1
Exhibit 10.17
REINSURANCE GROUP OF AMERICA, INCORPORATED
MANAGEMENT INCENTIVE PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1996
General Plan Purpose and Structure
The purpose of the Management Incentive Plan (MIP) is to motivate superior,
focused, and prudent performance on the part of key associates for the
ultimate benefit of shareholders and associates. Awards shall be determined
and payable annually during the lifetime of MIP using the following overall
three-part structure:
1. Trigger: To protect shareholders, no awards of any kind will be
--------
payable for any fiscal year in which earnings per share falls
below a specified amount.
2. Key Financial Goals and Awards: To assure fiscal soundness and
-------------------------------
provide solid funding for all awards, a meaningful portion of every
Participant's MIP award opportunity shall be linked to Company
performance against key financial objectives. Company goals shall
mean designated performance objectives for the Company on a
consolidated basis.
3. Subsidiary/Division and Unit/Individual Goals and Awards: A
---------------------------------------------------------
meaningful portion of a Participant's MIP award will be tied to the
performance of his or her subsidiary or division as well as his or
her unit's and/or individual performance.
Awards under MIP are intended to qualify as "other performance based
compensation" under Section 162(m)(4)(c) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder. MIP shall be interpreted
and construed in a manner consistent with such purpose.
Definitions
The following words and phrases, when used below, unless the context clearly
otherwise requires, shall have the following respective meanings:
a. Company. Reinsurance Group of America, Incorporated and its
-------
direct and indirect subsidiaries.
b. Compensation. An award to which a Participant is entitled under
------------
MIP.
c. Discretionary Compensation. Compensation which, but for the
--------------------------
paragraph entitled "Discretionary Compensation" below, would not be
Performance Based Compensation, in whole or in part, because a
Participant's entitlement to all or part of such Compensation is
based upon the exercise of discretion by the Compensation Committee.
d. Participant. An eligible associate of Reinsurance Group of
-----------
America, Incorporated or one of its direct or indirect subsidiaries
who is designated by the Compensation Committee, pursuant to the
paragraph entitled "Participation" below, as a participant in MIP.
2
e. Performance Based Compensation. Compensation which is computed
------------------------------
based upon the attainment of one or more pre-established, objective
Performance Goals. In order for Compensation to be Performance Based
Compensation, a third party, having knowledge of the relevant facts,
must be able to determine whether the goals have been achieved and
the amount of Compensation payable because of such achievement.
f. Performance Goal. A business criterion that applies to a
----------------
Participant, the Company or a particular subsidiary, division or unit
of the Company.
g. Performance Grid. The worksheet on which the Performance Goals
----------------
for each Participant and the potential amount of Performance Based
Compensation is set forth for each Plan Year.
h. Salary. A Participant's base salary as of the later of the
------
beginning of each Plan Year or the date he or she becomes a
Participant.
i. Plan Year. The year on which MIP is operated, which is
---------
presently the calendar year.
j. Unanticipated Extraordinary Event. A significant event which is
---------------------------------
not of a recurring nature, which does not arise from the Company's
business, which was not anticipated at the beginning of the Plan Year
when a Participant's Performance Grid was established, which impacts
the gain from operations (GFO) computed under GAAP for the Company or
a subsidiary, division or unit by at least $500,000 in a Plan Year,
and which would result in an unjustified windfall or penalty in a
Participant's Compensation for such Plan Year. Any such event, the
Participants that it affects, and whether it provides a windfall or
penalty for each such Participant must be determined by the
Compensation Committee prior to the end of the Plan year. Examples of
events which, if of sufficient magnitude would be Unanticipated
Extraordinary Events, are changes in the tax laws, changes in
accounting rules, and acquisitions and dispositions.
Plan Administration
Administration of MIP is divided as follows:
1. The Compensation Committee of the Board of Directors of Reinsurance
-------------------------------------------------------------------
Group of America, Incorporated (the Compensation Committee) has
-----------------------------------------------------------
ultimate approval authority for MIP and shall annually monitor and
approve:
* Participation and opportunity levels
* Company goals
* General design and mix of opportunity
* Total plan awards
* Performance Goals and their achievement
The Compensation Committee shall also review Unanticipated
Extraordinary Events. The intent of this review is to avoid
windfalls or penalties with respect to MIP awards. Any such event,
the Participants that is affects, and whether it provides a windfall
or penalty for any Participant must be determined by the Compensation
Committee prior to the end of the Plan Year.
Each member of the Compensation Committee must be a "disinterested
person" as defined in Rule 16(b)-3 promulgated by the Securities and
Exchange Commission
-2-
Reinsurance Group of America
Management Incentive Plan
3
and an "outside director" as defined in Section 162(m)(4)(C)(i) of the
Internal Revenue Code of 1986, as amended.
2. The Senior Management Committee of Reinsurance Group of America,
---------------------------------------------------------------
Incorporated shall recommend all MIP actions and awards to the
------------
Compensation Committee for approval and shall report any other MIP
information as the Compensation Committee may reasonably request.
3. The Executive Director - Human Resources of RGA Reinsurance Company
-------------------------------------------------------------------
shall be the general administrator of MIP. This will include
maintenance of records, preparation of summary materials for the
Senior Management Committee, and ensuring the payment of awards net
of all applicable withholding.
Participation
Participation in MIP shall be determined annually by the Compensation
Committee, in its discretion. Initially, all associates in positions rated
at 800 Hay points or more, Sales and Marketing associates and managers rated
at 500 or more Hay points shall be eligible to participate in MIP.
Participation one year does not guarantee participation in subsequent years.
Performance Goals
Establishing Performance Goals. The Performance Goals for each Participant
- ------------------------------
and the amount of Compensation payable if those goals are met shall be
established for each Plan Year by the Compensation 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,
performance shares, or otherwise, shall be set forth in each Participant's
Performance Grid.
As a general rule, all, or nearly all, performance objectives shall be
established by using quantifiable, numeric standards of performance. Such
objectives shall be established annually using the following guidelines:
- --------------------------------------------------------------------------------------------------------
Level Definition Incentive Odds of
Payable Attainment
- --------------------------------------------------------------------------------------------------------
< Threshold Unacceptable None -----
- --------------------------------------------------------------------------------------------------------
Threshold Good Modest 8 in 10
- --------------------------------------------------------------------------------------------------------
Target Very Good Significant 5 in 10
- --------------------------------------------------------------------------------------------------------
Maximum Outstanding Maximum 2 in 10
- --------------------------------------------------------------------------------------------------------
When necessary, some objectives may reflect progress toward multi-year
results or may require a subjective determination of attainment. For all
goal-based performance levels, awards shall be pro-rated for results between
the specific objectives set at Threshold, Target, and Maximum.
In all cases, performance measures and objectives must receive a minimum of
two levels of approval in order to be effective, e.g., immediate supervisor,
next level manager.
-3-
Reinsurance Group of America
Management Incentive Plan
4
The Performance Goals and associated Compensation shall be measured by goals
for the Company, a particular subsidiary or division, and a particular unit
or individual.
Company Goals. The Company goals used to determine the overall Performance
- -------------
Goals and Compensation shall be determined by reference to earnings per share
and increase in total revenues of the Company. Each will be given equal
weight in the calculation.
Setting Company goals serves:
a. To assure overall financial results that are consistent with the
payment of management incentives.
b. To reinforce teamwork and focus on annual operating objectives
for the Company as a whole.
c. To generally link relative cash compensation levels to relative
financial performance in the marketplace, modified as needed by
the realities of any given fiscal year to preserve desired
general odds of attainment as established by MIP.
Subsidiary/Division and Unit/Individual Goals. Subsidiary/division goals
- ---------------------------------------------
consist of subsidiary or division operating earnings, revenues, gains and
premiums. Unit results will be evaluated using either financial and/or
operational measures, including product development, client development,
revenues and earnings, and will support the overall objectives of the
business. Individual performance goals consist of product development, client
development as well as, in certain cases, intangible items such as leadership
capabilities, willingness to work with associates across the organization,
progress against professional/personal developmental plans, and successful
completion of a major project in which the associate played a key role. While
the Company intends to tie individual performance to clearly articulated and
objective measures, it will be necessary, and at times prudent, for
management to use a certain degree of discretion in evaluating individual
results.
These goals are key parts of MIP and are included for three main purposes:
a. The primary purpose is to require the establishment of specific,
focused, measurable performance goals of a subsidiary/division
and unit/individual nature.
b. A secondary purpose is to permit a meaningful recognition of
differences in performance and contributions by
subsidiaries/divisions or units/individuals, especially when such
differences are not totally reflected in performance against
Company goals.
c. A final purpose is to provide flexibility in the determination of
total awards so that all key facets of performance can be
recognized for any given year, especially unusual circumstances
not totally reflected in performance against goals.
Certification. No Compensation shall be payable to any Participant for any
- -------------
Plan Year unless and until the Compensation Committee certifies that the
Performance Goals and any other material terms were in fact satisfied.
-4-
Reinsurance Group of America
Management Incentive Plan
5
Discretionary Compensation
To the extent that any part of the Compensation of a Participant for a Plan
Year would be Discretionary Compensation, either because of the goals set
forth on his or her Performance Grid or because of the terms and conditions
of MIP, other than this paragraph, the Participant's Compensation for such
Plan Year shall be determined based upon the assumption that the maximum
amount of compensation which is Discretionary Compensation has been earned.
However, the Compensation Committee shall then have the discretion to reduce
such Discretionary Compensation in whole or in part to the extent that it
deems appropriate. For example, if the individual element in a Participant's
Performance Grid for a particular Plan Year is not Performance Based
Compensation, the Participant will be deemed to have earned the maximum
Compensation payable based on his or her Performance Grid for individual
performance, and then the Compensation Committee, in its sole discretion,
shall have the right to reduce the component of the Participant's
Compensation based on his or her individual performance in whole or in part.
For further example, in the event of an Unanticipated Extraordinary Event
which would result in a penalty for an affected Participant, there shall
initially be no downward adjustment in the Compensation that such a
Participant would have been entitled to receive if such event had not
occurred. In the event of an Unanticipated Extraordinary Event which would
result in a windfall for an affected Participant, such Participant's
Compensation shall initially be computed on the assumption that the
Unanticipated Extraordinary Event was not such an event. However, the
Compensation Committee shall then, in its sole discretion, determine whether
such Participant's Compensation, as so determined initially, shall be
adjusted downward by taking into account or not taking into account the
effect of such event in whole or in part.
Maximum Compensation
The maximum amount of Compensation which shall be payable to any Participant
for any Plan Year shall not exceed $750,000.
Incentive Awards and Benefit Plans
The Compensation Committee, in its discretion, may elect to pay Compensation
in cash or in the form of performance shares, restricted stock, or other
stock based awards. Any such stock-based Compensation may be under the
Executive Performance Share Plan or the Flexible Stock Plan, as determined by
the Compensation Committee. Compensation shall be included as "eligible
compensation" for the Company's Retirement, Group Life Insurance and
Disability plans.
Other Administrative Issues
1. MIP shall remain in effect until amended or terminated by the
Compensation Committee. The Company intends to maintain MIP
indefinitely but reserves the right to amend or terminate it by
appropriate Compensation Committee action at any time if the
Compensation Committee deems such action to be in the best interests
of the Company, its shareholders, or its associates.
2. Participation in MIP is not a guarantee of employment, participation in
one year does not guarantee participation in subsequent years, and
participation shall be determined on an individual basis as
recommended by the Senior Management Committee and approved by the
Compensation Committee.
3. A Participant whose active employment within the Company has been
terminated prior to the date awards are determined and paid to other
participants for any fiscal year shall forfeit all rights to any
award for such fiscal year. However, if termination
-5-
Reinsurance Group of America
Management Incentive Plan
6
is due to retirement (at or after age 55), total disability (as
determined by the Compensation Committee on the basis of appropriate
medical evidence), or death, the Compensation Committee shall authorize
an applicable award, generally on a pro rated basis. Such award shall be
determined on a case-by-case basis, but the following will serve as
general guidelines in the absence of unusual circumstances:
- --------------------------------------------------------------------------------
Type of Award Award Payable
- --------------------------------------------------------------------------------
Company/Goal Award A percentage of salary earned, based on the
Company's performance at the time of
termination.
- --------------------------------------------------------------------------------
Unit/Individual Award As recommended by the Senior Management
Committee and generally a Target level award,
based on salary earned.
- --------------------------------------------------------------------------------
4. Mid-year changes in participation, or participation levels, will be
made as appropriate and as recommended by the Senior Management
Committee and approved by the Compensation Committee. Determinations
will be on a case-by-case basis, but as a general rule the following
will apply:
- --------------------------------------------------------------------------------
Level Action
- --------------------------------------------------------------------------------
Hired or promoted into Award will be a percentage of salary earned
participating position while in participating position.
- --------------------------------------------------------------------------------
Change in duties where salary Pro rata revision in opportunity level (up or
level changed by at least 15% down, or revised mix).
- --------------------------------------------------------------------------------
Demotion to a position no Percentage of salary earned while in
longer designated for participating position will be possible,
participation depending on circumstances.
- --------------------------------------------------------------------------------
5. All award opportunities will be expressed as a percentage of salary
earned from January 1 through December 31.
6. A Participant whose individual performance is deemed to be
unsatisfactory by the Senior Management Committee will forfeit his or
her MIP award if such forfeiture is recommended by the Senior
Management Committee and approved by the Compensation Committee. A
similar forfeiture can occur for members of the Senior Management
Committee as determined by the Compensation Committee.
7. No Compensation will be payable for years beginning after 1995 unless
MIP, as amended, and the material terms upon which Compensation may
be paid under MIP, are approved by the shareholders of the
Reinsurance Group of America, Incorporated.
mip.rga
-6-
Reinsurance Group of America
Management Incentive Plan