Guess what? Insurance companies are big payers. Stephen Hester isn’t the only UK-based insurance professional making big money. The Prudential’s Richard Woolnough earns more ($29m) than the bosses of big U.S. investment banks like Goldman Sachs and JPMorgan. And insurance pay isn’t constrained by European regulations in the same way that pay in banking is.
Several big insurers (Prudential, Old Mutual and RSA) have recently released their annual reports. Included therein are their remuneration reports. This is what those remuneration reports say about insurance pay.
1. Salaries are stagnating in line with inflation
At Prudential, salaries for executives rose a mere 3% last year. This was reportedly ‘in line with budgets for all employees.’ Salaries will also rise by 3% in 2014.
2. Senior executives get a generous travel allowance for coming in and out of the office
At Old Mutual, chief executive Julian Roberts was paid £50k just to cover his travel in and out of the office last year. He got another £14k to cover his wife’s travel on business trips.
3. Senior insurance executives get split cash-share bonuses, just like bankers
At RSA, 50% of bonuses are paid in cash and 50% are paid in shares. The share section is deferred over three years. For Stephen Hester, it will seem much like working for an investment bank.
However, while banks are constrained to paying bonuses no higher than 200% of salaries (or maybe 250% in special circumstances), insurance firms are free to pay what they like. At Prudential, for example, cash bonuses for executives are restricted to 200% of salary, while long term deferred share bonuses (deferred over three years) can be another 550% on top of that.
4. At the very top of the insurance industry, some people are incredibly well paid – and they’re not even on the board
At the Prudential, the five highest paid employees earned a combined £51m last year. Three were on the board, but two weren’t. We already know that Richard Woolnough, a top fund manager at Pru’s asset management arm M&G Investments, earned a small fortune, but another unnamed non-executive also earned around £7.5m in 2013.
5. RSA (Stephen Hester’s new employer) is deliberately stingy with its bonus allocations
When RSA decides how much bonus to pay, it says that it pays attention to, the ‘market median bonus opportunity of its benchmark peer groups.’
That doesn’t sound too promising: bonuses would be hire if it went for a mean average instead of selecting the mid-point.
6. Below board level, it’s not just about the money
While senior executives may be making millions, below board level employees are remunerated in other ways. In the US, for example, the Prudential runs a ‘High Five Recognition Program.’ This apparently allows its associates to choose from a ‘list of badges for actions such as teamwork, innovation, inspiration and to formally recognize when colleagues have gone above and beyond expectations.’ Who needs money when you have that?