27. Share-based payment agreement with cash settlement
A share-based remuneration programme has been in place for the members of the Management Boards of UNIQA Insurance Group AG and UNIQA Österreich Versicherungen AG since the 2013 financial year. As part of this programme, UNIQA virtual shares are granted conditionally for each financial year on the basis of allocation values defined in the service contract, based on the average price of UNIQA ordinary shares in the period of six months prior to the start of the performance period. Cash payments subject to agreed limits are provided for at the end of a performance period of four years for the individual annual tranches or depending on certain performance targets.
The selected key performance targets aim to ensure a relative market-based performance measurement and an absolute performance measurement depending on UNIQA’s company-specific targets. The performance targets, including performance periods up to 2022, comprised the total shareholder return (TSR) of UNIQA ordinary shares compared to the TSR of the shares in the companies on the DJ EURO STOXX TMI Insurance, the net combined ratio (CoR) in UNIQA’s property and casualty insurance segment and the return on risk capital (RoRC: the return on economically required capital), with these targets each weighted equally by one-third to determine overall target achievement.
Under IFRS 9/17, which will apply from the 2023 financial year, the CoR target will no longer be shown. For performance periods from 2023 onwards, two ESG targets were therefore included in the LTI programmes instead of the CoR target. These are the “Weighted Average Carbon Intensity” (WACI), which aims to reduce the average emissions intensity of the companies in UNIQA’s asset portfolio, and the “Science Based Target Initiative” (SBTi), which aims to increase the proportion of companies in UNIQA’s asset portfolio that have undertaken commitments to reduce emissions. Only direct investments by UNIQA in the relevant companies in the asset portfolio are involved here. The two ESG targets are each weighted at 20 per cent to determine overall target achievement. The TSR and RoRC targets will be reduced from one-third each to 30 per cent each.
A transitional regulation applies to the LTI programme for 2020, 2021 and 2022. The annual target achievement(s) of the CoR target (until 2022) and the annual target achievement(s) of the two ESG targets from 2023 (within the four-year overall performance period) are determined and an average of these three key figures is calculated, which is weighted by one-third to determine the overall target achievement. The TSR and RoRC targets each have an unchanged weighting of one-third.
The programme stipulates annual investments in UNIQA shares with a holding period also of four years in each case.
The cash settlement is calculated as follows for each tranche of shares: payment = A × B × C
A = number of virtual shares awarded for the performance period.
B = average price of the UNIQA ordinary share in the period of six months before the end of the performance period.
C = degree of target achievement at the end of the performance period for the targets mentioned above. The maximum target achievement is 200 per cent.
The fair value on the date that share-based payment awards are granted is recognised as expense over the period in which the unconditional entitlement to the award is obtained. The fair value is based on expectations with respect to achievement of the defined key performance targets. Changes in measurement assumptions result in an adjustment of the recognised provision amounts affecting income. Obligations from share-based remuneration are stated under “Other provisions”.
As at 31 December 2023 a total of 1,215,805 virtual shares (2022: 1,167,795 shares) were relevant for the measurement. The fair value of share-based remuneration (excluding non-wage labour costs) at the reporting date amounts to € 5,590 thousand (2022: 4,420 thousand).