Vátryggingafelag Íslands : VIS Remuneration Report 2023

VIS Remuneration Report

2023

Contents

The VIS Remuneration Report provides information on the Remuneration Committee and the compensation of the Board of Directors, the CEO, Managing Directors and key personnel in the past year.

2. VIS remuneration structure

At the 2018 Annual General Meeting, the Board of Directors' proposal for a bonus scheme that links together the interests of the Company's shareholders and senior management was approved unanimously by the shareholders. It was the opinion of the Board of Directors that the implementation of the bonus scheme had been a positive step for the Company and assisted the Board of Directors and management in achieving the Company's strategic and operational goals. Subsequently, the owners unanimously approved the Board's proposal at the 2019 AGM to expand to bonus scheme so that it also covered other employees. The year 2023 was the sixth year of the Company's bonus scheme. The results of the bonus scheme have been set out in detail in each year's Remuneration Report and are also presented at the Annual General Meeting.

The bonus scheme takes into account considerations relating to the protection of the Company's customers, creditors and shareholders, and otherwise complies with good business practices in the insurance field and is consistent with sound and healthy operations.

2.1 Bonus scheme goals and results for 2023

In 2023, the VIS bonus scheme was divided into two levels, with the first level intended for senior-level managers and second level intended for other employees of the Company to reward them for good operations and professional work that supports the Company's overall interests. The functioning of the bonus scheme is described in the Company's Remuneration Report for the year 2023. Total bonus payouts in 2023 amounted to ISK 129,261,670 excluding payroll-related expenses.

Bonus scheme of senior management

Bonuses for managers are based on the same common performance criteria as for employees, which account for 60%, and personal performance criteria, which account for 40%.

Total bonus payouts to senior managers for results achieved in 2023 amounted to ISK 62,300,271 excluding payroll-related expenses. Half of the bonus is paid out as salary, while half is delivered in the form share-based rights after three years have passed.

Bonus scheme of employees

VIS financial performance

Performance results based on return on equity.

Implementation of VIS policies

Performance results based on new sales and customer satisfaction.

Overall, the success rate in achieving the established targets for employee bonuses in 2023 was 85%, or ISK

425,000 for each full-time employee. Total bonus payouts in 2023 amounted to ISK 66,961,399 excluding payroll- related expenses. Employees of key functions did not receive in bonus in accordance with the Remuneration Policy.

2.2 Employee share option scheme

In October 2023, share option agreements were concluded with employees of VIS and its subsidiaries in accordance with the share option scheme for which the Company's Board of Directors received authorisation in the Remuneration Policy approved at the Annual General Meeting in March 2023. The purchase price of shares is calculated based on the market price of shares traded on Nasdaq Iceland, where shares in the Company are listed, in accordance with the weighted average price in transactions involving the Company's shares during ten whole trading days prior to the contract date, or ISK 15.25 per share. A total of 239 employees concluded share option agreements covering up to 20,973,700 shares a year based on 100% exercise of the share options.

2.3 Implementation of the equality and equal pay policy

VIS has adopted an equality plan which is an integral part of its equality policy. The equality plan lays down measurable targets for equality issues and sets out time-specific actions for achieving the established targets. By implementing an effective equality plan, the Company ensures that equality is maintained between its employees and that gender discrimination, if any, is eradicated.

VIS first received equal pay certification in 2017 and now has a valid certification until 2026 after an audit in 2023 revealed that the Company met all the requirements of the equal pay standard. The certification must be maintained through regular reviews. The next review is a maintenance audit at the end of 2024. The results of salary surveys show that the Company has been very successful in tackling equality issues.

Gender pay gap eliminated

The gender pay gap has been steadily decreasing and was eliminated in 2021. No gender pay gap was measured in 2023. This result is very pleasing and shows that the concerted efforts of the past few years have resulted in a

salary structure that is based on merit rather than gender.

Gender pay gap - development for VÍS

Remuneration 2024

The Board of Directors proposes a bonus scheme on a consolidated bases that takes into account the structural changes that are taking place at the Company and its transformation into a group of companies in the financial services sector.

In the new group, the parent company and each subsidiary will establish targets and benchmarks, both financial and strategic. The benchmarks and targets will continue to be challenging and ambitious and help management and employees within the group to unite around clear operational priorities as well as expectations for the performance of the companies in 2024. As before, the purpose of the bonus scheme is to better align the long- term interests of the Group and its employees, while efforts are also being made to bring the bonus scheme closer to what is customary in the financial services industry and adapt the form of bonuses to the rules set forth in Act No. 161/2002 on Financial Undertakings, as recent changes to the provisions of the Act on bonuses include requirements for managing risk by increasing the weight of risk-based rights in bonuses at financial undertakings.

As in previous years, the bonus scheme approved by the Board of Directors for the year 2024 includes a general bonus scheme for VIS employees whereby bonuses will be paid to employees in equal amounts in accordance with the Company's overall performance. The maximum bonus according to the scheme is ISK 500,000. Performance criteria have also been approved for a bonus scheme for certain employees of VIS, Fossar and the parent company whereby bonuses are calculated as a percentage of the annual salary, either up to 10% or up to 25% of the total annual salary, depending on the nature of the position. In cases where an employee's maximum bonus is a fixed amount and below the legal requirements for deferral, the entire bonus is still expected to be paid out as salary when the year's results are known. In cases where the maximum bonus is a percentage of an employee's annual salary, it is still expected that at least 50% of the bonus will be allocated in the form of share- based rights to be delivered after three years have passed. The Board of Director proposes that in 2024, employees can choose to receive up to 80% of their calculated bonuses in the form of share-based rights.

The Board of Directors further proposes to the AGM that a share option scheme should be approved pursuant to Article 10 of Act No. 90/2003 covering all employees of the Company. Under the share option scheme, the Board of Directors would be authorised to allocate share options up to a maximum amount of ISK 1,500,000 for each employee per year for the next three years. The purpose of authorising the Board of Directors to approve such a share option scheme is to link together the long-term interests of the Company and employees and give employees the opportunity to benefit directly if the Company is performing well.

The revised Remuneration Policy is submitted to the Company's Annual General Meeting.