US P&C insurance CEO bonus jumps despite cat losses

Property/casualty (P&C) CEO bonus payments increased to 393 percent of salary in 2017 from 225 percent of salary in 2016, according to a study by consulting firm Compensation Advisory Partners (CAP).

CAP examined 2017 compensation and financial performance across eighteen of the largest P&C and life & health (L&H) Insurance companies.

Included in the P&C sample were Allstate, AIG, Assurant, Chubb, CNA, Hartford Financial Services Group, Progressive, Travelers and XL Group.

The average bonus increase in the P&C insurance segment came despite 2017 having been a turbulent year for the P&C industry with catastrophe (CAT) losses increasing 122 percent at median for the companies included in the study. The P&C industry experienced record CAT losses in 2017 and continued to be challenged by loss frequency and severity. Some of the earnings pressure was eased however, by improved investment income results, operational improvements, and adequate capital levels that helped companies withstand losses.

Overall, the P&C sector saw revenue growth of 4.6 percent at median for the P&C businesses in 2017, outpacing prior year increase of 2.6 percent at median, according to the study.

Operating income increased by 11 percent at median, an improvement over 2016. Results varied dramatically by company however, with the degree of CAT losses impacting profitability, the study noted.

Operating income return on equity (ROE) was approximately 8 percent, reflecting a decline versus the prior year, yet ROE increased for five of nine P&C companies.

In all but one P&C company, CEO bonuses changed in the same direction as the change in operating income results; five of nine companies saw bonuses increase, while four were flat or down. The median bonus increase was 36 percent compared to an overall decrease in 2016.

After seeing an increase in bonuses for 2016, L&H companies saw bonuses increase again in 2017 to 300 percent of salary at median from 264 percent in 2016. All but two companies had an increase in CEO bonuses over the prior year.

The L&H sample included Aflac, Genworth Financial, Lincoln National, Manulife Financial, MetLife, Principal Financial Group, Prudential Financial, Torchmark and Unum Group.

The L&H industry delivered positive results in 2017, somewhat stronger than in 2016. Operating Income increased in seven of the nine companies.

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