If you want to rank at the top of the insurance industry’s list of highest-paid execs, it helps if you head up a life/health insurance company.
In 2007, the top-ranked executive at a public company was William Robert Berkley at property/casualty insurer W.R. Berkley Corp., at $27.3 million in total compensation. But the list quickly switches gears: Seven of the top-10 executives were from life companies, with compensation ranging from $25.8 million to $18 million.
The numbers were compiled recently by SNL Financial, a research firm that ranked executives by base salary plus other compensation like stock and bonuses, and also charted return on investment of the different types of insurance companies by profitability ratios and stock performance.
Life and health insurance is a particularly good game to be in, analysts say. Those companies’ profitability was up 12 percent in 2007, but CEO compensation was up quite a bit more: 38 percent, overall.
A handful of companies – Ameriprise Financial, MetLife, and Genworth Financial – skewed that increase by raising executives’ compensation more than 30 percent in one year, said John Gayley, a principal with Stamford, Conn.-based researcher Towers Perrin. But generally speaking, the raise in compensation reflects a demand for a different kind of executive for the life/health companies.
Many traditional life companies have moved more intensely into long-term savings and retirement products, which require “a different skill set” among its top brass, said SNL senior research analyst Will Retzer. Sometimes, that means companies will pay more to get and keep those types of executives.
“It gives you a different trajectory than a straight property and casualty company,” he said.
News reports of executives’ salary and bonuses have drawn media scrutiny and shareholder outrage recently, particularly with regard to severance packages such as the $47 million windfall for ousted American Investment Group CEO Martin Sullivan, who ranked 19th on the list in 2007 with $14 million in compensation in 2007.
Despite the furor (or perhaps partly because of it) shareholders are more sharply watching how much executives are taking home, Gayley said.
“You’re always going to find some anomalies out there where performance doesn’t match pay, but within the insurance industry in general, he said, “the line is getting closer.”
Retzer said compensation in insurance has more or less followed the path of the company’s profitability across the board. Property/casualty insurance companies’ profitability went up 13 percent, for example, as did executive compensation.
The most striking example comes from executives in mortgage and financial guaranty insurance companies, already suffering in 2007 from financial troubles: Profitability was down 15 percent for those companies, and while those companies’ executives saw base salaries rise by 13 percent, overall compensation plummeted 44 percent overall.
“It’s hard to justify to a board to give someone a nice bonus or a pay raise when the company is struggling severely,” Retzer said.
