JÖNKÖPING INTERNATIONAL BUSINESS SCHOOL
J ÖNKÖPING UNIVERSITY

C EO r emuneration in l isted
E ur ope an insurance companies
Trends and justifications over the years 2005-2009

Authors:
Sara Palmén
Jönköping International Business School

Avare Suleyman
Jönköping International Business School

Tutor:
Dr. Petra Inwinkl
Associate Professor in Accounting and Finance,
Jönköping International Business School

Master thesis within Business Administration
Title:

CEO remuneration in listed European insurance companies – Trends and justifications over the years 2005-2009

Authors:

Sara Palmén, Avare Suleyman

Tutor:

Dr. Petra Inwinkl

Examiners:

Dr. Petra Inwinkl, Prof. Gary Cunningham

Date:

Spring 2010 (uploaded 2010.06.03)

Key words:

CEO, chief executive officer, remuneration, fixed pay, variable pay, short-term, long-term, benefit, Europe, insurance, incentive, attraction, retention, agency theory, financial crisis, trend, justification.

Abstract
In the ever so increasingly competitive business climate of the 21st century, human resources are vital for corporate success. Employees need proper incentives to perform in goal-oriented manners.
Incentive systems, especially Chief Executive Officer [CEO] remunerations, have been a popular topic since the 1990s, and this tendency has increased both during the 2002-2003 corporate scandal era, as well as the financial crisis which sparked in 2007. The recent tendency appears to lean towards companies cutting their executive bonuses as well as criticism and suspiciousness towards large bonus payments. While remuneration policies within the banking industry have been thoroughly debated and researched, another financial industry that is left largely untouched are the insurance companies. The focus of this research is therefore CEO remuneration in European insurance companies.
This descriptive study, of annual reports of stock-listed insurance companies, uses a purposive cluster sample to explore quantitative trends in CEO remunerations. In addition, a content analysis of five randomly selected companies out of the sample provides a deeper, complementary understanding of the justifications of the trends. The research questions are: What trends on CEO remuneration can be found over the years 2005-2009 in annual reports of European insurance companies, concerning total remuneration, fixed salary and short-term bonus? What justifications do companies make for the remunerations over the years 2005-2009?
The quantitative part of the research inductively tests the assumption that CEO remuneration has decreased during the past few years 2008 and/ or 2009 due to the impact of the financial crisis. The content analysis part of the research deductively tests if agency theory concerns and issues concerning attraction and retention play a role in determining remuneration policies.
From this research, it is concluded that short-term variable pay is largely performance-based. Still, many other aspects serve as input factors when determining compensation levels. Based on the content analysis, it is revealed that interest alignment and attraction- and retention-issues are important determinants of remunerations. Subjective factors such as discretionary judgements also play a crucial role. The quantitative trends found in this study show that total remunerations have decreased markedly in 2008, and more vaguely in 2009. The financial crisis has had an impact on especially the short-term variable part of salaries, but also on base salary levels. Although not all companies that were investigated in the content analysis explicitly mention it in their annual reports, over the years 2005-2009, all of them become more concerned about remuneration policies and business risk factors. Over the investigated years, these companies also become more attentive to creating proactive and sophisticated value creating remuneration policies that are in line with international standards, in order to act legitimate towards stakeholders.

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Table of Contents
Table of Contents ..................................................................................... ii
1 Introduction .......................................................................................... 1
1.1
1.2
1.3

Problem and purpose ........................................................................................................ 2
Delimitations ...................................................................................................................... 3
Outline of this paper ......................................................................................................... 4

2 Frame of reference ............................................................................... 5
2.1
2.2
2.2.1
2.2.2
2.2.3
2.2.4
2.2.5
2.2.6
2.3
2.4

Compensation systems – remuneration ......................................................................... 5
Determinants and justifications of remuneration ......................................................... 6
Actors involved in the determination of remuneration ............................................... 6
Determinants of CEO remuneration ............................................................................. 6
Corporate target setting as the foundation for incentive construction ..................... 6
Motivational incentives ..................................................................................................... 7
Agency theory and incentives .......................................................................................... 7
Attraction and retention via incentives .......................................................................... 8
Trends in CEO remuneration ......................................................................................... 8
The 21st century popular unease with CEO remuneration ......................................... 9

3 Methodological approaches for this twofold study ........................... 10
3.1
3.1.1
3.1.2
3.1.3
3.2
3.2.1
3.2.2

Quantitative research ...................................................................................................... 10
Purposive sampling in order to collect data on remuneration trends...................... 10
Critique on the quantitative research ............................................................................ 11
Processing of quantitative data ...................................................................................... 12
Content analysis ............................................................................................................... 13
Deductive analysis of remuneration justifications ...................................................... 13
Critique on the content analysis .................................................................................... 14

4 Results and analysis ........................................................................... 15
4.1
4.2
4.2.1
4.2.2
4.2.3
4.2.4
4.2.5
4.3
4.3.1
4.3.2
4.3.3
4.3.4

Initial remarks concerning this chapter ........................................................................ 15
Content analysis findings of remuneration justifications........................................... 15
Initial remarks concerning the content analysis .......................................................... 15
The role of agency theory in justifying remuneration ................................................ 16
The role of attraction and retention in justifying remuneration ............................... 17
The role of the financial crisis in justifying remuneration ......................................... 18
The role of discretionary factors in justifying remunerations ................................... 19
Quantitative findings of remuneration amounts and trends ..................................... 19
Initial remarks concerning the quantitative research .................................................. 19
Total remuneration in average, median and range ..................................................... 20
Fixed base pay in average and median.......................................................................... 21
Short-term variable pay in average and median .......................................................... 23

4.3.4.1

The connection between short-term variable pay and corporate financial performance .................. 25

5 Concluding remarks ...........................................................................26
5.1
5.2

Summary of findings ....................................................................................................... 26
Suggestions for further research.................................................................................... 26

6 References...........................................................................................28
7 Appendices .........................................................................................32
7.1
7.2

Definitions used in this paper ........................................................................................ 32
Sample of stock exchanges retrieved from the WFE ................................................. 33

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7.3
7.3.1

Population and sample list from the sampled exchanges .......................................... 35
Sample list from London Stock Exchange – non-life insurance companies ......................................................................................................................... 36
7.3.1
continuing: Sample list from London Stock Exchange – non-life insurance companies ....................................................................................................... 38
7.3.1
continuing: Sample list from London Stock Exchange – non-life insurance companies ....................................................................................................... 39
7.3.2
Sample list from London Stock Exchange – life insurance companies .................. 40
7.3.3
Sample list from Euronext Stock Exchange – non-life insurance companies ......................................................................................................................... 42
7.3.3
continuing: Sample list from Euronext Stock Exchange – non-life insurance companies ....................................................................................................... 43
7.3.4
Sample list from Euronext Stock Exchange – life insurance companies ................ 44
7.3.5
Sample list from Madrid Stock Exchange – Bolsa de Madrid .................................. 45
7.3.6
Sample list from Frankfurt Stock Exchange – Deutsche Börse ............................... 46
7.3.7
Sample statistics ............................................................................................................... 48
7.4
Exchange rate conversions into Euro 2005-2009....................................................... 49
7.5
Collection of remuneration data.................................................................................... 50
7.5.1
Sample companies’ remuneration data ......................................................................... 50
7.5.2
Sample companies’ remuneration data ......................................................................... 51
7.5.3
Sample companies’ remuneration data ......................................................................... 52
7.5.4
Sample companies’ remuneration data ......................................................................... 53
7.5.5
Sample companies’ remuneration data converted into Euro .................................... 54
7.5.6
Sample companies’ remuneration data converted into Euro .................................... 55
7.5.7
Sample companies’ remuneration data converted into Euro .................................... 56
7.5.8
Sample companies’ average remuneration data (EUR) .............................................. 57
7.5.9
Sample companies’ average remuneration data (EUR).............................................. 58
7.5.10 Sample companies’ median and range remuneration data (EUR)............................ 59
7.5.11 Sample companies’ median and range remuneration data (EUR)............................ 60
7.6
Turnovers and operating profits of companies in the content analysis over the years 2005-2009 ................................................................................................................ 61
7.7
Webpage references to retrieve sample companies’ annual reports......................... 62
Graph 1 Average total CEO remuneration 2005-2009 (EUR) ................................................. 20
Graph 2 Median total CEO remuneration 2005-2009 (EUR) .................................................. 21
Graph 3 Average fixed base CEO remuneration 2005-2009 (EUR) ....................................... 22
Graph 4 Median fixed base CEO remuneration 2005-2009 (EUR) ........................................ 22
Graph 5 Average short-term variable CEO remuneration 2005-2009 (EUR) ....................... 24
Graph 6 Median short-term variable CEO remuneration 2005-2009 (EUR) ........................ 25
Table 1 Number of companies in the average total CEO remuneration ranges over the years 2005-2009 ............................................................................................................... 21

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1

Introduction

In the ever so increasingly competitive business climate of the 21st century, companies face mounting pressure to remain high performing, and sharpen to become even more successful.
While all forms of capital are vital in production, the assets which hold the most productive potential, and prospective of differentiating companies from others, are the human resources that companies control. In order to achieve the full potential of human resources, employees need proper incentives to perform in certain manners (Kressler, 2003).
For employees, salary is an important measure of the relative value of the job they perform.
Pay is the most common human resource management and controlling tool, and as such is the most comparable and frequently negotiated reward. While compensation concerns all employees, on top organizational levels remuneration1 has a stronger link to performance
(Merchant & Van der Stede, 2007). It is explicitly labelled a major corporate governance issue, because the strategic and conceptual duties of the Chief Executive Officer [CEO] are generally more important than the duties of any given blue collar worker (Jensen, Murphy &
Wruck, 2004).
Incentive systems, especially CEO remunerations have been a popular topic since the 1990s, and this tendency has increased both during the 2002-2003 corporate scandal era, as well as the financial crisis that commenced in 2007 (PricewaterhouseCoopers, 2010). The corporate scandals, in the beginning of the 21st century which were sparked by Enron, and continuing with for instance Hollinger and Tyco led to recognition of widespread flawed executive compensation structures (Bebchuk & Fried, 2004). Remuneration system designs, bonus amounts and justifications have been reported frequently during the 21st century in the media stream and even more so since the spark of the financial crisis. Debating of remuneration issues and consequences of remuneration packages have surged, as public interest in the subject has increased steadily. On a daily basis, news on the bonuses paid to CEOs, and other executive directors in diverse industries, are reported on in the news channels. For instance, leaders of nations in the European Union [EU] unified on a bank bonus sanction in their proposal draft to the G20 meeting2 in September 2009 (EUbusiness, 2009). The recent tendency appears to lean towards companies cutting their executive bonuses a s well as criticism and conspicuousness towards large bonus payments. The ongoing global financial crisis, which commenced in 2007, has stirred a lot of emotion among the public and sparked discussions about whether poor governance mechanisms in companies, especially banks, can be partly blamed for the situation (PricewaterhouseCoopers, 2010). A topic that lies at the heart of the debate is whether large remunerations can be justified and are fair, especially in the harsh economic climate.
Remuneration issues tickle the media, policy makers, politicians and interest groups (Ferrarini & Moloney, 2004). Especially in the aftermath of the most turbulent period of the financial crisis, the topic deserves further investigation. While remuneration policies within the
1

A list of concept definitions used in this paper can be found in appendix 7.1.

2

The Group of 20 consists of 19 of the world’s leading financial nations ’ central bank governors and finance ministers, as well as the EU. This group regularly meets to discuss global financial and political matters.

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banking industry have been thoroughly debated and researched, a similar industry that is left largely untouched are the insurance companies.
An insurance company that has once been in the spotlight concerning its remuneration pol icies, among other things, is Skandia. In 2003, the world was shocked that directors in the
Swedish insurance giant had been involved in both unethical and illegal wrongdoings (BBC
News, 2003). The directors were accused of misusing corporate assets for renovating luxury apartments (Wallace, 2004), but what attracted specific criticism were the controversial remuneration programs (Conway, 2003). The bonus scheme had paid executives ex treme amounts of money, by far exceeding the maximum amount set by the board. One executive committed suicide after the media had mentioned his benefits from the bonus program
(Wallace, 2004). The Skandia scandal echoed across the world and enraged the public as
Skandia was the oldest company on the Swedish stock exchange. Also, its former CEO Lar sEric Petersson had been awarded the best CEO in 1999 by a Swedish business magazine. Petersson was later convicted to jail for two years because of the economic misconduct in
Skandia (AJC Consultants, 2006).
In 2003, as well as during the financial and banking crisis back in 1990, there was a call for more control and transparency of remuneration programs. Pollster SIFO reported that public confidence in Swedish business had fallen from 60percent in 1995 to 28percent in 2003
(DN.se, 2003). A similar public attitude seems to reside today; questioning and criticizing of corporate governance practices, especially CEO remuneration.
Executive remuneration is generally justified by its positive effects on corporate performance, such as motivating, controlling and retaining executives. It is, allegedly, a field of accounting and corporate governance that links directly the human factor with the profit and loss statements. Still, many studies reveal that bonus payments have increased while financial performance has not (Bebchuk & Fried, 2004). Also, it has not been firmly established that there is a link between performance and pay (Coffee, 2005).
Due to the news stream and public opinion on the issue rising, the field of CEO remuneration within the financial services industry deserves to be broadened by more knowledge.
Therefore, this study investigates how the trend of CEO remunerations looks during the years 2005-2009 and if the financial crisis might have affected CEO remunerations. It will also reveal what justifications insurance companies make for paying out these bonuses.

1.1

Problem and purpose

This research investigates whether the 2007-2009 financial crisis has affected CEO remunerations in European insurance companies. As short-term bonuses are linked to corporate performance, a less successful year will result in drops in bonuses. While CEO remuneration levels have increased globally since the 1990s, PricewaterhouseCoopers (2010) have found global decreases in CEO remunerations in 2009, as compared to 2008. Therefore, the hypothesis preceding this research is that the financial crisis has led to a decrease in remunerations also in European insurance companies. In addition, PricewaterhouseCoopers (2010) assumes that companies will become more aware of, and attuned to, their stakeholders. Thus, companies will try to proactively satisfy stakeholder requirements by lowering attainable bonuses beforehand, through changing their remuneration policies and designs. Therefore, it is
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interesting to reveal what has happened to the remuneration trend over the financial crisis.
Hence, CEO remunerations, over the years 2005-2009, are of interest to investigate. This research contributes to corporate governance and more specifically to the field of remunerations. Previous research has not sufficiently covered what happens with executive remunerations during financial crises and the accompanying heated public debate. While the banking industry has been thoroughly researched and debated, insurance companies, another financial service institution, have been almost completely neglected. Still insurance companies play a vital role in the community as standard setters, and the public confides in them to be l egitimate social actors. The purpose of this research is therefore to investigate CEO remuneration trends and justifications in European insurance companies over the years 20052009. The following research questions are addressed during this study:
What trends on CEO remuneration can be found over the years 2005-2009 in annual reports of European insurance companies, concerning total remuneration, fixed salary and short-term bonus? What justifications do companies make for the remunerations over the years 2005-2009?
These research questions are addressed by performing a twofold descriptive study of annual reports. One part of the research is the establishment of CEO remuneration trends by collecting quantitative data of emoluments in 20 insurance companies. The second part of the research reveals justifications by performing a content analysis of five insurance companies.
By doing so, the research focuses on the following, in the total sample of 20 companies:
-

total amount of CEO remuneration, which consists of fixed remuneration, shortterm bonus and benefits,

-

CEO short-term bonus percentage of total pay, existence of long-term CEO bonus (such as shares and stock options), percentage increase in total CEO remuneration as compared to the previous year, percentage increase in fixed CEO remuneration as compared to the previous year, and -

percentage increase in short-term CEO bonus from as compared to the previous year. In other words, long term remuneration components will not be included in the total amount of CEO remuneration in this research, as explained in section 1.2.
In the content analysis of five companies, the research also reveals:

1.2

justifications of the trends in executive remunerations (i.e. not only justifications for
CEO remuneration, but for corporate executive remuneration in general).

Delimitations

The reason why CEO remuneration amounts are investigated in particular, but justifications in general, is that companies very seldom disclose justifications for individual executives’ pay, but instead in common.
Although pensions and other long-term remuneration components constitute a significant portion of emoluments, the uniqueness of their design as well as level of disclosure, makes it
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impractical to include them in this research. Therefore, this study merely includes fixed pay, benefits and short-term variable pay, since these remuneration portions are transparently disclosed and can be immediately realized into cash. All long-term remunerations, including pensions, are contracted several years back and forth in time, and thus have to vest for long before being realized. For these reasons, they are not reliable amounts at grant date, but only when they have vested. In fact, their value often shifts dramatically during the vesting period.
Moreover, pension systems are restricted by being subject to national legislation requirements. Due to these reasons, the designs of long-term remuneration components such as corporate pension remunerations differ markedly among companies even in the same industry. Also, and more importantly, long-term contracts are extremely unlikely to be cancelled because of events in the business world, such as the financial crisis. PricewaterhouseCoopers
(2010) supports this claim in their findings; executive pensions have remained unchange d during the last couple of years, despite the financial crisis. Therefore, one cannot assume to reveal a change in long-term remunerations or pensions over the years 2005-2009. Hence, the uniqueness of these components makes them non- comparable.
This study examines insurance companies’ annual reports due to these companies’ importance as public actors. Insurance companies are financial actors that set standards for the business world and therefore it is suitable to delimit this study to them. The whole population of all publicly listed insurance companies including both life insurance and non-life insurance companies, on the five largest European stock exchange markets3, are included. As they are under public scrutiny and under rules that apply to publicly listed companies, they are presumably carefully governed. Also, the companies listed on these exchanges are in ge neral the biggest and most successful ones in Europe, and sets, peer standards for the remaining European insurance companies. Therefore, this population allows the subtraction of the most representative sample this research can achieve in order to reveal a trend.

1.3

Outline of this paper

Chapter 2 presents the background and the frame of reference for this study. The chapter describes compensation systems, determinants and justifications of remunerations, and CEO remuneration trends.
Chapter 3 describes the methodological approach of this research. It consists of quantitative research and a content analysis of five companies’ annual reports.
Chapter 4 contains findings as well as processing of the content analysis data, and the quantitative data along with analysis.
Chapter 5 offers concluding remarks and suggestions for further research.

3

According to the sample of stock exchanges from World Federation of Exchanges [ WFE] statistics, in appendix 7.2.

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2
2.1

Frame of reference
Compensation systems – remuneration

According to Merchant and Van der Stede (2007), incentive systems tie rewards to performance and are important due their multi-functionality, in that they inform employees about desired result areas and plant motivation to achieve the required performance targets, or even exceed those targets. Clear communication of targets should lead to desired performance and enable assignment of responsibility to achieve desired end results.
Companies can use both positive and negative rewards, carrots and sticks, for motivational purposes. Punishments are usually manifested through the absence of a positive reward.
Companies, however, do not solely rely on monetary rewards. They might also provide nonmonetary rewards such as reserved parking spots, offices and titles. Monetary reward, i.e. remuneration, is often linked to performance Merchant and Van der Stede (2007) claim, especially at managerial levels. There are three main categories of monetary reward systems
(Merchant and Van der Stede, 2007):
Performance-based salary increases are used in all organizations at all levels. The increase consists of a cost of living adjustment and of merit-based increases.
Short-term incentive plans provide payments based on measured performance on yearly bases or even shorter periods. The main reason for the use of short-term incentives is to encourage top performance by differentiating salaries to make sure that higher rewards are provided to the employees that make the largest contributions to the organization. The employees, in turn, appreciate to be rewarded for outstanding performance.
Long-term incentive plans in contrast to short-term incentives, encompass longer periods than one year. When employees receive long-term rewards, the main focus is on their contribution in maximizing the organizational long-term value. Another intention is to attract and retain key personnel for instance by encouraging ownership in the organization. There are different forms of long-term incentives and they are usually restricted to the very top level of management. Some incentive plans are measured in terms of accounting variables such as return on equity [ROE] and earnings per share [EPS], but the most common rewards are equity-based, such as stock options. The bases for these rewards differ, but are often changes in the organizations’ stock value.
In the case of executives, a well-designed remuneration package will provide motivation for the alignment of their self-interests with the objectives of the organization (Merchant & Van der Stede, 2007). The purpose of remuneration packages will lead to three essential acco mplishments on a managerial level, namely to attract and retain the right executives, motivate them to take long-term, competitive actions that will create shareholder value and avoid bad decisions that result in destroying value (Jensen et al., 2004).

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2.2

Determinants and justifications of remuneration

2.2.1 Actors involved in the determination of remuneration
Bender (2003) explains that executive remuneration is set differently depending on national legislation, industry, whether the company is stock listed or not, and company practices.
However, in general, the remuneration committee of the company determines policies and pay levels. Depending on domestic regulation, this sometimes happens under supervision of the supervisory board. Consultancy firms are occasionally hired to contribute with advice, and shareholders are allowed to cast their vote about remuneration on the Annual General
Meeting [AGM] of shareholders. The remuneration policy is affected by many considerations, such as being in line with corporate strategy and aligning executives’ interests with those of shareholders, as well as isomorphic pressures and legitimacy concerns.
2.2.2 Determinants of CEO remuneration
Determinants of CEO pay have been extensively studied, but no absolute conclusions have been drawn. For instance, Grunditz and Lindqvist (2003) established that there is no relation between corporate performance and CEO remuneration in Swedish listed companies while
Krauter and de Sousa (2008) claim a weak link between remuneration and corporate financial performance in the Brazilian market. Still, Konkell and Örn (2009) found a significant correlation between pay and performance in Swedish banks. McCahery and Renneboog (2001) found that CEO compensation in the United Kingdom [UK] is largely dependent on sales growth rather than corporate performance, and that accounting performance and share prices are better determinants of CEO remuneration in Europe than corporate performance.
Coffee (2005) agrees with this, claiming that remuneration is much less performance -based in Europe than in the United States of America [USA].
Sigler (1997) found that size of insurance companies in the USA is positively correlated with
CEO remuneration. The author claims this is evidence that companies must offer competitive pay in order to attract talented executives, since pay increases as companies become harder to manage. Gabaix and Landier (2006) claim that firm size and average firm size within the industry are important determinants of CEO pay. This would explain trends in
European versus American pay levels (Conyon & Murphy, 2000). Gabaix and Landier (2006) further mention scarcity of CEO talent, competition, managerial entrenchment and increased job market insecurity as reasons for remuneration levels.
Despite the lack of conclusive findings of determinants of CEO remuneration, many factors, both internal corporate factors as well as external market factors, have been acknowledged to affect pay levels (Krauter & de Sousa, 2008).
2.2.3 Corporate target setting as the foundation for incentive construction
While companies set different targets for their operations, the most common is financial profit, in order to maximize shareholder value (Jensen et al., 2004). Still, no matter what the targets are, target setting is the departure of incentives (Kressler, 2003). Companies dete rmine desired future states and then set strategies and methods for accomplishment of the targets. Tools, such as incentive systems, are developed in order to reach goals, because incentive systems denote priorities. When incentives are in place and have been properly

6

communicated, employees will work in manners as to fulfil the goals, because of their craving of the incentives.
2.2.4 Motivational incentives
Business success is contingent on effective motivational incentives to affect employee beha viours and hence performance (Kressler, 2003). Using incentives as motivational tools is common within business practice. The most widespread way to do this is by performancebased pay.
In the beginning of the 20th century, performance-based pay was primarily used for unqualified workers within the piece-rate industry (Kressler, 2003). Today, this trend has shifted heavily, towards managers having larger portions of variable pay and blue-collar workers having fixed salaries. In the USA, the trend of large sums of CEO remuneration is very outspoken (Coffee, 2005), but it is also globally obvious (Conyon & Murphy, 2000).
Kressler (2003) points out that it is important to distinguish between motivation and incentives. While motivation can be likened to an engine that drives the employee, incentives are like fuel or an accelerator pedal, which can change the speed or directi on, but never take the place of the engine in the first place. Monetary incentives, such as remunerations, can powerfully push employees to work harder, faster and more effectively, but the willingness to do the work must exist in the first place (Kressler, 2003). Monetary incentives works also as an important tool that enhances the management control of employees. Incentive systems play a vital role in management controlling, which involves steps to be taken in order to make sure that employees are working towards the organizational goals. Therefore, incentives become a management control benefit as they motivate the employees (Merchant and Van der
Stede, 2007).
2.2.5 Agency theory and incentives
Motivating employees is vital not only because of the above mentioned reasons, but also because of the agency problem.
The division of ownership and management allows companies to grow and expand their operations but, simultaneously, it inevitably leads to conflicting interests (Bebchuk & Fried,
2004) of shareholders [principals] and managers [agents]. The focus of shareholder interest is maximization of share value. Manager interests, on the other hand, are diverse, but focused on private benefits, such as salary and perks. This lacking overlap of interests between the principal and the agent, along with the control which the principal must exercise over the agent (Eisenhardt, 1989) is called an agency problem.
Agency theory takes a couple of different directions. The economic theory of agency co ncerns how to suppress the self-interest of managers and achieve shareholder value maximization through aligning incentives with that goal. Monitoring managers, for instance via board activities (Eisenhardt, 1989), is also an option, but incentives are considered more effective in this respect as they also align risk attitudes of the parties (Bebchuk & Fried, 2004). Wha tever way one tries to control agents, costs arise for the principal (Boivie, Lange, McDonald
& Westphal, 2009). These may be costs for supervision or monetary compensation (Bartol &

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Locke, n.d., in Rynes & Gerhart, 2000) and they are borne because principals presume that the benefits of, for instance, compensation outweigh the costs.
Hall (1999, in Carpenter & Yermack, 1999) claims that agency problems are the reason companies face corporate governance complications and incentive difficulties. While some a uthors (Jensen & Murphy, 1990) claim that the power of agency theory in explaining CEO remuneration is quite low, most claim that it still predicts well how incentive systems are designed in practice (Garen, 1994). The best way to reduce or mitigate agency problems, these authors declare, is through corporate governance mechanisms and policies (Jensen et al.,
2004), such as incentive schemes that tie CEO remuneration to shareholder value creation.
Executive remuneration is a classic concern of corporate governance theory (Ferrarini &
Moloney, 2004), but also in practice, research has provided evidence that the agency problem is one reason why CEO remunerations have peaked since the 1990s (Boatright, 2009).
2.2.6 Attraction and retention via incentives
Compensation also has a vital role in attracting and retaining employees. According to Rynes
(1987, in Rynes & Gerhart, 2000), compensation is a versatile recruitment tool as it offers valuable outcomes to employees. It satisfies human needs and performance-based pay is a confirmation of employees’ significant contribution to the company. Also, compensation communicates corporate philosophies and goals. Evidence also suggests that compensation contributes to retaining top performers, especially when companies face significant labour market competition (Ermel & Bohl, 1997). In this case companies offer a package that is comparable or superior to those offered by competitors (Merchant & Van der Stede, 2007 ).
Previous research supports the claim that there is a strong link between pay level and retention of high-level managers. The higher the pay level, the less likely employees will look for another job (Bretz, Boudreau & Judge, 1994).

2.3

Trends in CEO remuneration

Over the past 40 years, CEO remuneration levels have changed dramatically due to fundamental changes in the global economy (Jensen et al., 2004). After World War II, there was a sharp trough, and subsequently, the pay level increased by 0.8percent annually over the following 30 years (Jarque, 2008). From the 1980s and onwards, CEO pay peaked, at the same time as the field of management accounting and control flourished. Rather than being considered a corporate governance problem, it was revealed that designing optimal remuneration contracts could be a solution to conflicts of interests (Hill, 2010). Consequently, even if a significant increase in the use of equity-based performance-linked pay, such as share options, was revealed already during the 1970s (Jensen et al., 2004), this increase sharpened more during the 1990s (Ferrarini & Moloney, 2004). Between 1980 and 2003, US executive compensation increased six fold, but still, this is fully explained by the increasing market capitalization during those years (Boatright, 2009). While CEO pay has for long been considerably higher in the USA than the UK, as well as the rest of Europe (Conyon & Murphy,
2000: Coffee, 2005), there is also a trend of international remuneration convergence (Hill,
2010). Also, Jensen et al. (2004) claim that CEO pay actually has not risen in real terms between 1930 and 1990. The most dramatic increase in CEO pay levels, though, happened between 1998 and 2007, when annual growth rates were approximately 10percent (Jarque,
2008: PricewaterhouseCoopers, 2010).
8

PricewaterhouseCoopers (2010) reports that the 2007-2009 financial crisis has led to major amendments in the design of banking remunerations. Still, other industries were also greatly affected. Global annual bonuses were down by 15 to 20percent in 2009, as compared to the previous year 2008 (PricewaterhouseCoopers, 2010). PricewaterhouseCoopers (2010) reports on the remuneration changes made in the FTSE 1004 and FTSE 2505 groups. There is an increased focus on remuneration components and on the structure of remuneration packages.
Base salaries have dropped about one percent for executives in the FTSE 100 and remained stable in the FTSE 250, and variable pay has dropped by 20 to 25 percent, due to the harsh economic climate. PricewaterhouseCoopers (2010) claims that remuneration policies in the years 2009, and even more so in 2010, especially in the financial sector, will change dramatically in order to align executive interests with those of shareholders. Future policies will account for business risks through clawback and deferral arrangements, in order to satisfy institutional investors, as well as lower base salaries. Moreover, remuneration statements will become more transparent, explaining and justifying policies better.

2.4

The 21st century popular unease with CEO remuneration

Executive remuneration is a traditional matter of corporate governance, but is increasingly in the limelight these days (Ferranini & Moloney, 2004). After several major corporate scandals were revealed in 2002 and the consecutive years, remuneration has been close ly scrutinized by investors, the media (Jarque, 2008) and accountants (PricewaterhouseCoopers, 2010). The scandals have created a popular unease concerning the subject (Ferrarini & Moloney, 2004) .
Major concerns have been whether remuneration package design truly aligns executives’ i nterests with shareholders’ and if compensation really is performance- based (Hill, 2010). Several weaknesses in corporate governance mechanisms (Hill, 2010), insufficient risk assessment and consideration of long-term interests (Kirkpatrick, 2009) have also been questioned.
The scandals therefore contributed to remuneration procedures, policies and disclosure being increasingly regulated globally in order to address the many issues regarding executive remuneration (Bender, 2003). An example of this is the EC Recommendation 2004/913/EC concerning disclosure of determinants of remuneration policies, along with the subsequent
EC Recommendations 2005/162/EC6, 2009/384/EC7 and 2009/385/EC8 (RiskMetrics
Group, 2009).

4

Share index of the 100 most capitalized UK companies listed on the London Stock Exchange.

5

Share index of the 250 most capitalized UK companies listed on the London Stock Exchange.

6

Commission Recommendation of 15 February 2005 on the role of non- executive or supervisory directors of listed companies and on the committees of the (supervisory) board.

7

Commission Recommendation on 30 April 2009 on remuneration policies in the financial services sector.

8

Commission Recommendation on 30 April 2009 complementing Recommendations 2004/913/EC and
2005/162/EC as regards the regime for remuneration of directors of listed companies.

9

3

Methodological approaches for this twofold study

This study uses a descriptive approach, as its aim is to fulfil the dual purpose of exploring trends along with justifications, and different kinds of data need to be gathered in order to do so. Therefore, it consists of inductive quantitative research, accounted for in section 3.1, as well as a deductive content analysis, accounted for in section 3.2.

3.1

Quantitative research

The quantitative research answers the first of the research questions put forth in this study, namely: What trends on CEO remuneration can be found over the years 2005-2009 in annual reports of European insurance companies, concerning total remuneration, fixed salary and short-term bonus?
The quantitative method needs to be used in order to collect data from annual reports.
Quantitative data collection is appropriate, because of the need to verify findings using measurable numbers (Saunders, Lewis & Thornhill, 2003).
From studying research on CEO remuneration within other industries as well as research reports within the field, such as PricewaterhouseCoopers’ (2010) annual review of CEO compensation, the prior assumption is a decrease in CEO remuneration payouts during the past couple of years, 2008 and/or 2009. In order to prove this, this study uses an inductive approach through compiling data on remuneration amounts over the years 2005-2009. The research generates new findings and knowledge in the field by inducing trends, and therefore this part of the research is characterized as inductive.
3.1.1 Purposive sampling in order to collect data on remuneration trends
To answer the research question at hand, a purposive sampling method is most convenient as the research aims for a sample of standard-setting companies within the population of interest- the financial services industry. As explained in section 1.2, the chosen sample can be assumed to display an actual trend pattern for similar financial institutions.
The purposive sample in this study is all European9 insurance companies listed on the five largest European stock exchange markets10.
The list of stock exchange markets is sampled with the help of the World Federation of Exchanges’ [WFE] statistics webpage (WFE, 2008 a). The federation is an association of a large number of stock markets around the world, responsible for the functioning of key components in the financial world (WFE, 2008 b). In order to be granted membership, stock exchanges must meet certain requirements. Generally, the WFE requires high standards within organizational, informational and regulatory issues. Many governments and national associa9

To be included in the sample, the company must either have its headquarters in Europe or have its business primarily in Europe.

10

According to the WFE, the five largest European stock exchanges are Madrid (Bolsa de Madrid), London
SE, NYSE Euronext, Nasdaq OMX Nordic and Frankf urt (Deutsche Börse). Insurance company sample lists were collected from all exchanges except the Nordic, because the webpage of the Nordic exchange did not a llow for a list of insurance companies to be extracted.

10

tions consider membership to be a sign of good investment choice and superior policy.
Therefore, the WFE is a reliable source from which to sample stock exchange markets
(WFE, 2008 b).
A list of all stock exchanges listed on the WFE as of January 2010 is extracted. From this list, the five largest European ones are selected, on the basis of the number of companies listed on the exchanges. The stock exchange sampling list is attached in appendix 7.2.
In order to collect a total sample, this study requires a visit to the web pages of the sampled exchanges and extraction of lists of all insurance companies, both life and non-life insurance companies, listed there. As the companies that are listed may change from day to day, one day to extract the lists from all exchanges is decided on. This day is the 15th of April 2010.
The resulting total sample provides a statistically significant number of insurance companies.
The next step is to search the World Wide Web for the web pages of the sampled insurance companies. Not all companies in the total sample have published their annual reports for the years 2005-2009. Yet, in order to perform this research, a date for the final retrieval of reports needs to be set. This day is the 19th of April 2010.
The final sample only includes those companies that disclose remuneration in accordance with the 2004/913/EC11 Recommendation (Commission, 2004), article 3.1, in that the company’s annual report contains a remuneration report or the company supplies an independent remuneration statement on its webpage. For convenience issues, the remuneration disclosures for the years 2005-2009 must have been made publicly available in English, on the company’s webpage. After excluding the companies that do not fit these criteria, all the remaining ones are included. The final sample is therefore made up of 20 companies12.
3.1.2 Critique on the quantitative research
There are some limitations to using this sampling method, as it is a non-probability sample, meaning it will have deficiencies in representativeness and generalizability. However, using this technique is unavoidable due to that the sample must be a set of standard-setting companies within the financial institutions and the above mentioned criteria need to be fulfilled in order to get all the required data and achieve comparability. Despite the methodological limitations, the results of the research are highly relevant and appropriate for this specific purpose. As the selection criteria are carefully considered and justified, the representativeness of the study for insurance companies as well as other financial institutions is maintained.
Moreover, some of the sampled insurance companies are involved purely in the insurance business, and some of them are branched between insurance, banking, retirement, real estate and other financial services. All of them are active in the insurance industry, and if they are operating in other business, it is within financial services. This further adds to the representativeness and generalizability of this research to other financial service institutions.
11

Commission Recommendation of 14 December 2004 fostering an appropriate regime for the remuneration of directors of listed companies.

12

The insurance companies included in the final sample are Admiral, Aegon, Aviva, Axa, Beazley, Brit, Cha ucer, Chesnara, Fbd, Hardy Under, Hiscox, Ing groep, Jardi ne, Novae, Old Mutual, Protector, Rsa, Std, St
James, and Storebrand. Appendix 7.3.8 shows the population, reduction of population, total sample and final sample figures.

11

3.1.3 Processing of quantitative data
Section 1.1 outlines the quantitative data collected for this research. In order to make data lucid and clear, it is presented in excel document tables, which can be found in appendices
7.5.1-7.5.2. This also enables easy calculation of sums (appendices 7.5.1), percentages (appendices 7.5.3-7.5.4) and exchange rate conversions13 (appendices 7.5.5-7.5.7).
This research uses three mathematical calculations to analyse trends in remunerations, namely:  average (appendices 7.5.8-7.5.9),
 median (appendices 7.5.10-7.5.11), and


range (appendices 7.5.10-7.5.11).

After collecting remuneration data, exchange rate conversions are made.
The exchange rates used to convert
- amounts in British pounds into Euro, and
- amounts in Norwegian crowns into Euro are retrieved from Sveriges Riksbank (n.d.). The extracted lists display average annual exchange rates in Swedish crowns per foreign currency for the years 2005-2009. In this study, the exchange rates SEK/£ and SEK/€ are used. For instance, when converting British pounds into Euro in the year 2005, the exchange rates (appendix 7.4) are used in the following way:
13.5782 SEK/£
9.2849 SEK/€
13.5782 ÷ 9.2849 = 1,4624 €/£.
Sveriges Riksbank (n.d.) calculates the average annual currency exchange rate based on the published observations for the daily fixed rates during 12 month periods. This study uses the annual average currency exchange rate and the cross rate method to calculate the exchange rate between two different currencies with the Swedish crowns as the reference currency. As such, this has taken into account daily fluctuations due to relative demand and relative supply, and inflation as outlined in the asset market model of exchange rate determination.
Average remuneration is calculated by adding the remuneration component amounts of all companies in the final sample, per year, and dividing it by the number of companies in the sample. This calculation is done for fixed base remuneration (graph 3), short-term variable bonus (graph 5) and total remuneration (graph 1).
Because average numbers are easily distorted by outliers, this research will also present median amounts of fixed base remuneration (graph 4), short-term variable bonus (graph 6) and
13

Exchange rate conversions were necessary as some of the sampled companies disclose d financial information in GBP [Great Britain Pounds] and NOK [Norsk Krone], while we wanted them in EUR [Euro] in order to compare them. The annual average exchange rates were extracted from Sveriges Riksbank (n.d.).

12

total remuneration (graph 2). Median remuneration is found by doing an ascending list of the remuneration amounts of all companies in the final sample, per year. Then, the middle nu mber of that list is extracted. Since, the sample used in this research consists of 20 companies, one adds the 10th and 11th numbers in the ascending list, and divides the sum by two to find the median.
Ranges are presented for total remuneration. For clarity reasons, the total remunerations, per year, are adhered to million ranges. For instance, the first two ranges are 0 -1 000 000 and
1 000 000-2 000 000. The numbers of companies that pay total remunerations in the million ranges are then tabulated in table 1.

3.2

Content analysis

The content analysis answers the second of the research questions put forth in this study, namely: What justifications do companies make for the remunerations over the years 2005-2009?
The content analysis method is employed to gain a complementary in-depth understanding of justifications of the remuneration trends.
3.2.1 Deductive analysis of remuneration justifications
This study also presents a theoretical framework and a compilation of some earlier research
(chapter 2) in order to provide a foundation and departure of the research at hand. A content analysis of the secondary data in the annual reports deductively tests if agency theory, issues concerning attraction and retention and the financial crisis play a role in determining remunerations. Also, the analysis reveals if there are other justifications that play a role in remuneration determination. The content analysis is performed in order to complement and triangulate the quantitative trend findings with underlying causes. The purpose of using a content analysis approach is to gain in-depth understanding. Fair enough, but in order to perform this research as broad as possible in the content analysis frame, it includes a handful of sampled companies. A random selection of five cases out of the purposive sample of 20 companies is made. The content analysis sample thus amounts to 25 percent of the final sample [5/20 = 25percent].
In order to conveniently extract a random sample of five numbers from the purposive sample, a simple way is to use MS Excel (Davies, 2007). When entering the formula
=RAND()*20 and hitting the enter key, a random number between 1 and 20 appears. Ignoring the decimal figures, one notes the number. Then, by continually pressing the key F9, and noting the numbers, new random numbers appear. One hits the F9 key until one has co llected the amount of random numbers needed. Using this random number extraction method, the five companies included in the content analysis are Admiral14, Aegon15,
Beazley16, Ing17 and Std18.

14

Admiral Group plc

15

Aegon N.V.

16

Beazley Group plc

13

A thorough descriptive content analysis of the companies’ remuneration statements is made in order to reveal justifications of remunerations.
3.2.2 Critique on the content analysis
Because annual reports are important sources of corporate information for stakeholder, they are trusted to be reliable. Still, annual reports can also be considered to be marketing tools, biased by positive management spirit. While companies aim to make corporate reporting reflect positive aspects of operations, auditors and external legitimacy pressures still counteract this strive to the extent that they are trustworthy and the most appropriate sources of information for this research.
The content analysis is based on five companies’ annual reports. This affects the generaliz ability of the content analysis part of the research. However, the aim of this research is to gain in-depth understanding of remuneration justification. Hence, this method is most appropriate for the purpose of this study.

17

ING Group N.V.

18

Standard Life plc

14

4
4.1

Results and analysis
Initial remarks concerning this chapter

For clarity reasons, research findings are presented along with analysis of them. Also, in o rder to make this chapter easily comprehensible, findings and processing of the content analysis data (section 4.2) precedes findings and analysis of the quantitative research (section 4.3).
All findings in section 4.2 are based on the remuneration statements in the 2005-2009 annual reports of the five companies. The findings in section 4.3 are based on data in the remuneration statements and notes of the annual reports 2005-2009 of all 20 sampled insurance companies. Due to that the findings of this research are based entirely on the investigated annual reports, references to annual reports will not be made in chapter 4, except when citations are used. Appendix 7.7 provides a list of the web pages where the annual reports of the 20 insurance companies can be retrieved.

4.2

Content analysis findings of remuneration justifications

4.2.1 Initial remarks concerning the content analysis
The content analysis part of this research is based on the random sample of five companies, namely Admiral, Aegon, Beazley, Ing and Std, sampled in accordance with section 3.2.1.
Admiral is a UK based car insurer listed on the London Stock Exchange’s non- life list since
September 2004 (Admiral Group plc, 2010). Harry Engelhardt still remains CEO since its launch in 1993 and under his lead, Admiral has expanded into Canada, Spain, Italy and the
USA. Admiral prides itself on being the first UK insurance company online, and for the awards it has earned each year since 2001 on Financial Times top 50 and Sunday Times top
100 lists of best places to work at in the UK.
As one of the world’s largest providers of life insurance, pensions, investment products, and long-term savings to over 40 million customers, Aegon is a multi-billion Euro company (Aegon, 2010). The roots of the company date back to the Netherlands, in 1844, and the company has experienced forceful international growth ever since, enabling its presence in about
25 countries today. In the 1980s, Aegon started floating its shares on several stock e xchanges, such as Amsterdam, London, New York and Tokyo. From the stock exchanges sampled in this research, Aegon is listed on London life, Euronext life and Deutsche Börse.
Since Beazley’s UK inception in 1986, it has diversified into several insurance markets, such as property, marine, and political risks and contingency (Beazley, n.d.). Beazley floated its stocks on the London non-life sector in November 2002. Since 2009, the syndicate also operates in the life insurance sector, and employs some 670 employees globally.
Ing operates in the life insurance and retirement services as well as the investment and banking industry since 1991 (Ing, 2009). Today, Ing is present in fifty countries worldwide (Ing,
2010 a), and its insurance branch employs 39 000 people (Ing, 2010 b). The group is listed on London life and Euronext life.
Listed on the life insurance sector of London stock exchange, Std provides investment ma nagement, healthcare insurance, life assurance and pensions to some 6.5 million customers in
15

Europe, North America and the Asia Pacific region (Standard Life, 2010 a). The company was established in Edinburgh in 1825 and employs approximately 10 000 worldwide today
(Standard Life, 2010 b).
From the content analysis of the annual reports of Admiral, Aegon, Beazley, Ing and Std for the years 2005-2009, the following findings are of interest to the research question in this study. 4.2.2 The role of agency theory in justifying remuneration
Section 2.2.5 outlines how the agency problem can be best overcome by aligning executive interests with the interests of shareholders by the use of remunerations.
All the five case companies’ annual reports support the above proposition. This can be seen in several statements they make in their remuneration reports. In most reports, this is expressed explicitly by stating that a primary goal of remuneration is to align management and shareholder interests. Some of the reports declare it with expressions stating that remuneration should be aimed at achieving corporate goals. As the main corporate goal of companies is to maximize shareholder value, this is an implicit statement claiming the same alignment objective. “Long-term incentives ensure a focus on longer-term strategic targets and create alignment of management with the interests of shareholders.”
(Ing Group N.V. Annual Report, 2009, p 81)
The primary way of achieving alignment is by use of long-term remunerations, as shareholder value is a long-term commitment that needs to be sustainable over time in order to maximize value. Therefore, most long-term incentive plans are forms of executive share ownership, so that managers own a portion of the company, just as shareholders do. Std paid all remunerations in cash up until 2005, when the company declared its new policy of withholding long-term incentives in vesting shares. The company even went as far as to publish guidelines recommending executives to hold a certain amount of wealth in shares, in o rder to communicate this new policy clearly. Still, the company lucidly explained that merely those executives that are in a position to deliver long-term value may be eligible for longterm compensation.
The other companies also reward shares or options mounting to a certain percentage of total remuneration. The shares owned by the executives must vest for a number of years, while simultaneously meeting certain performance targets in order to be granted and cashed in.
Giving room for such deferral is an element of downsize risk that powerfully aligns interests.
If executives perform poorly, operating profits will suffer, shares will drop, and this a dversely affects executives as much as other shareholders, since remuneration is tied to share price index. An example of this is how Beazley develops its remuneration justifications in
2008 and 2009, stating that remuneration should include setting personal capital at risk in order to balance interests even further.
Remuneration, and more specifically long-term compensation, thus holds the power of aligning interests and creating commitment to the corporate objective of shareholder value maximization. 16

4.2.3 The role of attraction and retention in justifying remuneration
Compensation plays a key role in attraction and retention of employees. This is described in section 2.2.6.
In this content analysis, a consistent trend among the companies was noted, in that they do benchmark studies against other comparable companies both in the insurance sector and in the financial sector in large. For instance, Aegon constructs its comparator group according to the selection criteria industry, size, geographic scope and location, in order to have a comparator group as similar as possible to Aegon itself. Beazley also compares its pay with other companies in the insurance business and while Admiral does peer comparisons, this company does not disclose what kind of comparator group it uses. Ing and Std, however, compare with companies all across the financial services industry, as they believe their salaries need to be competitive in relation to all these companies. The companies do many co mparator analyses internally, but also purchase external consultancy services in order to get more benchmark material. The aim of these peer reviews is to be able to offer competitive compensation packages in the markets in which they believe they compete for talent.
“The main aim of the policy is to ensure that management and staff are remunerated fairly and in such a manner as to facilitate the recruitment, retention and motivation of suitably qualified personnel.”
(Beazley Group plc Annual Report and Accounts, 2009, p 58)
Evidence of the above statement has been found in all investigated reports in the content analysis. The company in which this stance is least prevailing is Admiral. For their 2005-2006 reports, they claim that remuneration should take into account salary levels of comparable companies, but base salary should be below-market levels. In 2007-2008, Admiral further elaborates that remuneration should be competitive. The 2009 policy and design is even more sophisticated, declaring that remuneration should assist in attracting high calibre staff.
This statement is mirrored in the remuneration design, in that it is altered, promising staff
50percent of the maximum long-term incentive only for staying in the company for three years. It thus seems as if attraction and retention of competent staff becomes more and more of a priority.
The same sophistication process over the years 2005-2009 can be seen in the disclosures that
Beazley makes. Attraction and retention are consistently mentioned as important considerations, but in the years 2007-2009, the company further explains the importance of key staff for its business and its objective in retaining them by offering retention shares after being employed for six years. Also, Beazley declares attraction and retention as the most important consideration in forming its remuneration strategy. The most generous forms of c ompensation are awarded only in exceptional circumstances, namely for recruitment.
Ing also states that recruitment and retention is the prime objective of its remuneration policy, and the company has designed both base salary and long-term compensation for this respect. A compensation benchmark the company did against comparable companies in 2003 had revealed a gap in variable pay, and the company thus increased this portion. In 2009, there is a further discussion in the annual report concerning the unstable employment market and the importance of securing recruitment of key personnel with the use of compensa-

17

tion. Still, the most charitable emoluments are only to be used for recruitment of exceptionally qualified executives.
This research establishes that both variable and fixed executive remuneration are set in a way as to attract and retain key personnel.
4.2.4 The role of the financial crisis in justifying remuneration
In Admiral, no signs of the effect of the financial crisis whatsoever are to be noted. In
Beazley, the remuneration policy is significantly elaborated in 2009, compared to earlier years. No explicit references are made to the crisis, in the remuneration statement but the company does, for the first time, include risk as an important element to take into account when setting rewards and also states that bonuses must be affordable. The same implicit r egard can be noted in Std’s 2008 and 2009 annual reports. In 2008, the company scaled back long-term bonuses by 10percent in the light of market conditions. In 2009, for the first time,
Std defers some of its bonus payments in shares, and incorporates clawback clauses in cases of faulty payments.
Aegon and Ing were severely hit by the financial crisis, and both companies needed to be backed up by the Dutch State and were hence forced to make amendments in their remuneration stance.
In December 2008, Aegon was injected with core capital from the Dutch State in order to strengthen its capital base. Three months later, the Dutch financial sector concurred on a gentlemen’s agreement to be prudent in paying out bonuses for the year 2008. Later, the company held discussions with the state, which resulted in default of variable pay also in
2009. Hence, Aegon paid no variable compensations referring to the years 2008 and 2009, as approved by the AMG.
Ing’s injection agreement with the Dutch State meant that this company also had to cancel its 2008 and 2009 short- and long-term remunerations in order to strengthen its capital base.
Also, the Supervisory Board was to review its entire remuneration policy for executives to align it with international standards, and no bonuses were to be paid until this is finalized.
Important aspects in the comprehensive review include taking cost of capital and risk into account and including clawback mechanisms for paid remunerations in case of inaccurate data or other harm towards the company. Reasonableness tests, to expose undesired outcomes for payable remunerations, are also new inventions. Moreover, the new policy stresses being more focused on long-term value creation, including aspects such as corporate and social responsibility criteria and other non-financial indicators such as customer satisfaction, employee engagement and diversity. In its 2009 remuneration statement, Ing justifies its proposed remuneration policy with reference to external effects, and more specifically the fina ncial crisis:
“In the public debate on the causes of the financial crisis, a lot of attention is given to remuneration practices in the financial sector. […] …the financial crisis has shifted the focus of interests, drawing even more focus to the utility of financial institutions and their responsibilities towards their stakeholders. ING is well aware of the pivotal role that banks and insurance companies play in society.”
(Ing Group N.V. Annual Report, 2009, p 76)

18

Thus, realizes that its remuneration policy must account for interests of various stakeholders and balance more than financial input factors to enhance sustainable value creation. The r emuneration statement also makes references to harsher standards and principles from the financial community and various stakeholders such as unions, the public and the state.
4.2.5 The role of discretionary factors in justifying remunerations
Some of the companies also make discretionary judgments when setting salaries. The input aspects are things such as competence, qualifications, skills, background, experience, respo nsibilities and roles.
Aegon’s 2005-2006 statements declare that base salary is affected by the discretionary factors responsibility and role of executives, while these factors change into qualifications, experience and expertise in 2007-2009.
In Beazley’s 2005-2007 remuneration reports, no discretionary judgements are mentioned. In the 2008 report, recognition of responsibilities is declared to be the input factor for base salaries. The 2009 remuneration statement mentions responsibilities, roles and meritocracy justifications are mentioned as justifications for base salary.
In Std’s 2005-2007 reports, contribution and level of experience are mentioned. In 2008 and
2009, these factors remained, but role and position were added as important parameters.
Justifications for the Ing base salary levels set in 2005 are experience, background and responsibilities. Responsibilities are also an input for setting short-term variable pay. From
2006 and onwards, performance and leadership competencies are added as indicators for base salary. In Ing’s proposed remuneration statement (in the 2009 annual report), the co mpany aims to take such discretionary, non-financial factors into account to a greater extent.

4.3

Quantitative findings of remuneration amounts and trends

4.3.1 Initial remarks concerning the quantitative research
The calculations for performing average, median and range computations can be found in section 3.1.2. These calculations are the basis of constructions of the graphs in section 4.3.
Studying the companies’ annual reports, it is found that the companies make similar considerations and judgments in determining their remuneration policies. Strikingly, the outputs of the policies differ much, both in the content analysis sample companies, as well as in the total sample of 20 companies, which is the basis of the quantitative findings in section 4.3.
Huge differences in remuneration levels in different companies, and also from year to year, are noted. The following examples (converted into annual average Euros) can illustrate some extreme cases. In the year 2006, Admiral pays only 6.6percent of the amount Aegon pays in total remuneration [418 038 ÷ 6 307 000] (appendix 7.5.5). In Chaucer, total remuneration increased by 324percent between the years 2005 and 2006, and the same company’s shortterm bonus increased by 1 966percent between 2008 and 2009 (appendix 7.5.7). From having paid out a couple of million Euros in short-term bonuses, Aegon and Ing cancelled its bonuses in total the years 2008 and 2009 (appendix 7.5.6).

19

Something all companies in the sample of 20 have in common concerning their remuneration package is that they make use of long-term remuneration (appendix 7.5.3), such as shares and stock options. However, the extent of this use is not investiga ted, as explained in section 1.2. Instead, the total remuneration in this research consists of fixed remuneration, short-term bonus and benefits.
4.3.2 Total remuneration in average, median and range
Graph 1 displays the trend in average total CEO remuneration in the sample of the 20 insurance companies over the years 2005-2009. The growth in remuneration from 2005 to 2006 can be explained by the positive economic climate. When the financial crisis hit in 2007, a downwards sloping trend was suspected, which graph 1 proves. Between the years 20072008, the crisis was imminent and had the greatest effect on remuneration. The slight i ncrease in 2009 may reflect a minor recovery from the crisis. As shown in appendix 7.5.5, 50 percent [10 ÷ 20 = 50 percent] of the companies that were affected by the financial crisis and hence started paying lower remunerations in 2007 and/or 2008, increased remuneration in
2009.
Average total CEO remuneration over the years
2005-2009 (EUR)
EUR
2 500 000

2 099 171

1 982 534

2 000 000
1 500 000

1 314 166
1 492 393

1 201 017

1 000 000
500 000
0

Years

2005

2006

2007

2008

2009

Graph 1 Average total CEO remuneration 2005 -2009 (EUR)

Because extreme cases have the risk of distorting average amounts, median amounts of total remuneration over the years are also investigated, to ensure that findings are reliably processed and presented. This trend can be found in graph 2. As one can see, it is almost a trend replica of the average in graph 1, proving these numbers valid. Still, the fluctuations in the median total remuneration are greater than the average total remuneration. This can be seen in that graph 2 is steeper than graph 1, especially in the rise between the years 2005-2006.
The magnitude of the plunge between the years 2007-2008 is replicated in both graphs, thus proving the effect of the financial crisis. However, graph 2 shows that the 2008-2009 alleged recovery is insignificant or perhaps even non-existing.

20

Median total CEO remuneration over the years
2005- 2009 (EUR)
EUR
2 000 000
1 800 000
1 600 000
1 400 000
1 200 000
1 000 000
800 000
600 000
400 000
200 000
0

1 873 115

1 870 259

1 039 482
1 042 186

983 880

Years

2005

2006

2007

2008

2009

Graph 2 Median total CEO remuneration 2005 -2009 (EUR)

This trend of decreasing remuneration payouts in 2008 and 2009 is further strengthened when studying how many of the companies pay remunerations in the million ranges (table 1).
There is a significant increase in the number of companies paying lower amounts of total remuneration in the years 2008 and 2009, compared to the years 2006 and 2007, and a resulting decrease in companies paying large amounts. For instance, the number of companies paying total remunerations in the ranges 0-1 000 000 and 1 000 000-2 000 000 in 2005 are 14
[10+4], while the number in 2008 is 17 [9+8] and in 2009, it is 16 [9+7]. Also, the number of companies paying total remunerations over 3 000 000 have decreased from 5 [4+1] in 2006 to 0 [0+0] in 2008 and 1 [1+0] in 2009.
Years

2005 2006 2007 2008 2009
Number of companies in range
Total remuneration Range 0-1 000 000
10
6
6
9
9
(EUR)
Range 1 000 000-2 000 000
4
5
5
8
7
Range 2 000 000-3 000 000
5
4
5
3
3
Range 3 000 000-4 000 000
0
4
3
0
1
over
1
1
1
0
0
Total number of companies
20
20
20
20
20
Table 1 Number of companies in the average total CEO remuneration ranges over the years 2005-2009

From these findings, a link between the financial crisis and total remuneration can be esta blished. The financial crisis had a large effect on the total CEO remunerations paid in 2008 and 2009.
4.3.3 Fixed base pay in average and median
As can be seen in graphs 3 and 4, average and median fixed pay rises between 2005 and
2006.

21

Average fixed base CEO remuneration over the years 2005-2009 (EUR)
EUR

800 000
667 450

700 000
600 000

664 645
630 210
610 758

607 041

500 000
400 000

300 000
200 000

Years

2005

2006

2007

2008

2009

Graph 3 Average fixed base CEO remuneration 2005-2009 (EUR)

While average fixed base pay drops trivially already in 2007, median fixed base pay does not drop until 2008. Still, the graphs reveal a trend, namely that fixed base pay drops during the financial crisis 2007/2008-2009.
Median fixed base CEO remuneration over the years 2005-2009 (EUR)

EUR

700 000

591695 621420

600 000
500 000
400 000

536878

513303

504 056

300 000

200 000
100 000
0

Years

2005

2006

2007

2008

2009

Graph 4 Median fixed base CEO remuneration 2005-2009 (EUR)

A browse through the statistical compilation of the fixed base pay amounts (appendix 7.5.5) reveals that, out of 20 companies, only three deviants have increased their base salaries both in 2008 and 2009. In appendix 7.5.5, lowered remuneration amounts (as compared to the previous year) are represented by red figures, while unchanged or increased remuneration amounts are represented by black figures. Two of the deviants who increased their base sala22

ries in 2008 and 2009 are Ing and Aegon. In these companies, variable bonuses were cancelled in total due to agreements with the Dutch state, which explains their increase in base salaries. As can be seen in Aegon’s and Ing’s annual reports for 2008 and 2009, the reasons for increasing base salaries are retention issues and benchmark concerns. The third deviant is
Storebrand, a company that has increased its fixed base CEO pay during the entire period
2005-2009. The reasons for this have not been investigated, since this company was not part of the content analysis.
But why did most other companies lower their fixed salaries? The remaining content analysis sample companies can illuminate this query. Admiral lowered its CEO’s fixed salary significantly both in 2008 and 2009. The policy of this company is that the main goal of remuner ation is to align interests with shareholders. One might therefore hypothesize that the drop in fixed pay is a symbol of CEO commitment to the company even in the harsh economic climate. Beazley mentions responsibilities as justifications for its base salary. As CEO responsibilities have not changed from 2007 to 2008 and 2009 respectively, one might ponder why the company still lowered base salaries. However, Beazley explains this in the 2008 and 2009 annual reports. The lower pay reflects lower profits along with cost management concerns in the harsh economic climate. Std does not justify the drop in base salary at all. From this, it seems that the drops in base salaries in 2007 (graph 3)/2008 (graph 4) and 2009 (graphs 3 and 4), are direct effects of the financial crisis and the resulting harsh economic climate.
This study merely investigates the justifications of lowered base salaries thoroughly in the five companies in the content analysis. Still, after reviewing the remuneration statements of all 20 sampled companies, in order to collect the data for the quantitative research, it is found that most companies make benchmark studies on pay levels in comparable companies, as explained in section 4.2.2. Financial service companies are very much in sync and are subject to strong isomorphic pressures. They buy consultancy services on pay management in similar companies and level with their comparator group, in order to be firmly market based and thus accepted by their stakeholders. Thus, this research concludes that the trend of lowering base salaries during a financial crisis is strong and is due to concentration on cost management, peer pressures and acting legitimately for various stakeholders.
4.3.4 Short-term variable pay in average and median
Compared to the fluctuations in base pay, variations in average short-term pay (graph 5) are much greater over the years 2005-2009. The short-term remuneration fluctuations depend on the direct link between corporate performance and short-term variable remuneration, and one should therefore expect that variable remuneration follows turnover and profit patterns.
Therefore, short-term variable pay dropped 2007-2008, during the financial crisis, and slightly increased in 2009.

23

Average short-term variable CEO remuneration over the years 2005- 2009 (EUR)
EUR
1 400 000

1 299 620

1 200 000

1 177 004

1 000 000
800 000
600 000

636 094

815 418

514 347

400 000
200 000
0
2005

2006

2007

2008

2009

Years

Graph 5 Average short-term variable CEO remuneration 2005 -2009 (EUR)

The trend in average short-term variable pay recurs in median short-term variable pay (graph
6). The difference here is that all median amounts are somewhat lower than averages. This distortion of average values is a result of a couple of extreme cases (outliers) in the sample,
i.e. companies paying extreme short-term bonuses each year. These companies differ from year to year. Axa and Rsa are the only two companies that pay short-term bonuses of over one million Euro each of the years 2005-2009.
As mentioned, in 2009, graphs 5 and 6 indicate a slight recovery in the amounts of shortterm remunerations. The extreme cases paying over one million Euro in short-term bonuses, in 2009, are Aviva, Axa, Hiscox, Old Mutual and Rsa (appendix 7.5.9). The remaining fifteen companies pay amounts below one million. In the same year, as much as twelve companies paid short-term bonuses lower than 600 000 to their CEO’s (appendix 7.5.9), and in 2008, this number was 13 companies. The corresponding number in 2008 was seven and in 2007, it was only five.
From these findings, it is obvious that the short-term variable CEO remuneration has dropped during the financial crisis and the number of companies paying lower amounts than
600 000 has drastically increased. Also, year 2009 does not offer a definite recovery, as 12 companies still pay low amounts of short-term remunerations, as compared to only five in
2007.

24

Median short-term variable CEO remuneration over the years 2005-2009 (EUR)
EUR
1 200 000

1 117 702

1 000 000

901 085

800 000
600 000
400 000

490 388

498 701
359 225

200 000
0
2005

2006

2007

2008

2009

Years

Graph 6 Median short-term variable CEO remuneration 2005-2009 (EUR)

4.3.4.1 ance The connection between short-term variable pay and corporate financial perform-

Studying the turnovers and operating profits (appendix 7.6) of the five companies in the content analysis, one can distinguish a connection between short-term variable pay and corporate financial performance. In appendix 7.6, red figures denote drops since the previous year, and black figures denote increases. Between the years 2005 and 2006, there was an increase in turnover in all five companies except for Std and operating profits grew or remained fairly stable, i.e. decreased insignificantly, in all five companies. This can probably be explained by the positive economic climate in those years. In 2007 and 2008, however, the financial crisis hit. The effects can be noted in the financial figures of the five c ompanies. In
2007, turnover and operating profits started to decrease in Aegon and Std, and in 2008, turnovers and profits of all companies were down. Meanwhile, short-term variable pay also plunged. While Admiral, Beazley and Std started to recover slightly in 2009 (especially when looking at the figures in domestic currency, £, in appendix 7.6), the financials in Ing and Aegon were still down along with short-term remunerations. Ing and Aegon cancelled their variable pay totally in the years 2008 and 2009, after agreements with the Dutch state.
It is concluded that short-term variable pay follows the same pattern as turnover and operating profits. When corporate performance is low, the variable performance-based remuneration component also surges.

25

5

Concluding remarks

5.1

Summary of findings

This study reveals that remuneration is to a great extent performance-based in the studied companies. Variable pay is a component of remuneration that is mainly dependent on corporate success. Still, many other aspects serve as input factor and act as justifications when determining compensation levels. Interest alignment and attraction- and retention-issues are important determinants. Also, discretionary, quite subjective, factors play a role.
Moreover, the trends revealed in this study show that remunerations (consisting of fixed remuneration, short-term bonus and benefits) increased from 2005 to 2006. The findings also show that remunerations have decreased markedly in 2008, while the drop is less vague in
2009. In 50 percent of the sampled companies, there is even a slight recovery in 2009 (figures of total remunerations, which are red in 2008 but black in 2009, in appendix 7.5.5) . The financial crisis has had an impact on remunerations. The fixed base pay plunge is due to a negative market outlook and cost management issues in beforehand, while the short-term variable pay is affected by the overall performance of the companies in retrospect. As mentioned in section 1.1, the drop in short-term variable remuneration was expected as variable remunerations, are performance-based. Also, the financial crisis seems to have made the studied companies more aware of risks and more prudent in remunerations, using for instance clawback arrangements.
The findings of this study show that, over the years 2005-2009, the studied companies develop increasingly amplified considerations concerning remuneration policies and their effects. They have become more aware and put more emphasis on making their remuneration policies more in line with international standards. Also, they develop more sustainable and sophisticated value creating remuneration policies. A factor that plays a role here, in making companies provide clearer and transparent remuneration reports, is presumably the increasing demands from the external environment and stakeholders, and the desire of companies to act legitimately. All these findings are consistent with findings by PricewaterhouseCoopers
(2010) as outlined in sections 1.1 and 2.3.

5.2

Suggestions for further research

While the remuneration field has recently been widely debated, and opinions about bonuses abound, a lot of research remains to be done. Future studies can control for variables such as operating profits and net revenue on a larger scale than was performed in this research. Future researchers could do statistical analyses with respect to those and other variables such as asset base, country of residence and dividing the companies into the segments life and nonlife insurance to see if these factors have an impact on remuneration. A larger scale study of more companies, both in the insurance or financial services industry in large, but also in other industries, could also add to the field of CEO remuneration.
To acquire more profound insights, a future study could investigate entire annual reports of fewer companies and perhaps even perform surveys or interviews to get deeper in sights in the field of remuneration justifications, especially during and after the financial crisis. Since

26

this research merely investigates remuneration statements of annual reports, it might have missed out on other significant determinants that are linked to this research field.

27

6

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Standard Life. (2010 a) Welcome to Standard Life. Retrieved 2010-05-17 from http://www.standardlife.com/index.html Standard Life. (2010, June 30th b) About Standard Life. Retrieved 2010-05-17 from http://www.standardlife.com/about/index.html Sveriges Riksbank. (n.d.) Årsgenomsnitt (ackumulerat) på valutakurser. Retrieved 2010-04-23 from http://www.riksbank.se/templates/stat.aspx?id=16749
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7
7.1

Appendices
Definitions used in this paper

These definitions describe the meanings given to concepts used in this paper.
Benefit – A form of compensation that is supplementary to pay. Examples are i ncome protection, social security contributions, health club membership, life assurance, life/health/medical/travel/accident insurance, death in service benefit, tax planning, car parking, car allowance, expatriate allowance etc. [Synonyms: perquisite/perk].
Fixed pay – Pay that has been negotiated in advance, and does not vary along with achieved performance targets.
Incentive – A factor that accelerates motivation towards action or non-action.
Long-term remuneration – A performance-driven compensation plan, which stretches over multiple years, i.e. is forward looking. Examples are options and shares. These forms of remunerations require vesting for a number of years before being realizable.
Remuneration – Monetary payment for delivered services; pay for employment. [Synonyms: salary, pay, emolument, compensation].
Short-term remuneration – A performance-driven compensation plan, which stretches over one year and compensates for past performance. Short-term remuneration is most often paid in cash, but it can also be shares which can be immediately realized and do not need to vest.
Variable pay – Pay that is dependent on fulfilment of previously agreed performance targets. Variable pay is often used as a powerful incentive to make employees fulfil corporate goals. 32

7.2

Sample of stock exchanges retrieved from the WFE

This sample list has been extracted from the WFE (2008 a) statistics webpage, according to the criteria ‘number of listed companies as of January 2010’. The five European stock e xchanges with the largest amount of listed companies were selected to extract insurance company sample from. These five exhanges are bold and shaded in the table below.

Exchange

Americas
Bermuda SE
BM&FBOVESPA
Buenos Aires SE
Colombia SE
Lima SE
Mexican Exchange
NASDAQ OMX
NYSE Euronext (US)
Santiago SE
TSX Group
Asia - Pacific
Australian SE
Bombay SE
Bursa Malaysia
Colombo SE
Hong Kong Exchanges
Indonesia SE
Jasdaq
Korea Exchange
National Stock Exchange India
New Zealand Exchange
Osaka SE
Philippine SE
Shanghai SE
Shenzhen SE
Singapore Exchange
Taiwan SE Corp.
The Stock Exchange of Thailand
Tokyo SE
Europe - Africa - Middle East
Amman SE
Athens Exchange
BME Spanish Exchanges
Borsa Italiana
Budapest SE
Cyprus SE
Deutsche Börse
Egyptian Exchange
Irish SE
Istanbul SE
Johannesburg SE

Total

2009
December
Domestic
Foreign
Cies
Cies

Total

2010
January
Domestic
Cies

Foreign
Cies

percent
Change
/
Jan. 09

46
386
106
87
241
406
2 852
2 327
236
3 700

16
377
101
87
195
125
2 569
1 832
232
3 624

30
9
5
0
46
281
283
495
4
76

46
385
106
85
241
406
2 843
2 328
237
3 726

16
376
101
84
196
125
2 564
1 830
233
3 651

30
9
5
1
45
281
279
498
4
75

-9,8percent
-2,0percent
-4,5percent
-3,4percent
0,0percent
9,1percent
-5,5percent
-3,2percent
-0,4percent
-2,7percent

1 966
4 955
959
231
1 319
398
889
1 788
1 453
165
432
248
870
830
773
755
535
2 335

1 882
4 955
952
231
1 308
398
889
1 778
1 453
143
431
246
870
830
459
741
535
2 320

84
0
7
0
11
0
0
10
0
22
1
2
0
0
314
14
0
15

1 965
4 962
956
231
1 321
398
884
1 794
1 457
164
433
249
873
881
774
755
535
2 329

1 881
4 962
949
231
1 309
398
884
1 784
1 457
141
432
247
873
881
461
741
535
2 314

84
0
7
0
12
0
0
10
0
23
1
2
0
0
313
14
0
15

-1,9percent
0,8percent
-1,8percent
-2,1percent
4,7percent
0,3percent
-3,7percent
-0,1percent
3,7percent
-4,1percent
-7,7percent
1,2percent
1,0percent
19,1percent
0,8percent
4,4percent
1,9percent
-2,5percent

272
288
3 472
296
47
115
783

272
285
3 435
291
44
115
704

0
3
37
5
3
0
79

272
287
3 452
296
47
116
775

272
284
3 415
291
44
116
698

0
3
37
5
3
0
77

313
64
315
398

312
55
315
353

1
9
0
45

237
63
316
397

236
54
316
352

1
9
0
45

3,4percent
-1,4percent
-3,0percent
-1,3percent
9,3percent
-2,5percent
-6,9percent
35,6percent
-6,0percent
-0,3percent
-3,2percent

33

7.2 continuing: Sample of stock exchanges retrieved from the WFE
Exchange

Ljubljana SE
London SE
Luxembourg SE
Malta SE
Mauritius SE
MICEX
NASDAQ OMX Nordic Exchange
NYSE Euronext (Europe)
Oslo Børs
Saudi Stock Market - Tadawul
SIX Swiss Exchange
Tehran SE
Tel Aviv SE
Warsaw SE
Wiener Börse
Total

Total
76
2 792

2009
December
Domestic Foreign
Cies
Cies
76
0
2 179
613

266
20
65 n/d 797
1 160
238
n/d
339
364
622
486
115
44 991

30
20
64 n/d 773
990
190 n/d 275
364
609
470
97

34

236
0
1 n/d 24
170
48 n/d 64
0
13
16
18

Total
76
2 770
271
20
63
235
788
1 155
234
135
340
364
610
489
115
45 287

2010
January
Domestic
Cies
76
2 163

Foreign
Cies
0
607

30
20
62
235
764
986
188
135
276
364
597
473
97

241
0
1
0
24
169
46
0
64
0
13
16
18

percent
Change
/
Jan. 09
-7,3percent
-9,8percent
3,8percent
5,3percent
-3,1percent
n/d
-4,0percent
14,0percent
-9,7percent
n/d
5,3percent
2,2percent
-4,8percent
6,5percent
-3,4percent

7.3

Population and sample list from the sampled exchanges

For appendices 7.3.1-7.3.7, the following list explains the abbreviations used.
Abbreviations
NE =

Non-EU residence company

NER =

No English reports published

NR =

No reports published online (no remuneration statement available)

D=

Double listed (same company is already sampled)

NW =

No webpage found

NF =

Non-fiscal reporting year

Sample statistics that explain appendices 7.3.1-7.3.7 can be found in appendix 7.3.8.

35

7.3.1 Sample list from London Stock Exchange – non-life insurance companies
Company name

Total sample Years

Final sample 2009

2008

2007

2006

2005

NR

1

1

1

NR

1

1

1

1

1

AI CLAIMS

NF

NF

NF

NF

NF

ALEA

NE

NE

NE

NE

NE

ALLIANZ SE ORD

1

1

1

1

1

√

ALM BRAND ORD

1

1

1

1

1

√

AMER INTL GROUP

NE

NE

NE

NE

NE

AMLIN

NR

1

1

1

1

APRIL GROUP ORD

NR

1

1

1

1

ASPIS PRONIA R

NR

NR

NR

NR

NR

ATE ISNURANCE/R

NER

NER

NER

NER

NER

ATLANTIC INSURA

NR

NER

1

1

1

AXA ORD

1

1

1

1

1

√

√

BEAZLEY

1

1

1

1

1

√

√

NR

1

1

1

NR

1

1

1

1

1

√

√

NER

1

1

1

1

CATLIN GRP

NE

NE

NE

NE

NE

CBG GROUP

NR

1

1

1

NR

1

1

1

1

1

√

√

COBRA

NR

NR

NR

NR

NR

COSMOS INSURANC

NR

1

1

1

1

DZI INSURANCE O

NR

NR

NR

NR

NR

ABBEY PROTECT.
ADMIRAL GRP

BRIGHTSIDE
BRIT INS HLDGS
CAT OCCIDENTE O

CHAUCER HLDGS

36

√

√

7.3.1 continuing: Sample list from London Stock Exchange – non-life insurance companies Company name

Total sample Years

Final sample 2009

2008

2007

2006

2005

ERGO VER ORD

NR

1

1

1

1

EULER HERMES OR

NR

1

1

1

1

EURO RELIANCE R

NER

NER

NER

NER

NER

EUROBROKERS IN/

NR

NR

NR

NR

NR

1

1

1

1

1

FONDIARIA-SAI O

NR

1

1

1

1

FONDIARIA-SAI S

D

D

D

D

D

FOYER ORD

NW

NW

NW

NW

NW

GABLE HLDGS

NR

1

1

1

1

GEN.ACC.8SE.PF

NR

1

1

1

1

GENERALI DT HLG

1

1

1

1

1

GENERALI ORD

D

D

D

D

D

NR

1

1

NR

NR

HANNOVER RUECKV

1

1

1

1

1

√

HARDY UNDER. BM

1

1

1

1

1

√

√

HISCOX

1

1

1

1

1

√

√

JARDINE LLOYD

1

1

1

1

1

√

√

LANCASHIRE

1

1

1

1

NR

NR

NR

NR

NR

NR

NER

NER

NER

NER

NER

1

1

1

1

1

MARSH&MCLENNAN

NR

1

1

1

1

MIDDLE SEA INS

NR

1

1

1

1

F.B.D.HLDGS

HAMPDEN

LEO INS
MANNHEIMER HLDG
MAPFRE ORD

37

√

√

√

√

7.3.1 continuing: Sample list from London Stock Exchange – non-life insurance companies Company name

Total sample Years
2009

2008

2007

2006

2005

NR

1

1

1

1

D

D

D

D

D

MINERVA INSURAN

NW

NW

NW

NW

NW

MUNICH RE N ORD

1

1

1

1

1

√

NOVAE GRP

1

1

1

1

1

√

NER

NER

NER

NER

NER

NE

NE

NE

NE

NE

PERSONAL GRP.HD

1

1

1

1

1

POZAVAR0VALNICA

NR

1

1

1

1

NER

NER

NER

NER

NER

PROTECTOR FORS

1

1

1

1

1

PRVA POKOJNINSK

NR

1

1

1

NR

RANDALL&QUILTER

NR

1

1

1

NR

RSA INS.

1

1

1

1

SAMPO A ORD

1

1

1

SCOR ORD

1

1

TAWA

NR

THB GROUP

Final sample MILANO ASSICURA
MILANO N SVGS

NUERNBERGER BET
OMEGA INS.

PREMAFIN ORD

√

√

√

√

1

√

√

1

1

√

1

1

1

√

1

1

NR

NR

NF

NF

NF

NF

NF

TOPDANMARK ORD

1

1

1

1

1

√

TRYGVESTA

1

1

1

1

1

√

TUEUROPA ORD

1

1

NR

NR

NR

UNIPOL ORD

NR

1

1

1

1

UNIPOL PRF

D

D

D

D

D

38

7.3.1 continuing: Sample list from London Stock Exchange – non-life insurance companies Company name

Total sample Years
2009

2008

2007

2006

2005

UNIQA VERS ORD

NR

1

1

1

1

UNISON FORSIKRI

1

1

1

1

1

VIENNA INSURANC

NR

1

1

1

NR

VITTORIA ORD

NR

1

1

1

1

NER

NER

NER

NER

NER

NW

NW

NW

NW

Final sample NW

ZAVAROVALNICA T
ZD EURO INS AD

√

Abbreviations
NE =

Non-EU residence company

NER =

No English reports published

NR =

No reports published online (no remuneration statement available)

D=

Double listed (same company is already sampled)

NW =

No webpage found

NF =

Non-fiscal reporting year

POPULATION (all non-D)

(75-4)

71

TOTAL SAMPLE

24 Marked √

FINAL SAMPLE

12 Marked √

39

7.3.2 Sample list from London Stock Exchange – life insurance companies
Total
sample

Years
Company name

Final sample 2009

2008

2007

2006

2005

AEGON NV

1

1

1

1

1

√

√

AVIVA

1

1

1

1

1

√

√

BULSTRAD INS OR

NR

1

1

1

NR

CASH.LIFE ORD

NR

1

1

1

1

CATHAY FIN (S)

NE

NE

NE

NE

NE

NER

NER

NER

NER

NER

NR

1

1

1

1

CNP ASSURANCEE

1

1

1

1

1

√

√

DELTA LLOYD ORD

1

1

1

1

NR

FORTIS B ORD

1

1

1

1

1

FORTIS CAP CO A

D

D

D

D

D

HANSARD

1

1

1

NR

NR

ING GROEP ORD

1

1

1

1

1

IRISH LIFE&P.GP

NR

1

1

1

1

LEGAL&GEN.

NR

1

1

1

1

LIBERTY LIFE IN

NE

NE

NE

NE

NE

NER

1

1

1

1

1

1

1

1

1

NR

1

NR

NR

NR

PRUDENTIAL

1

1

1

1

1

RESOLUTION

NR

NR

NR

NR

NR

SAGICOR FIN.

1

1

1

1

1

√

ST.JAMES'S PLAC

1

1

1

1

1

√

CATTOLICA ASS O
CHESNARA

MEDIOLANUM ORD
OLD MUTUAL
PHOENIX GRP(DI)

40

√

√

√

√

√

√

√

7.3.2 continuing: Sample list from London Stock Exchange – life insurance companies
Total
sample

Years
Company name

Final sample 2009

2008

2007

2006

2005

STD LIFE

1

1

1

1

1

√

√

STOREBRAND ORD

1

1

1

1

1

√

√

TORCHMARK CORP

1

1

1

1

1

√

NER

NER

NER

NER

NER

D

D

D

D

D

W UERTT LEBEN N
W UERTT LEBEN OR

Abbreviation
NE =

Non-EU residence company

NER =

No English reports published

NR =

No reports published online (no remuneration statement available) D=

Double listed (same company is already sampled)

NW =

No webpage found

NF =

Non-fiscal reporting year

POPULATION (all non-D)

(28-2)

26

TOTAL SAMPLE

12 Marked √

FINAL SAMPLE

8 Marked √

41

7.3.3 Sample list from Euronext Stock Exchange – non-life insurance companies
Total
sample

Years
Company name
2009

2008

2007

2006

2005

APRIL GROUP

D

D

D

D

D

APRIL NV

D

D

D

D

D

NR

NR

NR

NR

NR

AXA

D

D

D

D

D

AXA NV

D

D

D

D

D

EULER HERMES

D

D

D

D

D

EULER HERMES NV

D

D

D

D

D

FOYER

D

D

D

D

D

MUNCHENER RUCKVERS

D

D

D

D

D

PARTNERRE LTD.

1

1

1

1

1

NER

NER

NER

NER

NER

SCOR NV

D

D

D

D

D

SCOR SE

D

D

D

D

D

TEMERIS

NW

NW

NW

NW

Final sample NW

ASSISUCURAZ.GEN.ORD

RV ASSURANCE (D)

√

NE =

Non-EU residence company

NER =

No English reports published

NR =

No reports published online (no remuneration statement available) D=

Double listed (same company is already sampled)

NW =

No webpage found

NF =

Non-fiscal reporting year

42

7.3.3 continuing: Sample list from Euronext Stock Exchange – non-life insurance companies (14-10)

POPULATION (all non-D)

4

TOTAL SAMPLE

1Marked √

FINAL SAMPLE

0

43

7.3.4 Sample list from Euronext Stock Exchange – life insurance companies
Total
Final sample sample

Years
Company name
2009

2008

2007

2006

2005

AEGON

D

D

D

D

D

CNP ASSURANCEZ

D

D

D

D

D

DELTA LLOYD

D

D

D

D

D

FORTIS

D

D

D

D

D

FORTIS STRIP

D

D

D

D

D

ING GROEP

D

D

D

D

D

ING GROEP CERT

D

D

D

D

D

Abbreviations
NE =

Non-EU residence company

NER =

No English reports published

NR =

No reports published online (no remuneration statement available) D=

Double listed (same company is already sampled)

NW =

No webpage found

NF =

Non-fiscal reporting year

POPULATION (all non-D)

(7-7)

0

TOTAL SAMPLE

0

FINAL SAMPLE

0

44

7.3.5 Sample list from Madrid Stock Exchange – Bolsa de Madrid
Total
sample

Years
Company name
2009
GR.C.OCCIDEN
MAPFRE

2008

2007

2006

2005

NR

NR

NR

NR

NR

D

D

D

D

Final sample D

Abbreviations
NE =

Non- EU residence company

NER =

No English reports published

NR =

No reports published online (no remuneration statement available)

D=

Double listed (same company is already sampled)

NW =

No webpage found

NF =

Non-fiscal reporting year

POPULATION (all non-D)

(2-1)

1

TOTAL SAMPLE

0

FINAL SAMPLE

0

45

7.3.6 Sample list from Frankfurt Stock Exchange – Deutsche Börse
Total
sample

Years
Company name
2009

2008

2007

2006

2005

Aegon N.V.

D

D

D

D

D

Allianz SE

D

D

D

D

D

AMLIN PLC LS-,28125

D

D

D

D

D

Assisurazioni Generali S.p.A

D

D

D

D

D

AVIVA PLC LS-,25

D

D

D

D

D

AXA S.A.

D

D

D

D

D

NR

1

NR

NR

NR

Ergo Versicherungsgruppe AG

D

D

D

D

D

FONDIARIA - SAI EO 1

D

D

D

D

D

Generali Deutschland Holding AG

D

D

D

D

D

Hannover Rückversicherung AG

D

D

D

D

D

Mannheimer AG Holding

D

D

D

D

D

MAPFRE S.A. NOM. EO-, 10

D

D

D

D

D

Münchener Rück AG

D

D

D

D

D

Nürnberger Beteiligungs- AG

D

D

D

D

D

OLD MUTUAL PLC LS-,10

D

D

D

D

D

PRUDENTIAL PLC LS-,05

D

D

D

D

D

RSA INSURANCE GR.LS-,275

D

D

D

D

D

SCHWEIZ.RUECKV.NAM.SF0,10

1

1

1

1

1

√

SWISS LIFE HLDG NAM SF.12

1

1

1

1

1

√

UNIQA VERSICHERUNGEN

D

D

D

D

D

VIENNA INSURANCE GRP INH.

D

D

D

D

D

W UERTTB.LEBENSV.VNA.S

D

D

D

D

D

BALOISE HLDG NA SF 0,10

46

Final sample 7.3.6 continuing: Sample list from Frankfurt Stock Exchange – Deutsche Börse
Total
sample

Years
Company name
2009
ZURICH FINL SVC.NA.SF0,10

2008

2007

2006

2005

1

1

1

1

1

Final sample √

Abbreviations
NE =

Non- EU residence company

NER =

No English reports published

NR =

No reports published online (no remuneration statement available)

D=

Double listed (same company is already sampled)

NW =

No webpage found

NF =

Non-fiscal reporting year

POPULATION (all non-D)

(24-20)

4

TOTAL SAMPLE

3 Marked √

FINAL SAMPLE

0

47

7.3.7 Sample statistics
Number #

London NL London L

Euronext NL Euronext L Bolsa d M

Deutsche B

Non-adjusted population

150

75

28

14

7

2

24

Double listed (same company is already sampled) (D)

44

4

2

10

7

1

20

Total population (excluding double-listings)

106

71

26

4

0

1

4

Not published all of the years 2004-2009 on web

43

31

9

1

0

1

1

Non-European company (NE)

6

4

2

0

0

0

0

Not published English reports (NER)

11

7

3

1

0

0

0

No web page found (NW)

4

3

0

1

0

0

0

Non-fiscal reporting year (NF)

2

2

0

0

0

0

0

Reduction from population

66

Total sample

40

page (no remuneration statement available) (NR)

Reduction due to:
Lacking remuneration statement

13

Lacking CEO remuneration specification

7

(only total remuneration sums are presented)
Final sample

20

48

7.4

Exchange rate conversions into Euro 2005-2009

The following exchange rates are used in order to convert NOK and £ into €. The method for calculating them is outlined in section 3.1.2. In excel conversion calculations, the below exchange rates are shortened to four decimal places.
Converting £ to €* years 20052009

£

€

€/£

Shortened to four decimals

2005

13,5782

9,2849

1,462395933

1,4624

2006

13,5752

9,2549

1,466812175

1,4668

2007

13,5281

9,2481

1,462797764

1,4628

2008

12,0912

9,6055

1,258778825

1,2588

2009

11,926

10,6213

1,122838071

1,2228

*Using annual average exchange rates from Sveriges Riksbank. (n.d.)

Converting NOK to €* years
2005-2009

NOK

SEK/NOK

NOK/ €

€/NOK

Shortened to four decimals 2005

100

116,0089

1,160089

8,00361007

0,124943618

0,1249

2006

100

115,0416

1,150416

8,044829

0,12430345

0,1243

2007

100

115,4602

1,154602

8,00977307

0,124847482

0,1248

2008

100

117,0538

1,170538

8,20605568

0,121861225

0,1219

2009

100

121,6225

1,216225

8,73300582

0,114508111

0,1145

SEK

*Using annual average exchange rates from Sveriges Riksbank. (n.d.)

49

7.5

Collection of remuneration data

7.5.1 Sample companies’ remuneration data
#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Company
Admiral
Aegon
Aviva
Axa
Beazley
Brit
Chaucer
Chesnara
Fbd
Hardy Under
Hiscox
Ing groep
Jardine
Novae
Old mutual
Protector
Rsa
Std
St James
Storebrand

Currency
£
€
£
€
£
£
£
£
€
£
£
€
£
£
£
NOK
£
£
£
NOK

Total remuneration (fixed+short-term+benefits)
2009
2008
2007
2006
329 000
313 000
298 000
285 000
1 007 000
879 000
5 437 000
6 307 000
2 028 000 1 757 000
1 095 000
2 232 000
3 284 364 2 537 980
3 692 977
3 365 659
1 155 068
632 761
1 586 094
1 277 121
834 000
838 000
923 000
846 000
414 000
282 000
1 303 000
1 587 000
536 000
296 000
351 000
325 000
565 000
609 000
907 000
867 000
677 319
817 841
665 366
547 500
1 688 000
630 000
2 157 000
1 141 000
1 353 500 1 353 000
3 290 000
3 588 000
1 527 000 1 422 000
1 258 000
1 273 000
836 000 1 506 000
1 714 000
1 140 000
2 085 000 1 302 000
1 588 000
1 564 000
3 142 000 3 151 000
2 863 000
3 697 000
2 329 000 2 037 000
1 912 000
1 834 000
1 571 000 1 199 000
1 463 000
1 563 000
954 723
589 868
917 368
2 588 963
5 820 000 9 100 000
6 099 000
5 593 000

50

2005
268 000
5 085 000
1 922 000
2 935 237
703 568
642 000
375 000
273 000
729 000
551 708
499 000
2 809 000
899 000
381 000
1 439 000
1 709 000
1 754 000
1 362 000
855 769
5 100 000

Fixed (base) pay
2009
2008
328 000
313 000
950 000
865 000
925 000
914 000
680 887
687 526
350 000
303 333
512 000
506 000
273 000
262 000
148 000
134 000
464 000
469 000
265 000
265 000
436 000
428 000
1 353 500 1 353 000
525 000
519 000
340 000
340 000
830 000
617 000
2 678 000 2 596 000
944 000
896 000
772 000
754 000
425 000
425 000
4 529 000 4 176 000

2007
298 000
731 000
525 000
642 840
450 000
484 000
255 000
135 000
600 000
250 000
405 000
1 289 000
500 000
340 000
735 000
2 408 000
842 000
725 000
400 000
3 602 000

2006
285 000
796 000
875 000
689 883
377 573
465 000
247 000
135 000
560 000
210 000
326 000
1 289 000
507 000
300 000
700 000
2 038 000
796 000
706 000
425 000
3 539 000

2005
268 000
803 000
790 000
626 810
340 000
412 000
240 000
124 000
475 000
210 000
309 000
1 289 000
362 000
280 000
550 000
1 596 000
770 000
656 000
380 000
3 404 000

7.5.2 Sample companies’ remuneration data
#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Company
Admiral
Aegon
Aviva
Axa
Beazley
Brit
Chaucer
Chesnara
Fbd
Hardy Under
Hiscox
Ing groep
Jardine
Novae
Old mutual
Protector
Rsa
Std
St James
Storebrand

Currency
£
€
£
€
£
£
£
£
€
£
£
€
£
£
£
NOK
£
£
£
NOK

Other benefits
2009
1 000
57 000
74 000
4 150
16 002
2 000
2 000
15 000
34 000
6 311
2 000
0
214 000
4 000
303 000
0
360 000
24 000
62 223
282 000

2008
0
14 000
91 000
4 150
14 686
76 000
14 000
15 000
21 000
5 589
2 000
0
17 000
5 000
196 000
0
300 000
65 000
37 368
282 000

2007
0
1 545 000
46 000
4 150
18 460
1 000
14 000
13 000
27 000
3 691
2 000
0
17 000
7 000
355 000
0
283 000
30 000
37 368
249 000

2006
0
1 219 000
61 000
4 150
17 573
3 000
14 000
12 000
27 000
4 727
15 000
0
16 000
1 000
318 000
0
264 000
164 000
38 963
232 000

51

2005
0
223 000
104 000
4 150
18 923
9 000
14 000
12 000
24 000
4 322
15 000
0
16 000
1 000
250 000
0
245 000
20 000
57 769
207 000

Short-term bonus (variable) pay
2009
2008
2007
0
0
0
0
0
3 161 000
1 029 000
752 000
524 000
2 599 327
1 846 304
3 045 987
789 066
314 742
1 117 634
320 000
256 000
438 000
139 000
6 000
1 034 000
373 000
147 000
203 000
67 000
119 000
280 000
406 008
547 252
411 675
1 250 000
200 000
1 750 000
0
0
2 001 000
788 000
886 000
741 000
492 000
1 161 000
1 367 000
952 000
489 000
498 000
464 000
555 000
455 000
1 025 000
841 000
787 000
775 000
380 000
708 000
467 500
127 500
480 000
1 009 000
4 642 000
2 248 000

2006
0
4 292 000
1 296 000
2 671 626
881 975
378 000
1 326 000
178 000
280 000
332 773
800 000
2 299 000
750 000
839 000
546 000
1 659 000
774 000
693 000
2 125 000
1 822 000

2005
0
4 059 000
1 028 000
2 304 277
344 645
221 000
121 000
137 000
230 000
337 386
175 000
1 520 000
521 000
100 000
639 000
113 000
739 000
686 000
418 000
1 489 000

7.5.3 Sample companies’ remuneration data

#

Company

Bonus % of total pay
2009
2008
1 Admiral
0
0
2 Aegon
0
0
3 Aviva
51
43
4 Axa
79
73
5 Beazley
68
50
6 Brit
38
31
7 Chaucer
34
2
8 Chesnara
70
50
9 Fbd
12
20
10 Hardy Under
60
67
11 Hiscox
74
32
12 Ing groep
0
0
13 Jardine
52
62
14 Novae
59
77
15 Old mutual
46
38
16 Protector
15
18
17 Rsa
44
41
18 Std
49
32
19 St James
49
22
20 Storebrand
17
51

2007
0
58
48
82
70
47
79
58
31
62
81
61
59
80
31
16
41
48
52
37

2006
0
68
58
79
69
45
84
55
32
61
70
64
59
74
35
45
42
44
82
33

2005
0
80
53
79
49
34
32
50
32
61
35
54
58
26
44
7
42
50
49
29

Y = yes, N = no
Long-term bonus, additionally, as pay
2009
2008
2007
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y

52

2006
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y

2005
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y

7.5.4 Sample companies’ remuneration data
#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Change from previous year (in domestic currency)
Company % increase/decrease in fixed (base) pay
% increase in short-term bonus
2009
2008
2007
2006
2009
2008
2007
Admiral
5
5
5
6
0
0
0
Aegon
10
18
-8
-1
0*
-100
-26
Aviva
1
74
-40
11
37
44
-60
Axa
-1
7
-7
10
41
-39
14
Beazley
15
-33
19
11
151
-72
27
Brit
1
5
4
13
25
-42
16
Chaucer
4
3
3
3
2 217
-99
-22
Chesnara
10
-1
0
9
154
-28
14
Fbd
-1
-22
7
18
-44
-58
0
Hardy Under
0
6
19
0
-26
33
24
Hiscox
2
6
24
6
525
-89
119
Ing groep
0
5
0
0
0*
-100
-13
Jardine
1
4
-1
40
-11
20
-1
Novae
0
0
13
7
-58
-15
63
Old mutual
35
-16
5
27
95
-2
-9
Protector
3
8
18
28
-16
22
-73
Rsa
5
6
6
3
22
7
2
Std
2
4
3
8
104
-46
2
St James
0
6
-6
12
267
-73
-77
Storebrand
8
16
2
4
-78
106
23

0*: cannot divide by 0

53

2006
0
6
26
16
156
71
996
30
22
-1
357
51
44
739
-15
1 368
5
1
408
22

% increase in total remuneration
2009
2008
2007
5
5
5
15
-84
-14
15
60
-51
29
-31
10
83
-60
24
0
-9
9
47
-78
-18
81
-16
8
-7
-33
5
-17
23
22
168
-71
89
0
-59
-8
7
13
-1
-44
-12
50
60
-18
2
0
10
-23
14
7
4
31
-18
-6
62
-36
-65
-36
49
9

2006
6
24
16
15
82
32
323
19
19
-1
129
28
42
199
9
116
5
15
203
10

7.5.5 Sample companies’ remuneration data converted into Euro

#

Company

Total remuneration (fixed+short-term+benefits)
2009
2008
2007
2006
1 Admiral
369 401
394 004
435 914
418 038
2 Aegon
1 007 000
879 000 5 437 000 6 307 000
3 Aviva
2 277 038 2 211 712 1 601 766 3 273 898
4 Axa
3 284 364 2 537 980 3 692 977 3 365 659
5 Beazley
1 296 910
796 520 2 320 138 1 873 281
6 Brit
936 415 1 054 874 1 350 164 1 240 913
7 Chaucer
464 839
354 982 1 906 028 2 327 812
8 Chesnara
601 821
372 605
513 443
476 710
9 Fbd
565 000
609 000
907 000
867 000
10 Hardy Under
760 494 1 029 498
973 297
803 073
11 Hiscox
1 895 286
793 044 3 155 260 1 673 619
12 Ing groep
1 353 500 1 353 000 3 290 000 3 588 000
13 Jardine
1 714 516 1 790 014 1 840 202 1 867 236
14 Novae
938 661 1 895 753 2 507 239 1 672 152
15 Old mutual
2 341 038 1 638 958 2 322 926 2 294 075
16 Protector
359 759
384 107
357 302
459 537
17 Rsa
2 615 001 2 564 176 2 796 874 2 690 111
18 Std
1 763 919 1 509 301 2 140 076 2 292 608
19 St James
1 071 963
742 526 1 341 926 3 797 491
20 Storebrand
666 390 1 109 290
761 155
695 210

2005
391 923
5 085 000
2 810 733
2 935 237
1 028 898
938 861
548 400
399 235
729 000
806 818
729 738
2 809 000
1 314 698
557 174
2 104 394
213 454
2 565 050
1 991 789
1 251 477
636 990

54

Fixed (base) pay
2009
2008
368 278
394 004
950 000
865 000
1 038 590 1 150 543
680 887
687 526
392 980
381 836
574 874
636 953
306 524
329 806
166 174
168 679
464 000
469 000
297 542
333 582
489 541
538 766
1 353 500 1 353 000
589 470
653 317
381 752
427 992
931 924
776 680
306 631
316 452
1 059 923 1 127 885
866 802
949 135
477 190
534 990
518 571
509 054

2007
435 914
731 000
767 970
642 840
658 260
707 995
373 014
197 478
600 000
365 700
592 434
1 289 000
731 400
497 352
1 075 158
300 518
1 231 678
1 060 530
585 120
449 530

2006
418 038
796 000
1 283 450
689 883
553 824
682 062
362 300
198 018
560 000
308 028
478 177
1 289 000
743 668
440 040
1 026 760
253 323
1 167 573
1 035 561
623 390
439 898

2005
391 923
803 000
1 155 296
626 810
497 216
602 509
350 976
181 338
475 000
307 104
451 882
1 289 000
529 389
409 472
804 320
199 340
1 126 048
959 334
555 712
425 160

7.5.6 Sample companies’ remuneration data converted into Euro
#

Company

Other benefits
2009
1 Admiral
1 123
2 Aegon
57 000
3 Aviva
83 087
4 Axa
4 150
5 Beazley
17 967
6 Brit
2 246
7 Chaucer
2 246
8 Chesnara
16 842
9 Fbd
34 000
10 Hardy Under
7 086
11 Hiscox
2 246
12 Ing groep
0
13 Jardine
240 279
14 Novae
4 491
15 Old mutual
340 208
16 Protector
0
17 Rsa
404 208
18 Std
26 947
19 St James
69 864
20 Storebrand
32 289

2008
0
14 000
114 551
4 150
18 487
95 669
17 623
18 882
21 000
7 035
2 518
0
21 400
6 294
246 725
0
377 640
81 822
47 039
34 376

2007
0
1 545 000
67 289
4 150
27 003
1 463
20 479
19 016
27 000
5 399
2 926
0
24 868
10 240
519 294
0
413 972
43 884
54 662
31 075

2006
0
1 219 000
89 475
4 150
25 776
4 400
20 535
17 602
27 000
6 934
22 002
0
23 469
1 467
466 442
0
387 235
240 555
57 151
28 838

2005
0
223 000
152 090
4 150
27 673
13 162
20 474
17 549
24 000
6 320
21 936
0
23 398
1 462
365 600
0
358 288
29 248
84 481
25 854

55

Short-term bonus (variable) pay
2009
2008
2007
0
0
0
0
0 3 161 000
1 155 361
946 618
766 507
2 599 327 1 846 304 3 045 987
885 963
396 197 1 634 875
359 296
322 253
640 706
156 069
7 553 1 512 535
418 804
185 044
296 948
67 000
119 000
280 000
455 866
688 881
602 198
1 403 500
251 760 2 559 900
0
0 2 001 000
884 766 1 115 297 1 083 935
552 418 1 461 467 1 999 648
1 068 906
615 553
728 474
53 128
67 655
56 784
1 150 870 1 058 651 1 151 224
870 170
478 344 1 035 662
524 909
160 497
702 144
115 531
565 860
280 550

2006
0
4 292 000
1 900 973
2 671 626
1 293 681
554 450
1 944 977
261 090
280 000
488 111
1 173 440
2 299 000
1 100 100
1 230 645
800 873
206 214
1 135 303
1 016 492
3 116 950
226 475

2005
0
4 059 000
1 503 347
2 304 277
504 009
323 190
176 950
200 349
230 000
493 393
255 920
1 520 000
761 910
146 240
934 474
14 114
1 080 714
1 003 206
611 283
185 976

7.5.7 Sample companies’ remuneration data converted into Euro
Change from previous year (EUR)
% increase/decrease in fixed (base) pay
2009
2008
2007
1 Admiral
-7
-10
4
2 Aegon
10
18
-8
3 Aviva
-10
50
-40
4 Axa
-1
7
-7
5 Beazley
3
-42
19
6 Brit
-10
-10
4
7 Chaucer
-7
-12
3
8 Chesnara
-1
-15
0
9 Fbd
-1
-22
7
10 Hardy Under
-11
-9
19
11 Hiscox
-9
-9
24
12 Ing groep
0
5
0
13 Jardine
-10
-11
-2
14 Novae
-11
-14
13
15 Old mutual
20
-28
5
16 Protector
-3
5
19
17 Rsa
-6
-8
5
18 Std
-9
-11
2
19 St James
-11
-9
-6
20 Storebrand
2
13
2
#

Company

2006
7
-1
11
10
11
13
3
9
18
0
6
0
40
7
28
27
4
8
12
3

% increase in short-term bonus
2009
2008
2007
0*
0*
0*
0*
-100
-26
22
23
-60
41
-39
14
124
-76
26
11
-50
16
1 966
-100
-22
126
-38
14
-44
-58
0
-34
14
23
457
-90
118
0*
-100
-13
-21
3
-1
-62
-27
62
74
-16
-9
-21
19
-72
9
-8
1
82
-54
2
227
-77
-77
-80
102
24

56

2006
0*
6
26
16
157
72
999
30
22
-1
359
51
44
742
-14
1 361
5
1
410
22

% increase in total remuneration
2009
2008
2007
-6
-10
4
15
-84
-14
3
38
-51
29
-31
10
63
-66
24
-11
-22
9
31
-81
-18
62
-27
8
-7
-33
5
-26
6
21
139
-75
89
0
-59
-8
-4
-3
-1
-50
-24
50
43
-29
1
-6
8
-22
2
-8
4
17
-29
-7
44
-45
-65
-40
46
9

2006
7
24
16
15
82
32
324
19
19
0
129
28
42
200
9
115
5
15
203
9

7.5.8 Sample companies’ average remuneration data (EUR)
#

Company

Total remuneration (fixed+short-term+benefits)
2009
2008
2007
2006
1 Admiral
369 401
394 004
435 914
418 038
2 Aegon
1 007 000
879 000
5 437 000
6 307 000
3 Aviva
2 277 038
2 211 712
1 601 766
3 273 898
4 Axa
3 284 364
2 537 980
3 692 977
3 365 659
5 Beazley
1 296 910
796 520
2 320 138
1 873 281
6 Brit
936 415
1 054 874
1 350 164
1 240 913
7 Chaucer
464 839
354 982
1 906 028
2 327 812
8 Chesnara
601 821
372 605
513 443
476 710
9 Fbd
565 000
609 000
907 000
867 000
10 Hardy Under
760 494
1 029 498
973 297
803 073
11 Hiscox
1 895 286
793 044
3 155 260
1 673 619
12 Ing groep
1 353 500
1 353 000
3 290 000
3 588 000
13 Jardine
1 714 516
1 790 014
1 840 202
1 867 236
14 Novae
938 661
1 895 753
2 507 239
1 672 152
15 Old mutual
2 341 038
1 638 958
2 322 926
2 294 075
16 Protector
359 759
384 107
357 302
459 537
17 Rsa
2 615 001
2 564 176
2 796 874
2 690 111
18 Std
1 763 919
1 509 301
2 140 076
2 292 608
19 St James
1 071 963
742 526
1 341 926
3 797 491
20 Storebrand
666 390
1 109 290
761 155
695 210
Total
Average

26 283 316
1 314 166

24 020 342
1 201 017

39 650 690
1 982 534

41 983 423
2 099 171

2005
391 923
5 085 000
2 810 733
2 935 237
1 028 898
938 861
548 400
399 235
729 000
806 818
729 738
2 809 000
1 314 698
557 174
2 104 394
213 454
2 565 050
1 991 789
1 251 477
636 990
29 847 867
1 492 393

57

Fixed (base) pay
2009
2008
368 278
394 004
950 000
865 000
1 038 590
1 150 543
680 887
687 526
392 980
381 836
574 874
636 953
306 524
329 806
166 174
168 679
464 000
469 000
297 542
333 582
489 541
538 766
1 353 500
1 353 000
589 470
653 317
381 752
427 992
931 924
776 680
306 631
316 452
1 059 923
1 127 885
866 802
949 135
477 190
534 990
518 571
509 054
12 215 153
610 758

12 604 201
630 210

2007
435 914
731 000
767 970
642 840
658 260
707 995
373 014
197 478
600 000
365 700
592 434
1 289 000
731 400
497 352
1 075 158
300 518
1 231 678
1 060 530
585 120
449 530

2006
418 038
796 000
1 283 450
689 883
553 824
682 062
362 300
198 018
560 000
308 028
478 177
1 289 000
743 668
440 040
1 026 760
253 323
1 167 573
1 035 561
623 390
439 898

2005
391 923
803 000
1 155 296
626 810
497 216
602 509
350 976
181 338
475 000
307 104
451 882
1 289 000
529 389
409 472
804 320
199 340
1 126 048
959 334
555 712
425 160

13 292 891
664 645

13 348 992
667 450

12 140 828
607 041

7.5.9 Sample companies’ average remuneration data (EUR)
#

Company

Other benefits
2009
2008
1 Admiral
1 123
0
2 Aegon
57 000
14 000
3 Aviva
83 087
114 551
4 Axa
4 150
4 150
5 Beazley
17 967
18 487
6 Brit
2 246
95 669
7 Chaucer
2 246
17 623
8 Chesnara
16 842
18 882
9 Fbd
34 000
21 000
10 Hardy Under
7 086
7 035
11 Hiscox
2 246
2 518
12 Ing groep
0
0
13 Jardine
240 279
21 400
14 Novae
4 491
6 294
15 Old mutual
340 208
246 725
16 Protector
0
0
17 Rsa
404 208
377 640
18 Std
26 947
81 822
19 St James
69 864
47 039
20 Storebrand
32 289
34 376
Total
Average

1 346 279
67 314

1 129 210
56 460

2007
0
1 545 000
67 289
4 150
27 003
1 463
20 479
19 016
27 000
5 399
2 926
0
24 868
10 240
519 294
0
413 972
43 884
54 662
31 075

2006
0
1 219 000
89 475
4 150
25 776
4 400
20 535
17 602
27 000
6 934
22 002
0
23 469
1 467
466 442
0
387 235
240 555
57 151
28 838

2005
0
223 000
152 090
4 150
27 673
13 162
20 474
17 549
24 000
6 320
21 936
0
23 398
1 462
365 600
0
358 288
29 248
84 481
25 854

2 817 720
140 886

2 642 031
132 102

1 398 686
69 934

58

Short-term bonus (variable) pay
2009
2008
2007
0
0
0
0
0 3 161 000
1 155 361
946 618
766 507
2 599 327
1 846 304 3 045 987
885 963
396 197 1 634 875
359 296
322 253
640 706
156 069
7 553 1 512 535
418 804
185 044
296 948
67 000
119 000
280 000
455 866
688 881
602 198
1 403 500
251 760 2 559 900
0
0 2 001 000
884 766
1 115 297 1 083 935
552 418
1 461 467 1 999 648
1 068 906
615 553
728 474
53 128
67 655
56 784
1 150 870
1 058 651 1 151 224
870 170
478 344 1 035 662
524 909
160 497
702 144
115 531
565 860
280 550
12 721 884
636 094

2006
0
4 292 000
1 900 973
2 671 626
1 293 681
554 450
1 944 977
261 090
280 000
488 111
1 173 440
2 299 000
1 100 100
1 230 645
800 873
206 214
1 135 303
1 016 492
3 116 950
226 475

2005
0
4 059 000
1 503 347
2 304 277
504 009
323 190
176 950
200 349
230 000
493 393
255 920
1 520 000
761 910
146 240
934 474
14 114
1 080 714
1 003 206
611 283
185 976

10 286 932 23 540 079 25 992 401 16 308 353
514 347 1 177 004 1 299 620
815 418

7.5.10 Sample companies’ median and range remuneration data (EUR)
#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Company
Admiral
Aegon
Aviva
Axa
Beazley
Brit
Chaucer
Chesnara
Fbd
Hardy Under
Hiscox
Ing groep
Jardine
Novae
Old mutual
Protector
Rsa
Std
St James
Storebrand
No 10
No 11
Total
Median
Range 0-1000000
Range 1000000-2000000
Range 2000000-3000000
Range 3000000-4000000 over Total remuneration (fixed+short term+benefits)
2009
2008
2007
2006
369 401
394 004
435 914
418 038
1 007 000
879 000 5 437 000 6 307 000
2 277 038 2 211 712 1 601 766 3 273 898
3 284 364 2 537 980 3 692 977 3 365 659
1 296 910
796 520 2 320 138 1 873 281
936 415 1 054 874 1 350 164 1 240 913
464 839
354 982 1 906 028 2 327 812
601 821
372 605
513 443
476 710
565 000
609 000
907 000
867 000
760 494 1 029 498
973 297
803 073
1 895 286
793 044 3 155 260 1 673 619
1 353 500 1 353 000 3 290 000 3 588 000
1 714 516 1 790 014 1 840 202 1 867 236
938 661 1 895 753 2 507 239 1 672 152
2 341 038 1 638 958 2 322 926 2 294 075
359 759
384 107
357 302
459 537
2 615 001 2 564 176 2 796 874 2 690 111
1 763 919 1 509 301 2 140 076 2 292 608
1 071 963
742 526 1 341 926 3 797 491
666 390 1 109 290
761 155
695 210

2005
391 923
5 085 000
2 810 733
2 935 237
1 028 898
938 861
548 400
399 235
729 000
806 818
729 738
2 809 000
1 314 698
557 174
2 104 394
213 454
2 565 050
1 991 789
1 251 477
636 990

Fixed (base) pay
2009
2008
368 278
394 004
950 000
865 000
1 038 590 1 150 543
680 887
687 526
392 980
381 836
574 874
636 953
306 524
329 806
166 174
168 679
464 000
469 000
297 542
333 582
489 541
538 766
1 353 500 1 353 000
589 470
653 317
381 752
427 992
931 924
776 680
306 631
316 452
1 059 923 1 127 885
866 802
949 135
477 190
534 990
518 571
509 054

2007
435 914
731 000
767 970
642 840
658 260
707 995
373 014
197 478
600 000
365 700
592 434
1 289 000
731 400
497 352
1 075 158
300 518
1 231 678
1 060 530
585 120
449 530

2006
418 038
796 000
1 283 450
689 883
553 824
682 062
362 300
198 018
560 000
308 028
478 177
1 289 000
743 668
440 040
1 026 760
253 323
1 167 573
1 035 561
623 390
439 898

2005
391 923
803 000
1 155 296
626 810
497 216
602 509
350 976
181 338
475 000
307 104
451 882
1 289 000
529 389
409 472
804 320
199 340
1 126 048
959 334
555 712
425 160

1 007 000
1 071 963
2 078 963
1 039 482

1 029 498
1 054 874
2 084 372
1 042 186

1 840 202
1 906 028
3 746 230
1 873 115

1 867 236
1 873 281
3 740 517
1 870 259

938 861
1 028 898
1 967 759
983 880

489 541
518 571
1 008 112
504 056

534 990
538 766
1 073 756
536 878

600 000
642 840
1 242 840
621 420

560 000
623 390
1 183 390
591 695

497 216
529 389
1 026 605
513 303

9
7
3
1
0
20

9
8
3
0
0
20

6
5
5
3
1
20

6
5
4
4
1
20

10
4
5
0
1
20

17
3
0
0
0
20

17
3
0
0
0
20

16
4
0
0
0
20

15
5
0
0
0
20

17
3
0
0
0
20

59

7.5.11 Sample companies’ median and range remuneration data (EUR)

#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Company
Admiral
Aegon
Aviva
Axa
Beazley
Brit
Chaucer
Chesnara
Fbd
Hardy Under
Hiscox
Ing groep
Jardine
Novae
Old mutual
Protector
Rsa
Std
St James
Storebrand
No 10
No 11
Total
Median
Range 0-1000000
Range 1000000-2000000
Range 2000000-3000000
Range 3000000-4000000 over Other benefits
2009
1 123
57 000
83 087
4 150
17 967
2 246
2 246
16 842
34 000
7 086
2 246
0
240 279
4 491
340 208
0
404 208
26 947
69 864
32 289

2008
0
14 000
114 551
4 150
18 487
95 669
17 623
18 882
21 000
7 035
2 518
0
21 400
6 294
246 725
0
377 640
81 822
47 039
34 376

2007
0
1 545 000
67 289
4 150
27 003
1 463
20 479
19 016
27 000
5 399
2 926
0
24 868
10 240
519 294
0
413 972
43 884
54 662
31 075

2006
0
1 219 000
89 475
4 150
25 776
4 400
20 535
17 602
27 000
6 934
22 002
0
23 469
1 467
466 442
0
387 235
240 555
57 151
28 838

2005
0
223 000
152 090
4 150
27 673
13 162
20 474
17 549
24 000
6 320
21 936
0
23 398
1 462
365 600
0
358 288
29 248
84 481
25 854

16 842
17 967
34 809
17 405

17 623
18 882
36 505
18 253

20 479
27 000
47 479
23 740

22 002
23 469
45 471
22 736

21 936
24 000
45 936
22 968

60

Short term bonus (variable) pay
2009
2008
2007
0
0
0
0
0
3 161 000
1 155 361
946 618
766 507
2 599 327
1 846 304
3 045 987
885 963
396 197
1 634 875
359 296
322 253
640 706
156 069
7 553
1 512 535
418 804
185 044
296 948
67 000
119 000
280 000
455 866
688 881
602 198
1 403 500
251 760
2 559 900
0
0
2 001 000
884 766
1 115 297
1 083 935
552 418
1 461 467
1 999 648
1 068 906
615 553
728 474
53 128
67 655
56 784
1 150 870
1 058 651
1 151 224
870 170
478 344
1 035 662
524 909
160 497
702 144
115 531
565 860
280 550
455 866
524 909
980 775
490 388
15
4
1
0
0
20

322 253
396 197
718 450
359 225
16
4
0
0
0
20

766 507
1 035 662
1 802 169
901 085
10
6
2
2
0
20

2006
0
4 292 000
1 900 973
2 671 626
1 293 681
554 450
1 944 977
261 090
280 000
488 111
1 173 440
2 299 000
1 100 100
1 230 645
800 873
206 214
1 135 303
1 016 492
3 116 950
226 475

2005
0
4 059 000
1 503 347
2 304 277
504 009
323 190
176 950
200 349
230 000
493 393
255 920
1 520 000
761 910
146 240
934 474
14 114
1 080 714
1 003 206
611 283
185 976

1 100 100
1 135 303
2 235 403
1 117 702
8
8
2
1
1
20

493 393
504 009
997 402
498 701
14
4
1
0
1
20

7.6 Turnovers and operating profits of companies in the content analysis over the years 2005-2009
The table below presents turnovers and operating profits over the years 2005-2009, for the companies in the content analysis sample. The bold figures have been converted into Euros, using the annual exchange rates at Sveriges Riksbank (n.d.). Black figures represent a rise from the previous year and red figures denote a decrease since the previous year.
Turnovers and operating profits of the companies
Company Years Turnover in £ Turnover in €
£ 1 000
Admiral

Operating profit in €

£ 1 000

€ 1 000

Operating profit in £

€ 1 000

263 112

384 774

121 656

177 909

2006

310 966

456 129

148 360

217 616

2007

364 134

532 654

182 383

266 789

2008

422 800

532 212

202 263

254 604

2009
Aegon

2005

507 500

569 840

215 800

242 308

2005

45 510 000

3 595 000

2006

49 309 000

3 358 000

2007

45 576 000

3 041 000

2008

7 526 000

1 085 000

2009

46 409 000

487 000

Ing Group 2005

71 141 000

8 894 000

2006

73 621 000

8 033 000

2007

76 586 000

9 508 000

2008

66 291 000

-1 487 000

2009

47 765 000

-1 525 000

Beazley

410 800

600 752

17 900

26 177

2006

565 000

828 749

92 400

135 533

2007

692 200

1 012 549

150 500

220 151

2008

667 400

840 109

99 800

125 626

2009
STD life

2005

905 300

1 016 505

109 500

122 951

2005

18 307 000

26 772 082

614 000

897 911

2006

15 349 000

22 514 100

810 000

1 188 118

2007

10 113 000

14 793 274

620 000

906 935

2008

16 226 000

20 424 945

406 000

511 064

2009

17 435 000

19 576 682

419 000

470 469

61

7.7

Webpage references to retrieve sample companies’ annual reports

#

Company

Webpage

1

Admiral

http://www.admiralgroup.co.uk/investor/financial_reports.php

2

Aegon

http://www.aegon.com/en/Home/Investors/Publications/Annual-reports/

3

Aviva

http://www.aviva.com/investor-relations/results-and-reports/reports/

4

Axa

http://www.axa.com/en/publications/annualreports/archives/

5

Beazley

http://investor.relations.beazley.com/investorrelations/resultspresentations/reports/

6

Brit

http://investor.britinsurance.com/phoenix.zhtml?c=133807&p=irol -reportsannual

7

Chaucer

http://www.chaucerplc.com/chp/en/investors/results?year=archive

8

Chesnara

http://www.chesnara.co.uk/servlet/HsPublic?context=ir.static.jsp&client=csn&path=util&service=getPage&page=companyreports&bre adcrumb=financial_sub&sidenav=financial_side&footer=0

9

Fbd

http://www.fbdgroup.com/investor-information/reports-presentations/

10 Hardy Under

http://www.hardygroup.co.uk/

11 Hiscox

http://www.hiscox.com/en/investors/report-and-accounts/latest-report.aspx

12 Ing groep

http://www.ing.com/group/showdoc.jsp?docid=372285_EN&htmlid=440582_EN&menopt=ivr|pub|arc

13 Jardine

http://www.jltgroup.com/investors/annual-and-interim-reports/

14 Novae

http://www.novae.com/1/investor/annualreports.aspx

15 Old mutual

http://www.oldmutual.com/ir/financialReports.jsp

16 Protector

http://www.protectorforsikring.no/wip4/detail_ir.epl?cat=10089

17 Rsa

http://www.rsagroup.com/rsa/pages/ir/reports?year=2006&by=date&order=DESC

18 Std

http://www.standardlife.com/investor/financial_reports.html

19 St James

http://investor.sjp.co.uk/sjp/fi/results/

20 Storebrand

http://www.storebrand.no/site/stb.nsf/Pages/allreports2010.html

62