F.27. Share-based payments

Selected members of management of the Group are beneficiaries of a Generali Group’s long-term incentive plan, 2015-2017 Cycle. The plan aims to strengthen the link between the remuneration of the potential beneficiaries and expected performance under the Generali Group’s strategic plan (so-called absolute performance), also retaining the link between remuneration and the creation of value relative to a peer group (so-called relative performance). The plan also aims to achieve management engagement at Generali Group level. The incentive for achieving the objectives will be paid in shares issued by Assicurazioni Generali S.p.A. (ultimate parent company).

Cycle is divided into three tranches. The sum of shares set aside in each of the three years will be assigned in a single deal only at the end of the third year, approximately by the month of April (date of assignment), after an overall evaluation of the Board of Directors concerning the effective achievement of the Objectives not only on annual basis but over three years as well.

For each cycle, the maximum number of shares (per beneficiary) which can be assigned at the end of three years is calculated by dividing the maximum award amount (calculated as a percentage of base salary) by the share value, calculated as the average of the three months prior to the approval by the Board of Director of the draft budget for the financial year and the consolidated financial statement relating to the financial year which closed prior to that in which the plan began.

Total amount of shares which can be assigned is subdivided into the three tranches at respective percentages rate of 30% – 30% – 40%.

Plan structure and Vesting period
The plan is structured to cover approximately a period of 6 years calendar: three financial reporting years (vesting period) plus about three years for shares assignment and lock-up period (50%shares will be assigned after 2-year holding period beginning from the date of enrollment in the name of the beneficiaries).

Vesting period starts from January 1, 2015.

Vesting conditions
The number of shares to be allocated for each tranche is directly linked to the assessment of achievement against the objectives identified for the cycle. For the 2015–2017 plan, the objectives identified are the relative Total Shareholders’ Return – rTSR (compared with a Peer Group, identified in the STOXX Euro Insurance Index) and the Return on Equity – ROE); the performance level, and corresponding incentive level, depends on the simultaneous achievement of the two objectives.

Even after Objectives achievement, the Bonus (whole or in part) might not be assigned when the Generali Group’s return on risk capital index (RORC) is below 9.5% (on annual and three year basis, or the different percentage time to time determined by the Board of Directors) or the working/administrative relationship with Assicurazioni Generali S.p.A. or with other companies in the Generali Group is terminated before the end of the three years period of the Plan.

Valuation
Total cycle cost (TC) is calculated in following manner:
Maximum award amount = 175% (based on table of annual performance outcome) * Base salary
Maximum share number = Maximum award amount/share value (calculated as the average of the three months prior to the approval by the Board of Director of the draft financial statements relating the year before the beginning of the plan)
Base Share number = Base salary / share value (calculated as the average of the three months prior to the approval by the Board of Director of the draft financial statements relating the year before the beginning of the PLAN)