Subsidiaries In Various Geographies Europe â€Myaasignmenthelp.Com

Question: Discuss About The Subsidiaries In Various Geographies Europe? Answer: Introduction The selected company is QBE Insurance. It is one of the largest insurance providers in the world and has various subsidiaries in various geographies such as Europe, Asia Pacific, Australia The company was created in 1973 owing to merger of three entities and since then witnessed inorganic growth through the mode of acquisitions so as to enhance its presence in various geographies such as America and emerging countries. The market capitalisation of the company is about AUD 18 billion. One of the subsidiaries which cater to the Australia insurance business under the QBE fold is QBE Australia. The investigative report with regards to the remuneration report of the company is indicated below. Incentives Usage The remuneration committee is entrusted with the responsibility of determining the remuneration for the various top executives of the company such as the CEO, MD and CFO. There incentive package consists of fixed remuneration, besides STI (Short Term Incentives) and LTI (Long Term Incentives). The absolute remuneration derived by the CEO during the last four years is summarised in the table below (QBE, 2016; 2015; 2013). Components of Remuneration John Neal (CEO) FY2013 FY2014 FY2015 FY2016 Fixed Remuneration (USD 000's) 2011 1883 1631 1635 STI Cash (USD 000's) 0 586 330 821 Other (USD 000's) (STI) 82 122 60 97 Conditional Rights Vested (USD 000's) (LTI) 816 731 259 476 TOTAL (USD 000's) 2909 3322 2280 3029 The percentage breakup of the various elements of remuneration for the CEO is highlighted below. Components of Remuneration John Neal (CEO) FY2013 FY2014 FY2015 FY2016 Fixed Remuneration (USD 000's) 69.13% 56.68% 71.54% 53.98% STI Cash (USD 000's) 0.00% 17.64% 14.47% 27.10% Other (USD 000's) (STI) 2.82% 3.67% 2.63% 3.20% Conditional Rights Vested (USD 000's) (LTI) 28.05% 22.00% 11.36% 15.71% TOTAL (USD 000's) 100.00% 100.00% 100.00% 100.00% It is apparent from the above that there is a decline in the fixed remuneration derived which is about half of the total compensation while the other half is contributed by the STI and LTI Executive Remuneration Reporting Modifications One of the key differences between the 2013 and 2016 remuneration reporting relates to the disclosures of the new executive remuneration framework which was done in 2013 and has been put to implementation from 2014 onwards. Thus, there is has been a discontinuation of QIS cash awards and instead the STI and LTI have been aligned more with global remuneration systems based on recommendations from remuneration committee. An additional difference is in the distribution of the various components of remuneration for the CEO which in 2016 comprised more in terms of LTI and less in termed of fixed remuneration as compared to 2013. In other aspects, there does not seem to be any significant difference in the reporting mechanism as similar sections and detailed of the underlying remuneration paid to executives and their various sub-components is offered for both the years. Further, no incremental change seems to be observable in the 2016 remuneration report in comparison to the 2013 correspon ding report (QBE, 2016; 2013). Company Performance and Executive Pay In order to evaluate the linkage of the companys performance and the remuneration of the key executives particularly the CEO, it is essential to summarise the various KPI as highlighted in the annual report of the company as highlighted below (QBE, 2016). Parameters 2016 2015 2014 2013 ROE for STI (%) 8.4 7.8 8.1 N/A Total Shareholders Return for LTI (%) 5.32 15.24 -0.37 7.72 EPS (US cents) 60.8 49.8 55.8 -22.8 Evaluating the STI of the CEO, it is apparent that it is linked to the ROE which is why the STI payments are higher for 2016 and 2014 in comparison for 2015 when there was a dip in the ROE. Also, the conversion of the rights granted under LTI is critically dependent on the relative TSR and considering the lacklustre performance in this regards, no conversion of the rights granted under LTI in the previous years has been converted in 2016. Thus, there seems to be ample evidence which links the performance of the company with the executive compensation. Key performance parameters The STI and LTI incentives of executives are linked to certain performance parameters. It is noteworthy that these parameters and their respective weightage is not constant and tends to vary as per the recommendation of the remuneration committee. The various financial and non-financial performance parameters as per the FY2016 remuneration report are outlined below (QBE, 2016). Financial Performance Measures Statutory ROE (Return on Equity) (80% for weightage for CEO) Divisional RoAC (Returns on Allocated Capital) (No weight for CEO but significant weight for divisional heads. Relative TSR (Total Shareholders Returns) (50% of the weight for LTI) Average statutory ROE of the group over the last three years (50% of the weight for LTI) Non-Financial Performance Measures The company also defines certain KPI (Key Performance Indicators) which are responsible for part of the STI which is 20% for the CEO. This essentially involves a balanced scorecard approach which tends to combine the various financial and non-financial KPI for the different executives. It is noteworthy that the balanced scorecard is customised for each individual based upon the underlying role and responsibilities (QBE, 2016). This various KPI in this regards are as summarised in the table indicated below. It is noteworthy that the balanced scorecard has been introduced from FY2015 onwards. It is evident from above that major emphasis is paid on the financial performance only especially the ROE while the non-financial performance parameters have limited weightage only. Recommendation On the basic of the above analysis, it is apparent that from FY2013 to FY2016, the remuneration reporting has seen some positive changes with regards to the new remuneration framework with the use of balanced scorecard. However, it may be recommended that the weightage on the balanced scorecard should be increased especially with regards to determination of STI. This would ensure that the management is provided with the requisite incentive so as to focus on creation of shareholders wealth rather than focus on the financial metrics alone. References QBE (2016), Annual Report 2016, QBE Website, [online] Available at https://www.group.qbe.com/sites/default/files/Default%20Media/QBE_2016_Annual_Report.pdf [Accessed September 14, 2017] QBE (2014), Annual Report 2014, QBE Website, [online] Available at https://www.group.qbe.com/sites/default/files/Default%20Media/QBE_AR14_Full_report.pdf [Accessed September 14, 2017] QBE (2013), Annual Report 2013, QBE Website, [online] Available at https://www.group.qbe.com/sites/default/files/Default%20Media/FY13%20Annual%20Report.pdf [Accessed September 14, 2017]