Remuneration policy

MMI’s remuneration policy is one of the key components of the group’s overall human resources (HR) strategy. It supports the HR strategy by helping to build a high-performance, values-driven culture with a view to capitalising on growth and expansion opportunities, raising the group’s levels of innovation and entrenching its entrepreneurial approach to business. The full MMI remuneration policy is available on the MMI website.

key elements of mmi’s

remuneration policy

MMI’s key risk management strategies are to:

  • The Remuneration Committee, which is responsible to the board, oversees the setting and administration of the remuneration policy, subject to constant monitoring and regular review. The full terms of reference of the committee are available on the MMI website. Directors’ attendance at committee meetings is available in the corporate governance report. The activities of the committee for the period under review are detailed in the corporate governance report.
  • The remuneration policy is aligned with the overall business strategy, objectives and values of the group.
  • Metrics to assess performance will take into account not only the level of achievement, but also the risks taken in achieving that level of performance, ie performance measures will be risk adjusted where appropriate.
  • Employees are offered a competitive total remuneration package, benchmarked to the market.
  • All remuneration (guaranteed and variable) is differentiated based on performance.
  • Guaranteed remuneration is normally set at the median market level. However, it can be targeted at levels in the upper quartile for key positions where a premium is payable due to the scarcity and/or technical nature of skills.
  • Three performance components are appraised, based on a robust performance management system – group, divisional and individual performance.
  • Subjective and objective measures are used for individual performance appraisal purposes.
  • The policy differentiates between level of accountability (related to the diversity and complexity of decisions made plus the degree of responsibility and/or level of authority involved in the job) and pay band (related to the going market rate for the particular job).
  • Pay bands are broad and allow flexibility.
  • Individuals are remunerated for their unique individual contribution (individual worth) as well as for their contribution to/collaboration in meeting team objectives.
  • The short-term incentive (or performance bonus) scheme is used to promote goal attainment (mutually agreed, strategically aligned outcomes/targets that contribute to the successful implementation of the group’s strategic business plans) over a one-year period.
  • A long-term incentive plan focuses on the realisation of the group’s vision for the future and aligning performance with longer-term value-adding objectives over a three-year period.
  • Pay-for-performance incentive systems have also been instituted based on predefined quantitative and qualitative measures.
  • The remuneration of employees in the risk and compliance function is determined independently of the various divisions in MMI, with performance measures based principally on the achievement of their function’s current objectives.

MMI’s short-term incentive (performance bonus) scheme

The group’s key short-term incentive scheme is a non-guaranteed performance bonus, paid annually as a percentage of an individual’s total guaranteed remuneration package.

Why a performance bonus?

  • Performance bonuses are awarded for the attainment of pre-set, business-aligned performance objectives.
  • Bonuses serve as both motivation and reward for scheme participants who achieve or exceed these performance objectives.

Who qualifies for a performance bonus?

  • Only employees with a high level of accountability are eligible to participate in the performance bonus scheme.
  • Other high-performing employees are eligible for partici-pation in a budgeted short-term incentive payment pool, based on a percentage of the total payroll.

What performance objectives have to be met?

  • Performance objectives are set at three levels: group, divisional and individual.
  • To strengthen the link between pay and individual performance, strategic objectives, as set out in the group and divisional operating plans, are translated into personal goals, including knowledge, skills and competence to be acquired.
  • Personal goals are agreed upfront, ie at the start of each performance period.

Who approves the performance objectives?

  • All group targets have to be approved by the Remuneration Committee of the board.
  • Individual goals/targets have to be agreed with the employee’s line manager or team leader.

How is performance appraised?

  • The group and divisional components of performance are appraised based on a balanced scorecard comprising metrics of a financial and non-financial nature. The same metrics apply in part to individual performance in line with the individual’s level of accountability.
  • Group performance is evaluated by the Remuneration Committee, divisional performance by the group chief executive officer and individual performance in terms of MMI’s performance management system.


Pay-for-
Performance

Short-term
incentives

Long-term
incentives

How are performance bonuses paid?

Provided all relevant group, divisional and personal performance criteria are met, performance bonuses are determined annually and paid as set out below:

  • Performance bonuses are not guaranteed.
  • Performance bonuses above a certain threshold level are paid out in two tranches, depending on the overall amount involved. Bonuses below the threshold level are paid in cash by way of a lump sum payment once the bonus has been determined.
  • Performance bonuses above a certain second threshold are paid out in three tranches with a percentage of the final tranche deferred into retention units of the long-term incentive plan, vesting after two years.
  • Bonus amounts not yet paid can be withheld if the performance of the group, division or individual deteriorates significantly prior to the payout dates of the remaining tranches.

Balanced scorecard

The balanced scorecard incorporates five key performance indicators/metrics, all of which are reviewed annually.

For 2014, the following metrics applied:

  • Three financial metrics
    • Core headline earnings
    • Return on embedded value (ROEV)
    • Embedded value (EV) of new business
  • Two non-financial metrics
    • Strategic projects
    • Transformation (FSC scorecard)

A five-point rating scale is used to assess performance:

1 = underperformance,
2 = threshold performance,
3 = target performance,
4 and 5 = outperformance.

MMI’s scorecard contains the group’s objectives. In addition to that, each division has its own scorecard that aligns with the group scorecard, but contains division-specific targets and objectives.

Meeting the group’s objectives is paramount. Performance against the group’s targets determines the size of the aggregate bonus pool. The performance of each division against its scorecard determines how the aggregate bonus pool is allocated between divisions.

Short-term incentive scheme (performance over the year)

KPI

Weight

F2014 target

Actual

Achieved

Return on embedded value (ROEV)

20%

11%

16%

Target exceeded

Core headline earnings

25%

11% growth

12%

Target achieved

Value of new business (VNB)

20%

R756m

R779m

Target achieved

Transformation

15%

FSC score of 75

79

Target achieved

Strategic initiatives

20%

Internal assessment

Refer to list below

Target achieved

Strategic initiatives

  • Products
    • Launch MMI’s new short-term insurance offering in South Africa
    • Launch the first products for the middle-income segment in South Africa
  • Clients
    • Commence the implementation of MMI’s client-centric strategy and operating model
  • Growth and diversification
    • Further develop geographical diversification by implementing acquisition and other strategies in Africa, finalising the business case and operating model in India, and investigating opportunities in Southeast Asia
  • Culture
    • Develop and nurture a culture of innovation and collaboration

Non-financial metrics

Strategic projects

These strategic initiatives have been identified as essential to the ongoing success of MMI. They have been included to ensure that the focus of the scorecard is not exclusively on short-term profitability but gives due recognition to initiatives expected to add value over the longer term by improving the group’s strategic positioning in areas other than purely financial.

Overall B-BBEE scorecard

The Financial Sector Charter (FSC) takes into account the various pillars of broad-based black economic empowerment, including all labour and transformation-related policies and practices: eg ownership, employment equity, skills development, procurement, socio-economic development and enterprise development.

Short-term incentive payments (for operational employees)

These payments have been instituted to motivate employees with lower levels of functional accountability who are not eligible to participate in the performance bonus scheme to exceed performance expectations.

  • Only high performance and/or consistent outperformance is recognised and rewarded.
  • Payments are made from a budgeted pool, based on a percentage of the total guaranteed remuneration packages of all employees and not on group or divisional performance.

Long-term incentive plan (LTIP)

  • The purpose of the LTIP is to attract, motivate, reward and thus help to retain employees who are able to influence the performance of the group on a basis that aligns their interests with those of the group’s shareholders.
  • The LTIP is a cash-settled share scheme. Participants are paid a cash bonus calculated using the value of an MMI Holdings Ltd share on the JSE.
  • Each tranche of shares (allocated on an annual basis) contains a combination of performance (acting as a performance driver) and retention (acting as a retention mechanism) units, all of which vest after three years.
  • For each tranche of shares, performance criteria are measured and averaged over the three-year vesting period, thus eliminating short-term fluctuations and focusing on long-term value creation.
  • The primary metric under the LTIP is the group’s ROEV, measured against the country’s growth in gross domestic product (nominal GDP) and against the average ROEV achieved over the three years by the five largest insurance groups in South Africa. The targeted ROEV is nominal GDP growth + 3% per annum, and the maximum additional vesting due to the outperformance of the peer group is 150% of the allocated performance units.
  • Vesting rates of the performance units are determined according to three cut-off points: threshold performance, target performance and outperformance.
  • The Remuneration Committee may, in its sole discretion, waive or amend the performance criteria for performance units should extraordinary circumstances arise.
  • If the Remuneration Committee deems it appropriate, the performance criteria for the award of future performance units may be different, taking into account the prevailing economic conditions.

Long-term incentive scheme (performance to date)

Return on embedded value

Target (GDP +3%)

Actual*

Tranche 1 (2011 to 2014)

Annualised performance for the period 1 July 2011 to 30 June 2014

10.8%

16.3%

Tranche 2 (2012 to 2015)

Annualised performance for the period 1 July 2012 to 30 June 2014

10.5%

18.9%

Tranche 3 (2013 to 2016)

Annualised performance for the period 1 July 2013 to 30 June 2014

10.8%

20.4%

* Average annualised percentages, measured since inception of each tranche up to 30 June 2014.

Disclosure of directors’ remuneration

King III and the Companies Act require that the individual remuneration of all prescribed officers should be disclosed. The identified prescribed officers of MMI are Nicolaas Kruger, Ngao Motsei, Preston Speckmann and Wilhelm van Zyl. Their remuneration is set out here.

Details of the remuneration of executive and non-executive directors are provided here.

Director’s emoluments

Non-executive directors are paid an all-inclusive retainer, which is annually benchmarked by participation in various market surveys. The non-executive directors’ fees are not linked to the performance of the company in any way.

directors’ emoluments

Months Fees R’000 Salary R’000 Performance bonus R’000

Directors

June 2014 June 2013 June 2014 June 2013 June 2014 June 2013 June 2014 June 2013

Nicolaas Kruger

12

12

5 082

4 795

7 104

6 333

Wilhelm van Zyl2

12

12

4 695

4 100

6 256

5 573

Preston Speckmann

12

12

3 270

2 972

3 798

3 455

Ngao Motsei

12

7

1 897

1 618

2 027

1 405

Morris Mthombeni3

2

4 107

3 037

Johan Burger

12

12

1 043

1 292

Leon Crouse

12

12

652

794

Blignault Gouws4

5

12

868

1 255

Fatima Jakoet

12

12

1 456

1 626

Niel Krige

12

12

543

747

Jabu Moleketi

12

12

683

751

Syd Muller

12

12

1 215

1 495

John Newbury

5

473

JJ Njeke

12

12

1 604

2 013

Vuyisa Nkonyeni

12

12

739

840

Sizwe Nxasana

12

12

839

683

Khehla Shubane

12

12

614

747

Frans Truter

12

12

2 249

2 569

Ben van der Ross

12

12

1 097

1 479

Johan van Reenen

12

12

850

924

Mary Vilakazi5

5

12

907

1 600

Louis von Zeuner6

6

518

15 877

19 288

19 051

16 522

19 185

16 766

 

directors’ emoluments

Long-term incentive payments R’000 Pension fund R’000 Total R’000 Share-based payment charge1 R’000

Directors

June 2014 June 2013 June 2014 June 2013 June 2014 June 2013 June 2014 June 2013

Nicolaas Kruger

12 339

8 241

298

395

24 823

19 764

14 550

8 163

Wilhelm van Zyl2

12 364

6 598

343

509

23 658

16 780

11 151

9 057

Preston Speckmann

7 728

3 265

207

311

15 003

10 003

6 539

5 195

Ngao Motsei

288

258

4 212

3 281

2 796

1 006

Morris Mthombeni3

3 765

194

4 107

6 996

Johan Burger

1 043

1 292

Leon Crouse

652

794

Blignault Gouws4

868

1 255

Fatima Jakoet

1 456

1 626

Niel Krige

543

747

Jabu Moleketi

683

751

Syd Muller

1 215

1 495

John Newbury

473

JJ Njeke

1 604

2 013

Vuyisa Nkonyeni

739

840

Sizwe Nxasana

839

683

Khehla Shubane

614

747

Frans Truter

2 249

2 569

Ben van der Ross

1 097

1 479

Johan van Reenen

850

924

Mary Vilakazi5

907

1 600

Louis von Zeuner6

518

32 431

21 869

1 136

1 667

87 680

76 112

35 036

23 421

1Share-based payment charge relating to the group’s existing shares schemes for the period. This will be reflected under long-term incentive payments when paid.
2Resigned 30 June 2014
3Resigned 31 August 2012 (Included in the salary figure is a loss of office payment of R4 106 521)
4Retired 27 November 2013
5Resigned 27 November 2013
6Appointed 1 January 2014

The group directors and prescribed officers are all remunerated by MMI Holdings Limited.

executive directors’ incentivisation

MomCSP*

MetLTRS** MMI LTRAS***

N Kruger

’000

W van Zyl

’000

P Speckmann

’000

N Kruger

’000

W van Zyl

’000

P Speckmann

’000

Units in force at 1 July 2012

447

313

155

458

489

305

Granted at prices ranging between (cents)

1 340

1 340

Units granted during year

5

2

Units exercised/released during year

(417)

(318)

(157)

Market value of range at date of exercise/release (cents)

1 959 – 2 149

2 074

2 074

Units in force at 30 June 2013

30

458

489

305

Units granted during year

Units exercised/released during year

(30)

(458)

(489)

(305)

Market value of range at date of exercise/release (cents)

2 515

2 530

2 530

2 530

Units in force at 30 June 2014

executive directors’ incentivisation

MMI LTIP****

N Kruger

W van Zyl

P Speckmann

N Motsei

Retention

units

’000

Perfor-
mance

units

’000

Retention

units

’000

Perfor-
mance

units

’000

Retention

units

’000

Perfor-
mance

units

’000

Retention

units

’000

Perfor-
mance

units

’000

Units in force at 1 July 2012

61

399

51

268

36

146

19

77

Granted at prices ranging between (cents)

Units granted during year

51

343

44

230

32

125

18

73

Units exercised/released during year

Market value of range at date of exercise/release (cents)

Units in force at 30 June 2013

112

742

95

498

68

271

37

150

Units granted during year

50

333

42

222

30

120

29

117

Units exercised/released during year

Market value of range at date of exercise/release (cents)

Units in force at 30 June 2014

162

1 075

137

720

98

391

66

267

 

Units outstanding (by expiry date) for the MMI LTIP are as follows:

N Kruger

W van Zyl

P Speckmann

N Motsei

2014

Retention

units

’000

Performance

units

’000

Retention

units

’000

Performance

units

’000

Retention

units

’000

Performance

units

’000

Retention

units

’000

Performance

units

’000

Financial year 2014/2015

61

399

51

268

36

146

19

77

Financial year 2015/2016

53

359

45

240

33

130

19

76

Financial year 2016/2017

48

317

41

212

29

115

28

114

Total outstanding shares

162

1 075

137

720

98

391

66

267

 

2013

Financial year 2014/2015

61

399

51

268

36

146

19

77

Financial year 2015/2016

51

343

44

230

32

125

18

73

Total outstanding shares

112

742

95

498

68

271

37

150

 

Units outstanding (by expiry date) for the MomCSP are as follows:

2013

N Kruger

’000

Financial year 2013/2014

30

Total outstanding shares

30

 

Units outstanding (by expiry date) for the MMI LTRAS are as follows:

2013

N Kruger

’000

W van Zyl

’000

P Speckmann

’000

Financial year 2013/2014

458

489

305

Total outstanding shares

458

489

305

*Momentum Conditional Share Plan.

**Metropolitan Long-term Replacement Scheme.

***MMI Long-term Retention Award Scheme.

****MMI Long-term Incentive Plan.

For more detail please refer to note 21.2(e).