investments Canada Inc., Vanguard Investments Hong Kong Limited and Vanguard Investments UK, Limited.
5. As reported on Schedule 13G filed February 8, 2021, FMR LLC shares dispositive voting power with certain of its subsidiaries and affiliates and other companies, including FIAM LLC, Fidelity Institutional Asset Management Trust Company, Fidelity Management & Research Company LLC and Strategic Advisers LLC.
6. As reported on Schedule 13G filed on February 16, 2021, Harris Associates L.P. and its subsidiaries have sole voting and dispositive power over 6,005,612 shares.
6. Mr. Gauthier has joint ownership and shares voting and investment power with his spouse over all the beneficially owned shares.shares of common stock.
7.Includes for Ms. Manning 285,373419,172 shares of common stock subject to stock options, restricted share units and/or SARs that are exercisable within 60 days.
8.Includes for Mr. Larson a total of 51,94366,043 shares of common stock subject to stock options, restricted share units and/or SARs that are exercisable within 60 days. Mr. Larson shares voting and investment power for 4,928 shares with his spouse.
9. Includes for Mr. Néemeh 146,540 shares of common stock subject to stock options and/or SARs that are exercisable within 60 days.
10. Includes for Ms. Barbi, 3,338 shares of common stock subject to stock options and/or SARs that are exercisable within 60 days.
11. Includes for Mr. Cheng 17,353 shares of common stock subject to stock options and/or SARs that are exercisable within 60 days.
12. Includes for Mr. Laughlin 51,103 shares of common stock subject to stock options and/or SARs that are exercisable within 60 days.
13. Includes a total of 677,49730,257 shares of common stock subject to stock options, restricted share units and/or SARs that are exercisable within 60 days.
10. Includes for Ms. Barbi 16,921 shares of common stock subject to stock options, restricted share units and/or SARs that are exercisable within 60 days.
11. Includes for Mr. Herrmann 4,122 shares of common stock subject to stock options, and/or SARs that are exercisable within 60 days.
12. Includes 667,013 shares of common stock subject to stock options, restricted share units and/or SARs that are exercisable within 60 days.
EXECUTIVE STOCKOTHER SECURITIES OWNERSHIP GUIDELINESINFORMATION
In order
Director Stock Retention Policy
Our director stock retention policy provides that, subject to certain exceptions for tax obligations and estate planning purposes, a non-employee member of the Board of Directors may not transfer any shares of the Company's common stock which he or she received as compensation for service on the Board of Directors until the value of the total shares held by the director equals or exceeds five times the amount of the annual cash retainer paid to such director.
Directors' Phantom Shares
Non-employee directors may elect to receive phantom shares by deferring all or a portion of their annual compensation (including the stock portion). A phantom share is a hypothetical share of our common stock based upon the fair market value of the common stock at the time of the grant. Phantom shares granted prior to January 1, 2016 are not distributed until the director ceases to serve on the Board, at which time the Company will issue cash or shares of common stock in an amount equal to
the value of the phantom shares. Effective January 1, 2016, directors may elect to receive distributions of deferred shares after five or seven years or at retirement pursuant to a post-deferral election. Distributions can be either via shares or cash and may be paid as a single payment or in five substantially similar annual installments.
Directors with phantom shares will earn dividend equivalents on each performance unit credited to and accumulated under their account. "Dividend Equivalents" means a dollar amount equal to the cash dividend that such director would have been entitled to receive if the director had been the owner, on the record date for a dividend paid on the Company's common stock, of a number of shares of common stock equal to the number of performance units then properly credited to and accumulated under the director's phantom share account.
Since phantom shares can be distributed in cash instead of stock, they are not included as shares beneficially owned by the directors under the Beneficial Ownership Table (page 79). Several directors have elected to participate in the deferral option and the following table illustrates their accumulated phantom share balance as of December 31, 2022: PHANTOM SHARE OWNERSHIP
| | | | | |
| Name | Phantom Shares |
| Pina Albo | 6,967 |
| J. Cliff Eason | 31,4361 |
| Patricia L. Guinn | 1,918 |
| Hazel M. McNeilage | 5,266 |
| Ng Keng Hooi | 2,230 |
| Stephen O'Hearn | 2,515 |
| Steven C. Van Wyk | 7,164 |
1The balance for Mr. Eason was distributed in January 2023. |
Executive Stock Ownership Guidelines
To further align the interests of our management and our shareholders, our executive stock ownership guidelines provide that our senior executives should hold a specified number of shares of Company stock, expressed as a multiple of such executives' base salary,salary. For 2022, these guidelines were as follows:
| | | | | |
| OWNERSHIP GUIDELINES |
| Position | Share Ownership Requirement |
President &and Chief Executive Officer | 8x Base Salary |
| Senior Executive Vice President | 5x Base Salary |
| Executive Vice President | 2x - 4x Base Salary |
| Senior Vice President | 1x - 2x Base Salary |
The number of shares includes only those shares of common stock that are directly or beneficially owned by the executive.executive plus unvested RSUs discounted by a notional tax rate. Executives who are subject to the guidelines must retain the net shares (net of applicable taxes for PCS and RSU awards and, for SARs and stock options, the net of exercise cost and taxes) from any SARs and stock option exercise or award of PCS or RSU until they satisfy the applicable stock ownership requirement.
As of December 31, 2020, Messrs,2022, Ms. Manning and Mr. Larson Néemeh, Cheng and Laughlin met their respective ownership requirements. Upon her promotion to PresidentMr. Cheng's ownership requirement increased in 2022 and Chief Executive Officerhe does not currently meet the requirement. Ms. Barbi and Mr. Herrmann joined RGA in 2017, Ms. Manning became subject to significantly higher ownership requirementsJanuary 2020 and hasNovember 2020, respectively, and have not had sufficient time to meet her stock ownership requirement. Ms. Barbi joined RGA in January 2020 and has not had sufficient time to meet hertheir stock ownership requirement.
Prohibitions against Short Sales, Hedging, Margin Accounts and Pledging
The Company’sCompany's Insider Trading Policy (the "Policy") prohibits directors, executive officers, employees, and others from engaging in short sale transactions in Company securities and prohibits the purchase or use, directly or indirectly, of financial instruments that are designed to hedge or offset any decrease in the market value of the Company’sCompany's securities (including prepaid variable forward contracts, equity swaps, collars, and exchange funds). In addition, the Policy strongly discourages holding the Company’sCompany's securities in margin accounts or pledging Company securities as collateral. These restrictions are intended to prevent a misalignment of interests with the Company’sCompany's shareholders or the appearance of such a misalignment. An exception to the general ban on hedging may be sought from the General Counsel on a case-by-case basis, subject to pre-clearance procedures.
DELINQUENT SECTION 16(A) REPORTSDelinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC and the NYSE. Directors, executive officers and greater than 10% shareholders are required by SEC regulation to furnish us with copies of all Forms 3, 4 and 5 they file.
Based solely on our review of the copies of such forms we have received or that were filed with the SEC, or written representations from certain reporting persons, we believe that all our directors, executive officers and greater than 10% beneficial owners complied with all filing requirements applicable to them with respect to transactions during 2020.2022.
ADDITIONAL INFORMATION
VIRTUAL MEETING INFORMATION
Again this year, we will conduct the 2021 Annual Shareholders Meeting solely online via the Internet through a live webcast and online shareholder portal. Due to the COVID-19 pandemic and restrictions on travel, we continue to use the virtual annual meeting format to facilitate shareholder attendance and participation by leveraging technology to communicate effectively and efficiently with our shareholders. The virtual format allows our shareholders to participate fully from any location around the world, at no cost to them.
We have designed the virtual format to enhance shareholder access and participation and protect shareholder rights. The Board intends that the virtual meeting format provide shareholders a level of transparency as close as possible to the traditional in-person meeting format and is committed to ensuring such an experience.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
1. Who is entitled to vote and how many votes do I have?
If you arewere a holder of record of Company common stock at the close of business on March 29, 2021,31, 2023, you are eligible to vote at the 20212023 Annual Meeting. For each matter presented for vote, you have one vote for each share you own.
2. How do I vote?
Your vote is important. Please cast your vote as soon as possible using one of the following methods.
By Telephone or Internet. All shareholders of record also can vote by touchtone telephone within the U.S., U.S. territories and Canada, using the toll-free telephone number on the proxy card, or through the Internet, using the procedures and instructions described on the proxy card. The telephone and Internet voting procedures are designed to authenticate shareholders' identities, to allow shareholders to vote their shares and to confirm that their instructions have been recorded properly. You can vote via the Internet (www.proxyvote.com) or via telephone by calling 1-800-690-6903 by 11:59 p.m., Eastern Time, on May 18, 2021.23, 2023.
By Written Proxy. All shareholders of record can vote by written proxy card. If you received a proxy card or voting instruction form in the mail, you may vote by completing, signing, dating and returning your proxy card in the return envelope provided to you in accordance with the instructions provided with the proxy card. If you sign and return your proxy card but do not mark any selections giving specific voting instructions, your shares represented by that proxy will be voted as recommended by the Board of Directors.
At the Meeting. All shareholders of record may vote at the meeting. Whether you plan to attend the meeting or not, we encourage you to vote by proxy as soon as possible. The proxy committee will vote your shares according to your directions.
3. How do I attend a virtual meeting?
Due to health and safety concerns regarding the COVID-19 pandemic, we will be hosting a virtual Annual Meeting of Shareholders live via the Internet. To attend the Annual Meeting via the Internet please visit www.virtualshareholdermeeting.com/RGA2021and be sure to have the information that is
printed on your notice card. Shareholders will be afforded the same rights and opportunities to participate in the virtual meeting as they would at an in-person meeting.
4. Can I ask questions during the Annual Meeting?
Yes. Shareholders will be afforded the same rights and opportunities to participate at our virtual meeting as they would at an in-person meeting. Upon the opening of the meeting (5-30 minutes prior to the scheduled start time of the meeting), shareholders will be able to submit questions via a closed text box through the virtual shareholder meeting dashboard. Only validated shareholders may ask questions and only questions that are germane to the meeting or materials presented will be addressed. Questions will be answered at the end of the meeting. Out of consideration for others, we ask that shareholders limit themselves to only one question. We may not be able to answer every question, but we will do our best to provide a response to as many as possible. Questions which meet the guidelines, but were not answered due to time constraints may be posted and answered on the Company's Investor Relations website.
5. What are the procedures for accessing technical support to assist in the event of any difficulties accessing the virtual meeting?
The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Shareholders should ensure that they have a strong internet connection if they plan to attend and/or participate in the meeting.
We encourage shareholders to access the meeting website approximately 10-15 minutes prior to the start time to allow for any unforeseen technical issues, as the meeting webcast will begin promptly at 2:00 pm CDT. If you encounter any difficulties accessing the virtual meeting, please call the technical support number that will be posted on the virtual meeting login page for assistance. Technical support will be available beginning at 1:45 p.m. CDT, 15 minutes prior to the commencement of the meeting, through the conclusion of the meeting.
6. Can I change my vote?
There are several ways in which you may revoke your proxy or change your voting instructions before the time of voting at the meeting:
•Vote again by telephone or at the Internet website.
•Mail a revised proxy card or voting instruction form that is dated later than the prior one.
•Vote at the Annual Meeting.
•Notify the Company's Corporate Secretary in writing that a prior proxy is revoked or voting instructions are changed.
Please note that in orderfor your vote to be counted, the revocation or change must be received by 11:59 p.m., Eastern Time, on May 18, 2021.23, 2023.
4. What is a Broker Non-Vote?
A "broker non-vote" occurs when a broker submits a proxy for the meeting with respect to a discretionary matter but does not vote on non-discretionary matters because the beneficial owner did not provide voting instructions on those matters. Under NYSE rules, the proposal to ratify the appointment of independent auditors is considered a "discretionary" item. This means that brokerage firms may vote in their discretion on behalf of clients (beneficial owners) who have not furnished voting instructions at least 15 days before the date of the Annual Meeting. In contrast, all of the other
proposals set forth in this Proxy Statement are "non-discretionary" items—brokerage firms that have not received voting instructions from their clients on these matters may not vote on these proposals.
8.5. Who pays for the solicitation of proxies?
The Company pays the cost of soliciting proxies. Proxies will be solicited on behalf of the Board of Directors by mail, telephone and other electronic means or in person.
9.6. How do I comment on Company business?
We collect comments from the proxy card if you vote by mailing the proxy card. You may also mail comments to our Corporate Secretary at our corporate headquarters. Although it is not possible to respond to each shareholder, your comments help us to understand your concerns.
10.7. Where can I find additional information about the Company?
The Company's website, www.rgare.com, contains additional information about the Company, including:
| | | | | |
● | This Proxy Statement and our 2020 Annual Report to Shareholders; |
● | Our Code of Conduct, the Directors' Code of Business Conduct and Ethics and our Financial Management Code of Professional Conduct (see page 13); |
● | Our Board's Corporate Governance Guidelines and charters for the Audit, Compensation, Investment, Nominating and Governance and Risk Committees. The committee charters include a detailed description of the roles and responsibilities of each committee (see page 17); |
● | The process by which interested parties and shareholders can communicate with our directors and the Board; and |
● | Additional financial information can be found in the Quarterly Financial Supplement on the Investor Relations portion of the website in the "Quarterly Results" tab in the "Featured Report" section. |
•This Proxy Statement and our 2022 Annual Report to Shareholders;
•Our Code of Conduct, the Directors' Code of Business Conduct and Ethics and our Financial Management Code of Professional Conduct (see page 12); •Our Board's Corporate Governance Guidelines and charters for the Audit, Human Capital and Compensation, Investment, Nominating and Governance and Risk Committees. The committee charters include a detailed description of the roles and responsibilities of each committee (see page 17); •The process by which interested parties and shareholders can communicate with our directors and the Board; and
•Additional financial information can be found in the Quarterly Financial Supplements on the Investor Relations portion of our website.
Information on our website does not constitute part of this Proxy Statement.
You may also write us at our corporate headquarters, 16600 Swingley Ridge Road, Chesterfield, Missouri 63017, to receive the following information, without charge:
| | | | | |
Shareholder Request | RGA ContactADDITIONAL INFORMATION |
| Shareholder Request | RGA Contact |
| A copy of any of the codes of conduct or governance documents described above | Investor Relations |
| A copy of our Articles of Incorporation, Bylaws, this Proxy Statement, form of proxy card and our Annual Report to Shareholders | Corporate Secretary |
Interested parties and shareholders may communicate directly with our Chair of the Board Mr. Eason | General Counsel |
VOTING
Each share of common stock outstanding at the close of business on the record date is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on. Under Missouri corporate law, the approval of any action taken at the Annual Meeting is based on votes cast. If a quorum is present, the votes necessary to approve the proposals are as follows:
| | | | | | | | |
| VOTING MATTERS |
| Item | Proposal | Vote Required to Adopt the Proposal |
| 1. | Election of Directors | The vote required to elect each director is the affirmative votes of the holders of a majority of the common stock entitled to vote which are present in person or represented by proxy at the Annual Meeting. |
| 2. | Shareholders' Advisory Vote on Frequency of Shareholders' Advisory Vote on Executive Compensation | The vote required to pass this proposal is the affirmative votes of the holders of a majority of the common stock entitled to vote which are present in person or represented by proxy at the Annual Meeting. |
| 3. | Approval of Amendments to Company Flexible Stock PlanShareholders' Advisory Vote on Executive Compensation | The vote required to pass this proposal is the affirmative votes of the holders of a majority of the common stock entitled to vote which are present in person or represented by proxy at the Annual Meeting. |
| 4. | ApprovalRatification of Amendments to Company Flexible Stock Plan for DirectorsAppointment of Independent Auditor | The vote required to pass this proposal is the affirmative votes of the holders of a majority of the common stock entitled to vote which are present in person or represented by proxy at the Annual Meeting. |
5. | Approval of Amended & Restated Phantom Stock Plan for Directors | The vote required to pass this proposal is the affirmative votes of the holders of a majority of the common stock entitled to vote which are present in person or represented by proxy at the Annual Meeting. |
6. | Ratification of Appointment of Independent Auditor | The vote required to pass this proposal is the affirmative votes of the holders of a majority of the common stock entitled to vote which are present in person or represented by proxy at the Annual Meeting. |
Shareholder approval occurs if the votes cast in favor of the proposal exceed the votes cast against the proposal. "Votes cast" on these proposals means votes "for" or "against" a particular proposal. Abstentions and broker non-votes are not considered votes cast on these proposals and therefore have no effect on the outcome of these proposals. In uncontested elections, directors are elected by a majority of votes cast. Shares represented by proxies which are marked or voted "withhold authority" with respect to the election of any one or more nominees for election as Directors (Item 1), proxies which are marked or voted "abstain" on the other proposals, and proxies which are marked or voted to deny discretionary authority on any other matters will be counted for the purpose of determining the number of shares represented by proxy at the Annual Meeting. Such proxies will thus have the same effect as if the shares represented thereby were voted against such nominee or nominees, against the proposals and against any such other matters.
If a broker indicates on the proxy that it does not have discretionary authority as to certain shares to vote on a particular matter, those shares will not be considered as present and entitled to vote with respect to that matter and thus will have no effect on the outcome of the vote with regard to such matters. Please note that brokers cannot vote uninstructed shares on your behalf in director elections or with regard to executive compensation matters. For your vote to be counted, you must submit your voting instruction form to your broker.
We know of no other matters to come before the meeting. If any other matters properly come before the meeting, the proxies solicited hereby will be voted on such matters in accordance with the judgment of the persons voting such proxies. Voting results will be disclosed in our Current Report on Form 8-K filed with the SEC within four business days following the 20212023 Annual Meeting.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more shareholders sharing the same address by delivering a single proxy statement addressed to those shareholders. This process, which is commonly referred to as "householding," potentially provides extra convenience for shareholders and cost savings for companies. Some brokers household proxy materials, delivering a single proxy statement to multiple shareholders sharing an address unless contrary instructions have been received
from the affected shareholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and
would prefer to receive a separate proxy statement or if your household currently receives multiple copies and would like to participate in householding in the future, please notify your broker.
SHAREHOLDER PROPOSALS AND UNIVERSAL PROXY NOMINATIONS
Shareholder proposals submitted under the process prescribed by the SEC (in Rule 14a-8 of the Securities Exchange Act of 1934) for presentation at the 20222024 Annual Meeting must be received by us by December 9, 2021,15, 2023, for inclusion in our Proxy Statement and proxy relating to that meeting. Upon receipt of any such proposal, we will determine whether or not to include such proposal in the Proxy Statement and proxy in accordance with regulations governing the solicitation of proxies. We currently anticipate that the 20222024 Annual Meeting will be held in-person on May 25, 2022.22, 2024.
In order forFor a shareholder to bring business before a shareholder meeting, timely notice must be given to usthe Company within the time limits described above. Such notice must include a description of the proposed business, any material interest of the shareholder proponent or beneficial owner (or their respective affiliates, associates and those with whom they are acting in concert) in the proposed business; the text of the proposal or business (including the text of any resolutions proposed); and a description of all agreements and arrangements between or among such shareholder, beneficial owner and their respective affiliates, associates and those with whom they are acting in concert, and any other person in connection with the proposal. Required disclosures should be updated and supplemented, if necessary, so that they are accurate as of the record date for a meeting and as of ten business days prior to the meeting. The shareholder proposing business or making a nomination (or a qualified representative of the shareholder) must appear at the applicable meeting of shareholders to present such business or nomination in order for it to be considered.
The Board or the presiding officer at the Annual Meeting may reject any such proposals that are not made in accordance with these procedures or that are not a proper subject for shareholder action in accordance with applicable law. The foregoing time limits also apply in determining whether notice is timely for purposes of rules adopted by the SEC relating to the exercise of discretionary voting authority. These requirements are separate from and in addition to the requirements a shareholder must meet to have a proposal included in our Proxy Statement. In each case, the notice must be given to our Secretary at our corporate headquarters.
To comply with the SEC's universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company's nominees must comply with our Bylaws and provide notice that sets forth the information required by Rule 14a-9 under the Securities Exchange Act of 1934 no later than April 4, 2024.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and federal securities laws including, among others, statements relating to projections of the future operations, strategies, earnings, revenues, income or loss, ratios, financial performance and growth potential of the Company. Forward-looking statements often contain words and phrases such as “intend,” “expect,” “project,” “estimate,” “predict,” “anticipate,” “should,” “believe”"anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "if," "intend," "likely," "may," "plan," "potential," "pro forma," "project," "should," "will," "would," and other words and terms of similar expressions.meaning or that are otherwise tied to future periods or future performance, in each case in all derivative forms. Forward-looking statements are based on management’smanagement's current expectations and beliefs concerning future developments and their potential effects on the Company. Forward-looking statements are not a guarantee of future performance and are subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results, performance, and achievements could differ materially from those set forth in, contemplated by or underlying the forward-looking statements.
The effects of the ongoing novel coronavirus (“COVID-19”) pandemic and the response thereto on economic conditions, the financial markets and insurance risks, and the resulting effects on the Company’s financialFactors that could also cause results liquidity, capital resources, financial metrics, investment portfolio and stock price, could cause actual results andor events to differ, materially from those expressed or implied by forward-looking statements. Further, any estimates, projections, illustrative scenarios or frameworks used to plan for potential effects of the pandemic are dependent on numerous underlying assumptions and estimates that may not materialize. Additionally, numerous other important factors (whether related to, resulting from or exacerbated by the COVID-19 pandemic or otherwise) could also cause actual results and events to differpossibly materially, from those expressed or implied by forward-looking statements, including, without limitation:include, among others: (1) adverse changes in mortality (whether related to COVID-19 or otherwise), morbidity, lapsation or claims experience, (2) inadequate risk analysis and underwriting, (3) adverse capital and credit market conditions and their impact on the Company’sCompany's liquidity, access to capital and cost of capital, (4) changes in the Company’sCompany's financial strength and credit ratings and the effect of such changes on the Company’sCompany's future results of operations and financial condition, (5) the availability and cost of collateral necessary for regulatory reserves and capital, (6) requirements to post collateral or make payments due to declines in the market value of assets subject to the Company’sCompany's collateral arrangements, (7) action by regulators who have authority over the Company’sCompany's reinsurance operations in the jurisdictions in which it operates, (8) the effect of the Company parent’sparent's status as an insurance holding company and regulatory restrictions on its ability to pay principal of and interest on its debt obligations, (9) general economic conditions or a prolonged economic downturn affecting the demand for insurance and reinsurance in the Company’sCompany's current and planned markets, (10) the impairment of other financial institutions and its effect on the Company’sCompany's business, (11) fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and real estate markets, (12) market or economic conditions that adversely affect the value of the Company’sCompany's investment securities or result in the impairment of all or a portion of the value of certain of the Company’sCompany's investment securities that in turn could affect regulatory capital, (13) market or economic conditions that adversely affect the Company’sCompany's ability to make timely sales of investment securities, (14) risks inherent in the Company’sCompany's risk management and investment strategy, including changes in investment portfolio yields due to interest rate or credit quality changes, (15) the fact that the determination of allowances and impairments taken on the Company’sCompany's investments is highly subjective, (16) the stability of and actions by governments and economies in the markets in which the Company operates, including ongoing uncertainties regarding the amount of U.S. sovereign debt and the credit ratings thereof, (17) the Company’sCompany's dependence on third parties, including those insurance companies and reinsurers to which the Company cedes some reinsurance, third-party investment managers and others, (18) financial performance of the Company’sCompany's clients, (19) the threat of natural disasters, catastrophes, terrorist attacks, pandemics, epidemics or pandemicsother major public health issues anywhere in the world where the Company or its clients do business, (20) competitive factors and competitors’ responses to the
Company’s Company's initiatives, (21) development and introduction of new products and distribution opportunities, (22) execution of the Company’sCompany's entry into new markets, (23) integration of acquired blocks of business and entities, (24) interruption or failure of the Company’sCompany's telecommunication, information technology or other operational systems, or the Company’sCompany's failure to maintain adequate security to protect the confidentiality or privacy of personal or sensitive data and intellectual property stored on such systems, (25) adverse developments with respect to litigation,
arbitration or arbitration results,regulatory investigations or actions, (26) the adequacy of reserves, resources and accurate information relating to settlements, awards and terminated and discontinued lines of business, (27) changes in laws, regulations, and accounting standards applicable to the Company or its business, (28) the effects of the Tax Cutsincluding Long-Duration Targeted Improvement accounting changes and Jobs Act of 2017 may be different than expected and (29)(28) other risks and uncertainties described in this document and in the Company’sCompany's other filings with the Securities and Exchange Commission (“SEC”("SEC").
Forward-looking statements should be evaluated together with the many risks and uncertainties that affect the Company’sCompany's business, including those mentioned in this document and described in the periodic reports the Company files with the SEC. These forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update these forward-looking statements, even though the Company’sCompany's situation may change in the future.future, except as required under applicable securities law. For a discussion of these risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements, you are advised to see Item 1A – “Risk Factors”"Risk Factors" in the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 2020.2022, as may be supplemented by Item 1A – "Risk Factors" in the Company's subsequent Quarterly Reports on Form 10-Q and in our other periodic and current reports filed with the SEC.
USE OF NON-GAAP FINANCIAL MEASURES
The CompanyRGA uses a non-GAAP financial measure called adjusted operating income as a basis for analyzing financial results. This measure also serves as a basis for establishing target levels and awards under the Company'sRGA's management incentive programs. Management believes that adjusted operating income, on a pre-tax and after-tax basis, better measures the ongoing profitability and underlying trends of the Company's continuing operations, primarily because that measure excludes substantially all of the effect of net investment related gains and losses, as well as changes in the fair value of certain embedded derivatives and related deferred acquisition costs. These items can be volatile, primarily due to the credit market and interest rate environment, and are not necessarily indicative of the performance of the Company's underlying businesses. Additionally, adjusted operating income excludes any net gain or loss from discontinued operations, the cumulative effect of any accounting changes, tax reform and other items that management believes are not indicative of the Company's ongoing operations. The definition of adjusted operating income can vary by company and is not considered a substitute for GAAP net income. Reconciliations from GAAP net income are provided in the following tables.
Book value per share excluding the impact of AOCI is a non-GAAP financial measure that management believes is important in evaluating the balance sheet in order to ignore the effects of unrealized amounts primarily associated with mark-to-market adjustments on investments and foreign currency translation.
Adjusted operating income per diluted share is a non-GAAP financial measure calculated as adjusted operating income divided by weighted average diluted shares outstanding. Adjusted operating return on equity is a non-GAAP financial measure calculated as adjusted operating income divided by average shareholders'stockholders' equity excluding AOCI. Similar to adjusted operating income, management believes these non-GAAP financial measures better reflect the ongoing profitability and underlying trends of the Company's continuing operations, they also serve as a basis for establishing target levels and awards under RGA's management incentive programs.
Effective withReconciliations from GAAP net income, book value per share, net income per diluted share and average stockholders' equity are provided in the first quarter of 2017, the Company modified the labeling of its non-GAAP measure "operating income" to "adjusted operating income."following tables.
| | Reinsurance Group of America, Incorporated and Subsidiaries | Reinsurance Group of America, Incorporated and Subsidiaries | Reinsurance Group of America, Incorporated and Subsidiaries |
| Reconciliation of Non-GAAP Measures | Reconciliation of Non-GAAP Measures | Reconciliation of Non-GAAP Measures |
| (Dollars in millions) | (Dollars in millions) | (Dollars in millions) |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | Net income to adjusted operating income | Net income to adjusted operating income | Twelve Months Ended December 31 | Net income to adjusted operating income | Twelve Months Ended December 31 |
| | 2020 | 2019 | 2018 | |
| Net income | $415 | $870 | $716 | |
| Net income to adjusted operating income | | Net income to adjusted operating income | 2022 | 2021 | 2020 |
| $ | 623 | | $ | 617 | | $ | 415 | |
| Reconciliation to adjusted operating income: | Reconciliation to adjusted operating income: | | Reconciliation to adjusted operating income: | |
| Capital (gains) losses, derivatives and other, included in investment related (gains) losses, net | (6) | | (43) | | 121 | | |
| Capital (gains) losses, derivatives and other, included in investment related gains/losses, net | | Capital (gains) losses, derivatives and other, included in investment related gains/losses, net | 354 | | (338) | | (6) | |
| Capital (gains) losses on funds withheld, included in investment income, net of related expenses | Capital (gains) losses on funds withheld, included in investment income, net of related expenses | 3 | | 4 | | (2) | | Capital (gains) losses on funds withheld, included in investment income, net of related expenses | 18 | | (4) | | 3 | |
| Embedded derivatives: | Embedded derivatives: | | Embedded derivatives: | |
| Included in investment related (gains) losses, net | 43 | | (13) | | 22 | | |
| Included in interest credited | 16 | | 36 | | (14) | | |
| Included in investment related gains/losses, net | | Included in investment related gains/losses, net | 107 | | (79) | | 43 | |
| Included in interest credited | | Included in interest credited | (42) | | (36) | | 16 | |
| DAC offset, net | DAC offset, net | (6) | | (25) | | 8 | | DAC offset, net | (21) | | 30 | | (6) | |
| Investment income (loss) on unit-linked variable annuities | (9) | | (21) | | 5 | | |
| Investment (income) loss on unit-linked variable annuities | | Investment (income) loss on unit-linked variable annuities | 19 | | (3) | | (9) | |
| Interest credited on unit-linked variable annuities | Interest credited on unit-linked variable annuities | 9 | | 21 | | (5) | | Interest credited on unit-linked variable annuities | (19) | | 3 | | 9 | |
| Interest on uncertain tax provisions | 9 | | 14 | | --- | |
| Non-investment derivatives | 1 | | 2 | | --- | |
| Interest expense on uncertain tax provisions | | Interest expense on uncertain tax provisions | 1 | | (21) | | 9 | |
| Non-investment derivatives and other | | Non-investment derivatives and other | (62) | | (2) | | 1 | |
| Uncertain tax positions and other tax related items | Uncertain tax positions and other tax related items | 21 | | 8 | | (62) | | Uncertain tax positions and other tax related items | (5) | | (90) | | 21 | |
| Adjusted operating income | $496 | $853 | $789 | |
| Net income attributable to noncontrolling interest | | Net income attributable to noncontrolling interest | 4 | | — | | — | |
| Adjusted operating income | | Adjusted operating income | 977 | | 77 | | 496 | |
Excluded adjustments for ABP purposes1 | | Excluded adjustments for ABP purposes1 | 60 | | 158 | | — | |
| Adjusted operating income for ABP purposes | | Adjusted operating income for ABP purposes | $ | 917 | | $ | (81) | | $ | 496 | |
| | | | | | | | | | | | | | |
| Earnings per share | Twelve Months Ended December 31 |
| | 2020 | 2019 | 2018 |
| Diluted earnings per share from adjusted operating income | $7.54 | $13.35 | $12.12 |
| Earnings per share from net income: | | | |
| Basic earnings per share | $6.35 | $13.88 | $11.25 |
| Diluted earnings per share | $6.31 | $13.62 | $11.00 |
| Weighted average number of common and common | | | |
| equivalent shares outstanding (diluted) | 65,835 | 63,882 | 65,094 |
| | | | | | | | | | | | | | | | | |
| Book value per share | |
| | 2020 | 2019 | 2018 | 2017 |
| Common shares outstanding | 67,957 | | 62,656 | | 62,814 | | 64,452 | |
| | | | |
| Book value per share outstanding | $211.19 | $185.17 | $134.53 | $148.48 |
| Less effect of AOCI: | | | | |
| Accumulated currency translation adjustments | $(1.02) | $(1.46) | $(2.69) | $(1.34) |
| Unrealized appreciation of securities | $80.94 | $52.65 | $13.63 | $34.14 |
| Pension and postretirement benefits | $(1.06) | $(1.12) | $(0.80) | $(0.78) |
| Book value per share, before impact of AOCI | $132.33 | $135.10 | $124.39 | $116.46 |
| | | | | |
| | | | | | | | | | | | | | |
| Earnings per share | Twelve Months Ended December 31 |
| 2022 | 2021 | 2020 |
| Diluted earnings per share from adjusted operating income | $14.43 | $1.13 | $7.54 |
Diluted earnings per share adjustments for ABP purposes1 | $0.70 | $2.31 | — |
| Diluted earnings per share from adjusted operating income for ABP purposes | $13.73 | $(1.18) | $7.54 |
| Earnings per share from net income: | | | |
| Basic earnings per share | $9.31 | $9.10 | $6.35 |
| Diluted earnings per share | $9.21 | $9.04 | $6.31 |
| Weighted average number of common and common | | | |
| equivalent shares outstanding (diluted) | 67,703 | 68,286 | 65,835 |
1Adjusted operating income per share for 2022 ABP purposes excludes variable investment income that is outside of a range of -50% to +50% from that assumed in our annual financial plan. In the aggregate for 2022, we reported variable investment income of $363.6 million, of which $60 million was excluded because of this adjustment, which equates to a reduction in earnings of $0.70 per diluted share. Adjusted operating income per share for 2021 ABP purposes excludes approximately $158 million of unrealized gains, net of tax, associated with the Company's investments in limited partnerships and private equity funds for which it utilizes the equity method of accounting, which equates to a reduction in earnings of $2.31 per diluted share. Unrealized gains on these types of investments were not contemplated when the 2021 ABP performance goals were established and therefore the Committee determined that it is more appropriate to exclude them from actual 2021 performance. |
| | | | | | | | | | | | | | | | | |
| Book value per share outstanding | |
| 2022 | 2021 | 2020 | 2019 |
| Common shares outstanding | 66,676 | | 67,171 | | 67,957 | | 62,656 | |
| | | | |
| Book value per share outstanding | $62.16 | $193.75 | $211.19 | $185.17 |
| Less effect of AOCI: | | | | |
| Accumulated currency translation adjustments | $(2.56) | $(0.13) | $(1.02) | $(1.46) |
| Unrealized appreciation (depreciation) of securities | $(81.10) | $55.09 | $80.94 | $52.65 |
| Pension and postretirement benefits | $(0.40) | $(0.74) | $(1.06) | $(1.12) |
| Book value per share outstanding, before impact of AOCI | $146.22 | $139.53 | $132.33 | $135.10 |
| | | | | |
APPENDIX A
Proposed Amendments to Flexible Stock Plan
The proposed amendment will amend Section 3.1 of the Flexible Stock Plan, which, if approved, will read as set forth below. Additions to the Flexible Stock Plan are indicated by underlining and deletions are indicated by strike-outs.
3.1 Number of Shares. The number of Shares which may be issued or sold or for which Options, SARs, Restricted Stock, RSUs, Performance Shares or other Stock Based Awards may be granted under the Plan shall be 14,960,07716,460,077 Shares, determined as 1,600,0001,500,000 Shares available on and after the Effective Date plus the 13,360,07714,960,077 Shares that were available under the terms of the Plan prior to the Effective Date to the extent such Shares remain outstanding and available or become outstanding and available again hereunder. Such Shares may be authorized but unissued Shares (subject to payment of any required par value), Shares held in the treasury, or both.
The proposed amendment will amend Section 7.2 of the Flexible Stock Plan to extend the termination date to the fifth anniversary of the date of shareholder approval of the proposed amendment at the 2021 Annual Meeting, which, if approved, will read as follows:
7.2 Termination. The Plan will terminate automatically on May 2319, 20222026. In addition, the Plan may be terminated at any time by the Board. The Plan will remain in effect with respect to outstanding Benefits until no Benefits remain outstanding.
APPENDIX B
Proposed Amendment to Flexible Stock Plan for Directors
The proposed amendment will amend Section 3.1 of the Director Plan, which, if approved, will read as set forth below. Additions to the Director Plan are indicated by underlining and deletions are indicated by strike-outs.
3.1 Number of Shares. The number of Shares which may be issued or sold or for which other Stock Based Awards may be granted under the Plan shall be 282,500 307,500 Shares. Such Shares may be authorized but unissued Shares (subject to payment of any required par value), Shares held in the treasury, or both. The maximum dollar amount with respect to which Benefits may be granted to any Participant under the Plan in any one year period shall not exceed $900,000. Pursuant to Section 9.3 of the Plan, any Shares subject to a Participant’s election pursuant to Section 9.3 of this Plan generally shall not be counted against the Share reserve of this Plan and shall, instead, count against Shares granted pursuant to the Phantom Stock Plan for Directors of Reinsurance Group of America, Incorporated as amended from time to time (“Phantom Plan”).
APPENDIX C
Amended & Restated Phantom Stock Plan for Directors
The full text of the Amended & Restated Phantom Plan is set forth below. Additions to the Phantom Plan are indicated by underlining and deletions are indicated by strike-outs.
REINSURANCE GROUP OF AMERICA, INCORPORATED
PHANTOM STOCK PLAN FOR DIRECTORS
As Amended and Restated Effective May 19, 2021
REINSURANCE GROUP OF AMERICA, INCORPORATED
PHANTOM STOCK PLAN FOR DIRECTORS
ARTICLE I
NAME AND PURPOSE
1.1Name. The name of this Plan is the "Reinsurance Group of America, Incorporated Phantom Stock Plan for Directors."
1.2 Purpose. The Company has established this Plan to encourage the highest level of director performance by members of the Board of Directors of the Company, by providing certain outside directors with deferred compensation based on the Company’s success and progress. The Plan is hereby amended and restated as provided herein and this restatement shall be effective with respect to amounts deferred on or after May 23, 201719, 2021, except with respect to Section 7.4, which apply to outstanding Performance Units granted at any time under the Plan.
ARTICLE II
DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION
2.1General Definitions. The following words and phrases, when used in the Plan, unless otherwise specifically defined or unless the context clearly otherwise requires, shall have the following respective meanings:
i.Account. Account shall have the meaning given such term in ARTICLE VI.
ii.Affiliate. A Parent or Subsidiary of the Company, a Subsidiary of a Parent and any limited liability company, partnership, corporation, joint venture, or any other entity in which the Company or any such Subsidiary owns an equity interest.
iii.Board. The Board of Directors of the Company.
iv.Code. The Internal Revenue Code of 1986, as amended and in effect from time to time, or any successor statute. Any reference to the Code includes the regulations promulgated pursuant to the Code.
v.Common Stock. Any class of the Company's common stock or any securities issued in respect thereof by the Company or any successor to the Company as a result of an event described in ARTICLE X and Section 11.10 hereof.
vi.Company. Reinsurance Group of America, Incorporated, a Missouri corporation, or any successor to all or substantially all of its business by merger, consolidation, purchase of assets or otherwise.
vii.Deferral Period. Deferral Period shall have the meaning given such term in Section 5.3.
viii.Director. A duly elected and acting member of the Board who receives Director’s Fees from the Company for his or her services as a member of the Board and who is not an officer or employee of the Company or any of its Affiliates.
ix.Director’s Fees. Any and all of the following, whether payable in cash or Common Stock:
1.Annual retainer fees for services as a Director (including retainers paid to Board and Committee chairs);
2.Board and Committee meeting attendance fees; and
3.Any other form of compensation (including cash, equity grants or performance units) paid to a Director for service as a member of the Board, a Committee or a Board sub-group.
x.Disability. A physical or mental condition which, in the opinion of a qualified doctor of medicine chosen by the Company, permanently prevents a Director from carrying out his or her duties as a member of the Board.
xi.Dividend Equivalents. Dividend Equivalents shall have the meaning given such term in Section 7.4.
xii.Effective Date. The date that the Plan, as amended and restated herein, is approved by the shareholders of the Company which must occur within one year before or after approval by the Board.
xiii.Fair Market Value. The closing price of a share of Common Stock on the New York Stock Exchange on a given date, or in the absence of market transactions on such date, the closing price of a share of Common Stock on the New York Stock Exchange on the last day on which a sale occurred prior to such date. If the shares are not listed on the New York Stock Exchange, Fair Market Value shall be what the Board determines in good faith to be 100% of the fair market value of a share on that date. The determination of Fair Market Value shall be subject to adjustment as provided in ARTICLE X.
xiv.Parent. Any corporation that is a “parent corporation,” as that term is defined in Section 424(e) of the Code, or any successor provision.
xv.Participant. A Director who has satisfied the eligibility requirements of Section 4 and who has Performance Units credited to his or her Account.
xvi.Performance Unit. A hypothetical share of Common Stock allocated to a Participant on the Company’s records based on the Fair Market Value of the Common Stock at the time of the grant.
xvii.Plan. Plan shall have the meaning given such term in ARTICLE I.
xviii.Plan Year. The calendar year.
xix.Retirement. Retirement of a Participant as a Director.
xx.Subsidiary. Any corporation that is a “subsidiary corporation,” as that term is defined in Section 424(f) of the Code, or any successor provision.
2.2Other Definitions. In addition to the above definitions, certain words and phrases used in the Plan may be defined in other portions of the Plan.
ARTICLE III
ADMINISTRATION
3.1Board. The Board shall administer the Plan. Questions involving eligibility, benefits or the interpretation or operation of the Plan shall be referred to the Board. All determinations of the Board, in its sole discretion, shall be conclusive. The Board may obtain such advice or assistance as it deems appropriate from persons not serving on the Board.
3.2 Expenses. All costs and expenses incurred in the operation and administration of this Plan will be borne by the Company.
ARTICLE IV
ELIGIBILITY
4.1Participants. Each Director who is a Participant on May 23, 2017 shall continue to be a Participant as of such date. Each individual who becomes a Director on or after May 23, 2017 shall be eligible to participate as of the beginning of the next Plan Year.
ARTICLE V
PERFORMANCE UNITS
5.1 Number of Performance Units. The total number of Performance Units that may be granted under this Plan shall not exceed 130,000155,000.
5.2 Election to Receive and Defer Performance Units. With respect to each Plan Year, a Participant shall be eligible to receive a grant of Performance Units in lieu of all or any portion of his or her Director’s Fees by making and filing with the Board a written election by the date specified by the Company, which shall be no later than the December 31 prior to the first day of the Plan Year in which such Director’s Fees would otherwise be earned.
5.3 Deferral Period. A Participant who elects to receive a grant of Performance Units in lieu of his or her Director’s Fees for any Plan Year under Section 5.2 shall also be eligible at such time to elect to defer payment of such Performance Units (i) for a period of five (5) or seven (7) years from the last day of the calendar year in which a Performance Unit is granted or (ii) to Retirement (“Deferral Period”). The Participant shall designate to receive payment of such Performance Units in a single payment or up to five substantially equal annual installment payments. With respect to each grant of Performance Units, a Participant may elect a different Deferral Period and manner of payment hereunder. A Participant who does not affirmatively elect a Deferral Period shall be deemed to have elected a Deferral Period until Retirement with distribution to be made in a single payment.
5.4 Irrevocability. Any election (or deemed election) under ARTICLE V with respect to a Performance Unit shall become irrevocable as of the December 31 prior to the first day of the calendar year in which such Performance Unit is granted.
5.5 Changes. In accordance with the provisions of this Section 5.5, a Participant may change the Deferral Period and/or the form of payment for Performance Units which relate to a particular year by making a re-deferral election and/or an election to have such Performance Units paid in a different form. Any election under this Section 5.5 must comply with all of the following requirements: (i) no prior election to change the Deferral Period or form of payment may have been made with respect to the same year’s deferrals, (ii) the election is made at least one year prior to the date the distribution would otherwise have begun, (iii) the first payment with respect to which such election is made shall be deferred for a period of not less than five years from the date such payment would otherwise have been made, and (iv) any election related to a payment that was otherwise to be made at a specified time may not be made less than twelve months prior to the date of the first scheduled payment. For purposes of applying the provisions of this Section 5.5, installment payments shall be considered a single payment for purposes of applying these subsequent deferral election rules.
ARTICLE VI
ACCOUNTS
6.1 Performance Unit Accounts. Performance Units shall be credited to a Performance Unit Account (the “Account”) established and maintained for a Participant. The Performance Units shall be allocated to a Participant’s Account annually on the same day the annual equity grant is made to Directors, unless the Board approves a different allocation date. The number of Performance Units shall equal the number of full shares of Common Stock that the amount of the deferred Director’s Fees would have purchased at Fair Market Value on the allocation date. Partial Performance Units will not be allocated, and standard rounding will be applied to determine the number of full Performance Units. The Account of a Participant shall be the record of Performance Units granted to him or her under the Plan, is solely for accounting and record keeping purposes and shall not require a segregation of any Company assets or setting aside for or registering in the name of a Participant any Common Stock. In addition, the existence of such record and the Account shall not be deemed to create a trust of any kind or a fiduciary relationship between the Company and a Participant or his or her beneficiary. Each allocation of Performance Units under the Plan to a Participant and the number and value of such Performance Units as of the date of allocation shall be communicated annually to the Participant.
ARTICLE VII
RESTRICTIONS AND PAYMENTS
7.1 Restrictions. The Participant shall have no rights and privileges of a shareholder as to the Performance Units credited to his or her Account. Accordingly, the Participant shall have no right to receive dividends actually paid or distributed at the time declared (other than Dividend Equivalents granted under Section 7.4) and no right to vote on account of any allocation of Performance Units to his or her Account. In addition, no interest in the Performance Units or any Account may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of at any time.
7.2 Payment of Performance Units. Except as otherwise provided under this ARTICLE VII, distribution of the Performance Units shall occur (or commence in the case of annual installments) on the date immediately following the last day of the applicable Deferral Period. Distribution shall be made in a single payment, unless at the time of deferral the Participant had elected to receive payment in annual installments. The Board shall have the sole discretion to determine whether such distribution shall be made in cash or in stock.
(a)Lump Sum Payments. If distribution shall be made in a single lump sum, the amount of the distribution shall equal (i) the Fair Market Value of a share of Common Stock as of the last day of the Deferral Period multiplied by the number of Performance Units credited to his or her account on such date, or (ii) one share of Common Stock in lieu of cash for each Performance Unit credited to his or her account on the last day of the Deferral Period.
(b)Annual Installments. If distribution shall be made in annual installments, the amount of each installment shall equal (i) the Fair Market Value of a share of Common Stock as of the last day of the Deferral Period (or the applicable annual anniversary thereof), multiplied by the number of Performance Units being distributed in such installment, or (ii) one share of Common Stock in lieu of cash for each Performance Unit being distributed in that installment.
7.2 End of Directorship. If a Participant ceases to be a Director prior to the end of the Deferral Period, distribution of all Performance Units allocated to such Participant’s Account shall be made or commence at the time and in the form of payment elected or deemed to have been elected at the time of deferral. Payment shall be made to the Participant, the Participant’s beneficiary in the event of death, or the Participant’s estate in the case of Disability if there is no attorney-in-fact, as the case may be.
7.3 Tax. In all cases, for purposes of compliance with Section 409A of the Code, payment shall be deemed to be made upon the fixed date or payment event specified under Section 7.2(b) if the payment is made (a) thirty (30) days prior to the specified fixed payment date or event; (b) a later date within the same calendar year as the specified fixed payment date or event; or (c) if later, by the 15th day of the third calendar month following the specified fixed payment date or event. However, in no event shall a Participant be permitted, directly or indirectly, to designate the taxable year of the payment.
7.4Dividend Equivalents. Grants of Performance Units may include, at the sole discretion of the Board, Dividend Equivalents on each Performance Unit credited to and accumulated under the Participant’s Account. “Dividend Equivalents” means a dollar amount equal to the cash dividend that the Participant would have been entitled to receive if the Participant had been the owner, on the record date for a dividend paid on the Common Stock, of a number of shares of Common Stock equal to the number of Performance Units then properly credited to and accumulated under the Performance Unit Account of the Participant. The payment of Dividend Equivalents attributable to any unvested Performance Units is not permitted during the period in which the Performance Units are unvested. Dividend Equivalents will be deemed to be reinvested in additional Performance Units on the date a dividend is paid on the Common Stock, and the additional Performance Units will be accumulated and credited to a Participant’s Account on the annual allocation date described in Section 6.1. The number of Performance Units acquired with the Dividend Equivalents shall equal the number of full shares of Common Stock that the amount of the Dividend Equivalents would have purchased at Fair Market Value on the dividend payment date, and standard rounding will be applied to determine
the number of full Performance Units. All Performance Units credited to a Participant’s Account under this Section 7.4 shall be paid at the same time, and in the same form, as elected by the Participant under Section 5.3 with respect to the underlying Performance Units in the Participant’s Account. All outstanding grants of Performance Units made prior to May 19, 2021 are deemed to include the right to receive Dividend Equivalents.
ARTICLE VIII
REGULATORY COMPLIANCE AND LISTING
8.1 Regulatory Compliance. If the Board decides to deliver Common Stock in lieu of cash under ARTICLE VII, the issuance or delivery of any Common Stock may be postponed by the Company for such period as may be required to comply with any applicable requirements under the federal securities laws, any applicable listing requirements of any national securities exchange and requirements under any other law or regulation applicable to the issuance or delivery of such shares, and the Company shall not be obligated to issue, purchase or deliver any Common Stock if the issuance, purchase or delivery of such shares shall constitute a violation of any provision of any law or of any regulation of any governmental authority or any national securities exchange. If the Company is unable to deliver Common Stock after a reasonable period of time, the Board shall direct the delivery of cash under ARTICLE VII to satisfy the distribution of Performance Units.
8.2 Other Agreements. As a condition to receipt of Common Stock, the Participant shall execute such agreements and other documents as the Company may reasonably request for securities law purposes.
ARTICLE IX
AMENDMENT, TERM AND TERMINATION
9.1Amendment. Except as hereinafter provided, the Board shall have the sole right and power to amend the Plan at any time and from time to time. No termination, suspension or modification of this Plan may materially and adversely affect any right acquired by any Participant (or a Participant’s legal representative) or any successor or permitted transferee under a Performance Unit granted before the date of termination, suspension or modification, unless otherwise provided in a separate agreement or otherwise or required as a matter of law.
9.2Limitation. The Board may not amend the Plan (i) without approval of the shareholders of the Company if shareholder approval would be required for such an amendment under the rules of the New York Stock Exchange or (ii) in a manner that would violate applicable law.
9.3Term. The original effective date of the Plan was January 1, 1997 and the Plan as amended and restated herein shall commence as of the Effective Date and, subject to the terms of the Plan, including those requiring approval by the shareholders of the Company, shall continue in full force and effect until terminated.
9.4Termination. The Plan will terminate automatically on May 23, 2027. In addition, the Board may at any time terminate the Plan unless otherwise required by law, the rights of a Participant with respect to Performance Units granted prior to such termination may not be impaired without the consent of such Participant.
ARTICLE X
ADJUSTMENTS
10.1 Adjustment. In the event of any change in the Common Stock of the Company by reason of any extraordinary dividend, stock dividend, spin-off, split-up, spin-out, recapitalization, warrant or rights issuance or combination, exchange or reclassification of shares, merger, consolidation, reorganization, sale of substantially all assets or, in the Board's sole discretion, other similar or relevant event, the Board shall proportionately adjust, in an equitable manner, the total number of Performance Units which may be granted under the Plan under ARTICLE V and the number of Performance Units held by a Participant under the Plan and, if appropriate to reflect such event and preserve the value of such Performance Units, the number, kind and class of shares underlying the Performance Units.
ARTICLE XI
MISCELLANEOUS
11.1Underscored References. The underscored references contained in the Plan are included only for convenience, and they shall not be construed as a part of the Plan or in any respect affecting or modifying its provisions.
11.2Number and Gender. The masculine and neuter, wherever used in the Plan, shall refer to either the masculine, neuter or feminine; and, unless the context otherwise requires, the singular shall include the plural and the plural the singular.
11.3Governing Law/Venue. This Plan shall be construed and administered in accordance with the laws of the State of Missouri, without giving regard to the conflict of laws provisions thereof. Any legal action against the Plan, the Company, an Affiliate, or the Board may only be brought in the Circuit Court in St. Louis County and/or the United States District Court in St. Louis, Missouri.
11.4 No Director Reelection. Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any Director for reelection by the Company’s shareholders.
11.5 Limitations. Neither the adoption of this Plan by the Board nor the submission of the Plan to the Company’s shareholders for approval shall be construed as creating any limitations on the power or authority of the Board to adopt such other additional incentive or other compensation arrangements as the Board may deem necessary or desirable
11.6 Deductions. The Company shall have the right to (i) deduct from all amounts paid pursuant to the Plan any taxes required by law to be withheld with respect to such amounts, and (ii) require, within three months after issuance or delivery of any Common Stock, payment by the Participant of any taxes required by law with respect to the issuance or delivery of such shares.
11.7 Designation of Beneficiary. Each Participant may designate one or more beneficiaries to receive all payments due to such Participant hereunder upon his or her death. Such beneficiary designation may be revoked or amended by such Participant, from time to time, by appropriate notice in writing delivered to the General Counsel of the Company. In the absence of any beneficiary designation or in the event that the designated beneficiaries shall not be living
at the time of death of the Participant, the Account value on the date of death of the Participant shall be payable and delivered to the estate of such deceased Participant.
11.8 Common Stock. The shares of any Common Stock delivered under the Plan may be either authorized but unissued shares (subject to payment of any required par value) or treasury shares, as determined from time to time by the Board. In either case, the shares shall be fully registered and transferable without restriction.
11.9 Assignment. No rights, interests or benefits under this Plan may be assigned, transferred, pledged or hypothecated in any way. Such rights, interests or benefits shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge or hypothecation, or other disposition of such rights, interests or benefits contrary to the preceding provisions, or the levy of any attachment or similar process thereupon, shall be null and void and without effect.
11.10 Successors and Assigns. This Plan shall be binding upon and inure to the benefit of the successors and assigns of the Company, whether by way of merger, consolidation, operation of law, assignment, purchase or other acquisition of substantially all of the assets or business of the Company and any such successor or assign shall absolutely and unconditionally assume all of the Company’s obligations hereunder.
11.11 No Equitable Rights. The payments to a Participant or his or her beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Company. No person shall have any interest in any such assets by virtue of the provisions of the Plan. The Company’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. To the extent that any person acquires a right to receive payments from the Company under the provisions hereof, such right shall be no greater than the right of any unsecured general creditor of the Company. No such person shall have nor acquire any legal or equitable right, interest or claim in or to any property or assets of the Company.
11.12Tax Compliance. Payments and benefits under this Plan are intended to comply with Code Section 409A to the extent subject thereto, and, accordingly, to the maximum extent permitted, this Plan shall be interpreted and administered to be in compliance therewith. For purposes of Code Section 409A, a Participant’s entitlement to annual installment payments shall be treated as an entitlement to a single payment. For purposes of this Plan, a termination of directorship or Retirement shall only be deemed to occur if such termination constitutes a “separation from service” within the meaning of Code Section 409A.
11.13 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
