Notes for P&L

Note 7 Employees and employee benefits expense

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Remuneration to the Board of Directors and senior management

Preparation and decision-making process regarding remuneration to the board, CEO and group management
The guidelines that applied during the financial year 2024 for remuneration to senior executives were decided by the annual general meeting. The principle for remuneration to the Board of Directors, Chief Executive Officer (CEO) and Group Management is that remuneration should be competitive. The Nomination Committee proposes Board fees to the Annual General Meeting (AGM). Board fees are paid based on a resolution of the AGM. For committee work, remuneration is paid to the Chairman of the audit committee according to the decision of the AGM, to other members no fee is paid for committee work. For remuneration to the CEO, members of Group Management and other members of senior management in the Group, the Board of Directors has appointed a remuneration committee consisting of the Chairman of the Board and one Board member, with the CEO as the reporting member. A fixed salary, variable remuneration and conventional employment benefits as well as pension benefits are paid to the CEO, Group Management and other members of senior management. In addition, incentive programmes apply as described below. The remuneration committee adheres to the guidelines for remuneration to senior management approved by AddLife AB's AGM.

Incentive program for senior executives
The Group's share-based long-term incentive scheme makes it easier for senior management to acquire shares in the company. The reason for implementation of the long-term incentive scheme is to give management personnel within the AddLife Group the opportunity to learn about and work towards an increase in the value of the Company’s shares through their own investment, thereby achieving greater alignment of interests between them and the Company's shareholders. The purpose of the incentive scheme is also to help senior executives to increase their shareholding in the Company over the long-term.

AddLife currently has a total of three outstanding incentive programs based on call options, corresponding to a total of 605,800 B shares. Employees have paid a market-based premium for the acquired call options on B shares. The option premium in the program has been calculated by Handelsbanken using the Black & Scholes valuation method. The assumptions in the calculations include the exercise price being set at 110 percent of the volume-weighted average trading price during the measurement period, volatility based on statistical data from historical figures, the risk-free interest rate based on government bond rates, the term and exercise period according to the program conditions, and dividends estimated according to the group’s dividend policy. The programme includes a subsidy so that the employee receives the same sum as the option premium paid in the form of cash payment, i.e. salary, after two years, provided that the option owner at this point is still employed within the Group. This subsidy and the associated social security costs are accrued as personnel costs over the vesting period. AddLife has the right, but no obligation to repurchase the options when an employee terminates employment. The holder may exercise the options regardless of continued employment in the Group. Issued call options on repurchased shares have resulted in an estimated dilution effect of approximately 0.0 percent (0.0) during the financial year, based on the average share price for the year.

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AddLife has an outstanding incentive program based on performance shares corresponding to a maximum of 141,500 B shares, which represents approximately 0.1 percent of the total number of shares. Participation in LTIP 2024 requires Participants to invest in B shares of the company ("Investment Shares"). The maximum amount that Participants can invest in B shares within LTIP 2024 corresponds to approximately 10–16 percent of their annual gross salary before tax. For each Investment Share, Participants receive a number of performance share rights, and each performance share right can, after the three-year vesting period, entitle the holder to receive up to one B share. The allocation of B shares requires that the Participant remains employed and retains all their Investment Shares for approximately three years, and that the performance conditions for the respective program are met. The performance condition is based on the average annual earnings growth (EBITA) during the period from January 1, 2024, to December 31, 2026, as well as sustainability-related targets. If the minimum level of 7 percent annual earnings growth is not reached, the performance share rights will not entitle the holder to any B shares. If the maximum level of 20 percent annual earnings growth is achieved, each performance share right entitles the holder to one B share. An annual earnings growth of 15 percent results in an allocation of 50 percent. To enable control and predictability over the maximum outcome per Participant and the costs of LTIP 2024, the maximum value of the Performance Shares that can be allocated per performance share right is capped at 300 percent of the volume-weighted average share price during the Investment Period. When assessing the final outcome of the performance share rights, the board will evaluate whether the vesting level is reasonable in relation to AddLife’s financial results and position, significant changes in the group, stock market conditions, and other relevant factors. If the board determines that this is not the case, it may adjust the allocation to a level it deems appropriate.

The total cost of LTIP 2024 over the entire program period, based on certain assumptions and calculated in accordance with IFRS 2, is estimated at approximately SEK 5.5 million excluding social security contributions at the expected outcome, and approximately SEK 11.0 million at the maximum outcome. The cost of social security contributions, based on an assumed rate of 31.42 percent, is estimated at approximately SEK 2.7 million at the expected outcome and approximately SEK 6.1 million at the maximum total outcome.

During the financial year, SEK 1 million (–) was expensed as a result of the program, in accordance with IFRS 2.

The CEO acquired 7,500 Investment Shares within the framework of LTIP 2024. For these Investment Shares, the CEO received 45,000 performance share rights, which after the relevant program period may entitle them to an equal number of B shares. Fourteen other senior executives acquired a total of 15,065 Investment Shares within LTIP 2024. For these Investment Shares, they received 62,760 performance share rights.

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The Board of Directors
The remuneration has been determined by the Nomination Committee, and the total paid remuneration of SEK 2,600 thousand has been allocated among the board members in accordance with the resolution of the 2023 Annual General Meeting.

Parent Company's CEO
Fredrik Dalborg, Parent Company CEO, received a fixed salary of SEK 5,468 thousand (4,942) and SEK 3,327 thousand (1,841) in variable pay. Variable remuneration includes SEK 1,205 thousand regarding the year’s cost for a subsidy for participation in the Group’s incentive programme. Taxable benefits for the CEO totalling SEK 89 thousand (65) are additional. From age 65, the CEO is covered by a defined contribution pension, the size of which depends on the outcome of pension insurance agreements. In 2024, a total of SEK 1,457 thousand (1,856) in pension premiums, determined annually by the remuneration committee, were paid for the CEO.

Variable salary is not pensionable income. Variable remuneration based on Group earnings may amount to 40 percent of fixed salary. Further variable cash remuneration may be awarded in extraordinary circumstances, provided that such extraordinary arrangements are limited in time and only made on an individual basis, for the purpose of recruiting or retaining executives, or as remuneration for extraordinary performance beyond the individual’s ordinary tasks. Such remuneration may not exceed an amount corresponding to 50 percent of the fixed annual salary and may not be paid more than once each year per individual. Any resolution on such remuneration shall be made by the Board based on a proposal from the Remuneration Committee. During 2024, no such remuneration has been paid. The notice period is six months from the company's side and six months from the CEO's side. In the event of termination by the company, the CEO is entitled to severance payment equivalent to nine months' salary in addition to salary during the notice period. No severance package is payable if the employee terminates the contract.

Other members of Group Management
Other members of Group Management were paid a total of SEK 3,256 thousand (6,571) in fixed salaries and SEK 1,667 thousand (1,827) in variable remuneration. Variable remuneration includes SEK 687 thousand regarding the year’s cost for a subsidy for participation in the Group’s incentive programme, which was expensed during the 2024 financial year and will be paid in the coming years. Taxable benefits totalling SEK 152 thousand (284) are additional. Persons in Group Management are covered from age 65 by pension entitlements based on individual agreements. Existing pension schemes consist of defined contribution schemes, in which the pension amount depends on the outcome of pension insurance agreements. During 2024, a total of SEK 1,015 thousand (1,644) in pension premiums was paid for the group ‘Other members of Group Management’. Variable remuneration based on Group earnings may amount to 40 percent of fixed salary. Further variable cash remuneration may be awarded in extraordinary circumstances, provided that such extraordinary arrangements are limited in time and only made on an individual basis, for the purpose of recruiting or retaining executives, or as remuneration for extraordinary performance beyond the individual’s ordinary tasks. Such remuneration may not exceed an amount corresponding to 50 percent of the fixed annual salary and may not be paid more than once each year per individual. During 2024, no such compensation has been paid. The notice period is six to twelve months from the company's side and six months from the employee's side. Severance payment is granted for a maximum of six to twelve months' salary. No severance package is payable if the employee terminates the contract.

Personnel information
Members of the Board of Directors' are directors, elected by a general meeting, in the Parent Company and in Group companies. Members of senior management' are people in Group Management and Managing Directors at Group companies.