This section answers a number of questions about the Shareholders’ Meeting.
The Shareholders’ Meeting Notice was published on 13 March 2020 in the web site on this page and on 18 March 2020 in the newspapers “Milano Finanza and “Il Piccolo”. On 27 march the notice has been integrated. The amendments have been made public through the same modalities on the same day.
As for attendance and voting, the authorised financial intermediary holding Generali shares must be instructed to send a notice to the Company concerning attendance. This notice includes the number of shares held in custody at the end of the seventh market day before the date of the Shareholders' Meeting in first or single call (i.e. record date, which this year is 16th April 2020). Shareholders qualifying as such after the record date are not entitled to attend and vote at the Shareholders' Meeting. The notice must be delivered to Assicurazioni Generali by the end of the third market day before the date of the Shareholders' Meeting in first or single call. Shareholders may attend and vote also if the notice from the authorised intermediary is delivered after the deadline, provided it is delivered by the start of the Shareholders' Meeting.
Pursuant to the Legislative Decree no. 27/2010, as amended, the rights to attend and to vote at the Shareholders' Meeting may be exercised by Shareholders who – at the end of the seventh business day before the day of the Shareholders' Meeting (i.e. the record date) – are holders of shares of the issuer and have notified their intention to attend the Shareholders' Meeting to the authorised intermediary. This right is not forfeited if shares are transferred wholly or in part after the record date, which, for this Shareholders' Meeting, is 16th April 2020. Any registration of purchase or sale after that date is not relevant for the purpose of entitlement to attend and vote at the Shareholders' Meeting.
Pursuant to applicable laws and regulations (art. 123-ter Consolidated Law on Finance), listed insurance and reinsurance companies are required to publish the report on remuneration policy and payments within a set period. This report includes three sections: the first section describes the remuneration policy for members of the corporate bodies, managers having strategic responsibilities and of the key functions (i.e. control functions), the second section describes how the policy as approved last year has been implemented, detailing also the actual fees paid during the previous year; the third contains the reports of key functions verifications executed by Audit, Compliance and Risk Management functions.
In this framework, the Italian regulation under the new Article 123 ter of the Consolidated Law on Financial Intermediation, upon implementing the European Shareholder Rights Directive II provides that the Shareholders’ Meeting is called upon to pass a binding resolution on the first part of the remuneration report (also in accordance with the specific IVASS provisions applicable to the insurance sector), while the vote requested on the second section has an advisory nature as long as the Shareholders’ Meeting is called only to resolve in favour of or against that second section of the report.
Shareholders may only attend the 2020 Annual General Meeting by conferring a proxy to the Representative Designated by the Company, Computershare S.p.A.. For further details please refer to the procedure for participation and voting by proxy available on the page dedicated to the 2020 AGM.
The proxy is also valid for the subsequent calls of the Shareholders' Meeting. The proxy is not valid if the name of the representative is not stated; the proxy and the related voting instructions may be revoked. The proxy must be in writing and the proxy form will be available on the website of Assicurazioni Generali and at the registered office.
The Designated Representative of the Company is the organisation the Company may appoint for each Shareholders' Meeting, pursuant to article 135-undecies of the Code on Financial Intermediaries, that Shareholders may appoint as proxy, providing voting instructions on some or all the items of the agenda, by the second business day before the Shareholders' Meeting. Proxies must be appointed using the appropriate form, which may be downloaded from the website starting by 6th April at the latest and is free of charge for Shareholders. For this Shareholders' Meeting, the Designated Representative is Computershare S.p.A., as specified in the Shareholders' Meeting Notice.
Reports are available to the public at the registered office, on the website (section Governance – Annual General Meeting – AGM 2020) and on the storage mechanism used by the Company, known as "eMarket SDIR", by the deadline set for the issues of the Shareholders' Meeting Notice of call or as required by the applicable laws.
Pursuant to the Legislative Decree no. 27/2010, the Shareholders' Meeting minutes must be available within 30 days from the day of the Meeting. Within 5 days from the day of the Shareholders' Meeting, a summary must be published on the website, detailing the outcomes of the votes, the number of shares represented in the Shareholders' Meeting and the percentage of the share capital represented by the shares for which votes have been cast, the number of votes in favour, the number of votes against the resolutions and the number of abstentions.
No it is not. Pursuant to article 123-bis, paragraph 3, of the Legislative Decree no. 58 of 24 February 1998, the Board of Directors of the Company is called upon to adopt the Corporate Governance Report. This document, as a consequence, is not subject to discussion and approval by the Shareholders’ Meeting.
As has taken place in the recent past, the agenda for this meeting also includes a proposal for an amendment to the Articles of Association, which serves to implement the long-term incentive plan.
ISVAP Regulation no. 17/2008 stipulates that upon each amendment to the Articles of Association, the insurance companies deliberate on an update of the clause of the latter that, pursuant to such regulation, states the amount of share capital and other equity elements.
a. Compensation package for the Group CEO.
This is the first renewal for our Group CEO. In the past he was appointed internally immediately following the abrupt and unforecasted exit of the previous CEO Mario Greco. The package at that time was only slightly reviewed because this was his first assignment as Group CEO coming from his experience as CEO of Italy, called to execute the strategy drafted by the previous CEO.
During the first 3 years of his assignment, Philippe Donnet has proven to overachieve all the targets of the previous strategic plan, building a strong credibility in the market and with investors as a successful Group CEO. In the last year of his mandate he also built and communicated a new strategic plan, a plan which represents a cornerstone transformation for Generali, its business and its market capitalization and consequently was highly appreciated by the market and investors.
Therefore, the discussion on the renewal of his mandate is happening under completely different framework and circumstances.
The current mandate is in fact connected with a very challenging and demanding 3-year strategic plan drafted by him and his management team, requiring increased responsibilities and managerial accountabilities connected with the deep and comprehensive transformation of our entire Group and business. It was therefore very important to confirm and retain his leadership for the whole duration of the mandate, recognizing a package aligned with market benchmark for a full CEO position.
The process of compensation review of the Group CEO followed our strict and rigorous governance process with multiple discussions in the Remuneration Committee and the Board of Directors.
All the process was supported by external independent legal and reward advisors working specifically for the Remuneration Committee and addressing the market benchmarking topics.
Our policy provides that the remuneration package is defined with the purpose to maintain a competitive level between the median and the upper quartile of the reference market in order to attract, motivate and retain our executives (as stated on page 13 19 of our Remuneration Report). This is even more important in the context of the renewal of the mandate of the Group CEO.
As stated on page 26 41 of our Remuneration Report, upon reviewing the Group CEO’s compensation package the most updated market benchmarking information of remuneration data and practices in the insurance and financial sectors have been considered with reference to our main peers and in particular other groups like Allianz, Axa, Zurich, Aviva and Unipol.
If we look at the analysis, performed with the support of Mercer and PwC, considering also most updated public data and reports, the average market reference of CEOs fixed remuneration within our main relevant peers is equal to € 1,710,000.
Moreover, all the decisions regarding the remuneration review of our Group CEO are supported by the achieved business results and consistent with the highly challenging targets set for the strategic plan 2019-2021 disclosed to the market.
Furthermore, it should be noted that the new package comes also out of a substantial redefinition of the structure of the deferred part of the variable remuneration. First of all, in the past the Group CEO was entitled to deferred part of the variable pay (LTI) with a maximum of 250% of fixed compensation (with 200% target) deferred in 3 years with provisions of maintenance of full rights to receive the payment of incentive systems in any case of termination. The new package provides for a reduction of the LTI to maximum 200% of fixed compensation (with 150% target) with a prolongation of the deferral to 5 years and limiting the provisions of maintenance only on a pro-rata basis and in specific good leaver cases, according to investors recommendations.
According to the independent opinion of PwC at the time of the renewal, the overall package of the Group CEO (all included) was positioned consistently within our policy targets reference versus the market.
b. Award levels with respect to short-term incentives in favor of senior executive officers.
As stated in our Report, the variable short term incentive for our senior managers is capped at 200% of their baseline.
The baseline is set from 50% of fixed compensation for functional roles up to 100% of fixed compensation for business roles with an average of ca. 75%.
All the information regarding the award level of the annual part of variable compensation for senior executive officers are explicitly stated in the remuneration report as below described.
Both target and maximum levels of variable remuneration for our senior managers are fully disclosed in % terms at page 14 27 of our Remuneration Report (target: 33% fix compensation; 25% annual incentive; 42% deferred incentive; and maximum 22%% fix compensation; 35% annual incentive; 43% deferred incentive) and extensive disclosure of our short term incentive system is provided in section 3.3.1 from page 15 29 to 21 35.
Moreover, total fix remuneration of our senior managers is reported on page 49 62 and is equal to € 9,689,167. Thus, overall target and maximum award levels can be calculated taking account the policy % reported as:
- target award levels equal to € 7,340,300 (9,689,167/33%*25%);
- maximum award levels equal to € 15,414,500 (9,689,167/22%*35%).
Actual award levels amount of our senior managers in payment is also reported on page 49 62 equal to € 11,567,775.
c. Termination payments, severance and non-compete agreements.
Termination Payments policy responds to the sectorial common market practices and must be compliant with the applicable law and regulation.
It is also worth noting that, under Italian employment laws, a specific remuneration (different and separated from the severance) must be necessarily provided for non-competition covenants in order for them to be valid and enforceable (and such remuneration must be assessed and set case by case depending on the actual extension of an NCC in terms of duration, territory, scope etc.)
On page 7 21 of our report is stated that the severance payments take into account only the gross annual remuneration and the average of the previous 3 years actual payments of annual cash incentives, thus severances do not include any portion of the deferred variable pay (LTI).
d. Discretionary compensation.
As stated in our remuneration report, the discretion which may be used by the Board of Directors in exceptional cases must be supported by strong rationale and should follow our strict and rigorous governance process with clear disclosure in our report to the market.
The remuneration report also indicates specific cases in which such remunerations may be awarded (e.g. upon establishment of a new employment, upon conclusion of certain extraordinary transactions, etc.), the criteria to determine the related amounts (e.g. value of incentives lost in the previous employment, value of the transaction compared to the overall remuneration of the individual, etc.), specifying that payments must comply with payment methods and limits as applicable under the remuneration policy (see page 28 41).
Moreover, with specific reference to possible discretion reserved to the Board of Directors in exceptional circumstances based on specific predefined criteria (eg. the one regarding the additional funding pool for incentive purposes on page 17 30 of our report), it has never been used in the past as stated in our report.
The specific share plan for the Group CEO has been designed in the context of the overall compensation review of our Group CEO. This is the first renewal of his mandate strictly connected with a very challenging and demanding 3-year strategic plan drafted by him and his management team, requiring increased responsibilities and managerial accountabilities connected with the deep and comprehensive transformation of our entire Group and business. The achievement of this plan would represent a real revolution in the dimension of the Group with very challenging targets: if the targets of the plan are met, the market capitalization of the Group will look completely different.
It is therefore very important to confirm and retain his leadership for the whole duration of the mandate.
It is also important to highlight that a specific and similar plan was also approved for his first mandate and the numbers and targets have been realigned in the restructuring of the package for his renewal.
Considering the specific features of the plan, we would like to highlight that:
- The potential award of 550,000 shares is the maximum (not target) provided by the plan in case of achievement of the maximum level of performance results of + 46% absolute (not relative) TSR and 8% EPS growth (CAGR – Compound Annual Growth Rate) that are even higher than the 2019-2021 strategic targets communicated to the market.
- Moreover, the +46% increase in absolute (not relative) TSR is connected to a reference share price of € 16,56, providing therefore a strong pay for performance connection. If we consider the current value of the share and volatile & difficult times we are facing, reaching a +46% increase in absolute terms versus the share price of reference of € 16,56 it is even more extraordinary challenging.
- The potential award of 550,000 shares requires the Group CEO to own the same amount of shares since September 2019 to end of the mandate. This has to be carefully valuated because it represents a considerable personal investment and risk sharing by the Group CEO with all the possible downside and personal cost exposure. This commitment has been required by the Board and accepted by the Group CEO in order to create a strong and complete alignment between results and Shareholders and Company interests.
- Targets set are extremely challenging also considering the previous share plan of the previous mandate, taking into account that, for the previous plan, the reference share price was € 12,52 versus € 16,56 of the new plan.
- The payment of the incentive is also subject to the fulfilling of predetermined Regulatory Solvency Ratio thresholds in line with those defined for the incentive system and it is also subject to a 5 years deferral rule (different from the previous share plan with 3 years deferral).
The previous share plan was included in a different overall compensation package (more connected to his previous role as CEO of a business country) with an higher level of LTI, a lower deferral period and different clauses.
A new long-term incentive plan based on Assicurazioni Generali shares – the 2020 -2022 Group LTI – is submitted for the approval of the Shareholders' Meeting.
The structure of the plan is in line with the one approved for the 2019-2021 plan. A three-year overall performance period (2020 - 2022) is provided.
The vesting of the shares is subject to the achievement of Group performance conditions and the verification of the achievement of a minimum level of Regulatory Solvency Ratio as the only access threshold to the incentive plan.
The choice of the performance objectives of the LTI 2020-2022 Plan had first of all to deal with the uncertainties related to future changes in the international accounting standards (IFRS 9 and 17), suggesting the definition of KPIs as consistent and neutral as possible with respect to this evolution in prospective perspective, relevant to investors and in line with the Group's strategic priorities.
It is therefore proposed to confirm the structure and mechanisms of the LTI plan in line with last year but to review the metrics, weights and performance targets in the light of the reference context:
- increasing the relevance of the relative Total Shareholder Return (rTSR) indicator, with weight 60%;
- introducing the Net Holding Cash Flow (NHCF) target as a cumulative reference for the period, with a weight of 40%.
The structure of the Long-Term Incentive Plan is differentiated in terms of overall timeline and deferral periods for two different categories of beneficiaries, pursuant to regulatory provisions:
- for the Managing Director/Group CEO and Group Management Committee (GMC) members, the pay-out system is set over an overall timeframe of seven calendar years;
- for other relevant personnel, the other members of the Global Leadership Group (GLG), the Talents and the other key roles selectively identified, the pay-out system is set over an overall timeframe of six calendar years.
The maximum number of shares to be granted is equal to 9.500.000, which account for 0,6% of the current share capital.