Share award scheme
For Talanx AG and the major Group companies including Hannover Rück SE, it was resolved to introduce a share award scheme initially for the members of the Boards of Management and then for certain managerial staff, with effect from the 2011 financial year, that grants stock appreciation rights in the form of virtual shares, known as “share awards”. This share award scheme comes in two versions:
- Talanx share awards (for members of the Talanx Board of Management and the major Group companies and certain managerial staff, other than Hannover Rück SE)
- Hannover Re share awards (for members of the Board of Management of Hannover Rück SE and from the 2012 financial year also for certain managerial staff of Hannover Rück SE. This share award scheme replaces the terminated stock appreciation rights scheme of Hannover Re. Please refer to our remarks in section “Stock appreciation rights scheme of Hannover Rück SE”
The share awards do not entitle participants to demand actual shares, only the payment of a cash amount subject to the following conditions.
The share award scheme is open to all persons contractually entitled to share awards and whose service or employment relationship is still in force at the time of allocation of the share awards and will not end due to termination by either party or by mutual agreement before expiry of the waiting period.
Share awards will first be issued for the 2011 financial year and thereafter separately for each subsequent financial year (allocation year).
The total number of share awards granted depends on the value per share. The value per share is calculated as the unweighted arithmetic mean of the Xetra closing prices. The conditions for participants prescribe for the calculation a period of five trading days before to five trading days after the meeting of the Supervisory Board that approves the consolidated financial statements for the previous financial year. The Talanx share awards are based on the value per share of Talanx AG, while the Hannover Re share awards are based on the value per share of Hannover Rück SE. For the managerial staff of Hannover Rück SE the period is 20 trading days before to ten trading days after the meeting of the Supervisory Board that approves the consolidated financial statements for the previous financial year. The total number of share awards to be allocated is arrived at by dividing the amount available for allocation of share awards to each entitled participant by the value per share, rounded up to the next full share. For Board of Management members of Talanx and major Group companies as well as Hannover Rück SE 20% of the individual’s defined variable remuneration is allocated in share awards, while for the managerial staff of Hannover Rück SE the figure is 40% or 35% according to the management levels.
The share awards are allocated automatically, without the need for a declaration by either party. For each share award, the value of one share determined according to the above definition on the disbursement date is paid out after a waiting period of four years. The value per share is calculated using the procedure described in the previous paragraph.
The amount payable to each entitled participant is the total value – calculated at the time of disbursement – of the share awards for which the four-year waiting period has expired. This amount is paid by bank transfer in the month following the end of the period designated for calculating the value per share as described in the previous paragraphs.
Together with payment of the value of the share awards, an amount equal to the dividend – if dividends were distributed to shareholders – is paid. The amount of the dividend is the sum of all dividends paid per share during the term of the share awards multiplied by the number of share awards paid out to each entitled participant at the time of disbursement. If the share awards are paid out ahead of time, only the value of the dividends for the period up to the occurrence of the event triggering the early pay-out will be paid. Proportionate shares in dividends not yet distributed are not taken into account.
If the entitled participant’s period of office as a member of the Board or the service contract with the member of the Board or the employment contract with the participant ends, the participant remains entitled to payment of the value of any share awards already granted at the time of expiry of the respective waiting period, unless said termination is based on resignation of the participant, or resignation/dismissal for good cause. In the event of death of the participant, entitlement to share awards already allocated or still to be allocated passes to the heirs. All share awards are calculated based on the value per share determined on the disbursement date.
No share awards may essentially be allocated after the participant has left the company, except if the participant has left the company due to non-reappointment, retirement or death, and then only in respect of entitlements to variable remuneration earned by the participant in the last year – or part thereof – of activity on behalf of the company.
The share award scheme is accounted for within the Group as share-based remuneration with a cash settlement governed by the requirements of International Financial Reporting Standards – IFRS 2. Due to the different calculation bases used for the Talanx share awards and the Hannover Re share awards, the further characteristics of the two versions are described under Talanx Share Awards.