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Reinsurance Group
at the Annual Meeting. Shareholders will be entitled to cast one vote on each matter for each share of common stock held of record on the record date. Any person giving such a proxy has the right to revoke it at any time before it is voted by giving written notice of revocation to the Secretary of the Company, by duly executing and delivering a proxy bearing a later date, or by attending the Annual Meeting and voting in person. date is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on. Under Missouri corporate law, the approval of any action taken at the annual meeting is based on votes cast. If a quorum is present, the votes necessary to approve Items 1, 2 and 3, or to act on any other matters properly brought before the meeting, is the affirmative vote of the holders of a majority of the shares of our common stock entitled to vote which are present in person or represented by proxy at the 2014 Annual Meeting. that meeting. For additional information on the procedures for shareholder proposals, see “Director Qualifications and Nominations.” DIRECTORS New Directors Nominating & Governance Committee. Ms. Phillips was appointed to the Compensation Committee and Nominating & Governance Committee.
®NOTICE OF THE ANNUAL MEETING OFTHE SHAREHOLDERSOFREINSURANCE GROUPOF AMERICA, INCORPORATEDChesterfield, MissouriApril 8, 2013TO THE SHAREHOLDERS OFREINSURANCE GROUP OF AMERICA, INCORPORATEDChesterfield, MissouriApril 14, 2014To the Shareholders of Reinsurance Group of America, Incorporated:The Annual Meeting of the Shareholders of Reinsurance Group of America, Incorporated will be held at the Company’s principal executive offices located at 1370 Timberlake Manor Parkway, Chesterfield, Missouri 63017 on May 15, 2013,21, 2014, commencing at 2:00 p.m., at which meeting only holders of record of the Company’s common stock at the close of business on March 18, 201331, 2014 will be entitled to vote, for the following purposes:1. To elect two directors for terms expiring in 2016;2016 and three directors for terms expiring in 2017;2. To vote to approve the compensation of the Company’s named executive officers on a non-binding, advisory basis; 3.To vote to approve an amendment to the Company’s Flexible Stock Plan;4.To vote to re-approve the performance measures under the Company’s Annual Bonus Plan;5.To vote to re-approve the performance measures under the Company’s Flexible Stock Plan;6.To vote on a proposal to amend the Company’s Articles of Incorporation to declassify the Board of Directors;7.3.To ratify the appointment of Deloitte & Touche LLP as the Company’s independent auditor for the fiscal year ending December 31, 2013;2014; and8.4. To transact such other business as may properly come before the meeting. REINSURANCE GROUP OF AMERICA, INCORPORATED By 
J. Cliff EasonChairman of the Board
William L. HuttonSecretaryTABLE OF CONTENTSPage No. 
PROXY STATEMENT SUMMARYWilliam L. HuttonSecretaryYou have received these proxy materials because the Board of Directors is soliciting your proxy to vote your shares at the 2014 Annual Shareholders’ Meeting. This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references (“##”) are supplied to help you find additional information in this proxy statement. This proxy statement and the related proxy materials were first mailed to shareholders and made available on the internet on April 14, 2014.Annual Shareholders’ MeetingTime: May 21, 2014, 2:00 p.m., Central timePlace: 1370 Timberlake Manor Parkway, Chesterfield, Missouri 63017Record Date: Close of business on March 31, 2014Voting Matters and Board RecommendationsPROPOSAL BOARD VOTERECOMMENDATIONPAGE REFERENCE(FOR MORE DETAIL)Election of Directors FOR 3 Advisory Vote to Approve Executive Compensation FOR 44 Ratification of the appointment of Deloitte & Touche as Independent Auditor for fiscal 2014 FOR 45 How to Cast Your VoteYou can vote by any of the following methods:via the internet (www.investorvote.com/rga) by 11:59 p.m., Eastern Time, on May 20, 2014.via telephone by calling 1-800-652-VOTE (8683) by 11:59 p.m., Eastern Time, on May 20, 2014.if you received a proxy card or voting instruction form in the mail, by completing, signing, dating, and returning your proxy card in the return envelope provided to you in accordance with the instructions provided with the proxy card.in person, at the 2014 Annual Shareholders’ Meeting.Board Nominees (page 4)NAME DIRECTORSINCEINDEPENDENT ELECTION FORTERM ENDINGCOMMITTEEMEMBERSHIPSChristine R. Detrick 2014 Yes 2016 Audit; Nominating & Governance Joyce A. Phillips 2014 Yes 2016 Compensation; Nominating & Governance Arnoud W.A. Boot 2009 Yes 2017 Audit; FIRM John F. Danahy 2009 Yes 2017 Audit; Compensation J. Cliff Eason 1993 Yes 2017 Compensation; Nominating & Governance iInformation about our Board and its Committees (page 14) NUMBER OFMEMBERSPERCENTINDEPENDENTNUMBER OFMEETINGS IN2013Full Board 10 90% 8 Audit 4 100% 8 Compensation 5 100% 6 Finance, Investment, Risk Management 5 80% 7 Nominating & Governance 5 100% 5 Governance FactsSize of Board 10 Number of Independent Directors 9 Audit and Compensation Committees Comprised Entirely of Independent Directors Yes Independent Presiding Director Yes Separate Chairman and CEO Yes Majority Voting for Directors in Uncontested Elections Yes Advisory Vote on Executive Compensation Annual Annual Board and Committee Self-Evaluations Yes Stock Ownership Guidelines for Directors and Executive Officers Yes Restrictions on Hedging and Pledging of Company Shares for Directors and Employees Yes Executive Incentive Recoupment (Clawback) Policy Yes Shareholder Rights Plan (Poison Pill) No 2013 Business HighlightsAside from an after-tax charge of approximately $184 million, or $2.53 per diluted share, to increase claims liabilities in Australia in the second-quarter, 2013 full-year results were relatively strong including record revenues in excess of $10 billion. Summarized below are some key highlights of our financial performance for 2013:2013 total shareholder return (TSR) was 46.7%.Our net operating income for 2013 decreased 30.6% to $358.4 million, or $4.95 per diluted share.* The decrease was primarily attributable to the second-quarter charge in Australia, described above.Our net premiums increased $347.4 million, or 4.4%, compared to 2012.2013 revenues exceeded $10 billionFor additional information on our 2013 financial performance, see our 2013 Annual Report on Form 10-K.*See “Appendix A: Use of Non-GAAP Financial Measures” for reconciliations to GAAP figures.ii2013 Executive Compensation HighlightsANNUAL BONUS PLAN (based only on overall Company financial performance)Payout 38.4% of target Metric Actual Results % of Target Payout Operating Income Per Share $4.95/share 0.0% Annual Consolidated Revenue $10.3 billion 122.8% New Business Embedded Value $444 million 200.0% 2011-2013 PERFORMANCE CONTINGENT SHARE PROGRAM Payout To be approved late April 2014 Metric Actual Results % of Target Payout Cumulative Three-Year Revenue Metric 8.0% 75.8% Three-Year Operating Return on Equity (ROE) 10.3% 0.0% Three-Year Relative Return on Equity To be approved late April 2014 To be approved late April 2014 Primary Components of Executive Compensation (page 24)COMPONENT FORM KEY FEATURES Base Salary Cash ● Intended to attract and retain top talent ● Generally positioned near the 50th percentile of our pay level peer group, but varies with individual skills, experience, responsibilities, and performance● Represents approximately 31.9% of named executive officer (NEO) target total compensation for 2013 Annual BonusPlanCash ● Tied to one or more of the following factors: overall Company performance, performance of the participant’s division or business unit and/or individual performance ● Performance goals established at the beginning of each fiscal year ● Payouts range from 0% of target payout to 200% of target payout, depending on performance ● Intended to motivate annual performance with respect to key financial measures ● Represents approximately 27.9% of NEO target total compensation for 2013 PerformanceContingentSharesEquity ● Tied to the rate of revenue growth, ROE and Relative ROE performance over a three-year period ● Performance goals established at the beginning of each 3 year cycle ● Payouts range from 0% of target payout to 200% of target payout, depending on performance ● Intended to motivate intermediate performance with respect to key financial measures and align our NEOs’ interests with those of our shareholders ● Represents approximately 21.1% of NEO target total compensation for 2013 StockAppreciationRightsEquity ● Fully vests on the fourth anniversary of grant (25% per year) ● Intended to motivate long-term performance, promote appropriate risk-taking align our NEOs’ interests with shareholders’ interests and promote retention ● Represents approximately 19.1% of NEO target total compensation for 2013 iiiPROXY STATEMENT Page No. i1124The Board of Directors and Committees810111114172627272829Option and SARs Exercises and Stock Vested During Fiscal 20123232343536Securities Ownership of Directors, Management and Certain Beneficial Owners3840Item 2 — Shareholders’ Advisory Vote on Executive Compensation41Item 3 — Approval of Amendment to the Company’s Flexible Stock Plan42Item 4 — Approval of Performance Measures under the Company’s Annual Bonus Plan50Item 5 — Approval of Performance Measures under the Company’s Flexible Stock Plan5258Item 7 — Ratification of Appointment of the Independent Auditor6061iiInformation About the 2013 Annual Meeting and Proxy VotingEven though you may plan to attend the meeting, please mark, date, and execute the enclosed proxy and mail it promptly. A postage-paid return envelope is enclosed for your convenience.Reinsurance Groupof America, Incorporated®1370 Timberlake Manor ParkwayChesterfield, Missouri 63017-6039for theAnnual Meeting of the ShareholdersTo Be Held May 15, 2013at the Company’s Offices in Chesterfield, MissouriThis Proxy Statement is furnished to the holders of common stock of Reinsurance Group of America, Incorporated (the “Company”) is making this proxy solicitation in connection with the solicitation of proxies for use at theCompany’s 2014 Annual Meeting of the Shareholders (the “Annual Meeting”) to be held at 2:00 p.m. on May 15, 2013,21, 2014, and all adjournments and postponements thereof, for the purposes set forth in the accompanying Notice of the Annual Meeting of the Shareholders.thereof. The Company is first mailing this Proxy Statement and the enclosed Annual Report to Shareholders for the fiscal year ended December 31, 20122013 on or about April 8, 2013.Whether14, 2014. The solicitation will primarily be by mail and the expense thereof will be paid by the Company. In addition, proxies may be solicited by directors, officers, or not you expectregular employees of the Company in person, or by telephone, facsimile transmission or other electronic means of communication.The close of business on March 31, 2014 has been fixed as the record date for the determination of the Company shareholders entitled to attendvote at the Annual Meeting, you are requested to complete, sign,Meeting. As of the record date, and return the enclosed form of proxy. If you attend the meeting, you may vote by ballot. If you do not attend the meeting, yourapproximately 69,514,009 shares of common stock canwere outstanding and entitled to be voted only when represented by a properly executed proxy.Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Company’s Notice of Annual Meeting, 2014 Proxy Statement and 2013 Annual Report toShareholders are available on the Company’s website at www.rgare.com.QUESTIONS AND ANSWERS ABOUT THE MEETING1. Who is entitled to vote and how many votes do I have?If you are a holder of record of Company common stock at the close of business on March 18, 2013 has31, 2014, you are eligible to vote at the 2014 Annual Meeting. For each matter presented for vote, you have one vote for each share you own.2. How do I vote?Your vote is important. Please cast your vote as soon as possible using one of the following methods.By Telephone or Internet. All shareholders of record also can vote by touchtone telephone within the U.S., U.S. territories and Canada, using the toll-free telephone number on the proxy card, or through the Internet, using the procedures and instructions described on the proxy card. The telephone and Internet voting procedures are designed to authenticate shareholders’ identities, to allow shareholders to vote their shares and to confirm that their instructions have been fixedrecorded properly.By Written Proxy. All shareholders of record can vote by written proxy card. If you received a proxy card or voting instruction form in the mail, you may vote by completing, signing, dating, and returning your proxy card in the return envelope provided to you in accordance with the instructions provided with the proxy card. If you sign and return your proxy card but do not mark any selections giving specific voting instructions, your shares represented by that proxy will be voted as recommended by the Board of Directors.In Person. All shareholders of record may vote in person at the meeting. Whether you plan to attend the meeting or not, we encourage you to vote by proxy as soon as possible. The proxy committee will vote your shares according to your directions.13. Can I change my vote?There are several ways in which you may revoke your proxy or change your voting instructions before the time of voting at the meeting please note that, in order to be counted, the revocation or change must be received by 11:59 p.m., Eastern Time, on May 20, 2014:Vote again by telephone or at the Internet website.Mail a revised proxy card or voting instruction form that is dated later than the prior one.Vote in person at the Annual Meeting.Notify the Company’s Corporate Secretary in writing that a prior proxy is revoked or voting instructions are changed.4. What is the voting requirement to approve each of the proposals and how are votes counted?At the close of business on March 31, 2014, the record date for the determination ofmeeting, the Company shareholders entitled to vote at the Annual Meeting. As of the record date, approximately 73,685,270had outstanding 69,514,009 shares of common stock were outstanding and entitled to be voted at the Annual Meeting. Shareholders will be entitled to cast one vote on each matter for eachstock. Each share of common stock held of recordoutstanding on the record date.Shareholder approval occurs if the votes cast in favor of the proposal exceed the votes cast against the proposal. “Votes cast” on these proposals means votes “for” or “against” a particular proposal, whether by proxy or in person. Abstentions and broker non-votes are not considered "votes cast" on these proposals and therefore have no effect on the outcome of these proposals. In uncontested elections, directors are elected by a majority of votes cast.5. Who pays for the solicitation of proxies?The Company pays the cost of soliciting proxies. Proxies will be solicited on behalf of the Board of Directors of the Company is making this proxy solicitation. The solicitation will primarily be by mail, and the expense thereof will be paid by the Company. In addition, proxies may be solicited by directors, officers, or regular employees of the Company in person, or by telephone, facsimile transmission or other electronic means or in person.6. How do I comment on Company business?Your comments are collected when you vote using the Internet. We also collect comments from the proxy card if you vote by mailing the proxy card. You may also send your comments to us in care of communication.Important Notice Regarding the AvailabilitySecretary at Reinsurance Group of Proxy MaterialsAmerica, Incorporated, 1370 Timberlake Manor Parkway, Chesterfield, Missouri 63017-6039. Although it is not possible to respond to each shareholder, your comments help us to understand your concerns.7. May I nominate someone to be a director of the Company?Yes. For information on the procedures for shareholder nominations of director candidates, see “Board of Directors - Director Qualifications and Nominations.”8. When are the Annual Meeting: This2015 shareholder proposals due?Shareholder proposals submitted under the process prescribed by the SEC (in Rule 14a-8 of the Exchange Act) for presentation at the 2015 annual meeting must be received by us by December 15, 2014, for inclusion in our Proxy Statement and our 2012 Annual Reportproxy relating to Shareholders are available atwww.rgare.com.2ITEM BOARD OF DIRECTORSITEM 1 — ELECTION- ELECTION OF DIRECTORSThe first item to be acted upon at the Annual Meeting is the election of WilliamArnoud W.A. Boot, John F. Danahy, Christine R. Detrick, J. BartlettCliff Eason and Alan C. HendersonJoyce A. Phillips as directors of the CompanyCompany. Mses. Detrick and Phillips stand for election to the Board for terms expiring at the annual meeting of the shareholders in 2016, or until their respective successors have been elected and qualified. Messrs. Boot, Danahy and Eason stand for re-election to the Board for terms expiring at the annual meeting of the shareholders in 2017 or until their respective successors have been elected and qualified. The Board nominates Messrs. Bartlettdirectors Boot, Danahy, Detrick, Eason and HendersonPhillips for election at the Annual Meeting. Each nominee is currently a director of the Company.RetirementAppointment of Rachel LomaxOn December 17, 2013, the Company announced the appointment of the dateChristine R. Detrick, former Director and Head of the Annual Meeting, Rachel Lomax will retire fromAmericas Financial Services Practice of Bain & Company, Inc., and Joyce A. Phillips, Chief Executive Officer, Global Wealth, Australia and New Zealand Banking Group Limited, to the Board, of Directors. Her position oneffective January 1, 2014. Ms. Detrick was appointed to the Board will remain vacant until her successor is electedAudit Committee and qualified.Nominees and Continuing DirectorsThe Board currently has nineten directors who are divided into three classes, eachtwo of which contains three directors. Following the Annual Meeting, the Board will have eight directors who will be divided into three classes, two of which will contain three directors and one will contain twoof which contains four directors. The term of office for each class is three years. Certain information with respect to the director nominees proposed by the Company and the other directors whose terms of office will continue after the Annual Meeting is set forth below.Should any one or more of the nominees be unable or unwilling to serve (which is not expected), the proxies (except proxies marked to the contrary) will be voted for such other person or persons as the Board may recommend.Vote RequiredIf a quorum is present, the vote required to approve this Item 1 is a majority of the common stock represented in person or by proxy at the Annual Meeting. The Company recommends a voteFOR the nominees for election to the Board.To Be Elected as Directors for Terms Ending in 2016:Director SinceWilliam J. Bartlett, 63Retired partner, Ernst & Young Australia. Mr. Bartlett was an accountant and consultant with Ernst & Young for over 35 years and advised numerous clients in the global insurance industry. Mr. Bartlett was appointed a partner of Ernst & Young in Sydney, Australia in July 1980, a position he held until his retirement in June 2003. He served as chairman of the firm’s global insurance practice from 1991 to 2000, and was chairman of the Australian insurance practice group from 1989 to 1998. Mr. Bartlett currently serves as an independent, non-executive director of Suncorp Group Limited, GWA Limited and the Abacus Property Trust, all of which are listed on the Australian Stock Exchange. Mr. Bartlett previously served as a member of the Australian Life Insurance Actuarial Standards Board and a consultant to the Australian Financial Reporting Council on Auditor Independence. He holds several professional memberships in Australia (ACPA and FCA), South Africa (CASA), and the United Kingdom (FCMA).2004Alan C. Henderson, 67Retired President and Chief Executive Officer of RehabCare Group, Inc. (“RehabCare”) from June 1998 until June 2003. Prior to becoming President and Chief Executive Officer, Mr. Henderson was Executive Vice President, Chief Financial Officer and Secretary of RehabCare from 1991 through May 1998. Mr. Henderson was a director of RehabCare from June 1998 to December 2003, Angelica Corporation from March 2001 to June 2003, and General American Capital Corp., a registered investment company, from October 1989 to April 2003.2002To Continue in Office Until 2015:Director SinceFrederick J. Sievert, 65Retired President of New York Life Insurance Company from 2002 through 2007. Mr. Sievert shared responsibility for overall company management in the Office of the Chairman, from 2004 until his retirement in 2007. Mr. Sievert joined New York Life in 1992 as Senior Vice President and Chief Financial Officer. In 1995, Mr. Sievert was promoted to Executive Vice President and was elected to the Board of Directors in 1996. In addition, he was President and a member of the board of New York Life Insurance and Annuity Corporation, served as Chairman of the Board of NYLIFE Insurance Company of Arizona, and served on the Board of Directors for Max New York Life, the company’s joint venture in India, Siam Commercial New York Life, the joint venture in Thailand, and the company’s South Korea operation. Prior to joining New York Life, Mr. Sievert was a senior vice president for Royal Maccabees Life Insurance Company, a subsidiary of the Royal Insurance Group of London, England. Mr. Sievert currently serves as a director of CNO Financial Group, Inc.2010Stanley B. Tulin, 63Retired Vice Chairman and CFO of AXA Financial, Inc. and its principle insurance subsidiary, AXA Equitable Life Insurance Company. Mr. Tulin joined AXA Equitable in 1996 as Senior Executive Vice President and CFO. In 1997, he became Executive Vice President and CFO of AXA Financial. In 1998, he was named Vice Chairman and a director of AXA Equitable, while remaining CFO of AXA Financial. He served on the AXA Group Executive Committee from 2000 through 2006. In his position at AXA, Mr. Tulin gained extensive experience in acquisitions and divestitures, consolidated risk management and financial communications. Since his retirement in 2006, Mr. Tulin has regularly consulted to AXA Financial, Inc. Prior to joining AXA Equitable, Mr. Tulin served as co-chairman of Coopers & Lybrand’s Insurance Industry Practice group and was part of the actuarial and strategic planning group at Milliman & Robertson, Inc. for 17 years. Mr. Tulin is a fellow of the Society of Actuaries and a member of the American Academy of Actuaries.2012A. Greig Woodring, 61President and Chief Executive Officer of the Company since 1993. Mr. Woodring headed the reinsurance business at General American Life Insurance Company from 1986 until the Company’s formation in December 1992. He also serves as a director and officer of a number of Company subsidiaries.1993To Continue in Office Until 2014:Director SinceArnoud W.A. Boot, 53Professor of Corporate Finance and Financial Markets at the University of Amsterdam and director of the Amsterdam Center for Law & Economics since 2002. Mr. Boot is the founder and director of the Amsterdam Center for Corporate Finance. Prior to his current positions, Mr. Boot was a partner in the Finance and Strategy Practice at McKinsey & Company from 2000 through 2001, was the Vice Dean, Faculty of Economics and Econometrics at the University of Amsterdam from 1998 through 2000 and president of the European Finance Association in 2008. Mr. Boot serves as Chairman of the Bank Council of the Dutch Central Bank and is a member of the Dutch Scientific Council for Government Policy and the Dutch Social Economic Council. He is a member of the Advisory Scientific Committee of the European Systemic Risk Board in Frankfurt and he is also a research fellow at the Centre for Economic Policy Research in London and the Davidson Institute of the University of Michigan.2009John F. Danahy, 66Retired Chairman and Chief Operating Officer of May Merchandising Company and May Department Stores International, subsidiaries of The May Department Stores Company (MDSC). Mr. Danahy served in various positions within MDSC for 38 years until his retirement in 2006. Mr. Danahy previously served as corporate-wide Senior Vice President of Information Technology and as Chairman and Chief Operating Officer of The Famous-Barr Co. for five years. Mr. Danahy has an Executive Master of Business Administration degree from Washington University’s Olin Business School.2009J. Cliff Eason, 65Retired President and CEO of Southwestern Bell Telephone, SBC Communications, Inc. (“SBC”), a position he held from September 2000 through January 2001. Mr. Eason served as President, Network Services from 1999 through 2000; President, SBC International, from 1998 until 1999; President and CEO of Southwestern Bell Telephone Company (“SWBTC”) from 1996 until 1998; President and CEO of Southwestern Bell Communications, Inc. from 1995 through 1996; President of Network Services of SWBTC from 1993 through 1995; and President of Southwestern Bell Telephone Company of the Midwest from 1992 to 1993. He held various other positions with SBC and its subsidiaries prior to 1992. Mr. Eason was a director of Williams Communications Group, Inc. until his retirement in January 2001.19933To Be Elected as Director for Term Ending in 2016
To Be Elected as Directors for Terms Ending in 2017
4
CORPORATE GOVERNANCE
We have adopted a Principles
Directors
Qualifications of Directors
Following the Annual Meeting, the Board of Directors will beis made up of eightten individuals, each with a valuable core set of skills, talents and attributes that make them appropriate for our Company’s Board as a whole. When searching for new Board candidates, the Nominating and Governance Committee considers the evolving needs of the Company’s global business and searches for Board candidates that fill any current or anticipated future needs or gaps in skills and experience. As determined by our Board and the Nominating and Governance Committee, all of our directors possess the following qualifications: financial literacy, leadership experience, commitment to the Company’s values, absence of conflicting commitments, and knowledge and experience that will complement that of other directors and promote the creation of shareholder value. Other areas of expertise or experience are desirable given our Company’s global reinsurance business and operations and the current make-up of the Board, such as expertise or experience in: life insurance, financial services, information technology, international markets, operations, capital markets, investments, banking, risk management, public company service and actuarial science. The process undertaken by the Nominating and Governance Committee in recommending qualified director candidates is described under “Additional Information – Shareholder“Shareholder Nominations and Proposals.”
All of our directors bring significant executive leadership derived from their careers and professions. When considering whether our current directors had the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the Nominating and Governance Committee and the Board of Directors focused primarily on the information discussed in each of the directors’ individual biographies described above.
William J. Bartlett:
| ü | Financial Literacy | Such person should be “financially literate” as such qualification is interpreted by the Board in its business judgment. |
| ü | Leadership Experience | Such person should possess significant leadership experience, such as experience in business, finance/accounting, law, education or government, and shall possess qualities reflecting a proven record of accomplishment and ability to work with others. |
| ü | Commitment to Our Values | Such person shall be committed to promoting our financial success and preserving and enhancing our business and ethical reputation, as embodied in our codes of conduct and ethics. |
| ü | Absence of Conflicting Commitments | Such person should not have commitments that would conflict with the time commitments of a director. |
| ü | Reputation and Integrity | Such person shall be of high repute and recognized integrity and not have been convicted in a criminal proceeding (excluding traffic violations and other minor offenses). Such person shall not have been found in a civil proceeding to have violated any federal or state securities or commodities law, and shall not be subject to any court or regulatory order or decree limiting his or her business activity, including in connection with the purchase or sale of any security or commodity. |
| ü | Knowledge and Experience | Such person should possess knowledge and experience that will complement that of other directors and promote the creation of shareholder value. |
| ü | Other Factors | Such person shall have other characteristics considered appropriate for membership on the Board, including an understanding of marketing and finance, sound business judgment, significant experience and accomplishments and educational background. |
| Elements of Director Compensation | ||
| Annual Retainer | ||
| Chairman of the Board | $83,000 | |
| Audit Committee Chair | $62,000 | |
| Other Committee Chairs | $58,000 | |
| All other independent directors | $50,000 | |
| Payments Per Meeting | ||
| Chairman of the Board | $4,000 for attending in person | |
| $2,000 for telephonic meetings | ||
| All other independent directors | $3,000 for attending in person | |
| $1,500 for telephonic meetings | ||
| Annual Stock Grants | ||
| Chairman of the Board | 2,125 shares | |
| All other independent directors | 1,725 shares | |
| 2013 DIRECTOR COMPENSATION | ||||
| NAME | FEES EARNED OR PAID IN CASH1 | STOCK AWARDS2 | ALL OTHER COMPENSATION3 | TOTAL |
| William J. Bartlett | $111,500 | $101,378 | $96,9524 | $309,830 |
| Arnoud W.A. Boot | $105,500 | $101,378 | $5,194 | $212,072 |
| John F. Danahy | $112,000 | $101,378 | --- | $213,378 |
| J. Cliff Eason | $139,500 | $124,886 | $11,578 | $275,964 |
| Alan C. Henderson | $107,500 | $101,378 | $31,429 | $240,307 |
Rachel Lomax5 | $50,500 | $101,378 | --- | $151,878 |
| Fred J. Sievert | $107,500 | $101,378 | --- | $208,878 |
| Stanley B. Tulin | $90,500 | $101,378 | $15,018 | $206,896 |
| 1. | This column reflects the retainer and fees earned in 2013 for Board and committee service. The 2013 retainer was paid in January 2013 and the 2013 Board and committee meeting fees were paid in January 2014. |
| 2. | This column reflects the award of 1,725 shares (2,125 shares in the case of Mr. Eason) of common stock on February 21, 2013, at a closing market price of $58.77. The stock is issued as part of the directors’ annual compensation. For additional information on the valuation assumptions, refer to note 16 of the Company’s financial statements in the Form 10-K for the year ended December 31, 2013, as filed with the SEC. Mr. Eason elected to defer his stock awards under the Flexible Stock Plan. |
| 3. | This column includes 2013 reimbursement to the director for spousal travel expenses incurred in connection with attending the October meeting of the Board of Directors, which is usually held in one of the Company’s global offices outside the U.S. Under U.S. tax laws, the amount of such reimbursement for spousal travel must be included on the Form 1099-MISC that is issued annually by the Company to each director. Directors are responsible for payment of any taxes they incur because of the reimbursement for spousal travel expenses. The amount for Mr. Henderson also reflects reimbursement for spousal travel expenses he incurred in 2011 and 2012. |
| 4. | Represents compensation for services as a director of our Australian holding and operating companies. Australian dollars converted to U.S. dollars using an annualized currency exchange rate. |
| 5. | Ms. Lomax retired from the Board of Directors on May 15, 2013. |
| PHANTOM OR DEFERRED SHARE OWNERSHIP | |
| NAME | PHANTOM OR DEFERRED SHARES |
| William J. Bartlett | 5,631 |
| J. Cliff Eason | 22,758 |
| Alan C. Henderson | 1,086 |
Arnoud W.A. Boot: managementGovernance Guidelines and business consulting experience; corporate finance; investments; risk management; international business, marketsCharters
John F. Danahy: information technology; international business, marketsa Financial Management Code of Professional Conduct (the “Financial Management Code”). The Principles apply to all employees and operations; public company management experience
J. Cliff Eason: information technology; international business, marketsofficers of the Company and operations; public company management experience
Alan C. Henderson: audit committee experience; experience as CEOits subsidiaries. The Directors’ Code applies to directors of the Company and CFO of a public company; public company accounting and finance
Frederick J. Sievert: experience as an executive officer of a major U.S.-based life insurance company with international operations; life insurance business and market; insurance regulation; financial reporting; investments; risk management; international business, markets and operations
Stanley B. Tulin: experience as an executive officer of a major global financial services company; actuarial consulting experience; audit committee experience; consolidated risk management experience; mergers and acquisitions consulting experience; financial services and life insurance knowledge
A. Greig Woodring: asits subsidiaries. The Financial Management Code applies to our President and Chief Executive Officer, since 1993, extensive personal knowledgeChief Financial Officer, Corporate Controller, primary financial officers in each business unit, and all professionals in finance and finance-related departments. We intend to satisfy any disclosure obligations under Item 5.05 of Form 8-K by posting on our website information about amendments to, or waivers from, any provision of the Company’s business, operations, customersFinancial Management Code that applies to our chief executive officer, chief financial officer and industry
Contents May. We believe that these decreased payouts in a year with lower overall Company performance philosophy. Our net premiums increased Our net operating income for Our annualized operating return on equity was Our book value per share, excluding Accumulated Other Comprehensive Income, increased 2013.The Board of Directors has adopted Corporate Governance Guidelines and charters for the Audit, Compensation, Nominating and Governance and Finance, Investment and Risk Management Committees (collectively, the “Governance Documents”). These codes of conduct and Governance Documents are available on our website at www.rgare.com. Information on our website does not constitute part of this Proxy Statement. We will provide without charge, upon request, a copy of any of the codes of conduct or Governance Documents. Requests should be directed to Investor Relations at 1370 Timberlake Manor Parkway, Chesterfield, Missouri 63017, by electronic mail (investrelations@rgare.com) or by telephone (636-736-7000).Director IndependenceIn accordance with the Corporate Governance Guidelines, the Board undertook reviews of director independence in February 20122013 and February 2013.2014. During these reviews, the Board received a report from the Company’s General Counsel noting that there were no transactions or relationships between the Company or its subsidiaries and any of the independent directors (i.e., Messrs. Bartlett, Boot, Danahy, Eason, Henderson, Sievert or Tulin and Ms. Lomax in 2013 and Messrs. Bartlett, Boot, Danahy, Eason, Henderson, Sievert or Ms. Lomax)Tulin and Mses. Detrick and Phillips in 2014) nor any member of such director’s immediate family. The purpose of this review was to determine whether any of those directors had a material relationship with us that would preclude such director from being independent under the listing standards of the New York Stock Exchange (“NYSE”) or our Corporate Governance Guidelines.As a result of this review, the Board affirmatively determined, in its judgment, that each of the current eightnine directors named above are independent of us and our management under the applicable standards. Mr. Woodring is a non-independent director because he is our Chief Executive Officer.11Board DiversityAlthough we do not have a formal written policy with respect to diversity, the Board believes that it is essential that directors represent diverse perspectives, skills and experience. When evaluating the various qualifications, experiences and backgrounds of Board candidates, the Board reviews and discusses many aspects of diversity such as gender, race, national origin, education, professional experience, geographic representation and differences in viewpoints and skills. To the extent possible, director recruitment efforts include several of these factors and the Board strives to recruit candidates that enhance the Board’s diversity.Board Leadership StructureIn recognition of the differences between the two roles and in order to maximize effective Board leadership, our Company has separated the position of Chief Executive Officer and Chairman of the Board since we became public in 1993. The CEO is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while the Chairman of the Board provides guidance to the CEO, sets the agenda for Board meetings, presides over meetings of the full Board and presides at the regularly scheduled executive sessions of the independent directors.The Board’s Role in Risk OversightThe Board has an active and ongoing role, as a whole and also at the committee level, in overseeing management of the Company’s risks. The Board of Directors has established a Finance, Investment and Risk Management (“FIRM”) Committee to assist the Board with its oversight responsibilities and strengthen and support efforts to promote best practices in the Company’s enterprise risk management activities. The FIRM Committee reviews, monitors, and when appropriate, approves the Company’s programs, policies and strategies relating to financial and investment risks and overall enterprise risk management. In addition, the Audit Committee oversees management of risks related to accounting and financial reporting and reviews reports on ethics and compliance matters each quarter. The Compensation Committee is responsible for overseeing the management of risks relating to the Company’s employee compensation policies, practices, plans and arrangements, including executive retention. The Nominating and Governance Committee manages risks associated with the independence of the Board of Directors, leadership development and CEO succession planning, and reviews any potential conflicts of interest.planning. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, Committee meetings are scheduled so the entire Board of Directors (including directors who are not actual committee members) are able to participate in Committee meetings and stay apprised of the risks monitored and discussed by each Committee. In addition, each Committee provides recommendations to the full Board as required or appropriate.Risk Considerations in our Compensation ProgramThe Compensation Committee considers the risks associated with our compensation policies and practices, with respect to both executive compensation and compensation generally. The Compensation Committee continually considers the Company’s long-standing culture which emphasizes incremental continuous improvement and sustained long-term shareholder value creation, and ensures that these factors are reflected in the design of the Company’s compensations plans. Our compensation program is structured so that a considerable amount of our incentive-eligible employees’ compensation is tied to the long-term health of the Company. We avoid the type of disproportionately large, annual incentives that could encourage employees to take risks that may not be in our shareholder’s long-term interests, and we weight our management’s incentive compensation toward profitability and long-term performance. We believe this combination of factors encourages our executives and other employees to manage the Company in a prudent manner with a focus on increasing long-term shareholder value. Furthermore, as described in “Compensation Discussion and Analysis” below, the Compensation Committee may exercise full discretion and include subjective considerations in its incentive compensation decisions, which restrain the influencedecisions.12While a significant portion of our executive compensation plan is performance-based, we do not believe that our program encourages excessive or unnecessary risk-taking. Risk-taking is a fundamental and necessary part of our business, and our Compensation Committee has focused on aligning the Company’s compensation policies with the Company’s long-term interests and avoiding short-term rewards for management decisions that could pose long-term risks to the Company. The following policies and practices emphasize the Compensation Committee’s focus on balancing risk with reward:•Annual Bonus Plan. Our Annual Bonus Plan (“ABP,” formerly called Management Incentive Plan) is designed to reinforce our pay for performance culture by making a significant portion of management’s annual bonus compensation variable. ABP awards are based solely on Company results or on a combination of Company, business unit and/or individual performance. The ABP aligns annual cash bonus compensation with our short-term business strategies and the targets reflect our short-term goals for operating income per share and revenue growth. The Compensation Committee sets award levels with a minimum level of performance that must be met before any payment can be made. To further ensure that there is not a significant incentive for unnecessary risk-taking, we cap the payout of these awards at 200% of the target.•Performance Contingent Stock Grants. Our performance contingent stock (“PCS”) grants are a three year performance-driven incentive program that reinforces our intermediate-term strategic, financial and operating goals. Annual grants of PCS are designed to reward the achievement of specific intermediate-term corporate financial performance goals. The measures used for the PCS grants are an important means of aligning the economic interests of management and shareholders. The Compensation Committee sets award levels with a minimum level of performance that must be met before any payment can be made. To further ensure that there is not a significant incentive for unnecessary risk-taking, we cap the payout of these awards at 200% of target. We measure performance for the PCS grants based 33.5% on operating return on equity, 33.5% on relative return on equity compared to an established peer group and 33.0% on a compound annual growth rate for revenue, all calculated as of the end of the applicable three-year performance period.•Long-term Incentive Compensation. Our Flexible Stock Plan provides for the award of various types of long-term equity incentives, including stock options and stock appreciation rights (“SARs”), to associates who have the ability to favorably affect our business and financial performance. We believe that stock options and SARs provide the most appropriate vehicle for providing long-term value to management because of the economic tie to shareholder value. In 2011, we replaced stock option grants with SARs grants as our means of providing long-term incentive compensation. We believe annual grants of SARs allow us to reward the achievement of long-term goals and are based on our desire to achieve an appropriate balance between the overall risk and reward for short, intermediate and long-term incentive opportunities.•Share Ownership Guidelines. Our share ownership guidelines require members of senior management to hold a specified value of Company stock which is based on the level of their role and responsibility in the organization. This ensures that our senior management will have a significant amount of value tied to long-term holdings in Company stock.•Executive Incentive Recoupment Policy. In February 2013, the Board adopted an Executive Incentive Recoupment Policy, which permits the Company to recoup all or a portion of incentive awards paid to certain executives upon the occurrence of certain recoupment events. Such events include: (i) a financial restatement due to the material noncompliance with any financial reporting requirement under the federal securities laws; (ii) receiving an incentive award based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; (iii) causing injury to the interests or business reputation of the Company or of a business unit whether due to violations of law, regulatory sanctions or otherwise; and (iv) a material violation of the Company’s Principles of Ethical Business Conduct. The Compensation Committee has express authority to interpret and administer the policy, implement various remedies based on the circumstances triggering the recoupment and make all determinations with respect to the policy in its sole discretion.Annual Bonus Plan. Our Annual Bonus Plan (“ABP”) is designed to reinforce our pay for performance culture by making a significant portion of management’s annual compensation variable. ABP awards are based solely on Company results or on a combination of Company, business unit and/or individual performance. The ABP aligns annual cash bonus compensation with our short-term business strategies and the targets reflect our short-term goals for operating earnings per share, revenue growth and new business embedded value. The Compensation Committee sets award levels with a minimum level of performance that must be met before any payment can be made. To further ensure that there is not a significant incentive for unnecessary risk-taking, we cap the payout of these awards at 200% of the target.Performance Contingent Share Grants. Our performance contingent share (“PCS”) grants are a three-year performance-driven incentive program that reinforces our intermediate-term strategic, financial and operating goals. Annual grants of PCS are designed to reward the achievement of specific intermediate-term corporate financial performance goals. The measures used for the PCS grants are an important means of aligning the economic interests of management and shareholders. The Compensation Committee sets award levels with a minimum level of performance that must be met before any payment can be made. To further ensure that there is not a significant incentive for unnecessary risk-taking, we cap the payout of these awards at 200% of target. We measure performance for the PCS grants based 33.5% on operating return on equity, 33.5% on relative return on equity compared to an established peer group and 33.0% on a compound annual growth rate for revenue, all calculated as of the end of the applicable three-year performance period.Long-term Incentive Compensation. Our Flexible Stock Plan provides for the award of various types of long-term equity incentives, including stock appreciation rights (“SARs”) and stock options to associates who have the ability to favorably affect our business and financial performance. In 2011, we replaced stock option grants with SARs grants as our means of providing long-term incentive compensation. We believe that SARs provide the most appropriate vehicle for providing long-term value to management because of the economic tie to shareholder value. We believe annual grants of SARs allow us to reward the achievement of long-term goals and are based on our desire to achieve an appropriate balance between the overall risk and reward for short, intermediate and long-term incentive opportunities.Share Ownership Guidelines. Our share ownership guidelines require members of senior management to hold a specified number of shares of Company stock which is based on the level of their role and responsibility in the organization. This ensures that our senior management will have a significant amount of value tied to long-term holdings in Company stock.13Executive Incentive Recoupment Policy. In February 2013, the Board adopted an Executive Incentive Recoupment Policy, which permits the Company to recoup all or a portion of incentive awards paid to certain executives upon the occurrence of certain recoupment events. Such events include: (i) a financial restatement due to the material noncompliance with any financial reporting requirement under the federal securities laws; (ii) receiving an incentive award based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; (iii) causing injury to the interests or business reputation of the Company or of a business unit whether due to violations of law, regulatory sanctions or otherwise; and (iv) a material violation of the Company’s Principles of Ethical Business Conduct. The Compensation Committee has express authority to interpret and administer the policy, implement various remedies based on the circumstances triggering the recoupment and make all determinations with respect to the policy in its sole discretion.Communications with the Board of DirectorsThe Board of Directors has posted the process whereby interested parties and shareholders can communicate with our directors and the Board on our website at www.rgare.com. Interested parties and shareholders may communicate directly with our Chairman of the Board, Mr. Eason, by sending a written communication as follows:General CounselReinsurance Group of America, Incorporated1370 Timberlake Manor ParkwayChesterfield, Missouri 63017The process for communicating with the Board provides that the General Counsel will make a record of the receipt of any such communications. All properly addressed communications will be delivered to the specified recipient(s) not less than once each calendar quarter, and will not be directed to or reviewed by management prior to receipt by such persons.Board MeetingsThe Board of Directors held a total of seven regular meetings and no specialeight meetings during 2012.2013. Each incumbent director attended at least 75% of the meetings of the Board and committees on which he or she served during 2012.2013. We do not have a policy with regard to attendance by directors at the Annual Meeting. The Chairman of the Board attended the 20122013 annual meeting of shareholders.BOARD COMMITTEESThe Board of Directors has an Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), a Compensation Committee, a Nominating and Governance Committee, and a Finance, Investment and Risk Management Committee.14Audit Committee Committee Members Roles and Responsibilities William J. Bartlett*Arnoud W.A. BootChristine R. DetrickJohn F. Danahy*Chairü Responsible for the appointment, compensation, retention and oversight of the work of our independent auditor ü Oversees our accounting and financial reporting processes and policies and the integrity of our financial statements ü Supervises the adequacy of our internal controls over financial reporting and disclosure controls and procedures Number of Meetings in 2013: 8ü Pre-approves audit, audit-related, and non-audit services to be performed by the Company’s independent auditor ü Reviews reports concerning significant legal and regulatory matters ü Reviews the plans and performance of our internal audit function ü Reviews and discusses our filings on Forms 10-K and 10-Q, including the financial information in those filings Independence and Financial Literacy ü The Board has determined that the members are “independent” within the meaning of Securities and Exchange Commission (“SEC”) regulations applicable to audit committees and the NYSE listing standards ü The Board has determined that the members have accounting and related financial management expertise within the meaning of the NYSE listing standards ü The Board has determined that all the members are qualified as audit committee financial experts within the meaning of SEC regulations Compensation Committee Committee Members Roles and Responsibilities John F. Danahy*J. Cliff EasonJoyce A. PhillipsFrederick J. SievertStanley B. Tulin*Chairü Establishes and oversees our general compensation and benefits programs ü Reviews and approves the performance and compensation of the CEO, other named executive officers and members of our senior management ü Sets performance measures and goals and verifies the attainment of performance goals under performance-based incentive compensation plans Independence Number of Meetings in 2013:6ü The Board of Directors has determined, in its judgment, that all of the Committee’s members are independent within the meaning of the NYSE listing standards. ü For purposes of its independence determination, the Board considered the enhanced independence standards for compensation committees under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 which are required by the SEC for the listing standards of national securities exchanges. Interlocks and Insider Participationü The members of the Compensation Committee are not and have never been officers or employees of the Company or any of its subsidiaries. ü No directors or executive officers of our Company serve on the compensation committee of another company of which a member of our Compensation Committee is an officer. 15Finance, Investment and Risk Management Committee Committee Members Roles and Responsibilities Alan C. Henderson*William J. BartlettArnoud W.A. BootStanley B. TulinA. Greig Woodring*Chairü Assists the Board in connection with its oversight responsibilities for the Company’s risk, investment and finance policies, programs, procedures and strategies ü Reviews, monitors, and when appropriate, approves the Company’s programs, policies and strategies relating to financial and investment risks and overall enterprise risk management Number of Meetings in 2013: 7Nominating & Governance Committee Committee Members Roles and Responsibilities Frederick J. Sievert*Christine R. DetrickJ. Cliff EasonAlan C. HendersonJoyce A. Phillips*Chairü Develops and implements policies and practices relating to corporate governance ü Reviews and monitors implementation of our Corporate Governance Guidelines ü Identifies individuals qualified to become members of the Board, consistent with the criteria established by the Board; develops and reviews background information on candidates for the Board; and makes recommendations to the Board regarding such candidates Number of Meetings in 2013:5ü Prepares and supervises the Board’s annual review of director independence and the performance of self-evaluations conducted by the Board and Committees ü Oversees the succession planning process for our CEO, which includes reviewing development plans for potential successors, evaluating potential internal and external successors for executive and senior management positions, and development and periodic review of the Company’s plans for CEO succession in various circumstances Independence ü The Board of Directors has determined, in its judgment, that all of the Committee’s members are independent within the meaning of the NYSE listing standards Committee assignments listed above are effective as of January 1, 2014. Effective on such date, several committee assignments changed: Mses. Detrick and Phillips were appointed to the Board, with Ms. Detrick joining the Audit CommitteeTheand Nominating & Governance committees and Ms. Phillips joining the Compensation and Nominating & Governance committees; additionally, Mr. Tulin left the Audit Committee met eight times in 2012. On January 1, 2012, the Committee consisted of Messrs. Bartlett (Chairman), Boot, Danahy and Ms. Lomax. Mr. Tulin joined the Committee on January 26, 2012 and Ms. Lomax will retire from the Committee following the Annual Meeting. The Committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent auditor. The Committee oversees our accounting and financial reporting processes, the adequacy of our internal controls over financial reporting and disclosure controls and procedures, the integrity of our financial statements, pre-approves all audit and non-audit services to be provided by the independent auditor, reviews reports concerning significant legal and regulatory matters, and reviews the plans and performance of our internal audit function. The Committee also reviews and discusses our filings on Forms 10-K and 10-Q, including the financial information in those filings. The Audit Committee works closely with management as well as our independent auditor and internal auditor. FIRM committee.A more detailed description of the roleroles and responsibilities of the Audit Committeeeach committee is set forth in a written charter, adopted by the Board ofDirectors,committee charters, which isare available on our website (www.rgare.com). The Audit Committee has established procedures16CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONSReview and Approval of Related Person Transactions. We do not have any agreements, transactions or relationships with related persons such as directors, nominees, executive officers or immediate family members of such individuals. At least annually we review all relationships between our Company and our directors and executive officers and their immediate family members to determine whether such persons have a direct or indirect material interest in any transaction with us. Our Global Legal Services staff is primarily responsible for the receipt, retention,development and treatmentimplementation of complaints regarding financial reporting, internal accountingprocesses and controls to obtain information from the directors, nominees and executive officers with respect to related person transactions. If such a transaction arose, our Global Legal Services staff would determine, based on the facts and circumstances, whether we or auditing matters. Please seea related person has a direct or indirect material interest in the process regarding contacting the Audit Committee on our website (www.rgare.com).Thetransaction. As required under SEC rules, related person transactions that are determined to be directly or indirectly material to us are disclosed in this Proxy Statement and other SEC filings.Our Board of Directors has determined, inadopted a policy as part of its judgment,corporate governance guidelines that all of the members of the Audit Committee:are independent within the meaning of Securities and Exchange Commission (“SEC”) regulations applicable to audit committees and the NYSE listing standards;are qualified as audit committee financial experts within the meaning of SEC regulations; andhave accounting and related financial management expertise within the meaning of the NYSE listing standards.The Audit Committee Charter provides that members of the Audit Committee may not simultaneously serve on the audit committee of more than two other public companies, unless such member satisfactorily demonstrates that he or she has the ability to devote the time and attention required to serve on multiple audit committees.Compensation CommitteeThe Compensation Committee met five times during 2012. On January 1, 2012, the Committee consisted of Messrs. Danahy (Chairman), Boot, Eason and Sievert. Mr. Tulin joined the Committee on January 26, 2012 and on that date Mr. Boot moved to the Finance, Investment and Risk Management Committee. The Committee meets as often as necessary to perform its duties and responsibilities, which include establishing and overseeing our general compensation policies, reviewing and approving the performance and compensation of the CEO, other named executive officers and members of our senior management. A more detailed description of the role and responsibilities of the Compensation Committee is set forth in a written charter adoptedrequires advance approval by the Board of Directors, which is available on our website (www.rgare.com). The Board of Directors has determined, in its judgment, that allbefore any of the Committee’s members are independent within the meaning of the NYSE listing standards. For purposes of its independence determination, the Board considered the enhanced independence standards for compensation committees under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 which are required by the SEC for the listing standards of national securities exchanges.Compensation Committee Interlocks and Insider Participation. The members of the Compensation Committee are not and have never been officers or employees offollowing persons knowingly enter into any transaction with the Company or any of its subsidiaries. No directorsour subsidiaries or affiliates through which such person receives any direct or indirect financial, economic or other similar benefit or interest. The individuals covered by the policy include:any director,any nominee for director,any executive officersofficer,any holder of more than 5% of our Company serve on the compensation committee of another company of which avoting securities,any immediate family member of our Compensation Committeesuch a person, as that term is an officer.Nominatingdefined in the policy, and Governance CommitteeThe Nominating and Governance Committee met four times in 2012. Since January 1, 2012, the Committee consistedany charitable entity or organization affiliated with such person or any immediate family member of Messrs. Sievert (Chairman), Eason and Henderson. This Committee is responsible for developing and implementing policies and practices relating to corporate governance, including reviewing and monitoring implementation of our Corporate Governance Guidelines. In addition, the Committee identifies individuals qualified to become members of the Board, consistent with the criteria establishedsuch person.Transactions covered by the Board; develops and reviews background information on candidatespolicy include any contract, arrangement, understanding, relationship, transaction, contribution or donation of goods or services, but exclude transactions with any charitable entity or organization affiliated with a director, nominee for the Board; and makes recommendations to the Board regarding such candidates. The Committee also prepares and supervises the Board’s annual review of director, independence and the performance of self-evaluations conducted by the Board and Committees. The Committee oversees the succession planning process for our CEO, which includes reviewing development plans for potential successors, evaluating potential internal and externalsuccessors for executive and senior management positions, and development and periodic review of the Company’s plans for CEO succession in various circumstances. A more detailed description of the role and responsibilities of the Nominating and Governance Committee is set forth in a written charter adopted by the Board of Directors, which is available on our website (www.rgare.com). The Board of Directors has determined, in its judgment, that all of the Committee’s members are independent within the meaning of the NYSE listing standards. Shareholders wishing to propose nominees to the Committee for consideration should notify in writing our Secretary in accordance with the process described in “Additional Information — Shareholder Nominations and Proposals.” The Secretary will inform the members of the Committeeofficer, 5% security holder or any immediate family member of such nominees.Finance, Investment and Risk Management CommitteeThe Finance, Investment and Risk Management Committee met six timesa person if the amount involved is $2,500 or less. At this time, the Company is not involved in 2012. On January 1, 2012, the Committee consistedany transactions that would be covered by this policy.17Table of Messrs. Henderson (Chairman), Bartlett, Woodring and Ms. Lomax. Mr. Boot joined the Committee on January 26, 2012 and Ms. Lomax will retire from the Committee following the Annual Meeting. This Committee is responsible for assisting the Board in connection with its oversight responsibilities for the Company’s risk, investment and finance policies, programs, procedures and strategies. In addition, the Committee reviews, monitors, and when appropriate, approves the Company’s programs, policies and strategies relating to financial and investment risks and overall enterprise risk management. A more detailed description of the role and responsibilities of the Finance, Investment and Risk Management Committee is set forth in a written charter adopted by the Board of Directors, which is available on our website (www.rgare.com).COMPENSATION DISCUSSIONAND ANALYSISCOMPENSATION DISCUSSION & ANALYSISOur executive compensation program is designed to attract and retain the senior level employees who direct and lead our business and to reward these individuals for superior financial performance. Our Board of Directors has delegated to the Compensation Committee the authority to establish and oversee our general compensation policies,program, review the performance and approve the compensation of our Chief Executive Officer, and review and approve the compensation of the other Named Executive Officers and members of our senior management. The Compensation Committee also producesreviews and approves this compensation discussion and analysis on executive compensation for inclusion in this Proxy Statement (the “CD&A”). Since January 26, 2012,During 2013, the Compensation Committee has consisted of Messrs. Danahy (Chairman), Eason, Sievert and Tulin.Named Executive OfficersIn 2011 Effective January 1, 2014, Ms. Phillips joined the Company restructured, creating new executive opportunities designed to ensure that the Company is appropriately positioned to take advantage of emerging global opportunities. As a result of this restructuring and costs associated with the relocation of two executives to our St. Louis headquarters, ourCompensation Committee.Our named executive officers have changed for 2012 and2013 are as follows: A. Greig Woodring –- President and Chief Executive Officer, Officer;Jack B. Lay –- Senior Executive Vice President and Chief Financial Officer, Officer;Paul A. Schuster –- Senior Executive Vice President, Global Group, Health and Long-Term Care and Global Financial Solutions, Allan E. O’Bryant – Executive Vice President, Head of International MarketsEurope/Middle East/South Africa Markets;Allan E. O’Bryant - Executive Vice President, Head of Asia Markets; and Operations, and Donna H. Kinnaird –- Senior Executive Vice President and Chief Operating Officer.Mr. Alain Néemeh, who continuesEXECUTIVE SUMMARYCompany Performance for 2013Overall Company financial results, whether positive or negative, directly affect compensation paid to serve as President and Chief Executive Officer of RGA Canada and head of our Global Mortality Products initiative, was given additional executive responsibilityexecutives. In 2013, compensation for the Company’s Australian operations early in 2012. Ms. Donna Kinnaird joined the Company in April 2012 as Senior Executive Vice President and Chief Operating Officer, a newly created position which is responsible for overseeing our global corporate service functions and special projects. Mr. Allan O’Bryant joined the Company in 2010 and now serves as Executive Vice President, Head of International Markets and Operations. Ms. Kinnaird and Mr. O’Bryant both received reimbursement of expenses related to their relocation to St. Louis, Missouri in 2012 and Mr. O’Bryant received reimbursements associated with an expatriate assignment. For more information on these payments, see Footnote 6 to the Summary Compensation Table. As roles and responsibilities at the Company continue to evolve, we anticipate that there will be additional changes to the list of named executive officers was negatively affected by net operating income that was below both our 2013 plan and our performance in prior years, primarily attributable to a charge to increase claims liabilities in Australia. This decline in operating income decreased the 2014 Proxy Statementpayout under the annual bonus plan and will impact payment under the 2011-2013 PCS grants when payouts are made in future years.Performancefinancial performance demonstrates that our compensation program operates in accordance with our pay for 2012We believe that our compensation philosophy and objectives have resulted in an executive compensation program and decisions that have appropriately incented the achievement of our business performance targets, goals and objectives. Our compensation decisions are intended to benefit our shareholders and drive long-term shareholder value. Summarized below are some key highlights of our financial performance for 2012:2013:$570.9$347.4 million, or 8%4.4%, compared to 2011.2012 increased 6%2013 decreased 30.6% to $516.4$358.4 million, or $6.96$4.95 per diluted share.*12%7.4% for 2012,2013, and has averaged 13%approximately 11% over the last 5 years.*13%7.3% in 2012.2013.**See “Additional Information – Use of Non-GAAP Financial Measures” below.* See "Appendix A: Use of Non-GAAP Financial Measures" for reconciliations to GAAP figures.18Say on Pay Feedback from ShareholdersA primary focus of our Compensation Committee is whether the Company’s executive compensation program serves the best interests of the Company’s shareholders. As part of its ongoing review of our executive compensation program, the Compensation Committee considered the affirmative shareholder advisory vote on executive compensation (“say on pay”) at the Company’s 2012 annual meeting,2013 Annual Meeting, where a significant majority (96%(99% of votes cast on the proposal) of our shareholders approved the compensation program described in the proxy statement for that meeting. Taking the vote into consideration, along with an overall review of the compensation program, the Compensation Committee determined that the Company’s executive compensation philosophy, objectives and elements continue to be appropriate. We did not make material changes to the Company’s executive compensation program during 2012.PERFORMANCEAND PRACTICESHow Our Performance Affected 20122013 CompensationOur emphasis on pay for performance and the alignment of compensation with the creation of long-term shareholder value means that significant portions of the compensation paid to our executives vary based on our corporate performance. Our positive financial results, both positive and negative, are reflected in our 20122013 compensation decisions in the following ways:Based on our operating income and revenue growth performance in 2012,For the Annual Bonus Plan, payouts ranged from 122.5%38.4% to 124.9%99.4% of target for our named executive officers under our annual bonus plan.*
Operatingofficers. Named executive officer ABP payouts are largely based on Company operating income, in 2012 were $516.4 million.* This amount exceeded the thresholdrevenue growth performance goal, but did not reach the target performance level.
Revenue growth in 2012 was 11.5%. This amount exceeded the maximum performance level.
| ▪ | Operating income (weight = 75%) in 2013 was $358.4 million. This amount did not reach the minimum performance level.* |
| ▪ | Revenue growth (weight = 15%) in 2013 was 4.9%. This amount exceeded the target performance level, but did not reach the maximum performance level. |
| ▪ | New business embedded value (weight = 10%) in 2013 was $444 million. This amount exceeded the maximum performance level. |
Our cumulative three-year revenue in 2012 was $26,932.1 million. This amount exceeded the target, performance goal for our intermediate-term incentive awards but did not reach the maximum performance level.
Our three-year operatingrespectively. The relative return on equity measure is dependent upon public availability of financial results from our peer companies. Because of the timing for 2010-2012 exceeded the threshold performance goal foravailability of this information, our intermediate-term incentive awards but did not reach the target performance level.*
Our performance for the relative return on equity metric will not be approved by the Compensation Committee until late April 2014. The weighted average of our cumulative three-year revenue and operating return on equity performance for 2010-2012 exceededthis period has not been determined at this time. Payments for the maximum performance level.
| ▪ | Our cumulative three-year revenue for 2011-2013 was $28,988.8 million. This amount exceeded the threshold performance goal for our intermediate-term incentive award but did not reach the target performance level. |
▪ Our three-year operating return on equity for 2011-2013 did not reach the threshold level.* ▪ As described above, our performance for the relative return on equity metric for the 2011-2013 PCS grants will not be available until late April 2014. * See “Appendix A: Use of Non-GAAP Financial Measures” for reconciliations to GAAP figures.19Our Compensation Program Reflects Best PracticesWe have designed our compensation program to drive performance towardstoward achievement of our short-term and long-term goals and to increase long-term shareholder value, while appropriately balancing risk and reward. We regularly review our program to incorporate best practices, such as the following:WHATWE DOü Pay for Performance. We have a pay for performance executive compensation structure that provides an appropriate mix of short, intermediate and long-term performance incentives, with emphasis on shareholder value. We heavily link our executive compensation to financial performance by having the majority of the total compensation for our executives earned only upon the achievement of corporate, divisional and/or individual performance goals. Other than base salary, we do not provide any fixed compensation.ü Use of Multiple Performance Metrics.Our incentive compensation programs utilize multiple performance metrics, including revenue, Operating Income (as defined below), new business embedded value, return on equity and relative return on equity, each of which incentivizes balanced performance and creation of long-term shareholder value. Performance metrics used in our annual incentive program complement and are aligned with those used in our intermediate and long-term incentive programs.ü Compensation Benchmarking. The Compensation Committee reviews publicly available information of peer companies to evaluate how our named executive officers’ compensation compares to executives in similar positions at other companies, and considers that information when establishing compensation. We align our executive compensation levels with the market median in order to retain current talent and attract new talent.ü Mitigation of Risk. We use a combination of performance metrics in determining our executives’ performance-based compensation that motivate our executives to achieve performance that is in line with the best interests of the Company and our shareholders. By using a variety of performance metrics in our annual bonus plan and our intermediate and long-term performance programs, we mitigate the risk that our executives would be motivated to pursue results with respect to one performance measure to the detriment of the Company as a whole.ü Compensation Recoupment Policy. We have an Executive Incentive Recoupment Policy, which permits the Company to recoup all or a portion of an incentive award paid to certain executives upon the occurrence of a specified recoupment event, including a financial restatement. We have incorporated the provisions of this policy into our incentive plans.ü Stock Ownership Guidelines. To further align the long-term interests of our executives and our shareholders, we have robust stock ownership requirements for our executive officers.ü Independent Compensation Consultant. The Compensation Committee benefits from its use of an independent compensation consulting firm which provides no other services to the Company.ü Annual Shareholder “Say on Pay.” Because we value our shareholders’ input on our executive compensation programs, our Board has chosen to provide shareholders with the opportunity each year to vote to approve, on a nonbinding, advisory basis, the compensation of the named executive officers in our proxy statement.ü Compensation Committee Discretion. We give our Compensation Committee full discretion to modify, reduce or eliminate any cash incentive award.20The majority of the total compensation opportunity for our senior management group is performance-based and can be earned only upon the achievement of corporate, divisional and individual performance goals. Other than base salary, we do not provide any guaranteed compensation.The majority of our executive compensation is variable, as opposed to fixed or guaranteed. The following chart shows the fixed and variable pay mix for our Chief Executive Officer, compared to the other named executive officers:WHATWE DON'T DOX No Employment Contracts. We do not have any employment or contractual pre-employment severance agreements for our executives and we only offer limited benefits on termination of employment.X No Perquisites. We do not offer our executives personal-benefit perquisites, such as aircraft, cars, or apartments and we do not reimburse our executives for personal-benefit perquisites such as club dues or other social memberships, except in some foreign countries that require such perquisites to maintain a local competitive position.X No Preferential Payments. We do not pay preferential or above market returns on executive deferred compensation.X Limited Benefits Upon Change in Control. We have limited benefits upon change in control and our Flexible Stock Plan includes a double-trigger for the acceleration of awards upon a change in control.X No Golden Parachutes or Gross-Ups. We do not have any golden parachute agreements or tax gross-ups for severance payments with our executives.X No Speculative Trading. Our Insider Trading Policy prohibits employees from short-selling Company stock, buying or selling puts and calls of Company stock, or engaging in any other transaction that reflects speculation about the Company’s stock price or that might place their financial interests against the financial interests of the Company.X No Repricing of Grants. Our Flexible Stock Plan prohibits repricing for underwater stock options.X No Hedging. Our Insider Trading Policy prohibits employees from engaging in hedging or monetization transactions, which can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds.X No Unapproved Pledging. Our Insider Trading Policy prohibits employees from pledging Company stock without the pre-approval of our General Counsel.
Our incentive compensation programs utilize multiple performance metrics, including revenue, Operating Income (as defined below), return on equity and relative return on equity, each of which incentivizes balanced performance which the Committee believes will create long-term shareholder value. Performance metrics used in our annual incentive program complement and are aligned with those used in our intermediate and long-term incentive programs.
Some incentive compensation is earned across overlapping performance periods to ensure that performance during one period is not maximized to the detriment of performance in other periods.
We recently adopted an Executive Incentive Recoupment Policy, which permits the Company to recoup all or a portion of an incentive award paid to certain executives upon the occurrence of a specified recoupment event, including a financial restatement.
We have appropriate executive stock ownership retention requirements to align management’s interests with that of our shareholders.
Our Flexible Stock Plan and related agreements do not permit repricing of grants.
Our executive compensation levels are generally aligned with the market median in order to retain our current talent and attract new talent.
We do not pay preferential or above market returns on executive deferred compensation.
We do not offer our executives personal-benefit perquisites, such as aircraft, cars, or apartments, and we do not reimburse for personal-benefit perquisites such as club dues or other social memberships.
We do not have any employment or severance agreements for executive officers and have limited benefits on termination of employment.
We have limited benefits upon change in control (vesting may be accelerated for existing equity awards if approved by the Compensation Committee) and our Flexible Stock Plan includes a double-trigger for the acceleration of such awards upon a change in control.
We do not have any golden parachutes or tax gross-ups for severance payments.
Our Compensation Committee retains discretion to modify, reduce or eliminate any cash incentive award.
Our Compensation Committee routinely considers risk when designing our compensation program, establishing performance metrics for our various incentive compensation programs, granting awards and determining payouts. In 2012, as in prior years, the Committee determined that our compensation program does not create risks that are reasonably likely to have a material adverse effect on our Company. For additional information, refer to the section entitled “Risk Considerations in our Compensation Program.”
Our Compensation Committee is comprised entirely of independent directors.
Our compensation consultant is retained by the Compensation Committee and is independent of management and the Company.
Our Compensation Philosophy and Objectives
Create incentives that will focus executives on, and reward for, increasing long-term shareholder value;
Reinforce our pay for performance culture by making a significant portion of compensation variable and based on Company and business unit performance;
Provide competitive total compensation opportunities that will attract, retain and motivate high-performing executives.
2013 Compensation Actions.”
evaluating employee performance; recommending business performance targets, goals and objectives; and recommending salary levels, cash bonus and equity incentive award targets. background information regarding our strategic objectives; compensation recommendations as to In 2013 COMPENSATION ACTIONS 2012 Company ABP Results Performance Measure Operating Earnings Per Share Revenues (dollars in millions) Weighted Average 2012 Bonus at Minimum 2012 Bonus at Maximum Actual ABP Percentage for Actual ABP Payment for 2012 Greig Woodring Jack Lay Paul Schuster Allan O’Bryant Donna Kinnaird March Greig Woodring Jack Lay Paul Schuster Allan O’Bryant Donna Kinnaird 2014 ABP. Participants include executives in leadership or senior management roles. be eligible to receive equity incentive awards. Shares (“PCS”) early April Applicable Percentage Achieved Performance Measure Revenue Growth (3 Year) ROE (3 Year) Relative ROE (3 Year) Weighted Average Awards participants. Mr. O’Bryant and Ms. Kinnaird have not been employed by the Company for enough years to reasonably expect attainment of their stock ownership goals.COMPENSATION DECISIONSThe Role of the Compensation CommitteeOur executive compensation program is evaluated and approved by the Compensation Committee with the objective of providing incentive-based compensation that aligns with the business goals of the Company and the interests of its shareholders. The Compensation Committee also determines the compensation of the Chief Executive Officer and evaluates and approves the compensation of the other senior management of the Company, including our named executive officers.Compensation ConsultantIn forming its recommendations on our overall compensation program, the Committee has, from time to time, engaged an independent consulting firm to provide advice about competitive compensation practices and determine how our executive compensation compares to that of other comparable companies, including selected publicly held insurance and reinsurance companies. In March 2010, Steven Hall & Partners (“SH&P”) was engaged to serve as independent advisor to the Compensation Committee. The Committee directly engaged SH&P to advise and assist with decisions relating to our executive compensation program, including providing advice regarding incentive plan design, annual comprehensive competitive market studies, competitive compensation data for directors, technical advice on disclosure requirements relating to executive compensation, and to apprise the Compensation Committee of compensation best practices. In 2012, SH&P conducted a competitive marketplace assessment and based on that review we modified our peer groups (as described in greater detail below). In 2013, SH&P conducted a review of our annual and long-term incentive plans, our pay level peer group, as well as a competitive marketplace assessment for our Chief Executive Officer and Chief Financial Officer. SH&P provides no other services to the Company or its affiliates. Additionally, the Company’s Compensation Committee determined no conflicts of interest exist which would prevent SH&P from serving as independent advisors to the Compensation Committee.Management Participation and Involvement in Compensation DecisionsPursuant to the Compensation Committee charter, the Committee reviews and approves the compensation of our Chief Executive Officer, other named executive officers and senior management. Management plays a significant role in the compensation-setting process for the named executive officers (other than the CEO), senior management and all other employees. No member of management is involved in determinations regarding their own pay. The most significant aspects of management’s role are:Our Chief Executive Officer and Chief Human Resources Officer work with the Compensation Committee chair to establish the agenda for Committee meetings. ManagementThe Company also prepares relevant information and reports for each Compensation Committee meeting. Our Chief Executive Officer also participates in Compensation Committee meetings at the Committee’s request to provide:22his evaluation of the performance of the executive officers;senior management and his direct reports; andexecutive officers (other than himself).Our executive officersexecutives and other members of management are also made available to SH&P or any other compensation consultant to provide information regarding position descriptions, compensation history and other information as requested, and to review draft results provided by SH&P.Competitive Marketplace AssessmentWe use groups of companies from the lists below to evaluate our compensation practices for purposes such as pay levels, pay design and performance comparisons.•Pay Level Peer Group. Pay Level Peer Group.For pay level comparisons for our Named Executive Officers and Executive Committee, we use a group comprised of companies that are similar to us in industry and size and are appropriate comparators for purposes of evaluating the competitiveness of our pay levels. We use the Pay Level Peer Group to evaluate the overall competitiveness of our compensation packages, as well as individual elements of compensation. The selected companies are publicly-traded insurers and reinsurers (life and property-casualty) and other financial services companies, including direct competitors. In 2012, SH&P performed a comprehensive assessment of this group to determine the continued appropriateness of each constituent. Three members of the group (Aflac Inc., Kemper Corporation and Sun Life Financial, Inc.) were deemed inappropriate going forward due to size (revenues and assets) and were removed. Two additional companies were selected for inclusion (American National Insurance Co. and Lincoln National Corp.).•Pay Design Peer Group.For comparisons of our pay design, we review companies in the Pay Level Peer Group, as well as eight additional companies that were deemed inappropriate comparators for purposes of evaluating pay levels due to size, but which the Compensation Committee believes are useful sources of competitive intelligence regarding pay design and practices. This group is used to evaluate market practices with respect to types of pay vehicles utilized, incentive compensation program designs, performance metrics and pay mix.•Performance Peer Group.For comparisons of our performance among companies in the life insurance and reinsurance industry, we exclude most companies in the property and casualty business because their return profile is not a good comparator; however, we retain two large, global multi-line (property casualty and life) competitors because they are among the companies against whom we measure our performance and returns. This group is used for purposes of evaluating our relative performance for purposes of determining incentive compensation paid.2012,2013, SH&P performed a comprehensive assessment of this group to determine the three listscontinued appropriateness of comparator companies were as follows:2013 PAY LEVEL PEER GROUPPay Level Peer GroupPay Design Peer GroupPerformance Peer GroupAmerican Financial Group, Inc.Aflac, Inc.Aflac, Inc.American National Insurance*American Financial Group, Inc. Assurant, Inc.Assurant, Inc.American National Insurance*American National Insurance*CNO Financial Group, Inc.Assurant, Inc.CNO Financial Group, Inc.Everest Re Group Ltd.CNO Financial Group, Inc.Genworth Financial, Inc. Genworth Financial, Inc.Everest Re Group Ltd.Lincoln National Corp.*Lincoln National Corp.*Genworth Financial, Inc.Manulife Financial Corp.PartnerRe Ltd.Kemper CorporationMetlife, Inc.Phoenix Companies, Inc.Lincoln National Corp.*Munich RePrincipal Financial Group, Inc.Manulife Financial Corp.Phoenix Companies, Inc.Protective Life Corp.Metlife, Inc.Principal Financial Group, Inc.StanCorp Financial Group, Inc.Munich ReProtective Life Corp. TorchmarkAmerican National InsuranceLincoln National Corp. PartnerRe Ltd.Prudential Financial, Inc.Unum GroupPhoenix Companies, Inc.StanCorp Financial Group, Inc. Assurant, Inc. PartnerRe Ltd. Torchmark Corp. CNO Financial Group, Inc. Phoenix Companies, Inc. Unum Group Everest Re Group Ltd. Principal Financial Group, Inc. Pay Design Peer Group. For comparisons of our pay design, we review companies in the Pay Level Peer Group, as well as eight additional companies that were deemed inappropriate comparators for purposes of evaluating pay levels due to size, but which the Compensation Committee believes are useful sources of competitive intelligence regarding pay design and practices. The Pay Design Peer Group is used to evaluate market practices with respect to types of pay vehicles utilized, incentive compensation program designs, performance metrics and pay mix.2013 PAY DESIGN PEER GROUPAflac, Inc. Lincoln National Corp. Protective Life Corp. American Financial Group, Inc. Manulife Financial Corp. Prudential Financial, Inc. American National Insurance Metlife, Inc. StanCorp Financial Group, Inc. Assurant, Inc. Munich Re Sun Life Financial, Inc. CNO Financial Group, Inc. Protective Life Corp.PartnerRe Ltd. Swiss Reinsurance Co. Ltd. Everest Re Group Ltd. Prudential Financial,Phoenix Companies, Inc.Torchmark Corp. Genworth Financial, Inc. Principal Financial Group, Inc. Unum Group Kemper Corporation Performance Peer Group. For comparisons of our performance among companies in the life insurance and reinsurance industry, we exclude most companies in the property and casualty business because their return profile is not a good comparator; however, we retain two large, global multi-line (property casualty and life) competitors because they are among the companies against whom we measure our performance and returns. The Performance Peer Group is used to evaluate our relative performance for purposes of determining incentive compensation paid.232013 PERFORMANCE PEER GROUPAflac, Inc. Manulife Financial Corp. Prudential Financial, Inc. Assurant, Inc. Metlife, Inc. StanCorp Financial Group, Inc. Unum GroupAmerican National Insurance Munich Re Sun Life Financial, Inc. CNO Financial Group, Inc. Phoenix Companies, Inc. Swiss Reinsurance Co. Ltd. Genworth Financial, Inc. Principal Financial Group, Inc. Torchmark Corp. Lincoln National Corp. Protective Life Corp. Unum Group *Notes new addition to peer group.The three companies removed from the Pay Level Peer Group in 2012 remain in the Pay Design and Performance Peer Groups and the two new additions to the Pay Level Peer Group were also added to the two other groups. As described above, constituents in the Pay Design and Performance Peer Groups are not as constrained by size.We plan to review and update these lists periodically in order to ensure that comparators remain appropriate in light of evolving best practices with respect to peer group determinations, mergers and acquisitions, divestitures, growth in our size and the size of those companies in the comparator groups, and other changes which might affect the appropriateness of a particular comparator.When making determinations in 20122013 relating to base salary, target total cash compensation, intermediate and long-term incentives and target total direct compensation for our named executive officers, we used the competitive compensation analysis provided by SH&P as the beginning reference point. This analysis included a review and assessment of publicly disclosed proxy data for companies in our pay level peer group as well as publicly available survey data. While we do not explicitly benchmark our pay levels to particular percentiles, we generally reference the market median when evaluating market practice. In addition to a review of the competitive compensation data provided by SH&P, we also considered individual performance, internal pay equity among positions and levels, and the relative importance of positions. We believe that the compensation strategy we established aligns our target compensation with the market median and should allow us to retain our current talent and attract new talent.ELEMENTSELEMENTS OF COMPENSATION COMPENSATION AND 2012 COMPENSATION ACTIONSElements of CompensationOur compensation program consists of the following elements:•Base salary. Our base salaries are designed to provide part of a competitive total compensation package that will attract, retain and motivate high-performing executives.•Annual incentives. Our Annual Bonus Plan (“ABP”) awards are designed to reinforce our pay-for-performance culture and align incentive compensation with our short-term business strategies by making all or a significant portion of an executive’s ABP award variable and based on Company, business unit and/or individual performance.•Intermediate and long-term incentives. Under our Flexible Stock Plan, as amended (“Flexible Stock Plan”), we can award performance contingent stock (“PCS”), stock appreciation rights (“SARs”) and stock options (which were last awarded in 2010). Our PCS, SARs and stock options are designed to reinforce our pay-for-performance culture, align the long-term financial interests of our executives and shareholders, align compensation with our intermediate and long-term business strategies, and provide a significant equity component based on long-term shareholder value creation as part of the total compensation package. The following graph demonstrates 2012 target compensation pay mix by element for each of our named executive officers:
•Retirement and pension benefits. Our retirement and pension benefits are designed to provide another part of a competitive total compensation package that permits us to attract and retain key members of our management team.Base salary. Our base salaries are designed to provide part of a competitive total compensation package that will attract, retain and motivate high-performing executives. Adjustments to base salary are made periodically to recognize competitive changes and personal performance.Annual incentives. Our Annual Bonus Plan (“ABP”) awards are designed to reinforce our pay-for-performance culture and align incentive compensation with our short-term business strategies by making all of an executive’s ABP award variable and based on Company, business unit and/or individual performance.Intermediate and long-term incentives. Under our Flexible Stock Plan, as amended (“Flexible Stock Plan”), we can award performance contingent share (“PCS”) and stock appreciation rights (“SARs”). Our PCS and SARs grants are designed to reinforce our pay-for-performance culture and align the long-term financial interests of our executives with our shareholders. These awards also align compensation with our intermediate and long-term business strategies and provide a significant equity component based on long-term shareholder value creation as part of the total compensation package. The following graph demonstrates 2013 target compensation pay mix by elements for each of our named executive officers: 24
Retirement and pension benefits. Our retirement and pension benefits are designed to provide another part of a competitive total compensation package that permits us to attract and retain key members of our management.Base SalariesIn determining the base salaries of our named executive officers, the Compensation Committee considers our compensation compared to that of the Pay Level Peer Group, as determined by a review ofwell as published surveys and compensation data of the peer companies.surveys. The Compensation Committee also considers recommendations submitted to it by our Chief Executive Officer for the other named executive officers.20122013 Salaries. In February 2012,2013, based on a marketplace assessment, our compensation strategy, our goals for and analysis of targeted overall compensation, and Company performance during the previous two years, we increased the 20122013 base salary for Greig Woodring, our Chief Executive Officer by approximately 4.0% to $1,000,000. This amount$1,040,000. The increase reflects a level that we concluded was appropriate based on our review of his performance and leadership. Based upon quantitative results and the recommendations of our Chief Executive Officer and our subjective evaluation of individual performance, we approved the following base salaries for 20122013 for the other named executive officers: Jack Lay — $565,000, Paul Schuster — $520,150, Allan O’Bryant — $442,900 and Donna Kinnaird — $500,000.officers as listed below.2013 NAMED EXECUTIVE OFFICER BASE SALARIESNAME BASE SALARY PERCENTAGE INCREASE Greig Woodring $1,040,000 4% Jack Lay $581,950 3% Paul Schuster $541,000 4% Allan O’Bryant $456,200 3% Donna Kinnaird $515,000 3% 2014 Salaries.In February 2013,2014, the Compensation Committee established base salaries for the named executive officers, as follows: Greig Woodring — $1,040,000,– $1,060,000, Jack Lay — $581,950,– $601,950, Paul Schuster — $541,000,– $549,500, Allan O’Bryant — $456,200– $465,400 and Donna Kinnaird $515,000.$530,450.25Annual Bonus PlanOur management and professional level associates are eligible to participate in our Annual Bonus Plan (“ABP,” formerly called Management Incentive Plan)ABP”), which provides annual cash incentive compensation based on one or more of the following factors: our overall performance, the performance of the participant’s division, or business unit or department, and individual performance during the previous year. Under the ABP, participants may receive a cash bonus each year.ABPAnnual Bonus Plan Performance Measures.The ABP award is designed to serve as an annual incentive. The target-level financial performance goals established by the Compensation Committee are intended to require substantial efforts by our management team toward our strategic goals, but at the same time they are intended to be within reach if such efforts are made, and toalso provide additional rewards for extraordinary achievement. The Compensation Committee establishes ABP objectives for the Company during February of each year, and determines results and awards the following February.March. ABP financial objectives are not tied to our peer group, and are instead tied solely to our financial performance objectives.In 2012,Beginning in 2013, ABP Company objectives were measured measured:•75% on annual Operating Income (as described under “Our Compensation Philosophy and Objectives” above) per share and 25%share;•15% on annual consolidated revenues. revenues; and•10% on new business embedded value."Operating Income" per share is our net income per share from continuing operations less realized capital gains and losses and certain other non-operating items. New business embedded value ("NBEV") is a measure of the value of the profits expected to emerge from new business net of the cost of supporting capital. NBEV is a forward looking calculation that reflects the lifetime value created through new business sales. We believe this measure helps promote a long-term vision of profitability for the Company and is widely recognized in our industry as a measure of value creation. Additionally, we believe NBEV complements our other ABP measures which provide incentives for annual growth (revenues) and profitability (operating earnings per share).Divisional results are based on each division’s financial performance metrics. Individual performance results are measured by progress on major projects, productivity, client development or similar-type goals in which the employee played a major role. While we intend to tie individual performance to clearly articulated and objective measures, it is necessary, and at times prudent, for management to use a certain degree of discretion in evaluating individual results. Based on these criteria, the Compensation Committee approves a list of senior management participants, which includes (as applicable) individual incentive and/or business unit or division allocations, a minimum performance level that must be met before any payment can be made, as well as a target and a maximum. In addition, overall Company financial performance must meet certain minimum levels, which we refer to as the “trigger,” as determined in advance by the Committee, before any awards (including any portion of an award based solely on individual performance) are made under the ABP. Awards are based on a specific target percentage of salary, which varies for each participant.Targets reflect our annual goals for Operating Income per share, revenue growth and revenue growth.new business embedded value. The allocation of ABP awards between individual, divisional and Company-wide performance varies for each participant based on his or her job responsibilities. In general, allocations for divisional, departmental and individual performance are weighted more heavily for employees with less Company-wide responsibility, andresponsibility. In contrast, allocations for Company-wide performance are weighted more heavily for executives with morebecause their roles involve greater Company-wide responsibility. The ABP allocations for Messrs. Woodring, Lay, Schuster and Ms. Kinnaird were based solely on overall Company results with no specific allocation for divisional or individual performance; accordingly, divisional and individual performance do not affect the size or payout of individual awards to these named executive officers. The ABP allocation for Mr. O’Bryant was split evenly between results for the Company results (50%) and International Market (excludingMarkets (50%) (excludes Australia/New Zealand operations, which report through another executive) results (50%).26We consider divisional and individual performance when evaluating total compensation and may, from time to time, establish a specific ABP allocation for a particular business objective or project. The types of individual performance that may be taken into consideration include contributions toward revenue growth, earnings per share, return on equity capital, expense management, or product or client development, as well as, in certain cases, intangible items such as progress toward achievement of strategic goals, leadership capabilities, development of staff, or progress on major projects in which the officer played a key role.2012 ABP2013 Annual Bonus Plan Awards. In February 2012,2013, the Compensation Committee approved the performance goals and business criteria for the named executive officers under the ABP for 2012,2013, including the minimum, target and maximum bonus opportunities, as a percentage of base salary, as described in the table below. Overall Company financial performance must meet certain minimum levels, (trigger), as determined in advance by the Compensation Committee, before any awards are made. The target-level performance goals we established were meant to require substantial efforts by our management team toward our strategic goals, but at the same time they were intended to be within reach if such efforts are made, and also provide significantadditional rewards for extraordinary achievement. We believe that goals that are viewed as too difficult to attain would not have the effect of providing appropriate incentives. Weight Minimum Target Maximum Actual
Results Applicable
Percentage
Achieved 75 % $ 6.70 $ 7.00 $ 7.30 $ 6.98 1 96.67 % 25 % $ 8,800 $ 9,300 $ 9,800 $ 9,841 200.0 % 122.5 % 1.The Company reported to shareholders Earnings Per Share of $6.96, which includes an additional tax expense of $1,041,000 due to the expiration of the Active Funding Exception (AFE) rules, that impact the taxes paid on foreign earnings. In accordance with the Compensation Committee’s decision in February 2012, the 2012 ABP Earnings Per Share performance measure excludes the additional AFE tax expense.2013 COMPANY ANNUAL BONUS PLAN RESULTS PERFORMANCEMEASUREWEIGHT MINIMUM TARGET MAXIMUM ACTUALRESULTSPERCENTAGEOF TARGETPAYOUTOperating Earnings
Per Share75% $7.06 $7.41 $7.76 $4.95 0.0% Revenues
(dollars in millions)15% $9,704 $10,204 $10,704 $10,318 122.8% New Business Embedded Value (dollars in millions) 10% $240 $320 $400 $444 200.0% Weighted Average 38.4% In February 2013,March 2014, the Compensation Committee approved the ABP awards for our named executive officers for 20122013 performance. The Compensation Committee determined that our Operating Incomeoperating earnings per share in 2012 exceeded2013 was $4.95 and did not reach the amount for minimum bonus awards but fell slightly belowperformance level. Revenue was $10.3 billion resulting in the amount for target bonus awards. Revenue growth exceededperformance level of 122.8% and NBEV was $444 million resulting in the amount for maximum bonus awards.performance level of 200.0%. For Messrs. Woodring, Lay, Schuster and Ms. Kinnaird, who havehad ABP allocations based solely on overall Company results, the weighted average of the two ABP measures for 20122013 performance was 122.5%38.4%. For Mr. O’Bryant, who hashad a ABP allocation based on results for the Company and RGA International Markets (excluding Australia and New Zealand), the weighted average for his two ABP measures for 20122013 performance was 124.9%99.4%. Mr. O’Bryant’s ABP measure for RGA International Markets (excluding Australia and New Zealand) includes revenue, profit, new business embedded valueNBEV and expense management.The following table describes the minimum, target and maximum bonus opportunities for the named executive officers, as a percentage of base salary, as approved by the Compensation Committee in February 2012,2013, and the actual ABP payments for 20122013 performance, as approved by the Committee in February 2013:2012 Named Executive Officer ABP Results Name 2012 Bonus at
Target
2012 60 % 120 % 240 % 147.00 % $ 1,470,000 45 % 90 % 180 % �� 110.25 % $ 622,912 40 % 80 % 160 % 98.00 % $ 509,747 40 % 80 % 160 % 99.88 % $ 442,373 40 % 80 % 160 % 98.00 % $ 490,000 20132014:272013 ANNUAL BONUS PLAN RESULTS NAME 2013 BONUS ATMINIMUM2013 BONUSAT TARGET2013 BONUS ATMAXIMUMACTUAL ABPPERCENTAGEFOR 2013ACTUAL ABPPAYMENT FOR2013Greig Woodring 60 % 120 % 240 % 38.4 % $479,482 Jack Lay 45 % 90 % 180 % 38.4 % $201,227 Paul Schuster 40 % 80 % 160 % 38.4 % $166,282 Allan O'Bryant 40 % 80 % 160 % 99.4 % $362,702 Donna Kinnaird 40 % 80 % 160 % 38.4 % $158,290 2014 Annual Bonus Plan and Opportunities.The design of our 2013 annual incentive plan, changed from the prior years. The 2013 ABP continues to include both operating income per share and consolidated revenue financial goals. Additionally, the Compensation Committee approved new business embedded value (“NBEV”) as an additional company performance measure. NBEV is a measure of the value of the profits expected to emerge from new business net of the cost of supporting capital. NBEV is a forward looking calculation that reflects the lifetime value created through new business sales. The 20132014 ABP objectives for Messrs. Woodring and Lay and Ms. Kinnaird will be tied solely to overall Company performance, measured 75%50% on annual Operating Income per share, 25% on book value per share, 15% on NBEV and 10% on annual consolidated revenues, and 10% on NBEV, with awards based on a specified percentage of salary. We believe that goals that are viewed as too difficultThe 2014 ABP objectives for Mr. Schuster will be tied 50% to attain would not haveoverall Company performance and 50% to performance of the effectEurope/Middle East/South Africa business unit. The 2014 ABP objectives for Mr. O’Bryant will be tied 50% to overall Company performance and 50% to performance of providing appropriate incentives.the Asia Pacific (excluding Australia) business unit. In addition, overall Company earnings per share performance must meet certain minimum levels, as determined in advance by the Compensation Committee, before any awards are made.In February 2013,2014, the Compensation Committee approved the performance measures and bonus opportunities for the 2013 ABP, as described in the following table:Name 2013 Bonus at
Minimum 2013 Bonus at Target 2013 Bonus at
Maximum 60 % 120 % 240 % 45 % 90 % 180 % 40 % 80 % 160 % 40 % 80 % 160 % 40 % 80 % 160 % 2014 ANNUAL BONUS PLAN OPPORTUNITIES NAME 2014 BONUS ATMINIMUM2014 BONUS ATTARGET2014 BONUS ATMAXIMUMGreig Woodring 65% 130% 260% Jack Lay 45% 90% 180% Paul Schuster 40% 80% 160% Allan O'Bryant 40% 80% 160% Donna Kinnaird 40% 80% 160% Intermediate and Long-Term IncentivesOur Flexible Stock Plan provides us with the ability to grant various types of equity incentives, including stock options, stock appreciation rights, restricted stock, performance shares, cash settled units, and other stock-basedforms of awards. Starting in 2011,In 2013, the value of each annual equity incentive grant was evenly split between PCSPerformance Contingent Shares (“PCS”) and SARs. Prior to 2011, annual grants were split between PCS and stock options.Stock Appreciation Rights (“SARs”). The Compensation Committee believesdetermined that a balanced allocation of PCS and SARs rewards participants for the achievement of both intermediate and long-term goals, and achieves an appropriate balance between the overall risk and reward for incentive opportunities.The PCS grants are designed to allow us to reward the achievement of specific intermediate-term corporate financial performance goals with equity that is earned on the basis of Company performance. We implemented the PCS program because we believe it is consistent with our pay-for-performance compensation philosophy and focuses onachieving the financial performance necessary to increase shareholder value. We believe that the PCS grants require management to focus on intermediate-term growth and return on equity, while the SARs and stock options are designed to focus attention on accomplishment of long-term goals that influence the creation of long-term shareholder value rather than focus on specific performance criteria.value. We continue toannually evaluate the appropriate mix of intermediate and long-term pay elements (i.e., PCS versus SARs/stock options)SARs) in comparison to the market to remain competitive in our compensation practices and to best support our strategy.28As discussed above under “Competitive Marketplace Assessment,” the Committee determines a target total compensation package for our named executive officers based on an analysis of competitive market conditions and overall Company performance. Accordingly, the Committee does not consider individual performance to a material extent in determining the size of PCS and SARs/stock optionSARs awards. However, the named executive officers are expectedrequired to maintain an acceptable level of performance to retain award eligibility.In December 2013, the Compensation Committee approved changes to the design of our Intermediate and Long-Term Incentives under our Flexible Stock Plan. The changes were intended to reduce the shares of Company stock issued under the Plan while maintaining the current value of awards for plan participants. Beginning in 2014, awards for participants in senior management roles, including named executive officers, will be 75% PCS and 25% SARs (formerly 50% PCS and 50% SARs). This change increases the performance based nature of awards while reducing share issuance. For all other plan participants, awards will consist of Cash Settled Units (“CSUs”) and restricted shares, with 75% of awards being delivered in CSUs and 25% in restricted shares. The CSUs will have the same vesting period and performance measures as the PCS awards and will be settled in cash at vesting versus shares. The restricted shares will have a three-year vesting period with settlement in shares at vesting.Performance Contingent Stock ProgramOur PCS grants are part of a performance-driven incentive program under our Flexible Stock Plan. Executives in leadership or senior management roles, or that are considered top subject matter experts within our Company, participate in this program. We believe this program focuses managementparticipants on our strategic and intermediate-term financial and operating goals. Incentive awards are intended to reflect management’sparticipants’ involvement in our performance and to encourage their continued contribution to our future. We view intermediate incentive awards as an important means of aligning the economic interests of management and shareholders.The purpose of the PCS grants is to reward participants with equity if we achieve the rate of revenue growth, ROE and Relative ROE that is approved each year by the Compensation Committee when it considers annual grants. The PCS grants are ongoing and each year, a new three-year cycle begins, giving us the opportunity to review and update performance measures for new grants. The three-year performance and reward period shifts managementparticipant focus and effort toward intermediate and longer-term sustained results.The PCS units are granted at the beginning of the performance period. The Compensation Committee also sets award levels with a minimum level of Company performance that must be met before any payment to the individual can be made, (referred to as the “trigger”), as well as a target and a maximum. If we do not meet minimum performance goals, the awards will not be made, and if we exceed those performance goals, the award can be as much as 200% of the targeted award opportunity. The awards are also contingent upon the participant’s employment status with us at the end of the three-year performance period.PCS grants are not treated as outstanding shares until the performance goals over the three-year performance period are met and awards are made, as determined and approved by the Compensation Committee. Awards are made in units of fully vested, unrestricted common stock.We measure performance for the PCS grants based 33.5% on ROE, 33.5% on Relative ROE and 33.0% on a compound annual growth rate for revenue, all calculated as of the end of the applicable three-year performance period. When we establish the targets for a particular performance period, we may adjust those targets up or down so they are set at amounts or ranges that are generally consistent with our publicly disclosed intermediate-term growth rate goals.29The grants are made pursuant to the terms of the Flexible Stock Plan and award agreements. Upon retirement of a holder of a PCS grant, provided that the holder has attained age 55 and a combination of age and years of service with the Company that equals at least 65, the units will be pro-rated based on the number of months of the holder’s participation during the three-year performance period and the number of shares earned.2010-20122011-2013 PCS Results. In February 2010,2011, we established the target and range for revenue growth, ROE and Relative ROE for the period beginning in 20102011 at levels that were consistent with our intermediate-term goals for those measures. As a result, at the time of grant, we believed that achievement of the target revenue growth and return on equity would require a high level of financial and operating performance. We believebelieved the goals and ranges we established for these grants of PCS arewere challenging but achievable.The performance period for the 20102011 PCS grant began on January 1, 20102011 and ended on December 31, 2012.2013. In March 2013,2014, we reviewed the results for the 2010-20122011-2013 performance period and determined that our cumulative revenue in fiscal 20122013 exceeded the amount for target bonus awardsthreshold performance goal but did not reach the amount for maximum bonus awards.target performance level. Our ROE exceeded the threshold amount but did not reach the amount for target bonus awards.threshold level. Our cumulative three-year revenue and operating return on equity performance for the Relative ROE metric exceededperiod resulted in payouts of 8.0% and 10.3% of target, respectively. Because the targetrelative return on equity measure is dependent upon public availability of financial results from our peer companies, our performance goal but not reach the maximum performance level. The weighted average of the three measures for the period was 151% of target, andrelative return on equity metric will not be approved by the Compensation Committee approved payouts on that basis.until late April 2014, after the filing of this Proxy Statement. Payments will be made in May 2014. These payments will be fully disclosed in our 2015 Proxy Statement.Actual results for the 2011-2013 PCS performance period will be affected by a second quarter after-tax charge of approximately $184 million, or $2.53 per diluted share, to increase claims liabilities in Australia. Actual results are interpolated to determine the performance level achieved among the threshold, target and maximum goals established by the Committee. The following table describes the growth goals established in February 20102011 and actual results determinedavailable in March 2013:2010 – 2012 PCS Results2014 Weight Threshold Target Maximum Actual 33.0% 9% 11% 13% 12.5% 172.4% 33.5% 11% 13% 15% 12.3% 81.9% 33.5% 18th Percentile 51st Percentile 84th Percentile 87th Percentile 200.0% 151.3% See:2011-2013 PCS RESULTS PERFORMANCEMEASUREWEIGHT THRESHOLD TARGET MAXIMUM ACTUAL PERCENTAGE OFTARGET PAYOUTRevenue Growth(3 Year)33.0% 7% 9% 11% 8.0% 75.8% ROE (3 Year) 33.5% 11% 13% 15% 10.3% 0.0% Relative ROE(3 Year)33.5% 18th Percentile51st Percentile84th PercentileTBD TBD For additional information, see “Option and SARs Exercises and Stock Vested During Fiscal 2012” for a description of the share amount and value of the2013.”2012-2014 PCS awards we approved for the 2010 PCS grants.2011-2013 PCS Awards. In February 2011,2012, we established the targets and ranges for the 20112012 PCS grants. We continued the use of revenue growth, ROE and Relative ROE as the performance measures in the same weightings as used in the prior year. The performance period for the 20112012 PCS grant began on January 1, 20112012 and will end on December 31, 2013.2014.2012-20142013-2015 PCS Awards. In February 2012,2013, we established the targets and ranges for the 20122013 PCS grants. We continued the use of revenue growth, ROE and Relative ROE in the same weightings as used in prior years. The performance period for the 20122013 PCS grant began on January 1, 20122013 and will end on December 31, 2014.2015.We established the targets and ranges for revenue growth, ROE and Relative ROE for the period beginning in 2012 at levels that are consistent with our intermediate-term goals for those measures. As a result, we believe that achievement30We established the targets and ranges for revenue growth, ROE and Relative ROE for the period beginning in 2013 at levels that are consistent with our intermediate-term goals for those measures. As a result, we believe that achievement of the targets will require a high level of financial and operating performance.2013-2015 PERFORMANCE CONTINGENT SHARE GRANTS PERFORMANCEMEASUREWEIGHT THRESHOLD TARGET MAXIMUM Revenue Growth 33.0% 6.0% 8.0% 10.0% ROE (3 Year) 33.5% 10.0% 11.5% 13.0% Relative ROE (3Year) 33.5% 25th Percentile50th Percentile75th PercentileSee “Grants of Plan-Based Awards in 2013” for a description of the 2013 PCS grants.2014-2016 PCS Awards. In February 2014, we established the targets and ranges for the 2014 PCS grants. We established the targets and ranges for revenue growth, ROE and Relative ROE for the period beginning in 2014 at levels that are consistent with our intermediate-term goals for those measures. As a result, we believe that achievement of the targets will require a high level of financial and operating performance. The performance period for the 20132014 PCS grant began on January 1, 20132014 and will end on December 31, 2015.2016.We approved the 20132014 PCS grants for the named executive officers, as follows (number of shares represents the target award): Greig Woodring — 23,822 shares,– 31,852 shares; Jack Lay — 5,941– 6,903 shares, Paul Schuster — 5,819– 6,651 shares, Allan O’Bryant — 3,914– 4,492 shares and Donna Kinnaird — 4,381.SARs and – 5,069.Stock OptionsIn February 2011, the Compensation Committee decided to grant stock appreciation rightsAppreciation RightsStock Appreciation Rights (“SARs”) instead of stock options as it had done in prior years for our long-term equity incentive awards. SARs are granted annually, and the number of SARs granted is based on the grant recipient’s position within the Company. The Committee considers compensation data of the Pay Level Peer Group in determining the amount of SARs granted to our named executive officers and considers market data from published surveys in determining the amount of SARs granted to other employees.The vesting schedule for SARs grants is four years, 25% of which vests at the end of each of the first four years. The strike price of each SAR award is valued using the NYSE closing price of the Company’s common stock on the grant date of the award (the(e.g. the date of the February 2013 Compensation Committee meeting). Upon vesting, the SARs are settled in the equivalent value of unrestricted shares of common stock. The SARs expire 10 years after the grant date. Upon retirement, of a holder of SARs pursuant to this plan, provided that the holderparticipant has attained age 55 and a combination of age and years of service with the Company that equals at least 65, the SARs continue to vest in accordance with the vesting schedule.Prior to February 2011, the Company granted stock options as the form of our long-term equity incentive awards. The terms and conditions of the stock option grants are substantially similar to our SARs grants. The option awards also useused an exercise price that was set at the closing price on the day of the award (the date of the February Committee meeting) and also expire 10 years after grant. The vesting schedule for grants of stock options iswas five years, no portion of which vestsvested in the first year, and 25% of which vestsvested at the end of each of the four remaining years.20122013 SARs Grant. In February 2012,2013, we approved the 20122013 SARs awards for Messrs Woodring, Lay, Schuster, O’Bryant and O’Bryant. In April 2012, we approved the 2012 SAR award for Ms. Kinnaird. The vesting schedule for the SARs grant is four years (vesting 25% at the end of each of the first four years). We made these grants because we believe that SARs provide the mostare an appropriate vehicle for providing long-term value to managementparticipants because of the tiealignment to long-term shareholder value. The SARs granted in February 2012 and April 2012,2013 have a strike price of $56.65 and $59.36, respectively,$58.77, which is the closing price of our stock on the date the grants were approved. The grants were made pursuant to the terms of31the Flexible Stock Plan and award agreements. See “Grants of Plan-Based Awards in 2012”2013” for a description of the 20122013 SARs grants.20132014 SARs Grant. In February 2013,March 2014, we approved the 20132014 SARs awards for the named executive officers, as follows: Greig Woodring — 68,237– 39,101 shares, Jack Lay — 17,019– 8,474 shares, Paul Schuster — 16,669– 8,165 shares, Allan O’Bryant — 11,210– 5,514 shares and Donna Kinnaird — 12,551.– 6,223. The vesting schedule for the SARs grant is four years (vesting 25% at the end of each of the first four years)year). We made these grants because we believe that SARs provide the mostan appropriate vehicle for providing long-term value to management because of the tiealignment to long-term shareholder value. The SARs have a strike price of $58.77,$78.48, which was the closing price of our stock on February 21, 2013,March 7, 2014, the date the grants were approved.Executive Stock Ownership GuidelinesIn order to further align the interests of our management and our shareholders, our executive stock ownership guidelines provide that our senior executives should hold a specified number of shares of Company stock as follows: our Chief Executive Officer (77,000 shares), Senior Executive Vice Presidents (21,000 —– 35,000 shares), and Executive Vice Presidents and Senior Vice Presidents (5,000 —– 21,000 shares, depending on grade level of position). The number of shares includes only those shares of common stock that are directly or beneficially owned by the executive. Executives who are subject to the guidelines must retain the net shares (net of applicable taxes for PCS and, for SARs and stock options, the net of exercise cost)cost and taxes) from any SARs/stock option exercise or award of PCS or SARs until they satisfy the applicable stock ownership requirement.As of December 31, 2012,2013, Messrs. Woodring, Lay and Schuster have met the stock ownership requirements through holdings of shares of our common stock.Timing of Regular Equity GrantsWe typically release earnings for the fourth quarter in late January of the following year. ThePrior to 2014, the Compensation Committee meetsmet in mid-February of each year to approve regular grants of SARs and PCS awards. In 2014, the equity grant approvals were moved to March. Equity grants are effective on and have a grant date of the same day as the Committee meeting, and the strike price for grants of SARs is the closing price of our common stock on the NYSE on the day of the Committee meeting. This timing and process is designed to ensure that our fourth-quarter earnings information is fully disseminated to the market by the time the SARs strike price is determined. The PCS awards are measured by financial performance over a three-year period and the market price of our common stock is not a factor in those calculations or measures.PerquisitesWe do not provide personal-benefit perquisites to our named executive officers or their families, such as airplanes, cars, or apartments, and we do not reimburse executive officers or any of our employees for personal-benefit perquisites such as club dues or other social memberships. In some countries outside North America, it is our practice to provide remuneration and benefit packages that are competitive against the local or regional market to senior leaders, such as housing, club and car allowances. Executive officers and other employees may seek reimbursement for business-related expenses in accordance with our business expense reimbursement policy.32Compensation RecoveryUnder the Sarbanes-Oxley Act, in the event of misconduct that results in a financial restatement that would have reduced a previously paid incentive amount, we can recoup those improper payments from our Chief Executive Officer and Chief Financial Officer.In addition, in February, 2013, the Board adopted an Executive Incentive Recoupment Policy that permits the Company to recoup all or a portion of incentive awards paid to certain executives upon the occurrence of certain recoupment events. Such events include: (i) a financial restatement due to the material noncompliance with any financial reporting requirement under the federal securities laws; (ii) receiving an incentive award based on materially inaccurate financial statements or any other materially inaccurate performance; (iii) causing injury to the interests or business reputation of the Company or of a business unit; and (iv) a material violation of the Company’s Principles of Ethical Business Conduct. The Company can recoup incentive awards for up to four years following the payment of an award. The policy applies to an identified group of current or former officers and employees of the Company, as determined by the Board or the Compensation Committee from time to time based on position, responsibility, level, title, business unit and/or compensation. The Compensation Committee has express authority to interpret and administer the policy and to make all determinations with respect to the policy in its sole discretion.Savings PlanAll employees of RGA Reinsurance Company who meet the eligibility requirements participate in the RGA Reinsurance Company Savings Plan (the “Savings Plan”). Effective January 1, 2012, the Savings Plan replaced our Profit Sharing Plan. Pursuant to the Savings Plan, the Company matches up to 5% of compensation contributed to an associate’s 401(k) account. Additionally, there is a 2% non-elective Company contribution paid into each associate’s 401(k) account, regardless of their 401(k) participation.Retirement PlansSome of our employees, including our executive officers in the U.S., participate in the RGA Performance Pension Plan (the “Pension Plan”), a qualified defined benefit plan. The Pension Plan is a broad-based retirement plan that is intended to provide a source of income during retirement for full-time and part-time employees in the U.S. Additionally, U.S. employees at the vice-president level and above are eligible to participate in the RGA Reinsurance Company Augmented Benefit Plan (the “Augmented Plan”), a non-qualified plan under which eligible employees are entitled to additional retirement benefits not paid under the Pension Plan and the Savings Plan due to Internal Revenue Code (the “Code”) limits on the amount of benefits that may accrue and be paid under the Pension Plan and the Savings Plan. The Augmented Plan provides benefits based on an employee’s annual cash compensation and without regard to certain limitations that apply to broad-based, qualified retirement plans, in order for a participant’s retirement income provided under the plans to be based on total eligible cash compensation. The Augmented Plan is generally only available to the associates at the vice president level and above who earn more than the compensation limits under the qualified plans ($250,000255,000 for 2012)2013).Additionally, U.S. employees at the vice president level and above are eligible to participate in our Executive Deferred Savings Plan, a non-qualified plan which allows participants to defer income, including bonuses and incentive compensation, and to defer matching contributions without regard to qualified plan limitations. Base pay and regular annual incentive awards, but not long-term compensation, are treated as eligible pay under the terms of our retirement plans. We sponsor tax-qualified pension and savings plans, as well as non-qualified “parity” pension and savings plans providing benefits to employees whose benefits under the tax-qualified plans are limited by the Code. The Committee periodically reviews our retirement benefits to ensure that the benefits are appropriate and cost effective as part of an overall compensation program intended to provide basic economic security for our highly skilled and qualified workforce and at a level consistent with competitive practices.33Messrs. Woodring, Lay, Schuster, O’Bryant and Ms. Kinnaird participate in the Pension Plan and the Augmented Plan. Mr. Lay and Mr. O’Bryant participate in the Executive Deferred Savings Plan. For additional details regarding executive participation in our retirement plans, see “Pension Benefits in Fiscal 2012.2013.”No Employment and Severance AgreementsWe do not have employment, severance or change-in-control agreements with any of our named executive officers.Deductibility of CompensationThe goal of the Committee is to comply with the requirements of Code Section 162(m), to the extent deemed practicable, with respect to annual and long-term incentive programs to avoid losing the deduction for non-performance-basednon-performance based compensation in excess of $1,000,000 paid to our chief executive officer, chief financial officerChief Executive Officer and three other most highly-compensated executive officersemployees (other than the Chief Executive Officer and Chief Financial Officer)., subject to any restrictions under the Code or any guidance issued by the Internal Revenue Service applicable to the tax year at issue. We generally structure our performance-based compensation plans with the objective that amounts paid under those plans and arrangements are tax deductible, including having the planspossible performance goals approved by ourthe shareholders.COMPENSATION COMMITTEE REPORT
Name and Principal Position A. Greig Woodring President and CEO Jack B. Lay Sr. EVP and CFO Paul A. Schuster Allan E. O’Bryant EVP — Head of International Markets and Operations Donna H. Kinnaird Sr. EVP and COOTable of ContentsSummary Compensation TableFiscal Years 2012, 2011 and 2010 Compensation Year Salary1 Bonus Stock
Awards2 Option
Awards3 Non-
Equity
Incentive
Plan
Compen-
sation4 Change in
Pension
Value and
Nonqualified
Deferred
Compen-
sation
Earnings5 All
Other
Compen-
sation6 Total 2012 $ 995,615 — $ 1,149,995 $ 1,060,923 $ 1,470,000 $ 1,751,444 $ 86,662 $ 6,514,639 2011 $ 957,731 — $ 899,983 $ 774,207 $ 1,678,768 $ 2,600,800 $ 128,450 $ 7,039,939 2010 $ 919,288 — $ 850,014 $ 737,633 $ 1,405,819 $ 515,810 $ 94,005 $ 4,522,569 2012 $ 562,692 — $ 344,999 $ 318,271 $ 622,912 $ 357,821 $ 99,080 $ 2,305,775 2011 $ 542,014 — $ 330,004 $ 283,875 $ 695,108 $ 511,906 $ 95,593 $ 2,458,500 2010 $ 512,701 — $ 320,987 $ 218,514 $ 654,522 $ 213,903 $ 71,130 $ 1,991,757 2012 $ 518,402 — $ 335,991 $ 309,979 $ 509,747 $ 317,582 $ 53,658 $ 2,045,359 Sr. EVP — Global Group, Health, LT Care, Global Financial Solutions 2011 $ 502,351 — $ 330,004 $ 283,875 $ 644,518 $ 473,339 $ 68,932 $ 2,303,019 2010 $ 479,901 — $ 320,987 $ 218,514 $ 608,186 $ 202,291 $ 57,681 $ 1,887,560 2012 $ 441,412 — $ 225,014 $ 207,563 $ 442,373 $ 64,488 $ 272,404 $ 1,653,254 2012 $ 365,385 — $ 250,024 $ 235,270 $ 490,000 — $ 126,572 $ 1,467,251 OTHER EXECUTION COMPENSATION MATTERS EXECUTIVE COMPENSATION TABLESSUMMARY COMPENSATION TABLE NAME ANDPRINCIPAL POSITIONYEAR SALARY1 BONUS STOCKAWARDS2 OPTIONAWARDS3 NON-EQUITYINCENTIVEPLANCOMPEN-SATION4 CHANGE INPENSIONVALUE ANDNONQUALIFIEDDEFERREDCOMPEN-SATIONEARNINGS5 ALLOTHERCOMPEN-SATION6 TOTAL A. Greig Woodring 2013 $1,035,385 - $1,400,019 $1,267,843 $479,482 $105,030 $85,059 $4,372,818 President and CEO 2012 $995,615 - $1,149,995 $1,060,923 $1,470,000 $1,751,444 $86,662 $6,514,639 2011 $957,731 - $899,983 $774,207 $1,678,768 $2,600,800 $128,450 $7,039,939 Jack B. Lay 2013 $579,994 - $349,153 $316,213 $201,227 $138,916 $90,178 $1,675,681 Sr. EVP and CFO 2012 $562,692 - $344,999 $318,271 $622,912 $357,821 $99,080 $2,305,775 2011 $542,014 - $330,004 $283,875 $695,108 $511,906 $95,593 $2,458,500 Paul A. Schuster 2013 $538,594 - $341,983 $309,710 $166,282 $66,241 $52,873 $1,475,683 Sr. EVP - Head of Europe/Middle 2012 $518,402 - $335,991 $309,979 $509,747 $317,582 $53,658 $2,045,359 East/South Africa Markets 2011 $502,351 - $330,004 $283,875 $644,518 $473,339 $68,932 $2,303,019 Allan E. O'Bryant 2013 $454,665 - $230,026 $208,282 $362,702 $78,552 $339,977 $1,674,204 EVP - Head of Asia Markets 2012 $441,412 - $225,014 $207,563 $442,373 $64,488 $272,404 $1,653,254 Donna H. Kinnaird 2013 $513,269 - $257,471 $233,198 $158,290 $117,660 $477,823 $1,757,711 Sr. EVP and COO 2012 $365,385 - $250,024 $235,270 $490,000 - $126,572 $1,467,251 1. For Messrs. Woodring, Lay, Schuster, O’Bryant and Ms. Kinnaird, this column includes any amounts deferred at the election of the executive officers under the RGA Reinsurance Company Executive Deferred Savings Plan. The 2012 salary for Ms. Kinnaird was prorated based on her start date of April 2, 2012. 2. This column represents the grant date fair value of PCS units granted in such year, using probable outcomes of performance conditions, in accordance with Accounting Standards Codification: 718 – Compensation – Stock Compensation (“ASC 718”). For additional information on the valuation assumptions, refer to note 16 of the Company’s financial statements in the Form 10-K for the year ended December 31, 2012,2013, as filed with the SEC. See also “Grants of Plan-Based Awards in 2012”2013” for information on awards made in 2012.2013. These amounts reflect the grant date fair value for these awards, and do not correspond to the actual value that may be recognized by the named executive officers. For example, the amounts in this column would double if the PCS performance measures attain the maximum amount payout level of 200%.3. This column represents the grant date fair value of stock options or SARs granted in such year, in accordance with ASC 718. For additional information on the valuation assumptions, refer to note 16 of the Company’s financial statements in the Form 10-K for the year ended December 31, 2012,2013, as filed with the SEC. See also “Grants of Plan-Based Awards in 2012”2013” for information on optionsSARs granted in 2012.2013. These amounts reflect the grant date fair value for these awards, and do not correspond to the actual value that may be recognized by the named executive officers.4. Includes, for all named executive officers, cash incentives earned for performance during each fiscal year and paid in March of the following year (including any incentives deferred at the election of the executive officers) under the ABP, which we describe in the CD&A. The cash incentive payments for 2012 performance were $1,470,000 for Mr. Woodring, $622,912 for Mr. Lay, $509,747 for Mr. Schuster, $442,373 for Mr. O’Bryant and $490,000 for Ms. Kinnaird.Annual Bonus Plan.The cash incentive payments for 2011 performance were $1,672,949 for Mr. Woodring, $689,289 for Mr. Lay, $638,699 for Mr. Schuster.The cash incentive payments for 2010 performance were $1,400,000 for Mr. Woodring, $648,703 for Mr. Lay and $602,367 for Mr. Schuster.
Also includes Company match contributions for 2012 under the Savings Plan (the RGA Profit Sharing Plan before 2012) for Messrs. Woodring, Lay, Schuster, O’Bryant and Ms. Kinnaird. Under the former RGA Profit Sharing Plan, Messrs. Woodring, Lay, and Schuster, received Company contributions of $5,819 for 2011, and $5,819 for 2010.
| 5. | This column represents the sum of the change in pension value in each fiscal year for each of the named executive officers. The decrease in the pension value relative to prior years is due to an increase in the interest rate assumptions, thus reducing the present value for 2013. We do not pay above-market or preferential earnings on any account balances; therefore, this column does not reflect any amounts relating to nonqualified deferred compensation earnings. See the “Pension Benefits” and “Nonqualified Deferred Compensation” tables for additional information. |
| 6. | Amount includes contributions for Messrs. Woodring, Lay, Schuster, O’Bryant and Ms. Kinnaird by RGA Reinsurance Company to the officers’ accounts in qualified and non-qualified plans for the |
2013 Name Woodring Lay Schuster O’Bryant KinnairdFor Ms. Kinnaird, the amounts for 2013 include reimbursement of relocation costs (sale of a home). For Mr. O’Bryant, the amounts for 2013 also include reimbursement of relocation costs, as well as reimbursements associated with an expatriate assignment (includes $273,794 in trailing Japanese tax liabilities on compensation received while on assignment in Japan).Grants of Plan-Based Awards in 2012This table provides the following information about equity and non-equity awards granted to the named executive officers in 2012:2013: (1) the grant date; (2) the estimated future payouts under non-equity incentive plan awards, which consist of potential payouts under the ABPAnnual Bonus Plan award granted in 20122013 for the 20122013 performance period; (3) estimated future payouts under equity incentive plan awards, which consist of potential payouts under the PCS grants in 20122013 for the 2012-20142013-2015 performance period; (4) all other option awards, which consist of the SARs awards granted to the named executive officers in 2012;2013; (5) the strike price of the SARs granted, which reflects the closing price of Company stock on the date of grant and (6) the grant date fair value of each equity grant calculated under ASC 718. Grant
Date Estimated Future Payments
Under Non-Equity
Incentive Plan Awards¹ Estimated Future Payments
Under Equity Incentive Plan
Awards (Number of Shares)² All Other
Stock
Awards:
Number of
Shares
of Stock
or Units All Other
Option
Awards:
Number of
Securities
Underlying
Options
Options3 Exercise
of Base
Price of
Option
Awards
Awards4 Grant Date
Fair Value
of Stock
and Option
Awards5 Threshold Target Maximum Threshold Target Maximum $ 600,000 $ 1,200,000 $ 2,400,000 — — — — — — — 2/28/2012 — — — 10,150 20,300 40,600 — — — $ 1,149,995 — — — — — — — 53,991 $ 56.65 $ 1,060,923 $ 254,250 $ 508,500 $ 1,017,000 — — — — — — — 2/28/2012 — — — 3,045 6,090 12,180 — — — $ 344,999 — — — — — — — 16,197 $ 56.65 $ 318,271 $ 208,060 $ 416,120 $ 832,240 — — — — — — — 2/28/2012 — — — 2,966 5,931 11,862 — — — $ 335,991 — — — — — — — 15,775 $ 56.65 $ 309,979 $ 177,160 $ 354,320 $ 708,640 — — — — — — — 2/28/2012 — — — 1,986 3,972 7,944 — — — $ 225,014 — — — — — — — 10,563 $ 56.65 $ 207,563 $ 200,000 $ 400,000 $ 800,000 — — — — — — — 4/02/2012 — — — 2,106 4,212 8,424 — — — $ 250,024 — — — — — — — 11,198 $ 59.36 $ 235,270 NAME GRANTDATEESTIMATED FUTURE PAYMENTSUNDER NON-EQUITYINCENTIVE PLAN AWARDS¹ESTIMATED FUTURE PAYMENTSUNDER EQUITY INCENTIVE PLANAWARDS (NUMBER OF SHARES)²ALL OTHERSTOCKAWARDS:NUMBER OFSHARESOF STOCKOR UNITSALL OTHEROPTIONAWARDS:NUMBER OFSECURITIESUNDERLYINGOPTIONS3EXERCISEOF BASEPRICE OFOPTIONAWARDS4GRANTDATEFAIR VALUEOF STOCKANDOPTIONAWARDS5THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM GreigWoodring 624,000 1,248,000 2,496,000 --- --- --- --- --- --- --- 2/21/2013 --- --- --- 11,911 23,822 47,644 --- --- --- $1,400,019 --- --- --- --- --- --- --- 68,237 $58.77 $1,267,843 Jack Lay 261,878 523,755 1,047,510 --- --- --- --- --- --- --- 2/21/2013 --- --- --- 2,971 5,941 11,882 --- --- --- $349,153 --- --- --- --- --- --- --- 17,019 $58.77 $316,213 PaulSchuster 216,400 432,800 865,600 --- --- --- --- --- --- --- 2/21/2013 --- --- --- 2,910 5,819 11,638 --- --- --- $341,983 --- --- --- --- --- --- --- 16,669 $58.77 $309,710 AllanO’Bryant 182,480 364,960 729,920 --- --- --- --- --- --- --- 2/21/2013 --- --- --- 1,957 3,914 7,828 --- --- --- $230,026 --- --- --- --- --- --- --- 11,210 $58.77 $208,282 DonnaKinnaird 206,000 412,000 824,000 --- --- --- --- --- --- --- 2/21/2013 --- --- --- 2,191 4,381 8,762 --- --- --- $257,471 --- --- --- --- --- --- --- 12,551 $58.77 $233,198 1. These columns reflect the potential value of the payment for 20122013 performance under the ABP for each named executive if the threshold,minimum, target or maximum goals are satisfied for both performance measures.satisfied. The potential payments are performance-driven and are therefore completely at risk. The performance measurements,measures, salary and bonus multiples for determining the payments are described in the CD&A. The bonus amount for actual 20122013 performance was determined in February 2013March 2014 based on the metrics described in the CD&A, and is included in the “Summary Compensation Table” in the column titled “Non-Equity Incentive Plan Compensation.”
| 2. | This column reflects the number of PCS units granted in February |
| 3. | This column reflects the number of SARs granted in February |
| 4. | This column reflects the strike price per share of common stock for the SARs granted, which is the closing price of the common stock on February |
| 5. | This column reflects the full grant date fair value of PCS units under ASC 718 and the full grant date fair value of SARs under ASC 718 granted to the named executive officers in |
Grant Date Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Option Exercise Option Expiration Number of Shares or Units of Stock That Have Not Market Value of Shares or Units or Stock That Have Not Number of Unearned Shares, Units or Other Rights That Have Not Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not 1/28/2004 1/27/2005 2/21/2006 2/20/2007 2/20/2008 2/18/2009 2/19/2010 2/22/2011 2/22/2011 2/28/2012 2/28/2012 Grant Date Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Option Exercise Option Expiration Number of Shares or Units of Stock That Have Not Market Value of Shares or Units or Stock That Have Not Number of Unearned Shares, Units or Other Rights That Have Not Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not 1/27/2005 2/21/2006 2/20/2007 2/20/2008 2/18/2009 2/19/2010 2/22/2011 2/22/2011 2/28/2012 2/28/2012 Grant Date Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Option Exercise Option Expiration Number of Shares or Units of Stock That Have Not Market Value of Shares or Units or Stock That Have Not Number of Unearned Shares, Units or Other Rights That Have Not Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not 2/20/2007 2/20/2008 2/18/2009 2/19/2010 2/22/2011 2/22/2011 2/28/2012 2/28/2012 Grant Date Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Option Exercise Option Expiration Number of Shares or Units of Stock That Have Not Market Value of Shares, Units or Other Rights That Have Not Number of Unearned Shares, Units or Other Rights That Have Not Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not 2/28/2012 2/28/2012 Grant Date Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Option Exercise Option Expiration Number of Shares or Units of Stock That Have Not Market Value of Shares or Units or Stock Have Not Number of Unearned Shares, Units or Other Rights Have Not Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not 4/02/2012 4/02/2012 - Since the calculation of the Relative ROE measure is dependent upon public availability of financial results from our peer companies, the payout results for the 2010-2012 PCS grants were not determined until March 2013 and payments were not made until May 2013, after the 2013 Proxy Statement was published. The named executive officers made the following stock option and SARs exercises during 2012: Greig Woodring - 27,310 shares acquired on vesting ($1,747,840 value realized); Jack Lay - 10,313 shares acquired on vesting ($660,032 value realized); Paul Schuster - 10,313 shares acquired on vesting ($660,032 value realized). Name Woodring1 Lay Schuster O’Bryant Kinnaird Age on January 1 of the Plan Year in Which the Year of Service is Earned Percentage of Final Average Annual Compensation Credited Percentage of Excess Compensation Credited Up to 35 35 — 44 45 — 54 55 or over Number of Years Credited Service Present Value of Accumulated Benefit1 Woodring Lay Schuster O’Bryant Kinnaird2 Name Woodring Lay Schuster O’Bryant Kinnaird5 Name Woodring Lay Schuster O’Bryant Kinnaird Name William J. Bartlett Arnoud W.A. Boot John F. Danahy J. Cliff Eason Alan C. Henderson Rachel Lomax Fred J. Sievert Stanley B. Tulin The following table sets forth, as of December 31, Directors, Nominees and Named Executive Officers: A. Greig Woodring Jack B. Lay Paul A. Schuster Donna H. Kinnaird All directors and executive officers as a group Outstanding Equity Awards at 2012 Fiscal2013 Year-EndThe following table provides information on the 20122013 year-end holdings of SARs, stock options restricted stock and PCS by our named executive officers. This table includes unexercisedvested and unvested SARs and option awards and unvested PCS grants with performance conditions that have not yet been satisfied. Each equity grant is shown separately for each named executive. The vesting schedule for each grant is described in the footnotes following this table, based on the grant date. The market value of the stock awards is based on the closing market price of Company stock as of December 31, 2012,2013, the last business day of the year, which was $53.52.$77.41. The PCS grants are subject to specified performance objectives over the performance period. For additional information about the option awards and stock awards, see the description of equity incentive compensation in the CD&A.A. Greig Woodring Option Awards Stock Awards Equity Incentive Plan
Awards Number of Securities
Underlying Unexercised
Options Exercisable¹ Unexercisable Options Price Date Vested Vested Vested² Vested² 34,335 $ 39.61 1/28/2014 29,492 $ 47.47 1/27/2015 37,911 $ 47.48 2/21/2016 31,058 $ 59.63 2/20/2017 32,225 $ 56.03 2/20/2018 37,595 12,532 $ 32.20 2/18/2019 23,196 23,196 $ 47.10 2/19/2020 17,030 17,031 $ 59.74 2/22/2021 30,130 $ 1,612,558 13,497 40,494 $ 56.65 2/28/2022 40,600 $ 2,172,912 Jack B. Lay Option Awards Stock Awards Equity Incentive Plan
Awards Number of Securities
Underlying Unexercised
Options Exercisable¹ Unexercisable Options Price Date Vested Vested Vested² Vested² 10,533 $ 47.47 1/27/2015 11,321 $ 47.48 2/21/2016 11,119 $ 59.63 2/20/2017 15,022 $ 56.03 2/20/2018 17,473 5,825 $ 32.20 2/18/2019 6,871 6,872 $ 47.10 2/19/2020 6,244 6,245 $ 59.74 2/22/2021 11,048 $ 591,289 4,049 12,148 $ 56.65 2/28/2022 12,180 $ 651,874 Paul A. Schuster Option Awards Stock Awards Equity Incentive Plan
Awards Number of Securities
Underlying Unexercised
Options Exercisable¹ Unexercisable Options Price Date Vested Vested Vested² Vested² 2,780 $ 59.63 2/20/2017 7,511 $ 56.03 2/20/2018 11,649 5,825 $ 32.20 2/18/2019 6,871 6,872 $ 47.10 2/19/2020 6,244 6,245 $ 59.74 2/22/2021 11,048 $ 591,289 3,943 11,832 $ 56.65 2/28/2022 11,862 $ 634,854 Allan E. O’Bryant Option Awards Stock Awards Equity Incentive Plan
Awards Number of Securities
Underlying Unexercised
Options Exercisable¹ Unexercisable Options Price Date Vested Vested Vested² Vested² 2,640 7,923 $ 56.65 2/28/2022 7,944 $ 425,163 Donna H. Kinnaird Option Awards Stock Awards Equity Incentive Plan
Awards Number of Securities
Underlying Unexercised
Options
That
That Exercisable¹ Unexercisable Options Price Date Vested Vested Vested² Vested² 2,799 8,399 $ 59.36 4/02/2022 8,424 $ 450,852 37Option Awards Stock Awards Equity Incentive PlanAwardsGrantDateNumber of SecuritiesUnderlying UnexercisedOptionsEquityIncentive PlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptionsOptionExercisePriceOptionExpirationDateNumberof Sharesor Unitsof StockThatHave NotVestedMarketValue ofShares orUnits orStock ThatHave NotVestedNumber ofUnearnedShares,Units orOtherRights ThatHave NotVested2Market orPayoutValue ofUnearnedShares,Units orOtherRights ThatHave NotVested2Exercisable¹Unexercisable Greig Woodring 1/27/2005 29,492 $47.47 1/27/2015 2/21/2006 37,911 $47.48 2/21/2016 2/20/2007 31,058 $59.63 2/20/2017 2/20/2008 32,225 $56.03 2/20/2018 2/18/2009 50,127 $32.20 2/18/2019 2/19/2010 34,794 11,598 $47.10 2/19/2020 2/22/2011 25,545 8,516 $59.74 2/22/2021 2/28/2012 26,995 26,996 $56.65 2/28/2022 20,300 $1,571,423 2/21/2013 17,059 51,178 $58.77 2/21/2023 47,644 $3,688,122 Jack Lay 2/20/2007 11,119 $59.63 2/20/2017 2/20/2008 15,022 $56.03 2/20/2018 2/18/2009 23,298 $32.20 2/18/2019 2/19/2010 10,307 3,436 $47.10 2/19/2020 2/22/2011 9,366 3,123 $59.74 2/22/2021 2/28/2012 8,098 8,099 $56.65 2/28/2022 6,090 $471,427 2/21/2013 4,254 12,765 $58.77 2/21/2023 11,882 $919,786 Paul Schuster 2/20/2007 2,780 $59.63 2/20/2017 2/20/2008 7,511 $56.03 2/20/2018 2/18/2009 17,474 $32.20 2/18/2019 2/19/2010 10,307 3,436 $47.10 2/19/2020 2/22/2011 9,366 3,123 $59.74 2/22/2021 2/28/2012 7,887 7,888 $56.65 2/28/2022 5,931 $459,119 2/21/2013 4,167 12,502 $58.77 2/21/2023 11,638 $900,898 Allan O’Bryant 2/28/2012 5,281 5,282 $56.65 2/28/2022 3,972 $307,473 2/21/2013 2,802 8,408 $58.77 2/21/2023 7,828 $605,965 Donna Kinnaird 4/2/2012 5,599 5,599 $59.36 4/2/2022 4,212 $326,051 2/21/2013 3,137 9,414 $58.77 2/21/2023 8,762 $678,266 381. Options granted in 2004 and subsequent years vest and become exercisable in four equal annual installments of 25%, on December 31 of the second, third, fourth and fifth years. SARs, which were first granted in 2011, vest over four years (25% of which vests at the end of each of the first four years). 2. These columns reflect the number of shares and estimated market value of grants of PCS. In March 2013,Because the relative return on equity measure is dependent upon public availability of financial results from our peer companies, our performance for the relative return on equity metric will not be approved by the Compensation Committee determined thatuntil late April 2014, after the 2010-2012 PCS award wouldfiling of this Proxy Statement. Payments will be paid at 151% of target.made in May 2014. These payments will be fully disclosed in our 2015 Proxy Statement. See “Option and SARs Exercises and Stock Vested During Fiscal 2012”2013” for more information on the payout of those awards. SEC rules require disclosure of the number of shares and estimated market value of PCS grants based on a level equal to or the next level higher (e.g., targetperformance measure (target or maximum) thanthat exceeds the priorprevious fiscal year’s award. As noted, the 2010 PCS award paid out at 151%.performance. Accordingly, the number of shares and estimated market value for the PCS grants made in 20112012 are disclosed assuming they are awarded at the target (100%) level and 2012the 2013 are disclosed assuming they are awarded at the maximum (200%) level. The market or payout value is estimated using the closing price, $53.52,$77.41, of our common stock on December 31, 2012,2013, the last business day of the year. The performance period for the 20102011-2013 PCS grant was January 1, 2010 through December 31, 2012. The performance period for the 2011 PCS grant is January 1, 2011 through December 31, 2013. The performance period for the 20122012-2014 PCS grant is January 1, 2012 through December 31, 2014.2014. The performance period for the 2013-2015 PCS grant is January 1, 2013 through December 31, 2015.Option and SARs Exercises and Stock Vested During Fiscal 20132012 Stock Option and SARs Exercises2013 Stock Option and SARs Exercises - The following table provides information for the named executive officers regarding stock option and SARs exercises during 2012,2013, including the number of shares acquired upon exercise and the value realized. In previous years we have also disclosed the number of shares awarded in settlement of the PCS grants and value realized for the applicable three-year performance period. However, in 2012 we addedsince the Relative ROE measure to our PCS awards; the calculation of thisrelative return on equity measure is dependent upon pubicpublic availability of financial results from our peer companies. The payout resultscompanies, our performance for the 2010-2012 PCS grants could not be determined until March and paymentsrelative return on equity metric will not be approved by the Compensation Committee until late April 2014, after the filing of this Proxy Statement. Payments will be made untilin May 2013. Therefore, we2014. These payments will report PCS payments for the 2010-2012 performance periodbe fully disclosed in our 20142015 Proxy Statement. Option and SARs Awards Stock Awards Number of
Shares Acquired
on Exercise Value Realized
on Exercise Number of
Shares Acquired
on Vesting² Value Realized
on Vesting² 82,081 $ 2,152,173 — — — — — — — — — — — — — — — — — — 2013 STOCK OPTIONS AND SARS EXERCISES OPTION AND SARS AWARDS STOCK AWARDS NAME NUMBER OFSHARES ACQUIREDON EXERCISEVALUE REALIZEDON EXERCISENUMBER OFSHARES ACQUIREDON VESTING2VALUE REALIZEDON VESTING2Greig Woodring134,335 $767,881 --- $ --- Jack Lay121,854 $590,075 --- $ --- Paul Schuster --- --- --- $ --- Allan O'Bryant --- --- --- $ --- Donna Kinnaird --- --- --- $ --- 1. Mr. Woodring exercised 41,00034,335 options on August 29, 2012April 30, 2013 with an exercise price of $57.50. He$61.97. Mr. Lay exercised 20,54021,854 options on November 20, 201221, 2013 with an exercise price of $49.40. He exercised 20,541 options on November 21, 2012 with an exercise price of $49.66.$74.48.392. Since the relative return on equity measure is dependent upon public availability of financial results from our peer companies, our performance for the relative return on equity metric will not be approved by the Compensation Committee until late April 2014, after the filing of this Proxy Statement. The settlement of PCS awards for the 2010-20122011-2013 performance period will not be made until May 2013,2014, so this information is not yetcurrently available.Pension Benefits in Fiscal 2012PENSION BENEFITSSome of our employees participate in the RGA Performance Pension Plan (the “Pension Plan”), a qualified defined benefit plan. Some of our employees also participate in the Augmented Plan, a non-qualified plan under which eligible employees are entitled to receive retirement benefits not paid under the Pension Plan and the Savings Plan due to Internal Revenue Code (the “Code”) limits on the amount of benefits that may accrue and be paid under the Pension Plan and the Savings Plan.Messrs. Woodring, Lay, O’Bryant and Schuster and Ms. Kinnaird participate in the Pension Plan and the Augmented Plan. The monthly benefit payable for life at age 65 for each individual is the sum of (a) and (b) below:(a) The sum of (1) 1.05% of Final Average Monthly Compensation (as defined below), multiplied by the number of years of service earned as of December 31, 1995, plus (2) 0.65% of the excess, if any, of Final Average Monthly Compensation minus one-twelfth of the Social Security Maximum Wage Average (as defined below), multiplied by the number of years of service earned as of December 31, 1995; plus(b) The actuarial equivalent of a lump sum benefit equal to the sum of the amounts determined below for each full year of service completed after December 31, 1995: 2% 1% 4% 2% 6% 3% 8% 4% AGE ON JANUARY 1 OF THEPLAN YEAR IN WHICHTHE YEAR OF SERVICE IS EARNEDPERCENTAGE OF FINALAVERAGE ANNUALCOMPENSATION CREDITEDPERCENTAGE OF EXCESSCOMPENSATION CREDITEDUp to 35 2% 1% 35 – 44 4% 2% 45 – 54 6% 3% 55 or over 8% 4% “Social Security Maximum Wage Average” means the average of the Social Security Wage Base in effect for each calendar year during the 35-year period ending with the calendar year in which a participant attains the Social Security retirement age. “Social Security Wage Base” means the maximum amount of compensation that may be considered wages for FICA tax, or $110,100$113,700 for 2012.2013. “Breakpoint” means 60% of the Social Security Wage Base raised to the next highest $100 increment. “Excess Compensation” means the excess, if any, of “Final Average Annual Compensation” minus the Breakpoint. “Final Average Annual Compensation” means the highest average Benefit Salary for the five consecutive years during the preceding ten years. “Benefit Salary” means actual base salary, eligible bonuses and pre-tax salary deferrals made to the profit sharing plan or a cafeteria plan and the CODA portion of the profit sharing award, in plan years prior to 2012. Beginning with the 2012 plan year and in accordance with the terms of the Savings Plan, the Company will no longer provide profit sharing awards. “Final Average Monthly Compensation” is one-twelfth of Final Average Annual Compensation.Payment of the specified retirement benefits is contingent upon continuation of the plans in their present form until the officer retires. RGA Canada maintains the Canadian Supplemental Executive Retirement Plans, which are non-qualified defined benefit plans pursuant to which eligible executive officers are entitled to receive additional retirement benefits.40Until January 1, 1994, we also maintained an Executive Supplemental Retirement Plan (the “Supplemental Plan”), a non-qualified defined benefit plan pursuant to which eligible executive officers are entitled to receive additional retirement benefits. Benefits under the Supplemental Plan were frozen as of January 1, 1994. The frozen annual benefit payable upon retirement at age 65 is $3,060 for Mr. Woodring. Retirement benefits under the Supplemental Plan are payable at age 65 in the form of a 15-year certain life annuity, with no direct or indirect integration with Social Security benefits.Name Plan Name Payments
During
Last Fiscal
Year Performance Pension Plan 33 $ 1,049,188 — Augmented Benefit Plan 33 $ 8,791,935 — Supplemental Plan 33 $ 428,261 — Performance Pension Plan 21 $ 482,871 — Augmented Benefit Plan 21 $ 1,668,236 — Performance Pension Plan 21 $ 483,324 — Augmented Benefit Plan 21 $ 1,575,039 — Performance Pension Plan 2 $ 40,584 — Augmented Benefit Plan 2 $ 77,983 — Performance Pension Plan — — — Augmented Benefit Plan — — — RETIREMENT PLAN ACCUMULATED BENEFITS NAME PLAN NAME NUMBEROFYEARSCREDITEDSERVICEPRESENT VALUEOF ACCUMULATEDBENEFIT1PAYMENTSDURINGLAST FISCALYEARGreig Woodring Performance Pension Plan 34 $1,056,513 --- Augmented Benefit Plan 34 $8,915,662 --- Supplemental Plan 34 $402,239 --- Jack Lay Performance Pension Plan 22 $506,735 --- Augmented Benefit Plan 22 $1,783,288 --- Paul Schuster Performance Pension Plan 22 $507,262 --- Augmented Benefit Plan 22 $1,617,342 --- Allan O'Bryant Performance Pension Plan 3 $61,353 --- Augmented Benefit Plan 3 $135,766 --- Donna Kinnaird Performance Pension Plan 1 $27,868 --- Augmented Benefit Plan 1 $89,792 --- 1. The accumulated benefit for the U.S. plans is based on service and compensation (as described above) considered by the plans for the period through December 31, 2012.2013. The present value has been calculated assuming the earliest retirement age at which the participant can elect an unreduced benefit. For additional discussion of the assumptions, see note 10 of the Company’s financial statements in the Form 10-K for the year ended December 31, 2012,2013, as filed with the SEC. As described in such note, the interest assumption is 3.80%4.45%.2.Ms. Kinnaird was hired April 2, 2012, and therefore had not met the participation criteria as of December 31, 2012, for the above plans.Nonqualified Deferred Compensation in Fiscal 2012NON-QUALIFIED DEFERRED COMPENSATIONThe table below provides information on the non-qualified deferred compensation arrangements in which our U.S. named executive officers were eligible to participate during 2012.2013. Employees in the U.S. who hold the office of vice president and above are able to defer up to 50% of their base salary and up to 100% of their cash bonus payments under our Executive Deferred Savings Plan (“EDSP”). With respect to distributions, participants may elect to receive either a lump sum payment or 1 to 15 annual installments. In addition, we also maintain the Augmented Plan, a non-qualified plan under which eligible employees are entitled to receive profit sharing and matching contributions not paid to the employee under the Savings Plan (formerly the Profit Sharing Plan), due to Code limits or a reduction in compensation pursuant to the employee’s participation in the EDSP. The contributions made into the employee’s non-qualified deferred compensation account are based upon the maximum matching contribution rate we provide to other employees in connection with the Savings Plan.The investment fund alternatives under the Augmented Plan and EDSP are identical to those in the Savings Plan, and we credit the participant’s non-qualified deferred compensation account(s) with the returns he or she would have received in accordance with the investment alternatives selected from time to time by the participant. We do not pay above-market or preferential earnings, compensation or returns under the EDSP or Augmented Plan, or any other plan.41The named executive officers cannot withdraw any amounts from their deferred compensation balances until they either terminate employment or reach the designated distribution date selected by the executive at the time of their deferral election (in the case of benefits held in the executive’s EDSP account). Executive
Contributions in
Last FY1 Registrant
Contributions
in Last FY2 Aggregate
Earnings in Last
FY3 Aggregate
Withdrawals/
Distributions Aggregate
Balance
at Last FYE4 — $ 112,831 $ 87,971 — $ 693,224 $37,559 $ 79,975 $ 84,085 — $ 1,094,269 — $ 53,313 $ 47,978 — $ 360,879 — $ 26,341 $ 4,916 — $ 262,569 — — — — — 2013 NON-QUALIFIED DEFERRED COMPENSATION NAME EXECUTIVECONTRIBUTIONS INLAST FY1REGISTRANTCONTRIBUTIONSIN LAST FY2AGGREGATEEARNINGS IN LASTFY3AGGREGATEWITHDRAWALS/DISTRIBUTIONSAGGREGATEBALANCEAT LAST FYE4Greig Woodring --- $58,488 $255,356 --- $1,007,068 Jack Lay $42,782 $66,964 $163,000 --- $1,367,015 Paul Schuster --- $28,258 $73,445 --- $462,582 Allan O'Bryant $118,053 $9,785 $65,005 --- $455,412 Donna Kinnaird --- $2,308 --- --- $2,308 1. The amounts in this column are also included in the Summary Compensation Table in the salary column (i.e., contributions to the EDSP). 2. The amounts in this column reflect 20112012 contributions credited to the participant’s account during 2012.2013. For reasons related to the timing of the contributions, the amounts will not match the amounts in the Summary Compensation Table’s “All Other Compensation” column, which are contributions for 20122013 credited in 2013.2014. All amounts represent contributions in the Augmented Plan except for Mr. Lay – $36,473 and O’Bryant – $17,361, which amounts represents contributions to the EDSP.$47,559.3. Reflects earnings credited to the participant’s account during 20122013 in connection with the investment selections chosen from time to time by the participant. AllMr. Woodring’s and Ms. Kinnaird’s amounts represents earnings in the Augmented Plan. Amounts for Messrs. Lay – $79,321, Schuster – $10,702 and O’Bryant – $65,004 represent earnings in the Augmented Plan except for Messrs. Lay – $60,647, Schuster – $8,302 and O’Bryant – $4,797, which amounts represent earnings in the EDSP.4. The aggregate balance at last fiscal year-end column reflects the following amounts that were reported in the Summary Compensation Table in previous years: Woodring – $492,422;$693,224; Lay – $892,650;$1,094,269; Schuster – $259,588; and$360,879; O’Bryant – $231,312.$262,569.5.Ms. Kinnaird was hired April 2, 2012, and therefore had not met the participation criteria as of December 31, 2012, for the above plan.Potential Payments Upon Termination or Change of ControlPOTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROLAs described in the CD&A, our named executive officers do not have employment, severance or change of control agreements with our Company. The information below describes and quantifies certain compensation that may or will become payable under existing plans and agreements if the named executive officer’s employment had terminated on or by December 31, 2012,2013, due to a change of control, disability or death, given the executive’s compensation and service levels as of such date and, where applicable, based on our closing stock price on that date.December 31, 2013 or actual date of disability, death, etc. These benefits are in addition to benefits available generally to salaried employees such as distributions under the 401(k) and pension plans, retiree medical benefits, disability benefits and accrued vacation pay.Change of Control. Upon the occurrence of a change of control (as defined below), any unvested stock options or SARs granted before the date of that event could become exercisable if the Compensation Committee decided to maintain the named executive officer’s rights following a change in control. Our Flexible Stock Plan and stock option grant agreements provide that the Compensation Committee may accelerate the vesting periods or arrange for us to purchase the options so the named executive officer receives the value that he or she would have attained had the option been currently exercisable. In addition, our Flexible Stock Plan and PCS grant agreements provide that upon a change of control, as soon as practicable following the end of the applicable three-year performance period, we must deliver to the named executive officer the number of shares that coincides with the target award for each outstanding grant of PCS.42Disability or Death. If one of the named executive officers were to become disabled or die, any unvested stock options and SARs granted before the date of such event would immediately vest and become exercisable. In addition, he or she would receive a pro rata proportion of the shares of common stock that would have been issued under any award of PCS at the end of the three-year performance period. The pro rata proportion is determined based on the number of calendar months in the performance period during which he or she was employed, divided by 36 months (the total number of months in the three-year performance period).Retirement. Upon the “retirement” (as defined below) of a named executive officer, unvested stock options and SARs do not accelerate but continue to vest in accordance with the vesting schedule and provisions specified in the respective option grant agreement(s). Upon retirement, the pro rata distribution provisions described above under “Disability or Death” apply to any PCS grants. Due to the number of factors that affect the nature, amount and timing of the vesting and exercise of stock options or SARs, or the actual award following a PCS performance period, the amounts paid to or received by the named executive officer may differ and are undeterminable until actually realized.The named executive officers may participate in deferred compensation plans that permit deferral of certain compensation. They also participate in our defined contribution and defined benefit retirement plans. The last column of the table under “Nonqualified Deferred Compensation in Fiscal 2012”2013” reports each named executive’s aggregate balance at December 31, 2012,2013, under each nonqualified deferred compensation or defined contribution plan. The named executive officers are entitled to receive the amount in their deferred compensation account in the event of termination of employment or retirement. The table under “Pension Benefits in Fiscal 2012”2013” describes the general terms of each pension plan in which the named executive officers participate, the years of credited service and the present value of each named executive officer’s accumulated pension benefit.Definitions. “Change of Control” is defined in our Flexible Stock Plan and, for this discussion, means (i) the acquisition, without Board approval, of more than 20% of our outstanding common shares through a tender offer, exchange offer or otherwise, (ii) our liquidation or dissolution following a sale or other disposition of all or substantially all of our assets, (iii) a merger or consolidation involving us which results in us not being the surviving corporation, or (iv) a change in the majority of the members of our Board of Directors during any two-year period not approved by at least two-thirds of the directors who were members at the beginning of the two-year period.“Retirement” is defined in the respective equity incentive grant agreements and means disability, death or termination of employment due to retirement of a named executive officer whostatus after the participant has attained age 55 and a combination of age and years of service with the Company that equals at least 65.sixty-five (65); provided that, the maximum number of years of service credited for purposes of this calculation shall be ten (10). Thus, named executive officers who have attained age 55 and have 10 years of service satisfy the definition and are eligible for the benefits described above associated with retirement. At December 31, 2012,2013, the named executive officers who satisfied this requirement were Messrs. Woodring, Lay and Schuster.The following table provides the value of equity awards that would accelerate and become exercisable or vested upon the occurrence of a change of control or if the named executive officer had become disabled or died as of December 31, 2012.2013. The value calculations are based upon our stock price as of December 31, 20122013 ($53.52)77.41), the last business day of the year, and in the case of options reflect the payment of the respective option exercise price. Change of Control Disability or Death Options/SARs PCS
(full award at target) Options/SARs PCS
(pro rata) $416,101 $1,892,735 $416,101 $898,737 $168,307 $ 621,581 $168,307 $305,641 $168,307 $ 613,072 $168,307 $302,833 — $ 409,696 — $202,218 — $ 225,426 — $ 74,391 43VALUE OF EQUITY AWARDS UPON CHANGE OF CONTROL CHANGE OF CONTROL DISABILITY OR DEATH NAME OPTIONS/SARS PCS(FULL AWARD AT TARGET)OPTIONS/SARS PCS(PRO RATA)Greig Woodring $2,016,408 $3,415,484 $2,016,408 $2,179,963 Jack Lay $565,403 $931,320 $565,403 $623,192 Paul Schuster $556,121 $909,568 $556,121 $607,767 Allan O'Bryant $303,168 $610,455 $303,168 $407,457 Donna Kinnaird $276,539 $665,184 $276,539 $437,965 Director CompensationDirectors who also serve as officersITEM 2 – SHAREHOLDERS’ ADVISORY VOTE ON EXECUTIVE COMPENSATIONThe Dodd-Frank Act enables our shareholders to vote to approve, on an advisory basis (i.e., non-binding), the compensation of our named executive officers as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K (including in the Compensation Discussion and Analysis section, compensation tables and accompanying narrative disclosures).The Company has a “pay-for-performance” philosophy that forms the foundation of all decisions regarding compensation of our named executive officers. This compensation philosophy, and the program structure approved by the Compensation Committee, is central to our ability to attract, retain and motivate individuals who can achieve superior financial results. Please refer to “Compensation Discussion and Analysis – Executive Summary” for an overview of the compensation of our named executive officers.A primary focus of our Compensation Committee is whether the Company’s executive compensation program serves the best interests of the Company’s shareholders. As part of its ongoing review of our executive compensation program, the Compensation Committee considered the affirmative shareholder advisory vote on executive compensation (“say on pay”) at the Company’s 2013 annual meeting, where a significant majority (99% of votes cast on the proposal) of our shareholders approved the compensation program described in the proxy statement for that meeting. Taking the vote into consideration, along with an overall review of the compensation program, the Compensation Committee determined that the Company’s executive compensation philosophy, objectives and elements continue to be appropriate. Accordingly, we did not make material changes to the Company’s executive compensation program.We are asking our shareholders to approve the compensation of our named executive officers as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the “Compensation Discussion & Analysis,” compensation tables and narrative discussion. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and practices described in this Proxy Statement. This vote is advisory and therefore not binding on the Company, the Compensation Committee, or the Board of Directors. However, the Board and the Compensation Committee value the opinions of our shareholders and to the extent there is any subsidiary do not receivesignificant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will carefully consider those shareholders’ concerns when making future compensation decisions for our named executive officers and will evaluate whether any additional compensation for serving our Company as membersactions are necessary to address those concerns.Vote RequiredIf a quorum is present, the vote required to approve this Item 2 is a majority of the common stock represented in person or by proxy at the Annual Meeting.44Recommendation of the Board of Directors or anyThe Board of its committees. During 2012, Mr. Woodring wasDirectors recommends that shareholders vote FOR the soleproposal to approve the compensation of our named executive officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion & Analysis, compensation tables and narrative discussion.AUDIT MATTERSAUDIT COMMITTEE REPORTThe Audit Committee has reviewed and discussed our 2013 audited financial statements with executives. The Audit Committee also discussed with the independent registered public accounting firm the matters required to be discussed as required by auditing standards of the Public Company director meeting this criterion,Accounting Oversight Board (“PCAOB”), SEC Rule 2-07 of Regulation S-X, Statement of Auditing Standards (“SAS”) No. 114, “The Auditor’s Communication With Those Charged With Governance.” The Audit Committee has received the written disclosures and the groupletter from the independent registered public accounting firm required by the applicable requirements of directors who are not employees of our Company or any subsidiary (“non-employee directors”) consisted of Messrs. Bartlett, Boot, Danahy, Eason, Henderson, Sievert, Tulinthe PCAOB Rule 3526, and Ms. Lomax. In 2012, non-employee directorswere paid an annual retainer fee of $50,000 (except the chair ofhas discussed with those accountants their independence. Based on those reviews and discussions, the Audit Committee recommended to our Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended receivedcomprise the Committee:William J. Bartlett, ChairmanArnoud W.A. BootJohn F. DanahyChristine R. DetrickITEM 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORThe third item to be acted upon at the Annual Meeting is the ratification of the appointment of Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, “Deloitte”) as the Company’s independent auditor for the fiscal year ending December 31, 2014. The Audit Committee has appointed Deloitte, subject to shareholder ratification. Deloitte has served as independent auditor of the Company since 2000. Its long term knowledge of the Company and its subsidiaries, combined with its insurance industry expertise, has enabled it to carry out its audits of the Company’s financial statements with effectiveness and efficiency.In considering Deloitte’s appointment, the Audit Committee reviewed the firm’s qualifications and competencies, including the following factors:Deloitte’s status as a registered public accounting firm with the Public Company Accounting Oversight Board (United States) (PCAOB) as required by the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) and the Rules of the PCAOB;Deloitte’s independence and its processes for maintaining its independence;the results of the independent review of the firm’s quality control system;45the key members of the engagement team for the audit of the Company’s financial statements;Deloitte’s approach to resolving significant accounting and auditing matters including consultation with the firm’s national office; andDeloitte’s reputation for integrity and competence in the fields of accounting and auditing.The Audit Committee assures the regular rotation of the audit engagement team partners as required by law. The Audit Committee approves Deloitte’s audit and non-audit services in advance as required under Sarbanes-Oxley and SEC rules. Under procedures adopted by the Audit Committee, the Audit Committee reviews, on an annual retainer feebasis, a schedule of $62,000particular audit services that the Company expects to be performed and an estimated amount of fees for each particular audit service. The Audit Committee also reviews a schedule of audit-related, tax and other permitted non-audit services that the chairCompany may engage the independent auditor to perform and an estimated amount of anyfees for each of those services.All audit related services, tax services and other services were pre-approved by the Audit Committee, who receivedwhich concluded that the provision of such services by Deloitte was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee has adopted a Pre-Approval Policy which provides for pre-approval of audit, audit-related and tax services on an annual retainer feebasis and, in addition, individual engagements anticipated to exceed pre-established thresholds must be separately approved. The policy authorizes the Committee to delegate to one or more of $58,000). Non-employee directors were paid $3,000its members pre-approval authority with respect to permitted services.Representatives of Deloitte will attend the 2014 Annual Meeting. They will have an opportunity to make a statement if they desire to do so, and they will be available to respond to appropriate questions.The aggregate fees billed to us for each Boardthe years ending December 31, 2013 and 2012 by Deloitte are set forth below. These fees have been approved by the Company’s Audit Committee meeting attendedin accordance with its Pre-Approval Policy.AUDITOR FEES FISCAL YEAR 2013 2012 Audit Fees1 $6,012,545 $4,893,998 Audit Related Fees2 263,490 559,636 Total audit and audit-related fees 6,276,035 5,453,634 Tax Fees3 154,500 119,473 Other425,000 --- Total Fees $6,455,535 $5,573,107 1. Includes fees for the audit of our Company’s and its subsidiaries’ annual financial statements, reviews of our quarterly financial statements, and Sarbanes-Oxley Section 404 attestation. 2. Includes fees for services rendered by Deloitte for matters such as assistance with internal control reporting requirements, certain accounting consultations on potential acquisition and reinsurance transactions, and services associated with SEC registration statements, periodic reports and securities offerings. 3. Includes fees for tax services rendered by Deloitte, such as consultation related to tax planning and compliance. 4. Includes fees for professional facilitation services rendered by Deloitte. 46Vote RequiredIf a quorum is present, the vote required to approve this Item 3 is a majority of the common stock represented in person and $1,500 for participating in a telephonic Board or Committee meeting. Each non-employee director is issued 1,725 shares of stock effective onby proxy at the date of the February Board meeting. Alternatively, a non-employee director serving as Chairman of the Board (i.e., Mr. Eason) receives an annual retainer of $83,000, a $4,000 fee for each Board meeting attended in person and $2,000 for participating in a telephonic Board meeting, and an annual grant of 2,125 shares of stock. We also reimburse directors for out-of-pocket expenses incurred in connection with attending and participating in Board and Committee meetings and director education programs. Mr. Bartlett also serves as a director of our Australian holding and operating companies, and receives an annual retainer of $117,631 and superannuation pension benefits of $10,587 for those services.Director Stock Retention.Our director stock retention policy provides that, subject to certain exceptions, a non-employee memberAnnual Meeting.Recommendation of the Board of Directors may not transfer any shares of the Company’s common stock which he or she received as compensation for service on theThe Board of Directors at any time during his or her service as a director.The following table illustrateshas approved the compensation earned in 2012 for all directors: Fees Earned
or Paid in
Cash1 Stock
Awards2 All Other
Compensation Total $119,000 $ 97,721 $128,2183 $344,939 $107,000 $ 97,721 — $204,721 $113,500 $ 97,721 — $211,221 $138,500 $120,381 — $258,881 $109,000 $ 97,721 — $206,721 $107,000 $ 97,721 — $204,721 $107,500 $ 97,721 — $205,221 $ 95,000 $ 97,721 — $192,721 STOCK OWNERSHIP1.This column reflects the retainer and fees earned in 2012 for Board and committee service. The 2012 retainer was paid in January 2012 and the 2012 Board and committee meeting fees were paid in January 2013.2.This column reflects the award of 1,725 shares (2,125 shares in the case of Mr. Eason) of common stock on February 28, 2012, at a closing market price of $56.65. The stock is issued as part of the directors’ annual compensation. For additional information on the valuation assumptions, refer to note 16 of the Company’s financial statements in the Form 10-K for the year ended December 31, 2012, as filed with the SEC. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Stock awards are made pursuant to the Flexible Stock Plan for Directors. Mr. Eason and Ms. Lomax elected to defer their stock awards under the Flexible Stock Plan.3.Represents compensation for services as a director of our Australian holding and operating companies. Australian dollars converted to U.S. dollars using an annualized currency exchange rate.SECURITIES OWNERSHIP OF DIRECTORS, MANAGEMENT AND CERTAIN BENEFICIAL OWNERSSECURITIES OWNERSHIPOF DIRECTORS, MANAGEMENTAND CERTAIN BENEFICIAL OWNERSOwnership of Company Shares2012,2013, certain information with respect to: (1) each person known by us to be the beneficial owner of 5% or more of our outstanding common stock, and (2) the ownership of common stock by (i) each of our directors and nominees, (ii) each of our named executive officers, and (iii) all directors, nominees, and executive officers as a group.47Beneficial Owner1 Amount and Nature ofBeneficial Ownership2 Percent ofClass1 Significant Shareholders:BENEFICIAL OWNERSHIP AS OF DECEMBER 31, 2013 BENEFICIAL OWNER1 AMOUNT AND NATURE OFBENEFICIAL OWNERSHIP2 PERCENT OFCLASS1 Significant Shareholders: Blackrock, Inc.40 East 52nd StreetNew York, NY4,799,267 4,605,19333 6.50% 6.50%FMR/Johnson82 Devonshire StreetBoston, MA 021093,742,644 5,288,50644 5.06% 7.49%Vanguard Group100 Vanguard Blvd.Malvern, PA 19355 3,691,73855.23% Non-Employee DirectorsWilliam J. Bartlett 11,350 Non-Employee Directors William J. Bartlett 13,075 * Arnoud W.A. Boot 7,575 * John F. Danahy 10,575 * Christine R. Detrick - * J. Cliff Eason 15,825 * Alan C. Henderson 21,5716* Joyce A. Phillips - * Frederick J. Sievert 15,375 * Stanley B. Tulin 3,450 * Named Executive Officers Arnoud W.A. Boot5,850 *John F. Danahy8,850 *J. Cliff Eason15,825 *Alan C. Henderson19,8465 *Rachel Lomax3,525 *Frederick J. Sievert13,650 *Stanley B. Tulin1,725 *Named Executive Officers401,644 444,72576 * 126,512 116,57287 * 74,740 95,22098 * Allan E. O'Bryant 20,82710* Allan E. O’Bryant6,8039 *2,799 8,7361110 * (18(19 persons)889,189 1,004,7621211 1.20% 1.41%*Less than 1%.*Less than 1%.
| 1. | For purposes of this table, “beneficial ownership” is determined in accordance with Rule 13d-3 under the Exchange Act, pursuant to which a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days. For computing the percentage of the class of securities held by each person or group of persons named above, any shares which such person or persons has the right to acquire within 60 days (as well as the shares of common stock underlying fully vested stock options or SARs) are deemed to be outstanding for the purposes of computing the percentage ownership of such person or group but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person or group. No director, nominee or named executive officer owns more than 1% of our outstanding common stock. |
| 2. | Unless otherwise indicated, each named person has sole voting and investment power over the shares listed as beneficially owned and none of the shares listed are pledged as security. |
| 3. | As reported on Schedule 13G/A filed |
| 4. | As reported on a Schedule 13G/A filed February 14, |
| 5. | As reported on Schedule 13G/A filed February 12, 2014, The Vanguard Group shares dispositive voting power of 40,426 shares with Vanguard Fiduciary Trust Company, its wholly-owned subsidiary. |
| 6. | Includes for Mr. Henderson 3,000 shares owned by Bess L. Henderson Trust, of which Mr. Henderson is trustee and primary |
| 7. | Includes for Mr. Woodring |
| 8. | Includes for Mr. Lay |
| 9. | Includes for Mr. Schuster |
| 10. | Includes for Mr. O’Bryant |
| 11. | Includes for Ms. Kinnaird |
| 12. | Includes a total of |
Directors’ Phantom (Deferred) Shares
Non-employee directors may elect to receive phantom shares by deferring their annual retainer (including the stock portion) and meeting fees. A phantom share is a hypothetical share of our common stock based upon the fair market value of the common stock at the time of the grant. Phantom shares are not distributed until the director ceases to serve on the Board by reason of retirement as a director, at which time we will issue cash or shares of common stock in an amount equal to the value of the phantom shares.
Because phantom shares can be distributed in cash instead of stock, they are not included as shares beneficially owned by the directors under the “Ownership of Company Shares” table above. However, several directors have elected to participate in the deferral option, and the following table illustrates their accumulated phantom share balance as of December 31, 2012:
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Section 16(a) Beneficial Ownership Reporting Compliance
Review and Approval49any director,any nominee for director,any executive officer,any holder of more than 5% of our voting securities,any immediate family member of such a person, as that term is defined in the policy, andany charitable entity or organization affiliated with such person or any immediate family member of such person.Transactions covered by the policy include any contract, arrangement, understanding, relationship, transaction, contribution or donation of goods or services, but exclude transactions with any charitable entity or organization affiliated with a director, nominee for director, executive officer, 5% security holder or any immediate family member of such a person if the amount involved is $2,500 or less. At this time, the Company is not involved in any transactions that would be covered by this policy.
Audit Committee Report
The Audit Committee has reviewed and discussed our 2012 audited financial statements with management. The Audit Committee also discussed with the independent registered public accounting firm the matters required to be discussed as required by auditing standards of the Public Company Accounting Oversight Board (“PCAOB”), SEC Rule 2-07 of Regulation S-X, Statement of Auditing Standards (“SAS”) No. 114,“The Auditor’s Communication With Those Charged With Governance.” The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the PCAOB Rule 3526, and has discussed with those accountants their independence. Based on those reviews and discussions, the Audit Committee recommended to our Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, for filing with the SEC. This report is provided by the following independent directors, who comprise the Committee:
William J. Bartlett, Chairman
Arnoud W.A. Boot
John F. Danahy
Rachel Lomax
Stanley B. Tulin
ITEM 2 — SHAREHOLDERS’ ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) enables our shareholders to vote to approve, on an advisory (i.e., non-binding basis), the compensation of our named executive officers as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K (including in the Compensation Discussion and Analysis section, compensation tables and accompanying narrative disclosures).
The Company has a “pay-for-performance” philosophy that forms the foundation of all decisions regarding compensation of our named executive officers. This compensation philosophy, and the program structure approved by the Compensation Committee, is central to our ability to attract, retain and motivate individuals who can achieve superior financial results. Please refer to “Compensation Discussion and Analysis – Executive Summary” for an overview of the compensation of our named executive officers.
A primary focus of our Compensation Committee is whether the Company’s executive compensation program serves the best interests of the Company’s shareholders. As part of its ongoing review of our executive compensation program, the Compensation Committee considered the affirmative shareholder advisory vote on executive compensation (“say on pay”) at the Company’s 2012 annual meeting, where a significant majority (96% of votes cast on the proposal) of our shareholders approved the compensation program described in the proxy statement for that meeting. Taking the vote into consideration, along with an overall review of the compensation program, the Compensation Committee determined that the Company’s executive compensation philosophy, objectives and elements continue to be appropriate. Accordingly, we did not make material changes to the Company’s executive compensation program.
We are asking our shareholders to approve the compensation of our named executive officers as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion & Analysis, compensation tables and narrative discussion. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and practices described in this Proxy Statement. This vote is advisory and therefore not binding on the Company, the Compensation Committee, or the Board of Directors. However, the Board
and the Compensation Committee value the opinions of our shareholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will carefully consider those shareholders’ concerns when making future compensation decisions for our named executive officers and will evaluate whether any actions are necessary to address those concerns.
Vote Required
If a quorum is present, the vote required to approve this Item 2 is a majority of the common stock represented in person or by proxy at the Annual Meeting.
Recommendation of the Board of Directors
The Board of Directors recommends that shareholders voteFOR the proposal to approve the compensation of our named executive officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion & Analysis, compensation tables and narrative discussion.
ITEM 3 — APPROVALOF AMENDMENTTOTHE COMPANY’S FLEXIBLE STOCK PLAN
The third item to be acted upon at the Annual Meeting is a proposal to approve an amendment to our Flexible Stock Plan (“the Plan”) to increase the number of shares authorized for issuance under the Plan. The Board of Directors originally adopted the Plan in February 1993 and on March 31, 1993 our shareholders approved the Plan. The Plan was amended and restated effective July 1, 1998. Since then, the Plan has been amended on the following occasions:
The Plan provides for the grant of stock options, stock appreciation rights, restricted stock, performance shares and other stock based awards to our employees, employees and owners of entities that have a direct or indirect ownership interest in us or in which we have a direct or indirect ownership interest, individuals who are employed by or owners of our client companies or suppliers, and individuals who are employed by or owners of companies that render services to us (collectively, the “Participants”). As of March 2013, approximately 265 employees participate in the Plan.
Under the Plan, a maximum of 11,760,077 shares are presently authorized for issuance from treasury stock or authorized but unissued shares. Set forth below is information regarding the status of all of the Company’s equity incentive plans (i.e., Flexible Stock Plan, Flexible Stock Plan for Directors, and Phantom Stock Plan for Directors) as of March 18, 2013:
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The amended Plan would increase the total number of shares authorized for issuance by 1,600,000, for a total of 13,360,077. The proposed amendment will amend Section 3.1 of the Plan, which, if approved, will read as follows:
3.1 NUMBER OF SHARES. The number of Shares which may be issued or sold or for which Options, SARs or Performance Shares may be granted under the Plan shall be 13,360,077 Shares. Such Shares may be authorized but unissued Shares, Shares held in the treasury, or both.
The principal features of the Plan, as amended, are described below. This description is subject to and qualified in its entirety by the full text of the Plan, which was filed as Exhibit 99.1 to our Form 8-K filed with the SEC on May 20, 2011, and incorporated herein by reference. The Form 8-K and exhibits are available through our website (www.rgare.com) or at the SEC website (www.sec.gov/edgar). you may obtain a copy of the plan from us upon written request.
Proposed Amendment to the Plan
We are requesting shareholder approval to increase the number of shares available under the Plan so that we will have sufficient shares available for futures equity awards. Steven Hall & Partners, our independent compensation consultant, ran a quantitative transfer model and calculated the number of shares we are requesting using a methodology similar to those used by a number of shareholders.
One of the important drivers of the need for additional shares under the Plan is the success of our officers and employees in outperforming our peers with respect to the key performance metrics established under our PCS program. Our PCS awards (as described in the Compensation Discussion and Analysis), provide for payment in unrestricted shares at the end of a three year performance period, with the final payout determined based upon our performance compared to our peers on performance metrics (revenue growth, ROE and Relative ROE). Consequently, unless the proposed increase is approved, the Company may be unable to make planned grants to existing high-value employees and executives and anticipated new executive hires, which will put us at a significant competitive disadvantage compared to our peers.
In administering our equity compensation program, we consider both our “burn rate” and our “overhang” in evaluating the impact of the program on our shareholders. Our burn rate is defined as the number of equity awards granted in the year, divided by the undiluted weighted average number of common shares outstanding during the year. It measures the potential dilutive effect of annual equity grants. For 2012, our burn rate was 1.28% and our three-year average burn rate from 2010 through 2012 was 1.11%.
Our overhang is defined as the equity awards outstanding but not exercised, plus equity awards available to be granted (“available equity award shares”), divided by total common shares outstanding plus the available equity award shares. It measures the potential dilutive effect of outstanding equity awards and future awards available for grant. Our overhang as of March 18, 2013 was 7.24%. If we include the additional shares requested under the Plan in the calculation, then our overhang would be 9.07%.
We believe that our burn rate and overhang (with or without including the shares currently being requested under the Plan) are reasonable in relation to companies in our industry and reflect a judicious use of equity for compensation purposes. Moreover, we encourage our employees to hold their stock options and SARs for extended periods of time after vesting. We believe our efforts to encourage employees to hold their stock options and SARs reflects the confidence of our employees in our prospects for future growth. However, as a result, stock options and SARs remain in the overhang calculation for relatively long periods.
Our Board of Directors believes that the increase in the number of shares authorized for issuance under the amended Plan is appropriate and will enhance our ability to continue to reward and provide incentives to our key employees as well as to attract and retain qualified employees. Presently, the total number of shares represented by equity-based awards granted and outstanding and shares available for future grants (if ultimately issued) represent approximately 7.80% of our current shares outstanding under all current Company equity incentive plans. If the amendment is approved, the total number of shares represented by equity-based awards granted and outstanding and shares available for future grants (if ultimately issued) will represent approximately 9.97% of our current shares outstanding.
Key Features of the Plan
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Description of the Plan
The Plan provides for benefits to be awarded to eligible Participants in the form of stock options, stock appreciation rights, restricted stock, performance shares, cash awards and other stock based awards. If any benefit expires or is terminated, surrendered, cancelled or forfeited, the shares covered by such benefit will be added back to the shares available for use under the Plan. In addition, shares delivered to us in payment of the exercise price of an option will be available for use under the Plan.
If our common stock is changed by reason of any stock dividend, spin-off, split-up, spin-out, recapitalization, merger, consolidation, reorganization, combination or exchange of shares, then the number and class of shares available for benefits, the number of shares subject to any outstanding benefits and the price thereof will be appropriately adjusted.
The Compensation Committee of the Board of Directors (the “Committee”) administers the Plan. The Committee currently consists of four of our outside directors. The Committee, by majority action, is authorized to determine the individuals to whom the benefits will be granted, the type and amount of such benefits and the terms of the benefit grants, as well as to interpret the Plan and to make all other determinations necessary or advisable for the administration of the Plan to the extent not contrary to the provisions of the Plan. The Committee makes its determinations under the Plan based upon the recommendations of our Chief Executive Officer and management, information made available to the Committee and its judgment as to the best interests of the Company and our shareholders. In certain circumstances, the Committee may delegate all or any part of its authority under the Plan to our employees or another committee.
Under the Plan, the Committee may award: (a) stock options exercisable into shares of our common stock which may or may not qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code, as amended; (b) stock appreciation rights; (c) restricted shares of our common stock; (d) performance shares, (e) cash awards, and (f) other stock based awards and benefits. As provided in the Plan, the Committee has complete discretion to determine the type and number of benefits granted to any Participant and the terms and conditions that attach to each grant. Such terms and conditions are not necessarily uniform among different Participants. The receipt by a Participant of one type of grant under the Plan does not entitle the Participant to receipt of any other type of grant. Payment for shares of common stock purchased upon exercise of any option or any other benefit granted under the Plan that requires payment by a Participant to us will be made in cash, or with the consent of the Committee, by the tender of shares of common stock having a fair market value equal to the purchase price, or in other property, rights and credits, to the extent permitted by law, any combination of the foregoing, or any other method of payment authorized by the Committee in an individual award agreement.
Stock Options. The Committee may grant stock options, which entitle the Participant to purchase our common stock at a price established by the Committee, and that price will not be less than the Fair Market Value of our common stock on the date of the grant. “Fair Market Value” means the closing price of shares on the New York Stock Exchange on a given date. As of March 18, 2013, the closing price of shares on the New York Stock Exchange was $60.10. The Committee determines the term of the stock options, including the times and conditions under which the options become exercisable. The maximum number of shares with respect to which incentive stock options are issuable under the Plan is 150,000 shares. The maximum number of shares with respect to which options may be granted to any Participant
in any one-year period may not exceed 200,000 shares. For purposes of the preceding sentence, shares of common stock covered by an option that is cancelled will count against the maximum number of shares that may be granted to any Participant in any one-year period, and if the exercise price under an option is reduced, the transaction will be treated as a cancellation of the option and a grant of a new option. In practice, we typically grant options that do not completely vest until at least three years following the grant date.
Stock Appreciation Rights. The Committee may grant Stock Appreciation Rights (“SARs”), which gives the Participant a right to receive payment in an amount equal to the appreciation, if any, in the Fair Market Value of a share from the date of the grant to the date of its payment. Pursuant to the Plan, such payment can be made in cash, in common stock or in any combination of cash and common stock, as the Committee may determine. In practice, we settle SARs awards with the equivalent value of unrestricted common stock. The maximum number of SARs that may be granted to any Participant in any one-year period is 200,000. For purposes of the preceding sentences, any SARs that are cancelled will count against the maximum number of SARs that may be granted to any Participant in any one-year period and if the fair market value of a share on which appreciation under a SAR is calculated is reduced, the transaction will be treated as a cancellation of the SAR and the grant of a new SAR. In practice, we typically grant SARs that do not completely vest until at least three years following the grant date.
Restricted Stock. The Committee may grant benefits under the Plan in the form of Restricted Stock. Shares of Restricted Stock are issued and delivered at the time of the grant but are subject to forfeiture as provided in the grantee’s individual agreement. The grantee is entitled to full voting and dividend rights with respect to all shares of Restricted Stock from the date of grant, but cannot transfer such shares until all restrictions have been satisfied. Grants are made at a per share cost equal to the par value.
Performance Shares. Performance Shares are the right of an individual to whom a grant of such shares is made to receive shares or cash equal to the Fair Market Value of such shares at a future date in accordance with the terms of such grant. Generally, such right is based upon the attainment of targeted profit and/or performance objectives.
Cash Awards. Cash Awards are benefits payable in cash. The Committee may grant Cash Awards at such times and in such amounts as it deems appropriate.
Other Stock Based Awards. An Other Stock Based Award is an award that is valued in whole or in part by reference to, or is otherwise based on, Company common stock.
In the event of a “change in control” (as defined below) the Committee may provide such protection as it deems necessary to maintain a Participant’s rights. The Committee may, among other things, (i) accelerate the exercise or realization of any benefit, (ii) purchase a benefit upon the Participant’s request for cash equal to the amount which could have been attained upon the exercise or realization of the benefit had it been currently exercisable or payable, (iii) adjust the benefit as the Committee deems appropriate, and (iv) cause the benefit to be assumed by the surviving corporation. A “change of control” generally means (i) the acquisition, without the approval of the Board, by any person or entity, other than us and certain related entities, of more than 20% of the outstanding shares of common stock through a tender offer, exchange offer or otherwise; (ii) the liquidation or dissolution of us following a sale or other disposition of all or substantially all of our assets; (iii) a merger or consolidation involving us which results in our not being the surviving parent corporation; or (iv) a change in the majority of the members of the Board of Directors during any two-year period not approved by at least two-thirds of the Directors who were members at the beginning of the two-year period.
The Plan will remain in effect until terminated by the Board of Directors. The Board, in its sole discretion, may terminate the Plan at any time and from time to time may amend or modify the Plan. However, the Board may not amend the Plan, without obtaining shareholder approval in a manner (i) which would cause options which are intended to qualify as incentive stock options to fail to qualify, (ii) which would cause the Plan to fail to meet the requirements of Rule 16b-3 of the Securities Exchange Act of 1934 or Internal Revenue Code Section 162(m), or (iii) which would violate applicable law. No amendment, modification or termination of the Plan will adversely affect a Participant’s right to any benefit granted under the Plan prior to such amendment or termination.
Performance Objectives
Section 162(m) of the Code denies a deduction to any publicly-held company for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to the covered employee exceeds $1 million. However, certain kinds of compensation, including “qualified performance-based compensation,” are disregarded for purposes of the Section 162(m) deduction limitation. The Company intends that certain awards granted under the Plan are intended to qualify as “qualified performance-based compensation” under Section 162(m) and thus be exempt from the deduction limitation of Section 162(m).
All Performance Shares and any other compensation granted pursuant to the Plan that is intended to constitute “qualified performance-based compensation” within the meaning of Section 162(m) will be subject to attainment of one or more pre-established performance objectives established by the Committee, which will be based upon any one or more of the performance criteria set forth below:
operating earnings or income; operating earnings per share; net income; total or net revenues; gross or net premiums; shareholder return and/or value; retained earnings; book value or book value per share; gross or net margin; profit returns and margins; operating or net cash flow; financial return ratios; return on equity; return on average adjusted equity; return on assets; return on invested capital; earnings per share growth; change in embedded value; new business embedded value;
budget achievement; expenses; expense control; market capitalization; stock price; market share; working capital; cash available to Company from a subsidiary or subsidiaries; dividends; ratings; business trends; economic value added; and
product development; client development; leadership; project progress; project completion; quality; customer satisfaction; diversity and corporate governance.
Benefits Granted Under the Plan
Non-qualified stock options, grants of PCS units, SARs and restricted stock are the forms of benefits that have been granted under the Plan. See “Grants of Plan-Based Awards in 2012” for a description and summary of the 2012 PCS and SARs grants.
Federal Income Tax Consequences
Stock Options. No income will be realized by a Participant on the grant of a stock option, and we will not be entitled to a deduction at such time.
Upon the exercise of a non-qualified option, the excess, if any, of the Fair Market Value of the stock on the date of exercise over the purchase price is ordinary income to the holder as of the date of exercise. We generally will be entitled to a deduction equal to such excess amount in the year of exercise. Any gain or loss upon a subsequent sale or exchange of the shares of common stock received upon such exercise is capital gain or loss, long-term or short-term depending on the holding period of the common stock.
Generally, a Participant does not recognize ordinary income at the time of exercise of an incentive stock option and no deduction is available to us, provided the stock option is exercised while the participant is an employee or, in certain circumstances, for a limited period of time thereafter. If an incentive stock option is exercised after these periods, the exercise is treated for federal income tax purposes as the exercise of a non-qualified stock option. Also, incentive stock options are treated as non-qualified stock options to the extent they (together with any other incentive stock options) first become exercisable in any calendar year for common stock having a fair market value, determined as of the date of grant, in excess of $100,000.
If common stock acquired upon exercise of an incentive stock option is sold or exchanged more than one year after the date of exercise and more than two years from the date of grant, any gain or loss is long-term capital gain or loss. If common stock acquired upon exercise of an incentive stock option is disposed of prior to the expiration of these one-year or two-year holding periods (a “Disqualifying Disposition”), the Participant recognizes ordinary income at the time of the disposition, and we may claim a deduction, in an amount equal to the excess of the fair market value of the common stock at the date of exercise over the exercise price. Any additional gain is treated as capital gain, long-term or short-term depending on how long the common stock was held. Where common stock is sold or exchanged in a Disqualifying Disposition (other than certain related-party transactions) for an amount less than its fair market value at the date of exercise, any ordinary income recognized in connection with the Disqualifying Disposition is limited to the amount of gain, if any, recognized in the sale or exchange, and any loss is a long-term or short-term capital loss, depending on how long the common stock was held.
Although the exercise of an incentive stock option as described above does not generally produce ordinary income to the Participant, it does result in an increase in the Participant’s alternative minimum taxable income in an amount equal to the excess of the value of the common stock on the date of exercise over the exercise price and may result in an alternative minimum tax liability.
SARs. No income will be realized by a Participant upon the grant of an SAR, and we will not be entitled to a deduction at such time. Upon the exercise of a SAR, the excess, if any, of the Fair Market Value of the stock on the date of exercise over the Fair Market Value of the stock on the date of grant is ordinary income to the holder as of the date of exercise. We generally will be entitled to a deduction equal to such excess amount in the year of exercise.
Restricted Stock. Unless a timely 83(b) election is made, as described in the following paragraph, a Participant generally will not recognize taxable income upon the grant of restricted stock because the restricted stock generally will be nontransferable and subject to a substantial risk of forfeiture at the time of grant. A Participant will recognize ordinary income when the restrictions that impose a substantial risk of forfeiture of the shares of common stock or the transfer restrictions (collectively, the “Restrictions”) lapse. The amount recognized will be equal to the difference between the fair market value of the shares at the time the Restrictions lapse and the original purchase price paid for the shares, if any. The ordinary income recognized by a Participant with respect to restricted stock will be subject to applicable tax withholding by us. If a timely 83(b) election has not been made, any dividends received with respect to common stock subject to the Restrictions will be treated as additional compensation income and not as dividend income.
A Participant may elect, pursuant to Section 83(b) of the Internal Revenue Code (“Code”), to recognize as ordinary income the fair market value of the restricted stock upon grant, notwithstanding that the restricted stock would otherwise not be includable in gross income at that time. If the election is made within 30 days of the date of grant, then the Participant would include in gross income an amount equal to the difference between the fair market value of the restricted stock on the date of grant and the purchase price paid for the restricted stock, if any. Any change in the value of the shares after the date of grant will be taxed as a capital gain or capital loss only if and when the shares are disposed of by the Participant. If the Section 83(b) election is made, the Participant’s holding period for capital gains begins on the date of grant.
The Section 83(b) election is irrevocable. If a Section 83(b) election is made and the Participant then forfeits the restricted stock, the Participant may not deduct as a loss the amount previously included in gross income. A Participant’s tax basis in shares of restricted stock received will be equal to the sum of the amount (if any) the Participant paid for the common stock and the amount of ordinary income recognized by the Participant as a result of making Section 83(b) election or upon the lapse of the Restrictions. Unless a Section 83(b) election is made, the Participant’s holding period for the shares for
purposes of determining gain or loss on a subsequent sale will begin on the date the Restrictions on the shares lapse. In general, we will be entitled to a deduction at the same time, and in an amount equal to, the ordinary income recognized by a Participant with respect to shares of restricted stock. If, subsequent to the lapse of the Restrictions on the shares, the Participant sells the shares, the difference, if any, between the amount realized from the sale and the tax basis in the shares of the Participant will be taxed as a capital gain or capital loss.
Performance Shares. A Participant generally will not recognize taxable income upon the grant of performance shares. Instead, a Participant will recognize as ordinary income, and we will have as a corresponding deduction, any cash delivered and the fair market value of any common stock delivered in payment of an amount due under the performance share award. The ordinary income the Participant recognizes will be subject to applicable tax withholding by us. Upon selling any shares of common stock received by a Participant in payment of an amount due under a performance share award, the Participant generally will recognize a capital gain or loss in an amount equal to the difference between the sale price of the shares of common stock and the Participant’s tax basis in the shares of common stock.
Cash Awards. Awards payable in cash are includible in the Participant’s gross income when paid and deductible by us when paid or accrued.
Other Stock Based Awards. The tax consequences associated with any other stock based award will vary depending on the specific terms of the award, including whether the award has a readily ascertainable fair market value, whether or not the award is subject to forfeiture provisions or restrictions on transfer, the nature of the property to be received by the Participant under the award, the applicable holding period and the Participant’s tax basis.
Code Section 162(m). Section 162(m) of the Code denies a deduction to any publicly-held company for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to the covered employee exceeds $1 million. However, certain kinds of compensation, including “qualified performance-based compensation,” are disregarded for purposes of the Section 162(m) deduction limitation. The Company intends that certain awards granted under the Plan are intended to qualify as “qualified performance-based compensation” under Section 162(m) and thus be exempt from the deduction limitation of Section 162(m).
Code Section 409A. Section 409A of the Code generally provides that any deferred compensation arrangement that does not meet specific requirements regarding (i) timing of payouts, (ii) advance election of deferrals, and (iii) restrictions on acceleration of payouts will result in immediate taxation of any amounts deferred to the extent not subject to a substantial risk of forfeiture. In addition to regular income taxes that result from such immediate taxation, a participant is subject to an interest penalty and an additional 20% in income taxes on the amounts immediately taxable as a result of a Section 409A violation. Payments that are subject to Section 409A and made by a publicly-held company upon the separation from service of certain officers and other individuals are subject to a 6-month delay.
Section 409A is broadly applicable to certain types of equity-based and cash-based compensation. For example, performance shares may be classified as deferred compensation subject to the requirements of Section 409A. Awards issued under the Plan are intended to be exempt from or comply with the requirements of Section 409A of the Code.
The foregoing statement is only a summary of certain federal income tax consequences of the Flexible Stock Plan and is based on our understanding of present federal tax laws and regulations.
Vote Required
If a quorum is present, the vote required to approve this Item 3 is a majority of the common stock represented in person or by proxy at the Annual Meeting, so long as the total votes cast on this proposal represent more than 50% in interest of all shares entitled to vote hereon.
Recommendation of the Board of Directors
The Board of Directors has approved the proposed amendment to our Flexible Stock Plan and recommends that shareholders vote FOR the proposal.
ITEM 4 — APPROVALOF PERFORMANCE MEASURESUNDERTHE COMPANY’S ANNUAL BONUS PLAN
The fourth item to be acted upon at the Annual Meeting is a proposal to re-approve the performance measures under our Annual Bonus Plan (the “ABP”) for tax purposes. Shareholder approval is being sought so that awards pursuant to the ABP will qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code (the “Code”), which limits to $1,000,000 the amount deductible for non-performance-based compensation paid to the chief executive officer, chief financial officer, and three other most highly-compensated executive officers (other than the CEO and CFO). No additional amendments are being requested. The Company’s shareholders previously approved the measures and/or plan at the annual meetings of shareholders in 1996, 2003 and 2008.
The classes of employees eligible to participate in the ABP are associates who are designated annually by the Compensation Committee, which we refer to as “participants.” As of March 2013, approximately 1,774 employees participated in the ABP. The ABP provides for awards to be granted to participants in any of the following forms, as determined by the Compensation Committee: cash, performance shares, restricted stock or other stock-based compensation. Any stock-based awards may be issued pursuant to the Flexible Stock Plan. Please see “Item 3 – Approval of Amendment to the Company’s Flexible Stock Plan” and “Item 5 – Approval of Performance Measures under the Company’s Flexible Stock Plan” for additional information on that plan.
The principal features of the ABP are described below. This description is subject to and qualified in its entirety by the full text of the ABP, which was filed as Exhibit 10.5 to our Form 10-K filed with the SEC on March 1, 2013, and incorporated herein by reference. The Form 10-K and exhibits are available through the Company’s website (www.rgare.com) or at the SEC website (www.sec.gov/edgar). You also may obtain a copy of the Annual Bonus Plan from us upon written request.
General Plan Provisions
The purpose of the ABP is to motivate superior, focused and prudent performance on the part of associates for the ultimate benefit of shareholders. Awards are determined and payable annually using an overall three-part structure:
no awards will be payable in any fiscal year in which performance criteria fall below a specified amount known as the “trigger”;
to assure fiscal soundness and provide solid funding for all awards, a meaningful portion of every participant’s award opportunity is linked to Company and division performance against key financial objectives; and
a meaningful portion of many, but not all, participants’ awards are tied to his/her unit’s and/or individual performance (unit results will be evaluated using either financial and/or operational measures).
The Compensation Committee of the Board of Directors (the “Committee”) has ultimate approval authority for awards under the ABP and will annually monitor and approve participation and opportunity levels, Company goals, the general design and mix of opportunity, total awards and performance goals and their achievement. The Company’s management will recommend all awards under the ABP to the Committee for approval. The Company’s Human Resources department is the general administrator of the ABP and will maintain records, prepare summary materials for the Committee and ensure the payment of awards net of all applicable withholding.
Each member of the Committee must be a “non-employee director” as defined in Rule 16b-3 promulgated by the SEC under the Exchange Act. The Board of Directors has designated a Committee consisting solely of individuals who constitute “outside directors” as defined in Section 162(m) of the Code.
Awards are based upon attainment of pre-established goals relating to overall Company performance or the performance of a subsidiary, division, business unit, or an individual. The pre-established goals may include one or more of the following:
operating earnings or income; operating earnings per share; net income; total or net revenues; gross or net premiums; shareholder return and/or value; retained earnings; book value or book value per share; gross or net margin; profit returns and margins; operating or net cash flow; financial return ratios; return on equity; return on adjusted equity; return on assets; return on invested capital; earnings per share growth; change in embedded value; new business embedded value;
budget achievement; expenses; expense control; market capitalization; stock price; market share; working capital; cash available to Company from a subsidiary or subsidiaries; dividends; ratings; business trends; economic value added; and
product development; client development; leadership; project progress; project completion; quality; customer satisfaction; diversity and corporate governance.
The goals may be stated in terms of absolute levels or relative to another company or companies or to an index or indices.
No award will be payable unless and until the Committee certifies that the performance goals and any other material terms have been met. No award will be payable for any year in which the performance criteria falls below a specified amount, or trigger. The maximum annual award that can be granted to any participant for any calendar year is $3,000,000.
The performance goals for each participant and the amount of compensation payable if those goals are met will be established for each plan year (or other performance period) by the Committee no later than 90 days after the commencement of the period of service to which the performance goals relate (which will generally be the beginning of the plan year) and while the outcome of whether or not those goals will be achieved is substantially uncertain. However, in no event will such goals be established after 25% of the period of service to which the goals relate has elapsed. Such goals and the compensation payable for each plan year if the goals are achieved, including the portion of such compensation payable in cash, or otherwise, will be set forth in each participant’s award agreement. Any restricted stock, performance shares, or other stock-based compensation may be granted under the Flexible Stock Plan, as determined by the Committee. Any payment under any award will be made within the calendar year following the applicable plan year (or other period of performance) to which such award relates. The Committee will have the discretion to reduce the compensation which would otherwise be payable upon the achievement of one or more performance goals in whole or in part to the extent that it deems appropriate.
The ABP will remain in effect until amended or terminated by the Committee. Presently, the Committee intends to maintain the ABP indefinitely, but reserves the right to amend or terminate it at any time if the Committee deems such action to be in the best interests of the Company or its shareholders or employees.
A participant who is no longer actively employed by the Company on the date awards are determined and paid to other participants for any year (or other performance period) will forfeit all rights to any award for such year, except in the case of termination due to retirement at or after the age of 55, total disability or death. In such cases, the Committee will, in its discretion, authorize an applicable award, generally on a pro rated basis, but only if the applicable performance goals have been met. A participant whose individual performance is deemed to be unsatisfactory will forfeit his or her award if such forfeiture is approved by the Committee.
Awards may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. The Company will have the right to deduct or withhold, or require a participant to remit to the Company, an amount sufficient to satisfy Federal, state and local, domestic or foreign, tax withholding.
Because awards under the ABP are subject to the discretion of the Committee, awards to be received by individual participants are not determinable. Please see “Compensation Discussion and Analysis” and Executive Compensation” for a discussion of awards under the ABP for our named executive officers.
Federal Income Tax Consequences
Cash Awards. Awards payable in cash are includable in the participant’s gross income when paid and deductible by the Company when paid or accrued.
Performance Shares, Restricted Stock and Other Stock-Based Awards. The tax consequences of these types of awards are described in the discussion of “Federal Income Tax Consequences” under Item 5.
The foregoing statement is only a summary of certain federal income tax consequences of the ABP and is based on the Company’s understanding of present federal tax laws and regulations.
Vote Required
The vote required to approve this Item 4 is a majority of the common stock represented in person or by proxy at the Annual Meeting, so long as the total votes cast on this proposal represent more than 50% of the shares entitled to vote hereon.
Recommendation of the Board
In accordance with its charter, the Compensation Committee of the Board of Directors recommended to the Board of Directors that it approve the proposal regarding the establishment of performance measures as described above. The Board of Directors recommends that shareholders voteFOR the proposal.
ITEM 5 — APPROVALOF PERFORMANCE MEASURESUNDERTHE COMPANY’S FLEXIBLE STOCK PLAN
The fifth item to be acted upon at the Annual Meeting is a proposal to re-approve the performance measures under the Company’s Flexible Stock Plan, as amended (the “Plan”) for tax purposes. Under Section 162(m), shareholder approval of the material terms of the performance measures used for determining awards to our associates under the Plan is required to enable the Company to obtain a deduction for awards paid under the Plan in excess of $1,000,000 to the chief executive officer, chief financial officer, and three other most highly-compensated executive officers (other than the CEO and CFO) for a given year. As described under the caption “Performance Goals” below, the amendment to the Plan will expressly provide for such goals.
Flexible Stock Plan
The Board of Directors originally adopted the Plan and our shareholders approved the Plan in 1993. The Plan was amended and restated in 1998. As described under “Item 3 – Approval of Amendment to the Company’s Flexible Stock Plan,” the Plan has been amended on several occassions since then, most recently in 2011.
The Plan provides for the grant of stock options, stock appreciation rights, restricted stock, performance shares and cash and other stock-based awards to our employees, employees and owners of entities that have a direct or indirect ownership interest in us or in which we have a direct or indirect ownership interest, individuals who are employed by or owners of our client companies or suppliers, and individuals who are employed by or owners of companies that render services to us (collectively, the “participants”). As of March 2013, approximately 265 employees participate in the Plan.
Under the Plan, a maximum of 11,760,077 shares are presently authorized for issuance from treasury stock or authorized but unissued shares and a maximum of 13,360,077 shares shall be authorized if the Plan is amended as described in “Item 3 – Approval of Amendment to the Company’s Flexible Stock Plan”. As of March 18, 2013, equity-based awards to purchase or receive 5,038,020 shares of common stock were granted to participants and outstanding under the Plan, and 5,939,942 shares have been exercised by, awarded to or received by participants. As of April 4, 2013, the closing price of our common stock on the NYSE was $59.06 per share.
The principal features of the Plan are described below. This description is subject to and qualified in its entirety by the full text of the Plan, which was filed as Exhibit 99.1 to our Form 8-K filed with the SEC on May 20, 2011, and incorporated herein by reference. The Form 8-K and exhibits are available through the Company’s website (www.rgare.com) or at the SEC website (www.sec.gov/edgar). You also may obtain a copy of the Plan from us upon written request.
The Plan provides for benefits to be awarded to eligible participants in the form of stock options, stock appreciation rights, restricted stock, performance shares, cash awards and other stock-based awards. If any benefit expires or is terminated, surrendered, cancelled or forfeited, the shares covered by such benefit will be added back to the shares available for use under the Plan.
If our stock is changed by reason of any stock dividend, spin-off, split-up, spin-out, recapitalization, merger, consolidation, reorganization, combination or exchange of shares, then the number and class of shares available for benefits, the number of shares subject to any outstanding benefits and the price thereof will be appropriately adjusted.
The Compensation Committee of the Board of Directors (the “Committee”) administers the Plan. The Committee currently consists of four of our outside directors. Each member of the Committee must be a “non-employee director” as defined in Rule 16b-3 promulgated by the SEC under the Exchange Act. The Board of Directors has designated a Committee consisting solely of individuals who constitute “outside directors” as defined in Section 162(m) of the Code. The Committee, by majority action, is authorized to determine the individuals to whom the benefits will be granted, the type and amount of such benefits and the terms of the benefit grants, as well as to interpret the Plan and to make all other determinations necessary or advisable for the administration of the Plan to the extent not contrary to the provisions of the Plan. The Committee makes its determinations under the Plan based upon the recommendations of our chief executive officer and management, information made available to the Committee and its judgment as to the best interests of the Company and our shareholders. In certain circumstances, the Committee may delegate all or any part of its authority under the Plan to our employees or another committee. Because awards are subject to the discretion of the Committee, future awards are not determinable. Please see “Compensation Discussion and Analysis” and “Executive Compensation” for discussion of 2012 awards to our named executive officers under the Plan.
Under the Plan, the Committee may award:
stock options exercisable into shares of our common stock which may or may not qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code, as amended;
stock appreciation rights;
restricted shares of our common stock;
performance shares (including performance contingent restricted stock);
cash awards; and
other stock-based awards and benefits.
As provided in the Plan, the Committee has complete discretion to determine the type and number of benefits granted to any participant and the terms and conditions that attach to each grant. Such terms and conditions are not necessarily uniform among different participants. The receipt by a participant of one type of grant under the Plan does not entitle the participant to receipt of any other type of grant. Payment for shares of common stock purchased upon exercise of any option or any other benefit granted under the Plan that requires payment by a participant to us will be made in cash, or with the consent of the Committee or as provided in the applicable individual award document, by the tender of shares of common stock having a fair market value equal to the purchase price, or in other property, rights and credits, to the extent permitted by law, or any combination of the foregoing.
Stock Options. The Committee may grant stock options, which entitle the participant to purchase our common stock at a price established by the Committee, and that price will not be less than the fair market value of our common stock on the date of the grant. “Fair market value” means the closing price of shares on the NYSE on a given date. The Committee determines the term of the stock options, including the times and conditions under which the options become exercisable. The maximum number of shares with respect to which incentive stock options are issuable under the Plan is 150,000 shares. The maximum number of shares with respect to which options may be granted to any participant in any one-year period may not exceed 200,000 shares. For purposes of the preceding sentence, shares of common stock covered by an option that is cancelled will count against the maximum number of shares that may be granted to any participant in any one-year period, and if the exercise price under an option is reduced, the transaction will be treated as a cancellation of the option and a grant of a new option.
Stock Appreciation Rights (“SARs”). The Committee may grant SARs, which gives the participant a right to receive payment in an amount equal to the appreciation, if any, in the fair market value of a share from the date of the grant to the date of its payment. Such payment is made in cash, in common stock or in any combination of cash and common stock, as the Committee may determine. The maximum number of SARs that may be granted to any participant in any one-year period is 200,000. For purposes of the preceding sentence, any SARs that are cancelled will count against the maximum number of SARs that may be granted to any participant in any one-year period, and if the fair market value of a share on which appreciation under a SAR is calculated is reduced, the transaction will be treated as a cancellation of the SAR and the grant of a new SAR.
Restricted Stock. The Committee may grant benefits under the Plan in the form of Restricted Stock. Shares of Restricted Stock are issued and delivered at the time of the grant but are subject to forfeiture as provided in the grantee’s individual agreement. The grantee may be entitled to full voting and dividend rights with respect to all shares of Restricted Stock from the date of grant, but cannot transfer such shares until all restrictions have been satisfied. Grants are made at a per share cost equal to the par value.
Performance Shares. Performance Shares are the right of an individual to whom a grant of such shares is made to receive shares or cash equal to the fair market value of such shares at a future date in accordance with the terms of such grant. Generally, such right is based upon the attainment of targeted profit and/or performance objectives.
Cash Awards. Cash Awards are benefits payable in cash. The Committee may grant Cash Awards at such times and in such amounts as it deems appropriate. The amount of any cash award in any fiscal year to any participant who is subject to Section 16 of the Securities Exchange Act of 1934 cannot exceed the greater of $100,000 or 50% of his cash compensation (excluding any cash award under the Plan) for such fiscal year.
Other Stock-Based Awards and Other Benefits. An Other Stock-Based Award is an award that is valued in whole or in part by reference to, or is otherwise based on, Company common stock. The Committee may grant other types of benefits under the Plan if the Committee believes that such benefits would further the purposes for which the Plan was established.
In the event of a “change in control” (as defined below) the Committee may provide such protection as it deems necessary to maintain a participant’s rights. The Committee may, among other things:
accelerate the exercise or realization of any benefit;
purchase a benefit upon the participant’s request for cash equal to the amount which could have been attained upon the exercise or realization of the benefit had it been currently exercisable or payable;
adjust the benefit as the Committee deems appropriate; and
cause the benefit to be assumed by the surviving corporation.
A “change of control” generally means (i) the acquisition, without the approval of the Board, by any person or entity, other than us and certain related entities, of more than 20% of the outstanding shares of common stock through a tender offer, exchange offer or otherwise; (ii) the liquidation or dissolution of us following a sale or other disposition of all or substantially all of our assets; (iii) a merger or consolidation involving us which results in our not being the surviving parent corporation; or (iv) a change in the majority of the members of the Board of Directors during any two-year period not approved by at least two-thirds of the Directors who were members at the beginning of the two-year period.
The Plan will remain in effect until terminated by the Board of Directors. The Board, in its sole discretion, may terminate the Plan at any time and, from time to time, may amend or modify the Plan. However, the Board may not amend the Plan, without obtaining shareholder approval in a manner (i) which would cause options which are intended to qualify as incentive stock options to fail to qualify, (ii) which would cause the Plan to fail to meet the requirements of Rule 16b-3 of the Exchange Act or Section 162(m) of the Code, or (iii) which would violate applicable law. No amendment, modification or termination of the Plan will adversely affect a participant’s right to any benefit granted under the Plan prior to such amendment or termination. Non-qualified stock options, grants of PCRS units and restricted stock are the forms of benefits that have been granted under the Plan.
Performance Goals
The Flexible Stock Plan permits the Committee, in its discretion, to condition any of the awards upon achievement of one or more performance goals. In order for awards to constitute performance-based compensation for purposes of Section 162(m), the Committee has recommended, and our Board of Directors has approved, an amendment to the Plan to specify the goals applicable to performance-based awards under the Plan. Under the amendment, awards intended to constitute performance-based compensation will be based upon attainment of pre-established goals relating to overall Company performance or the performance of a subsidiary, division, business unit or an individual. The pre-established goals may include one or more of the following:
operating earnings or income; operating earnings per share; net income; total or net revenues; gross or net premiums; shareholder return and/or value; retained earnings; book value or book value per share; gross or net margin; profit returns and margins; operating or net cash flow; financial return ratios; return on equity; return on adjusted equity; return on assets; return on invested capital; earnings per share growth; change in embedded value; new business embedded value;
budget achievement; expenses; expense control; market capitalization; stock price; market share; working capital; cash available to Company from a subsidiary or subsidiaries; dividends; ratings; business trends; economic value added; and
product development; client development; leadership; project progress; project completion; quality; customer satisfaction; diversity and corporate governance.
The goals may be stated in terms of absolute levels or relative to another company or companies or to an index or indices.
In order to permit compliance with Section 162(m), the Committee has determined to make such awards in accordance with the following procedures: No later than the 90th day of each performance year, the Committee will establish an objective performance goal for that performance year and while the outcome of whether or not those goals will be achieved is substantially uncertain. However, in no event will such goals be established after 25% of the period of service to which the goals relate has elapsed. The Committee must certify the attainment of the applicable performance goal before an award is made. The Committee may decrease the actual award amount paid to a covered person for any performance year based on such secondary goals and considerations as may be determined by the Committee in its sole discretion.
The Committee will not change the material terms of the performance goals or the maximum amount payable with respect to any award to a covered officer, without first obtaining shareholder approval.
Federal Income Tax Consequences
Stock Options. No income will ordinarily be realized by a participant on the grant of a stock option, and we will not be entitled to a deduction at such time. If a participant exercises an incentive stock option and does not dispose of the shares acquired within two years from the date of the grant, or within one year from the date of exercise of the option, no income will generally be realized by the participant at the time of exercise. We will not be entitled to a deduction by reason of the exercise.
If a participant disposes of the shares acquired pursuant to an incentive stock option within two years from the date of grant of the option or within one year from the date of exercise of the option, the participant will experience a disqualifying disposition and will realize ordinary income at the time of disposition equal to the excess, if any, of the lesser of (a) the amount realized on the disposition, or (b) the fair market value of the shares on the date of exercise, over the participant’s basis in the shares. We generally will be entitled to a deduction in an amount equal to such income in the year of the disqualifying disposition. If a participant disposes of the shares acquired pursuant to an incentive stock option following the later of the date (a) two years from the date of grant of the option or (b) one year from the date of exercise of the option, the difference, if any, between the amount realized from the sale and the exercise price will be taxed as a capital gain or capital loss.
The excess of the fair market value of the shares at the time an incentive stock option is exercised over the exercise price is tax preference income taken into account in computing the alternative minimum tax applicable to the optionee. If, however, a disqualifying disposition occurs in the year in which the incentive stock option is exercised, the maximum amount that will be included for purposes of alternative minimum tax is the gain on the disposition of the shares.
Upon the exercise of a non-qualified option, the excess, if any, of the fair market value of the stock on the date of exercise over the purchase price is ordinary income to the holder as of the date of exercise. We generally will be entitled to a deduction equal to such excess amount in the year of exercise.
SARs. No income will be realized by a participant upon the grant of an SAR, and we will not be entitled to a deduction at such time. Upon the exercise of a SAR, the excess, if any, of the fair market value of the stock on the date of exercise over the fair market value of the stock on the date of grant is ordinary income to the holder as of the date of exercise. We generally will be entitled to a deduction equal to such excess amount in the year of exercise.
Restricted Stock. Unless a timely Section 83(b) election is made, as described in the following paragraph, a participant generally will not recognize taxable income upon the grant of restricted stock because the restricted stock generally will be nontransferable and subject to a substantial risk of forfeiture. A participant will recognize ordinary income when the restrictions that impose a substantial risk of forfeiture of the shares of common stock or the transfer restrictions (collectively, the “Restrictions”) lapse. The amount recognized will be equal to the difference between the fair market value of the shares at the time the Restrictions lapse and the original purchase price paid for the shares, if any. The ordinary income recognized by a participant with respect to restricted stock will be subject to applicable tax withholding by us. If a timely Section 83(b) election has not been made, any dividends received with respect to common stock subject to the Restrictions will be treated as additional compensation income and not as dividend income.
A participant may elect, pursuant to Section 83(b) of the Code, to recognize as ordinary income the fair market value of the restricted stock upon grant, notwithstanding that the restricted stock would otherwise not be includable in gross income at that time. If the election is made within 30 days of the date of grant, then the participant would include in gross income an amount equal to the difference between the fair market value of the restricted stock on the date of grant and the purchase price paid for the restricted stock, if any. Any change in the value of the shares after the date of grant will be taxed as a capital gain or capital loss only if and when the shares are disposed of by the participant. If the Section 83(b) election is made, the participant’s holding period for capital gains begins on the date of grant.
The Section 83(b) election is irrevocable. If a Section 83(b) election is made and the participant then forfeits the restricted stock, the participant may not deduct as a loss the amount previously included in gross income. A participant’s tax basis in shares of restricted stock received will be equal to the sum of the amount (if any) the participant paid for the common stock and the amount of ordinary income recognized by the participant as a result of making Section 83(b) election or upon the lapse of the Restrictions. Unless a Section 83(b) election is made, the participant’s holding period for the shares for purposes of determining gain or loss on a subsequent sale will begin on the date the Restrictions on the shares lapse. In general, we will be entitled to a deduction at the same time, and in an amount equal to, the ordinary income recognized by a participant with respect to shares of restricted stock. If, subsequent to the lapse of the Restrictions on the shares, the participant sells the shares, the difference, if any, between the amount realized from the sale and the tax basis in the shares of the participant will be taxed as a capital gain or capital loss.
Performance Shares. A participant generally will not recognize taxable income upon the grant of performance shares. Instead, a participant will recognize as ordinary income, and we will have as a corresponding deduction, any cash delivered and the fair market value of any common stock delivered in payment of an amount due under the performance share award. The ordinary income the participant recognizes will be subject to applicable tax withholding by us. Upon selling any shares of common stock received by a participant in payment of an amount due under a performance share award, the participant generally will recognize a capital gain or loss in an amount equal to the difference between the sale price of the shares of common stock and the participant’s tax basis in the shares of common stock.
Cash Awards. Awards payable in cash are includible in the participant’s gross income when paid and deductible by us when paid or accrued.
Other Stock-Based Awards or Benefits. The tax consequences associated with any other stock-based award or other benefits will vary depending on the specific terms of the award, including whether the award has a readily ascertainable fair market value, whether or not the award is subject to forfeiture provisions or restrictions on transfer, the nature of the property to be received by the participant under the award, the applicable holding period (if any) and the participant’s tax basis.
The foregoing statement is only a summary of certain federal income tax consequences of the Flexible Stock Plan and is based on our understanding of present federal tax laws and regulations.
Vote Required
The vote required to approve this Item 5 is a majority of the common stock represented in person or by proxy at the Annual Meeting, so long as the total votes cast on this proposal represent more than 50% of the shares entitled to vote hereon.
Recommendation of the Board
In accordance with its charter, the Compensation Committee of the Board of Directors recommended to the Board of Directors that it approve the proposal regarding the establishment of performance measures as described above. The Board of Directors recommends that shareholders vote FOR the proposal.
Equity Compensation Plan Information
The following table presents Equity Compensation Plan information as of December 31, 2012:
Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Issuance under Equity Compensation Plans | |||||||||
Equity Compensation Plans Approved by Security Holders | 4,190,525 | $ | 49.63 | 1,734,737 | ||||||||
Equity Compensation Plans Not Approved by Security Holders | — | — | — | |||||||||
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TOTAL | 4,190,525 | $ | 49.63 | 1,734,737 | ||||||||
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ITEM 6 — PROPOSALTO AMENDTHE ARTICLESOF INCORPORATIONTO PROVIDEFORTHE DECLASSIFICATIONOFTHE BOARDOF DIRECTORS
The sixth item to be acted upon at the Annual Meeting is an amendment (the “Proposed Amendment”) to the Company’s Amended and Restated Articles of Incorporation (“Articles of Incorporation”) that would provide for the elimination of the Company’s classified Board structure.
The Articles of Incorporation provide that the Board shall be divided into three classes, as nearly equal in number as possible. Directors in each class are elected every three years to three-year terms, with the term of one class expiring at each annual meeting. Currently, each class has three directors. Our current classified board structure has been in place since we became public in 1993.
Our Board is committed to adopting governance practices that are the most beneficial to the Company and its shareholders. The Board recognizes that in recent years some parties with an interest in corporate governance have advocated eliminating classified boards at public companies; however, the Board believes that the Company’s shareholders should make decisions about board classification based on the Company’s facts and circumstances. The Board believes that the current classified structure helps ensure continuity of the Company’s business strategies, promotes Board stability in a complex industry and has reinforces the Board’s commitment to long-term shareholder value because a majority of directors will always have meaningful experience as directors of the Company. Classified boards also provide protection against certain abusive takeover tactics and provide more time for a board to solicit higher bids in a hostile takeover situation because it is more difficult to change a majority of directors on the board in a single year. However, the Board also recognizes the position that directors are more accountable to shareholders, and therefore more likely to act in the best interests of shareholders, if they stand for election annually as opposed to serving multiple-year terms. By eliminating the provisions for a classified Board, the Company’s shareholders would have the opportunity to vote on all directors annually.
Proposed Amendment to the Articles of Incorporation
If the Proposed Amendment is approved, commencing with the class of directors standing for election at the Company’s 2014 Annual Meeting, directors will stand for election for one-year terms. The term of office for each director elected at the 2014 Annual Meeting and thereafter will expire at the next succeeding annual meeting of shareholders and until their successors are elected and qualified or until their earlier death, resignation, removal or disqualification. The approval of the Proposed Amendment would not shorten the terms to which our shareholders have previously elected directors. This means that directors who were elected prior to the 2014 Annual Meeting will continue to hold office until the end of the terms for which they were elected and until their successors are elected and qualified. Thus, directors elected at the 2012 Annual Meeting will continue to have terms that expire at the 2015 Annual Meeting and directors elected under Item 1 at this Annual Meeting will have terms that expire at the 2016 Annual Meeting.
If the Proposed Amendment is approved, accordingly, this phase-in process would result in the full declassification of the Board by the 2016 Annual Meeting. At our 2016 Annual Meeting, and at each annual meeting thereafter, the entire Board would stand for election for a one-year term, and there would no longer be any class designation for our directors. In all cases, each director will hold office until his or her successor has been elected and qualified or until the director’s earlier resignation or removal. Furthermore, if there is a vacancy in the Board, because the number of directors is increased or otherwise, at or following the 2014 Annual Meeting, any director elected to fill such vacancy would hold office for a term expiring at the next annual meeting. If the Proposed Amendment is not approved, the Board will remain classified.
This general description of the Proposed Amendment is qualified in its entirety by reference to the text of the Proposed Amendment, which is attached asExhibit A to this Proxy Statement. Additions to the Articles of Incorporation are indicated by underlining and deletions are indicated by strike-outs. If the Proposed Amendment is approved by shareholders, the Proposed Amendment will become effective upon the filing of the Articles of Amendment to our Amended and Restated Articles of Incorporation with the Secretary of State of the State of Missouri. The Board would also adopt corresponding amendments to our Amended and Restated Bylaws. If the Proposed Amendment is not approved, the Articles of Incorporation and the Bylaws will remain unchanged and the Board will remain classified.
Vote Required
If a quorum is present, the vote required to approve this Item 5 is at least 85% of all of the issued and outstanding shares of common stock represented in person or by proxy at the Annual Meeting.
The Board is submitting the Proposed Amendment to the shareholders without a recommendation either in favor of or opposed to the Proposed Amendment. The Board believes that the Company’s shareholders are in the best position to analyze the advantages and disadvantages of a classified board structure for the Company and to make an independent determination about the best governance approach for the Company in light of the Company’s past performance, governance reputation, history and other corporate governance features.
ITEM 7 — RATIFICATIONOF APPOINTMENTOFTHE INDEPENDENT AUDITOR
The seventh item to be acted upon at the Annual Meeting is the ratification of the appointment of Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, “Deloitte”) as the Company’s independent auditor for the fiscal year ending December 31, 2013. The Audit Committee has appointed Deloitte, subject to shareholder ratification. Deloitte has served as independent auditor of the Company since 2000. Its long term knowledge of the Company and its subsidiaries, combined with its insurance industry expertise, has enabled it to carry out its audits of the Company’s financial statements with effectiveness and efficiency.
In considering Deloitte’s appointment, the Audit Committee reviewed the firm’s qualifications and competencies, including the following factors:
Deloitte’s status as a registered public accounting firm with the Public Company Accounting Oversight Board (United States) (PCAOB) as required by the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) and the Rules of the PCAOB;
Deloitte’s independence and its processes for maintaining its independence;
the results of the independent review of the firm’s quality control system;
the key members of the engagement team for the audit of the Company’s financial statements;
Deloitte’s approach to resolving significant accounting and auditing matters including consultation with the firm’s national office; and
Deloitte’s reputation for integrity and competence in the fields of accounting and auditing.
The Audit Committee assures the regular rotation of the audit engagement team partners as required by law. The Audit Committee approves Deloitte’s audit and non-audit services in advance as required under Sarbanes-Oxley and SEC rules. Under procedures adopted by the Audit Committee, the Audit Committee reviews, on an annual basis, a schedule of particular audit services that the Company expects to be performed and an estimated amount of fees for each particular audit service. The Audit Committee also reviews a schedule of audit-related, tax and other permitted non-audit services that the Company may engage the independent auditor to perform and an estimated amount of fees for each of those services.
All audit related services, tax services and other services were pre-approved by the Audit Committee, which concluded that the provision of such services by Deloitte was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee has adopted a Pre-Approval Policy which provides for pre-approval of audit, audit-related and tax services on an annual basis and, in addition, individual engagements anticipated to exceed pre-established thresholds must be separately approved. The policy authorizes the Committee to delegate to one or more of its members pre-approval authority with respect to permitted services.
Representatives of Deloitte will attend the 2013 Annual Meeting. They will have an opportunity to make a statement if they desire to do so, and they will be available to respond to appropriate questions.
The aggregate fees billed to us for the years ending December 31, 2012 and 2011 by Deloitte are set forth below. These fees have been approved by the Company’s Audit Committee in accordance with its Pre-Approval Policy.
Audit Fees1 Audit Related Fees2 Total audit and audit-related fees Tax Fees3 Total Fees Fiscal Year 2012 2011 $ 4,893,998 $ 4,407,040 237,636 450,110 $ 5,131,634 $ 4,857,150 119,464 113,990 $ 5,251,098 $ 4,971,140
Vote Required
If a quorum is present, the vote required to approve this Item 7 is a majority of the common stock represented in person or by proxy at the Annual Meeting.
Recommendation of the Board of Directors
The Board of Directors has approved the proposal regarding the appointment of Deloitte and recommends that shareholders voteFOR the proposal.
Voting
If a quorum is present, the affirmative vote of the holders of a majority of the shares of our common stock entitled to vote which are present in person or represented by proxy at the 2013 Annual Meeting is required to approve Items 1, 2 3, 4, 5 and 73 to act on any other matters properly brought before the meeting (other than the other specified proposals), provided that with respect to Items 3, 4 and 5 the total votes cast must represent over 50% of the shares entitled to vote. If a quorum is present, the affirmative vote of the holders of 85% of our common stock entitled to vote which are present in person or represented by proxy at the 2013 Annual Meeting is required to approve Item 6.meeting. Voting results will be disclosed in our Current Report on Form 8-K filed with the SEC within four business days following the Annual Meeting. Shares represented by proxies which are marked “withhold authority” with respect to the election of any one or more nominees for election as directors and proxies which are marked “abstain” or which deny discretionary authority on Items 2 3, 4, 5 and 63 will be counted for the purpose of determining the number of shares represented by proxy at the meeting. Such proxies will thus have the same effect as if the shares represented thereby were voted against such nominee or nominees and against such other matters, respectively.
Shareholder Nominations and Proposals
As described in our Corporate Governance Guidelines, the Nominating and Governance Committee will consider shareholder nominations for directors that meet the notification, timeliness, consent and information requirements of our Articles of Incorporation. The Committee makes no distinctions in evaluating nominees for positions on the Board based on whether or not a nominee is recommended by a shareholder, provided that the procedures with respect to nominations referred to above are followed. Potential candidates for nomination as director candidates must provide written information about their qualifications and participate in interviews conducted by individual Board members, including the Chairs of the Audit or Nominating and Governance Committees. Candidates are evaluated using the criteria adopted by the Board to determine their qualifications based on the information supplied by the candidates and information obtained from other sources. The Committee will recommend candidates for election as director only if the Committee determines, in its judgment, that they have the following specific, minimum qualifications that have been recommended by the Nominating and Governance Committee to, and approved by, the Board:
Financial Literacy. Such person should be “financially literate” as such qualification is interpreted by the Board in its business judgment.
Leadership Experience. Such person should possess significant leadership experience, such as experience in business, finance/accounting, law, education or government, and shall possess qualities reflecting a proven record of accomplishment and ability to work with others.
Commitment to Our Values. Such person shall be committed to promoting our financial success and preserving and enhancing our business and ethical reputation, as embodied in our codes of conduct and ethics.
Absence of Conflicting Commitments. Such person should not have commitments that would conflict with the time commitments of a director.
Reputation and Integrity. Such person shall be of high repute and recognized integrity and not have been convicted in a criminal proceeding (excluding traffic violations and other minor offenses). Such person shall not have been found in a civil proceeding to have violated any federal or state securities or commodities law, and shall not be subject to any court or regulatory order or decree limiting his or her business activity, including in connection with the purchase or sale of any security or commodity.
Knowledge and Experience. Such person should possess knowledge and experience that will complement that of other directors and promote the creation of shareholder value.
Other Factors. Such person shall have other characteristics considered appropriate for membership on the Board of Directors, including an understanding of marketing and finance, sound business judgment, significant experience and accomplishments and educational background.
Shareholder proposals submitted under the process prescribed by the SEC (in Rule 14a-8 of the Exchange Act) for presentation at the 2014 annual meeting must be received by us by December 9, 2013, for inclusion in our Proxy Statement and proxy relating to that meeting. Upon receipt of any such proposal, we will determine whether or not to include such proposal in the Proxy Statement and proxy in accordance with regulations governing the solicitation of proxies. We currently anticipate that the 2014 Annual Meeting will be held on May 21, 2014.
In order for a shareholder to nominate a candidate for director, under our Articles of Incorporation, timely notice of the nomination must be given to us in advance of the meeting. Ordinarily, such notice must be given not less than 60 nor more than 90 days before the meeting (but if we give less than 70 days notice of the meeting, or prior public disclosure of the date of the meeting, then the shareholder must give such notice within 10 days after notice of the meeting is mailed or other public disclosure of the meeting is made, whichever occurs first). The shareholder filing the notice of nomination must describe various matters as specified in our Articles of Incorporation, including such information as name, address, occupation, and number of shares held.
In order for a shareholder to bring other business before a shareholder meeting, timely notice must be given to us within the time limits described above. Such notice must include a description of the proposed business, the reasons therefore, and other matters specified in our Articles of Incorporation. The Board or the presiding officer at the Annual Meeting may reject any such proposals that are not made in accordance with these procedures or that are not a proper subject for shareholder action in accordance with applicable law. The foregoing time limits also apply in determining whether notice is timely for purposes of rules adopted by the SEC relating to the exercise of discretionary voting authority. These requirements are separate from and in addition to the requirements a shareholder must meet to have a proposal included in our Proxy Statement.
In each case, the notice must be given to our Secretary, whose address is 1370 Timberlake Manor Parkway, Chesterfield, Missouri 63017-6039. Any shareholder desiring a copy of our Articles of Incorporation or Bylaws will be furnished a copy, without charge, upon written request to the Secretary.
Householding of Proxy Materials
This Proxy Statement and our 20122013 Annual Report to Shareholders may be viewed online at www.rgare.com. Information on our website does not constitute part of this Proxy Statement. You may request a physical copy of this Proxy Statement, form of proxy card and our Annual Report to Shareholders, without charge, by writing to us at 1370 Timberlake Manor Parkway, Chesterfield, Missouri 63017-6039, Attention: Secretary.
Use
Exhibit A
Proposed Amendment to the Company’s
Amended and Restated Articles
| REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES | ||||||
| RECONCILIATION OF CONSOLIDATED NET INCOME TO OPERATING INCOME | ||||||
| (DOLLARS IN THOUSANDS) | ||||||
| (UNAUDITED) | ||||||
| TWELVE MONTHS ENDED DECEMBER 31 | ||||||
| 2013 | 2012 | |||||
| GAAP net income | $418,837 | $631,893 | ||||
| Reconciliation to operating income: | ||||||
| Capital (gains) losses, derivatives and other, included in investment related (gains) losses, net | 103,495 | (21,418 | ) | |||
| Capital (gains) losses on funds withheld: | ||||||
| Included in investment income | (8,345 | ) | (11,134 | ) | ||
| Included in policy acquisition costs and other insurance expenses | — | 350 | ||||
| Embedded derivatives: | ||||||
| Included in investment related (gains) losses, net | (137,948 | ) | (142,754 | ) | ||
| Included in interest credited | (51,330 | ) | 29,314 | |||
| DAC offset, net | 63,966 | 30,131 | ||||
| Gain on repurchase of collateral finance facility securities | (30,229 | ) | — | |||
| Operating income | $358,446 | $516,382 | ||||
| TWELVE MONTHS ENDED DECEMBER 31 | ||||||
| 2013 | 2012 | |||||
| Diluted earnings per share from operating income | $4.95 | $6.96 | ||||
| Earnings per share from net income: | ||||||
| Basic earnings per share | $5.82 | $8.57 | ||||
| Diluted earnings per share | $5.78 | $8.52 | ||||
| Weighted average number of common and common | ||||||
| equivalent shares outstanding | 72,461 | 74,153 | ||||
| AT DECEMBER 31 | ||||||
| 2013 | 2012 | |||||
| Treasury shares | 8,370 | 5,211 | ||||
| Common shares outstanding | 70,768 | 73,927 | ||||
| Book value per share outstanding | $83.87 | $93.47 | ||||
| Book value per share outstanding, before impact of AOCI | $69.66 | $64.95 | ||||
B. Removal of Directors. Subject to the rights, if any, of the holders of any class of capital stock of the Corporation (other than the Common Stock) then outstanding, (1) any Director, or the entire Board of Directors, may be removed from office at any time prior to the expiration of his term of office only for cause and only by the affirmative vote of the holders of record of outstanding shares representing at least 85% of all of the then outstanding shares of capital stock of the Corporation then entitled to vote generally in the election of Directors, voting together as a single class at a special meeting of shareholders called expressly for that purpose (such vote being in addition to any required class or other vote); and (2) any Director may be removed from office by the affirmative vote of a majority of the entire Board of Directors at any time prior to the expiration of his term of office, as provided by law, in the event that the Director fails to meet any qualifications stated in the Bylaws for election as a Director or in the event that the Director is in breach of any agreement between the Director and the Corporation relating to the Director’s service as a Director or employee of the Corporation.
C. Nominations. Subject to the rights, if any, of holders of any class of capital stock of the Corporation (other than the Common Stock) then outstanding, nominations for the election of Directors may be made by the affirmative vote of a majority of the entire Board of Directors or by any shareholder of record entitled to vote generally in the election of Directors. Any shareholder who otherwise desires to nominate one or more persons for election as a Director at any meeting of shareholders held at any time may do so only if the shareholder has delivered timely notice of the shareholder’s intent to make such nomination or nominations, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that if less than 70 days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, such notice by the shareholder to be timely must be received not later than the close of business on the 10th day following the day on which the notice of the date of meeting was mailed or public disclosure was made, whichever occurs first. A shareholder’s notice to the Secretary shall set forth: (1) the name and address of record of the shareholder who intends to make the nomination; (2) a representation that the shareholder is a holder of record of shares of capital stock of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (3) the class and number of shares of the capital stock that are beneficially owned by the shareholder on the date of such notice; (4) the name, age, business and
residential address, and principal occupation or employment of each proposed nominee; (5) the class and number of shares of capital stock that are beneficially owned by such nominee on the date of such notice; (6) a description of all arrangements or understandings between the shareholder and each nominee and the name of any other person or persons pursuant to which the nomination or nominations are to be made by the shareholder; (7) any other information regarding each proposed nominee that would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (8) the written consent of each proposed nominee to being named as a nominee in the proxy statement and to serve as a Director of the Corporation if so elected. The Corporation may require any proposed nominee to furnish any other information it may reasonably require to determine the eligibility of the proposed nominee to serve as a Director of the Corporation. The presiding officer of the meeting may, if the facts warrant, determine that a nomination was not made in accordance with the foregoing procedure, and if he should make that determination, he shall so declare at the meeting and the defective nomination shall be disregarded.
D. Vacancies. Subject to the rights, if any, of the holders of any class of capital stock of the Corporation (other than the Common Stock) then outstanding, any vacancies in the Board of Directors which occur for any reason prior to the expiration of the term of officeof the class in which the vacancy occurs, including vacancies which occur by reason of an increase in the number of Directors, shall be filled only by the Board of Directors, acting by the affirmative vote of a majority of the remaining Directors then in office (although less than a quorum).
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| The Board of Directors recommends a vote FOR Proposal 2. | For | Against | Abstain | The Board of Directors recommends a vote FOR Proposal 3. | For | Against | Abstain | |||||||||||||||
| 2. | Advisory vote to approve named executive officer compensation. | ¨ | ¨ | ¨ | 3. | Approve amendment to the Company’s Flexible Stock Plan. | ¨ | ¨ | ¨ | |||||||||||||
| The Board of Directors recommends a vote FOR Proposal 4. | For | Against | Abstain | The Board of Directors recommends a vote FOR Proposal 5. | For | Against | Abstain | |||||||||||||||
| 4. | Re-approve the performance measures under the Company’s Annual Bonus Plan. | ¨ | ¨ | ¨ | 5. | Re-approve the performance measures under the Company’s Flexible Stock Plan. | ¨ | ¨ | ¨ | |||||||||||||
| The Board of Directors makes no recommendation as to how you vote regarding Proposal 6. | For | Against | Abstain | The Board of Directors recommends a vote FOR Proposal 7. | For | Against | Abstain | |||||||||||||||
| 6. | Amend the Company’s Articles of Incorporation to declassify the Board of Directors. | ¨ | ¨ | ¨ | 7. | To ratify the appointment of Deloitte & Touche LLP as the Company’s independent auditor for the fiscal year ending December 31, 2013. | ¨ | ¨ | ¨ | |||||||||||||
The undersigned hereby acknowledges receipt of the Notice of the 2013 Annual Meeting of Shareholders and the accompanying Proxy Statement.
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
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IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
April 8, 2013
Dear Shareholder:
We invite you to attend the 2013 Annual Meeting of Shareholders of Reinsurance Group of America, Incorporated, to be held on May 15, 2013 at the Company’s offices at 1370 Timberlake Manor Parkway, Chesterfield, Missouri 63017 at 2:00 p.m.
It is important that your shares are represented at the meeting. Whether or not you plan to attend the meeting, please review the enclosed proxy materials, complete the proxy form below, detach it, and return it promptly in the envelope provided.
The proxy statement and our 2012 Annual Report to Shareholders may be viewed online at www.rgare.com.
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders.
The Proxy Statement and the 2012 Annual Report to Shareholders are available at:
http://www.rgare.com
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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Proxy — REINSURANCE GROUP OF AMERICA, INCORPORATED
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned does hereby appoint Jack B. Lay and William L. Hutton, or either of them, the true and lawful attorneys-in-fact, agents and proxies of the undersigned to represent the undersigned at the Annual Meeting of the Shareholders of REINSURANCE GROUP OF AMERICA, INCORPORATED to be held May 15, 2013, commencing at 2:00 p.m., St. Louis time, at the Company’s offices at 1370 Timberlake Manor Parkway, Chesterfield, Missouri 63017, and at any and all adjournments and postponements of said meeting, and to vote all the shares of Common Stock of the Company standing on the books of the Company in the name of the undersigned as specified and in their discretion on such other business as may properly come before the meeting.
(Continued and to be marked, dated and signed, on the other side)
