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May 20, 2006 at 08:00 PM
In 2006, 22 executives at the top 16 insurers that sell life insurance pulled in total compensation of over $261 million, according to regulatory filings. [The companies were ranked according to their admitted assets for the year 2006. The reason for 16 insurers is that one company, Hartford, has 2 units in the top 15.]
The executive with the highest 2006 total compensation of the 22 executives included in this listing was Arthur Ryan, chairman and CEO of Prudential Financial, who received a package of $25,750,135. At the other end of the spectrum, Pacific Life’s James Morris who was COO in 2006 and became president and CEO in April 2007 received total compensation of $3,577,602.
Mark Watson, managing director, corporate governance at Moody’s Investor Services, said these compensation packages were “not extraordinary.” Referring to Pru’s Ryan, Watson said that Pru is one of the top 100 companies in the United States and $25 million “is not going to get you near the top of that list.”
An “outlying number” in this life executive group, Watson said, would be “40 or plus million.”
Additionally, he noted that the average compensation of CEOs in the S&P 500 is in the range of “11 to 12 million dollars.”
In Ryan’s case, Watson said, tenure plays into his compensation since “Ryan is a 13-year CEO.”
Further, Ryan was brought in from outside the life business, Watson continued, and this is something that characterizes the top tier of many of the largest life insurance companies. “Life insurance brings in talent from outside the business,” Watson said, “and you have to pay salaries commensurate with where they came from.”
You don’t see this in other financial services industries, such as securities or banking, he noted.
So, if a company is going to bring in someone from outside the business, “it will have to pay top dollar for talent,” Watson said.
Approximately $17 million of the $261 million in total compensation of these executives, or about 6.5%, was in actual salary. Edward Liddy, chairman and CEO of Allstate Corp., Northbrook, Ill., was paid the highest salary, at $1,211,545, while the lowest was paid to W.G. Jurgensen, CEO of Nationwide Financial, Columbus, Ohio, who received $244,105. The average salary for executives of these companies was $888,885 in 2006, while the median salary was $990,000.
By far, the bulk of total compensation was accounted for by bonuses, stock awards and non-equity compensation plans.
Bonuses totaled $35,933,205, or 13.5% of total compensation received by this group of executives. But the use of bonuses appeared in the packages of only 9 of the 22 executives listed. The largest 2006 bonus, $10,125,000, was received by Martin Sullivan, president and CEO of AIG, New York.
