REG - Phoenix Grp Hldgs - Phoenix Group Holdings - 2015 Annual Results <Origin Href="QuoteRef">PHNX.L</Origin> - Part 3
23/03/2016 08:18
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with-profit funds and Group pension schemes is included, but the
related own funds are recognised only to a maximum of the SCR amount. Surpluses that arise in with-profit funds and Group
pension schemes, whilst not included in the PLHL Solvency II surplus, are available to absorb economic shocks. This means
that the headline surplus is highly resilient to economic stresses.
Excluding the SCR and own funds relating to unsupported with-profit funds and Group pension schemes, the estimated Solvency
II Shareholder Capital coverage ratio is 154% as at 31 December 2015.
BREAKDOWN OF SOLVENCY II POSITION
GRAPH
1 The Shareholder Capital surplus excludes own funds and SCR of unsupported with-profit funds and Group pension schemes.
2 Unsupported with-profit funds and Group pension schemes refer to those funds whose Solvency II own funds exceed their
SCR. Where a with-profit fund or Group pension scheme cannot cover its SCR, its own funds and SCR are included within the
Shareholder Capital surplus.
SENSITIVITY AND SCENARIO ANALYSIS
As part of the Group's internal risk management processes, the regulatory capital requirements are tested against a number
of financial scenarios. The results of that stress testing are provided below and demonstrate the resilience of the PLHL
Solvency II surplus.
Estimated
PLHL Solvency II surplus
1 January 2016
£bn
Base: 1 January 2016 1.3
Following a 20% fall in equity markets 1.3
Following a 15% fall in property values 1.3
Following a 75bps interest rates rise1 1.4
Following a 75bps interest rates fall1 1.2
Following credit spread widening2 1.2
Following 5% decrease in annuitant mortality rates3 1.1
1 Assumes recalculation of transitionals subject to PRA approval.
2 Credit stress equivalent to an average 100bps spread widening across ratings, 10% of which is due to
defaults/downgrades.
3 Equivalent of 6 months increase in longevity.
Financial performance
Capital resources
LEVERAGE
In managing capital the Group seeks to optimise the level of debt on its balance sheet. The Group's closed book business
model allows it to operate with higher leverage than life companies that are still writing new business, as it does not
need to fund upfront capital requirements and new business acquisition expenses.
Financial leverage ratio
The Group monitors the level of debt in its statement of consolidated financial position by reference to the financial
leverage ratio. The financial leverage ratio is used to determine the interest margin payable on the PGH Capital bank
facility.
The financial leverage ratio as at 31 December 2015 decreased to 37.8% reflecting debt repayments in the period.
The financial leverage ratio is calculated as gross shareholder debt1 as a percentage of gross MCEV 2. Following the
implementation of the Solvency II regime, MCEV will not be reported going forwards. This, together with the Group's
achievement of an investment grade credit rating during 2015, means that the financial leverage calculation will also not
be reported in future periods.
Gross shareholder debt and shareholder debt (including hybrid debt) included in MCEV at 31 December 2015 are set out in the
table below:
Year ended Year ended
31 December 2015 31 December 2014
£m £m
PGH Capital facility 650 840
PGH Capital senior bond 300 300
PGH Capital subordinated notes3 396 -
PLL subordinated debt 200 200
Tier 1 notes4 6 394
Gross shareholder debt 1,552 1,734
Adjustments to include the following items at fair value:
PLL subordinated debt 12 12
PGH Capital senior bond 24 22
PGH Capital subordinated notes 4 -
Tier 1 notes4 - (7)
Shareholder debt included in MCEV 1,592 1,761
1 Gross shareholder debt is defined as the notional face value of the shareholder and hybrid debt.
2 Gross MCEV is defined as the sum of Group MCEV and the value of shareholder and hybrid debt as included in the MCEV.
3 Total face value of the PGH Capital subordinated notes is £428 million (2014: £nil), of which bonds with a face value of
£32 million (2014: £nil) are held by Group companies.
4 Total face value of the Tier 1 notes is £6 million (2014: £425 million), of which bonds with a face value of £nil (2014:
£31 million) are held by Group companies.
The Group's gross shareholder debt decreased by £182 million to £1,552 million in the year. This reduction includes
repayments of £190 million in respect of the PGH Capital facility, including prepayments of £70 million in respect of
payments due in 2016 and £30 million in respect of payments due in 2017.
In January 2015, the Group announced the exchange of 99% of the Group's Tier 1 notes for £428 million of new subordinated
notes, issued by PGH Capital. As the new notes mature in 2025, the notes will be included in the financial leverage
calculation at their notional face value of £396 million, excluding notes with a face value of £32 million held by Group
companies.
In August 2015, Fitch Ratings assigned the Group an investment grade credit rating, which triggered a further 50bps margin
reduction on the outstanding bank facility effective from 28 August 2015.
In March 2016, the Group agreed an amendment of its £900 million 5 year unsecured bank facility into a £650 million
unsecured revolving credit facility, maturing in June 2020.There are no mandatory or target amortisation payments
associated with the facility but prepayments are permissible.
Further detail on shareholder debt is included in note E5 to the IFRS consolidated financial statements.
Risk management
"The Group has an embedded Risk Management Framework that is forward-looking and proactive to manage risk within risk
appetite. Strong risk governance founded on the three lines of defence supports policyholder security and the safe
execution of the Group's strategy."
Wayne Snow
Group Chief Risk Officer
22 March 2016
Risk Culture
We seek to embed a culture that is forward-looking and competent in its assessment and management of risk, a culture where
everyone in the Group is aligned in their goals to deliver better risk based decisions.
To support this goal, the Group defined a Risk Culture Statement which sets out the Group's aspirations for Risk
Management.
"The Group has a balanced risk culture, supportive of commercial risk-taking coupled with strong execution in line with its
risk appetite.
At its core are the Group's values and behaviours, clarity of accountability and a healthy tension between the first and
second lines of defence.
Collectively this means people understand the Group's approach to risk, take personal responsibility to manage risk in
everything they do and encourage others to follow their example."
During 2015, Group Risk conducted its third annual Risk Culture survey. The results of this survey enable us to assess and
measure our Risk Culture over time as well as being able to tailor training programmes to ensure the continued engagement
and development of our employees.
The Group's Risk Management Framework
The Group's Risk Management Framework ('RMF') embeds proactive and effective risk management across the Group. It seeks to
ensure that all risks are identified and managed effectively and that the Group is appropriately rewarded for the risks it
takes.
During the year, the Group continued to strengthen our RMF to meet evolving regulatory requirements including Solvency II
and the UK Corporate Governance Code. I was pleased to see our approach to risk management was recognised in the investment
grade rating awarded by Fitch Ratings.
Further detail on the 10 components of our RMF and the principal risks facing the Group are provided below.
Risk strategy
The Group's risk strategy provides an overarching view of how risk management is incorporated consistently across all
levels of the business, from decision-making to strategy implementation.
It assists the business achieve its strategic objectives by supporting a more stable, well managed business with improved
customer and shareholder outcomes.
This is achieved not by risk avoidance, but through the identification and management of an acceptable level of risk (its
'risk appetite') and by ensuring that the Group is appropriately rewarded for the risks it takes.
To ensure that all risks are managed effectively the Group is committed to:
· embedding a risk aware culture;
· maintaining a strong system of internal controls;
· enhancing and protecting customer and shareholder value by continuous and proactive risk management;
· maintaining an efficient capital structure; and
· ensuring that risk management is embedded into day-to-day management and decision-making processes.
Risk appetite
The Group's risk appetite is the level of risk the Group is willing to accept in pursuit of its strategic objectives. The
statements below encapsulate our risk appetite for policyholder security and conduct, earnings volatility, liquidity and
our control environment:
· Capital - The Group and each life company will hold sufficient capital to meet regulatory requirements in a number of
asset and liability stress scenarios.
· Cash flow - The Group will seek to ensure that it has sufficient cash flow to meet its financial obligations and will
continue to do this in a volatile business environment.
· Embedded value - The Group will take action to protect embedded value.
· Regulation - The Group and each life company will, at all times, operate a strong control environment to ensure
compliance with all internal policies and applicable laws and regulations, in a commercially effective manner.
· Conduct - Phoenix has zero appetite for deliberate acts of misconduct, including omissions that result in customer
detriment, reputational damage and/or pose a risk to the Financial Conduct Authority ('FCA') statutory objectives.
The risk appetite and control framework supports the Group in operating within the boundaries of these statements by
limiting the volatility of key parameters under a range of adverse scenarios agreed with the Board. Risk appetite limits
are chosen which specify the maximum acceptable likelihood for breaching the agreed limits. Assessment against these limits
is undertaken through extensive scenario and reverse stress testing.
Risk universe
A key element of effective risk management is ensuring that the business has a complete and robust understanding of the
risks it faces. These risks are defined in the Group's risk universe.
The risk universe allows the Group to deploy a common risk language, allowing for meaningful comparisons to be made across
the business. There are three levels of risk universe categories. The highest risk universe category is Level 1 and
includes:
· strategic risk;
· customer risk;
· financial soundness risk;
· market risk;
· credit risk;
· insurance risk; and
· operational risk.
Embedded within these categories, and Customer risk in particular, are the conduct risks faced by the Group and its
customers. These risks are separately monitored and reported on across the organisation to ensure that conduct risk
receives appropriate emphasis and oversight.
The Group has developed a PGH Board approved risk appetite statement to manage Conduct Risk. The appetite statement is
supported by the assessment of all conduct related risks faced by the Group on a quarterly basis. This regular assessment
and reporting enables us to be forward-looking and proactive in the management of conduct risk.
External communication and stakeholder management
The Group has a number of internal and external stakeholders, each of whom has an active interest in the Group's
performance, including how risks are managed. Significant effort is made to ensure that our stakeholders have appropriate,
timely and accurate information to support them in forming views of the Group.
Governance, organisation and policies
Governance
Overall responsibility for approving, establishing and embedding the RMF rests with the Board. The Board recognises the
critical importance of having an efficient and effective RMF and appropriate oversight of its operation. There is a clear
organisational structure in place with documented, delegated authorities and responsibilities from the Group Board to the
PLHL Board, the Boards of Phoenix Life and the Executive Committee.
The RMF is underpinned by the operation of a three lines of defence model with clearly defined roles and responsibilities
for statutory boards and their committees, management oversight committees, Group Risk and Group Internal Audit.
First line: Management
Management of risk is delegated from the Board to the Group Chief Executive Officer, Executive Committee members and
through to business managers. A series of business unit management oversight committees operate within the Group. They are
responsible for implementation of the RMF, ensuring the risks associated with the business activities are identified,
assessed, controlled, monitored and reported.
Second line: Risk Oversight
Risk oversight is provided by the Group Risk function and the Board Risk Committee. The Board Risk Committee comprises four
independent Non-Executive Directors. It is supported by the Group Chief Risk Officer and met six times during 2015. During
2015, the Board further improved risk oversight with the establishment of a dedicated Risk Committee of the Phoenix Life
Board to provide additional Board Committee focus on risk matters at Phoenix Life.
Third line: Independent Assurance
Independent verification of the adequacy and effectiveness of the internal controls and risk management is provided by the
Group Internal Audit function, which is supported by the Board Audit Committee.
Organisation
The Group Chief Risk Officer manages the Group Risk function and has responsibility for the implementation and oversight of
the Group's RMF. The Group Risk function has responsibility for oversight over financial, operational and regulatory risk.
The PRA/FCA relationship team manages the relationship and interactions with our primary regulators and reports to the
Group Chief Risk Officer.
Policies
The Group policy framework comprises a set of 30 policies that support the delivery of the Group's strategy by establishing
operating principles and expectations for managing the key risks to our business. The policy set contains the minimum
control standards to which each business unit must adhere to and against which they report compliance.
The policies define:
· the individual risks the policy is intended to manage;
· the degree of risk the Group is willing to accept, which is set out in the policy risk appetite statements;
· the minimum controls required in order to manage the risk to an acceptable level; and
· the frequency of the control's operation.
Each policy is the responsibility of a member of the Executive Committee who is charged with overseeing compliance
throughout the Group.
The governance framework in operation throughout the Group can be found in the chart below.
Business performance and capital management
The Annual Operating Plan is assessed to ensure that the Group operates within our stated risk appetite. Business
performance is routinely monitored with consolidated reporting against performance targets.
The Group operates a Capital Management Policy where capital is allocated across risks where capital is held as a mitigant
and, in turn, to individual risk owners who hold risk capital budgets. The amount of risk capital required is reviewed
regularly to ensure the risk exposure remains within budget. Any requests to increase budgets are referred to the Board for
approval.
Risk and capital assessment
The Group operates a standardised assessment framework for the identification and assessment of the risk it may be exposed
to and how much capital should be held in relation to those exposures. This framework is applicable across the Group and
establishes a basis, not only for the approach to risk assessment, management and reporting but also for determining and
embedding capital management at all levels of the Group in line with Solvency II requirements.
Risk assessment activity is a continuous process and is performed on the basis of identifying and managing the significant
risks to the achievement of the Group's objectives.
Stress and scenario tests are used extensively to support the assessment of risk and provide analysis of their financial
impact.
Independent reviews conducted by Group Risk provide further assurance to management and the Board that individual risk
exposures and changes to our risk profile are being effectively managed.
Management information
Overall monitoring and reporting against the risk universe takes place in business unit management committees and Boards.
This is then reported to the Executive Committee, PLHL Board and the Group Board via regular risk reporting.
The Board Risk Committee receives a consolidated risk report on a quarterly basis, detailing the risks facing the Group and
the overall position against risk appetite limits. The Board Risk Committee is also provided with regular reports on the
activities of the Group Risk function.
People and reward
Effective risk management is central to the Group's culture and its values. Processes are operated that seek to measure
both individual and collective performance and discourage incentive mechanisms which could lead to undue risk taking.
Training and development programmes are in place to support employees in their understanding of the RMF.
Technology and infrastructure
The Group employs market leading risk systems to support the assessment and reporting of the risks it faces. This enables
management to document key risks and controls and evidence the assessment of them at a frequency appropriate to the
operation of the control.
Risk management effectiveness
The provisions of the UK Corporate Governance Code require an annual review of the effectiveness of Risk Management.
Now in its fourth year, this independent assessment provides assurance to management and the Boards that the RMF has been
implemented consistently and is operating effectively across the Group.
governance framework
Graph
Principal risks and uncertainties facing the Group
The Group's top principal risks and uncertainties are detailed in the table below, together with their potential impact,
mitigating actions which are in place and changes in the risk profile from last year. As economic changes occur and the
industry and regulatory environment evolves, the Group will continue to monitor their potential impact.
Further details of the Group's exposure to financial and insurance risks and how these are managed are provided in note E6
of the IFRS consolidated financial statements.
Risk Impact Mitigation Change from last year
In times of severe market turbulence, the Group may not have sufficient capital or liquid assets to meet its cash flow targets or it may suffer a loss in value. The emerging cash flows of the Group may be impacted during periods of severe market turbulence by the need to maintain The Group undertakes regular monitoring activities in relation to market risk exposure, including limits in each asset class, cash flow forecasting and stress and scenario testing. In response to this, the Group has implemented de-risking strategies to mitigate against unwanted customer and shareholder outcomes. The Group also maintains cash buffers in its holding companies to reduce reliance on emerging cash flows. The recent decline in yields on UK Government debt has put pressure on the Group's excess capital position. Hedging strategies have been implemented to limit this impact and the position is closely managed. However, under the Solvency II regime the life companies remain exposed to further reductions in yields and swap rates.
appropriate levels of regulatory capital. The impact of market turbulence may also result in a material adverse impact on the
Group's embedded value.
Significant counterparty failure. Assets held to meet obligations to policyholders include debt securities. Phoenix Life is exposed to deterioration in the actual The Group regularly monitors its counterparty exposure and has specific limits relating to individual exposures, counterparty credit rating, sector and geography.Where possible, exposures are diversified through the use of a range of counterparty providers. All material reinsurance and derivative positions are appropriately collateralised and guaranteed. During 2015, the Group recaptured a reinsurance arrangement between Phoenix Life Assurance Limited and the Group's Bermudian subsidiary Opal Re. The arrangement was replaced with a similar reinsurance agreement with Reinsurance Group of America ('RGA'), ISFR AA- by S&P.In preparation for Solvency II, the Group also sold debt securities valued at £0.8 billion from its with-profits funds.
or perceived creditworthiness or default of issuers.An increase in credit spreads on debt securities, particularly if it is
accompanied by a higher level of actual or expected issuer defaults, could adversely impact the Group's embedded value.The Group
is also exposed to trading counterparties failing to meet all or part of their obligations, such as reinsurers failing to meet
obligations assumed under reinsurance arrangements.
Adverse changes in experience versus actuarial assumptions. The Group has liabilities under annuities and other policies that are sensitive to future longevity and mortality rates. Changes The Group undertakes regular reviews of experience and annuitant survival checks to identify any variances in assumptions. The Group has also entered into a reinsurance contract to manage this risk within appetite. There has been no adverse change in experience over the year. However, material strengthening of actuarial assumptions over 2015 increased longevity risk capital requirements and improved resilience. The arrangement with RGA referenced above reinsured £1.3 billion of annuity liabilities out of the Group.
in assumptions may lead to changes in the assessed level of liabilities to policyholders. The amount of additional capital
required to meet those liabilities could have a material adverse impact on the Group's embedded value, results, financial
condition and prospects.
Changes in the regulatory and legislative landscape may impact the way that Phoenix Life engages with its customers. The move to the conduct-focused regulator may see a continued move away from rules-based regulation with a greater focus on The Group puts considerable effort into managing relationships with its regulators so that it is able to maintain a forward view regarding potential changes in the regulatory landscape. The Group assesses the risks of regulatory change and the impact on our operations and lobbies where appropriate. In publishing the findings of the 'Fair Treatment of Customers in Closed Books' review, the FCA has set out their expectation of firms in relation to managing conduct risk. This has enabled Phoenix to benchmark itself against these expectations and focus on activities to enhance its management of conduct risk.
customer outcomes. This may challenge the existing approach and/or may result in remediation exercises where Phoenix Life cannot
demonstrate that it met the expected customer outcomes in the eyes of the regulator.
Changes in the retirement marketplace may result in poor outcomes for customers. The changes in the retirement marketplace have opened up a number of new options for customers. While these options provide Phoenix Life has made a number of changes to its retirement processes to take account of the changes. These include ensuring that appropriate risk warnings are provided to customers in advance of them taking a course of action. This is aligned to the new rules that the FCA has outlined in PS15/4. The retirement changes went live in April 2015. Phoenix was operational on day 1 and has been able to offer customers a range of options. Phoenix has actively encouraged customers to utilise Pension Wise. In addition Phoenix implemented the FCA risk warnings thus ensuring that customers have made informed choices.
greater flexibility for customers, there is a need for customers to ensure that they engage with the process to ensure that they
make informed decisions that are suitable for their needs. Additionally, providers need to ensure that their processes
facilitate effective decision-making by customers. Failure to do this may result in a risk that a customer takes an option that
they do not understand or that may not be appropriate for them.
The principal risk relating to the implementation of the Solvency II Directive has been removed following the approval of
the Group's Internal Model and related applications.
The current assessment of the residual risk in respect of each of the Group's principal risks is illustrated in the chart
opposite.
The residual risk is the remaining risk after controls and mitigating actions have been taken into account.
The Group's senior management and Board also take emerging risks into account when considering potentially adverse outcomes
and appropriate management actions prior to the risk crystallising.
Some of the current emerging risks the Group considers are listed in the table below.
Risk Description Risk Universe Category
Title
Regulatory Thematic Reviews The unknown consequences and the potential impact, including retrospective activity, as a result of Thematic Reviews conducted by the regulators. Customer
Pension Exit Charges The Treasury have asked the FCA to legislate on a cap for pension products so that customers can take advantage of the pension freedoms.The FCA have also noted that they are seeking a 'voluntary solution' on exit charges for other legacy products. Customer
Political Risk Unexpected changes driven by political agenda in the run up to, and following, the European referendum during 2016. Strategic
Principal risks
GRAPH
Viability statement
In accordance with the provision of section C.2.2 of the 2014 revision of the UK Corporate Governance Code, the Board has
completed an assessment of the prospects and viability of the Group over a five-year period to December 2020. The Board has
determined that the five-year period to December 2020 is an appropriate period for the assessment, this being the period
covered by the Group's Board-approved annual operating plan ('AOP').
In making the viability assessment, the Board has undertaken the following process:
· it reviewed what is mandatory in the context of viability;
· it reviewed the AOP which considers profits, liquidity, solvency and strategic objectives and the impacts of management
actions on the Group;
· it completed stress testing to assess viability under severe but plausible scenarios, including two adverse stresses
which represent the key financial risks to the Group as follows:
1. Market stress - a 1 in 10 year event combined market stress incorporating a fall in equity, property values and yields,
with a widening of credit spreads.
2. Longevity stress - a 1 in 10 year event longevity and credit stress, which implies a 1.3 year increase in life
expectancy for a 65 year old male alongside a widening of credit spreads.
· it considered the principal risks facing the Group which have the potential to impact on viability as discussed in the
Risk report above.
· it completed a qualitative assessment of all strategic risks to the Group and contingent actions available that could be
implemented should any risk materialise that threatens the Group's resilience.
The Board has also made certain assumptions when making the assessment and these include the following:
· the stress occurs on 1 January 2016 with no allowance for any recovery; and
· that corporate acquisitions are not relevant, as any acquisition would only be progressed on the basis it was value
accretive.
Based on the results of the procedures outlined above, the Board has a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due over the five-year period of assessment.
Environmental reporting
Our Corporate Responsibility programme supports our commitment to monitoring and reducing our environmental footprint.
This section includes mandatory reporting of greenhouse gas ('GHG') emissions pursuant to the Companies Act 2006 (Strategic
and Directors' Reports) Regulations 2013. Emissions disclosed relate to properties where the Group has operational control.
The Group has no responsibility for any emission sources that are not included in our consolidated financial statements.
Emissions have arisen principally through the combustion of fuel and operation of facilities (Scope 1) and the consumption
of purchased electricity, heat, steam and cooling, (Scope 2). Approximately 7% of 2015 emissions are estimated as full year
data is not yet available for all properties. A sample of emissions from fuel use for transport, back-up generation and
fluorinated gases were calculated and were determined to be non-material to the overall footprint, so have not been
included.
The data reported is based on the main requirements of the ISO14064 Part 1 and the GHG Protocol Corporate Accounting and
Reporting Standard (revised edition); data gathered for ongoing reporting against the UK Carbon Reduction Commitment
('CRC') scheme and energy and fuel consumption data for occupied properties has been used to calculate the carbon
footprint. The Government's Conversion Factors for Company Reporting 2015 have been used to convert energy data into CO2e
emissions.
Due to organisational structure changes in 2014 following the divestment of Ignis Asset Management Limited to Standard Life
Investments (Holdings) Limited, the Group has restated 2014 data to represent only properties where the Group has
operational control. This is in line with the Greenhouse Gas Protocol's guidance on organisational boundaries.
GREENHOUSE GAS EMISSIONS
Global GHG emissions data in tonnes of CO2e
Emissions from: 2015 2014
restated
Combustion of fuel and operation of facilities (Scope 1) 1,013 1,028
Electricity, heat, steam and cooling purchased for own use (Scope 2) 2,939 3,508
Total Carbon Footprint (Tonnes of CO2e) 3,952 4,536
Phoenix Group's chosen intensity measurement
2015 2014
restated
Emissions reported above normalised to per m2 0.09 tonnes CO2e/m2 0.10 tonnes CO2e/m2
Emissions reported above normalised to kgs per m2 90 kgs CO2e/m2 103 kgs CO2e/m2
Emissions from Group corporate offices normalised to per FTE 5.4 tonnes 6.1 tonnes
of CO2e/FTE of CO2e/FTE
Go online for the Group's full Corporate Responsibility Report www.thephoenixgroup.com/CRreport2015
Governance
The Directors of Phoenix Group Holdings support the high standards of corporate governance contained in the UK Corporate
Governance Code.
IN THIS SECTION
Chairman's introduction 42
Board structure 43
Board of Directors 44
Executive management team 46
Corporate governance report 47
Directors' remuneration report 57
Directors' report 81
Corporate governance
Chairman's introduction
"I am very pleased to have been appointed Chairman of the Board of a Group in which strong governance is embedded and
supported from top to bottom. My fellow Directors and I realise that governance evolves and we must continue to be
proactive in ensuring that robust governance in Phoenix remains a priority."
HENRY STAUNTON
CHAIRMAN
Board of Directors
Our Board of Directors comprises 10 directors, which has consistently been the number of Directors the last few Board
evaluations have recommended as the right number for our Board to function at its optimum level. The Board comprises the
Chairman, seven independent Non-Executive Directors and two Executive Directors. The increasing independence across the
Board over the last few years is demonstrated on the chart opposite.
In response to a recommendation from the November 2014 externally facilitated Board evaluation, a Board skills audit was
undertaken in early 2015 and this informed our succession planning by considering the skills and experience required in
differing degrees across our Board to pursue our strategy and govern the Group. In accordance with our Board succession
plan, approved by the Board in April 2015, we are currently recruiting two Non-Executive Directors to prepare for those
scheduled to leave the Board by the middle of 2017. This includes (as reported in my opening Chairman's statement) Tom
Cross Brown who will be leaving the Board at our May 2016 Annual General Meeting following a long period of excellent
service to the Group.
Since my arrival, we have undertaken (in November 2015) an internally facilitated Board evaluation from which it was
concluded that the Board could function well with between 9 and 11 Directors and that some overlap between new and
departing Directors may be desirable as the new Directors increase their familiarity with Phoenix Group.
In addition, a strong theme emerging from the Board evaluation was the desire to spend more time on strategy. We are now
including specific sections of the agenda at each Board meeting devoted to strategy as well as our annual strategic
off-site session and the continued monitoring of performance against strategy at each Board meeting. I am convinced that we
have a Board equipped to drive our strategy forward and pursue our M&A agenda.
Shareholders
I am gratified that our shareholders responded positively to the actions we took in response to the votes at our 2014 AGM
of 81% and 84% in favour of our remuneration report and policy respectively. At our 2015 AGM, votes in favour of all 18
resolutions were over 98% of votes cast. This is our best result since our 2010 London listing and we have therefore
returned to a positive trajectory of AGM resolution approvals as shown in the table opposite.
UK Corporate Governance Code
As detailed in the Corporate Governance Report on pages 47 to 55, we complied in 2015 with the provisions of the UK
Corporate Governance Code ('the Code') apart from one unavoidable matter when a Director was unable to attend our AGM for
personal reasons, resulting in a technical breach of code provision E2.3. This has been our only matter of non-compliance
with the Code in the past four years.
The following sections provide more detail on our Board of Directors, Executive Management team, operation of governance
and remuneration practices as follows:
· Board and committee structure
· Board of Directors
· Executive Management Team
· Corporate Governance Report
· Directors' Remuneration Report
· Directors' Report.
Phoenix Group Holdings Board and Committees
The main focus of the Phoenix Group Holdings Board is on Group strategy and performance, with input from board committees.
The chart below sets out the composition and main activities of the Phoenix Group Holdings Board and its committees. More
detailed operational and customer-focused matters are addressed at the subsidiary board and committee level.
Audit Committee
Alastair Barbour (Chair)
Isabel Hudson
Kory Sorenson
David Woods
Phoenix Group Holdings Board
Henry Staunton (Chair)
Ian Cormack - SID
Rene-Pierre Azria
Clive Bannister*
Alastair Barbour
Tom Cross Brown
Isabel Hudson
James McConville*
Kory Sorenson
David Woods
Remuneration Committee
Ian Cormack (Chair)
Isabel Hudson
Kory Sorenson
Risk Committee
David Woods (Chair)
Rene-Pierre Azria
Alastair Barbour
Tom Cross Brown
Nomination Committee
Henry Staunton (Chair)
Ian Cormack
Tom Cross Brown
Audit Committee
Financial Reporting
Internal Controls
External Audit
Internal Audit
Phoenix Group Holdings Board
Group Strategy
Group Budget
Group Risk Appetite
Performance Monitoring
External/Shareholder Reporting
External Debt
Major transactions
Remuneration Committee
Group remuneration framework
Executive Director remuneration
Employee share schemes
Risk Committee
Risk appetite and high-level risk matters
The Group's Risk Management Framework
Nomination Committee
Board appointments
Senior executive appointments
Board and senior executive succession planning
Total number of directors
Graph
* Executive Directors
AGM resolution approvals Number of resolutions Percentage ofvotes in favour*
2015 AGM 18 98%
2014 AGM 19 80%
2013 AGM 20 96%
2012 AGM 21 97%
2011 AGM 24 96%
2010 AGM (first AGM) 22 87%
* All resolutions passed By majority of at least this % of votes cast.
Board of Directors
The Group is governed by our Board of Directors. Biographical details of all Directors are shown below.
HENRY STAUNTON
CHAIRMAN
Committee membership
· Nomination Committee (Chairman)
Appointed to the Board
1 September 2015
Experience
Mr Staunton is Non-Executive Chairman of WH Smith plc, the leading FTSE250 retail group, and a Non-Executive Director of
Capital & Counties Properties plc. He is also Non-Executive Chairman of the privately owned BrightHouse Group, the
rent-to-own company, and a Non-Executive Director of ICBC Standard Bank, a subsidiary of ICBC.
From 2004 until 2013, Henry Staunton was a Non-Executive Director, Chairman of the Audit Committee and latterly Senior
Independent Director and Vice Chairman of Legal & General Group plc, where he gained significant insight into the life and
pensions industry. From 2008 to 31 December 2014 he was a Non-Executive Director of Merchants Trust plc, where he was the
Senior Independent Director.
During his executive career he was Finance Director of ITV plc from 2003 to 2006, and Finance Director of Granada plc from
1993 to 2003. Prior to that he joined Price Waterhouse as a graduate trainee, rising to become a Senior Partner of the
audit practice.
CLIVE BANNISTER
GROUP CHIEF EXECUTIVE OFFICER
Appointed to the Board
28 March 2011
Experience
Clive Bannister joined the Group in February 2011 as Group Chief Executive Officer. Prior to this, Mr Bannister was Group
Managing Director of Insurance and Asset Management at HSBC Holdings plc. He joined HSBC in 1994 and held various
leadership roles in planning and strategy in the Investment Bank (USA) and was Group General Manager and CEO of HSBC Group
Private Banking. He started his career at First National Bank of Boston and prior to working at HSBC was a partner in Booz
Allen Hamilton in the Financial Services Practice providing strategic
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