Life Insurer CEO Bonuses Should Be Fine: Consulting Firm

One sign of stability at life, health and annuity issuers: The big bosses’ incentive pay is likely to be pretty stable.

A team of analysts at Compensation Advisory Partners (CAP) talks about life and health carrier chief executive officer compensation trends in a new report based on a review of 17 large U.S. insurers.

The CAP analysts are predicting that just a few big insurers will skip paying CEO bonuses altogether, and that just a few will pay great, above-target CEO bonuses.

Resources

A copy of the CAP insurance company CEO compensation report is available here.
An earlier article about CEO compensation is available here.

For the rest of the insurance company CEOs, “performance and bonus payouts will vary significantly depending on the line of business,’ the analysts write.

But most of the CEOs probably will get some kind of bonus, the analysts write.

The life and health insurers the analysts included in their review are Aflac, Genworth Financial, Globe Life, Lincoln National Corp., Manulife Financial Corp., MetLife, Principal Financial Group, Prudential Financial and Unum Group.

The Past

Low interest rates and worries about COVID-19 claims are hanging over insurers, but typical insurers have been holding up better than companies in many other sectors of the economy, the analysts write.

At life insurers, for example, revenue increased an average of just 3.5% in 2019, but it did grow, and the median 2019 life and health insurer CEO bonus was 112% of the target level, the analysts write.

For life and health CEOs, the median annual incentive payout amounted to 278% of 2019 salary. That was down from a ratio of 281% in 2018.

The Future

Many companies base CEOs’ pay partly on profit margins.

This year, insurers will probably adjust the performance figures used to calculate CEOs’ pay to reflect the effects of unplanned COVID-19-related spending.

If insurers spent money to help employees shift to working at home, those insurers may leave the unplanned work-from-home expenses out of CEO performance analyses, the analysts write.

Some insurers “will consider not only financial performance but also how well the company and senior leadership responded in the crisis,” the analysts write.

For 2021, some insurers may adopt incentive plans that will make CEO pay more predictable.

The analysts suggest that insurers may also consider adding incentive pay measures that encourage CEOs to put more emphasis on meeting environmental, social and corporate governance goals.