Principels and Guidelines for Remuneration Policies 2020
The policies and their implementation are based on the principles of fairness and ethics, strategic coherence linked to the objectives of the business plan and adjusting to a safe and prudent management of risks in compliance with the regulations in force.
The above is stated in the belief that, through the definition and application of Remuneration Policies coherent with the aforementioned principles, it is possible to:
- help to create long-term value for all stakeholders;
- encourage the creation of long-term business strategies in the shape of strategic/industrial plans;
- protect the image and reputation of the company, in line with the provisions of its Code of Conduct;
- motivate directors, managers and employees to respond with adequate professionalism to the objectives that the company has set itself, so that they may be fully achieved.
The relevance of such principles is assessed each year by the Internal Control Functions in relation to the implementation of the policies themselves.
Directors (other than Member of the Management Control Committee)
The Directors are distinguished between executive (holders of management powers) and non-executive; in Cattolica, only the Director-General, where appointed, is qualified as executive. The remuneration of the Directors is in accordance with the Articles of Association of the Company.
The basic remuneration of non-executive Directors, whether independent or not, is established by the Shareholders' Meeting in a predetermined total fixed amount, which is then distributed individually by resolution of the Board of Directors. There is also an individual right to participate in meetings, also established by the Shareholders' Meeting.
This remuneration, which - except as specified below - constitutes the remuneration of non-executive directors, takes into account the commitment undertaken also in view of the time required for the preparation of board meetings, the study of the documentation supporting the meetings and the activity of legislative and regulatory updating, as well as the responsibilities assumed with the assignment and is not expressly linked to the future economic results of the Company and/or the achievement of specific targets indicated in advance by the Board or the delegated bodies respectively.
Moreover, for Directors who perform particular functions within the Board - Chairman, Vice-Chairmen and Secretary of the Board - an additional compensation decided by the Board of Directors, also set in fixed amounts, is envisaged.
For participation in the activities of the Internal Committees of the Board of Directors set up by the Company, the members appointed by the individual Committee may be paid a fixed amount - possibly increased by the Director who serves as Chairman of the Committee - in addition to the individual attendance allowance for participation in Committee meetings.
Non-executive Directors are not entitled to any form of variable remuneration or non-monetary benefits.
Their liability is covered by insurance (so-called directors' and officers' liability policy D&O, see resolution of the Shareholders' Meeting of 27 April 2002).
There are no indemnities for non-executive Directors in the event of early termination of their mandate.
Any exceptions to the remuneration of non-executive Directors with respect to the general criteria described in this para. are proposed by the Remuneration Committee to the Board of Directors and approved by the Shareholders' Meeting.
The Managing Director
In the event of the appointment of a Managing Director, the remuneration structure assigned to him will take into account the individual agreements and resolutions of the Board of Directors on the proposal of the Remuneration Committee, in compliance with current legislation and market best practice.
The General Manager
The Board of Directors has provided for the General Manager, appointed as of 1 November 2019, to divide the remuneration into a fixed component and a variable component of equal amount. The structure of the variable remuneration component is composed of a component linked to the achievement of short-term annual results (MbO) and the remaining component linked to the three-year results of the Business Plan (LTI) as summarised below:
- the short-term variable MbO monetary component corresponds to 40% of the gross annual remuneration paid to him.
- the long-term equity component (LTI) corresponds to 60% of the gross annual compensation paid for each year of the Plan's duration.
In addition to the appropriate and/or useful tools for the exercise of the office, the General Manager's remuneration package is completed by a series of benefits, including the company car, company welfare, insurance policies covering health, life, illness and accident risks, as well as the supplementary pension benefits provided for by the current National Collective Bargaining Agreement for Executives of Insurance Companies and the Company Regulations valid for Group Executives.
Members of the Internal Management Control Committee
The emoluments of the members of the Management Control Committee are determined by the Shareholders' Meeting on a fixed basis and in equal measure per capita, but with a special increase for the office of Chairman of the Committee itself. The Articles of Association also provide for the payment of an attendance allowance for each meeting of the Board of Directors, the Management Control Committee and any other Committee established by the Board of Directors of which they are members. There are no variable or performance-related remuneration components or forms of remuneration based on financial instruments. As far as the Directors are concerned, insurance cover is provided for their third-party liability.
The components of the Remuneration
The remuneration of Significant Personnel is composed of a fixed component and a variable component, aimed at directing the performance of resources towards the Company's targets.
The two components (the so-called pay mix) have been adequately rebalanced, particularly for Senior Management functions, to reward performance and merit, in accordance with the Company's strategic targets and risk management policy.
In order to align the incentives granted with long-term interest, at least 50% of the variable remuneration structure is made up of financial instruments partly subject to deferred payment schemes in accordance with current legislation.
The fixed component is sufficient to remunerate the service if the variable component of the remuneration is not paid due to the failure to achieve the targets.
The Board of Directors has the power, after consulting the Remuneration Committee, to take into account extraordinary events, including legislative and regulatory changes that have a significant impact on the structure and methods of calculating the values of the parameters of the assigned targets, as well as in the event of unforeseeable exceptional changes in macroeconomic conditions or a worsening of the financial environment ("Market Adverse Change" clause), when assessing the degree of achievement of the gates and targets.
The MBO Plan
The variable component is structured in a short-term monetary incentive system based on the traditional MbO (Management by Objectives) model, with percentages calculated according to the level of responsibility covered with a target level between a minimum of 25% and a maximum of 40% of the GAR.
For the holders of the Fundamental Functions who, according to current regulations, cannot be incentivised on the basis of economic and financial results, this percentage is 30% of the GAR. For these functions, the assignment of targets and the subsequent assessment of their degree of achievement will be carried out by the Board of Directors.
In line with best market practice, the MbO system assigns performance indicators, in particular:
- Group capital stability gate - soft limit of the Solvency II Ratio as defined by the Board of Directors calculated after taking into account the value of the distributed profit;
- Gate relating to the presence of profits distributable to shareholders;
- Solidarity targets linked to the actual achievement of the operating result, which excludes the most volatile components from the consolidated profit and loss account according to IAS/IFRS (e.g. realisations, write-downs, other one-off items) in order to give greater emphasis to the business performance, as envisaged by the budget, as well as the level of Rorac expected annually;
- Performance and risk management targets that also take into account the operating limits assigned, efficiency gains and project development, depending on the role held in the company by the assignee and in any case predetermined, measurable and linked to the Business Plan;
- Individual targets of compliance with current legislation.
The process determines, for each target role in the system, a form in which an indicator (KPI), the unit of measurement of this indicator, the weight of the indicator, the target value and, if necessary, the respective thresholds, the valuation curve are assigned. The percentage that can actually be disbursed will depend not only on whether the previously defined gates are exceeded, but also on the level of actual achievement of the targets.
In addition, in compliance with the regulations in force, ex-post malus and claw-back corrections of what is paid or to be paid as variable remuneration are provided for.
The methods of disbursement and the related timing are specifically regulated in the Regulations of the Plan.
The incentive scheme adopted provides for:
- the Group's capital stability clauses (Gate) - the soft limit of the Solvency II Ratio defined by the Board of Directors after taking into account the value of the profit distributed - and the presence of a profit distributable to shareholders, as basic conditions for the payment of the premium;
- four performance scenarios:
- insufficient overall performance and consequently a zero premium level;
- an overall return on the threshold (minimum acceptable - for most indicators 90% of the target level) and a premium level of 50% of the target value;
- an overall performance equal to the complete achievement of the targets with a premium level equal to 100% of the target value;
- an overall performance that exceeds the targets set (overperformance) with a premium level of up to 150% of the target value.
The New LTI 2018 – 2020 Plan
The 2018-2020 Business Plan provides for a series of targets and is based on the following pillars:
- profitable growth
- innovation and data management
- technical excellence
- cultural simplification and transformation
In order to support the achievement of these targets and to respond to the solicitations of investors, which require an alignment of the risk of Strategic Executives with that of shareholders, and to make Cattolica competitive on the labour market, an incentive plan was designed last year for key figures with the responsibility and skills required for these purposes: the Director-General, the Joint Director-General, the Deputy Director-Generals and the other members of the Management Committee, as well as the Executives of the Parent Company who, considering, in particular, their position (former D2/Directors), degree of responsibility and hierarchical dependence, are the first direct indications of such Senior Management roles. This plan consists of a long-term equity incentive system, called LTI (Long Term Incentive) and linked to performance targets over a multi-year time horizon, consistent with the duration of the Business Plan with allocation percentages varying from 30% to 60% of the GAR for each year of the Plan's duration.
Accordingly, during 2018, the Board of Directors, with the favourable opinion of the Remuneration Committee, finalised the Plan, based on financial instruments (ordinary shares of the Company), payable according to the degree of achievement of the targets of the 2018-2020 Business Plan, approved by the Shareholders' Meeting of 28 April 2018. The design and operation of the Action Based Incentive Plan strictly follows the significant IVASS Regulations.
Moreover, in order to enhance the Company's human capital including with a view to the future, a part of the LTI Incentive Plan is reserved for employees who, although not belonging to the category of Significant Personnel, have high organisational and digital skills that have demonstrated superior performance continuity. These persons will receive an incentive of between 10% and 25% of the GAR.
The long-term variable component takes the form of a three-year plan - from 2018 to 2020 - at the end of which, subject to the achievement of the set targets, free shares (performance shares) of the Parent Company will be assigned in accordance with the procedures set out in the specific Regulations of the Plan.
In particular, the number of shares potentially assignable to each recipient was determined at the beginning of the Plan as the ratio between the amount of the target incentive bonus (defined as a percentage of the GAR) and the value of the share calculated in accordance with the Regulations of the Plan.
Other components of the remuneration package for all personnel
Within each area of competence, the Corporate Bodies - Board of Directors, Director-General, Remuneration Committee, as well as the Organisation and Resources Department - have the power, according to the powers assigned to them and in compliance with the implementation processes in place within the Group, to define, in favour of employees, including non-significant personnel, the payment of specific one-off indemnities during the recruitment phase (e.g. entry bonus/stay bonus/guaranteed bonus/bonus, additional benefits, other remuneration components), as compensation for any loss of incentives accrued with the previous employer or to encourage the hiring of new talent and the acquisition of professional skills on the market.
It will also be possible to grant further integrations and improvements to the individual remuneration structure in favour of certain types of personnel, even if not significant. These treatments will be granted on the basis of specific criteria and assessments relating, for example, to the particular organisational positions held, the achievement of the level of performance of the targets assigned, participation in development projects or growth paths, retention actions, the level of experience and skills acquired, the ability to use and develop other management levers or other reasons of an extraordinary nature.
In order to attract new talent and retain those present in the Group, as well as to improve the high levels of performance not provided for by normal remuneration systems, the Director-General may propose to the Board of Directors, for the consequent resolutions, an adjustment or integration of the existing remuneration systems, subject to the positive opinion of the Remuneration Committee.
Other employees with variable remuneration
In addition to what has been specified, within the Group, variable remuneration systems may be envisaged both of a short-term monetary type and of a long-term capital type for Executives and other categories of employees and officers, including those who do not belong to Significant Personnel, or even for resources who hold roles of particular importance and/or have specific skills.
The above incentive schemes are based on the general principles and, where applicable, the application criteria already present in the Policies in force and may consist of remuneration of an economic or financial nature as well as the recognition of dedicated social benefits or other benefits.
For more information, please refer to the 2019 Report on the remuneration policy and compesation paid.
- 2019 Report on the Remuneration Policy and on Compensation paid2019 Report on the Remuneration Policy and on Compensation paid.pdf
- 2018 Remuneration Report2018 Remuneration Report.pdf
- 2017 Remuneration Report2017 Remuneration Report.pdf