REG - Phoenix Grp Hldgs - Phoenix Group Holdings - 2015 Annual Results <Origin Href="QuoteRef">PHNX.L</Origin> - Part 4
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support to financial institutions including leading
insurance companies, banks and investment banks. Mr Bannister is also Chairman of the Museum of London.
RENÉ-PIERRE AZRIA
INDEPENDENT NON-EXECUTIVE DIRECTOR
Committee membership
· Risk Committee
Appointed to the Board
2 September 2009
Experience
René-Pierre Azria is a senior partner at LionTree LLC, a US private advisory firm based in New York and specialising in
strategic analysis and mergers and acquisitions. Prior to joining LionTree LLC, Mr Azria founded and managed Tegris LLC,
also a mergers and acquisitions firm based in New York. Prior to founding Tegris LLC, Mr Azria was a worldwide partner with
Rothschild & Co., based in New York. Prior to joining Rothschild & Co. in 1996, Mr Azria served as Managing Director of
Blackstone Indosuez and President of the Financiere Indosuez Inc. in New York.
JAMES MCCONVILLE
GROUP FINANCE DIRECTOR
Appointed to the Board
28 June 2012
Experience
Between April 2010 and December 2011, Mr McConville was Chief Financial Officer of Northern Rock plc. Prior to that,
between 1988 and 2010, he worked for Lloyds Banking Group plc (formerly Lloyds TSB Group plc) in a number of senior finance
and strategy related roles, latterly as Finance Director of Scottish Widows Group and Director of Finance for the Insurance
and Investments Division. During 2011 and 2012, Mr McConville was a Non-Executive Director of the life businesses of Aegon
UK. In 2014, Mr McConville joined the board of Tesco Personal Finance plc as Non-Executive Director. Mr McConville
qualified as a Chartered Accountant whilst at Coopers and Lybrand.
ALASTAIR BARBOUR
INDEPENDENT NON-EXECUTIVE DIRECTOR
Committee membership
· Audit Committee (Chairman)
· Risk Committee
Appointed to the Board
1 October 2013
Experience
Alastair Barbour has over 30 years audit experience with KPMG where he worked across the full spectrum of financial
services clients from large general insurers and reinsurers to the life assurance and investment management sector, working
on a range of operational and strategic issues. Mr Barbour is the former Head of Financial Services, Scotland for KPMG. He
retired from KPMG in 2011 to build a Non-Executive career. He is a Director and Audit Committee Chairman of RSA Insurance
Group plc, Standard Life European Private Equity Trust plc and Liontrust Asset Management plc (all London Stock Exchange
listed companies). He is also a Director and Audit Committee Chairman of CATCo Reinsurance Opportunities Fund Ltd, a
Bermuda-based investment company listed on the London Stock Exchange and of The Bank of N. T. Butterfield & Son Limited, a
company listed in Bermuda.
IAN CORMACK
SENIOR INDEPENDENT DIRECTOR
Committee membership
· Remuneration Committee (Chairman)
· Nomination Committee
Appointed to the Board
2 September 2009
Experience
Mr Cormack is Non-Executive Chairman of Maven Income & Growth VCT 4 plc, a Senior Independent Director of both Partnership
Assurance Group plc and Xchanging plc and a Non-Executive Director of Hastings Insurance Holdings plc. Mr Cormack was Chief
Executive Officer of AIG, Inc. in Europe from 2000 to 2002 and prior to that he spent 32 years at Citibank where he was
Chairman of Citibank International plc and Co-Head of the Global Financial Institutions Client Group at Citigroup.
TOM CROSS BROWN
INDEPENDENT NON-EXECUTIVE DIRECTOR
Committee membership
· Nomination Committee
· Risk Committee
Appointed to the Board
24 September 2009
Experience
Tom Cross Brown was Global Chief Executive of ABN AMRO Asset Management from 2000 to 2003, as well as Chairman of ABN AMRO
Asset Management in the UK from 1997 to 2003. Prior to this, he spent 21 years with Lazard Brothers in London, latterly as
Chief Executive Officer of Lazard Brothers Asset Management. Mr Cross Brown is Non-Executive Chairman of Just Retirement
Group plc and is a Non-Executive Director of Artemis Alpha Trust plc.
ISABEL HUDSON
INDEPENDENT NON-EXECUTIVE DIRECTOR
Committee membership
· Audit Committee
· Remuneration Committee
Appointed to the Board
18 February 2010
Experience
Isabel Hudson is Non-Executive Chairman of the National House Building Council and a Non-Executive Director of Standard
Life PLC and BT Group plc. Ms Hudson is a former Non-Executive Director of
MGM Advantage, The Pensions Regulator and QBE Insurance. Other roles previously held by Ms Hudson include Chief Financial
Officer at Eureko BV and Executive Director of Prudential Assurance Company. Ms Hudson is an ambassador to Scope, a UK
charity, and has 34 years of experience in the insurance industry in the UK and mainland Europe.
KORY SORENSON
INDEPENDENT NON-EXECUTIVE DIRECTOR
Committee membership
· Audit Committee
· Remuneration Committee
Appointed to the Board
1 July 2014
Experience
Kory Sorenson is currently a Non-Executive Director of SCOR SE, Pernod Ricard SA, UNIQA Group and Aviva Insurance Limited.
She also volunteers as a Director of the Institut Pasteur foundation in Paris. Ms Sorenson has over 20 years of financial
services experience, most of which has been focused on insurance and banking. She was Managing Director, Head of Insurance
Capital Markets of Barclays Capital from 2005 to 2010 and also held senior positions in the financial institutions
divisions of Credit Suisse, Lehman Brothers and Morgan Stanley.
DAVID WOODS
INDEPENDENT NON-EXECUTIVE DIRECTOR
Committee membership
· Risk Committee (Chairman)
· Audit Committee
Appointed to the Board
18 February 2010
Experience
David Woods is a Fellow of the Institute of Actuaries, Non-Executive Chairman of Standard Life UK Smaller Companies Trust
plc and a Non-Executive Director of Murray Income Trust plc. He is also Chairman of the pension fund trustee companies
responsible for the governance of all the UK defined benefits/pension schemes in the Sopra Steria Group and is a Director
of Santander (UK) Group Pension Trustees Ltd.
Executive management team
Executive management of the Group is led by the Group Chief Executive Officer, Clive Bannister, who is supported by the
Executive Committee ('ExCo').
CLIVE BANNISTER
GROUP CHIEF EXECUTIVE OFFICER
22 March 2016
Roles and responsibilities
· Leads the development of the Group's strategy for agreement by the Board
· Leads and directs the Group's businesses in delivery of the Group strategy and business plan
· Leads the Group to safeguard returns for policyholders and grow shareholder value
· Embeds a risk-conscious Group culture which recognises policyholder obligations in terms of service and security
· Manages the Group's key external stakeholders.
JAMES MCCONVILLE
GROUP FINANCE DIRECTOR
Roles and responsibilities
· Develops and delivers the Group's financial business plan in line with strategy
· Ensures the Group's finances and capital are managed and controlled
· Develops and delivers the Group's debt capital strategy and other treasury matters
· Ensures the Group has effective processes in place to enable all reporting obligations to be met
· Supports the Group Chief Executive Officer in managing the Group's key external stakeholders
· Maximises shareholder value through clear, rigorous assessment of business opportunities.
ANDY MOSS
CHIEF EXECUTIVE, PHOENIX LIFE
Roles and responsibilities
· Leads the development and delivery of the Phoenix Life business strategy, including the continued integration of life
businesses
· Leads the Phoenix Life business to optimise outcomes for customers in terms of both value and security
· Ensures Phoenix Life deploys capital efficiently and effectively, with due regard to regulatory requirements, the risk
universe and strategy.
FIONA CLUTTERBUCK
HEAD OF STRATEGY, CORPORATE DEVELOPMENT AND COMMUNICATIONS
Roles and responsibilities
· Supports the Group Chief Executive Officer in the formulation of the strategy and the business planning for the Group
· Leads implementation of the Group's strategy as regards any potential acquisitions or disposals
· Leads external Group Communications in liaison with the Group Finance Director and Head of Investor Relations.
STEVE FAWCETT
GROUP HUMAN RESOURCES DIRECTOR
Roles and responsibilities
· Leads the implementation of the Group's employee strategy in order to recruit, retain, motivate and develop high quality
employees
· Provides guidance and support on all HR matters to the Group Chief Executive Officer, ExCo and the Group Board and
Remuneration Committee
· Delivers HR services to the Group.
WAYNE SNOW
GROUP CHIEF RISK OFFICER
Roles and responsibilities
· Leads the Group's risk management function, embracing changes in best practice and regulation including Solvency II
· Oversees and manages the Group's relationship with the FCA and PRA
· Oversees adherence to the Group's risk appetite.
SIMON TRUE
GROUP CHIEF ACTUARY
Roles and responsibilities
· Ensures capital is managed efficiently across the Group
· Manages the Group's solvency position
· Leads the development of the Group's investment strategy
· Identifies and delivers opportunities to enhance shareholder value across the Group.
QUENTIN ZENTNER
GENERAL COUNSEL
Roles and responsibilities
· Leads provision of legal advice to the Group Board, other Group company Boards, ExCo and senior management
· Oversees and co-ordinates maintenance of, and adherence to, appropriate corporate governance procedures across the
Group
· Designs and implements a framework to manage legal risk within the Group, including compliance by Group companies and
staff with relevant legal obligations.
Corporate governance report
INTRODUCTION
The Board is committed to high standards of corporate governance and the Group's Corporate Governance policy is aligned to
compliance with the UK Corporate Governance Code ('the Code') which sets standards of good practice for UK listed
companies. It is the Board's view that the Company has been fully compliant during 2015 with the provisions set down in the
Code apart from provision E.2.3 due to one Director being unable to attend the AGM for personal reasons.
THE BOARD
The Board comprises the Non-Executive Chairman, the Group Chief Executive Officer, the Group Finance Director and seven
independent Non-Executive Directors. Biographical details of all Directors are provided on pages 44 to 45.
Board Composition
Graph
The Board skillset must be aligned to the Group strategy of enhancing value for shareholders and policyholders and taking
forward the Group's M&A agenda. The Board undertook a skills audit in the first half of 2015, evaluating the Directors'
skills against strategic requirements. The output has been used to inform succession and recruitment of Directors. A
further skills audit will be undertaken in the first half of 2017, to ensure the Board skillset continues to be appropriate
to the Group's strategy and the external environment.
The Board considers that the following Directors are independent: Rene-Pierre Azria, Alastair Barbour, Ian Cormack, Tom
Cross Brown, Isabel Hudson, Kory Sorenson and David Woods. The Board has considered the criteria proposed by the Code in
assessing the independence of the Directors, in particular the following:
· The Board had previously considered Rene-Pierre Azria not to be independent as a firm he was connected with had
undertaken services for two shareholders, each holding more than 3% of the Company's issued share capital. Those two
shareholders have each sold down their shareholding to less than 0.5% and are no longer significant shareholders.
Therefore, the Board has concluded that Mr Azria can be considered independent as (a) he acts in a wholly independent
manner in character and judgement and (b) none of the relationships or circumstances listed in provision B1.1 of the Code
apply to Mr Azria.
· Tom Cross Brown is the non-executive Chairman of Just Retirement Group plc. The Group has an arrangement with Just
Retirement whereby Phoenix customers may be referred to Just Retirement to enable them to explore enhanced annuities should
they wish to do so. The decisions regarding this arrangement are not made by the Board of Phoenix Group Holdings and the
relationship is not considered to impact the independent status of Tom Cross Brown.
· Isabel Hudson is a non-executive director of Standard Life PLC which has investment management arrangements with the
Phoenix Life subsidiary companies. The decisions regarding these arrangements are not made by the Board of Phoenix Group
Holdings and the relationship is not considered to impact the independent status of Isabel Hudson.
The remuneration of the Directors is shown in the Directors' Remuneration Report on pages 57 and 80. The terms and
conditions of appointment of Non-Executive Directors are on the Group's website. In accordance with the provisions of the
Articles and the Code, all Directors (except Tom Cross Brown, who is standing down from the Board) will submit themselves
for election or re-election at the Company's AGM on 11 May 2016.
The Board is responsible to the shareholders for the overall performance of the Group. The Board's role is to provide
entrepreneurial leadership within a framework of prudent and effective controls which enables risk to be assessed and
managed. The Board has a schedule of matters reserved for its consideration and approval supported by a set of operating
principles. These matters include:
· Group strategy and business plans
· Major acquisitions, investments and capital expenditure
· Financial reporting and controls
· Dividend policy
· Capital structure
· The constitution of Board committees
· Appointments to the Board and Board committees
· Senior executive appointments
· Key Group policies.
The schedule of matters reserved for the Board is available from the Group Company Secretary. Matters which are not
reserved for the Board and also its committees under their terms of reference (which are available on the Group website),
or for shareholders in general meetings, are delegated to the executive management under a schedule of delegated
authorities approved by the Board.
The head office of the Company is in Jersey and, as such, the Board and its committees hold their meetings in Jersey.
The Chairman, Group Chief Executive Officer and Senior Independent Director
Henry Staunton is Chairman of the Board of Directors of the Company, having succeeded Howard Davies on 1 September 2015.
There is a division of responsibility, approved by the Board, between the Chairman, who is responsible for the leadership
and effective operation of the Board and the Group Chief Executive Officer, Clive Bannister, who is responsible to the
Board for the overall management and operation of the Group. The Chairman's other commitments are set out in his
biographical details on page 44. The Chairman was appointed on the basis of committing two days per week to Phoenix.
The Senior Independent Director, appointed by the Board, is Ian Cormack. His role is to be available to shareholders whose
concerns are not resolved through the normal channels or when such channels are inappropriate. He is also responsible for
leading the annual appraisal of the Chairman's performance by the Non-Executive Directors.
Board Effectiveness
In accordance with the Code, an evaluation of the performance of the Board and that of its Committees and individual
Directors was undertaken in the latter part of 2015. The process was led by the Chairman and internally facilitated by the
Company Secretary. The process involved completion by Directors of a questionnaire covering various aspects of Board,
Committee and Director effectiveness followed by individual meetings between the Chairman and each Director, concluding in
a Board report which was discussed by the Board in November 2015. Key outputs from the review are shown below:
An action list, with senior executive accountability, has been established to address the recommendations from the November
2015 evaluation.
The table below shows how the main recommendations from the November 2014 evaluation were addressed in 2015.
The output from the November 2015 Board and individual director reviews informed the review of the Board composition
undertaken by the Board Nomination Committee in January 2016, leading to the Board's recommendations to shareholders
regarding re-election of Directors at the 2016 Annual General Meeting ('AGM').
All Directors receive a tailored induction on joining the Board in accordance with a process approved by the Board. The new
Group Chairman, Henry Staunton, undertook a comprehensive induction before and following his appointment in September 2015.
This included a focus on the new Solvency II reporting environment, applicable from 1 January 2016, as well as detailed
strategic and operational briefings and information.
To ensure that the Directors maintain up-to-date skills and knowledge of the Company, all Directors receive regular
presentations on different aspects of the Company's business and on financial, legal and regulatory issues.
Key outputs from the 2015 Board effectiveness review:
· A strong theme was the desire to spend more time on strategy.
· Much of the discussion related to proposals to improve Board processes and operations to facilitate better use of
Directors' time.
· The Board skillset is considered balanced and right, with a continued focus on required skills in capital markets and
M&A.
PROGRESS AGAINST ACTIONS FROM THE EXTERNALLY-FACILITATED 2014 BOARD EFFECTIVENESS REVIEW:
Action Status
Conduct skills audit over next 12 months. Skills Audit conducted, matching Board skills to the Group's strategic requirements and reported to the Board in April 2015. The output has informed the skills required to replace those Directors due to vacate the Board over the next 18 months.
Provide clearer direction/priorities in Board papers which should be simplified and shortened where possible. Addressed, with ongoing monitoring expected.
Provide more life assurance sector intelligence (acknowledging that this is addressed in detail at the regulated life company subsidiary boards). Briefings provided to the Board on the commercial and regulatory environment facing the life assurance sector and the Senior Insurance Manager Regime; process established to provide Non-Executive Directors with ongoing media and press information on the life and pensions sector.
Conduct reviews of significant past decisions. Reviews of major recent decisions presented to the Board in April 2015 and October 2015.
Operation of the Board
The terms of appointment for the Directors state that they are expected to attend in person regular (at least six per year)
and additional Board meetings of the Company and to devote appropriate preparation time ahead of each meeting. In January
2016, the Nomination Committee reviewed the time spent by Directors and concluded that the time required of (and given by)
the Company's Directors is considered at least at the level expected in their appointment terms and is believed to be high
in comparison to other FTSE 250 companies.
Alastair Barbour, on account of being on the boards of a number of public companies listed in the UK and/or Bermuda and
chairing the audit committee for all, has provided an analysis of his work commitments to the Nomination Committee, which
shows the relatively low level of time commitment required for certain of his other roles and the complementary nature of
his roles and the time committed to Phoenix (40 days in 2015, his second biggest role). The Nomination Committee and Board
confirmed their satisfaction with the time and overall commitment given to Phoenix by Mr Barbour and all other directors.
The Board met seven times during 2015 and is scheduled to meet seven times in 2016 including for a two day strategy-setting
meeting. Additional meetings will be held as required, and the Non-Executive Directors will hold meetings with the
Chairman, without the Executive Directors being present, as they did on several occasions in 2015.
Board Committees
The Board has delegated specific responsibilities to four standing committees of the Board. The terms of reference of the
committees can be found on the Company's website.
Key focus areas at Board Meetings
· Reports from Chairs of Board committees and subsidiary Boards
· CEO Report
· Management Information Report
· Financial Reporting
· Strategy and Planning
· Consideration of corporate transactions
· Board and Board Committee changes and issues.
Board attendance 2015
Board Meetings
Maximum Actual
Chairman
Howard Davies¹ 5 5
Henry Staunton² 2 2
Executive Directors
Clive Bannister (CEO) 7 7
James McConville (FD) 7 7
Non-Executive Directors
René-Pierre Azria 7 7
Alastair Barbour 7 7
Ian Cormack 7 7
Tom Cross Brown 7 6
Isabel Hudson 7 7
Kory Sorenson 7 7
David Woods 7 7
1 Howard Davies resigned from the Board on 31 August 2015.
2 Henry Staunton was appointed to the Board on 1 September 2015.
Audit Committee
ALASTAIR BARBOUR
AUDIT COMMITTEE CHAIRMAN
Other members
Isabel Hudson
Kory Sorenson
David Woods
David Woods
Meeting attendance 2015
Audit Committee
Maximum Actual
Chairman
Alastair Barbour 7 7
Other members
Isabel Hudson 7 7
Kory Sorenson 7 7
David Woods 7 7
The composition of the Audit Committee is in accordance with the requirements of the Code that the Audit Committee should
consist of at least three independent Non-Executive Directors of whom at least one has recent and relevant financial
experience. Both Alastair Barbour and Isabel Hudson have that experience. The Audit Committee met seven times during 2015.
Its meetings are attended by the Chairman of the Risk Committee (who is also a member of the Audit Committee), the Group
Finance Director, the Deputy Group Finance Director, the Group Head of Internal Audit, the external auditors and usually
also by the Group Chairman and the Group Chief Executive Officer. The Audit Committee holds private meetings at least
annually with each of the Group Finance Director, the Group Head of Internal Audit and the external auditors.
Audit Committee's Role
· Receiving and reviewing the Annual Report and Accounts and other related financial disclosures, although the ultimate
responsibility for these matters remain with the Board.
· Monitoring the overall integrity of the financial reporting by the Company and its subsidiaries and the effectiveness of
the Group's internal controls.
· Provision of advice to the Board to enable the Board to report on whether the Annual Report and Accounts, taken as a
whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's
performance, business model and strategy.
· Responsible for making recommendations to the Board on the appointment of the external auditors and their terms of
engagement and for reviewing the performance, objectivity and independence of the external auditors. The terms of reference
of the Audit Committee state that it shall meet the external auditor at least once a year without management being
present.
· Considering and approving the remit of the internal audit function and reviewing its effectiveness.
· Oversight of activities of subsidiary audit committees through receipt and review of minutes, discussions between the
Chairmen of the Audit Committee and subsidiary audit committees, and the Audit Committee Chairman's attendance at the
Phoenix Life Audit Committee on an occasional basis, as well as his receipt of all papers going to the Phoenix Life Audit
Committee.
AUDIT COMMITTEE'S PRINCIPAL ACTIVITIES DURING 2015
External reporting and controls
· Reviewed the Company's 2014 Annual Report and Accounts, 2015 Interim Financial Statements and 2015 Interim Management
Statements, recommending their approval to the Board, as well as related disclosures and the financial reporting process,
supported by reports from management and the external auditors.
· Considered and addressed a number of significant matters in relation to the IFRS and MCEV financial statements for 2014
(annual), 2015 (interim) and 2015 (annual) as summarised in the table on page 52. These matters were considered by the
Audit Committee to be areas subject to the most significant levels of judgement or estimation, and identified with regard
to the significant risks assessed by the Group's external auditors as set out in their audit opinion on page 87.
· Reviewed the financial forecasts prepared by management, supported by the sensitivity analysis on the key assumptions
underpinning the forecasts, in support of the assumption that the Group will continue as a going concern and in support of
dividend payments.
· Reviewed the annual internal controls effectiveness report (and the half-year interim update) prior to its consideration
by the Board and received reports regarding consequential actions.
· Reviewed reports from Internal Audit and EY (as part of their audit assurance) on the control environment in the Group's
outsource service providers, noting that this was addressed in more detail at the Phoenix Life Audit Committee.
· Approved the internal controls framework which set out the process by which controls were set across the risk management
framework. The Committee requested the development of an assurance strategy to provide clarity of the roles of line 1
(Executive Management), line 2 (Risk Function) and line 3 (Internal Audit) for the assurance work surrounding the
framework. The assurance strategy was developed through the course of 2015 and reviewed by the Audit Committee prior to its
finalisation.
External audit
· Reviewed the effectiveness, engagement and remuneration of the external auditors, recommending their re-appointment to
the Board and thence to shareholders.
· Reviewed and monitored the independence of the external auditors including their provision of non-audit services.
· Monitored the engagement of the external auditors for non-audit work in accordance with approved policy.
· Considered and agreed the timing for a tendering exercise for the external audit engagement - see 'Auditor's
appointment'.
Internal audit
· Reviewed the External Quality Assessment of the internal audit function ('EQA'), undertaken by Independent Audit, the
conclusion being that the internal audit function was effective in its role, and suggesting areas for development.
· Approved the Group Internal Audit Proposition for 2015-2016 which had been updated to reflect the recommendations of the
EQA.
· Approved the annual update of the Group Internal Audit Charter (which was aligned to the CIIA Code for 'Effective
Internal Audit in Financial Services') and the Group Internal Audit Plan (including its link to the Risk Management
Framework), receiving regular reports to monitor progress against the plan. In line with the developing proposition, the
Internal Audit Plan was split between static/risk policy audits and dynamic/thematic audits.
· Reviewed the internal audit control environment opinion which included Internal Audit's view on the embedding of the
risk management framework across the Group.
· Reviewed the report by the Internal Audit Function on internal audit effectiveness in the Group's outsource service
providers ('OSPs'); and reviewed internal audit reports on information security in the OSPs, noting the extensive oversight
in Phoenix and that more detailed OSP oversight was undertaken by the Phoenix Life Audit Committee.
· Noted an initial review of the potential role of internal audit in risk culture governance.
Audit Committee's performance
· Reviewed the Audit Committee's performance, constitution and terms of reference, noting that all its duties had been
addressed in accordance with its terms of reference, and that the Board would undertake its own review of the performance
of the Board committees. The Audit Committee agreed, and recommended to the Board, a change to its terms of reference to
reflect responsibility for reviewing the internal controls and assurance framework and remove duplication with the Risk
Committee.
General
· Reviewed arrangements for whistleblowing (and whistleblowing activity) should an employee wish to raise concerns, in
confidence, about any possible improprieties; this being reviewed in the context of the market data available, requested by
the Audit Committee and provided by EY.
· Reviewed and approved updates to the Group Tax Policy and the Group Liquidity & Funding Policy.
Assessment of the effectiveness of the external audit process
The effectiveness of the external audit process was assessed through the completion of an assessment questionnaire by the
key divisions and Group functions within Phoenix Group. The feedback covered EY's performance with regard to their audits
under the IFRS, MCEV, Solvency I and Solvency II bases of reporting. To provide a more detailed analysis, the review was
supported by the utilisation of an online questionnaire based tool provided by a third party supplier. The output from the
review enabled management to identify key areas of focus to facilitate the audit process and enhanced understanding of the
importance of various criteria with regard to the external auditor relationship for a future tender exercise. The Audit
Committee contributed feedback to the exercise, considered the effectiveness of the process and reviewed the overall
findings.
Auditor's Appointment
The current auditors, EY, were appointed in September 2009. However, EY have been auditors to significant parts of the
Group for a longer period. In accordance with the requirements of The Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014, the Audit
Committee has decided to undertake a competitive audit tender in 2016 to be effective for the 2017 statutory audit, which
it considers in the best interests of its shareholders in light of the length of association with the current auditors.
Auditor's Independence
The Company has adopted a Charter of Statutory Auditor Independence, which requires the Company and the external auditors
to take measures to safeguard the objectivity and independence of the external auditors. These measures include a
prohibition regarding non-audit services in respect of specific areas, such as secondments to management positions, or
those which could create a conflict or perceived conflict. It also includes details of the procedures for the rotation of
the external engagement partner. The Charter can be found on the Group's website.
Significant matters considered by the Audit Committee in relation to the financial statements
Significant matters in relation to the 2015 IFRS financial statements and MCEV supplementary information How these issues were addressed
Review of the actuarial valuation process, to include the setting of actuarial assumptions and methodologies, and the robustness · Management presented papers to the Phoenix Life Audit Committee detailing recommendations for the actuarial assumptions and methodologies to be used for the interim and year-end reporting periods with justification and benchmarking as appropriate. These
of actuarial data assumptions and methodologies were debated and challenged by the Phoenix Life Audit Committee, focusing on longevity and persistency in relation to demographics and on credit in relation to economics, prior to their approval. The assumptions reflected
methodology and model improvements from the new actuarial reporting system referred to in the 2014 Annual Report and largely implemented during 2015.· A summary of these papers was presented for oversight review by the Audit Committee, and the Phoenix
Life Audit Committee's conclusions were reported to the Audit Committee through minutes of its meeting and a discussion between the Chairmen of the two committees. The Audit Committee discussed, and questioned management and EY on, the content of the
summary papers and the Phoenix Life Audit Committee's conclusions.· The Audit Committee received and considered detailed written and verbal reporting from the external auditors setting out their observations and conclusions in respect of the assumptions,
methodologies and actuarial models. Pension assumptions for use in the IAS 19 Employee Benefits valuations were reviewed and approved by the Audit Committee prior to the finalisation of the valuation reports.· Economic assumptions for use in the MCEV
valuation were reviewed and approved by the Audit Committee.· The Audit Committee requested and received a dedicated training session to enhance its knowledge of the different bases of assumptions setting.
Tax provisioning and the recoverability of deferred tax assets · As part of the interim and year-end reporting process, the Audit Committee considered presentations from management that provided an update on taxation risks and exposures, provisioning levels and matters pertaining to the recoverability of deferred tax
assets.
Valuation of complex and illiquid financial assets · Management presented papers setting out the basis of valuation of financial assets, including changes in methodology and assumptions, for the interim and year-end reporting periods to the Phoenix Life Audit Committee. The assumptions, valuations and
processes, particularly for financial assets determined by valuation techniques using significant non-observable inputs (Level 3), were debated and challenged by the Phoenix Life Audit Committee prior to being approved.· The valuation information was then
presented for oversight review by the Audit Committee who considered and confirmed the appropriateness of the basis of valuation.
Operating Profit · The Audit Committee reviewed the allocation of key items to operating profit to ensure the allocations were in line with the Group's operating profit framework and consistent with previous practice.
Assessment of whether the Annual Report and Accounts are fair, balanced and understandable · The Audit Committee considered an analysis of the processes (which had been further developed during 2015) and conclusions in support of management's conclusions that the Annual Report and Accounts are fair, balanced and understandable. In particular,
the Audit Committee sought assurance as to the review processes that operated over the production of the Annual Report and Accounts.
Going concern analysis · A comprehensive going concern assessment was undertaken by the Audit Committee for the 2015 year end and 2015 interim reporting periods, based on an assessment by management of the Group's liquidity for the going concern review period together with
forecasts and a stress and sensitivity analysis. The analysis also confirmed that all regulatory and working capital requirements would be met under the base case and adverse stress scenarios throughout the going concern review period.
Viability Statement · The Audit Committee reviewed the processes to support the Viability Statement proposed by provision C2.2 in the UK Corporate Governance Code. The Committee decided that the period covered by the viability statement should be five years to align it to
the Group's business planning.
Remuneration Committee
IAN CORMACK
REMUNERATION COMMITTEE CHAIRMAN
Other members
Isabel Hudson
Kory Sorenson
Kory Sorenson
Meeting attendance 2015
Remuneration Committee
Maximum Actual
Chairman
Ian Cormack 6 6
Other members
Isabel Hudson 6 6
Kory Sorenson 6 6
The composition of the Remuneration Committee accords with the requirements of the Code that the Remuneration Committee
should consist of at least three independent Non-Executive Directors. The Remuneration Committee met six times during
2015.
The Remuneration Committee is responsible for making recommendations to the Board on the Company's remuneration and
compensation plans, policies and practices and for determining, within agreed terms of reference, specific remuneration
packages for the Executive Directors. These include pension rights and executive incentive schemes to encourage superior
performance. Details of the remuneration structure and the Remuneration Committee's activities in 2015 are provided in the
Directors' Remuneration Report on pages 57 to 80.
FIT Remuneration Consultants provided advice to the Remuneration Committee in 2015 and are independent of the Group.
57 Read more about our remuneration structure and Remuneration Committee activities
Risk Committee
DAVID WOODS
RISK COMMITTEE CHAIRMAN
Other members
René Pierre Azria
Alastair Barbour
Tom Cross Brown
Tom Cross Brown
Meeting attendance 2015
Risk Committee
Maximum Actual
Chairman
David Woods 6 6
Other members
René Pierre Azria 6 6
Alastair Barbour 6 6
Tom Cross Brown 6 3
The establishment of a Risk Committee is not a requirement of the Code. However, the Board believes such a Committee is
important to ensure the robust oversight of the management of risk within the Group. The composition of the Risk Committee,
with a majority of independent Non-Executive Directors, is in accordance with the final recommendations of the report by
Sir David Walker titled 'A review of corporate governance in UK banks and other financial industry entities'. The Risk
Committee met six times in 2015. Its meetings are attended by the Chairman of the Audit Committee (who is also a member of
the Risk Committee), the Chief Risk Officer, the Group Head of Internal Audit and occasionally also by the Group Chairman
and the Group Chief Executive Officer.
The Risk Committee advises the Board on risk appetite and tolerance in setting the future strategy, taking account of the
Board's overall degree of risk aversion, the current financial situation of the Group and the Group's capacity to manage
and control risks within the agreed strategy. It advises the Board on all high level risk matters. Details of the Risk
Management Framework, for which the Risk Committee has oversight, are provided in the Risk Management section on pages 34
to 39.
Risk Committee's principal activities during 2015
· Reviewed the Group's risk appetite and recommended to the Board the Group's overall risk management strategy.
· Approved the Group Risk Function's 2016 plan and monitored progress against the 2015 Group Risk Function plan.
· Considered any breaches of the Group's risk appetite.
· Monitored compliance with the Group's principal risk policies, satisfying itself that action plans to address
significant breaches of those policies were sufficient.
· Reviewed the Group's risk profile, monitoring it against the risk categories of Market, Insurance, Credit, Financial
Soundness, Customer and Operational with particular attention to risk appetite, risk trends, risk concentrations,
provisions, experience against budget and key performance indicators for risk.
· Provided oversight of, and challenge to, the design and execution of the Group's stress and scenario testing, including
any changes of assumptions.
· Undertook horizon scanning to consider emerging risks that could impact the Group including more prominent badging of
forward-looking work in risk papers as proposed by the November 2014 Board Evaluation Report.
· Conducted a detailed risk governance review which included the establishment of a dedicated Risk Committee of the
Phoenix Life Board to provide additional Board Committee focus on risk matters.
· Agreed a set of operating principles for the Group and Phoenix Life Board Risk Committees to support their work in
providing effective risk oversight of the Group.
Nomination Committee
HENRY STAUNTON
NOMINATION COMMITTEE CHAIRMAN*
Other members
Ian Cormack
Tom Cross Brown
Tom Cross Brown
Meeting attendance 2015
Nomination Committee
Maximum Actual
Chairman
Henry Staunton* 2 2
Howard Davies 5 5
Other members
Ian Cormack 7 7
Tom Cross Brown 8 5
* Howard Davies up to 31 August 2015.
The composition of the Nomination Committee is in accordance with the requirements of the Code that a majority of its
members should be independent Non-Executive Directors. The Nomination Committee is responsible for considering the size,
composition and balance of the Board; the retirement and appointment of Directors; succession planning for the Board and
senior management; and making recommendations to the Board on these matters.
During 2015, a special-purpose Nomination Committee, consisting of independent Non-Executive Directors, Tom Cross Brown
(Chairman), Alastair Barbour, Kory Sorenson and David Woods, was appointed for the recruitment of the new Chairman.
The Nomination Committee (including the Chairman-selection Committee) met eight times in 2015. The Chairman-selection
Committee undertook a detailed process for the recruitment of the Chairman, including several briefing sessions with the
search consultants.
The standard process used by the Committee for Board appointments involves the use of an external search consultancy to
source candidates external to the Group (and in the case of executive appointments also considers internal candidates).
Detailed assessments of short-listed candidates are undertaken by the search consultancy, followed by interviews with
Committee members and other Directors and the sourcing of references before the Committee recommends the appointments to
the Board. This process was used for the appointment of Henry Staunton as Chairman in 2015. The search consultancy used in
2015 for Director appointments was The Zygos Partnership which has no other connection with the Company.
Nomination Committee's principal activities during 2015
· Delivered a recommendation to the Board for the appointment of Henry Staunton as Chairman following a comprehensive
search process led by the Nomination Committee with Zygos search consultancy.
· Undertook a skills audit in response to a recommendation from the 2014 Board Evaluation Report to re-assess the ideal
blend of skills and knowledge on the Board, aligned to the Group's strategy. The output of this audit was used in deciding
the skills and experience required for the new Chairman and will inform the requirements for new Non-Executive Director
appointments intended for 2016 .
· In conjunction with the skills audit and taking account of the Board Evaluation Review, reviewed the balance of skills,
diversity, experience, independence and knowledge on the Board.
· In conjunction with the skills audit and taking account of the Board Evaluation Review, reviewed the structure, size and
composition of the Board.
· Reviewed the time spent by Directors in fulfilling their duties, concluding that the time spent appeared to be high in
comparison with other FTSE 250 companies.
· Reviewed the succession plan for Executive and Non-Executive Directors and recommended its approval to the Board.
· Reviewed, prior to their appointments, the proposed new Non-Executive Director appointments to the subsidiary Phoenix
Life Board. This included succession planning for the Phoenix Life Board Chairman.
The Board's policy on diversity is as follows:
· The Board supports the enhancement of diversity, including gender, as a consideration when recruiting new Directors.
· The Board's overriding aim is to appoint the right Directors to the Board to drive forward the Group's strategy within a
robustly compliant framework.
· The Board will undertake regular skills audits to ensure the Board's skills remain appropriate for its strategy and
providing diversity where possible; the 2015 skills audit having been being assessed against ten strategic skill
categories.
Communication with Shareholders
The Company places considerable importance on communication with shareholders and regularly engages with them on a wide
range of issues.
The Company's Investor Relations department is dedicated to facilitating communication with investors and analysts and an
active investor relations programme is maintained.
During 2015 the Company's Investor Relations department and management held the following activity:
· 11 days of roadshows meeting investors
· 7 institutional conferences holding one-on-one or group meetings with investors
· 120 face-to-face meetings with investors and analysts.
At these meetings a wide range of relevant issues including strategy, performance, management and governance are discussed.
The Chairman, Senior Independent Director and Executive Directors are available to meet investors and analysts when
required. Should major shareholders wish to meet newly appointed Directors, or any of the Directors generally, they are
welcome to do so.
In addition, continued engagement is undertaken with shareholders and proxy advisers on evolving governance issues.
The Directors consider it important to understand the views of the market. Board members regularly receive copies of the
latest analyst reports on the Company and the sector, as well as market feedback to further develop their knowledge and
understanding of external views about the Company. The Chairman and the Non-Executive Directors provide feedback to the
Board on topics raised with them by major shareholders. In addition, investor days are conducted periodically. The Company
also undertakes perception studies, when appropriate, designed to determine the investment community's view of the core
business from both institutional fund managers and sell-side analysts.
The Company's AGM provides another opportunity to communicate with its shareholders. At the 2015 meeting, the Company
complied with the Code provisions relating to voting and the separation of resolutions. Shareholders were invited to ask
questions during the meeting. It is intended that the same processes will be followed at the 2016 AGM. In line with the
Code, details of proxy voting by shareholders will be made available at the meeting and will be posted on the Company's
website following the meeting.
The Company's Annual Report and Accounts, together with the Company's Interim Report, Interim Management Statements and
other public announcements and presentations, are designed to present a fair, balanced and understandable view of the
Group's activities and prospects. These are available on the Company's website at www.thephoenixgroup.com, along with a
wide range of relevant information for private and institutional investors, including the Company's financial calendar.
Financial Reporting and Going Concern
The Directors have acknowledged their responsibilities in the Statement of Directors' Responsibilities in relation to the
IFRS financial statements for the year ended 31 December 2015.
The Group's business activities, together with the factors likely to affect its future development, performance and
position are set out in the Strategic Report on pages 4 to 40.
The financial position of the Group, its cash flows and liquidity position are described in the financial statements and
notes.
The Board's going concern assessment is included within the Directors' report on page 82.
Viability Statement
The Viability Statement, as required by section C.2.2 of the Code, has been undertaken for a period of five years to align
to the Group's business planning and is contained in the Risk Management section on page 39.
Review of System of Internal Controls
The Code requires Directors to review the effectiveness of the Company's risk management and internal control systems which
includes financial, operational and compliance controls. The Board has overall responsibility for the Group's risk
management and internal control systems and for reviewing their effectiveness. The Group's systems of internal controls are
designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable
and not absolute assurance against material misstatement or loss. The Board's review of the period covered by this report,
which was undertaken with the assistance of the Audit and Risk Committees, was completed on 22 March 2016. Where any
significant weaknesses were identified, corrective actions have been taken, or are being taken and monitored.
The Board (and its subsidiary company boards) monitor internal controls on a continual basis, in particular through Audit
and Risk Committees. There is an ongoing process for identifying, evaluating and managing the significant risks faced by
the Group, which has been in place throughout the period covered by this report and up to the date of approval of the
Annual Report and Accounts for 2015, in accordance with the 'Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting' published by the Financial Reporting Council.
Additional assurance is provided by the internal audit function, which operates and reports independently of management.
The internal audit function provides objective assurance on risk mitigation and control to the Audit Committee.
Directors' remuneration report
Dear Shareholder,
"On behalf of the Board, I am pleased to present our Directors' remuneration report for the year ended 31 December 2015.
This report covers remuneration for Executive and Non-Executive Directors of the Company.
Ian Cormack
Remuneration Committee Chairman
22 March 2016
Linking Remuneration to Company performance
2015 was a year of major achievements for Phoenix Group as set out in more detail in the Group Chief Executive Officer's
report at the beginning of this Annual Report and Accounts. Particular operational and financial highlights for the year
included:
· Operating companies' cash generation of £225 million
· Incremental Market Consistent Embedded Value ('MCEV') from management actions of £205 million, meeting the target of
£400 million of management actions between 2014 and 2016, one year ahead of schedule
· The achievement of an investment grade credit rating from Fitch Ratings
· The approval of the Group's Solvency II Internal Model by the Prudential Regulation Authority
· The accreditation, for the fourth successive year, that Phoenix has been formally recognised as one of the 'UK's Top
Employers'
· Managing the new pension freedom changes introduced in April 2015, providing customers with greater choice with regard
to their retirement options.
As a closed life business, success for the Company is not assessed in the same way as at many other companies but through
the efficient delivery of management actions and maintenance of our capital strength both to ensure that we can meet our
obligations to policyholders and to maintain dividends to shareholders.
Against each of these objectives, this was an exceptional year for the Company. To deliver this performance, management
were asked not only to deliver on the targets originally set at the commencement of the year but also to deliver additional
goals set by the Board during the year, primarily securing an investment grade credit rating (which, while an aspiration,
had not been factored in the annual target setting process) and to revise the asset mix to reduce assets which carried a
higher capital charge thereby permitting approval of our Solvency II Internal Model.
While fully committed to maintaining the integrity of the Company's incentive arrangements at all times, the Committee
considered the impact of these additional priorities set for management by the Board and concluded that, while not
separately rewarding management for the delivery of these achievements (other than through the normal assessment of
personal performance in respect of 30% of the Annual Incentive Plan ('AIP') opportunity), the Committee should equally
ensure that such additional priorities should not inadvertently disadvantage the very high level of achievement from
management in respect of the targets set at the start of the year.
There were three direct consequences of delivering on the Board's additional priorities on the AIP:
· MCEV was included as a measure on the basis that it was a fair measure of the capital strength of the Company and,
generally, positive actions by management improve it. As explained more fully on page 64 under the section headed 'AIP
Outcomes for 2015', a consequence of our achieving an investment grade credit rating was that the value of bonds issued by
the Company increased due to the positive market impact. The Committee clearly did not want to penalise management for
this positive development.
· Similarly, management successfully adjusted the investment portfolio in line with the new priorities set by the Board to
enable our Internal Model to be approved and so the Committee, again, excluded the direct negative consequences of the
recalibration from the AIP out-turn.
· Cash distributed from the life company to the Company was included as a measure on the basis that it is both an
effective measure of the capital strength of the life companies (distributions will only be approved by its independent
Board if they are satisfied
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