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Suncorp Group Limited Annual Report 2010/11 19

Fixed remuneration

Fixed remuneration is reviewed each year in line with the Suncorp Group’s remuneration policy, competitor practices and other business and role-critical factors. As discussed in section 2.1, external remuneration consultants support the Remuneration Committee in assessing market practice to ensure fxed remuneration is competitive.

Increases to fxed remuneration were delivered during 2011 to refect competitive market practice. Short‑term incentives (STI)

The Suncorp Group operates an annual STI program designed to reward the contribution of SLT members in line with Suncorp Group and individual performance. For 2011, the Senior Executive target STI opportunity is typically positioned at an amount equivalent to 125% of fxed remuneration, with a maximum STI opportunity equivalent to 187.5% of fxed remuneration 1 . The Group CEO target STI opportunity is set at 100% of fxed remuneration, with a maximum STI opportunity equivalent to 150% of fxed remuneration. A portion of STI for SLT members is deferred for two years (refer ‘Incentive deferral’ section below). The size of the Suncorp Group’s STI pool available for distribution each year is determined by the Remuneration Committee, relative to fnancial and non‑fnancial performance outcomes. A key measure of fnancial performance is determined by the Suncorp Group’s achievement against agreed fnancial targets set by the Board each year. The quality of the fnancial result, including factors such as the current economic environment, is also taken into account when determining the size of the Suncorp Group’s STI pool.

Performance objectives

Individual performance is assessed against agreed performance objectives and targets using a balanced scorecard approach. Financial and non‑fnancial objectives, including risk management as a separate category, are weighted and refect the performance focus of both the Suncorp Group and specifc Business Units to support the overall business strategy. How is performance assessed?

The Group CEO and the Remuneration Committee assess each Senior Executive’s performance at the end of the fnancial year against the Suncorp Group and Business Unit scorecards, assessing actual outcomes relative to the agreed targets. The overall performance assessment refects both Suncorp Group and Business Unit performance. The Board believes that the Suncorp Group and Business Unit focus, the key performance measures, targets and their relative weightings, combine to effectively motivate SLT members.

Achievement of revenue targets is expected to be in line with strategic plans approved by the Board (as amended from time to time) and in a manner consistent with the Board’s expressed risk appetite.

Examples of key performance measures included within the balanced scorecard for the SLT are set out in the table below.

Suncorp Group performance objectives Weighting:

–– Group CEO: 100% –– Senior Executives: 60%

1. Proft and fnancials: targeted proft after tax and improvement in shareholder returns (return on equity)

2. Risk management: manage risk levels within agreed parameters 3. Customer: improve external confdence in the Suncorp Group 4. People: maintain a highly respected and engaged team

5. Key Company strategic deliverables: implementation of key strategic projects/ initiatives to drive business improvements

Business Unit performance objectives Weighting:

–– Senior Executives: 30%

1. Proft and fnancials: targeted proft after tax and improve shareholder returns 2. Risk management: drive a positive risk culture and risk governance framework and manage risk levels within agreed parameters

3. Customer: achieve customer retention, advocacy and grow customer base 4. People: maintain a highly engaged team

5. Key Business Unit strategic deliverables: implementation of key strategic projects/initiatives to drive business improvements

Individual performance objectives –– Senior Executives: 10%

Dependent on contribution to the team and demonstration of the Suncorp Group Values: –– Honesty –– Trust –– Courage –– Caring –– Fairness –– Respect

1 The STI target opportunity for Jeff Smith, CEO Suncorp Business Services, is contractually set at 138% of fxed remuneration. His maximum is in line with other Senior Executives (187.5%).